Ontario Labour Relations Board

File No.: 0116-81-R

Carpenters' District Council of Toronto and Vicinity on behalf of Locals 27, 666, 681, 1133, 1747, 1304, 1963, 3227 and 3233, United Brotherhood of Carpenters and Joiners of America, Applicant v. Bramalea Carpentry Associates and Pinehurst Woodworking Company Limited, Respondents.

BEFORE: R. O. MacDowell, Vice-Chairman, and Board Members H. J. F. Ade and C. A. Ballentine.

APPEARANCES: M. A. Church, M. Whelan and W Armstrong for the applicant; A. Craig and W. Christie for the respondents.

DECISION OF R. O. MacDOWELL, VICE-CHAIRMAN, AND BOARD MEMBER, H. J. F. ADE; July 29, 1981

1. This is an application under section 1(4) of The Labour Relations Act. The applicant union seeks a declaration from the Board that Pinehurst Woodworking Company Limited ("Pinehurst") and Bramalea Carpentry Associates ("Bramalea") are one employer for the purposes of The Labour Relations Act. Section 1(4) 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 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."

2. Bramalea is a partnership of William Donald Christie and James Herbert Christie formed in 1968 to carry on the business of carpentry contracting. Initially, the business was engaged only in small scale residential renovation and involved only the Christie brothers themselves. It was operated from William Christie's home. As the firm became better known however, it began to do more commercial construction work, and by 1971 seventy per cent of its activities involved commercial construction. By this time, the expanding business employed four employees, had leased premises on Drew Road in Mississauga, and was beginning to acquire more assets. The firm's solicitors advised the Christies to create a corporate vehicle through which to carry on business; and in November 1972 Pinehurst was incorporated. Bramalea became temporarily dormant. The prefabrication and installation work previously done by Bramalea was carried on by Pinehurst.

3. By 1973 it became apparent that some of Pinehurst's commercial clients would require work on "union" jobsites — that is, sites where outstanding contractual arrangements restricted the work to unionized subcontractors. In order to secure access to this work, it was decided to resurrect Bramalea and establish it as a "union" subcontractor. Bramalea entered into contractual relations with the carpenters union on August 30, 1973, and has been bound by a series of collective agreements since that time. There is no dispute that Bramalea is currently bound by the province-wide Carpenter's collective agreement.

4. Whenever Bramalea required carpenters they were obtained through the union hiring hall and directed to report to the jobsite. Indeed, Bramalea was a model employer in this regard. Over the years it faithfully adhered to the terms of the collective agreements, hired trade union members, and paid union rates and benefits. Bramalea has only one steady employee, John Killick, its site supervisor (and a union member).

5. The activities of Bramalea on union sites were kept completely separate from those of Pinehurst which looked after the non-union work. Pinehurst did all of the bidding and fabrication, but when it became necessary to install its products on union jobsites, Bramalea was the vehicle used. The installation of Pinehurst's products is Bramalea's principal business. The only exception is when Pinehurst is unable to produce all of the material needed for a particular job. Pinehurst occasionally supplies other unionized subcontractors.

6. Because of the rigid separation of the union and non-union aspects of the business, and Bramalea's faithful adherence to the collective agreements by which it was bound, there is no reason why the union would become aware of Pinehurst, which did not operate in the unionized sector of the construction industry. The volume of work performed by Pinehurst is much larger than that of Bramalea, but that work is not performed on sites where Pinehurst would come to the union's attention. Pinehurst now employs about 40 employees: 20 in its woodworking shop, 8 to 14 installers, and miscellaneous office staff. Unlike Bramalea whose employee complement fluctuates with the volume of installation work undertaken, the employee complement of Pinehurst is relatively stable, with some of its carpenters working in the shop or on site as circumstances require. The nature of the installation work is the same. Employees of Bramalea are never employed on Pinehurst jobs or in the Pinehurst shop.

