Ontario Labour Relations Board
[1981] OLRB Rep. June 663
0086-80-R Teamsters Local Union No. 879, affiliated with the International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America, Applicant, v. Grand Valley Ready Mixed Concrete Supply Limited, and K-W Blair Readymix (1973) Limited, Respondents, V. Christian Labour Association of Canada, Intervener
BEFORE: Kevin M. Burkett, Alternate Chairman and Board Members R. D. Joyce and S. Lewis.
APPEARANCES: Stanley Simpson and Leonard Schultz for the applicant; Robin B. Cumine and Brian Gedney for Grand Valley Ready Mixed Concrete Supply Limited; S. C. Bernardo and W. Carter for K- W Blair Readymix (1973) Limited; Elizabeth J. Forster and Hank Beekhuis for the intervener.
DECISION OF THE BOARD; June 12, 1981
This is an application filed under section 55 of The Labour Relations Act claiming a sale of a business within the meaning of the section and seeking a declaration that Teamsters Local 879, the applicant, holds bargaining rights for certain employees of Grand Valley Ready Mixed Concrete Supply Limited, the alleged successor employer.
The applicant also applied under section 1(4) of the Act but subsequently withdrew in respect of its attempt to seek relief under this section.
The applicant trade union holds bargaining rights for all employees of K-W Blair Readymix (1973) Limited, hereinafter referred to as K-W Blair, "in the capacity of truck drivers, mechanics, mechanics' helpers and batchers who are not performing supervisory duties, in the locations of the Company at Gait, Breslau, Kitchener, Waterloo and Paris, Ontario. . ." The scope of the applicant's bargaining rights vis-a-vis the employees of K-W Blair is described in a subsisting collective agreement; the most recent in a series of collective agreements between these parties. K-W Blair came into existence in 1973 following the purchase of K-W Readymix by Blair Readymix; the latter company owned by Carter Construction Company. The new company. K-W Blair Readymix (1973) Limited, operated from two Kitchener plants, a Cambridge plant and a Waterloo plant. In 1976 K.W. Blair built a semi-portable plant in Paris, Ontario. Three drivers and a batcher were assigned to work out of the Paris plant. Voluntary recognition was extended to Teamsters Local 879 in respect of these employees. Although a separate seniority list was maintained for the Paris location, this arrangement was discontinued in November, 1978 when the Paris division was included with Galt, Breslau, Kitchener and Waterloo for purposes of seniority. The effect of this arrangement was to place the Paris employees at the bottom of the combined seniority list.
K-W Blair's Paris operation did not meet the expectations of its owners. Volume reached a peak of 1,118 cubic metres in the month of October, 1976. The company hoped to increase vo1ume by 20%-30% the following year so that it could produce the 10,000 cubic metres (during the May-November season) needed to break even. The evidence establishes that the company did not come close to its production targets. Mr. W. S. Carter, the owner of the business, testified that the company "lost its shirt" on its Paris operation. On November 16, 1977 the three drivers working out of the Paris operation were laid off. Since November 16, 1977 the company has not had any employees working out of its Paris location. Mr. Carter testified that "in mid 1977 we essentially stopped operating out of Paris — we pulled out the trucks and people and put the plant in a moth-balled situation." Since that time the facility has been used as a refill plant or as a peaking station for work emanating from its other plants. KW Blair drivers working out of its other plants have occasionally used the plant to refill for second loads when delivering into the Paris — Brantford market, or to meet local demands at peak times. When the plant has been used in this manner employees of Ultra Stone (a company operating out of the same premises in which Mr. Carter holds a minority interest) have done the batching. The evidence establishes that only 2,800 cubic metres of concrete was processed through the Paris plant in 1978 and only 519 cubic metres to the end of September, 1979. The last order processed by K-W Blair out of its Paris plant was in September, 1979 and was for 5.5 cubic meters of concrete.
