Anonymised, illustrative composite. The incumbent lost the contract on retender. No business changed hands, no assets moved, no shares traded. Canada Labour Code s.189(1.1) inherited eleven years of service into the new contractor anyway.
At a glance
A federally regulated airport authority put its ground-handling services contract — ramp driving, baggage handling and aircraft marshalling for one terminal — out to retender after six years with the same contractor. The incumbent, a national ground-services company, lost the bid on price to a competitor with a lower cost structure. The winning contractor signed a new services agreement directly with the airport authority; it had no contract, no asset purchase agreement and no relationship of any kind with the losing incumbent. Nothing was bought, sold, leased or transferred between the two ground-services companies.
The winning contractor hired eleven of the incumbent’s ramp drivers who had worked that specific terminal, averaging 8.3 years of service on the route once earlier retenders at the same terminal were counted in. Its bid model priced their labour at the new contractor’s own standard ramp-driver rates and its own standard entitlements — the ordinary assumption when hiring people who have never worked for you before.
That assumption is wrong for a federally regulated retender, and it is wrong by the plain words of the Canada Labour Code. s.189(1.1) provides: “If, due to a contract being awarded through a retendering process, a second employer becomes responsible for carrying out any particular federal work, undertaking or business, or part of one, that was previously carried out by a first employer…is, for the purposes of this Division, deemed to be continuously employed with one employer” — reaching every employee working in or in connection with that operation, both before and after the retendering.
No sale, no transfer, no contract between the two ground-services companies is required — the retendering itself is the event the subsection deems continuous. Every one of the eleven drivers hired by the winning contractor to work the same terminal is, for the purposes of Part III’s individual termination provisions, deemed to have been continuously employed by one employer straight through the change of contractor, carrying their years with the losing incumbent forward as if the winning contractor had employed them the whole time.
Take the driver with the longest service: 11 years on the route, carried forward under the deeming rule as 11 years of continuous federal employment with the winning contractor from day one. Under CLC s.230(1.1), notice of termination scales up to a maximum of eight weeks at eight or more years of continuous employment — so that driver, on any future termination without cause, is owed the full eight-week maximum from the day the new contractor hired them, not from a clock that restarts at zero. Under s.235(1), severance pay is the greater of two days’ wages per completed year of continuous employment or five days’ wages — 22 days’ wages for that same driver, against a new employer who had never issued them a paycheque before the contract changed hands.
Across all eleven drivers at 8.3 years’ average service, the winning contractor inherited roughly 91 years of combined continuous service it had no visibility into when it priced the bid — a liability with no purchase price to offset it, because nothing was purchased.
The deeming rule has one hard boundary, and it is a clock rather than a document. s.189(1.2) provides: “Subsections (1) and (1.1) do not apply if the employee’s first day of employment by the second employer is more than 13 weeks after the day that is the earlier of (a) the employee’s last day of employment by the first employer; and (b) the day on which the federal work, undertaking or business is transferred or the first day the second employer carries out the federal work, undertaking or business, as the case may be.” A driver who takes a gap of more than 13 weeks between the old contractor and the new one breaks continuity entirely; a driver hired within that window — the ordinary case on a retender, where the new contractor typically starts the day the old one stops — carries every year forward.
Two further subsections round out the mechanism without changing the result here. s.189(1.4) confirms that any gap between the two jobs, up to the 13-week limit, simply is not counted toward the employee’s period of continuous employment — it neither breaks continuity nor adds to it. And s.189(1.5) and (1.6) prevent double-counting: if the losing incumbent already paid statutory notice or severance on the transition, the winning contractor is not required to pay it again for the same period of service.
The winning contractor recalculated its entitlement exposure for all eleven drivers against their full retendering-inherited service, rather than treating them as new hires, and confirmed with the losing incumbent that no termination notice or severance had already been paid on the transition — which would have offset the new contractor’s own future obligation under s.189(1.6). The bid model for the next contract renewal built in the deemed-continuity liability as a line item, rather than pricing ramp labour as if every hire started a service clock at zero.
Treating the eleven drivers as new hires with no prior service would have understated the winning contractor’s eventual termination liability by the full value of their retendering-inherited years — a defect invisible until the day one of them was actually let go, at which point the deemed continuity applies regardless of what the contractor’s own payroll records show, because the Code measures the employee’s continuous service, not the new employer’s hiring paperwork.
The tell is in the word “retendering” itself, which sounds like the opposite of a sale and reads, to anyone thinking in ordinary M&A terms, like the one scenario where continuity obviously should not apply — nothing was bought. Federally regulated labour continuity does not track a purchase; it tracks whether the same federal work, undertaking or business kept being carried out at the same place, under a different name, without more than a 13-week gap. A services contract lost on price is exactly that.
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