SUCCESSOR RIGHTS AND OBLIGATIONS
A. INTRODUCTION
In common law, an agreement binds only the parties to the agreement. Over the years this notion
has been altered as labour legislation in all Canadian labour jurisdictions permits collective
bargaining rights to flow through changes in ownership as long as there is a continuation of the
same business. Legislative provisions allowing for succession are aimed at preserving
bargaining rights from being eliminated as a result of a sale, transfer or other disposition of a
business. In essence, the union(s) retain(s) the bargaining rights and collective agreement(s)
remain in effect in these circumstances.
Traditionally the concept of succession has been applied primarily where a unionized business is
transferred from one private sector employer to another. In contrast, the legislative treatment of
transfers from the Public Service to other sectors has been varied and irregular. Until recently, in
the federal jurisdiction, Section 47 of the Canada Labour Code (CLC) was the only provision
that preserved Public Service bargaining rights and collective agreements following the transfer
of a Public Service undertaking to a Crown corporation subject to the CLC.
The increasing trend to divest government programs to other employers questioned the extent to
which existing bargaining rights would be preserved in these situations. In order to enhance the
concept of employment continuity, the government amended two statutes in spring 1996 to
extend successor rights within federal jurisdiction.
This paper describes successor rights and the amendments brought to the federal Public Service
Staff Relations Act (PSSRA) and the Canada Labour Code (CLC) in 1996. It also explores how
the normal collective bargaining process interacts with successor rights provisions.
B. WHAT ARE SUCCESSOR RIGHTS?
Successor rights are labour code provisions which allow a bargaining agent to continue to
represent employees in a bargaining unit and also allow for the continuation of collective
agreements (until the term expires) when a cohesive business or function is sold, transferred or
otherwise divested. The successor employer becomes responsible for its predecessor's rights,
privileges and duties towards the employees under the collective agreement. It should be noted,
however, that discretion exists in determining whether a collective agreement will remain in
effect until its expiration date and whether all bargaining agents and units will continue in the
same manner, especially in cases of intermingling workforces. These issues can be resolved by
the parties, however, in cases of disputes or questions of procedure the relevant labour board will
make the final decision.
The specific application of successor rights varies across Canada, according to the labour code in
force (e.g., that of Canada, the province, or, in some cases, the provincial Public Service). The
applicable labour code establishes the conditions for:
 the timing of application for certification by bargaining agents;
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

applications for orders by bargaining agents or new employers for bargaining unit/agent
determination; and
resolutions in situations of intermingling workforces.
Successor rights provisions provide for:
 fair and consistent treatment of employees;
 the protection of the collective bargaining rights of employees;
 a faster, improved and streamlined negotiation process;
 consistency in movement of going concerns in the broader public sector (including
separate employers as per PSSRA I-II);
 stability for new employers during start-up phase of operations;
 easier movement of employees between organizational forms within the Public Sector
(i.e., agencies, service enterprise corporations); and
 access to standard dispute resolution mechanisms (e.g., labour boards).
Current Federal Legislative Framework
For these reasons, in the spring of 1996, the Government of Canada extended the application of
successor rights to the following situations:
1. Movement of Public Service functions to other Public Service employers under the
jurisdiction of the PSSRA (e.g., service agencies, separate employers);
2. Movement of Public Service functions to any public or private sector employer operating
under the jurisdiction of the CLC (e.g., airports).
Both the Public Service Staff Relations Act and Canada Labour Code were amended in the
Budget Implementation Act, 1996. As a result, in relation to Public Service functions, successor
rights now apply in all situations above and, at the time of writing, to the provincial jurisdictions
of Saskatchewan and British Columbia.
Two provisos were introduced, however, to the manner in which the Public Service collective
agreements carry over:
1. Those National Joint Council directives which form part of Public Service collective
agreements will legally cease to apply to employees immediately prior to their termination
from the Public Service for which Treasury Board is the employer (as per the Financial
Administration Act 11(2)(g.1)) and, where successor rights apply, shall not bind the successor
employer (FAA 11(9)); and
2. An opting-out provision in the CLC provides the Governor in Council with the authority to
exempt certain transfers from the application of successor rights where it is in the public
interest to do so (CLC 47.2).
