You think that it would be more efficient for some of your activities to be contracted out, but assume that this would be impossible because you’re unionized. Think again. Recent changes to the Québec Labour Code may be of assistance.
First Step: The Collective Agreement To determine whether you can subcontract at least some of your activities, the first step is to analyze your collective agreement to see whether it contains any provisions that stand in the way of your plans. There are many different types of clauses that deal with subcontracting, and each must be studied carefully.
If your collective agreement does not contain such a clause, or if the clause in question allows you to subcontract subject to certain restrictions (e.g., on condition that no unionized position is abolished), then you can move on to the second step of the analysis, which is the application of Section 45 of the Labour Code.
Review of the Recent Changes
Section 45 has been the subject of discussion and debate for more than 40 years. It provides that a certification and the collective agreement transfer to the person who takes over the operation of a business when it is transferred in whole or in part. The certification and collective agreement are also passed on to the new employer if (i) the business is sold, (ii) the business merges with a competitor, (iii) there is a change in ownership or (iv) the activities are split between two parties.
Section 45 can therefore be an obstacle in certain commercial transactions, since a potential buyer may not necessarily want to take over the previous owner’s collective agreement.
One of the changes to Section 45 is that the certification and the collective agreement will not follow where the transfer of part of a business does not involve transferring to the subsequent employer, in addition to functions or right to operate, most of the elements that characterize the business involved. Effect of the Recent Changes
When these changes were adopted in February 2004, many union representatives feared that employers would take advantage of them by increasing subcontracts to nonunionized employers. However, the fact that only a handful of decisions have been made on these new provisions shows that these fears of abuse were misplaced. To fully understand the impact of the changes, it’s helpful to review some of the decisions dealing with them.
In the first decision applying the new provisions,1 the employer contracted out some of its shipping routes to independent contractors. Because employees or equipment had not been transferred, the Commission des relations du travail du Québec (the Commission) decided that the mere transfer of functions and the right to operate the business fell within the new exception. Consequently, no certification or collective agreement was transferred to the subcontractor.
Subsequent decisions have been even more enlightening. In a case involving a business in the food market industry,2 the employer transferred the verification of its orders to a subcontractor without transferring any employees, equipment or know-how. Interestingly, the subcontractor occupied a space in the employer’s warehouse that was exclusively reserved for him. The relationship was characterized as a contract for service because the employer had transferred only the verification of the orders. As this was only a small part of the employer’s operations, the Commission did not find any justification for concluding that the certification had been transferred to the subcontractor.
Finally, in a case that involved the subcontracting of cleaning operations on school grounds,3 the Commission again held that where none of the elements that characterize a business are transferred, other than the right to operate the business, there will not be sufficient grounds to transfer the rights and obligations of the union to the subcontractor. Furthermore, where no employees are transferred, this seems to be a decisive element, even if equipment has been transferred. This decision was confirmed on judicial review.
Impact on Your Business
The case law on the changes to Section 45 is still being developed. However, it’s already well-established that unionized employers may subcontract a part of their activities without the certification and collective agreement being transferred to the subcontractor, especially where no employees are transferred. This can result in many interesting opportunities for your business, whether you are a unionized employer or a subcontractor searching for new contracts.