Service Employees' Union, Local 204 v. Prudent Investments Inc.
[1981] OLRB Rep. November 1611
0491-81-R Service Employees' Union, Local 204, A.F.L.-C.I.O.-C.L.C., Applicant, v. Prudent Investments Inc., Respondent.
BEFORE: Ian Springate, Vice-Chairman, and Board Members D. B. Archer and J. Wilson.
APPEARANCES: Jeffrey Egner, Eugene Laliberte and Kevin Hebner for the applicant; Derek L. Rogers, F. Kan and Robert Pugh for the respondent.
DECISION OF THE BOARD; November 18, 1981
1This is an applicant under section 63 of the Labour Relations Act. It is the contention of the applicant, Service Employees' Union, Local 204 ("the union") that there has been a sale of a business by Colborne Holdings Limited ("Colborne") to Prudent Investments Inc. ("Prudent").
2Prior to May 11, 981 Colborne owned and operated two office buildings in the City of Toronto. Although fronting on different streets, the two buildings are actually connected to each other. One building, at 67 Yonge Street, is 16 floors high with stores on the ground floor and offices on the remaining 15 floors. The other building, at 6-8 Colborne Street, is a six story office building. Colborne leased out office space in the two buildings, although at the commencement of the events giving rise to these proceedings certain parts of the Colborne Street building were being renovated and accordingly were not leased out. As it happened, Colborne's largest tenant was the union, which leased space at 67 Yonge Street.
3In 1959 the union was certified to represent Colborne's cleaning employees at 67 Yonge Street., A number of collective agreements were entered into between Colborne and the union, the most recent covering the period of July 1, 1978 to June 30, 1980. The recognition clause in this collective agreement purported to cover employees at both 67 Yonge Street and 6-8 Colborne Street, although in fact a husband-wife team who did all of the cleaning at 6-8 Colborne Street were not treated by the parties as coming within the bargaining unit covered by the collective agreement. Colborne did employ ten cleaning staff at its Yonge Street building who were employed under the provisions of the collective agreement.
4On July 23, 1980 Colborne and the union met with a Ministry of Labour mediator to try to reach agreement on the terms of a new collective agreement. The union was represented at this meeting by its business agent Mr. Eugene Laliberte. Colborne was represented by Miss Shirley Prisque, who at the time was Colborne's property manager for both 67 Yonge Street and 6-8 Colborne Street. The president of Colborne was Mr. J. Liebman, a resident of Montreal. The evidence indicates that Colborne's property manager in Toronto was accorded a relatively free hand in running the company's day to day affairs, but that Mr. Liebman had always signed collective agreements on behalf of the company.
5At the July 23. 1980 meeting Mr. Laliberte and Miss Prisque signed a memorandum of settlement, the relevant provisions of which read as follows:
"1. The parties herein agree to the terms of this memorandum as constituting full settlement of all mattes in dispute.
The undersigned representatives of the parties do hereby agree to recommend complete acceptance of all the terms of this memorandum to their respective principals.
The parties herein agree that the term of the collective agreement shall be from July 1, 1980 to June 30, 1981.
The parties herein agree that the said collective agreement shall include the terms of the previous collective agreement which expired on June 30, 1981 [sic] provided, however, that the following amendments are incorporated:
Article 17 WAGES: Effective July 1, 1980 increase "Light" classification by 10% (41 cents)
Effective July 1, 1980 increase "Heavy" classification by 10%
(47 cents)
N.B. above 10% (38 cents) applies to Article 19d also.
- Article 29 CONTRACTING OUT AND RETIREMENT (new):
a) The Employer will not contract out any bargaining unit work which is currently being done by employees."
It should be noted that the collective agreement which expired on June 30, 1980 contained no restriction on the contracting out of bargaining unit work.
6Sometime during the month of September, 1980 the union's membership ratified the memorandum of settlement. There never was a formal ratification of the memorandum on the part of Colborne. Subsequent to the signing of the memorandum of settlement Miss Prisque started paying employees the wage rates provided for in the memorandum, although when Mr. Liebman became aware of her action he indicated he was unhappy with her for having done so.
7In August of 1980 Miss Prisque was replaced as Colborne's property manager by Mr. R. Pugh. On October 27, 1980 Mr. Laliberte forwarded a draft collective agreement to Mr. Pugh along with a request that he "check it through and let us know as soon as possible if it is all right so that we can set a date to sign this contract". Mr. Pugh testified that on receiving the draft collective agreement he checked it over with Mr. Liebman, but that then simply set it aside without taking any action on it. The draft collective agreement appears to have been based primarily on the provisions of the prior collective agreement and the changes referred to in the memorandum of settlement. However, the draft agreement also contained a new grievance-arbitration procedure which had not been referred to in the memorandum of settlement. Mr. Laliberte testified that Mr. Pugh had earlier agreed that he could add a new grievance procedure.
