Ontario Labour Relations Board
[1981] OLRB Rep. May 581
1751-80-R: United Food & Commercial Workers' International Union, Local 633, AFL-CIO-CLC, Applicant, V. Vaunclair Meats Limited, Respondent, v. Group of Employees, Intervener.
BEFORE: R. O. MacDowell, Vice-Chairman, and Board Members H. J. F Ade and M. J. Fenwick.
APPEARANCES: H. Caley for the applicant; W. Herridge, Q. C'. for the respondent; A. Wilkinson for the interveners.
DECISION OF THE BOARD: May 4, 1981
I. The name: "Vaunclair Meat Limited" appearing in the style of cause of this application as the name of the respondent is amended to read: "Vaunclair Meats Limited".
This is an application under section 5 of The Labour Relations Act. The applicant union contends that "the business", or " part of the business", of Vaunclair Purveyors Company Limited has been transferred to Vaunclair Meats Limited. The union had an established collective bargaining relationship with Vaunclair Purveyors. It is argued that Vaunclair Meats must now recognize these bargaining rights.
The first question which must be determined is whether Vaunclair Meats can be said to have acquired all or "part" of the business of Vaunclair Purveyors. If it has, it is required to recognize the union's bargaining rights. In order to answer this question, however, it is necessary to set out something of the predecessor's history, and the business context in which it operated. The evidence before the Board was that of J. 0. Hurlburt, who was corporate secretary and executive vice-president of Vaunclair Purveyors, and is now corporate secretary and treasurer of Vaunclair Meats.
A "purveyor" is the last link in the meat processing chain prior to distribution of the product to the hotel, restaurant and institutional (HRI) trade. A purveyor makes the meat "oven-ready" by fabricating and, if necessary, portioning both solid meat, and ground meat products. The primal rib is purchased from the packer, reduced in size (i.e., removing fat and bone), trimmed to be suitable for roasting or "steaking" and, portioned into cuts of a predetermined portion weight. This process involves a fabricator butcher who takes the primal cuts and reduces them to either an oven-ready or portion-ready state; then if they are also to be portioned by the purveyor, the "portion-ready" cuts are given to a portion-butcher who reduces them to the specified portion weight. The portion-butcher is a highly skilled tradesman who must perform his task with a considerable degree of precision and accuracy. After the product leaves the hands of the portion-butcher it goes to the "packer" who, as the name suggests, wraps the meat, puts it in boxes, and labels the packages. These are then sent to the cooler area where they remain until they are delivered to the HRI customers.
Fro ii the early 1950's, Vaunclair Purveyors was part of a corporate family controlled by Ben Winbaum (now president of Vaunclair Meats and formerly president of Vaunclair Purveyors) and Donald McKeown. This corporate family included Winco Limited. Winco ran a r umber of cocktail lounges, snack bars,and a chain of restaurants bearing the now familiar names of "Steak N' Burger" and "Rib of Beef". Hurlburt became active in the organization ii 1956, and eventually became a shareholder, director and officer. Control of the two companies remained in the hands of a common "control group" of shareholders.
Because of the close corporate links with Winco Limited, Vaunclair Purveyors supplied one hundred per cent of Winco's requirements. These requirements accounted for about forty percent of the Vaunclair Purveyors' sales. The remaining sixty per cent involved supplying meat to customers such as Ed's Warehouse, the Three Crowns Restaurant chain, Franklin Butchers, and Jim B's Food Limited which runs the Gentleman Jim Restaurants. Like Winco, some of these customers had corporate relationships with the owners of Vaunclair Purveyors, and in consequence were required to purchase their meat from that company. Vauriclair Purveyors operated from 50 Upjohn Road in Don Mills until June 1979, when it moved to a new plant on Milliken Blvd. in Scarborough.
In July, 1976, the Cara organization acquired control (50.01%) of both Winco and Vaunclair Purveyors. In acquiring Vaunclair Purveyors, Cara initially sought merely to cement the source of supply to its new acquisition (Winco); but later, Vaunclair Purveyors began to supply the needs of other Cara operations. Cara had its own established restaurant business providing food services in railway terminals, airlines and commercial complexes throughout Ca riada. Vaunclair Purveyors began to supply these outlets, but still kept many of its "non-Winco" and "non-Cara" customers. The volume of business with these customers remained the same; however, this volume was a much smaller proportion of the now significantly expanded business.
