Local Union 71 v. 449637 Ontario Inc., 1981 CanLII 1045

Local Union 71 v. 449637 Ontario Inc.

[1981] OLRB Rep. May 550

2195-80-R; 2343-80-R Local Union 71 of the United Association of Journeymen and Apprentices of the Plumbing and Pipefitting Industry of the United States and Canada,Applicant, v. 449637 Ontario Inc., carrying on business under the name and style of Rivard Mechanical, Michel Rivard Plumbing Limited, carrying on business under the name and style of Rivard Plumbing, J. G. Rivard Limited, J. G. Rivard (Quebec) Limited, Respondents.

BEFORE: M. G. Mitchnick, Vice-Chairman, and Board Members H. Kobryn and J. Wilson.

APPEARANCES. David Jewitt and Leo Martelfor the applicant; G. A. Howardfor 449637 Ontario Inc. and N. S. Slover for respondents Michel Rivard Plumbing Limited and J. G. Rivard Limited.

DECISION OF M. G. MITCHNICK, VICE-CHAIRMAN, AND BOARD MEMBER J. WILSON; May 11, 1981

1This matter involves consolidated applications under sections 1(4) ("related employer") and 55 ("sale of a business") of The Labour Relations Act, seeking a declaration that a new numbered company, 449637 Ontario Inc., carrying on business as Rivard Mechanical, is bound by the provincial agreement of the applicant. File No. 2194-80-M, a referral of a grievance to the Board pursuant to the provisions of section 11 2a of the Act, has been held in abeyance pending the outcome of the present proceedings.

2J. G. Rivard Limited has carried on business as a plumbing contractor in the Ottawa area since 1966, doing mainly residential work. The company has at all times been under the active direction and control of Jean-Guy Rivard, who, in addition, at all times held at least 998 of its 1,000 outstanding shares. J. G. Rivard Limited is a "union" company, having a history of collective agreements with the applicant Local Union 71. Since the beginning, Michel Rivard worked for his brother, Jean-Guy, first as a plumber in the field and then, as manpower permitted, as a field supervisor. On the evidence, there is no doubt whatever that J. G. Rivard Limited was, for both internal and external purposes, "Jean-Guy's company". Jean-Guy himself managed the company, and handled all of the estimating, bidding and customer relations, except in limited circumstances where he would be absent on vacation. If Michel Rivard encountered some work through a personal contact, like any other employee of the company he passed it on to Jean-Guy. Michel was one of the founding directors of J. G. Rivard Limited, but resigned as director in 1969 when a second company, Michel Rivard Plumbing Limited, was incorporated for tax-planning purposes. Michel was made the owner and director of Miehel Rivard Plumbing Limited, as was paid his salary by J. G. Rivard Limited through the second company. Michel Rivard Plumbing Limited at no time carried on a plumbing business on its own behalf, and until 1979 had no one but Michel on its payroll. In 1979 the second company was used as a device to carry out some of the work of J. G. Rivard Limited with two individuals who either could not or would not become members of Local 71. Local 71 discovered this and launched Board proceedings to recover damages as well as to bind Michel Rivard Plumbing Limited (and a third company) to its collective agreement. A settlement was negotiated and signed by the solicitors for J. G. Rivard Limited in mid-November. The settlement specifically provided that the collective agreement would become binding on Michel Rivard Plumbing Limited "on the basis that as at the date hereof John G. Rivard is the owner of a controlling interest of the voting shares of each company". A few days prior to this, Jean-Guy had in fact "bought out" his brother from Michel Rivard Plumbing Limited (there were no assets), and Michel Rivard ceased to have any association with Michel Rivard Plumbing Limited.

3The real events giving rise to these proceedings occurred the following summer. J. G. Rivard Limited had, over the previous 3 years, faced a steady diminution in work as a result of a fallen market and competition from non-union contractors in the residential field. By the end of 1979, a number of the union contractors in the residential plumbing field had gone out of business, including one which, at its peak, had employed some 150-200 plumbers year-round. Jean-Guy Rivard from time to time discussed the seriousness of the situation with Mr. Martel, Business Manager of Local 71, and urged Mr. Martel to take more action to control his own members. Mr. Martel did not dispute that, with more and more of the work going to non-union companies, his union was having difficulty preventing its members from going to work for those companies. He indicated that in the last renewal of the provincial collective agreement, in recognition of the problem, a lower rate was negotiated for residential than for commercial work.

4This action by the union was not, however, enough to save J. G. Rivard Limited. By 1980 the company was down to some 6 to 8 men (from a peak of 60 in 1975), and essentially was staying in business through its work for one customer, a major home-builder by the name of Costain Ltd. J. G. Rivard Limited had for many years been primarily the successful bidder on the plumbing work for Costain, with a small amount of the work going to a second union contractor, B. R. Rousseau. Evidence was given before the Board by Mr. Ted Lusk, the individual responsible for awarding Costain's contracts. Mr. Lusk indicated that as of 1978, all of the bids for Costain's plumbing work came from union contractors. Subsequent to that, however, the impact of non-union contractors began to be felt, and Mr. Lusk on a number of occasions indicated to Jean-Guy Rivard that the price differential was becoming a factor. Mr. Lusk testified that Jean-Guy did his best to hold his prices, but it was gradually becoming impossible for him to compete. In the summer of 1980, Costain's next phase of homes were ready for bids, and Mr. Lusk let Jean-Guy Rivard know that the price Jean-Guy was looking at would not be competitive with the non-union contractor, B. & B. Plumbing. Jean-Guy decided there was no point in attempting to bid any longer, and passed his decision on to his brother Michel and the other employees, all of whom had been anticipating for some time that the end was near.

