In a highly anticipated decision, the British Columbia Labour Relations Board (“BCLRB”) ruled yesterday that Target Canada’s takeover of a Zellers store in Burnaby, B.C. did not make the U.S. retailer a successor employer under B.C.'s Labour Relations Code.

In 2010-11, Target Corp. announced its expansion into Canada. As part of that expansion, Target entered into an agreement with Zellers to take over hundreds of leases across the country. Among them was a Zellers store at the Brentwood Mall in Burnaby, a unionized location that is now scheduled for closure (and subsequent takeover) in March, 2013.

The facts of the leasehold and takeover are complicated, but put simply, the question before the BCLRB was whether the takeover of the Zellers physical space (or its position as a principle discount retailer in the mall in the event that a new space was built for Target), coupled with the takeover of some of the store’s pharmacy records and merchandising arrangements constituted a sale of all or part of the Zellers business such that bargaining rights at the location would attach to Target.

The BCLRB held that Target was not a successor employer at the Brentwood Mall location. It held that the physical takeover of the space, the takeover of pharmacy records and any brand waivers, did not give rise to a continuation of the business. And while employees may be doing the same functions for both employers, this too was not sufficient to establish a continuity of Zellers’ business given the Target brand’s “unique and distinctive” presence in the retail industry. In short: Target was not acquiring a business, it was simply bringing its own well-established business to Canada. All it needed Zellers for was the space.

This decision could expand a purchasor’s ability to argue against a successorship application based on a “change of character” of the business, thus making brand presence and awareness an important consideration for established retailers looking to enter the Canadian market.