The Ironworkers District Council of Ontario and International Association of Bridge, Structural and Ornamental Ironworkers, Local 721 v. Ontario Erectors Association et al.

[1981] OLRB Rep. May 523

1608-78-R The Ironworkers District Council of Ontario and International Association of Bridge, Structural and Ornamental Ironworkers, Local 721, Applicant, v. Ontario Erectors Association v. Ferro Erectors (Toronto) Limited V. Ferro Structural Steel (Toronto) Limited, Respondents.

BEFORE: Pamela C. Picher, Vice-Chairman and Board Members B. Joyce and M. J. Fenwick.

APPEARANCES: James Hayes, Allan MacIsaac, Stan Arsenault, James MacDonald and Shalom Schachter for the applicant; R.A. Werry, J. Salamon and J. Collier for the respondents.

DECISION OF THE BOARD; May 5, 1981

1. This is an application under section 1(4) of the Act. The Ironworkers District Council of Ontario and the International Association of Bridge, Structural and Ornamental Ironworkers, Local 721 have applied to the Board under section 1(4) of the Act for a declara­tion that Ferro Structural Steel (Toronto) Limited (hereinafter referred to as "F.S.S.") is bound by the province wide collective agreement between the Ontario Erectors Association, on the one hand, and the Ironworkers District Council and Ironworkers Locals 700,721 ,736, 759, 765 and 786 on the other.

2. Sect .on 1(4) of the Act reads as follows:

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 or 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.

3. The applicants allege that two companies, F.S.S. and Ferro Erectors (Toronto) Limited (hereinafter referred to as "F.E.") are associated or related businesses under common control or direction within the meaning of section 1(4) of the Act and ask that the Board exercise its discretion to declare that they constitute one employer for the purposes of the Act.

4. At the outset the parties asked the Board to bifurcate the proceedings. Before presenting evidence and argument on the issue of the exercise of the Board's discretion under section 1(4) of the Act, the parties asked the Board to determine the preliminary question of whether F.E. and F.S.S. are associated or related activities or businesses carried on under common control or direction. By a decision dated May 22, 1979 the Board found that they were. At p. 2 of the decision the Board said,

Counsel for the company conceded that Ferro Erectors and Ferro Structural Steel are under common control or direction. The agreed statement of facts submitted by the parties establishes that Both Ferro Structural Steel and Ferro Erectors are to varying degrees, directly or indirectly engaged in the steel erection business. Moreover, the agreed statement of fact indicates that Ferro Structural Steel from time to time sub-contracts erection work to Ferro Erectors.

Having regard to the agreed statement of fact in its entirety and most particularly the matters set out above, the Board is of the view that the activities of Ferro Erectors and Ferro Structural Steel are "associated or related business or activities" within the meaning of section 1(4).

5. The Board then convened a hearing to determine whether it should exercise its discretion and grant the declaration sought by the union which would bind F.S.S. to the above mentioned province-wide collective agreement. Through article 2.7 of the agreement the employer agrees not to sub-contract any work covered by the agreement to anyone who is not in a contractual relationship with the International Association of Bridge, Structural and Ornamental Ironworkers or any of its locals.

6. Mr. Julius Salamon is the president and owner of both F.E. and F.S.S. F.E. became bound by a collective agreement with the Ironworkers in 1964 and has been continuously bound since through successor agreements. F.S.S. has not been organized by a union. F.E. was incorporated in 1964; F.S.S. started its operation in 1962. From its beginning F.E. has been in the steel erection business. It has never engaged in the manufacturing of structural steel members. F.S.S., on the other hand, is and always has been in the business of both manufacturing the structural steel members as well as frequently assuming responsibility for the erection of the steel it supplies through sub-contracting arrangements. F.S.S. has never used any of its own employees to perform steel erection work. To that extent F.S.S. does not itself perform work that would otherwise be performed by F.E. It does, however, control the sub-contracting arrangements which it has in the past entered into both with F.E. and other steel erection companies. No employees of F.E. have ever worked for F.S.S. or vice versa.

