Collective agreement
A collective agreement is the contract between an employer and a union covering unionised employees. Labour legislation across Canada generally provides that where a business is sold as a going concern, the collective agreement and the union’s bargaining rights bind the buyer — in an asset sale as well as a share sale.
Buyers sometimes assume an asset purchase lets them start fresh with the workforce. Successor-rights provisions in labour legislation are designed specifically to prevent that: the bargaining relationship attaches to the business, not to the corporate entity that happens to own it.
What to examine in diligence
- The full agreement and its expiry date — a bargaining round shortly after closing changes the risk
- Wage grids, benefits and pension obligations, including any pension solvency position
- Outstanding grievances and arbitration awards, which follow the business
- Contracting-out and technological-change clauses, which can constrain the buyer’s plans
- Seniority provisions, which limit how the workforce can be restructured
Sources
This definition is checked against primary sources. Links were last confirmed on the dates shown.
- 01Canada Revenue AgencyGovernmentSelling a business
- 02Treadstone LawLegal commentaryDoes a Collective Agreement Survive a Business Sale in Ontario?
- 03Treadstone LawLegal commentaryBuying a Business with a Unionized Workforce in Ontario
- 04Treadstone LawLegal commentaryEmployment Due Diligence Red Flags Before Buying an Ontario Business
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