0975-81-R International Beverage Dispensers' and Bartenders' Union, Local 280, Applicant, v. 419748 Ontario Limited and 382844 Ontario Limited carrying on business as The Horseshoe Tavern, Respondent.
BEFORE: M. G. Mitchnick, Vice-Chairman, and Board Members J. A. Ronson and B. L. Armstrong.
APPEARANCES: Beth Symes and Frank Cortese for the applicant; John M. Macaulay and John R. Lanctot for the respondent.
DECISION OF THE BOARD; September 25, 1981
- This is an application under section 55 of The Labour Relations Act, alleging that a sale of a business" has taken place, within the meaning of the Act. Section 55 provides as follows:
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.
(3) Where an employer on behalf of whose employees a trade union or council of trade unions, as the case may be, has been certified as bargaining agent or has given or is entitled to give notice under section 13 or 45, sells his business, the trade union, or council of trade unions continues, until the Board otherwise declares, to be the bargaining agent for the employees of the person to whom the business was sold in the like bargaining unit in that business, and the trade union or council of trade unions is entitled to give to the person to whom the business was sold a written notice of its desire to bargain with a view to making a collective agreement or the renewal, with or without modifications, of the agreement then in operation and such notice has the same effect as a notice under section 13 or 45, as the case requires.
The application arises out of a change in ownership of the premises known as The Horseshoe Tavern in the City of Toronto. As the name suggests, the premises prior to the sale were being operated as a tavern, being a public house directed to the sale of alcoholic beverages. As is normal in the business, the owners of the Tavern, being a company by the name of Samarina Investments Inc., engaged live entertainment to promote that end. To this extent, the business has remained the same following the sale. There have, however, been changes in format which require further elaboration.
The business and premises of the Tavern had deteriorated substantially by the time of the transfer in June of 1981. The music being featured at the Horseshoe at the time was described as "punk rock", resulting in a clientele described, not surprisingly, as "punk-rockers". The evidence establishes that, speaking generally, "punk-rockers are a somewhat distinctive group in society, identifiable by such indicia as pink-coloured hair, pins through the cheek, and patch-work clothes". They were described by the witnesses as being somewhat of a rough crowd, and the premises suffered considerable abuse by their presence. Food of limited sorts was available through an "open kitchen" which patrons could approach themselves, and an area of the floor was set aside for dancing. According to the evidence of Mr. Lanctot, one of the new owners, the selection of alcohol was severely limited as well, being primarily three types of liquor and often one type of (warm) beer.
Mr. Lanctot testified that he and his partnership, represented by the numbered companies named as respondents herein, are already the owners of a tavern in Ottawa, and were desirous of opening a second location in the City of Toronto. He explained that there are two types of liquor licences granted by the Liquor Control Board of Ontario, one being for a "lounge" area, and the other for a "dining-room". From the respondent's point of view, the main difference in the two licences is the extent of the requirements regarding food service, and since the respondents had no desire to go into the "restaurant" business, their only interest lay in acquiring a lounge licence in the City of Toronto. Unfortunately, according to Mr. Lanctot, such licences are virtually impossible to obtain, other than by way of transfer from an existing establishment. Accordingly, in December of 1980, the respondents entered into an agreement with Samarina Investments Inc. "to purchase all and singular the leasehold interest comprising the tavern business known as the Horseshoe Tavern situated at 368 to 372 Queen Street West, in the City of Toronto", conditional upon a successful transfer of the liquor licence. Samarina in fact had very little in the way of assets other than the lease of the premises, and the concomitant right to operate the tavern business thereon. Negotiations, therefore, were actually with the landlord, and the "purchase price" of the sale is essentially an agreement by the purchasers to pay off the various debts, by way of business and realty taxes etc., owing on the property. Pending the approval of the Liquor Control Board, the business was to continue to be operated by Samarina so as to maintain the licence in good standing. The Agreement of Purchase and Sale contained the following additional clauses of note:
(e) That the contracts set out in Schedule "B" hereto are all of the contracts relating to the operation of the Horseshoe Tavern, that all such contracts are presently in full force and effect and will be in full force and effect as of the date of closing, that no party to any such contract is in breach or default there under, that there are no other contracts relating to the operation of the Horseshoe Tavern other than those set out in Schedule "B" hereto, and that the Vendor will not from the date of execution of this agreement until the date of closing, enter into any new contracts relating to the operation of the Horseshoe Tavern without the consent of the Purchaser. [there were no Schedules attached]. .
(i) That the Vendor will use its best efforts to maintain the present staff used in the operation of the Horseshoe Tavern until the date of closing, and encourage them to stay on thereafter.
(j) The Vendor will not increase the wages of the present staff used in the operation of the Horseshoe Tavern by more than five percent (5%) for any one individual.
(I) That the Vendor will maintain the premises occupied by the Horseshoe Tavern in the same state of repair and condition as they are presently up to the date of closing, except reasonable wear and tear.