In 1977, Cara acquired Food Corp. which, inter alia, ran the "Harvey's" and "Swiss Chalet" chains Shortly thereafter, Vaunclair Purveyors began to supply the ground meat products used in the Harvey's operation. By this time, some ninety-three per cent of the gross sales of Vaunclair Purveyors involved Cara, Winco, or related companies. Winco accounted for some twenty to twenty-five per cent. The "non-Cara" customers which had once been a significant part of the Vaunclair Purveyors' business, were reduced to some seven per cent of the total business.
In July 1976, when Cara acquired control of Winco and Vaunclair Purveyors, there were approximately forty employees at the Upjohn Road location. This number was increased to about fifty when the company moved to its new plant on 95 Milliken Blvd. in Scarborough. The employee complement increased to about seventy when the plant was operating at its peak in or about January 1980, but had declined to between forty and fifty employees when it finally shut down on September 30, 1980.
The move to the new plant had been planned for several years and had been based upon projected; ales volumes which, in the result, did not materialize. The company had even built the plant a little bigger than necessary, in order to accommodate anticipated growth; but instead of growth, it faced decline. The general stagnation of the economy had an impact on the HRl trade, while increases in beef prices prompted customers to diversify their menus and reduce the number of high cost meat items. The delay in building the plant significantly increased its capital costs, and start-up expenses were much greater than anticipated. Finally, at about the same time, interest rates began to escalate. As a result, in the fiscal year ending March 31, 1980, Vaunclair Purveyors lost almost one half million dollars. This loss absorbed virtually all of the company's retained earnings, and it was eventually decided that the only solution was to shut down the operation in order to avoid further losses.
II. On August 22, 1980, employees were notified of an impending shut down which was scheduled to take place on September 30. They were given three weeks' pay in lieu of notice, and efforts were made to find them alternative jobs in other firms. (About fifty percent of the employees were successful in finding other jobs after the plant closed on September 30.) These terms were not entirely acceptable to the employee group and, after a brief wildcat strike, were improved. As part of the settlement of that strike the employees through their union agreed to continue working until September 30, and to execute a written release of all further claims on the company which was also to be signed by a representative of the trade union. It is not clear whether such releases were, in fact, executed.
Coincidental with the shut down of the operation, was a sale of the minority shareholders' holdings to Cara. Cara thus became the solo owner of Vaunclair Purveyors; but, by this time, it was acquiring a corporate vehicle with no ongoing economic activity. The only asset of Vaunclair Purveyors was its interest (through a joint venture) in the land, premises and immovable equipment at the 95 Milliken Blvd. location. Much of the fixed equipment could not be economically removed (refrigeration equipment for example), and Cara apparently hoped to lease the premises to another meat producer or other enterprise which could profitably utilize it. Cara had no intention of continuing in the meat business, and released Vaunclair Purveyors from the non-competition covenant by which it was originally bound. Cara also permitted the original principals of Vaunclair Purveyors (later the principals of Vaunclair Meats) to use the "Vaunclair" name and logo. The current Vaunclair delivery vehicles continue to carry that name.
Hurlburt and Winbaum recognized that the key employees of the Vaunclair Purveyors organization represented a human capital asset which would be lost if the organization were entirely broken up. Hurlburt and Winbaum had initiated a number of "new" businesses over the years, and they began to explore the possibility of a smaller new venture built around this nucleus. After some market research to determine its viability, they decided that they could continue to service many of their old "non-Cara related" customers through what Mr. Hurlburt described as a meat products "distribution house".
