Old Motors and New Motors are car dealerships that operate in the same community. Although they sell different brands and styles of cars, they are both affiliated with the same auto manufacturer. The two dealerships are located close to each other on different sides of the same street, which is the town’s main commercial street. Old Motors has been operating in the community under the same name since the 1960s, and its repairs and parts employees have been unionized since the late 1960s. New Motors has been in operation for approximately the same length of time, although it has changed names and owners several times during its existence. None of its employees are unionized. 

In late 2008, the North American economic meltdown caused the parent company of both dealerships to go into bankruptcy and consequently to restructure its operations. The restructuring plan included eliminating several brands whose products were seen as duplicates of more popular products under the company’s other brands. The restructuring plan also included closing dealerships that carried the cancelled products, or that were in direct competition with another of the company’s dealerships. In early May 2009, all of the company’s Canadian dealerships were informed that by the end of the month they would either lose their franchise with the parent company or have it confirmed. It was likely that either Old Motors or New Motors would have its franchise withdrawn. The two dealerships were located close to each other in a relatively small community. Both sold new and used cars, and provided service, including warranty repairs, for the company’s products, in addition to providing general auto repairs. New Motors was the dealership that carried one of the brands that was being cancelled; all of the brands sold by Old Motors were being continued. The decision on franchising was the responsibility of the company’s executives at its head office; neither dealership had any input into or influence on the decision.

At the end of May, the company decided that New

Motors would retain its franchise and that Old Motors’ franchise would be withdrawn. It seemed that this choice was made because New Motors had been selling considerably more new vehicles than Old Motors. Old Motors, along with other Canadian dealerships whose franchises were being cancelled, was offered a “wind-down” agreement that allowed it to operate until the end of 2009, while selling its inventory and performing warranty work. However, it would not be provided with any new inventory. There was nothing in the wind-down agreement that would have prevented Old Motors from continuing to operate as an independent business selling used cars or providing general auto repairs. However, there was a financial incentive offered for signing the wind-down agreement, and Old Motors’ owners decided to sign the agreement. The company encouraged franchises that were closing to sell their inventory or any other assets to dealerships that were remaining in business, and Old Motors thus entered into negotiations with

New Motors to sell virtually all of its assets.

The sales agreement that the two dealerships settled on sold New Motors all of Old Motors’ new car inventory, most of its used car inventory, all of its shop equipment and parts, and the rights to use Old Motors’ building. Old Motors’ building was owned by another company operated by Old Motors’ owner; the agreement leased the building to New Motors for five years, with an option for New Motors to purchase the building during the first four years of the lease. Using the Old Motors building was important to New Motors because the Old Motors building was considerably larger than New Motors’ building, and New Motors wanted to expand its business. New Motors also anticipated that it would need to use both buildings to accommodate the increased business resulting from Old Motors’ closing. New Motors planned to keep its used car sales and collision repair shop in its current building, and to move new car sales and auto repairs to the former Old Motors building. Both buildings would be rebranded with the New Motors name, with the name modified to include all the product lines that New Motors would now be representing.

At the start of June 2009, Old Motors laid off several of its repair shop employees, and encouraged them to apply for work at New Motors. Several Old Motors mechanics were interviewed at New Motors and a few were hired.

However, the majority of employees in New Motors’ auto repair facility had always been New Motors employees.

Under the collective agreement, the unionized Old Motors employees who were laid off continued their status as employees and could be recalled to work under specified circumstances.

New Motors carried out its plans to move the auto repair facility into the former Old Motors building; however, there was a delay in changing the signs, so for several months the building had the permanent Old Motors sign with a temporary sign indicating that the building was now part of New Motors. In mid-July 2009, Old Motors officially became part of New Motors’ operations. At the same time, all of the rest of Old Motors’ staff were laid off.

As part of the closure and sale of Old Motors, New Motors acquired Old Motors’ telephone number, although New Motors’ owner told the board that he was unaware that this had happened. New Motors also acquired Old Motors’ customer list, although it appears that the list was supplied by the parent company and not by Old Motors itself. Several months after the completion of the sale, New Motors used the list to send written notice to Old Motors’ customers that sales and service were now being carried out by New Motors in Old Motors’ former location.

The Union’s Position

The union argues that the certification that applied to the repairs and parts employees at Old Motors should be applied at New Motors as a successor employer. It argues that, under a mutually signed sales agreement, New Motors is operating in Old Motors’ building, carrying out the same functions and type of business, and doing so under a name that incorporates elements of Old Motors’ former name.

The union believes that there was clearly a transfer of an existing business and its assets in the sale. It also argues that the sale was a transfer of active assets and not the transfer of the remains of a closed or inactive business.

The Employer’s Position

The employer argues that decisions in other cases have established that successor ship is not automatic when a franchise closes and another franchise of the same company purchases its assets. It points out that Old Motors’ closure was a decision of the parent company that New Motors did not participate in. It also argues that decisions in other cases have established that an ongoing business operating in the same location as a former business does not automatically establish successor ship.