The transaction actually closed on June 17, 1981, following the approval of the licence transfer, and Samarina's lease still had until December 31, 1981 to run. As a matter of legal form, it was agreed that the respondents would accept the assignment of Samarina's lease as of the date of closing, and then immediately surrender the same to the landlord. The respondents at the same time entered into a new lease with the landlord, with the identical rent payable to the end of 1981 as that contained in the Samarina lease. A further term for the period beyond 1981 was negotiated with the landlord as well.
- Following the change in ownership, the tavern was closed for a short period while the respondents carried out major renovations to the interior. The number of lounge seats was increased and the number of dining room seats decreased, and a new kitchen was built in an enclosed area at the back of the premises. New bars were installed, including for the first time a "stand-up" bar. The coolers, tables and chairs were the property of the landlord, and remained. In fact, a number of tables and chairs disappeared at the time that Samarina vacated, and the respondents were allowed a credit against their purchase price. The beer pumps had been the property of Samarina, and were removed by them. The previous kitchen equipment had been the property of the kitchen operator, and left with the operator as well. The music is "country and western", and the clientele is now generally older and more sedate. The officer of the Metropolitan Toronto Police Morality Squad, called as a witness by the respondent, described them as simply a cross-section of "ordinary" people, although this group as well tends to have its distinctive dress of cowboy shirts and hats. From the evidence of all of the witnesses, it is clear that the premises have been upgraded by the new owners in every respect, and that the decor and clientele is demonstrably different from the days preceding the sale. The marketing theme is unmistakably country and western, and the respondents answer the telephone "The New Horseshoe Tavern". The new neon sign erected on the premises, however, still contains only the words "Horseshoe Tavern", and the business as well has been re-registered under the Partnership Registration Act in the name of "The Horseshoe Tavern". The reasons for this, the Board accepts, is a condition the landlord insisted be contained in the respondents' lease, as it was in Samarina's lease, as follows:
The Demised Premises are to be used by the Tenant only for the purposes of conducting the existing restaurant and tavern business thereon including entertainment (to be known as "The Horseshoe" and by no other name whatsoever without the Landlord's prior written consent) and shall not be utilized for any other purpose or purposes without the prior express written consent of the Landlord; any consent of the Landlord pursuant to this clause may be withheld by the Landlord in its sole and absolute discretion.
No former employee of Samarina has been employed by the respondents, nor, according to Mr. Lanctot, have any such individuals made application for employment.
Mr. Frank Cortese gave evidence on behalf of the applicant. Mr. Cortese is now the Secretary-Treasurer of the applicant, and has been with the applicant since 1958. He testified that even in 1958, when he arrived, the collective agreement was in force between the applicant and The Horseshoe Tavern, then operated by the present landlord, Jack Starr. Mr. Cortese testified that for years The Horseshoe Tavern had been known as the best spot for country and western music in Ontario. Annual trips to Nashville were organized by one of the Horseshoe's hostesses, an Aunt Bea, and advertised in the Tavern's windows although not in fact an undertaking of the Tavern itself. The Tavern was taken over by the Samarina Group in 1977, but Mr. Cortese indicated that the Tavern had been "punk rock" for no more than a year to a year and one-half prior to the sale to the present respondents. As a country and western fan, Mr. Cortese had been a patron of the Horseshoe during its earlier format, and conducted as well at least annual visits to the Tavern for business purposes after the change in format. Mr. Cortese was, therefore, in a position to identify with reasonable accuracy the period of change. Mr. Lanctot, on the other hand, has been residing in Ottawa, and testified that he had no knowledge whatever of the Horseshoe's prior history of country and western. The only other witness called by the respondents, the officer from the Morality Squad, was not asked to comment on the question of how long the "punk rock" format had been in place at the Horseshoe. The Board therefore finds that the "county and western" format had been replaced at the Horseshoe by the "punk rock" format for not more than a year and a half prior to the sale to the respondents. The Board notes as well that Mr. Lanctot conceded that the advertising theme of the "New" Horseshoe Tavern is: "Back to country and western", and that at least some of the current patrons of the Tavern have identified themselves as patrons from the days prior to "punk rock" taking over.
Mr. Lanctot testified that he had no knowledge of the Tavern's bargaining relationship with the applicant until he was approached by Mr. Cortese a week or so after the respondents reopened the Tavern. Mr. Cortese, for his part, testified that at least one of the employees of Samarina came to him at the time that the Tavern closed, and asked if he would be hired by the new owners. Mr. Cortese indicated that they would wait and see. Mr. Cortese acknowledges that it would have made more sense to approach the respondents to alert them to their obligations prior to new staff being hired and the Tavern opening, but explained that he got "caught up" in negotiations elsewhere. Notwithstanding Mr. Cortese's busy schedule, the Board would note the basic unfairness in the applicant sitting back on its position while new staff are being hired, some perhaps being induced to leave positions of employment elsewhere. The Board, however, is given no discretion with respect to the declarations which it may issue under section 55 of the Act, and the only issue before the Board is whether a "sale of a business" has taken place within the meaning of that section.