7. There is no doubt that Bramalea and Pinehurst carry on related activities or businesses under common control or direction. The Christie brothers are the sole principals of Bramalea and, with their wives, the directors and officers of Pinehurst. From a practical point of view they run both businesses. The two firms operate from the same location, and have the same lawyer, accountant, and office staff. DeAnn Christie, William Christie's wife is a Vice-President and employee of Pinehurst, and does the books for the two firms. She records the receivables, issues cheques, prepares the payroll, and does miscellaneous secretarial duties for both businesses. All of the tools and equipment are owned by Pinehurst. The Pinehurst name appears on the tool boxes. Gordon Duncan, a construction co-ordinator employed by Pinehurst handles employee relations on non-union sites for Pinehurst and on union sites for Bramalea. There is no chargeback to Pinehurst for this service. From 1977 to 1981 employees of both companies were regularly paid by cheques issued by Pinehurst. Separation slips also bore the Pinehurst name and employer number. Even union dues and welfare fund payments sent to the trustees of the union trust fund (originally managed by W. M. Mercer Limited and later by Gordon J. Manion and Associates Limited) were remitted on Pinehurst cheques. Because separate payroll companies are not unusual, and Bramalea was never delinquent in its payments, there was no reason to question this practice or inquire into the relationship between Bramalea and Pinehurst. The benefit fund administration companies have no organic link to the union which hires them, and we do not think information which they might have had can automatically be attributed to the union. In any event, there is no evidence to suggest that the trust fund administrators ever recognized that Pinehurst might be anything more than a payroll company for Bramalea. Certainly there was no indication that it might be an employer in its own right carrying on a related parallel business.

8. Prior to January, 1981, we are satisfied that the union officials could not reasonably have known on the relationship between Bramalea and Pinehurst. It is not unusual for manufacturing concerns to use unionized installation subcontractors, so the presence of Pinehurst Products on a union jobsite would not trigger any suspicion. Nor would the Pinehurst name on some of the tool boxes. The Carpenters' collective agreement requires unionized subcontractors to supply their employees with tools and the rental of such tools is quite common. John Killick, the only steady employee of Bramalea, a site supervisor and a union member, never notified the union of any possible relationship between Pinehurst and Bramalea; and, of course, neither did the owners of the two businesses.

9. The union first discovered Pinehurst early in January 1981, when that company became involved in what it mistakenly thought were "non-union" projects at St. Regis College and Woodside Mall. Pinehurst had earlier been advertising in the newspapers for carpenters for its non-union operation, but had agreed to hire two out-of-work union members who had applied for these jobs. It was these carpenters who were dispatched to the Woodside Mall site when Pinehurst learned that it was a union project. The union, in turn, filed a certification application based upon its membership at the Woodside site, but later withdrew that application when it learned that Pinehurst employed a number of employees at other sites in the area and, as Matthew Whelan, the union business agent told the Board, "we just didn't have the horses" to succeed in a certification application. At about the same time the union discovered Pinehurst using non-union employees on the St. Regis College site — again because William Christie had erroneously believed that he was dealing with a non-union contractor and accordingly, used the Pinehurst vehicle. Further investigation revealed the relationship between the two firms, and a section 1(4) application was filed.

10. There is no question in this case that the conditions necessary for a 1(4) declaration have been met. Pinehurst and Bramalea are engaged in related activities or businesses under common control and direction. The only question is whether the Board should exercise its discretion to make a section 1(4) declaration, where, as here, the respondents have operated related parallel businesses for many years, and the union could not reasonably have been aware of it. The union urges the board to issue a section 1(4) declaration because it moved with reasonable dispatch upon becoming aware of the two related companies and because, it argues, they should not be "rewarded" for their longstanding successful "double-breasted operation". The union does not seek a declaration with any retroactive effect or any remedy arising from past business relationships. The union only seeks access for its members to Pinehurst's non-union installation work, and undertakes to admit all of Pinehurst's present installation employees into membership. The respondents argue that there has been no erosion of the union's bargaining rights and that the Board should not thrust a bargaining relationship upon a group of long term employees of Pinehurst who may have no wish to be represented by the applicant. Section 1(4), the respondent argues, should not be used as a substitute for certification — especially when the non-union entity predated the unionized one.