Grand Valley Ready Mixed Concrete Supply Limited, hereinafter referred to as Grand Valley, commenced business in 1976. Mr. Brian Gedney and Mr. Ed. Tysolski, both of whom had extensive experience in the ready-mix business in the Paris-Brantford area, were its sole owners. The business operated from a plant on Papple Road in the township of Brantford. The business was successful in acquiring a major share of the local market. However, because of the competition generated by the larger companies operating in the area, Grand Valley had to cut its prices in order to maintain its market share. The business is one which is extremely price sensitive. Indeed, Mr. Carter, in reference to price sensitivity, testified that "10¢ will get you a job." Although Grand Valley was able to maintain its share of the market it found itself in severe financial difficulties in early 1979. Mr. Gedney testified that the company had a serious cash flow problem. The evidence is that Grand Valley was on the verge of bankruptcy.
Grand Valley employed 8 persons from its inception. The Christian Labour Association of Canada (CLAC) ,an intervener in this matter, was certified as bargaining agent for the employees of Grand Valley working in the Township of Brantford on May 1, 1979. Grand Valley and CLAC entered into a collective agreement on May 22, 1979 for the period May 1, 1979 to March 31, 1981 and have since entered into a successor agreement.
Mr. W. S. Carter was made aware of the financial difficulties confronting Grand Valley by the owners of Telephone City Gravel; a creditor of Grand Valley. Mr. Carter contacted Mr. ~3edney in early 1979. An agreement in principle was reached on May 3, 1979 under which the Carter Construction Company (1973) Limited acquired 70% of the common shares of Grand Valley for the sum of $1. As a condition of the agreement, Carter was to arrange for a $70,000 line of credit and to arrange for the release by the Bank of the personal securities of Gedney and Tysolski. In addition, Carter was to arrange a "satisfactory compromise" of certain accounts owned by Grand Valley, the day-to-day running of the Corporation was to be left in the hands of Gedney and Tysolski. However, Mr. Carter, through the controller of K-W Blair, was to maintain tight control over the financial dealings of Grand Valley and has done so. Mr. Carter, Mr. T. Scanlon (K-W Blair Controller), Mr. P. Hall (K-W Blair Vice-President Operations) and Mr. B. Wallace (K-W Blair Vice-President Sales) joined Messrs. Gedney and Tysolski on the Grand Valley Board of Directors. The agreement under which Carter acquired control of Grand Valley was finalized in June, 1979. Messrs. Gedney and Tysolski have no interest in K-W Blair or in any of the other Carter companies.
Grand Valley continued to operate out of its Papple Road location after the agreement with Carter had been concluded and continued to employ those who had been in its employ prior to this time. However, in September, 1979 Grand Valley purchased from K-W Blair, another Carter company, the aggregate storage bins and weigh batcher, the cement storage silo and weigh batcher, the conveyor system and air compressor to run it, and the boiler and batch control panel which had been the components of the K-W Blair plant at Paris. The property on which the K-W Blair plant was located is owned by Tullis Estates (another company controlled by the Carter family). The lease held by K-W Blair was transferred to Grand Valley at the same time. There was no provision in the transaction between K-W Blair and Grand Valley for the transfer of goodwill or customer lists. Grand Valley moved its trucks and its employees from the Papple Road location to the site of the former K-W Blair plant in Paris in October, 1979. Grand Valley commenced to operate from this site in October, 1979 under its own name using its own trucks and its own employees. The operation remained within the township of Brantford which is within the scope of the Christian Labour Association's bargaining rights. K-W Blair continued to tender on some jobs in the Brantford area and to do some business in the area, in competition with Grand Valley, from its other plants.
It is the transaction between Grand Valley and K-W Blair which has given rise to the instant application by Teamsters Local 879. The scope of the Teamsters' bargaining rights, as set out in the agreement between itself and K-W Blair, extends to Paris, Ontario. The Teamsters' bargaining rights were extended to Paris in 1976 in order to cover the K-W Blair plant located there; the same plant which currently houses the Grand Valley operation. Teamsters Local 879 maintains that when Grand Valley purchased the K-W Blair Paris plant it purchased a part of K-W Blair's business so that under Section 55 of the Act Local 879 is the bargaining agent for the employees now working at the site. There are the same employees who were represented by the Christian Labour Association when they worked for Grand Valley at Papple Road and for whom the Christian Labour Association continues to claim bargaining rights by virtue of the scope of its recognition under the collective agreement between itself and Grand Valley.