5The evidence is that Michel and 4 of the other employees, including a foreman, of J. G. Rivard Limited had in the early part of 1980 discussed amongst themselves the possibility of going out on their own if the company could not continue in business, rather than going to work for someone else. A new company, the respondent 449637 Ontario Inc., was incorporated in June of 1980. Michel and the other employees have a loose profit-sharing arrangement with respect to the income of that company. When Jean-Guy notified Mr. Lusk that he felt he could no longer compete in business, he advised Mr. Lusk that some of his employees, including his brother, were going out on their own, and asked Mr. Lusk to give them a chance. Mr. Lusk indicated that he would naturally consider them, but their price would have to be competitive. Michel Rivard was himself known to Mr. Lusk through his work in the field on Costain jobs. Michel did put in a bid on behalf of the new company, and, after some further negotiation with Costain, was accepted by them. Mr. Lusk testified that Michel's price was still a little higher than B. & B.'s, but that after talking to B. & B. and noting their aggressiveness, he had concerns that there might be a problem with their service.

6In August of 1980, Michel and the other four employees took what tools they had acquired over the years and set up shop in Orleans, in the east end of the Ottawa Region, some 15 miles from the office and warehouse of J. G. Rivard Limited. All of the original tools kits and other equipment of their former employer remained at the premises of J. G. Rivard Limited. The new company adopted the trade name "Rivard Mechanical" and has its own telephone number and business listing. Its work has been primarily the new Costain project, but two of the five employees have been employed on a new, unrelated job which Michel obtained in Cumberland, and on repair work in the Orleans area. The new company has purchased eqlipment of its own as required for more diversified jobs, the bulk of it in November and December of 1980. J. G. Rivard Limited had owned 10 trucks at the time of its discontinuance and the majority of them were sold for scrap. Four of the trucks were worth restoring, and were sold to a car dealership and leasing company of which Jean-Guy Rivard is a 50 per cent owner. Michel subsequently attended at the dealership premises with Jean-Guy's partner, who is the active partner in the vehicle companies, with a view to buying new trucks, and instead entered into lease agreements for the four old trucks. The trucks, which had J. G. Rivard Limited's lettering on them, were painted over one by one, in new colours, and when the work on them was completed, the leases were signed. For a couple of weeks prior to that Michel was permitted to use the trucks, before painting was complete; in that interim, white paint was applied by roller over the lettering, but it appears that the name "J. G. Rivard Limited" was discernible through the paint.

7J. C. Rivard Limited continued to employ 2 plumbers until the end of 1980 to complete the 1979 contracts it had with Costain, and has performed a small quantity of service work as well. It presently employs a small office staff for the purpose of winding up the business Jean Guy testified that he has bid on a couple of commercial contracts since the summer of 198), but has been unsuccessful. The overlap of work between J. G. Rivard Limited and Michel's company has meant that on occasion employees of both companies have been present on the same Costain job site. There has, however, been no interchange of employees whatever between the two companies, for the purpose of carrying out their respective contracts.

8The first point to be commented on, on the above facts, is the extent of the emphasis placed on the respondents on the fact that what occurred here arose solely as a matter of economic survival. While the Board is not insensitive to such problems, it must be stated unequivocally 1 hat The Labour Relations Act nevertheless does not contemplate or permit the unilateral withdrawal by one party from its obligations under the Act, or the achievement of this end simply by choosing to carry on the same business in a different form. Indeed, the provisions of section 1(4) in particular were designed to eliminate such action. While the Board is given an important measure of discretion under section 1(4), to exercise that discretion on the basis that an employer party was unable to fulfill its legal obligations on a competitive basis would undermine the scheme of the Act, and the very provisions of section 1(4) itself. Counsel for Rivard Mechanical argues: "There is not intent to interfere with the union but economic realities require that they must maintain a non-union operation". Clearly nothing is more fundamentally destructive of a union's rights and interests than operating non-union, and "economic realities" simply cannot be used to justify this. While it is obviously to no party's advantage for the employer to be forced out of business, that possibility is a problem which, under the Act, must be dealt with on a bilateral basis. The applicant trade union in this case, for example, has recognized the problem and taken certain steps to accommodate it. Whether these steps are adequate is a matter for the trade union itself to assess, and for time to ultimately judge.

9There is, on the other hand, nothing in The Labour Relations Act to prevent an individual employer from deciding in these circumstances to no longer continue in business, and the protection afforded to a trade union and its members may well be limited when that occurs. That is, in fact, what has occurred in the present case. Jean-Guy Rivard clearly was the entrepreneurial force and directing mind behind J. G. Rivard Limited throughout its history, and a surviving complement composed of Michel Rivard and other former employees, absent Jean-Guy Rivard, can in no way be said to be a "related employer" for the purposes of The Labour Relations Act. Section 1(4) reads:

Where, in the opinion of the Board, associated or related activities or businesses are carried on, whether or not simultaneously, by or through more than one corporation, individual, firm, syndicate or association or any combination thereof, under common control or direction, the Board may, upon the application of any person, trade union or council of trade unions concerned, treat the corporations, individuals, firms, syndicates or associations or any combination thereof as constituting one employer for the purposes of this Act and grant such relief, by way of declaration or otherwise, as it may deem appropriate.

It is clear that the effective control and direction over the operations of J. G. Rivard Limited was exercised by Jean-Guy Rivard, and Jean-Guy Rivard exercises no control or direction whatever over the new company. When Jean-Guy chose to drop out of the picture, "the essential unity and identity of an economic activity" necessary to a finding of "related employer" was gone. For reference in this regard, see Brant Erecting and Hoisting, [1980] OLRB Rep. July 945, at paragraph 13. In that case an individual named Munro had carried on a steel-erecting business with two brothers as partners. Munro himself, however, was the driving force behind the business and after the partnership fell on hard times and split apart, Munro set up an identical business on his own under the name Provincial Steel. Mr. Munro ran the latter business out of the basement of his home, just as he had the former. The Board stated, at paragraph 5:

5. Bill Munro was the key figure in the enterprise supplying virtually all of the business expertise and entrepreneurial initiative. Munro had worked in the industry for many years and had useful contacts and a good business reputation. It was Munro who solicited business, did the estimating and bidding for jobs, prepared price and man-hour projections to establish the work force which would be required, did the take-offs from the drawings, kept the books, prepared the payroll, and did the invoicing and other documentation associated with the business. It was Munro who signed the collective agreement on behalf of the partnership. The Squire brothers were "working foremen" who, together with the hired labour force, actually did the work on site.

and at paragraph 14:

We are satisfied that Munro's pivotal role in running the affairs of Brant Erecting and Hoisting and Provincial Steel, satisfies the requirement under section 1(4) that two allegedly "related" employers must be "under common control or direction".

and at paragraph 16:

16. The present case provides a classic example of the kind of business situation to which section 1(4) was intended to apply: The business of Brant Erecting, which was largely controlled and directed by Bill Munro, ran into difficulties and came to a halt in April, 1979. Munro, who, we are satisfied, was the principal entrepreneurial force behind the Brant Erecting business severed his connection with that firm and immediately established a virtually identical business under the name of Provincial Steel carried on through a company incorporated by his wife. The bursaries ability, contacts, expertise, and goodwill vested in Bill Munro himself; and some of the assets formerly used by Brant Erecting, became the assets and advantages which were the key to Provincial Steel's business success. There has been no change in the character of the business nor in the employee skills required by it. Provincial Steel is run (as was Brant Erecting) from an office in the Munro's basement and serves essentially the same clientele as was served by Brant Erecting. There was no hiatus between the apparent demise of Brant Erecting and the launching of Provincial Steel as a going concern. This is not a case in which a "key man" leaves one employer to go to work for another, or establishes a new business of his own in competition with his former employer. Here, the incorporation of Beverley Munro Inc., was undertaken so that Bill Munro could carry on essentially the same business as before. In our view these transactions fall squarely within the mischief of which section 1(4) is directed, and we are satisfied on the evidence before us that Brant Erecting and Hoisting and Beverley Munro Inc. carrying on business as Provincial Steel, carry on associated or related businesses, (ableit not simultaneously) under common control or direction. Accordingly, the Board is satisfied that it should declare that these two business entities are and always have been "one employer" for the purposes of the Labour Relations Act, and that Beverley Munro Inc. is bound by and must recognize any collective agreements or bargaining rights held by the applicant in respect of Brant Erecting and Hoisting.

In this case, by contrast, it is the "key man" himself who has decided to drop out, causing subordinate members of his organization to venture out on their own. As no common control or direction can be said to exist between the two economic organizations, the trade union must look to section 55 of the Act for its protection, if any. It should be noted that the short-lived employment of plumbers by Michel Rivard Plumbing Limited in 1979 does not affect the result in this case. It is clear that Michel Rivard Plumbing Limited at all times operated as no more than a payroll company for J. G. Rivard Limited, and had no presence of its own in the plumbing industry. In addition, this is not a case where it could be said that Jean-Guy and Michel Rivard exercised joint control over both companies. That kind of equality did not exist. If, as appears to be the case, effective control and direction over Michel Rivard Plumbing Limited was in the hands of Jean-Guy Rivard, that company and the new company (Rivard Mechanical) controlled by Michel Rivard would not be "related employers". Assuming, on the other hand, that Michel Rivard controlled Michel Rivard Plumbing Limited by virtue of his position as President (and owner), Michel Rivard was severed from all such connections with Michel Rivard Plumbing Limited a few days before the November 1979 memorandum was signed. This in itself raises a suspicion that the spin-off of Michel on his own in the brothers' contemplation as early as this November transaction. The applicant did, however, accept the settlement on the basis set out in the memorandum, which specified that it would operate "as at the date hereof", because of Jean-Guy's common ownership of the shares.

10We turn therefore to a consideration of section 55 of the Act, which provides:

55.-(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 a 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.

As can be seen, the term "sale" is defined very broadly, and the term "business" is not defined at all. As the Board stated in Raymond Cote, [1968] OLRB Rep. March 1211:

The meaning to be attached to the word "business" depends to a great extent on the facts and circumstances in each particular case. It cannot be said that any one facet of an enterprise taken by itself necessarily comprises a business. It has been expressed that a business is "the totality of the undertaking". The physical assets of buildings, tools and equipment used in a business are not necessarily the undertaking per se but are, along with management and operating personnel and their skills, necessary in the operations to fulfill the obligations undertaken with a hope' of producing profit to assume its success. The total of these things along with certain intangibles such as goodwill constitute a business.

11The list of possible factors is, needless to say, endless, but the applicant relies heavily on a passage from the Culverhouse Foodscase, [1976] OLRB Rep. Nov. 691, at paragraph 16, where the Board commented:

In each case the decisive question is whether or not there is a continuation of the business. .The most appropriate test to be applied in making this determination is whether the nature of the work performed subsequent to the transaction is the same as the nature of the work performed prior to the transaction.

This is only a starting point, however, as the remainder of the paragraph demonstrates. As the Board noted in Metropolitan Parking, [1979] OLRB Rep. Dec. 1193, at paragraph 32:

…Unless there is a continuation of the work and jobs, it would make little sense to preserve the collective agreement. Accordingly, the continuity of the work done is an important indicium of a transfer of a business.

And earlier, at paragraph 19:

In the absence of a successor rights provision any change in the legal entity constituting the employer would destroy subsisting bargaining rights, whether they flow from certification or derive from a collective agreement with the predecessor employer. Incorporation of the business, its transfer to other individuals, or a change in a partnership, would all effect a change in "the employer" even where the plant, equipment, proudest and work force remain substantially the same. The employees might find themselves working at the same plant, at the same machine, under the same working conditions, with the same supervision, doing exactly the same job as before, but as a result of a transfer (of which they may not even be aware) their collective bargaining rights and their collect; ye agreement would disappear.