11. Section 1(4) of the Act is designed to deal with situations where the economic activities giving rise to the employment relationships regulated by the Act, are carried on by or through more than one legal entity. Where such legal entities are engaged in related economic activities under common control and direction, the Board is entitled to "pierce the corporate veil" and treat them as one business or employer for the purposes of the Act. The legislature has determined that legal form should not dictate (and possibly fragment) the collective bargaining structure; nor should corporate restructuring undermine established bargaining rights. Because of section 1(4), those rights need not be treated as coextensive with the legal framework of the business, and to this extent, labour law policy seeks to insulate collective bargaining from uncertainty at the inception of the bargaining relationship, or disruption should the exigencies of the market prompt the employer to change the number or form of the legal vehicles through which it carries on business. Each of these functions of section 1(4) was referred to by the Board in Industrial Mines Installations Limited[1972] OLRB Rep. Dec. 1029:

"Section 1(4) is obviously contemplated to cure the mischief that results from being unable to properly define and tie down the employment relationship. In many situations where companies have a close relationship an employee may be shifted from one company to another so that his employment relationship, at any given period, is difficult to define in terms of one employer. So too, the number of employees employed by one of those companies at any given time may be impossible to ascertain.

Prior to the enactment of section 1(4), where such situations existed, it was difficult to define the employment relationship and to determine the proper employer for certain purposes under the Act. For example, in certification proceedings it was necessary to determine the proper employer in order to determine whether the union had sufficient membership among the employees to be certified.

Also, in some situations where a union had been granted bargaining rights for the employees of one employer, the employees could be shifted to another associated or related employer with the result that the bargaining rights which had been earned by the trade union for the employees was lost.

So too, in the case where associated or related employers joined in a common enterprise and used one work force, which was shifted and transferred from time to time, the certification with respect to one employer only was, in effect, a certification of a segment of the total enterprise, and could seriously impair the totality of the business operations by inhibiting the shifting of employees between union and non-union segments of the enterprise. It was also possible in situations where associated or related companies carried on a single enterprise that employees of the separate legal entities could be represented by different trade unions so as to cause the bargaining rights within the single enterprise to be unduly fragmented. An example of the type of situation where section 1(4) was applied is found in Walters Lithographing Company Limited, et al, [1971] OLRB Rep. 406.

It is in these types of situations that the interests of the parties in having the Board treat separate employers as constituting one employer for the purpose of the Act became apparent, and it is for that reason that section 1(4) was enacted."

But a section 1(4) declaration is discretionary. It is not intended to be an automatic response in every situation where its statutory preconditions are met. In determining whether that discretion should be exercised, the Board must have regard to both the mischief to which section 1(4) was directed, and the particular context under review.

12. In the present case there is no interchange of employees between the two firms. There is no common labour force, or pool of employees drawn upon by the two companies in the manner mentioned by the Board in Industrial Mines Installations Limited supra. There is no indication that work actually destined for Bramalea has ever been redirected to Pinehurst, or that Pinehurst has been used surreptitiously on unionized jobsites to the detriment of Bramalea. It may be argued that the Christies have gained a "benefit" from having access to unionized sites without extending the opportunity to work on non-union jobs to Bramalea's employees; but the union has also obtained a benefit. It was able to acquire bargaining rights for Bramalea even though there is no evidence that it represented any employees at the time that the voluntary recognition and collective agreement were concluded; (Bramalea probably had no employees at this point), and having no support, it would not have been able to apply for certification for either or both of the respondents without an organizing campaign to enroll the non-union employees into membership. Had the union been aware of Pinehurst at the inception of the relationship, it would have had to do what it now claims is unnecessary; namely, demonstrate support among Pinehurst employees. Why should the passage of time improve its position? If anything, the passage of eight (8) years suggests that the Board should be reluctant to disturb the industrial relations status quo! Pinehurst and its employee complement were established well before the union relationship with Bramalea, and there is no dispute that the Pinehurst employee complement is, and always has been, larger than that of Bramalea. The effect of a section 1(4) declaration would be to sweep a relatively large group of employees into both the union and the bargaining unit. This the respondent characterizes (not inaccurately) as "the tail wagging the dog".