The applicant maintains that the transaction by which Grand Valley obtained use of the Paris plant of K-W Blair constituted the sale of part of K-W Blair's business to Grand Valley. The applicant argues that the same business (i.e. same product, same market, same supplies and same equipment) was carried on before and after the transaction. It is the applicant's contention that the only difference in the business after the sale was the increased volume. The applicant, while asking the Board to find on the evidence that K-W Blair continued to operate out of its Paris plant up to September, 1979, attributes the increase in business volume following the sale to the price sensitivity of the ready-mix business. It is the applicant's position that the successor, Grand Valley, was able to compete more effectively because it was no longer burdened with the Teamsters' collective agreement and was able to operate out of the more efficient plant which had been the base of operations for K—W Blair in the Brantford area. The applicant asks the Board to pay special attention to the timing of the first transaction relative to the certification of the intervener trade union and the timing of the second relative to the last loads transported by K-W Blair from its Paris plant. The applicant asks the Board :0 find that section 55 applies and to declare its collective agreement with K-W Blair binding on Grand Valley.
The respondent, K-W Blair, rests its argument on the fact that its Paris facility was little more than an idle asset in the two-year period prior to the alleged section 55 transaction. The respondent, K-W Blair, characterizes the business as essentially one of transportation. In the face of K-W Blair's inability to transport concrete on any meaningful scale from its Paris plant in the two years preceding the alleged sale, and in the face of Grand Valley carrying on an identifiable and viable business prior to the sale, the respondent, K-W Blair, asks the Board to find that Grand Valley purchased certain idle assets owned by K-W Blair to further its own business. It is the submission of K-W Blair that the business continued to operate after the transaction as it had before and that at all times it was bound by collective agreement with the Teamsters. In that the successor must draw its life from the predecessor in order to constitute a sale of a busine5s within the meaning of section 55, the respondent K-W Blair asks the Board to find that it is the alleged successor's business which continues to exist and that therefore a sale of a part of K-W Blair's business has not taken place.
The respondent Grand Valley characterizes K-W Blair's operation in the two years prior to the alleged section 55 transaction as simply a convenience to its main business and asks the Board to be mindful of the fact that at no time in this period did it serve as a base for employees. The respondent asks the Board to contrast K-W Blair's Paris operation to that of Grand Valley, 1979 than had been processed through K-W Blair's Paris plant in the preceding year. The respondent Grand Valley describes the ready mix business as comprising customers, goodwill and drivers who know the customers. Grand Valley argues that, on the basis of these elements constituting the business, the Board must conclude that Grand Valley's business continued. The respondent Grand Valley points out that the effect of a contrary finding would place Grand Valley's employees under a closed shop collective agreement. It is argued that these employee;, who have selected CLAC as their bargaining agent, would be required to join the Teamsters or risk losing their employment. The respondent Grand Valley maintains that this result should be avoided.
The Christian Labour Association adopts the submissions of the two respondents and maintains that in the absence of any credible evidence to impugn the legitimacy of its bargaining rights they must be give effect.
The relevant provisions of section 55 of the Act provide:
"55. (1) In this section,
(a) 'business' includes a part or parts thereof;
(b) 'sells" includes leases, transfers and any other manner of disposition, and 'sold' and 'sale' have corresponding meanings.
(2) When an employer who is bound by or is a party to a collective agreement with a trade union or council of trade unions sells his business, the person to whom the business has been sold is, until the Board otherwise declares, bound by the collective agreement as if he had been a party thereto and, where an employer sells his business while an application for certification or termination of bargaining rights to which he is a party is before the Board, the person to whom the business has been sold is, until the Board otherwise declares, the employer for the purposes of the application as if he were named as the employer in the application.