The basic difference between a traditional purveyor and a "distribution house" lies in the elimination of much of the fabricating which would ordinarily be done by the purveyor. In a distribution house operation, the firm attempts, as much as possible, to purchase meat products which have already been through the fabricating stage and can then be packaged and sold to the customer without significant alteration (i.e., cutting, trimming, etc.). While virtually all of the meat passing through Vaunclair Purveyors was processed, only about fifteen per cent of the meat passing through Vaunclair Meats is processed - and most of this involves portioning or mechanical tenderizing. Vaunclair Meats hopes that even this proportion will be reduced, although it will not be eliminated entirely. The production and portioning of ground meat was to be (and is) a minor part of the new operation - in marked contrast to the situation prevailing when Vaunclair Purveyors was the principal supplier for the Harvey's hamburger chain. On the other hand, the two skilled "portioning butchers" hired by Vaunclair Meats are performing very much as before, and the product still has to be wrapped, packaged, labeled, dated, stored temporarily in the freezer area, and delivered, -again, in much the same manner as before. Of course, the purchase of products which have already been prefabricated, and the significant reduction in volume, have reduced the need for employees, and have made it necessary for the employees of Vaunclair Meats to be "multipurpose individuals" - that is, each performing a range of functions which in the larger, Vaunclair Purveyors organization would have been performed by several individuals in different job classifications. The fact remains, however, that the old customers of Vaunclair Purveyors frori the pre-Cara and pre-Winco days continue to be served very much as before. Indeed, upon the shut down of Vaunclair Purveyors, the new entity, Vaunclair Meats, acquired approximately one hundred and seventy thousand dollars worth of meat inventory which it used to continue to supply these customers before its own organization got fully underway. As Hurlburt put it, there was a hiatus in production, but no hiatus in service.
Thet is a substantial similarity between the principals and officers of Vaunclair Purveyors and Vaunclair Meats. Winbaum and Hurlburt were the key "non-Cara" shareholders of Vaunclair Purveyors, and it is they who control Vaunclair Meats. Ben Winbaum is the chairman and president of Vaunclair Meats, and was chairman and president of Vaunclair Purveyors. Jack Hurlburt is secretary and treasurer of Vaunclair Meats, and was secretary and 'Ace-president of Vaunclair Purveyors. Erich Poehlman was vice-president of production of Vaunclair Purveyors and holds the same position in Vaunclair Meats. Violet Szentkuthy was "office manager" for Vaunclair Purveyors, and in Vaunclair Meats has the title of "comptroller". Indeed, with the exception of a salesman hired after these proceedings began, all of the employees of Vaunclair Meats are former employees of Vaunclair Purveyors -although, as we have already pointed out, their functions may have changed somewhat in the new circumstances. Fred Wilkinson who was a driver with Vaunclair Purveyors, remains a driver with the new company, and also performs some more general duties. He is assisted in this by Steve Roth, who was a foreman in the shipping and receiving department of Vaunclair Purveyors. Violet Szentkuthy, who was the office manager of an office of five employees in the Vaunclair Purveyors' organization, is the single office and clerical employee of Vaunclair Meats. J. Argiris and L. Kataris, who were portion-butchers with Vaunclair Purveyors, perform the same function for Vaunclair Meats. (Erich Poehlman, the vice-president of production, now also does more general duties, such as fabricating meat products which do not meet the company's delivery specifications.) In addition, the new venture has fired certain temporary or part-time employees, or were former employees of Vaunclair Purveyors. Mr. Hurlburt testified that the new company has tried to recruit former employees of Vaunclair Purveyors but, since the venture is still somewhat speculative, has been reluctant to ask former employees to leave settled situations.
The new venture continues to operate from the Milliken Blvd. location utilizing approximately twenty per cent of the space formerly used by Vaunclair Purveyors. Vaunclair Meats pays a monthly rent either to Vaunclair Purveyors or directly to the Cara organization. The Board accepts Mr. Hurlburt's evidence, however, that the new company originally intended to seek other premises, and may still do so when this proceeding is completed.
As we have already mentioned, many of the customers of Vaunclair Meats were customers of Vaunclair Purveyors both before, and after, the Cara take over. Twenty-five of the thirty customers of Vaunclair Meats are the same. Five are new. Seventeen were, and are, controlled by the Winbaum-Hurlburt interests, so that they are required to purchase their meat requirements from Vaunclair Meats as they previously were from Vaunclair Purveyors. These customers are being served in much the same manner as before, although because of the significant decrease in the volume of business of Vaunclair Meats, their relative significance to Vaunclair Meats is more closely analagous to what it was in the years prior to the Cara take over, when they made up some sixty per cent of Vaunclair Purveyors' business. Approximately eighty per cent of the business of Vaunclair Meats is accounted for by these old customers. The seventeen "controlled" customers account for fifty per cent of the poundage of meat products produced. There has, however, been a considerable change in the product mix. The Harvey's chain required significant volumes of ground meat products and these products accounted for a large proportion of the sales of Vaunclair Purveyors (whether measured by production or dollar value). Vaunclair Meats, on the other hand, produces only a very small proportion of ground meat products as a service and convenience to its core customers. Ground meat products are not a significant component in its production process or revenue base.
