United Brotherhood of Carpenters and Joiners of America, Local 785 v. Roy Brandon Construction Brandon General Contractors Limited and / or Roy Brandon Limited
[1981] OLRB Rep. February 219
Before: M. G. Mitchnick Vice-Chairman and Board Members H.J.F. Ade and C.A. Ballentine.
Appearances: J. James Nyman, Stephen Koshler and Ernest Arsenault for the applicant; Joseph Kelly for the respondents.
DECISION OF M. G. MITCHNICK, VICE-CHAIRMAN, AND BOARD MEMBER H. J. F. ADE; February 23, 1981
1This is an application requesting the Board to find that the respondent Roy Brandon Limited is bound by the provincial Carpenters' collective agreement, either by virtue of a "sale of a business" within the meaning of section 55 of The Labour Relations Act, or by virtue of the "related employer" provisions of the Act.
2The facts which form the background to this application are not in dispute. The principal behind Roy Brandon Limited, Roy Brandon himself, until 1973 carried on business in the construction industry through a corporation with the name of Brandon General Contractors Limited. Roy Brandon and his wife were at all times the only shareholders, officers and directors of that company. The business of the company, from its beginnings in the 1950's, was primarily that of house-building. In the early 1970's, as the Brandons' son Brian grew up and was able to take on more of the burdens of the business, the company moved into the industrial, commercial and institutional sector as well. Most of the estimating was then done by Brian, although virtually all of the business contacts continued to exist through Roy Brandon himself. It is admitted that Brandon General Contractors Limited was at that time bound to a collective agreement with Carpenters Local 1940 covering all carpenters' work in the industrial, commercial and institutional sector within the counties of Waterloo, Wellington, Brant, Norfolk and Dufferin (including the complete city limits of Orangeville).
3By 1973, the company owned equipment and one or two trucks, plus substantial real property, including the building in which the company's office was housed. Through a series of misadventures involving a job at Conestoga College, however, Brandon General Contractors Limited, late in 1973, found itself unable to pay its debts. In October 1973 the company made an assignment in bankruptcy, as a result of which it literally lost everything. Roy Brandon arranged with the trustee in bankruptcy to complete some of the work in progress, solely for the benefit of the creditors.
4Following the assignment, Mr. Brandon picked himself up and started over. He registered a trade name of "Roy Brandon Construction" and began doing small house renovations. He continued to use many of the same suppliers as before, although, as one might expect, he was required to pay cash. Brian by this time had gone out of his own. In 1974, Roy Brandon incorporated the third respondent, Roy Brandon Limited, to carry on his business. Once again the only shareholders, officers and directors were and continue to be Roy Brandon and his wife. The couple's home served as the company's office as well. In May of 1974 the Board accredited the Kitchener-Waterloo Construction Association as exclusive bargaining agent for those employers in a collective bargaining relationship with certain Carpenters Locals, including 1940, in the industrial, commercial and institutional sector of the counties of Waterloo, Wellington, Dufferin, Grey, Brant and Norfolk. Brandon General Contractors Limited was named as an employer bound by that accreditation order. The bargaining rights of Local 1940 were subsequently transferred to the applicant, Local 785, by way of merger, and the Board in previous decisions has recognized that merger. Local 785 became subject to the province-wide designations when Bill 22 was passed amending The Labour Relations Act in 1977, and hence claims that the respondent is now covered by the provincial carpenters' agreement.
5As noted, Mr. Brandon continued without any hiatus to be active in the construction industry, although very little of his work until the present time was in the industrial. Commercial and institutional sector. The employment complement of Roy Brandon Limited has always been very small, and never included any former employees of Brandon General Contractors Limited. In 1975 Roy Brandon Limited, in addition to its activities in residential work in the Kitchener area, built a number of houses in the Arctic on behalf of the federal government. The same was true in 1976 and 1977. In 1978, however, the company had no work in the Arctic, and the housing market in and around Kitchener began to decline. Accordingly, the company began to do some commercial work as well, only a small percentage of which was carpentry work. In 1979 all of the company's work was in the Arctic. In 1980 the company was once again forced to turn to the industrial, commercial and institutional sector in order to provide a living for the Brandons, and was the successful bidder on a number of contracts in the counties surrounding Kitchener. In May of 1979 Brandon General Contractors Limited was, incidentally, discharged as a bankrupt by the Court, but has carried on no business since that time.
6In September of 1980 the applicant for the first time discovered, through the commercial reporting services, that Roy Brandon was again working in the industrial, commercial and institutional sector in the Kitchener area, and attended at once at one of the respondent's job sites. The respondent Roy Brandon Limited took the position that it was not bound by any collective agreement, and the present proceedings were launched.