- Section 55 of the Act provides that where a business, or part of a business, is sold, leased transferred or otherwise disposed of, the successor employer is bound by the collective bargaining obligations of the predecessor. The expensive definition of the term "sells" contained in section 55 underscores the purpose of the section. The section is designed to preserve bargaining rights regardless of the legal form of the transaction where the predecessor's business, or any part thereof, for which the union holds bargaining rights is transferred to a successor. (See Thorco Manufacturing Ltd. 65 CLLC 1116,052. The section is designed to protect bargaining rights in the face of transactions motivated by a desire to undermine or circumvent bargaining rights. Equally important, the section operates without regard to motive to preserve bargaining rights where the sale of a business has occurred. With reference to this second purpose, the Board stated in More Groceteria Limited, [1980] OLRB Rep. April 486, at 492:
"...the latter function of the section providing some permanence to collective bargaining rights — is often the most difficult to apply. Here the Legislature has determined that the objectives of labour relations policies require that the rightful prerogatives of owners independently to rearrange their business and even eliminate themselves as employers be balanced by protection to the employees from a sudden change in the employment relationship. Indeed, the transition from one corporate organization to another will in most cases be eased and industrial strife avoided if employees and their representatives are assured of some real measure of continuity in the collective bargaining process by operation of law. ...
(See also Aircraft Metal Specialists Ltd. [1970] OLRB Rep. Sept. 702.)
The issue before the Board is whether or not the sale of part of a business within the meaning of section 55 has occurred so that the bargaining rights of the applicant trade union which attach to that part of the alleged predecessor's business are preserved. There is no doubt that a "sale" within the meaning of section 55(l)(b) has taken place. The difficulty lies in determining whether a sale of a business or part thereof, as distinct from a sale of assets or something other than a business, has taken place.
There is no expansive definition of the term "business" in section 55 of the Act. The Act simply provides that a business includes a part or parts thereof. Given the scope of the Board's jurisdiction in labour relations matters, it is not surprising that the Board has been given a discretion to make the determination on a case-by-case basis. Generally speaking, a business is an aggregation of assets, goodwill, management and labour organized in such a way as to produce a marketable product or service and thereby to generate a profit for its owners and employment for its workers. From a labour relations perspective, the most important aspect of a business is its capacity to provide employment. Having regard to the purpose of section 55, it follows that under the section the Board seeks to determine if the elements of the predecessor's business which support employment have been passed from predecessor to successor. A comparison of the nature of the work performed before and after the transaction is usually a reliable indicator in this regard. However, the Board will also look to the transfer of plant and facilities, goodwill, customer lists, outstanding contracts, trademarks and logos, location and managerial skills in deciding if the predecessor's business has been passed to the successor in any given case.
The Board follows the same approach in deciding if the sale of part of a business within the meaning of section 55 has occurred. The Board attempts to ascertain if the essential elements of a segment of the alleged predecessor's business have passed to the alleged successor. The cases in which the Board has been called upon to decide if a sale of part of a business has occurred are reviewed in Beef Terminal (1979) Limited, [1980] OLRB Rep. Aug. 1167. The Board summarizes the import of these cases at para. 22 of that decision as follows:
"In each of the cases to which we have referred, the Board found that the predecessor had transferred a coherent and severable part of its economic organization — managerial or employee skills, plant, equipment 'knowhow' or goodwill — thereby allowing the successor to perform the economic functions formerly performed by the predecessor. This economic organization undertook activities which gave rise to employment, and the terms and conditions of employment, together with the union's right to bargain about them, were preserved. The part of the predecessor's business which it no longer wished to continue provided the business opportunity which the successor was able to pursue to its own advantage. In all of these cases there was a transfer of a distinct part of the predecessor's configuration of assets and no material change in the character of the work performed by employees within that asset framework. There was a continuation of the work performed, the essential attributes of the employment relationship, the skills of employees, and the functional coherence of the employee complement; and. but for section 55 the established bargaining and collective agreement rights would have been lost. This was the very mischief to which section 55 is directed, and the Board was satisfied on the evidence in each case that it should be applied."
(See also Metropolitan Parking Inc. [1979] OLRB Rep. Dec. 1193 at paras. 33 and 34.