This statement of course contemplates the situation, as in Culverhouse, where the successor actually inherits I he physical premises of its predecessor. The identity of employees is never a determinant for the Board, and where common situs is not a factor; the nature of the work performed becomes less of a determinant as well. On both of these points regard may be had again to Metropolitan Parking, at paragraph 36:

"36. Despite the labour relations focus of the statute "the business” is not synonymous with its employees or their work. In exceptional circumstances the accumulated skills, ability, know how or business contacts of the employee may be so crucial, or irreplaceable, that their loss would mean the demise of all or part of the business as a going concern; but these cases are rare. For the most part, the continued employment of the predecessor's employees is only one factor to be considered. The reason for this is succinctly stated by the Canada Labour Relations Board in N.A.B.E. T. v. Radio CJYC Ltd. et al., (1978) 1 Can.

LRBR 565:

"The purpose of the successorship provisions is to preserve bargaining rights in spite of changes in the ownership or control of an enterprise. Bargaining rights are typically granted to a trade union as bargaining agent for a unit of employees of an employer employed in certain classifications or at a certain location, or for all employees with specified exceptions. Bargaining rights do not attach to certain specific employees as individuals. Therefore, in defining the concept of business for the purpose of successorship, it would be incorrect to focus upon whether certain identifiable persons formerly in the employ of A are now in the employ of B. Furthermore, to focus on that question would invite employers to avoid the successorship provisions by refusing to maintain continuity of the individuals employed. A key to the protecting of bargaining rights must be whether there is continuity in the nature of the work done (i.e. in classifications or job content for which the union was certified) not in the actual persons who perform it...

But continuity of the work done is not sufficient alone to satisfy section 144. There must be some nexus between two employers other than the fact that one employed persons to do certain work that the other now does or will do, before one can be declared the successor of the other. Otherwise a loss of work to a competitor employer would result in a successorship. There must be come continuity in the employing enterprise for which a union holds bargaining rights as well as continuity in the nature of the work. The two go hand in hand.

[Emphasis added]"

12This is the approach which the Board adopts in distinguishing the predecessor's business from a similar or parallel business. See, e.g., Thunder Bay Ambulance Services, [1978] OLRB Rep. May 467. In deciding whether there has in fact been a "sale of a business", the Board noted in Metropolitan Parking, supra, at paragraph 30:

The vital consideration for.., the Board is whether the transferee has acquired from the transferor a functional economic vehicle.

Whether a sale of particular elements amounts to a "sale of a business" within the meaning of the Act depends on whether what was transferred, in all of the circumstances, possesses "that dynamic quality which distinguishes an idle collection of surplus assets from an active, severable and coherent part of a going concern" (Metropolitan Parking, at paragraph 33). Or, put more simply, "bargaining rights continue only when the employer transfers his business" (Metropolitan Parking, at paragraph 44). "Goodwill" is, of course, another way of describing the essential quality which distinguishes one business from another of like character. This was described in Dufferin Steel, [1976] OLRB Rep. March 81, paragraph 20, as being "the attractive force which brings in customers". The elements which make up this "attractive force" will of course vary form case to case, and industry to industry.

13In the construction industry, much of the "goodwill" associated with a particular business is personal to the key man in the organization. As Mr. Lusk of Costain testified, any contract which his company lets is valid only so long as the original contractor continues to perform the work; the contract is not "his" to transfer or assign. In the present case all of the managerial know-how, expertise and trade reputation which Jean-Guy Rivard brought to the business of J. (3. Rivard Limited disappeared when Jean-Guy went out of the business. This does not mean, of course, that other individuals in the organization necessarily start out "from scratch" when 1 hey make the decision to go out on their own; often, as here, they can and will rely on exposure and on contacts that they have made while working in a subordinate position in the industry Even if, as argued by the applicant, the group led by Michel Rivard did not take all of the steps to set up their own business until they had some form of commitment from Costain to provide some work, this is not an uncommon occurrence amongst individuals contemplating ;much a move, and falls short of the sort of continuity necessary to find a "sale of a business" from J. G. Rivard Limited to the fledgling group. While the case of Aircraft Metal Specialists Limited, [1970] OLRB Rep. Sept. 702, involved some change in the nature of the business. There a group of employees, including the individual who was the President and General Manager of the company going out of business, purchased from the predecessor (Field Aviation) certain of its equipment, leased the same premises, and did, on their own, solicit and obtain former customers of Field. The Board stated that there was "not a continuum between Field and Aircraft in the sense contemplated by the Act". Here Jean-Guy did, as one would expect, "put in a good word" with Costain for his brother and former employees, but clearly no arrangement or commitment was arrived at with Costain, and that was in no way condition of Jean-Guy's decision to discontinue business on his own.

14The significance of the "key man" to a construction contracting business does not mean that there can never be a "sale of a business" when the original principal sells out (compare Magrus Engineering, [1980] OLRB Rep. March 366). It does require, however, a careful analysis of what constituted the "functional economic vehicle" of the predecessor. Certainly the four unwanted trucks leased by Michel fall well short of meeting that definition, and lack that "dynamic quality" necessary to the finding of "a business". The looseness of the arrangements in transferring the trucks over the first couple of weeks, while being painted, is not surprising (given the relationship between the parties) and their use over this period appeared to be confined to the job-site of Costain, who was fully aware of the organizational changes that had occurred. The new group moved to their own location some 15 miles away (not an irrelevant factor in the residential servicing field), essentially purchased their own equipment, and received no work either through or from Jean-Guy Rivard or his company. The new company is financed solely by a line of personal credit arranged by Michel Rivard with his bank, and Jean-Guy Rivard has no part in that arrangement. Nor does there appear to have been any trading on the name or reputation of J. G. Rivard Limited, apart from, as noted before, any contacts made in the ordinary course of employment with that company. The result in this case ought not to turn solely on the fact that Michel is the brother of Jean-Guy, and that the name "Rivard" continues to be used by the new company. The Board accepts the testimony that people in the industry who were familiar with J. G. Rivard Limited would also have been aware, or been made aware, that Jean-Guy Rivard had gone out of business, and that Michel now was in business of his own. The case of B. R. Rousseau Plumbing, Board File No. 1463-80-R, released January 19, 1981, (unreported) involved another of the unionized plumbing contractors in the Ottawa area which went out of business at this time, and represents an interesting parallel to the present case. There also it was the brother of the principal of the predecessor company who spun out in business on his own. The application was brought solely on the basis of section 1(4) of the Act, but some of the Board's comments are applicable to section 55 as well. In particular, the Board noted in connection with the use of the family name, at paragraph 10:

With respect to the fourth criterion, that of representation to the public as a single enterprise, 446073 Ontario Inc. trades as Rousseau Plumbing and Heating. The Board not, however, that this is Gerald Rousseau's family name and a name that he is proud of and wants to continue working with in the Ottawa area. However, there has been no attempt to represent to the public that B. R. Rousseau Plumbing [the predecessor] and 446073 Ontario Inc. trading as Rousseau Plumbing and Heating are the same company. These two companies operated from different addresses; never shared the same telephone number; operated out of different premises and 446073 Ontario Inc. has adopted colours for its trucks which are quite different from the colours used by B. R. Rousseau Plumbing on its trucks. On this basis the Board finds that there has been no representation to the public that the two respondents are a single enterprise.

15Both of these cases may be distinguished from that of Base Electric Limited, [1978] OLRB Rep. Feb. 140, where the four brothers making up the predecessor company, the Board found, shared the responsibility for the management and goodwill of the company, and, upon separation, divided up amongst themselves all of the remaining assets, work-in-progress, and warranty work of the company. The present case, in fact, is much closer to Ralph Ford Electric, [1974] OLRB Rep. June 388. There an individual in a managerial capacity saw his employer being unionized and decided that he would be better off competing on his own on a non-union basis. When he left he took four other employees opposed to the union, the office secretary, and two trucks plus a quantity of electrical components and work shacks purchased from the predecessor company. He then proceeded to obtain by bid the electrical contracts on the house-building project on which the predecessor company, while he was employed, had begun to work. The Board found no sale of a business to have taken place, within the meaning of The Labour Relations Act.

16In the present case, J. G. Rivard Limited, as all were aware, did not intend to remain in business as a competitor of the new company. Does that alter the result? The Board finds on the facts that it does not (as in B. R. Rousseau, supra). While the withdrawal of J. G. Rivard Limited from the field might have made it easier for the new company to obtain work, the fact is that the Costain work, which is the focus of this application, was not going to go to J. G. Rivard Limited in any event. That is precisely why Jean-Guy found himself out of business in the first place. J. G. Rivard Limited, after the alleged "sale" to Michel, retained in all respects the capacity to compete, but was simply not in a position to do so. In order for Michel's new Rivard Plumbing to secure the Costain work, it still had to bid against non-union companies, and its price had to be competitive. J. G. Rivard Limited had no work to transfer, and transferred none. The work that it did have, plus any further service work that it could get, it completed itself. Jean-Guy Rivard or his company derived no benefit whatever from the work that the new company obtained, and Jean-Guy has played no part at all in the affairs of his brother's business. It was the imminent demise of Jean-Guy's company which forced his brother and employees to look elsewhere for their livelihood; we do not find, as the applicant submits, that Jean-Guy decided to go out of business to facilitate the start-up of a new company. The Board must find on the facts of the present case that when Jean-Guy went out of business, in the manner that he did, with him went the applicant's bargaining rights.

17The applications are dismissed.

DECISION OF BOARD MEMBER H. KOBRYN;

1. 1 dissent.

2. This decision stems from the basic principle stated in the preamble of The Labour Relations Act which reads:

WHEREAS it is in the public interest of the Province of Ontario to further harmonious relations between employers and employees by encouraging the practice and procedure of collective bargaining between employers and trade unions as the freely designated representatives of employees.

There is no dispute that this Board believes with recognition that the provincial Legislature is committed to the fundamental policy that collective bargaining rights are not a privilege, not a concession, not a favour, but a basic right which will not be withdrawn from any employee unless there are very serious reasons, and no such serious reasons exist in this case.

3. The evidence in this case shows that the transactions undertaken by the respondents were deliberately undertaken "for the purpose of eliminating a trade union or of undermining a collective bargaining relationship". This evidence was given by Michel Rivard and his two employees, Mr. Genest and Mr. Bisaillon, who all quite candidly admitted that they set out deliberately to "go non-union". These same witnesses also indicated that they had been planning and preparing for such a move for some time prior to the actual incorporation of the respondent company, 449637 Ontario Inc., c.o.b. as Rivard Mechanical in June of 1980.

4. One must also consider the transactions between the respondent companies which occurred prior to this application and the actions of the principals of the companies in light of their expressed intention to set up a "non-union shop". There is no question but that the employees were all members in good standing of the applicant prior to the formation of the respondent, 449637 Ontario Inc. In fact, all employees were still members in good standing in accordance with the union's records on the date of the hearing. Therefore, the applicant's bargaining rights have indeed been undermined deliberately by the actions and transactions of the respondents.

5. The issue before this Board in this application is to determine if there has occurred "a transfer of sufficient of the enterprise to constitute a sale of a business",keeping in mind the purpose of section 55. In determining this question, the mere absence of the specific sale of certain factors such as goodwill, trademarks, existing contracts, etc. is not determinative of the issue. In support of this point we must look to Culverhouse Foods Limited, [1976] OLRB Rep. Nov. 691, at page 698 where the Board stated at paragraph 16:

En route to a determination of the above essential questions the cases offer a countless variety of 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.

This Board must consider the above-mentioned factors referred to in the Culverho use decision as they relate to the evidence in this case demonstrating that a sale or transfer has taken place. The above-mentioned factors are supported by the following evidence.