7. Salamon testified that F.S.S. bids on small or medium size jobs which might typically involve a small office, warehouse or school. Most of them are within a fifty mile radius of Metropolitan Toronto. When F.S.S. bids on a job, Salamon testified, they provide three prices: the supply of steel only, both the supply and erection of the steel in circumstances where they would pay non-union wages and the supply and erection of steel in circumstances where they would pay union wages. When they become the successful bidder they use union sub-contractors for the steel erection work when the agreement they enter into with the general contractor or job owner indicates that union labour should be used on the project. Normally, when there is no such stipulation, F.S.S. sub-contracts the erection work to a non-union sub­contracting company. In no circumstances do they do the steel erection work themselves. Where a supply and erection bid is accepted they always sub-contract the steel erection work. Salamon testified that by far the greatest percentage of sub-contracting arrangements made by F.S.S. for the erection of structural steel is to non-union sub-contractors. Through the years, about one quarter of F.S.S.'s subcontracts have been made with unionized sub-contractors.

8. Salamon testified that F.S.S. has been subcontracting to both union and non-union sub-contractors from its inception in 1962. Up until 1970 when F.S.S. needed a unionized steel erection sub-contractor they would use F.E. or another unionized steel erector. F.E. virtually ceased doing business in 1970, however. Between 1970 and date of filing of this application, F.E. was awarded the subcontract by F.S.S. on only two jobs, one in 1971 and another in 1977. Salamon testified that in or about 1970 F.S.S. decided to no longer award its sub-contracts to F.E. because F.E. was no longer competitive. Thereafter when a particular project required union labour F.S.S. would sub-contract to some other unionized steel erecting sub­contractor. According to Salamon, F.E., in contrast to F.S.S., never entered directly into contractual arrangements with general contractors. Instead it would be engaged by a sub­contractor like F.S.S... In further contrast to F.S.S., F.E. did not itself submit bids for projects.

9. Although F.S.S. has never been unionized or bound by the collective agreement between the Ontario Erectors Association and the Ironworkers its name, rather than the name of F.E., was mistakenly included in the 1977-1978 collective agreement as a member of the O.E.A. The same mistake was repeated in the 1978-1980 collective agreement. Salamon testified that prior to these proceedings he had been unaware of this error. Following the discovery, though, F.S.S. met with the Ironworkers, Local 721 and officials of the O.E.A. at which time the O.E.A. accepted responsibility for the error. The union did not argue that the listing of F.S.S. in the collective agreement was caused by anything other than an unfortunate mistake.

10. To decide in any given case whether to exercise its discretion and grant a declaration under section 1(4) of the Act the Board considers to what extent the mischief that section 1(4) was designed to redress (that is, the wrongful erosion of a union's bargaining rights) has been created by the circumstances before it. The union has a legitimate interest in preventing the dissipation of its bargaining rights through the activities of a company related to the one for which it holds bargaining rights. The company also has an interest, however, in knowing with some certainty within a reasonable time how it may run its operation. To balance the various interests involved, the Board will decline to exercise its discretion and grant a declaration under section 1(4) of the Act if the union does not act with sufficient dispatch to protect its bargaining rights. In H. Allaire and Sons Company Limited[1974] OLRB Rep. July 457, for example, the Board at p. 460 said,

The prime question which must be answered by the Board is whether or not the Board should exercise its discretionary power under section 1(4) in a case of this kind. The power given to the Board to treat two corporations as constituting one employer is a discretionary power. The particular circumstances in each case must be weighed. Certain tests must apply and certain vital questions must be answered. For instance, has the applicant sought to have the Board exercise its discretionary power will him a reasonable period of time after knowing of the existence of two corporations who are closely associated in their activities or business? Is the applicant attempting to disturb any existing collective bargaining relationship? Has the applicant been unsuccessful in its prior attempts to obtain bargaining rights through the normal process of certification?

Surely there is an onus on an applicant union, being aware of the circumstances over a period of years, to seek relief from the Board within a reasonable period of time.

See also Harold R. Stark Limited [1978] OLRB Rep. Oct. 945; D.L. Stephens Contracting Niagara Limited [1978] OLRB Rep. June 531; Eliwall and Sons contracting Limited [1978] OLRB Rep. June 535.

11. In requiring the union to act with due diligence the Board is mindful that it would be in appropriate to place an excessively high standard on the union. In The Great Atlantic & Pacific Company of Canada Limited and A & P Drug Mart Limited, [1981] OLRB Rep. Mar. 285 the Board at pp. 12-13 said,