13. The union business agents who gave evidence were commendably candid with respect to this matter. Both acknowledged that a significant accretion to the union's bargaining rights would occur if a section 1(4) declaration was made. Indeed, one indicated that the union's certification application had been withdrawn because the union did not enjoy the support of the employees affected by it, and the other told the Board that he thought it would be "unfair" to sweep into the union employees that it had not sought to organize. In the circumstances, the union's undertaking to admit all these individuals into membership is a perfectly natural response to an acknowledged realization that by applying section 1(4) the union would be gaining something that it would not otherwise have had. In this respect, the situation may be contrasted with that of a unionized firm which creates a non-union subsidiary to do work which would otherwise (and could reasonably be expected to) come to the union firm.

14. There is no compelling reason to use section 1(4) to rationalize the bargaining structure - even assuming that the Board would be prepared to do so without a showing of support among the Pinehurst employees. Businesses such as that operated by Pinehurst are normally covered by a separate "shop agreement"; not the province-wide I.C.I. agreement which the union now seeks to have applied to the installation (and only the installation) employees employed by Pinehurst. Most of Pinehurst's employees would be beyond the ambit of the collective agreement as would the installation crew when they were working in the shop.

15. In a number of cases the Board has observed that section 1(4) is designed to preserve rather than extend bargaining rights. It is not to be used as a substitute for certification. (See: Farquhar Construction Ltd. [1978] OLRB Rep. Oct. 914 and cases cited therein; H. Allaire & Sons Co. Ltd. [1974] OLRB July 457; Inducon Construction [1975] OLRB Rep. Apr. 399; and, most recently W.M.I. Waste Management [1981] OLRB Rep. March 409.) In our view, that is precisely what the union is trying to do in this case, where there was an established business and employee complement predating the bargaining relationship, and no evidence of a concrete erosion of the union's bargaining rights. Accordingly, the Board is not prepared to exercise its discretion to issue a section 1(4) declaration. If the union wishes to acquire bargaining rights for the Pinehurst employees, it will be necessary to enroll them into membership, and apply for certification.

16. The application is dismissed.

DECISION OF BOARD MEMBER C.A. BALLENTINE;

1. I disagree with the majority decision of the Board whereby it declined to exercise the Board's discretion to issue a section 1(4) declaration.

2. As stated by the majority decision in paragraph 7: "There is no doubt that Bramalea and Pinehurst carry on related activities or business under common control and direction". Therefore, the statutory preconditions for a 1(4) declaration have been met. The only issue is whether the Board should exercise its discretionary powers and grant a section 1(4) declaration.

3. In determining whether the Board should exercise its discretion to grant a section 1(4), the Board must have regard to the mischief the legislature envisaged when section 1(4) was invoked.

4. The mischief in the present case results from the related companies under the control of the Christies, operating a union and non-union in the related carpentry field of construction (sub-contractors). This structure places them in a privileged position of tendering to the general or prime contractor over a reputable unionized carpentry contractor. The potential is there to work out a deal with a general unionized contractor who is in contractual relations with the Carpenters' Union. Two prices can be submitted. The company then proceeds to perform the work with the non-union arm at the lower price. If by chance the union catches them, it is a simple matter to switch to the union arm and complete the job. The majority acknowledge that if this were happening a section 1(4) declaration might be appropriate, but there is evidence that this happened in the instant case. I do not think it was a "mistake". We do not know how many times this has happened in the past or could happen in the future.

5. I do not accept the evidence of William Christie, that he erroneously believed he was dealing with a non-union general contractor on the Woodside Mall and St. Regis College projects, as the majority have stated in paragraph 9 of the decision. Nor can I agree with the majority when they state in paragraph 12 that "There is no indication that work actually destined for Bramalea has ever been redirected to Pinehurst". The general contractor on both of these projects was R. G. Kirby & Sons Ltd., a member of the Toronto Construction Association and a long-time unionized general contractor, who is in a contractual relationship with the applicant union.

