Ontario Labour Relations Board
[1981] OLRB Rep. January 34
1579-80-R United Brotherhood of Carpenters and Joiners of America, Local 249 and Carpenters' District Council of Lake Ontario on behalf of Locals 397, 572, 1071 and 1450 of The United Brotherhood of Carpenters and Joiners of America, Applicants, v. Hugh Murray (1974) Limited; and Trend Building Systems, owned and operated by 444758 Ontario Inc., Respondents.
BEFORE: R. C. MacDowell, Vice-Chairman, and Board Members H. J. F. Ade and O. Hodges.
APPEARANCES: D. J. Wray and A. Froatz for the applicants; and H. J. Suedbeck for the respondents.
DECISION OF THE BOARD; January 6, 1981
1This is an application under section 1(4) of The Labour Relations Act in which the applicants seek a declaration that the respondents Hugh Murray (1974) Limited ("Hugh Murray"), and Trend Building Systems, owned and operated by 444758 Ontario Inc. ("Trend") are one employer for the purposes of the Act. The statutory provision directly relevant to the "related employer" issue is as follows:
"1(4) 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."
The Board notes that Hans J. Suedbeck, the owner of both respondents appeared without counsel. Mr. Suedbeck advised the Board that he had spoken to his solicitor about this matter, but had decided to appear on his own.
2The purpose of section 1(4) of the Act was discussed by the Board in Brant Erecting [1980] OLRB Rep. July 945 as follows (at p. 948):
"Section 1(4) was enacted in 1971 and deals with situations where the economic activity giving rise to the employment or collective bargaining relationships regulated by the Act, is carried out by, or through more than one legal entity. Where such legal entities carry on related business activity under common control or direction, the Board is empowered to pierce the corporate veil. Section 1(4) ensures that the institutional rights of a trade union, and the contractual rights of its members, will attach to a definable commercial activity, rather than the legal vehicle(s) through which that activity is carried on. Legal form is not permitted to dictate or fragment a collective bargaining structure; nor will alterations in legal form undermine established bargaining rights. In this respect the purpose of section 1(4) is similar to that of section 55 which preserves the established bargaining rights and collective agreement when a ''business~~ is transferred from one employer to another ...
Section 1(4) does not require that related business activities under common control or direction be carried on simultaneously or contemporaneously. This issue was clarified in 1975 by the addition to section 1(4) of the phrase "whether or not simultaneously". The amendment reflects a legislative recognition that the essential unity and identity of an economic activity (which gives rise to employment) may be preserved even though the legal vehicles through which the activity is carried on will not operate simultaneously; and, business may be effectively transferred from one corporate entity to another, without any of the indicia of a "transfer of a business" which might trigger the application of section 55. This is especially the case in the construction industry where many of the employers will not have the permanence or investment in fixed plant and equipment characteristic of manufacturing concern. A small construction company can move from jobsite to jobsite or place to place, assembling tools, equipment and a labour force as required after it has made a successful bid. There may be no established economic organization, labour force or configuration of assets. A single principal may have several companies which are used, more or less interchangeably, so that bidding is done and work performed through whichever company is convenient. In such circumstances there may be an effective transfer of business between related businesses without any apparent disposition of assets, inventory, trade names, goodwill, employees, etc. Similarly, where capital requirements are minimal and business relationships transitory, it is relatively easy to wind up one business, and create another one which carries on essentially the same business as before. Indeed there will often be good commercial reasons for doing so unrelated to any express desire to undermine the union's bargaining rights ...
... To ensure that the industrial relations status quo is preserved, the Legislature has provided that where two employers carry on related economic activities, under common control and direction, whether or not simultaneously, they can be treated as one for the purposes of the Act.
3The facts in this case are not in dispute. Mr. Suedheck and his wife are the sole shareholders, officers, and directors of both Trend and Hugh Murray. Mr. Suedbeck exercises effective direction and control, and has the business experience, knowledge of the industry, contacts, and expertise to manage the two companies' ongoing business activities. He is the real source of entrepreneurial initiative, and it is his capital and financial backing which sustains both businesses.
4Trend was largely a plan or concept until April 1980 when the Suedbecks decided to incorporate a numbered company as the vehicle through which to conduct the business of Trend and certain unrelated real-estate ventures. Mr. Suedbeck testified that he had created Trend in order to create something of "his own" unconnected with Hugh Murray. He explained that he had purchased Hugh Murray in 1974, but subsequently, as a result of an application under section 55 of The Labour Relations Act, found that he was bound by an outstanding collective agreement with the applicant union. Trend was to be an entirely new venture which was unencumbered by any of the obligations of Hugh Murray. Indeed, Suedbeck indicated that Hugh Murray could well be phased out when its existing permanent employees reach retirement age, and thereafter, the Suedbecks' only enterprise would be the numbered company and Trend. Trend presently carries on, or is entitled to carry on, a construction business which is similar to that carried on by Hugh Murray.
5The first, and only project in which Trend has been involved, is an addition to a cheese factory in Harrowsmith, Ontario near the City of Kingston. This project began in late August or early September 1980. The original factory, and an earlier addition were constructed by Hugh Murray, and Suedbeck admitted that, but for the existence of Trend, Hugh Murray would have done this project. In addition, it might be noted that the project involves "Armco" prefabricated building materials purchased from Hugh Murray which is a franchised Armco dealer — but not the dealer which would ordinarily service the Harrowsmith area. Suedbeck indicated that there was a "gentlemen's agreement" that Hugh Murray would not use Armco products outside its franchise area, but there was nothing to prevent Trend from doing so, or to prevent Trend from purchasing Armco products from Hugh Murray and doing all of the construction work which would otherwise be done by the latter company.