The respondents contend that the union should have been aware earlier of the separate corporate existence of A & P Drug Mart Limited and should have made its 1(4) application earlier. In the respondents' submission, the union s unreasonable delay in discovering and acting upon that fact should now deprive it of the remedy available under section 1(4). The Board cannot accept that contention. The circumstances were such that the union could not reasonably have been aware that two or three employees of the more than five thousand which it represents were not being treated in accordance with the collective agreement, and immediately upon the union becoming so aware it filed grievances to protect its position. There may be no legal requirement for a company to advise a trade union about a related company which might affect the union's bargaining rights, and there may be no requirement that a company which intends to rely upon "the corporate veil" as a defence to a grievance should disclose that defence, however, it is inconsistent, in our view, for a company to take the position that the union "ought to have known" of these matters, when in response to the grievance, the Company itself did not clearly notify the union of the facts. Indeed, the presence in the Act of section 1(5) (creating an onus upon the respondents to reveal the corporate connection between them) suggests a legislative recognition that an applicant trade union generally will not be aware of the business or corporate relationships between the allegedly related businesses. In view of this explicit legislative direction, we do not think that we should adopt an unduly high standard of "due diligence", or readily apply such concept to bar a union which had no actual knowledge of the basis on which a section 1(4) application might be made. It will be noted that section 1(4) itself does not expressly contemplate any such bar.

The reality of trade union organization — as illustrated by the appli­cant in this case — also suggest that the Board should not exercise its discretion to create an unreasonably high standard of due diligence. A union's resources are not unlimited, and this limitation must be considered in assessing how quickly a union should become aware of, investigate and respond to, situations which might call for the application of section 1(4). .. . The Board must be careful lest it imposes upon them a standard of "due diligence" which is entirely unrealistic in the actual circumstances as they exist — especially when the respondents asserting that the union ''should have known or "acquiesced in the erosion of its bargaining rights", will usually have taken no steps to advise the union of the situation, and will usually have benefited (as in the present case) from the lower schedule of wages payable to employees not covered by a collective agreement. We have carefully considered the cases referred to by counsel for the respondents (see Industrial Mine Installations Limited, [1972] OLRB Rep. Dec. 1029, Inducon Construction of Canada Limited, [1975] OLRB Rep. April 399, H. Allaire & Sons Company Limited, [1974] OLRB Rep. July 457, D.L. Stevens Contracting Limited [1978] OLRB Rep. June 531, Ellwall and Sons Construction Limited, [1978] OLRB Rep. June 535, Zaff Constuc­tion Limited, [1977] OLRB Rep. Nov. 741, Farquhar Construction Limited, [1978] OLRB Rep. Oct 915, Harold R. Stark, [1978] OLRB Rep. Oct. 945, Acto Builders Limited [1979] OLRB Rep. June 465, and Metrus Contracting Limited, [1979] OLRB Rep. Oct. 1009), but in our view the principle espoused in these cases amounts to no more than this: if a trade union has actual knowledge that a related company is undermining its bargaining rights or the union is willfully blind to this act and, without cause, fails to seek remedy under section 1(4) within a reasonable period of time, the Board may exercise its discretion not to make a 1(4) declaration.

12. Concerning the timeliness of this application counsel for the company argues that the applicants had an obligation to bring their application under section 1(4) of the Act when they first learned of the existence of F.S.S. and not simply when they discovered that F.S.S. was sub-contracting to non-union sub-contractors. Additionally counsel argues that the evidence demonstrates that one of the other locals of the Ironworkers, Local 736, whose juris­diction covers the Hamilton area and who is part of the Ironworkers District Council, one of the applicants, has for years had clear knowledge that F.S.S. has sub-contracted to non-union erecting companies and has done nothing about it. Counsel emphasized that the collective agreement to which the applicants want the Board to declare that F.S.S. is bound is a province-wide agreement. He argues that it would be inappropriate for the Board to enable Local 721 to receive a declaration that would bind F.S.S. province-wide, thereby benefiting Local 736, which Local 736 because of its more obvious delay could not receive the declaration itself.

13. Mr. James MacDonald has been a full time business agent with the Ironworkers, Local 721 since 1974. He testified that he did not suspect that F.S.S. was sub-contracting to non-unionized steel erection companies until 1977 or approximately one and one half years prior to the fling of this application. Although the evidence establishes that F.S.S. had subcontracted steel erection work to a considerable number of non-union steel erection companies within the jurisdiction of Local 721, MacDonald stated his view that these were mostly outside of Toronto and on small jobs such that the union would not have readily become aware of them. The first time he actually discovered F.S.S. engaging the services of a non-union erection company, however, was in March, 1978 while they were on the Earlscourt school job. He discussed the matter with Mr. Salamon and the work was completed with a unionized erecting company. MacDonald testified that on this and other occasions he was given assurances by Salamon that whenever F.S.S. had a contract for both the supply and erection of steel they always used a union erecting company. MacDonald testified that through Salamon’s assurances he was led to believe that F.S.S. was bound by the O.E.A. agreement. Salamon's recollection of his exchange with MacDonald over the Earlscourt school job was somewhat different. Salamon testified that when he was approached by MacDonald about the job he told MacDonald that F.S.S. was not then, and never had been, bound by the O.E.A. collective agreement with Local 721 but that it was F.E. that was bound. Salamon testified that MacDonald responded that as far as he was concerned F.S.S. and F.E. were the same company. More generally, Salamon testified that he at no time told MacDonald that F.S.S. was unionized or a member of the O.E.A.