7The applicant takes the position, firstly, that a sale of a business took place when the principal of Brandon General Contractors Limited, Roy Brandon, decided to continue in business through Roy Brandon Construction and then Roy Brandon Limited. The applicant concedes that no tangible assets whatever were transferred from the bankrupt Brandon General Contractors Limited, but argues that Roy Brandon himself was the business, and that the business therefore followed him as he moved from company to company. Apart from whether any "goodwill" can be said to survive the bankruptcy of a business, it is debatable whether what occurred here can be brought within the actual language of section 55. Where the only element moving from one business to another is the principal himself, it appears to the Board, as in Brant Erecting and Hoisting, [1980] OLRB Rep. July 945, more appropriate to analyze the situation from the point of view of section 1(4) of the Act.
8Section 1(4) provides:
"Where, in the opinion of the Board, associated or related activities or business 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."
In comparing sections 55 and 1(4) of the Act, the Board in Brant Erecting stated:
"13. ... 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 a 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. The earlier company may have run into financial difficulties, or lost its reputation, or there may be legal, accounting or tax advantages in establishing a new vehicle through which the business, or related business activities can be conducted. Again, it is quite possible to do this without a clear and concrete disposition between the two firms so as to call section 55 into play. 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….”
As the above passage indicates, because of the ease with which one business vehicle can be discontinued and another one started, the section now makes it clear that whatever else "associated or related business" means, the words can apply to businesses which may not even be carried on at the same point in time. The Board in Brant Erecting noted:
"13. 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 unit v 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;…”
(emphasis added)
9The two businesses, in other words, although unrelated in time, may be so identical in their essential makeup as to be considered "associated or related" within the purpose and meaning of section 1(4) (although there may be a point at which the hiatus is so significant that it would be inappropriate to say that the section applies). As the Board also noted in Brant Erecting, the presence of bad faith, or the intention to avoid bargaining rights, is not a pre-requisite to the section applying. The absence of bad faith is, rather, something which the Board may take into account in deciding the extent to which it finds it appropriate to exercise its discretion, having regard to the labour relations purposes of the section.
10In the Brant Erecting case the predecessor company was dissolved without any formal act of bankruptcy. The Board in the present case, therefore, must decide whether the intercession of an assignment in bankruptcy has any effect on the application of section 1(4). Since section 1(4) does not turn on any flow-through or transfer of assets or goodwill, or even on continuity of operation, the answer appears to be that it does not. Were it otherwise, the principals of a company by declaring bankruptcy (with whatever loss to creditors) would find themselves in a better position vis-a-vis the union than if they had not. The language of the section does not appear to contemplate or support such a distinction. In a bankruptcy, of course, certain rights are extinguished by the Court's final order of discharge. It is doubtful, though, whether even the final order of discharge, any more than the winding-up or dissolution of a corporation (with its limited liability), would prevent the operation of section 1(4). The present case, however, need not decide that. Here Roy Brandon Construction and Roy Brandon Limited in fact commenced to carrying on business before the final order of discharge for Brandon General Contractors Limited was made. The Board, having regard to the "essential unity and identity" of their economic organizations, together with their common direction and control, is prepared to treat Roy Brandon Limited, Roy Brandon Construction, and Brandon General Contractors Limited as one employer for the purposes of the Act.
11Is Roy Brandon Limited therefore bound by the current provincial agreement, as the applicant alleges? Counsel for the company states that he himself received no notice of the accreditation proceedings which took place in 1973 and 1974, and that, in any event, section 49(1) of The Bankruptcy Act, R.S.C. 1970, chapter B-3, as amended, required leave of the Court in order to bind Brandon General Contractors Limited to the accreditation order of the Board. That section states:
"Upon the filing of a proposal made by an insolvent person or upon the bankruptcy of any debtor, no creditor with a claim provable in bankruptcy shall have any remedy against the debtor or his property.., until the trustee has been discharged or until the proposal has been refused unless with leave of the court and on such terms as the court may impose."
In response to this argument, the Board notes that, by virtue of section 102 of The Labour Relations Act, notice sent by the Board is deemed to have been received unless the contrary is proven (see Valentine Enterprises Contracting, 80 CLLC ¶ 14,042 (Ont. Div'l Ct.). In addition, it is highly doubtful that the section of The Bankruptcy Act relied upon, with its reference to "creditor" and "claim", has any application to an order of accreditation. But the Board need not rely on these grounds in forming its conclusions. It is admitted that the applicant (through its predecessor) had a collective agreement, and thus bargaining rights, with Brandon General Contractors Limited for the industrial, commercial and institutional sector in the five counties as of 1973. By operation of section 1(4), the Board deems those bargaining rights to have applied to Roy Brandon Limited when it commenced operation in 1974. Unless abandoned by the union, those bargaining rights would continue to exist at the time of the "province-wide" amendments to The Labour Relations Act in 1977, and thereafter. Where a company has not over a period of time performed work which would be the subject of existing bargaining rights, the Board has declined to find that the union has "slept on its rights" in failing to press those rights (see John Miller & Sons Ltd., [1979] OLRB Rep. June 540; Hugh Murray Limited, [1979] OLRB Rep. July 664), and the Board must decline to do so in the present case as well. The respondent was essentially inactive in the industrial, commercial and institutional sector, except to a limited extent in 1978, from 1973 to 1980, and it cannot be said that the union acted with unreasonable laxity in only discovering in September of 1980 the company's re-entry into the field. In follows therefore not only that the present application is timely, but that Local 785's bargaining rights remained in existence when the 1977 amendments to The Labour Relations Act funnelled all such bargaining rights into a single province-wide collective agreement.