8During or shortly prior to the month of October, 1980 Colborne began to rent out two additional floors at 6-8 Colborne Street. As a result of this move the company found that its husband-wife team was no longer sufficient to do all the cleaning work in the building, and accordingly it invited proposals for cleaning the building from a number of outside cleaning firms. Colborne ultimately accepted a proposal from United Cleaning Services Limited ("United"), and during October of 1980 United took over responsibility for the cleaning of 6-8 Colborne. In November United proposed that it also take over the cleaning of 67 Yonge Street, which proposal Colborne accepted. Up to this point Mr. Pugh, in addition to his other responsibilities, had been supervising the ten cleaning employees at 67 Yonge Street. Mr. Pugh testified that he had not been able to do an adequate supervisory job, and that a large amount of cleaning equipment as well as an air conditioner had disappeared from the premises.
9In late November or early December of 1980, Mr. Pugh and Mr. Liebman of Colborne met with Mr. Laliberte and Mr. T. Roscoe, the president of the union. At this meeting, Mr. Liebman sought to get the union to agree to an increase in its rent. Mr. Liebman also. advised the union officials that United would be taking over Colborne's cleaning employees and managing the cleaning operation at 67 Yonge Street. For their part, Mr. Roscoe and Mr. Laliberte tried to get Mr. Liebman to sign the draft collective agreement. Mr. Laliberte testified that the agreement was not signed, but that he came away from the meeting with the impression that Mr. Liebman would eventually sign it.
10Another meeting took place between Mr. Liebman, Mr. Pugh, Mr. Roscoe and Mr. Laliberte early in January, 1981. At this meeting the union requested that the company sign the collective agreement, and when this was not done, both Mr. Roscoe and Mr. Laliberte took the position that the prior collective agreement, together with the memorandum of settlement, constituted a valid collective agreement, a position rejected by Mr. Liebman. Either at this meeting or shortly prior to it, the timing is not clear on the evidence, the union indicated it would not object to having United take over the cleaning at 67 Yonge Street provided the employees did not lose their jobs and that they continued to receive the same pay and benefits.
11United took over the cleaning at 67 Yonge Street on January 5, 1981. The arrangement entered into between Colborne and United was summarized in a letter written on February 2, 1981 by Mr. Pugh to United. The letter reads as follows:
"After a period of 30 days, it would appear United has been successful in taking control of our janitorial services. I would therefore like to confirm our joint intentions, which we have discussed on several occasions.
(a) The Contract and price quoted, dated November 7, 1980, we accept. Commencement date January 5, 1981.
(b) Equipment and materials presently being used for our cleaning services will be purchased by United Cleaning Services. Our inventory of materials has been made, and we will disscuss equipment specifically.
(c) United Cleaning Services will continue to employ our present cleaning staff, at the rates now established. Union dues and employee benefit payments will be paid by United as well as sick pay benefits. United will bill Colborne Holdings Limited on a monthly basis, separate from regular services. Any questions regarding these payments should be directed to our Bookkeeper, Mrs. M. Moore.
We further discussed the need of proper cleaning equipment such as Maid Carts and vacuum cleaners etc., and because of your agreement to purchase same and in consideration of this major purchase Colborne Holdings Limited will agree to a contract for a period of at least 12 months, from the date of this letter, which shall include its successors and, or, assigns, executors or administrators."
United paid about $2,000.00 to Colborne for the cleaning equipment and materials referred to in paragraph (b) of the letter.
12As of January 5, 1981 the employees working at 67 Yonge Street were paid by United at the same rates provided for in the memorandum of settlement. On a monthly basis United forwarded to the union, union dues as well as thirty cents for every hour worked so that the union could purchase benefits for the employees. At the end of every month, United billed Colborne for its wage costs, including sick pay, as well as for an additional amount to cover United's overhead, supervisory costs and profit. Mr. Laliberte testified that in matters relating to union dues and benefits, the union dealt with United, but when employees had difficulties with their employment status or United supervisors, he dealt with Mr. Pugh of Colborne. On March 27, 1981 United sent three employees notices of termination. Mr. Laliberte talked to Mr. Pugh about the terminations, and subsequently on April 8th United advised the employees that they should disregard their termination notices.