Vaunclair Meats was incorporated at about the same time as the Vaunclair Purveyors' operation shut down. There was no hiatus for the five or six employees who became part of Vaunclair Meats. They received their severance pay and, presumably, terminated their employment with Vaunclair Purveyors on September 30 with the rest of the employees; however, they continued to work in the same location as the new organization got underway and appeared on its first payroll in mid-October. As we have already mentioned, the former customers of Vaunclair Purveyors, which became the customers of Vaunclair Meats, received deliveries to the account of Vaunclair Meats out of meat products which had been acquired from the inventory of Vaunclair Purveyors. The "lion's share" of the some 1.2 million dollars worth of inventory went to the F. G. Bradley Company; however, the approximately ten per cent of the inventory acquired by Vaunclair Meats was sufficient to serve its customers while it was getting underway.
The evidence concerning the actual value of equipment acquired from Vaunclair Purveyors is somewhat unclear. Hurlburt testified that when Vaunclair Purveyors moved to the 95 Milliken Blvd. location almost all of its equipment was purchased new, but it remains uncertain what value should be placed upon that portion of this equipment which was transferred to Vaunclair Meats a little over a year later. The Board heard evidence of some sixty-six thousand dollars in vehicles and one hundred and seventy-nine thousand dollars in meat inventory, but it also appears that Vaunclair Meats acquired certain calculators, office equipment, packaging equipment, butcher tables, scales, racking, and lab equipment. In addition, by occupying a portion of the Milliken Blvd. premises, it acquired the right to use such refrigeration and other equipment as could not economically be removed. Perhaps the best statement of the situation is that of Mr. Hurlburt. He testified that about eighty per cent of the assets of the new company were acquired from Vaunclair Purveyors, (although this eighty per cent represents only five per cent of the assets in the latter company). As in the case of the meat inventory, the lion's share of the assets, (and, in particular, an expensive automated patty line formerly used to serve Harvey's) was transferred to F. G. Bradley.
Counsel for the applicant union stressed the importance of the acquisition of the Vaunclair name, but the evidence suggests that we should not attach much significance to this factor. Hurlburt testified, and we accept, that the goodwill allegedly associated with the Vaunclair name was in fact associated with Ben Winbaum. A number of the customers, as we have already pointed out, were not free to purchase where they pleased in any event; and we accept Mr. Htirlburt's evidence that the remainder were more influenced by Mr. Winbaum's reputation than the corporate name. Vaunclair Meats did acquire "Purveyors" goodwill; but this resulted more from the similarity of the principals than the acquisition of the corporate name.
II
- The principle statutory provisions governing "successor rights" are as follows:
55(1) In this section,
(a) "business" includes a part or parts thereof;
(b) "sells" includes leases, transfers and any other manner of disposition, and "sold" and "sale" have corresponding
meanings.
(2) Where an employer who is bound by or is a party to a collective agreement with a trade union or council of trade unions sells his business, the person to whom the business has been sold is, until the Board otherwise declares, bound by the collective agreement as if he had been a party thereto and, where an employer sells his business while an application for certification or termination of bargaining rights to which he is a party is before the Board, the person to whom the business has been sold is, until the Board otherwise declares, the employer for the purposes of the application as if he were named as the employer in the application.
(5) The Board may, upon the application of any person, trade union or council of trade unions concerned, made within sixty days after the successor employer referred to in subsection 2 becomes bound by the collective agreement, or within sixty days after the trade union council of trade unions has given a notice under subsection 3, terminate the bargaining rights of the trade union or council of trade unions bound by the collective agreement or that has given notice, as the case may be, if, in the opinion of the Board, the person to whom the business was sold has changed its character so that it is substantially different from the business of the predecessor employer.
Where a business or part of a business is transferred or disposed of, the transferee acquires it subject to the collective bargaining obligations of the transferor. A union holding bargaining rights for the employees of the transferor retains those bargaining rights for the employees in a 'like unit" to that which existed prior to the transfer, and the transferee must continue to apply the collective agreement to that unit until the Board otherwise declares. This transfer and continuation of bargaining rights happens automatically upon the sale of all, or part, of the transferor’s business. The Board may terminate the union's bargaining rights if the successor employer significantly alters the character of the business or part of a business acquired; however, until the Board otherwise declares, the transferee stands in the shoes of his predecessor with respect to established bargaining obligations. In this sense, a union's bargaining rights are in the nature of a vested right, which, by statute, "runs with the business".