It is now clear from the Board's jurisprudence that a mere change in decor and entertainment such as occurred here is not a "change in the character of the business" within the meaning of section 55(5) of The Labour Relations Act. That section provides:
The Board may, upon the application of any person, trade union or council of trade unions concerned, made within sixty days after the successor employer referred to in subsection 2 becomes bound by the collective agreement, or within sixty days after the trade union or council of trade unions has given a notice under subsection 3, terminate the bargaining rights of the trade union or council of trade unions bound by the collective agreement or that has given notice, as the case may be, if, in the opinion of the Board, the person to whom the business was sold has changed its character so that it is substantially different from the business of the predecessor employer.
As the Board noted in Jimmy's II, [1977] OLRB Rep. Sept. 572, citing Winco-Steak'n Burger, [1974] OLRB Rep. Nov. 788:
... Having in mind the fact that subsection 5 runs against the flow of the general intent of the section, the Board takes the view that the words "substantially different" must be viewed by the Board in the formulation of its opinion as involving a fundamental difference affecting the nature of the work requirements and skills involved in the business to the extent that continued representation by the trade union would be inadequate, inappropriate or unreasonable in all the circumstances of the particular case under review.
See also Katrina's Tavern, [1978] OLRB Rep. Sept. 838; Colonial Tavern, [1978] OLRB Rep. Sept. 806. As in the cases cited, there can be no real dispute that the work in the tavern, as before the sale is essentially that of the applicant's craft members. Even the criticisms of Mr. Lanctot with respect to the performance he observed by employees formerly working for Samarina stemmed, at least at this stage, more from lack of adequate direction from management, than from any inherent incapacity on the part of the employees.
Beyond the question of section 55(5), however, remains the underlying question as to whether a "sale of a business" has taken place within the meaning of the Act. In this regard, the Board has noted, e.g. in Gordons Markets, [1978] OLRB Rep. July 630:
No matter what the form of the transaction, in order to find that a section 55 sale has taken place, the Board must be satisfied that the result of the transaction is a continuation of the predecessor's business. Since it is the predecessor's business to which the union bargaining rights attach, the successor's business must draw its life from the predecessor's business. The subsequent existence of a business identical to that carried on by the predecessor will not result in a section 55 finding of a sale if the Board is satisfied that the second business is merely a parallel business of a similar nature rather than a continuation of the successor's business.
The question to be answered by the Board therefore is whether or not the business carried on by Gordons as a retail food market is a continuation of Loblaw's retail food business or whether it is a separate and parallel business, albeit of the same nature.
In developing the indicia of a "sale of business", the Board has also been careful to note the differences which may exist from one industry to another. See, e.g. Tatham Company, [1980] OLRB Rep. March 366, at paragraph 26.
Normally it is the applicant which exhorts the Board to look beyond the form of a particular transaction, and to consider instead its substance. In this case, the direct contractual relationship between the prior tenant and the respondents, transferring the tenant's leasehold interest, together with the provisions quoted earlier from the agreement of purchase and sale, are wholly consistent with a continuity of business operation, and "sale" between the predecessor employer Samarina and the respondents. In this case, it is the respondents who urge the Board to look beyond the standard legal form of the transaction to what was really transpiring between the respondents and the landlord. The Board accepts the fact that there has been a distinct change in clientele before and after the sale to the respondents, and that the only "goodwill" emanating from the premises as they were being operated at the time of sale by Samarina is of a negative variety, having established a reputation which the respondents are having difficulty "living down" in their new operation.
Contrary to the submissions of the respondents, however, it is more than just the nature of the business, in the sense of the sale of alcoholic beverages, which has remained the same. The business is being carried on at the same location, using the same name, and it is immaterial to the issue before the Board whether the use of that name is by choice or otherwise. The evidence demonstrates that, whatever argument could be made based on the punk rock" direction of the Tavern in the period immediately preceding the sale, that direction was merely an interlude in the Horseshoe Tavern's long and well-established history as a "country and western" centre. While that recent interlude has made it more difficult for the respondents to reach back to the customers of old, it is obvious that that is what the respondents are trying to do, and have at this point succeeded to a minor degree. In Stafford Hotel, (unreported), Board File No. 1336-80-R dated December 15, 1980, a local neighbourhood pub also had fallen into disrepair (and disrepute) and had effectively been taken over by a motorcycle group. On facts not wholly dissimilar from our own, the Board found at paragraph 3:
Although not an element in the agreement for purchase and sale, the respondent registered and is using the same name, "Stafford Hotel", to carry on its business as the predecessor used for the same purpose. Prior to an interlude preceding the transaction when the tavern was frequented by a motorcycle group, the tavern was a local neighbourhood bar. With the sale and renovations it is once again serving the local population. The Board is satisfied that the respondent, by using the same name and sign, is capitalizing on the goodwill the predecessor had built up in the neighbourhood prior to the advent of the motorcycle group and attendant liquor licence suspension.
- The Board is satisfied, on all of the evidence, that in the present case as well a "sale of a business" has taken place within the meaning of section 55 of The Labour Relations Act, and that the bargaining rights of the applicant pertaining to The Horseshoe Tavern continue to bind the respondents as well. The applicant was therefore entitled to give notice to bargain to the respondents pursuant to the provisions of section 55(3) of the Act.