More detailed analysis of the two provisos can be found below in sections E and F respectively.
C. APPLICATION OF SUCCESSOR RIGHTS
The application of successor rights and determination of jurisdiction will depend invariably on
the facts of each case. The determination will rely on very precise and detailed descriptions of
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the transferred business, the relationship between the predecessor and successor employer as well
as the manner in which the activities will be performed by the successor.
When a federal agency is created from one part of the Public Service of Canada and remains in
the Public Service, successor rights will apply. For example, a new agency created as a separate
employer continues to be governed by the PSSRA and section 48 of that Act applies. If the new
agency is created as an organization outside the Public Service, it may be governed by the CLC if
the business, undertaking or work is federal according to section 2 of the CLC or section 91 of
the Constitution Act. In this case, successor rights provisions of the CLC would apply to the
agency.
It is not uncommon to face uncertainty in determining jurisdiction and application of successor
rights. Although the question of whether an undertaking, service or business is a federal one
depends on the nature of its operation, the subsidiary operations engaged in by the employees
also come into question. If the subsidiary operations are, by their nature, inherent in or essential
to the operation of the core federal undertaking, they too may be determined to be federal. In
these cases, successor rights may apply.
Labour lawyers are best equipped to provide advice on the determination of jurisdiction and on
the application of successor rights. Ultimately, finality on these issues is often provided by labour
boards or other labour law administrators when dealing with specific proceedings, such as a
declaration of transfer of business.
It should be noted that the responsibility to operate under the appropriate labour jurisdiction
belongs to the successor employer. Departments must be interested, however, because they
must factor in the overall cost of collective agreements in their negotiations with the successor
employer and must ensure that employees receive the appropriate entitlements according to the
Work Force Adjustment Directive (WFAD).
Trigger for successor rights application
The trigger for successor rights is the sale, transfer or other disposition of a business (or part of a
business) or undertaking (or part of the undertaking). In the case of section 48.1 of PSSRA this
trigger is the action of deleting a portion of the Public Service from Schedule I, Part I and adding
it to Schedule I, Part II. This may take place by Order in Council in accordance with section 5 of
the PSSRA or by legislation.
In the case of section 47 of the CLC, if the part of the Public Service being transferred is listed in
Part I, Schedule I of the PSSRA (i.e., it is a ‘department’), it must be deleted from Schedule I. If
the part of the Public Service being transferred is not listed (i.e., it is a branch, division or unit of
a listed department), the actual transfer will be the trigger. For this reason, the transfer date
should be clearly recorded in the transfer agreement or other formal agreement between
employers.
Where successor rights may flow from a provincial statute, the trigger would also be the actual
transfer, unless otherwise specified in the statute.
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I. Co-ordination with Collective Bargaining Cycles
The sale, transfer and divestiture of Public Service functions may occur at any time during the
normal collective bargaining cycle. Thus, successor rights provisions could apply when: 1) the
collective agreement is still in effect on the date of transfer or 2) when notice to bargain has been
given prior to the transfer date and the ‘freeze’ provisions of section 52 of the PSSRA are in
effect.1 The information provided below applies to successor rights provisions in the PSSRA and
CLC only and should not be considered to apply to situations where successor rights flow from a
provincial statute such as the British Columbia Labour Relations Code.
a) Collective Agreement in Effect on Transfer Date
When the collective agreement is still in effect in the Public Service at the time of the sale or
transfer of functions to another employer covered by the PSSRA or the CLC:
1. The collective agreement(s) or arbitral award(s) continue in force and existing bargaining
agents continue to represent employees.
2. Employers and bargaining agents may give notice to bargain within the period specified by
law any time after the transfer date (i.e., within the three months preceding the expiry of
the collective agreement).