The legislative history of the successor rights legislation has recently been reviewed in Metropolitan Parking Inc. [1979] OLRB Rep. Dec. 1193; and it is unnecessary to reiterate that review here. In Aircraft Metal Specialists Limited, [1970] OLRB Rep. Sept. 702, the Board succinctly summarized the purpose of section 55 (then 47a):
"A further and important purpose of section 47a is to preserve the bargaining rights with respect to work which has accrued to the benefit of the employees as a result of their union becoming the bargaining agent through certification or voluntary recognition. Once the union has been recognized with respect to a particular business the union then obtains a right to bargain with respect to wages, hours and other conditions of employment in that business. The right to participate in the business and its functions in that manner is in the nature of a vested right and section 47a allows the union to pursue that bargaining right when all or part of the business is sold. In making determinations under section 47a therefore, the Board is interested in maintaining the bargaining rights where the sale involves a continuum of the business."
More recently, in More Groceteria Limited, [1980] OLRB Rep. April 486, the Board had occasion to comment more generally on the problem posed by section 55 application and the conflicting interests which the Legislature has sought to harmonize. These issues were discussed in a long passage to which we might usefully refer:
"15. Section 55 of The Labour Relations Act is a very important part of the legislation guarding against the subversion of acquired collective bargaining rights and providing some permanence to them in an otherwise volatile commercial context. In the former respect, it is assisted by the various unfair labour practice sections of the Act together with section 1(4) which permits the Board to treat as one employer a business carried on through more than one corporation where there is a common control or direction and whether or not these businesses are being carried on simultaneously. An interesting early example of this unfair labour practice aspect of the provision can be found in the important Thorco Manufacturing Limited 65 CLLC 16, 052 case, a case that today could be just as fairly dealt with under section 1(4). However, this purpose of the provision is not applicable in the facts at hand. We are satisfied that the relationship between the respondent(s) and Loblaws has been arm's length and there is no evidence that the subject commercial transactions were other than for bona fide business purposes.
Unfortunately, however, the latter function of the section -providing some permanence to collective bargaining rights - is often the most difficult to apply. Here the Legislature has determined that the objectives of labour relations policies require that the rightful prerogatives of owners independently to rearrange their businesses and even eliminate themselves as employers be balanced by protection to the employees from a sudden change in the employment relationship. Indeed, the transition from one corporate organization to another will in most cases be eased and industrial strife avoided if employees and their representatives are assured of some real measure of continuity in the collective bargaining process by operation of law. So strong is the basis to this policy that the Supreme Court of the United States arrived at a similar conclusion without the benefit of a specific statutory provision like section 55. See John Wiley & Sons Inc. v. Livingston, [1964] 376 U.S. 543, 34 S.Ct. 909; Goldberg, The Labour Law Obligations of a Successor Employer, [1969], 63 N.W.L. Rev. 735; Note, (1966), 66 Col.L. Rev. 967; Note, (1969), 82 Harv.L.Rev. 418. This ongoing nature of collective bargaining agreements underlines again that such documents are not "ordinary contracts" nor are they in any real sense the simple products of consensual relationships. See McGavin v. Toastmaster Ltd. v. Ainscough et al [1976] I S.C.R. 718; 1975 CanLII 9 (SCC), 54 D.L.R. (3d) 1 Laskin, C.J.C. Itis against these impressive policy considerations that the Board must give meaning to and apply section 55.
The fundamental issue in cases of this kind is the threshold determination of the section: Has a business been sold? The term "sells" is defined to include "leases, transfers; and any other manner of disposition". This all embracive definition obviously reflects the labour relations policy considerations discussed generally above. To repeat, collective bargaining rights are not to be treated as co-extensive with commercial ownership and, to this extent, labour law policy seeks to insulate industrial relations from disruption by necessary and inevitable interaction in the market place. The term "business", on the other hand, is simply defined to include "a part or parts thereof". No similar exhaustive definition was attempted by the Legislature in recognition, we think, of the great diversity in commercial affairs and the resulting need for a case by case elaboration of the term in the light of labour law policy. A brief perusal of the many factual situations giving rise to the Board's jurisprudence bears testimony to the wisdom of this legislative choice. Accordingly, at the outset of reviewing a few of the cases that have applied the term "business" in the context of retail food stores, it should not be surprising to learn that the Board in determining whether a business has been sold has not deferred to the commercial documentation employed; has not been influenced by the use of intermediary agents to effect transfers; and has made workplace assessments with respect to the continuity of a particular enterprise, activity, or service arriving at conclusions that a court of law in a commercial matter might not arrive at, but conclusions which are fair to both the statute and context under review."
