Buying equipment, hiring employees of seller doesn’t make a successor employer: Board

New company served different customer and only operated one part of former company's equipment
|Canadian Employment Law Today|Last Updated: 04/30/2014

A company that purchased another company’s equipment, and hired a few of the first company’s workers, is not a successor employer, the British Columbia Labour Relations Board has ruled.

National Glass was a glass products company that operated a plant in Langley, B.C. The workforce at the plant was unionized.

On March 20, 2013, National announced it would be shutting down its production lines for laminated glass. Its tempered glass line would be shut down in April, except for limited production. As a result, all but seven employees were laid off. The remaining employees worked in shipping and distribution, as National was continuing with its distribution business only.

National sold its glass lamination equipment through an auction house, and the equipment was removed from the plant. After the tempered glass line shut down in April, that equipment was sold in July to Anneal Tempering.

The glass tempering equipment was large and heavy, and it was anchored to the floor of the plant. Not wanting to deal with a costly and complicated process of moving the equipment and rewiring it, Anneal leased the space in the plant from the plant’s owner, a third party. The glass tempering equipment remained in place and Anneal operated it, creating tempered glass for a single customer — a company related to Anneal.

The remaining distribution employees for National also continued to work in the plant, with the spaces for the two companies separated by chicken wire. Anneal employees used a different entrance, and neither had access to the other side. Anneal hired three former National employees to operate the glass tempering equipment.

The union for National employees filed an application under the B.C. Labour Relations Code for a declaration that Anneal was a successor employer to National and was bound by the collective agreement it had with National. It argued Anneal purchased the tempered glass line, which was a “severable and distinct part of National’s business and a functional economic vehicle in itself.”

Anneal also used National workers to continue operating the tempered glass line in the same location, the union said.

The board first examined the nature of National’s business. It found National produced and distributed glass products — which it fabricated at the plant using the glass lamination line and glass tempering line — to various customers. Most of National’s employees worked in production, with a few in distribution. When the company ceased production, it sold both lines, retaining only its distribution employees.

The board found Anneal purchased National’s glass tempering line so it could temper glass for its sister company. It didn’t purchase any of National’s “customer list, accounts receivable, goodwill, logo, trademark or existing contracts.” The glass tempering line was “merely one piece of equipment among several” National used and sold, said the board.

The board also found this lack of connection between the companies prevailed even when Anneal set up shop in the plant, as its area was separately leased and separated from National’s remaining employees. Additionally, Anneal didn’t produce glass for any of National’s clients.

The board ruled Anneal and National were separate and unrelated, and the transaction between them was only a sale of equipment, not a continuation of National’s business. Anneal was not a successor employer to National. See National Glass Ltd. and Anneal Tempering Inc., Re, 2014 CarswellBC 649 (B.C. Lab. Rel. Bd.).