3. Subject to a 120-day waiting period, the new employer or the bargaining agent may apply
to the appropriate labour board for an order determining the following:
 the number of bargaining units;
 which bargaining agent(s), continuing as a result of successor rights, will represent the
bargaining unit(s);
 whether the collective agreement remains in force; and
 the expiration date of the collective agreement.
This application may be made only from the 121st to the 150th day after the transfer date.
Neither the PPSRA nor the CLC provide any other opportunity for such applications.
Special Notice to Bargain Provisions
1. Where the Public Service Staff Relations Board or the Canada Labour Relations Board,
on application, has determined that the collective agreement shall remain in force, either
party to the collective agreement may apply to the board for permission to give notice to
bargain. This can be done no later than 90 days under the PSSRA, or 60 days under the
CLC, after the board makes its decision.
2. Where no application has been made to the board and a collective agreement is in force,
either party may apply to the board for permission to give notice to bargain. This can be
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Technically this could also happen when strike rights have already been acquired under the
PSSRA in which case section 47.1 of the CLC reinstates the freeze of the terms and conditions
contained in the collective agreement.
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done during the period commencing on the 151st day and ending on the 240th day
according to the PSSRA, and commencing on the 151st day and ending on the 210th day
according to the CLC, after the transfer.
Collective agreement still in effect on date of transfer
Transfer date
0 days
30
60
90
120
150
180
210
240
Notice to bargain may be given any time after the transfer date if it is within the three months
immediately preceding the expiry date of the collective agreements.
Waiting period (PSSRA section 48; CLC section 47)

No application can be made to the labour board to determine: the number of bargaining
units; which bargaining agent(s), continuing as a result of successor rights, will represent
the bargaining unit(s); whether the collective agreement remains in force; and the
expiration date of the collective agreement.

Only window for application to labour board to determine: the number of bargaining
units; which bargaining agent(s), continuing as a result of successor rights, will represent
the bargaining unit(s); whether the collective agreement remains in force; and the
expiration date of the collective agreement.
If application to the board is made, there is a 90-day period after the board’s
determination for either party to apply for permission to give notice to bargain.


If no application is made to the labour board, this is the period to apply for permission to
give notice to bargain.
b) Notice to Bargain Given Prior to Transfer Date
When either party has given notice to bargain prior to the date of transfer of functions under
PSSRA or CLC:
1. The PSSRA, section 52 freezes the terms and conditions contained in collective
agreements which came into effect prior to transfer date. They remain in force until the
requirements with respect to the acquisition of strike and lockout rights have been met,
unless both parties agree otherwise.
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2. Although section 52 of the PSSRA freezes the terms and conditions contained in the
collective agreement, the statutory provision to remove National Joint Council (NJC)
directives from the collective agreements immediately prior to the date on which
employees were terminated overrides the freeze (FAA section 11(2) (g.1)).
3. Either party may apply to the labour board for an order to determine the number of
bargaining units and which bargaining agent(s), continuing as a result of successor
rights, will represent the bargaining unit(s). Similarly, the application may be made only
from the 121st to the 150th day after the transfer date.
Special Notice to Bargain Provisions
Where the board makes a determination as to which bargaining units and which successor
bargaining agent(s) is to represent the bargaining unit(s), either party may give notice to
commence or recommence collective bargaining.
Note that all negotiations held between the previous employer and the bargaining agent which
have not been formalized in a collective agreement do not bind the new employer or bargaining
agent. In cases where bargaining has begun between the bargaining agent and the previous
employer and is interrupted by the transfer, the new employer and bargaining agent will
recommence bargaining.
Notice to bargain given prior to transfer date
Transfer date
0 days
30
60
90
120
150
Notice to bargain may be given any time after the transfer date if it is within the three months
immediately preceding the expiry date of the collective agreements.
