Are employees entitled to share ownership?

One of the unusual industrial-relations issues to appear lately brings up possible obligations of employers in relation to employees when someone buys over the shares of a company and continues to run it with the original employees.

Under our legislation, as stakeholders know, the Industrial Relations Act, in Section 48 (3) states: "For the purposes of this section, any question whether a person is a successor or assignee of another shall be determined by the Court from all the circumstances in accordance with good conscience and the principles of good industrial relations practice and shall be binding…on any successors to, or in the case of an employer, assignees of the employer who entered into the first registered agreement with the recognised majority union.”

This makes it clear that where one company buys or otherwise takes over the ownership of another company, the second company takes over the certification of the recognised majority union and any collective agreement signed between the first company and the union.

The resultant relationship, with whatever problems or issues arise, will have to be sorted out between the new owner and the union.

In other words, if Gopaul Lands Ltd buys over the shares of Seapaul Enterprises Ltd, when Mr Seapaul Snr dies, or the bank closes it down for bankruptcy, or the second generation of Seapauls have moved to Canada and are not interested in keeping it going, the arrangement and relationships between company and union are carried on at a corporate level, because the union itself is a corporation, just as the company is. Often, providing Gopaul Lands takes over Seapaul Enterprises as a going concern, and it continues to operate in the same place, in the same way with the same employees, the employees may not even be aware the ownership has changed.

But, as events in the energy industry have shown us over recent years, it is not always that simple.

Somehow, legal tangles always arise when employees’ rights under common law arise, because employees cannot be bought and sold along with machinery, stocks, acreage and other assets. They should have thought of that.

Illustrating this, a case arose some years ago – a generation or two, depending on how you divide up 20 years – when a foreign construction company got a contract to build a large edifice in Central Trinidad.

Point Lisas comes to mind. It became unionised and duly negotiated a collective agreement covering all employees. Once the building was satisfactorily done, the company went back to from whence it had come. Contract finished.

Twenty years later, said construction company returned to start another contract for a different organisation, and was astonished when the union it had once known showed up in its offices to claim bargaining rights.

Under our legislation, once a union has recognition. it does not lapse from inaction. Once recognition is granted. the only way it can be withdrawn is by being taken over by another union. It matters not that after 20 years all the employees are new, and none of them members of the old union – whether they want it or not, the union still has recognition status.

One question that has not been ruled on in the court yet is whether an employee, apart from earning wages and salary and other benefits, such as vacation, pension and medical benefits, without it actually being stated as part of their employment contract, also automatically earns a “share ownership benefit” due to their contribution to the growth and development (or a deduction in loss of share ownership in the case of bankruptcy) of the company they work for. This is not covered by either common law or legislated law here.

In a recent case in Canada, however, in a dispute between Chin v Beauty Express Canada Ltd, the Ontario Supreme Court of Justice considered just that issue, although from a different angle.

In that case the aggrieved worker had worked for the first company for 14 years, until it went bankrupt, and six years for the second company, which was not in any way connected to the first (in other words, not a successor or assignee company, in TT terms). But the employee was doing the same things and reporting to the same supervisor in the same location, which in TT law would possibly qualify it as being a successor company, although not under the Employment Standards Act (the ESA) in Ontario.

When the employee was terminated by the second company, with no cause being given, after 19 years of cumulative service (in Canada they can do what is called "at will" hiring and dismissal), she demanded the benefits she would get for the entire 19 years of service from her second employer, not just the last seven, during which she had actually worked for him.

The employer protested that he had only employed her for seven years, and therefore owed only such notice and severance benefits as seven years would have accumulated. In Ontario, statutory severance payments are due after the employee has worked for five or more years cumulatively, not one year as applies in TT. Notice there is calculated on one week’s pay for each year of service.

She was granted 11 weeks' notice in addition to severance pay, as the court was not willing to give credit for her service to the previous owner in calculating notice, but acknowledged that the skills and experience she had accumulated during that period saved the new employer the considerable expense he would have incurred if he had had to hire someone without that experience and train them himself.

The court said that that previous training and expertise “should be well reflected in the notice required at termination,” as it benefited the second employer.

Different strokes for different folks.