14. Two months later, in May 1978 another problem arose over a job at Nashdene Yard. MacDonald discovered a non-union erecting company on the job and learned from the general contractor's superintendent on the site that F.S.S. had the sub-contract for both supply and erection. Once again MacDonald called Salamon. Both Salamon and ultimately the president of the general contractor told MacDonald, however, that F.S.S. had the sub­contract for the supply of the steel only and thus no control over who performed the erection work. Although MacDonald testified that he didn't believe that F.S.S.'s contract was limited to supply only, he did not take action against F.S.S. or commence a section 1(4) application at the time.

15. Seven months later, however, in December 1978 MacDonald filed two grievances against F.S.S for engaging non-union erection companies on two other jobs allegedly in violation of the O.E.A. collective agreement. Towards the end of December the applicants filed the instant application under section 1(4) of The Labour Relations Act.

16. It is clear on the evidence that as far back as 1964 MacDonald knew of the existence of two separate Ferro companies. He knew from that time that F.E. was in the business of erecting steel and he knew that F.S.S. was in the business of fabricating the structural steel and contracting out the erection work. It is not surprising that MacDonald would have been aware of this corporate structure as he was employed by F.E. as a foreman from 1964 to 1965. He was there at the actual time when or immediately after F.E. entered into a collective agreement with the Ironworkers in 1964. At that time F.S.S. was in operation and, the Board concludes on the evidence, was contracting out the steel erection work both to F.E. and other steel erection companies, both union and non-union. Mr. Stanley Arsenault, another business agent with Local 721 also indicated he had been aware, over the years, that F.S.S. did not directly employ ironworkers but rather engaged sub-contractors for steel erection work.

17. If Local 721 had been concerned about preventing F.S.S. from sub-contracting any work to non-union erection companies, it could have come to the Board anytime after section 1(4) was introduced into the legislation in 1971. The Board is satisfied that for many years Local 721 has either known or ought to have known that F.S.S. was not organized and was not itself bound by the O.E.A. agreement which up until 1977 listed only F.E. and not F.S.S. as one of the O.E.A. members. They had reason to know therefore that their bargaining rights were limited to F.E. and did not cover F.S.S. even when it sub-contracted steel erection work.

18. It appears from the evidence that Local 721 was generally not concerned with F.S.S. because F.S.S. always in fact did sub-contract to unionized steel erection companies when the owner of the project or general contractor was either legally required, or felt under an obligation, to sub-contract to union companies. As Arsenault put it, up until 1977 they always considered that F.S.S. was a "fair" contractor.

19. On the basis of all the evidence the Board concludes that this is not a situation where it should grant a declaration under section 1(4). For the reasons canvassed above the Board is satisfied that Local 721 either knew or ought to have known prior to 1977 that F.S.S. was not bound by the O.E.A. collective agreement and was not therefore itself under a legal duty to sub-contract only to organized erection companies. In an effort to bind F.S.S. to the O.E.A. agreement they could have applied under section 1(4) of the Act well prior to 1977. Furthermore, according to MacDonald, he first suspected that F.S.S. was sub-contracting to non-union erectors in 1977. This was confirmed to him in March of 1978. Two months later the union again thought that F.S.S. had been responsible for sub-contracting to a non-union steel erection company although this was denied by F.S.S. and the general contractor of the job in question. No action was taken, however, for another seven and one half months when the union encountered two more problems. Additionally it would appear on the evidence that Ironworkers Local 736 a member of the District Council, one of the applicants, would have had for a considerable length of time clear knowledge of F.S.S.'s practice of sub-contracting to non-union contractors and would not, therefore, on its own, be entitled to a declaration under section 1(4). Giving a declaration to Local 721, however, would encompass the jurisdiction of Local 736 as it would have the effect of binding F.S.S. to what is now a province-wide agreement. In some circumstances this may be appropriate. In all of the circumstances of this case, however, the Board declines to exercise its discretion to grant the applicants a declaration under section 1(4) of the Act.