Waiting period (PSSRA section 48; CLC section 47)



No applications to the labour board for determination of number of bargaining units and
which bargaining agent(s), continuing as a result of successor rights, will represent the
bargaining unit(s).
PSSRA section 52 is in effect and freezes the terms and conditions of the collective
agreements.
Note that this freeze is limited by the statutory provision to remove NJC directives from
the collective agreements immediately prior to the date on which employees were
terminated according to section 11(2) (g.1) of the FAA.
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

Only window for application to labour board on determination of number of bargaining
units and which bargaining agent(s), as a result of successor rights, will represent the
bargaining unit(s).
Notice to bargain can be given anytime after the board’s determination.
“Raiding”
The standard provisions regarding a bargaining agent’s application to the labour board for
certification continue to apply in successor rights situations. Section 31 of the PSSRA and
section 24 of the CLC provide a number of periods when application can be made. One window
allowing for applications is the period immediately prior to the expiry of the collective
agreement. During this period, trade unions may apply for certification as bargaining agents for
units including employees affected by the transfer.
II. Bargaining Unit Determination
The successor employer may inherit many bargaining units from Treasury Board, which, in the
successor employer's view, do not facilitate the conduct of operations in the new organization or
protect the rights of employees. This is largely a result of the service-wide occupational-based
bargaining unit structure of the Public Service. For example, the Canadian Food Inspection
Agency has assumed responsibility for employees in 25 bargaining units, one of which had as
few as five members. Most successor rights provisions give labour boards the authority to decide
on a new unit structure, amend certification orders, negotiate scope clauses accordingly and
decide which unions will represent the new units. As described above, applications may be made
to the PSSRB or CLRB no earlier than 120 days after the transfer date.
a) Appropriateness of Bargaining Unit
The primary requirement is that the bargaining unit is capable of meaningful and harmonious
collective bargaining. Labour board jurisprudence has defined, among others, criteria such as
corporate structures, territorial scope of the employer’s activities, industrial peace, history of
certifications and collective bargaining, labour mobility, similarity of work, duties and working
conditions, administrative efficiency and employee wishes. In all cases, the appropriate labour
board makes the determination based on the facts related to the specific case.
Some factors identified by different labour boards in case law are:
 community of interest;
 centralization of managerial authority;
 economic factor; and
 source of work.
Additional factors of particular relevance to the Public Service are:
 history of certifications and negotiations; and
 plan of classification, including occupational groups or sub-groups, established by the
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employer (PSSRA 33 (2)).
b) Role of Classification Plan in the PSSRA
The PSSRA requires that the Public Service Staff Relations Board has regard to the classification
plan of the employer in determining the appropriateness of the bargaining unit. This plan must,
however, permit the satisfactory representation of the employees to be included in it.
A classification plan for the purposes of the Act should include explicit labour relations
objectives and should be based on the duties and responsibilities of the relevant employees. This
notion of duties is carried through to:
 the definition of managerial and confidential exclusions; and
 the determination of safety and security designations.
c) Some Relevant Case Law References
United Steelworkers of America v. Usarco Limited, [1967] O.L.R.B. Rep. 526
Cablevision National Ltée v. Syndicat des employés techniques de Cablevision National Ltée,
[1979] 3 Can.L.R.B.R. 267
Hospital for Sick Children, [1985] O.L.R.B. Rep. Feb. 266
Syndicat des employés des Banques Nationales de Rimouski v. National Bank of Canada, [1985]
11 C.L.R.B.R. (NS) 257
Canada Post Corporation v. Canadian Union of Postal Workers, [1988] 19 C.L.R.B.R. (NS) 129
U.F.C.W. v. Glengarry Transport Ltd., (1990), 81 di 64 (Can. L.R.B.)
Canadian Broadcasting Corp. v. A.C.T.R.A., (1991), 84 di 1 (Can. L.R.B.)
Canadian Museum of Civilization v. P.S.A.C., (1992), 92 C.L.L.C. 16,045 (Can L.R.B.)