The Bard has always recognized that the meaning to be attached to the word "business" depends to a great extent upon the facts and circumstances in each particular case. It cannot be said that any one facet of an enterprise taken by itself comprises the "business". The business is the "totality of the undertaking", including: the physical assets, tools and equipment, management and operating personnel, goodwill, and other intangibles. (See Raymond Cote, [1968] OLRB Rep. March 1211.) Thus, in determining whether it is the "business" which has been transferred, the Board has frequently found it useful to consider the extent to which these various elements of the predecessor's business organization have been transferred into the hands of the alleged successor; that is, whether there has been an apparent "continuation of all, or part, of the business - albeit with a change in the nominal owner." Many of these factors which the Board considers were summarized in Culverhouse Foods Limited, [1976] OLRB Rep. Nov. 691 (application for judicial review dismissed):
"In each case the decisive question is whether or not there is a continuation of the business.., the factors which might assist the Board in its analysis; among other possibilities the presence or absence of the sale or actual transfer of goodwill, a logo or trademark, customer lists, accounts receivable, existing contracts, inventory, covenants not to compete, covenants to maintain a good name until closing or any other obligations to assist the successor in being able to effectively carry on the business may fruitfully be considered by the Board in deciding whether there is a continuation of the business. Additionally, the Board has found it helpful to look at whether or not a number of the same employees have continued to work for the successor and whether or not they are performing the same skills. The existence or non-existence of a hiatus in production as well as the service or lack of service of the customers of the predecessor have also been given weight. No list of significant considerations, however, could ever be complete; the number of variables with potential relevance is endless. It is of utmost importance to emphasize, however, that none of these possible considerations enjoys an independent life of its own; none will necessarily decide the matter. Each carries significance only to the extent that it aids the Board in deciding whether the nature of the business after the transfer is the same as it was [sic] before, i.e. whether there has been a continuation of the business.
The issue before the Board, of course, remains whether there has been a "transfer of a business" or "part of a business"; but it is much easier to make that finding, and to conclude that the collective bargaining relationship should be continued, if there is substantial continuity of the other elements of the predecessor's business organization. If the elements formerly used by "A" to carry on business are now in the hands of "B", and are used for the same business purposes, it is difficult to resist the conclusion that there has been some form of transfer "of a business" from "A" to "B". (See also: the remarks of Widgery J. in Kenmir v. Frizzel et al [1968] 1 All ER 414 - a case arising out of legislation similar to section 55.)
Most of the cases under section 55 involve an alleged sale of a business in its totality. Only a few consider the meaning to be ascribed to the words "part of a business". Yet those words pose much more difficulty than the term business itself. Almost anything actually traceable to the predecessor could be regarded as "part" of its business, but it cannot have been intended that every minor disposition of surplus assets should give rise to a successorship. To accept this view, would make section 55 the vehicle for extending rather than preserving bargaining rights. Again, the issue must be considered in the factual context of each case and the Board has found a transfer of "part of a business" where one of a chain of retail stores has been sold to a competitor (Loblaws Groceterias Limited, [1973] OLRB Rep. Jan. 72; More Groceteria Limited, supra); where there was a transfer of certain milk delivery routes in a particular geographic area (Borden C'ompany Limited, [1970] OLRB Rep. Jan. 1244); where there was a transfer of the oil burner and installation service of a firm which was primarily engaged in the sale and delivery of fuel oil. (Automatic Fuels Limited, [1972] OLRB Rep. May 515); and where a slaughter house, which was formerly part of a much larger integrated meat packing company, was transferred to a new owner, ( Beef Terminal[1980] OLRB Rep. Aug. 1167). In Central Native Fisherman's Co-Operative et al, [1977] 1 Can. LRBR 329, the British Columbia Relations Board found that there had been a transfer of a "part of a business" when a cannery which was formerly part of a much larger business organization was sold to a fisherman's co-operative.
