Collective Agreements in a Business Transfer: What Happens to Them?

If the business you're buying or selling is covered by a collective bargaining agreement, a special — and often overlooked — rule in the Business Transfer Act applies, which the new owner should know from day one.

Short answer: An existing collective agreement generally transfers to the new owner. If the new owner doesn't want to continue it, the relevant union must be notified no later than 5 weeks after the takeover — otherwise the agreement is deemed tacitly accepted.

The starting point: the agreement transfers

Just as employees' individual employment terms generally transfer to the new owner, the same applies to any collective agreement the business is covered by. The new owner generally steps into the transferor's obligations under the agreement.

The 5-week deadline: how the new owner opts out

If the new owner doesn't want to be bound by the existing collective agreement, the relevant union must be notified. The deadline is 5 weeks from when the new owner knew or should have known that employees were covered by the agreement — but no earlier than 3 weeks after the takeover itself. If the new owner doesn't react in time, the agreement is deemed tacitly accepted. Even if the agreement is properly declined, individual employees' existing terms under the agreement still carry over as part of their individual employment, and the union can demand that the business rejoin the agreement — risking a subsequent labor dispute if that's refused.

Why does this matter for a buyer of a business for sale?

If you take over a business without being aware of this deadline, you risk being bound by a collective agreement you didn't actually want to continue — with whatever pay terms, working-hour rules and other provisions it may contain. If freeing yourself from an existing collective agreement matters to you, it's therefore essential to get it clarified and handled within the 5 weeks, not afterward.

What does this mean for you as a seller?

If your business is covered by a collective agreement, you should clearly disclose it to a potential buyer early in the process — ideally already during the due diligence phase. A buyer who only discovers the collective agreement late in the process may experience it as an unpleasant surprise, which at worst affects the price or the completion of the whole deal.

Does the rule apply regardless of how the deal is structured?

No. Like the rest of the Business Transfer Act, the rule assumes there's a transfer resulting in an actual change of employer — typically an asset purchase. If you instead sell the shares in the company, the employer is unchanged, and the collective agreement simply continues unchanged with the same company, without the 5-week deadline becoming relevant. See the difference in our article on whether the act applies to a share purchase.

Other contractual matters that often come along

Beyond the collective agreement itself, you as buyer or seller should also have a handle on any no-poach clauses in a business transfer, which can limit how freely employees can move between departments or competing functions after a change of ownership. As a buyer, collective agreement status is a standard part of a thorough HR due diligence — see the full checklist there.

Frequently asked questions

How long do I, as the new owner, have to decline a collective agreement?

5 weeks from the transfer. If you don't respond within the deadline to the relevant union, the agreement is deemed continued on unchanged terms.

Do I, as seller, need to disclose a collective agreement before I sell?

Yes, you should do so early in the process — ideally already as part of due diligence — so a buyer doesn't run into it as a surprise late in the negotiation.

Does the 5-week deadline also apply to a share sale?

No, because the company (the employer) is unchanged in a pure share sale, an existing collective agreement simply continues unchanged, and the rule about declining it becomes irrelevant.

Read the full walkthrough of employees' rights in our article on the Business Transfer Act, or book a no-obligation call if your business is covered by a collective agreement.