13The memorandum of settlement entered into between the union and Colborne on July 23, 1980 stated it was to cover a period ending on June 20, 1981. On April 3, 1981, the union sent Colborne a notice to commence bargaining for a new collective agreement. On April 22, 1981 proposals for a new agreement were forwarded to the company. No negotiations, however, actually took place.
14On April 15, 1981 a meeting was held in the union's office with Mr. Liebman, Mr. Pugh, Mr. Laliberte and Mr. Roscoe in attendance. At this meeting, Mr. Roscoe again tried to get Mr. Liebman to sign a collective agreement, but Mr. Liebman flatly refused to do so. Mr. Liebman also indicated that Colborne planned on selling its buildings. Either at this meeting, or about the same time, Mr. Laliberte advised Mr. Pugh that he felt the situation with United was not working out, that their deal with respect to United was off.
15On May 11, 1981 Prudent purchased from Colborne the land and buildings at 67 Yonge and 6-8 Colborne Streets. There is no connection between the principals of Prudent and Colborne. On May 11th, Prudent also acquired from Colborne an assignment of leases in the two buildings as well as an assignment of the cleaning contract between Colborne and United. On the same date, Colborne sent notices to all of its tenants advising them to henceforth pay their rent to Prudent. In that Prudent planned on doing extensive renovation work to the buildings, Colborne also served most of the tenants with notice to vacate.
16The Buildings at 67 Yonge Street and 6-8 Colborne have continued since their sale to Prudent to be used as rental office buildings. Prudent has contracted out the management of the buildings to a management firm which in turn has hired Mr. Pugh to continue to serve as property manager for both buildings. Prudent has continued to use United to perform the cleaning work. United for its part uses the same employees to do the cleaning work as before under exactly the same terms and conditions. United has continued to forward union dues and thirty cents an hour for benefits to the union.
17On June 2, 1981 counsel for the union sent Prudent notice to bargain for a collective agreement. This notice was forwarded to Prudent along with a copy of the union's application under section 63.
18It is the contention of the union that on May II, 1981 Colborne sold its business to Prudent. The union contends that part of Colborne's business was the provision of cleaning services to its tenants, and that this function was also transferred to Prudent. In this regard, the union’s view is that Colborne contracted out only the management of its cleaning staff to United, and not the bargaining unit work itself. Accordingly, contends the union, Colborne and ilot United, was the true employer of the cleaning staff at the time of the sale. In the alternative, the union submits that even if Colborne had contracted out the bargaining unit work, the union still retained bargaining rights with respect to Colborne. The union further takes the position that the memorandum of settlement, when considered together with the 1978-80 collective agreement, constituted a binding collective agreement and that the serving of notice to bargain on Prudent in June of 1981 had the effect of "freezing" the agreement's terms, including the provision restricting the sub-letting of bargaining unit work. For its part, Prudent contends that the building cleaning aspect of Colborne's operations were transferred to United back in January of 1981, and that accordingly in May of 1981 Prudent could not have acquired Colborne's cleaning business. Prudent further contends that in any event it acquired only assets from Colborne and not its business. Prudent also submits that since Mr. Liebman never ratified the memorandum of settlement, no collective agreement ever followed from the signing of the document.
19The relevant provisions of the Act are contained in section 63 which provides, in part, as follows:
"63.-(l) 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.
(3) Where an employer on behalf of whose employees a trade union or council of trade unions, as the case may be, has been certified as bargaining agent or has given or is entitled to give notice under section 14 or 53, sells his business, the trade union, or council of trade unions continues, until the Board otherwise declares, to be the bargaining agent for the employees of the person to whom the business was sold in the like bargaining unit in that business, and the trade union or council of trade unions is entitled to give to the person to whom the business was sold a written notice of its desire to bargain with a view to making a collective agreement or the renewal, with or without modifications, of the agreement then in operation and such notice has the same effect as a notice under section 14 or 53, as the case requires."
20As the Board noted in the Vaunclair Meats Limited case, [1981] OLRB Rep. May 581, when a business, or part of a business, is sold, or transferred or disposed of, the transferee acquires it subject to the collective bargaining obligations of the transfer. A union holding bargaining rights for 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 any subsisting 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. In this sense, a union's bargaining rights are in the nature of a vested right, which by statute, "runs with the business".