Did the alleged successor in this case obtain a part of the predecessor's business as would cause section 55 to operate? The answer is to be found in an examination of the two business organizations which existed prior to the transaction. In most section 55 applications, whether involving the alleged sale of the whole business or a part thereof, the nature of the alleged predecessor’s business organization provides the ultimate answer. The Board identifies its essential elements and determines if sufficient of these have been transferred to the successor as to allow the business and the employment which it generates to continue. See Thunder Bay Ambulance Service, [1978] OLRB Rep May 467 and Culverhouse Foods Limited, [1976] OLRB Rep. Nov. 691. However, if as in Canada Cement Lefarge, [1977] OLRB Rep. Jan. 5, and Darrigo Consolidated Holdings, [1980] OLRB Rep. Jan. 29, assets have been disposed of which are peripheral or unrelated to the business organization to which the bargaining rights at issue attach, the Board will not find that there has been a sale of a business within the meaning of the section.
The exercise becomes more complicated where, as in this case, the alleged successor has carried on a parallel business. Where the alleged successor has carried on a parallel business the result of the transaction may as easily be an expansion or alteration of his business as the transfer of the alleged predecessor's business. An employment opportunity which flows from an expansion or alteration of the business carried on by the alleged successor prior to the section 55 transaction does not trigger the operation of the section. The union's bargaining rights attach to the predecessor's business and their preservation is contingent upon a transfer and continuation of that business.
The Board has dealt with section 55 applications where the alleged successor has carried on a parallel business prior to the section 55 transaction in a number of recent decisions. In Norjohn Contracting Limited, [1978] OLRB Rep. May 438, Norjohn, a company in the paving and surface treatment business, purchased the shares of a competitor company and caused the sale to it of the competitor's emulsion plant and allied equipment and supplies. The transaction did not include the acquisition of customers' lists, accounts receivable or sales contracts. There was no transfer of goodwill. Norjohn's manning was adequate to provide for its expected business volume so that it did not have to hire any additional employees as a result of the transaction. The Board commented that "if Norjohn has been successful by means of this transaction in protecting its market in this manner, this is still not proof of a continuation of Law's business under Norjohn's ownership". The Board concluded that the competitor's business had not passed to the alleged successor who operated a parallel business prior to the sale. In Dominion Stores Limited, [1979] OLRB Rep. July 626, Dominion Stores moved to premises previously occupied by a competitor which had been vacated 5 months before. In separate transactions Dominion acquired a lease to the premises and many of the fixtures which had been used by the competitor. Dominion had operated from other premises in the immediate vacinity. It closed these premises on a Saturday and opened for business at the new premises on the following Monday. The employees of Dominion who had worked at the old premises were transferred to the new. The Board, in dismissing the application by the union which had held bargaining rights in respect of the alleged predecessor's employees, characterized the transactions "as undertakings in conjunction with the transfer of an existing business and not undertakings in conjunction with the purchase of the predecessor's business." In British American Bank Note Company Limited, [1979] OLRB Rep. Feb. 72, the British American Bank Note Company transferred two of its eighteen presses to a wholly owned subsidiary. The subsidiary was engaged in the printing of Wintario tickets. The Board, in dismissing the application, commented that both companies were engaging in similar, but parallel, businesses before the two presses were removed and further, that the Wintario work was obtained through the business efforts of the subsidiary. The Board concluded that the loss of work at British American Bank Note Company did not appear to flow from the sale of part of its business but from a decision of the subsidiary to do all of the Wintario work.
These cases illustrate the attention which must be paid to the nature and scope of the alleged successor's business where the successor carries on a parallel or like business prior to the section 55 transaction. The bargaining rights which are to be preserved under section 55 attach to the predecessor's business and it is the predecessor's business, or a part thereof, which must be transferred. If the transaction is one carried out in connection with the operation of a parallel business and if the business entity which results can more properly be described as having its roots in the alleged successor's business than in the alleged predecessor's business, it is unlikely that a sale of business within the meaning of section 55 has taken place.
In the instant case K-W Blair and Grand Valley carried on parallel businesses within the township of Brantford; at least in the period 1976-77. Grand Valley commenced to operate a ready-mix business from a single plant in the township of Brantford in 1976. The company achieved a dominant position in the local market thanks in large measure to the expertise and entrepreneurial initiative of Messrs. Gedney and Tysoski. Notwithstanding the financial difficulties experienced by Grand Valley in 1979, the company maintained its share of the market and maintained a constant level of employment up to and following the sale of the majority interest to Carter. It was through the sale of the majority interest to Carter that Grand Valley was able to acquire the capitalization necessary to continue its business. We are satisfied that following the sale of the majority interest to Carter Grand Valley continued to operate as a separate business under its own name, from its own premises and under the day-to-day direction of Messrs. Gedney and Tysoski. Grand Valley continued to employ those who had been with it prior to the transaction. The transaction brought K-W Blair and Grand Valley under common control and direction but the two companies continued to operate as separate entities.