6. Mr. Win. Armstrong a business agent of nine months with the applicant union gave evidence that he first became aware of "Pinehurst", the non-union arm of the Christie's, when he had visited the Kirby project at Woodside Mall on a routine visit. He approached two carpenters and asked them who they were employed by, he received an answer from one of them that the company was "Pinehurst", a subsidiary company of "Bramalea" (the union arm of the Christies'). It just happened that these two carpenters were members of the applicant union, who had answered a newspaper ad, placed by William Christie, in the Toronto Star. The ad didn't list the name of a company, just a telephone number, (the same number is used by the double-breasted companies). Subsequent to Mr. Armstrong's visit the two carpenters were paid the union rate and welfare benefits were submitted in accordance with the carpenters' collective agreement with Bramalea.

7. Under cross-examination, William Christie described the incident with the two union carpenters at the Woodside Mall as "just a coincidence". However, he stated they were sent to the Woodside Mall after two non-union carpenters had been kicked off the job. Counsel for the applicant union put a question to him that the two union carpenters believed they were working for Pinehurst. Mr. Christie said this was not true. Mr. Christie admitted the two union carpenters were laid off before the work was completed at the Woodside Mall, and he claimed John Killick, Bramalea's site supervisor finished the work.

8. Notwithstanding William Christie's claim that the St. Regis College project was a mistake the same as Woodside Mall, Mr. Armstrong on a routine visit to St. Regis College, several days after the incident at Woodside Mall had found two non-union carpenters employed by Pinehurst. On a complaint to the project superintendent of the general contractor, "Kirby", the non-union carpenters were immediately removed. The work was completed by Kirby by hiring union carpenters directly under the terms of the collective agreement between R. G. Kirby & Sons Ltd. and the Carpenter's Union.

9. I disagree with the majority describing "Bramalea" as being a model employer as they have in paragraph 4. The Christies devised a scheme that benefits them in a commercial sense to the detriment of the unionized carpentry contractors and they did erode the union's bargaining rights at both the Woodside Mall and the St. Regis College projects. With the majority decision of this Board they have the potential of continuing this mischief.

10. In paragraph 12 it is beyond my comprehension how the majority can conclude that the applicant union has benefited through the Christies' gaining a voluntary recognition agreement with the union in 1973. William Christie approached the Carpenters' Union in 1973 to obtain an agreement so Bramalea would have a licence to tender carpentry work to the unionized general contractors. The Carpenters' Union have the bargaining rights for the unionized general contractors and, under the collective agreement, the general contractors either engage union carpenters directly or they are obliged to sublet the work to a contractor in contractual relations with the union. The evidence from William Christie is that the only time they ever used Bramalea and engaged union carpenters was when it was necessary where the general contractor was already unionized. How did the carpenters union benefit? The Christies are the only beneficiaries, they pay the carpenters under "Pinehurst", the non-union arm, $11.00 to $12.00 per hour. Compared to the union rate of $17.00 per hour. This is a good business arrangement but is it the type of normal labour relations "scheme" that the legislature contemplated when it found it necessary to invoke section 1(4) in 1971 and subsequently had to add amendments? I think not.

11. I do not have the same concerns that the majority have expressed in paragraphs 12, 13 and 14, in regard to extending the union's bargaining rights of a section 1(4) declaration was made. In section 1(4) declarations there generally is a situation where some maybe displaced or maybe swept into the bargaining unit. At the hearing in the instant case Board Member Ade questioned the union what would happen to the non-union employees if a section 1(4) declaration resulted, the union's position was that they would accept the Pinehurst non-union carpenters into membership if they applied. The union's position is quite clear, they are not pursuing the shop employees of the Christies' operations, but they are endeavouring to consolidate the double-breasted operation in regard to on-site construction.

12. It is my decision that Bramalea Carpentry Associates and Pinehurst Woodworking Company Limited are one employer, for the purpose of the Act, and are bound to the Province Agreement of the applicant union for on-site construction work in the carpentry trade. A section 1(4) declaration should be declared to correct the mischief of the Christies' operation.