I. Presence Or Absence Of The Sale Or Actual Transfer Of Goodwill:

The evidence of Michel Rivard and Jean-Guy Rivard established that the goodwill associated with the Rivard name has been built up over the years by the operation of J. G. Rivard Limited. Since this company ceased its operations at the same time as the respondent company, 449637 Ontario Inc. c.o.b. as Rivard Mechanical, the goodwill associated with the Rivard name was naturally transferred to the second company. The most striking example of this transfer is the fact that the Costain contract was awarded to Rivard Mechanical even though it was not the lowest bid. Michel Rivard also admitted that since his brother has now ceased business, any calls which might still go in to J. G. Rivard Limited would likely now be referred to his company.

IL Customer Lists:

The evidence of Jean-Guy Rivard established that Michel Rivard had full knowledge of all the customers of J. G. Rivard Limited by nature of his position with that company, and if he wanted to "go after" those customers, he was free to do so. Therefore, there has in fact been a transfer of customer lists and the newly-incorporated company is "going after" the former customers of J. G. Rivard Limited and getting their business, e.g. Costain projects.

III. Existing Contracts:

Although the union assumed that there had been a transfer of existing contracts, the evidence of Mr. Lusk and the respondents indicates that this in fact did not occur. However, the union's confusion is understandable since the employees of the two different companies were working on the same project at the same time and, at one point, using the same vehicles with only the lettering on some of the vehicles covered by paint applied with a roller, but still visible, being the only alteration of same. Although the existing contracts between J. G. Rivard Limited and Costain may not have been transferred or assigned, the subsisting relationship which gave rise to those contracts over the past ten years was transferred to the respondent, Rivard Mechanical, as a result of the understanding between the respondents for J. G. Rivard to "step aside" to allow Rivard Mechanical to be in a position to continue the relationship with Costain and obtain future contracts, which in the past had gone to J. G. Rivard Limited

IV. Covenant Not To Compete:

Jean-Guy Rivard, in his evidence, indicated quite clearly that he never intended to compete with his brother's company. The evidence also establishes that he did not in fact ever compete with his brother's company, and in 1980 did not submit any bids on any of the work that his brother made a bid for and subsequently obtained. If this is not a covenant not to compete in form it surely is in substance. Michel Rivard was aware of his brother's intentions not to compete with his company and proceeded to incorporate a new company and enter into financial commitments with the bank, secure in the knowledge that he would not be facing any competition from his brother's company especially with respect to the lucrative Costain work.

V. Any Other Obligations To Assist The Successor In Being Able To Effectively carry On The Business:

Let us consider at this juncture the leasing of the trucks. It is significant to note that the respondent, J. G. Rivard Limited, disposed of its fleet of trucks at exactly the moment when Rivard Mechanical required trucks for its "new" operation. The evidence of Jean-Guy Rivard and Michel Rivard indicate that these trucks are leased through a company which is owned 50% by Jean-Guy Rivard after they were purchased by a company of which Jean-Guy is the president. Michel Rivard indicated, in his evidence that he was at his brother's company looking to buy trucks when an associate of his brother brought to his attention the fact that he could lease these trucks which had formerly been used in his brother's business and the leases were entered into at that time. These leases were apparently entered into on August 20, 1980, but no explanation is given as to how the employees of the new company operated from August 1, 1980 until August 20, 1980. Although different witnesses had slightly different recollections concerning the repainting of the trucks, my understanding of the evidence was that at one point when the trucks were being used by the newly-incorporated company, they were still bearing the name of J. G. Rivard covered over with paint put on a roller, leaving the name still visible. This fact, coupled with the fact that at least two of the employees drove the same truck before joining the new company, as after joining the new company that this would seem to suggest that the lease agreements were entered into subsequent to the physical transfer of the vehicles from company to the other. Furthermore, it is the evidence of the employees that they commenced work immediately at the same location, and this would also suggest that they would immediately require the same vehicles as they had been using prior to changing employment to perform such work. Based on the above evidence, it is more reasonable to conclude that the leases were in fact entered into after the vehicles had actually been transferred to the new company. Concerning these trucks, it certainly appears that there was no hiatus or break: in their service for one company before commencing work for the second company. The trucks continued to be used by the same employees on the same job sites for the same purposes. In addition, Jean-Guy Rivard's decision to get rid of the trucks at the same time as Michel Rivard required such trucks is more than coincidence, and Michel Rivard would not have taken on the work that he did so quickly if he had not some assurance from his brother that he would have the use of the necessary trucks and equipment they normally carried.

VI. 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 evidence in this respect is uncontradicted. All of the employees of Rivard Mechanical formerly worked for J. G. Rivard Plumbing Limited or Michel Rivard Plumbing Limited. It is noted that Mr. St. Denis worked in a non-union role with Michel Rivard Plumbing Limited until 1979. As a result of the union's previous section 1(4) application, Mr. St. Denis became a member of the union and after that settlement, Mr. St. Denis was put on the payroll of J. G. Rivard Limited and his union dues and benefits were deducted.

The evidence is also uncontradicted that all of these employees are performing the same skills now as they were when they worked for J. G. Rivard Limited. In fact, Mr. Genest has retained his same position as foreman. In addition, the evidence established that there was no hiatus in production or employment for the employees. There was simply what might be termed a payroll transfer. One week the employees worked for J. G. Rivard Limited, the next they were working for Rivard Mechanical at the same job sites doing the same work.

An interesting side aspect of this case is the suggestion by Mr. Jean-Guy Rivard that if an employee is a shareholder of a company, the employer does not have to remit union benefits on that employee. Although this is a false concept of employee status under the Ontario Labour Relations Act, it appears from the evidence that Mr. Rivard has convinced the four employees involved in this hearing of this position and that as a result, they have all become shareholders of the new company as they had been shareholders of the old one without knowledge of their union. Also the suggestion that there exists a "profit-sharing arrangement" which somehow might effect the employee's status, is also without foundation in the circumstances of this case. The evidence on this "profit-sharing arrangement" is so deliberately vague as to suggest that it is really a sham or some type of illusory incentive offered by Michel Rivard to the employees to convince them that they are better off under his non—union arrangement'' than with the union proper.