K-W Blair constructed a plant to serve the Brantford area at about the same time that Grand Valley came into existence. The business carried on by K-W Blair for its Paris plant in the period l~76-77 was a relatively small part of an integrated ready-mix business carried on from plants in Kitchener, Cambridge, Waterloo and Paris. Subsequent to November, 1977, the business carried on by K-W Blair from its Paris plant can best be characterized as incidental to its ready-mix business. Because of its inability to attract customers and secure jobs in the Brantford area, the company removed its trucks and the employees who were working there .n November, 1977. The company continued to operate its ready-mix business from its other plants and clearly, from November, 1977, the employment of those covered by the scope of the Teamsters' recognition has emanated from these other locations. The Teamsters have not represented a single employee working out of the Paris location since November, 1977, some 18 months before the sale of the Paris plant to Grand Valley.
A close corporate connection may sometimes support the inference that a transaction ha~ been designed to circumvent bargaining rights. We are unable to draw such an inference in respect of the transaction by which Grand Valley acquired K-W Blair's Paris plant. If the K-W Blair Paris plant had been a going concern at the time Carter acquired control of Grand Valley and if, after acquiring control, Carter had caused the K-W Blair's plant to be closed and had then moved in Grand Valley and its CLAC represented employees, an inference could be drawn that Carter was attempting to rid K-W Blair's Paris operation of the applicant trade union. However, K-W Blair's Paris plant ceased to be a base of operation eighteen months prior to the time Carter gained control of Grand Valley. K-W Blair had an opportunity to crack the Brantford market through its Paris plant but failed. Grand Valley was a going concern at the time and there is no evidence to link Carter and Grand Valley at the time Carter closed the Paris plant of K-W Blair. Indeed, the financial difficulties encountered by Grand Valley did not surface until well after K-W Blair had closed its Paris plant as a base of operations. In these circumstances we are unable to draw the inference that the transactions by which Caner gained control of Grand Valley and then sold K-W Blair's Paris plant to Grand Valley were designed to undermine the Teamsters' bargaining rights. The Teamsters continue to represent the employees of K-W Blair who are employed in its ready-mix business.
As has been discussed, section 55 also operates without regard to motive to preserve bargaining rights where there has been a sale of a business or a part thereof. However, in this case we are unable to conclude that there has been a transfer of a part of K-W Blair's business to Grand Valley. K-W Blair disposed of assets which were at best incidental to its business and had been for some 2 years. The location of a ready-mix plant is not determinative as is often the case in the sale of a retail food business. K-W Blair did not dispose of any of the essential elements of its business which combined to support the employment of the employees represented by the applicant trade union. Grand Valley, on the other hand, continued as a viable business operation in the Brantford area throughout the relevant period. It did so on the basis of the knowledge and goodwill of Messrs. Tysoski and Gedney, the efforts of its employees, and, in the period subsequent to May, 1979, the capital provided by Carter. When reference is had to the nature of the two business operations immediately prior to and the nature of the business operations which emerged following the alleged section 55 transaction, we are satisfied that the transaction was made for the genuine business purpose of improving Grand Valley's operation and that it was Grand Valley's business which continued after the transaction.
Grand Valley purchased from K-W Blair assets which were essentially idle for use in its business. Grand Valley's business continued to operate under the name of Grand Valley, with the same persons in day-to-day control and with the same employees. There was no transfer of any of the elements of K-W Blair's business which supported the employment of those represented by the applicant union. The business entity which emerged is rooted in the parallel business of Grand Valley carried on prior to the transaction and accordingly, we must conclude that a sale of a business within the meaning of section 55, as would preserve the applicant's bargaining rights, has not taken place.
The application is hereby dismissed.