12It is evident to the Board that Mr. Brandon at no time took the action he did for the purpose of escaping the union's bargaining rights. Had it been otherwise, the Board considers it probable that Mr. Brandon would have come up with a somewhat less identifiable name for his new company than "Roy Brandon Limited". The effect of the position taken by the respondent, however, is to undermine the rights validly acquired by the applicant with respect to the work which Mr. Brandon carried on for himself through the predecessor corporation in the industrial, commercial and institutional sector of the construction industry. It is clearly the intent of section 1(4) of the Act that such rights not be discarded lightly by the Board.
13The Board has a further discretion, however, in fashioning the relief it considers appropriate. Normally, a party in assessing its legal position must be taken to be acting at its own peril, the present case raises considerations of a special character, however, which cannot be ignored. While the bankruptcy of Mr. Brandon's original business and the subsequent passage of time are not such as to cause the Board, in this case, to exercise its discretion by refusing to grant the declaration sought, the Board does not consider this to be an appropriate case to fix the respondents with the consequences of that declaration on construction contracts to which the respondents had already become committed prior to receiving effective notice of the applicant's claim. As there was no written grievance filed in this matter, the Board finds the application itself to be the first effective notice given to the respondents of the applicant's claim, the application was mailed to the respondents by the Board on October 8, 1980, and by virtue of section 102(1) of The Labour Relations Act is presumed to have been received in the ordinary course of the mail. The Board in this case takes October 15, 1980, as the date by which effective notice was received by the respondents. As in English & Mould Ltd., [1979] OLRB Rep. Feb. 83, the Board exercises its discretion to limit its remedy to a form of prospective relief only, in this case affecting contracts entered into after the date notice of the claim was received. Clearly it must be an unusual case where the Board will consider it appropriate to limit the normal operation of its declaration in this manner (see Norfolk Hospital Association, 77 CLLC ¶ 14,094), but this is such a case.
14Accordingly, the Board exercises its discretion to declare Brandon General Contractors Limited, Roy Brandon Construction and Roy Brandon Limited to be one employer for the purposes of The Labour Relations Act, but the relief granted is to operate only with respect to construction contracts entered into after October 15, 1980. The collective agreement between the Carpenters Employer Bargaining Agency and the Ontario Provincial Council, United Brotherhood of Carpenters and Joiners of America will therefore be binding only on construction contracts entered into by Roy Brandon Limited or Roy Brandon Construction in the industrial, commercial and institutional sector in the Province of Ontario subsequent to October 15, 1980. The Board so declares.
DECISION OF BOARD MEMBERS, C. A. BALLENTINE;
I agree with the majority's decision declaring that the respondents are one employer under section 1(4) of the Act, and I am sympathetic with the view of my colleagues expressed in paragraph 12 of their decision that "Mr. Brandon at no time took the action he did for the purpose of escaping the union's bargaining rights".
Although this may be an unusual case, I am greatly concerned that the decision of this Board to have a declaration under section 1(4) operate prospectively is, when combined with the English & Mould Ltd. case, [1979] OLRB Rep. Feb. 83, detrimental to all parties in the organized construction industry. For the following reasons, I must dissent from the majority decision in that regard.
The discretion found in the legislation relating to section 1(4) is directed solely at circumstances where a "single employer" declaration is appropriate. It does not relate to the effect of the declaration on the remedies available to the applicant in grievance-arbitration proceedings once the Board has determined that it will issue the declaration. Hence, the Board should not purport to delay the operation of such a declaration. The section 1(4) declaration is properly effective as of the date the employer commenced operating the related business. (See Norfolk Hospital Association, 77 CLLC ¶ 14,094.) Indeed, the Divisional Court in that case at page 205 noted the natural consequences of such a declaration and the curious result if the declaration operated in the way in which the majority has decided:
... no curial process can be other than retroactive when it finally disposes of the matter in issue. What possible use the determination of the Ontario Labour Relations Board in this case would be had it meant its decision to apply only to future circumstances entirely escapes us.
It is my opinion that the English & Mould Ltd. case is bad law and should not be used by this Board as a precedent to be followed. For the Board to issue a declaration under section 1(4) and then suspend its effect while the projects being carried on by the non-union arm of the employer are completed merely invites the continued practice of employers attempting to get away with as many jobs as possible, before the relationship between the companies is discovered by the union and made subject to section 1(4) of the Act.
The applicant union in this case simply applied for a declaration under section 55 and in the alternative under section 1(4). The applicant did not ask the Board for any other relief which is open to it under a section 112a grievance-arbitration application if and when it chooses to exercise that right.
It is my decision that the unanimous declaration that the respondents are one employer for the purpose of the Act is operative in the way which the Divisional Court described in Norfolk Hospital Association.