Public Service Alliance of Canada, Professional Institute of the Public Service of Canada and the
Association of National Energy Board Employees v. National Energy Board, P.S.S.R.B. Decision
142-26-297 to 301, Nov. 8, 1993
Council of Graphic Arts Unions of the Public Service of Canada, Association of Public Service
Financial Administrators, Public Service Alliance of Canada and The Professional Institute of the
Public Service of Canada v. Canada Communication Group, P.S.S.R.B. Decision 142-28-302 to
310, Dec. 13, 1994
Public Service Alliance of Canada and The Professional Institute of the Public Service of Canada
v. National Capital Commission, P.S.S.R.B. Decision 142-29-312 and 313, Aug. 24, 1994
Brink’s Canada Limited v. Independent Canadian Transit Union. Local no.1, (1994), 95 di 100
(Can. L.R.B.)
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General Teamsters, Local Union no. 362 v. Brink’s Canada Limited, (1996), 100 di 39 (Can.
L.R.B.)
D. IMPLICATIONS OF COLLECTIVE BARGAINING TIMETABLES TO ASD SITUATIONS
Many alternative service delivery (ASD) situations will involve a cross section of employees
covered by collective agreements falling into three distinct groupings:
collective agreements still in effect (no notice to bargain yet given);
PSSRA, section 52 freeze of the terms and conditions of collective agreements in effect (notice
has been given); and
new collective agreements signed recently.
A number of issues have been raised with regard to the liability of new employers arising from
successor rights in the general collective bargaining process, the application of the WFAD and
potential retroactive employee compensation.
Employer Liabilities
The key date for applying successor rights provisions to ASD situations is the transfer date.
a) Successor Employer
Although the new employer assumes responsibility for the collective agreements associated with
the undertaking being sold or transferred, the number of employees receiving job offers is
outside the scope of successor rights and is strictly a matter for negotiation between the two
employers. Traditionally, Public Service transfers involving succession have resulted in job
offers to most affected employees.
The new employer is responsible for the terms of a collective agreement in effect or frozen on the
transfer date but is in no way liable for agreements reached by the Treasury Board and its
bargaining agents after the transfer date. Although a large portion of the original bargaining unit
may remain in the Public Service, the new employer is not bound by agreements that are signed
after the transfer date.
b) Past Service Liabilities
According to the WFAD, new employers must recognize years of service and continuous
employment with the Public Service when successor rights apply in order to determine employee
entitlements to benefits under the collective agreement. Accordingly, severance payments will
not be made to employees on termination from the Public Service when the successor employer
assumes liabilities for past and future severance payments.
In the case of organizations still governed by the PSSRA, the transfer of liabilities for severance
payments is not an issue because the provision continues and the funding for these liabilities is
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centrally allocated. In the case of transfers to other employers, however, funding arrangements to
transfer past service liabilities as well as annual leave credits or any other arrangements should
be addressed in the transfer agreement. The Office of the Superintendent of Financial Institutions
is responsible for preparing actuarial estimates of past service costs.
c) Retroactivity
When the transfer of function occurs during the course of collective bargaining and the collective
agreement is signed after the transfer date, transferred employees could benefit from the terms
and conditions of the new collective agreement for their period of Public Service employment.
If there are provisions for retroactivity contained in the new collective agreement, these will
apply to the transferred employees up until the date of transfer.
Note that the same principle applies to pay equity settlements.
E. EXCLUSION OF THE NJCS FROM THE COLLECTIVE AGREEMENTS
The NJC directives do not carry over to the successor employer. Although the collective
agreements carry over due to successor rights, these agreements apply to a community of
interests based on shared occupational activities and common terms and conditions of
employment. Conversely, NJC directives apply to all Public Service employees and are
negotiated based on the realities specific to the complexity of the employment conditions in the
Public Service (i.e., 200,000 employees dispersed across the country occupying a multiplicity of
occupational groups). For this reason, the government restricted the application of successor
rights to only the collective agreement. Note that the exclusion of NJC directives from the
collective agreements is linked directly to the termination authority in the FAA (section
11(2)(g.1) and section 11(9)). If Public Service employment were terminated via another
mechanism such as enabling legislation, a similar provision to exclude the carry over of NJC
directives with the collective agreement should be specified in that Act.
