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Act respecting labour standards Chapter IV - Larbour standards (Section 39.1 to 97)

Chapter IV - Larbour standards (Section 39.1 to 97)

Division IX - Effect of labour standards (Section 93 to 97)

Section 96

Alienation of an undertaking

The alienation or concession of the whole or a part of an undertaking does not invalidate any civil claim arising from the application of this Act or a regulation which is not paid at the time of such alienation or concession. The former employer and the new employer are bound solidarily in respect of that claim.

1979, c. 45, s. 96; 2002, c. 80, s. 59.

Interpretation

This section protects the civil claim of an employee from changes that an undertaking undergoes following an alienation or concession in whole or part. Section 96 ALS does not grant a right but rather a manner of applying the right to submit a civil claim.

The legislator has not defined the word "undertaking". Based on the jurisprudence, the undertaking represents the structured coordination of a series of material and human elements established with a view to carrying out a project having an economic or productive aim. The jurisprudence regularly makes reference to this notion of undertaking within the meaning of labour law, as in the case of section 45 of the Labour Code.

For the application of section 96 ALS, it is necessary to show the continuity of the operation of the original undertaking by the new employer. The Supreme Court notes that the undertaking must be found to be substantially the same with the new employer. The permanence of the undertaking, despite the change of employer, will be based on the proof of sufficient identification of the elements making up its "organic" reality. According to the Supreme Court, it is necessary to ascertain the transfer of a right to operate as well as the similarity of functions that make up the usual activities of the undertaking.

The Court will analyze, in particular, the extent of the transfer of activities that used to be performed by the old employer, all of the commercial equipment, goods on inventory, services offered, name of the business, the common clientele served, the goals pursued by the corporations, the employees hired by the new corporation, the initial suppliers of the undertaking and those still present with the new acquirer, the employees still on the job as well as the main representatives and directors of the undertaking, etc.

The expressions "alienation" and "concession in whole or in part" of an undertaking are not defined in the Act. In light of the legislator’s objective to protect the employee, these expressions must be given a broad interpretation.

Alienation necessarily involves a transfer of ownership over a thing or a right. Usually, alienation involves a sale. The Supreme Court has concluded that there is a need for a legal tie between the former employer and the new one, be it direct or indirect. For example, this definition does not rule out the possibility that an intermediary, such as a receiver or trustee, intervenes in the legal relationship, but it confirms that the decision to alienate depends solely on the person who holds the ownership right, namely the owner of the undertaking.

A concession (in whole or in part) implies third-party management in the administration or the performance of the undertaking’s operations without regard for the "legal" ownership of this undertaking. The term concession must be interpreted broadly to include every form of subcontract: a legal writing whereby a person, the grantor, grants to another person, the grantee, the possession of a right or a specific advantage. The following cases have been assimilated with concessions of undertaking: situations of subcontracting where the grantee, in addition to performing duties similar to those performed by the grantor, receives a right to operate dealing with a portion of the grantor’s undertaking; cases of operating a franchise or reassignment of a temporary concession.

In the case of a partial concession, a certain degree of integration is maintained between the main undertaking and the portion of the undertaking granted. In such cases, the grantor may impose on the new employer restrictions in the performance of his work, as the grantor retains control over the operation of the main undertaking, from which the concession ensues. A tight control by the grantor and the very limited autonomy of operation of the grantee are not obstacles to the transmission of the undertaking.

A civil claim means any civil debt, incurred or to be incurred, relative to the payment of an amount owing by the former employer in application of the Act respecting labour standards. Section 96 ALS refers to civil claims arising prior to the alienation but not yet paid at the time of the alienation or the concession of the undertaking. Consequently, the first employer is not responsible for civil claims ensuing from facts that occurred after the change of employer.

Through the use of the terms "Former employer and new employer" in section 96 ALS, one must understand that the debt is linked to the undertaking. The undertaking does not acquire the status of legal personality. That is why it is up to the employer who owns the undertaking to assume the obligations that arise from section 96 ALS.

An employee has a recourse against the former employer and the new employer. The acquirer or the grantee of an undertaking becomes jointly and severally responsible with the seller or the grantor for an unpaid claim. This principle of joint responsibility is also recognized in Article 1525 of the Civil Code of Québec by way of a presumption within the context of the operation of an undertaking. The Commission may, on behalf of the employee, institute proceedings against the former employer, the new employer or both, for the total amount of the debt.

The notification of an action against an employer having a solidary obligation interrupts the prescription of the recourse against the other employer, if the judgment concludes that each party is jointly responsible (see Article 2900 of the Civil Code of Québec).

On May 1, 2003, the reference to a sale by court order was removed. A sale by court order and any sale assimilated therewith is no longer an exception to section 96 ALS. This is an amendment to ensure concordance with section 45 of the Labour Code.