21Colborne carried on the business of operating and leasing out office space at 67 Yonge Street and 6-8 Colborne Street. Prudent purchased from Colborne its land and buildings, and also took an assignment of Colborne's leases and a cleaning contract related to the two buildings. Prudent now carries on the business of operating and leasing out office space at 67 Yonge Street and 6-8 Colborne Street. In our view, there was in fact a transfer of Colborne's business to Prudent so as to amount to a sale of its business within the meaning of section 63. In reaching this conclusion we have considered, but rejected, Prudent's contention that it did not acquire the cleaning part of Colborne's business in that Colborne had previously transferred its cleaning operations to United. An integral aspect of running an office building is the provision of cleaning services either by employing one's own employees to do the work or by retaining an outside contractor to do it. Prudent, just as Colborne before it, must still ensure that the two buildings are kept clean and in our view the union's bargaining rights with respect to cleaning staff employed by Colborne continue to apply with respect to Prudent.
22This then raises the question of the current status of the union's bargaining rights insofar as they apply to Prudent. Prudent contends that it does not currently employ any cleaning staff in that the people doing the cleaning in its two buildings are employed by United. Assuming this to in fact be the case, we are satisfied that should Prudent directly employ its own cleaning staff in the future, then they would come within a bargaining unit represented by the union. We are further satisfied that any document entered into between Colborne and the union which might be construed as a collective agreement has now expired. Accordingly, Prudent is not currently bound by any subsisting collective agreement with the union.
23As indicated above, the union's position is that the memorandum of settlement, when considered with the prior collective agreement, together constituted a valid collective agreement, and that the notice to bargain served on Prudent by the union triggered a "freeze" of its terms and conditions under section 79 of the Act. It is now settled law that a memorandum of settlement, with or without other documents incorporated therein by reference, may constitute a collective agreement. In the instant case, however, the memorandum does not purport to bind the parties to a final agreement but states only that the signers of the document "agree to recommend complete acceptance of all the terms of this memorandum to their respective principals". In Versaservices Limited, [1972] OLRB Rep. April 306, the Board in dealing with identical language to that contained in the memorandum of settlement now before us made the following comment:
"While it was argued that the Memorandum of Settlement by itself constituted a collective agreement we are unable to agree with that submission because under paragraph 2 of the Memorandum of Settlement it remained for the representatives to recommend complete acceptance to their principals and it is reasonable to assume that in order to conclude the agreement the principals were required to indicate their acceptance."
24The union contended that the company by paying the wage increase set out in the memorandum effectively ratified the document. Companies by their conduct can in fact indicate that they have ratified the terms of a memorandum of settlement. However, in the instant case, after the wage increase had been introduced by Miss Prisque, Mr. Liebman expressed his displeasure with her actions. Further, the union was aware that Mr. Liebman was the individual who always executed collective agreements on behalf of Colborne, not Miss Prisque, and indeed it pressed him on a number of occasions after the memorandum of settlement had been entered into to sign a collective agreement, but without success. Finally, the union itself appears not to have regarded the memorandum as a final agreement between the parties in that its draft collective agreement contained changes from the wording in the prior collective agreement which had not been set out in the memorandum of settlement. In all of these circumstances, we are satisfied that the memorandum of settlement was never accepted by Colborne so as to constitute a final agreement between the parties and that the provisions of the memorandum were not "frozen" in place by section 79 of the Act when the union served notice to bargain on Prudent.
25In the preceding paragraphs we have dealt only with the status of the union's bargaining rights insofar as they relate to Prudent. As noted above, at the hearing the parties raised a number of matters relating to the issues of whether the contract awarded by Colborne to United constituted a disposition of part of Colborne's business to United, whether Colborne and later Prudent were the true employers of the cleaning employees as opposed to United as well as the legal status of the existing arrangement between Prudent and United. These issues raise important questions concerning who is, or was, the true employer of the cleaning staff, as well as the possible applicability of sections 1(4) and 63 of the Act insofar as both Colborne and United, and Prudent and United are concerned. It is clear that any determination of these matters will directly affect the interests of United. United, however, was not named as a respondent in the proceedings and was not represented at the hearing. In these circumstances, we are of the view that any determination with respect to these matters should await a possible future separate proceeding in which United is named as a respondent and is given an opportunity to participate.
26Having regard to all of the foregoing, the Board declares that there has been a sale of a business from Colborne Holdings Limited to Prudent Investments Inc. The Board further declares that any cleaning staff employed by Prudent are represented by Service Employees' Union, Local 204 and come within a like bargaining unit to that covered by the most recent collective agreement entered into by the union and Colborne Holdings Limited. In that United Cleaning Services Limited was not named as a party in these proceedings, the Board makes no finding as to the true employment status of persons allegedly in that company's employ.