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

Alienation of an undertaking

The alienation or concession in whole or in part of the undertaking, or the modification of its juridical structure, namely by amalgamation, division or otherwise, does not affect the continuity of the application of the labour standards.

1979, c. 45, s. 97.

Interpretation

The basic aim of this provision is to protect the continuity of application of all of the labour standards from which an employee may have benefited within the undertaking. See the interpretation in section 96 ALS for the notions of undertaking, alienation and concession.

The modification of the legal structure of the undertaking refers to amalgamation, division or any other change in its "organization". This would be the case, for instance, of an individual owner of an undertaking who decides to incorporate and to transfer his undertaking to this corporation; the undertaking has continued, but it is now part of the new corporation.

The aforementioned factors do not affect the continuity of application of the labour standards decreed by this Act. Indeed, one must avoid interpreting the Act respecting labour standards in the sole light of rules of civil law. The purpose of section 97 ALS is to rule out the effect of the basic civil law principle of the relativity of contracts, stated in Article 1440 of the Civil Code of Québec. In the Civil Code of Québec, this same principle is also ruled out by the text of Article 2097, which states that a contract of employment is not terminated by alienation of the enterprise or any change in its legal structure by way of amalgamation or otherwise.

Section 97 ALS ensures the continuity of standards despite a change of employers. Indeed, in this case, the contract continues and the employer assumes responsibility for it. The employment relationship continues as if there had been no change.

Clearly, the legislator wanted the application of labour standards to be attached to the undertaking, regardless of the person who administers it. It is the connection of the employee’s contract of employment with the undertaking rather than with the employer as an individual that determines the scope of the employee’s rights. An illustration would be the case of an employee who has been working for undertaking A for two years. Undertaking A is sold to undertaking B. In one year, this employee, once he has reached three years of service, will be entitled to 6% for his annual leave indemnity.

Uninterrupted service is part of the standards covered by section 97 ALS. For example, if an employee is credited with two years of uninterrupted service, the legislator wanted him to be able to exercise a recourse for dismissal without good and sufficient cause regardless of the changes in the structure or administration of the undertaking for which he has worked.

Given the current state of the jurisprudence, an employee may benefit from certain rights under the Act respecting labour standards, this despite a take-over in the event of the insolvency or bankruptcy of the undertaking during his employment. There is no break in the employee’s uninterrupted service when the undertaking never ceased its activities or its active operation.