In Canac Shock Absorbers [1973] OLRB Rep. Oct. 508 and in Alcan Building Products Limited [1968] OLRB Rep. May 213, the Board dealt with business situations which have a number of similarities to the one presently before us. In Canac, the predecessor was engaged in the manufacture of a variety of product lines, most of which were related to the automobile industry. Its operations were divided into a number of departments. One of these was the shock absorber department, which employed approximately twenty per cent of the predecessor's total production personnel. The predecessor's corporate parent decided to liquidate the predecessor’s business, and the shock absorber portion of that business was transferred to Canac which, inter alia, leased machinery, equipment, tools, and that portion of the premises used by the predecessor (Acme Screw and Gear) to produce shock absorbers. The resulting situation was described by the Board as follows (at paragraph 22):
"Canac is presently engaged in the production of shock absorbers, and to that extent is carrying on part of the business formerly operated by Acme. The operation takes place in the same area of the plant as was used by Acme in the production of shock absorbers. The superintendent of the Acme shock absorbers department, and 11 or so other supervisory staff of the company, occupy similar posts in the new company. Canac is, in effect, the shock absorber department of Acme Incorporated, but otherwise continuing in much the same manner before incorporation."
The Board was satisfied that there had been a sale of "part" of a business.
In Aican Building Products Limited, a corporate entity was engaged in the production of aluminum products and carried on business through separate divisions, each of which had its own employee complement and produced a variety of product lines. For economic reasons, a decision was made to discontinue one of these divisions. The successor acquired the premises and some of 'the equipment used by the predecessor (the rest being disposed of to unrelated purchasers), retained a few of the former employees, and continued to produce two products which had accounted for only a small proportion of the predecessor's total production The Board nevertheless found a sale of "part of the predecessor's business".
In each of the cases to which we have referred, the Board found that the predecessor had transferred a coherent and severable part of its economic organization managerial or employee skills, plant, equipment, "know how" or goodwill, - thereby allowing the successor to perform a definable part of the economic functions formerly performed by the predecessor. This economic organization undertook activities which gave rise to employment, and the terms and conditions of employment, together with the union's right to bargain about them, where preserved. The part of the predecessor's business which it no longer wished to continue, provided the business opportunity which the successor was able to pursue to its own advantage. In all of the cases, there was a transfer of a distinct part of the predecessor's configuration of assets, and no material change in the character of the work performed by employees within that asset framework. There was a continuation of the work performed, the essential attributes of the employment relationship, the skills of employees, and the functional coherence of at least a part of the employee complement; and but for section 55, the established bargaining and collective agreement rights would have been lost. This was the very mischief to which section 55 is directed, and the Board was satisfied on the evidence in each case that it should be applied.
What then are the facts in the present case? It is obvious that "the business" of Vaunclair Purveyors has not been transferred to Vaunclair Meats if by "the business" one means the totality of its organization or the full range of economic activities which the former company carried out "at its zenith" in 1979-80. Much of that activity, and the equipment to carry it out was transferred to the F. G. Bradley Company - an entirely independent entity which was an active competitor of Vaunclair Purveyors, and which now continues to serve the Cara customers formerly served by Vaunclair Purveyors. Vaunclair Purveyors, as a corporate vehicle, ceased to carry on any of its former business activities, and currently remains essentially a holding company for certain real estate and commercial property assets. On the other hand a definable segment of the business formerly carried out by Vaunclair Purveyors continues to be carried on by Vaunclair Meats from the same location, with many of the same assets, some of the same employees, and on behalf of some of the same principals. Indeed, it is difficult to find very much in the Vaunclair Meats' organization which cannot be traced directly to its predecessor. While Vaunclair Meats was characterized as a "new" business, there is really not very much new about it - other than the new corporate vehicle, and even that is currently carrying on a similar kind of business from the same location under the Vaunclair name. Of course, the "new business" operates on a much smaller scale than Vaunclair Purveyors did; but as the Board found in Canac Shock Absorbers, and Alcan Building Products Limited, it is implicit in the term "part of a business" that the "part" may be considerably less than the whole. If, in making a section 55 determination, the Board were to give overriding significance to the reduction in the scale of operations, the term "part of a business" could be robbed of all meaning, and virtually written out of the Statute. Likewise, we do not think that we should lightly conclude that there has been a change in the "character" of the business simply because the transferred "part" operates in a new environment, in a somewhat different manner from the way it operated when it was part of the larger organization. This is to be expected of any severed "part", and it would be an unusual entrepreneur who did not initiate any new initiatives, or try to put his own imprint upon his recent acquisition. If a change in circumstances, or scale were sufficient to trigger section 55(5), there would be few sales of "part of a business" which could survive its application, and cases such as Canac, Alcan, More Groceteria and Automatic Fuels would have little significance.
