Employer-owned contractor is a successor employer, court rules

Employer closed plant and contracted out operations to new company it created to get out of collective agreement
By Jeffrey R. Smith
|Canadian Employment Law Today

A controversial 2005 decision by the Alberta Labour Relations Board, which allowed a company to get out of its collective agreement has been struck down by the Alberta Court of Appeal.

Finning Canada repairs and overhauls heavy equipment components from operations of its parent company, Finning International, a dealer of Caterpillar equipment in Alberta, British Columbia, Yukon and part of the Northwest Territories.

Finning’s Component Rebuild Centre (CRC) in Edmonton was becoming obsolete and the company decided to reorganize its CRC operations in 2003-2004. Finning set up another company, OEM Manufacturing, through a series of legal transactions in which “Finning would not be publicly disclosed as the registered shareholder.” Following this move, Finning announced it would close the Edmonton CRC plant and lay off its employees in March 2005. It would then contract out its work to OEM according to a customer services agreement. As part of the agreement, OEM would be the exclusive supplier for certain services in Finning’s territory but had the right to provide services to other customers. Finning would also invest in a new component rebuilding facility which would be independently operated by OEM.