The rationale for transferring part of the Public Service to another employer, be it public or
private, includes increased flexibility in the area of human resources management, consolidation
of similar program activities, and streamlined program and management systems. Although the
NJC directives and policies address issues common to many employers, the processes and
procedures contained in them are specific to the requirements of the Public Service of Canada.
Thus, the travel and relocation directives, for example, address a spectrum of situations, many of
which would not apply to a smaller, more cohesive business unit.
When successor rights apply in the context of an intermingling work force, or when the receiving
organization existed prior to the transfer, the successor employer will most likely have in place
many policies which address the same issues covered by the NJC directives, such as employee
travel.
However, when successor rights apply in the context of a new organization created specifically
for the transfer, such as a federal agency, developing policies to ‘replace’ the NJCs may seem a
difficult task. Although cloning the NJC directives in the new environment may foster an
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increased sense of continuity for employees, new organizations may find this step limits their
future flexibility to meet operational requirements.
Other than creating completely new and tailored policies, the new employer could ‘borrow’
other Public Sector employer policies, such as the government of Alberta for example, for a
transitional period. The employer could adjust them at a later time in consultation with the
bargaining agent(s). This course of action would clearly demonstrate that the new environment
will be different from the former (i.e., the federal Public Service), and that the new employer
intends to tailor policies to operational requirements in a fair manner.
Another possibility is that the new employer could continue the monetary benefits only
available to employees (in pay and in reimbursement of costs) contained in the NJC directives for
a transitional period. This approach would then allow the new organization to separate the
actual benefits from the body of rules and procedures contained in the directives. The
organization would then be in a better position to tailor-make its own employer policies in
consultation with the bargaining agent(s) at a later date. Note that the bargaining agent may
wish to bargain issues traditionally covered by the NJC directives. It may be a challenge for the
new employer to establish employer policies in these areas.
F. OPTING OUT PROVISIONS OF CLC
The opt-out provision is unique to the CLC in that it applies only to successor rights situations
where a part of the Public Service is transferred to an employer under CLC jurisdiction. The
PSSRA does not have such an opting-out provision. The Minister of the department effecting
the transfer is responsible for initiating a proposal for opting-out of successor rights for that
transfer.
The opt-out provision operates under the following terms:
 the undertaking is under CLC jurisdiction;
 the Minister responsible for the undertaking must make a public interest case to Treasury
Board Ministers and to the Minister of Labour; and
 the Minister of Labour makes a final recommendation to the Governor in Council, in
consultation with Treasury Board.
It should be noted that although the responsibility to operate under the appropriate labour
jurisdiction belongs to the successor employer, departments should be satisfied that an opt-out
proposal is in the public interest.
Public Interest
Departments are advised to consult with the Labour Branch of Human Resources Development
Canada should they consider using the opt-out clause. Rationales may include, but are not limited
to, meeting public policy objectives, satisfying government and employee interests and business
case arguments (e.g., risks to the viability of undertaking). Consultations with employees and
their representatives are recommended.
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Process
It may be possible for departments, depending on circumstances, to opt out of the application of
successor rights of the Canada Labour Code. Departments must persuade the Minister of
Labour to seek Treasury Board recommendation from the Governor in Council for approval of
opting out. This can be done in advance of the transfer date. The condition for this is that the
transfer date has been specifically determined and that the primary conditions for transfer have
been satisfied. The Order in Council cannot have a retroactive effect. Normally, the Governor in
Council reviews the proposals on a case-by-case basis, although a series of orders could be
sought where transfers are similar in nature. Separate Orders in Council and public interest
rationales are required in relation to each transfer.
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