Our attention was drawn to the alleged incongruity of applying the Vaunclair Purveyor's agreement to Vaunclair Meats, but we do not think the apparent inappropriateness of the collective agreement (which continues as a result of section 55) can be the governing factor in determining whether the business has changed its character. This automatic "flow through" of the predecessor's agreement will always create some transition benefit or hardship and a successor can as easily inherit a "cheap" agreement as a "rich" one. Indeed, this is one of the factors which should influence the price of the sale transaction. Moreover, every collective agreement negotiated for a "whole" will be more or less appropriate when applied to a part. Job descriptions may need to be modified, and some may be entirely redundant. Grievance procedures may be too simple or too complex. Contractual provisions respecting union stewards or safety committees may not fit well in the new circumstances. If the agreement provides a means for dealing with these issues, it must be followed. If it does not, then the employer can probably act unilaterally. In any event, we do not think it was intended that the Board should dispose of the collective agreement and the union's bargaining rights, simply because there might be problems in implementing a collective agreement.
Section n 55(5) provides for the termination of bargaining rights only where there has been a substantial change in the character of the business occurring within sixty days of the sale. Both the language and the context suggest that this exception to the general rule is intended to be an exceedingly narrow one. The temporal limitation also suggests that section 55(5) should only be applied to exceptional situations in which a person purchases a business organization then turns it into something quite different operating in an entirely unrelated labour and product market (a restaurant into a bowling alley, for example; or a tavern into an emporium for oriental rugs). In those circumstances, the successor is unlikely to have any intention of retaining the predecessor's employees, and it would make little sense to impose upon a new group of employees doing substantially different jobs, the wages and conditions negotiated with an entirely unrelated predecessor. In Winco Steak and Burger Restaurant Limited, [1974] OLRB Rep. Nov. 788, the Board suggested that any change which would make a business "substantially" different from the business of the predecessor, must necessarily involve "a fundamental difference, affecting the nature of the work requirements and skills involved in the business to the extent that continued representation by the trade union would be inadequate, inappropriate, or unreasonable in all the circumstances". We adopt that view
For the reasons we have already given, we do not think we can put much weight on the apparent in Appropriateness of the collective agreement (which in any case has now expired), or on the reduction in scale or the changes in internal organization of the business. This is especially so, if one recalls the "pre-Cara" situation, only a few years ago, when Vaunclair Purveyors itself operated at much lower volumes serving these same customers. If there is a "substantial change" in the character of the business of Vaunclair Meats, it must be because the firm is now a "distribution house" rather than a "traditional" purveyor. By purchasing prefabricated meat products, the company has substantially eliminated its need for skilled butchers. As Huriburt pointed out, some eighty-five per cent of the meat passing through Vaunclair Purveyors had to be "fabricated" while only fifteen per cent of the new company's business involves fabrication, and this segment involves portioning rather than rough fabrication.
There is no doubt that there is a difference in the work/employee requirements between a "distribution house", and a "traditional" purveyor, but is this difference enough to constitute a "sub ~tantia1 change in character" within the meaning of section 55(5)? Initially, the Board was disposed to accept Mr. Herridge's most persuasive argument in this regard; however, while the matter is not free from doubt, we do not think the evidence in this case justifies that conclusion. There are simply too many other similarities between Vaunclair Meats and that part of Vaunclair Purveyors which served the "non-Cara" customers. How can one find the business to be "substantially different" if it is supplying the same product to the same customers with employees actively recruited from the predecessor's labour force. Of course, those employees now do more general duties; but Wilkinson is primarily a driver, Argyris and Kataris remain portion-butchers, and wrapping and packing functions remain substantially the same whoever does them. There is something to be said for the respondent's contention, but, on balance, we do not think that there has been a substantial change with character of the business within the meaning of section 55(5). Nor do we see any purpose in holding a representation vote for the results of that vote would not affect our determination of the issue raised in sections 55(1), 55(2), or 55(5).
For the foregoing reasons, the Board finds that there has been a "sale" of "part" of the business of Vaunclair Purveyors to Vaunclair Meats, and that the union's bargaining rights continue in the new entity.