6Nominally, Hugh Murray and Trend have different business addresses, but this is purely superficial. Hugh Murray has a business address at 36 Harris Crescent in Belleville and the Trend business telephone rings in Mr. Suedbeck's office at that address. Even the reply filed on behalf of Trend in this matter mentioned the Harris Crescent address. The only other relevant address with respect to Trend is the Suedbecks residence. In addition, the two companies have the same bookkeeper, and the ottice manager of Hugh Murray has prepared employee pay cheques for Trend's employees and done other incidental administrative work for Trend. Miscellaneous secretarial and administrative duties for both companies are performed by Mr. Suedbeck and his wife; and as we have already indicated, the estimating, bidding, and other crucial functions of both businesses are performed by Mr. Suedbeck himself.
7Hugh Murray is a relatively small construction company owning only two trucks, three trailers and a small amount of construction equipment. Most of Hugh Murray's heavy equipment is rented as the business requires. Trend, likewise, is a small construction company having only about $1,000.00 worth of its own equipment. It rents one truck and one trailer from Hugh Murray, and when it does so the burnt orange colour scheme associated with Hugh Murray is maintained. While there is no evidence of an ongoing interchange of employees, Trend has sought to hire some of the employees regularly hired by Hugh Murray and Trend's site foreman is the same site foreman used by Hugh Murray as its needs require.
8On the basis of the evidence before us, we are satisfied that Hugh Murray and Trend are engaged in related economic activities under common control and direction and further that we should exercise our discretion to declare the two firms "one employer" for the purposes of the Act. There remains the question of the effect of this declaration on the applicant's bargaining rights. The critical provision of The Labour Relations Act is section 125(2) which provides as follows:
"(2) Where an employer is represented by a designated or accredited employer bargaining agency, the employer shall be deemed to have recognized all of the affiliated bargaining agents represented by a designated or certified employee bargaining agency that bargains with the employer bargaining agency as the bargaining agents for the purpose of collective bargaining in their respective geographic jurisdictions in respect of the employees of the employer employed in the industrial, commercial or institutional sector of the construction industry referred to in clause e of section 106, except those employees for whom a trade union other than one of the affiliated bargaining agents holds bargaining rights."
9The language of section 125(2) is somewhat complex but its effect is relatively straightforward. The section applies to all construction activity in the industrial, commercial and institutional sector of the construction industry and its purpose is to extend bargaining rights province wide wherever a trade union had bargaining rights for the employees of an employer in a particular geographic area. One result of the section is that if a local of a trade union has bargaining rights in one part of the province, all other locals of that union in the province of Ontario are deemed to have been recognized by the employer as the representative of employees employed in the ICI sector in their respective geographic areas. These bargaining rights were to be exercised through whatever local of the Carpenters' union has jurisdiction in that particular geographic area. Section 125(2) is one of a series of legislative amendments introduced in order to create a scheme of province wide collective bargaining, by trade, in the industrial, commercial, and institutional sectors of the construction industry. In other sectors, the pre-existing scheme of local area bargaining has been preserved.
10By a decision dated September 19, 1978, the Board affirmed the bargaining rights of Local 249 of the Carpenters union in respect of the carpenters, employed by Hugh Murray in Board area 29. (For ease of reference, we shall continue to refer hereunder to "carpenters" represented by the applicant although strictly speaking its bargaining rights are somewhat broader than that as will become apparent infra). At paragraph 9 of the 1978 decision, the Board ruled:
"Accordingly, there has been a sale of a business within the meaning of section 55 of the Act and the Board declares, as a result thereof, that Hugh Murray (1974) Limited is bound by the collective agreement between the applicant and Hugh Murray Limited and that the applicant has the right to bargain on behalf of all journeymen carpenters and joiners, working foremen and apprentices employed by Hugh Murray (1974) Limited within the area bounded by the counties of Lennox Addington and Frontenac and the townships of Front Leeds and Lansdowne in the county of Leeds, which is the unit described in the collective agreement.''
Accordingly, section 125(2) extends the bargaining rights of the carpenters' union across the province wherever Hugh Murray may operate in the industrial, commercial or institutional sectors of the construction industry.
11By virtue of our section 1(4) declaration, Trend and Hugh Murray (1974) Limited must be considered as "one employer" for the purpose of the Act. It follows that the Carpenters Union (through its constituent local unions) likewise holds bargaining rights for the carpenters employed by Trend in any part of the province in which Trend is engaged on an ICI project, arid Trend is bound by the Carpenters' province wide agreement to the same extent as Hugh Murray. In particular, Trend is bound to recognize the applicant's bargaining rights and apply the province wide agreement on the Harrowsmith construction project. Insofar, as work outside the ICI sector is concerned, the Board hereby declares that Local 249 of the applicant holds bargaining rights for the carpenters employed by Hugh Murray and Trend in Board area 29 and must apply the terms of any collective agreement with Hugh Murray applicable in that area. These local area bargaining rights in respect to non-ICI projects, of course, operate in addition to the applicant's province wide bargaining rights and collective agreement applicable to any carpenter employed by either Hugh Murray or Trend on any ICI project in any part of the province. In Laurentian University, [1979] OLRB Rep. July 672, the Board declared that the applicant(s)' bargaining rights in respect of carpenters employed in Board Area 12 had been abandoned. This decision was subsequently upheld on judicial review so that in the result the applicant would not have bargaining rights in respect of carpenters employed in "non-ICI" work in that Board area.