Finally, the evidence shows that the financial backing, incorporation costs and corporate scheme were all entered into by Michel Rivard who has had experience in these matters since 1966, and that the employees have simply gone along with the scheme with Michel Rivard, as they did with Jean-Guy Rivard, after they were told that this would legally permit them to avoid some of their financial commitments associated with the union while still remaining members by paying their dues.

VII. 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:

Once again the evidence is uncontradicted that Rivard Mechanical continues to service the prime customer of J. G. Rivard Limited, namely, Costain, and further that there was in effect no break in production or continuity of service for that customer. It is significant to note that Costain, until 1978, used J. G. Rivard exclusively for its plumbing contracting work in the Ottawa area. Mr. Jean-Guy Rivard testified that Costain was a very loyal company and that he had good relations with the representatives of that company. Mr. Lusk was called as a representative from Costain who also indicated that he knew Michel Rivard and had dealt with him while he was employed by J. G. Rivard Limited or by Michel Rivard Plumbing Limited.

Mr. Lusk's evidence concerning Costain's 1980 program, indicated that they would be finishing the Canadiana I series and also indicated that by January 1980, it was possible to estimate when that series would finish and the next series commence. The nature of the relationship which existed between Costain and J. C. Rivard and the friendship which Mr. Lusk indicated existed between him and J. G. Rivard Limited was such that Jean-Guy and Michel Rivard by January of 1980 would have had a clear idea as to what Costain's program was going to be for the rest of that year and approximately when bids would be required for the new series. Th.~ fact that Michel Rivard incorporated his company on June 19, 1980 shortly before bids were required on the second series is once again not a matter of coincidence.

The evidence of Mr. Bisaillon indicated that Jean-Guy Rivard had spoken to the employees as early as January 1980 to advise them that he would be getting out of the plumbing contracting bm;iness in that year. Just two months before this incident, in November of 1979, J. G. Rivard Limited settled a previous section 1(4) application brought by the union, and just two days prior to that settlement, Michel Rivard divested himself of his interest and presidency of Michel Rivard Plumbing Limited; although other employees, namely V. Fournier, J. L. Genest and M. Bisaillon all purchased shares in J. G. Rivard Limited around October 1979, \4ichel Rivard for a period of seven months studiously avoided any corporate association with his brother's companies. However, in June 1980, only seven months after divesting himself of his corporate interests, he incorporated a new company, 449637 Ontario Inc. c.o.b. as Rivard Mechanical. I firmly believe both Rivard brothers had made their respective plain as early as the fall of 1979. As that time Jean-Guy had decided to get out of the plumbing contracting business, the reason being not so much because of the competition of non-union shops as he alleged at the hearing, but rather because he had other financial interests which were keeping him busy and providing him with whatever income he required. Michel Rivard, on the other hand, had been president of Michel Rivard Plumbing Limited from 1969 through to 1979 until the union became aware of the arrangement between that company and I. G. Rivard Limited to employ non-union plumbers of union jobs. When Michel Rivard divested himself of his interest in Michel Rivard Plumbing Limited, he did so in order to facilitate the setting up of the new "non-union" company.

6. Conclusion resection 55 application: in this case the evidence is uncontradicted that there has been a continuation of the business after the sale. In fact the same employees are performing the same work as they were prior to the sale for the same customer. Also that this transfer of the work was coordinated by Mr. Jean-Guy Rivard and Michel Rivard so that there would be no break in the servicing of the important client, Costain. All the events referred to above support that there was an agreement to transfer the work, the goodwill, the employees, the bookkeeper and the trucks to the successor company for the sole purpose of avoiding the employer’s contractual and/ or legal obligations with respect to the applicant trade union. Unlike many other decided cases under this section, the anti-union intent is clear in this case. The same respondents had attempted by the vehicle of Michel Rivard Plumbing Limited to avoid their union obligations but in 1979 the union discovered this and the matter was settled. This incident definitely has a bearing on the question of good faith of the respondents in I his application.

7. Let us now relate the evidence presented in this case to section 1(4) of the Act which provides that where associated or related businesses are carried on by or through more than one corporation, individual, firm, etc. under common control or direction, this Board may treat the corporations, individuals, etc. as constituting one employer for the purposes of this Act, and I favour the applicant's submissions on this subject matter, which I will restate in detail.

8. Common ownership or financial control: it is clear that the respondent's position throughout the hearing has been that there is no common ownership or control of the respondent's corporations. The respondent states that J. G. Rivard owned and controlled the respondent companies J. G. Rivard Limited and Michel Rivard Plumbing Limited, and that Michel Rivard owns and controls 449637 Ontario Inc. c.o.b. as Rivard Mechanical. The respondents maintain that because there is no overlapping legal control or ownership existing at the present time, this Board should not issue a declaration under section 1(4).

9. There are two responses to the position taken by the respondents. One, section 1(4) does not require that the related activities be carried on simultaneously. The exhibits presented to this Board of the corporate records of all the respondent companies show that Michel Rivard was president and a shareholder of Michel Rivard Plumbing Limited from its incorporation in 1969 until November 12, 1979. There is no dispute as to the fact that Michel Rivard Plumbing Limited is bound by the relevant provincial and residential collective agreements.

10. Michel Rivard owned and controlled Michel Rivard Plumbing Limited from 1969 until 1979. In 1979 he then divested himself of his interest once the union became aware that Michel Rivard Plumbing Limited was supplying non-union plumbers to J. G. Rivard Plumbing Limited. Then, only seven months after divesting himself of his interest in Michel Rivard Plumbing Limited, Michel Rivard then set up the respondent company, 449637 Ontario Inc. c.o.b. as Rivard Mechanical. It is this nexus wherein the common control and ownership is found in this application exists between Michel Rivard Plumbing Limited and 449637 Ontario Inc. by virtue of the fact that Michel Rivard personally was owner and president of Michel Rivard Plumbing Limited and now is owner and president of the numbered company referred to above.

11. In support of this position reference is made to Brant Erecting and Hoisting [1980] OLRB Rep. July 945. It will be noted that in the Brant case three partners established a steel erecting building and fabricating business which business was subsequently unionized. The partnership ran into financial difficulties in 1978 and in April 1979 the firm ceased to carry on any business at all. In May of 1979 a new company was formed, the sole owner being one of the former partner's wives. The former partner was hired by the company to manage the company's ongoing business activities which were substantially the same as the previous partnership. At page 948 of the decision, the Board reviews the purpose of section 1(4) and states:

Legal form is not permitted to dictate or fragment a collective bargaining structure; nor will alterations in legal form undermine established bargaining rights. In this respect, the purpose of section 1(4) is similar to that of section 55 which preserves the established bargaining rights and collective agreement when a "business" is transferred from one employer to another.

The Board goes on in paragraph 13 on page 948 to state that the section does not require the related business activities to be carried on simultaneously and in particular states:

The amendment reflects a legislative recognition that the essential unity and identity of an economic activity (which gives rise to employment) may be preserved even though the legal vehicles through which the activity is carried on will not operate simultaneously; and, business may be effectively transferred from one corporate entity to another, without any f the indicia of a "transfer of a business" which might trigger the application of section 55. This is especially the case in the construction industry where many of the employees will not have the permanence or investment in fixed plant and equipment characteristic or a manufacturing concern. A small construction company can move from job site to job site or place to place, assembling tools, equipment, a labour force as required after it has made a successful bid. . .In such circumstances there may be an effective transfer of business between related businesses without any apparent disposition of assets, inventory, trade names, goodwill, employees, etc.

It is important to note the summary in the Brant case given by the Board in paragraph 16 where it was stated:

There was hiatus between the apparent demise of Brant Erecting and the launching of Provincial Steel as a going concern. This is not a case in which a "keyman" leaves one employer to go work for another, or establishes a new business of his own in competition with his former employer. Here, the incorporation of Beverly Munro Inc. was undertaken so that Bill Munro could carry on essentially the same business as before. In our view, these transactions fall squarely within the mischief of which section 1(4) is directed, and we are satisfied on the evidence before us that Brant Erecting and Hoisting and Beverly Munro Inc. carrying on business as Provincial Steel, carry on associated or related businesses (albeit not simultaneously) under common control.

It is significant to note that the Board had found earlier that the previous partnership had been dissolved. In this application Michel Rivard Plumbing Limited is still a legal entity even though the evidence of the respondents is that it is not carrying on active business activity since November 1979

12. It was stated earlier that there were two answers to the respondent's position that there was not cornmon ownership or control. The second answer is that "legal ownership" is in itself not being held to be determinative of the issue. Reference is made to previous quote from the Brant decision in support of this proposition where it was stated that legal form is not permitted to dictate or fragment collective bargaining structure. In addition it is interesting to note in the Brant decision that the Board makes no finding that there was an intent to undermine the collective bargaining relationship. In this application where the intent to interfere with the contractual and legal obligations of the union is clear, afortiori this Board cannot allow the legal form to dictate and must declare that the respondent, 449637 Ontario Inc. c.o.b. as Rivard Mechanical, is a related or associated employer with Michel Rivard Plumbing Limited and/ or J. G. Rivard Plumbing Limited and therefore bound by the provisions of the relevant residential and provincial collective agreements.

13. Other actors in support of the section 1(4) application: in this application I rely also on the evidence reviewed in detail in section 55 application. In addition to that evidence it must be pointed out that there is common management between the respondents in that Michel Rivard has been employed by all of the respondents (apart from J. G. Rivard (Quebec) Limited) in a management capacity as a supervisor. In that capacity, he established contact with customers and certainly had input as to the direction of those various companies. This common management does not presently overlap simultaneously but by virtue of the wording of section 1(4), this is not necessary before a declaration be issued.

14. In addition to the evidence already referred to under the section 55 application, the fact is that all the respondent companies have common solicitors who have been acting for them from the inception of their corporate existence. The evidence also established that the respondents used common accountants and the bookkeeper for J. G. Rivard Limited is the same as the bookkeeper for Michel Rivard. There is evidence of non-arm's length transactions between the respondent corporations and the principals.

15. As to the interrelationship of the companies, according to Mr. Lusk's evidence, he learned of the existence or proposed existence of the respondent 449637 Ontario Inc. from Jean-Guy Rivard. Jean-Guy Rivard indicated he had discussions with Mr. Lusk concerning the setting up of the second company, doing what he could to assist his faithful employees and his brother to take over the Costain work.

16. It must also be noted that Michel Rivard went to great lengths to attempt to avoid association with his brother's unionized company for the purpose, as he candidly admitted, "to set up a non-union shop". It is also a fact that there was no lay off but the employees simply changed payrolls in August once the new work had to be commenced for Costain.

17. What we have here in this case is a very sophisticated respondent who, from past experience from numerous encounters, has managed to master the legal aspects of our labour relations system and has made a concerted frontal assault on the very principle enshrined in the Preamble to The Labour Relations Act and that is to further harmonious relations between employers and employees by encouraging the practice and procedure of collective bargaining between employers and trade unions as freely designated representatives of the employees. These legalized tactics should be viewed for what they really are, a concerted effort to destroy the collective bargaining system and the resulting collective bargaining agreement, and they should not be allowed to succeed.

18For all of the above reasons I must also reject the Board's decision in the case of B. R. Rousseau Plumbing, Board File No. 1463-80-R, released January 19, 1981 which involved another of the unionized plumbing contractors in the Ottawa area, which went out of business at this time. There also was a brother of the principal of the predecessor company who spun out in business in a similar manner as in this case. This company was mentioned in our case as one of the unionized competitors for the Costain work. The above remarks about the respondents in the Rivard case would also apply to the B. R. Rousseau case for the same reasons as mentioned above.

19For the reasons outlined, this application should succeed on both the section 55 and the section 1(4) applications.