United Brotherhood of Carpenters and Joiners of America, Local Union No. 446 v. Subito Contracting (Drywall & Painting Co. Limited et al.
File No.: 0594-81-R Date: October 19, 1981
Before: Ian Springate, Vice-Chairman, and Board Members C. A. Ballentine and J. A. Ronson.
Appearances: Douglas J. Wray and Matti Rissanen for the applicant; Donald B. Laidlaw, Phyllis Checchin and Carlo Checchin for the respondents.
DECISION OF THE BOARD
1This is an application under section 1(4) of the Labour Relations Act in which the applicant has requested that the Board treat the three respondents as constituting a single employer for the purposes of the Act or, in the alternative, declare that there has been a sale of a business within the meaning of section 63 of the Act to Pioneer Contracting (Drywall & Painting) Inc. from either or both of the other two respondents.
3These proceedings concern three individuals and the various businesses under their control. Mr. Carlo Checchin and Mr. Giuliano Checchin are brothers. Giuliano Checchin is married to Phyllis Checchin. For ease of reference these three individuals will be referred to simply as Carlo, Giuliano and Phyllis. Also for ease of reference, the three respondents will be referred to simply as "Subito", "CM" and "Pioneer", and the applicant as "Local 446".
4Carlo was involved in the drywall installation and painting business for a number of years prior to the incorporation of any of the respondents. The evidence indicates that Carlo is a skilled worker, with a good deal of experience in supervising employees. Carlo appears to be particularly adept in estimating the cost of jobs and preparing bids. During 1973, Carlo and an individual identified only as Mr. Rizzo incorporated CM, with Carlo as its president, to do drywall installation and painting work in the Sault Ste. Marie area. Subsequently, Carlo acquired all of the company's shares. CM acquired a building located at 153 Great Northern Road in Sault Ste. Marie from which it continues to operate.
5CM appears to be a relatively successful firm. The company's major jobs have all been commercial projects, although it has also done a certain amount of residential work. Local 446 acquired bargaining rights for carpenters employed by CM in the industrial, commercial and institutional sector of the construction industry during or about 1974. On July 23, 1980, this Board certified Local 446 as the bargaining agent for all carpenters and carpenters' apprentices employed by CM in all other sectors of the construction industry, including the residential sector.
6Over the years CM acquired a number of assets in addition to its building. These included drywall tools, a truck and various types of office equipment. At one time the company employed a woman to work in the office. For a while, when this woman was off work due to illness, Carlo's sister-in-law, Phyllis, came in on a part-time basis to help out. At some point in time, just when, it is not clear, Phyllis was made the company's corporate secretary. Apparently this was done to assist Carlo, who testified that he does not write fluent English. Phyllis was not paid for the relatively minor duties she performed as corporate secretary.
7In 1975 Carlo and his brother Giuliano incorporated the Subito firm. Giuliano was experienced in the installation of drywall, but apparently had no previous managerial experience. Carlo and Giuliano each contributed $2,000.00 to provide Subito with operating capital and to allow it to purchase equipment, including tools and a truck. Notwithstanding that each contributed an equal amount to the firm, Giuliano received fifty-five per cent of the company's shares while Carlo received forty-five per cent. Giuliano was named president of the firm and he was responsible for its day to day operations. The field staff of Subito was overseen by Giuliano, who acted as a working foreman. Carlo did the firm's estimating work. Subito operated out of 153 Great Northern Road, and paid rent to CM. The firm engaged exclusively in residential drywall installation and painting.
8After Subito was established, a Mrs. Eseda Diotallevi was hired to do the office and paperwork for both Subito and CM. Mrs. Diotallevi was actually employed by Subito, but half of her wage cost was charged back to CM. Phyllis appears not to have done any work for Subito, although she continued to be the unpaid corporate secretary for CM.
9On June 14, 1978, Local 446 was certified as the bargaining agent for carpenters and carpenters' apprentices in the employ of Subito. On June 19, 1978, the union sent the company notice to bargain for a collective agreement, and on August 21, 1978 the parties met with a concilation officer, but without reaching any agreement. On September 18, 1978, the Minister of Labour released a "no-board" report, which meant that as of October 5, 1978, the union was in a legal position to strike. On November 19, 1978, the parties again met, and this time reached an understanding. On the basis of this understanding, Giuliano, on behalf of Subito, sent a letter to Local 446 agreeing to abide by the terms and conditions of "the last collective agreement in the housing sector". This was a reference to a standard form residential agreement which a number of Sault Ste. Marie contractors had entered into with Local 446. At the hearing, counsel for Local 446 stated that at the present time the union is not party to any residential agreements and accordingly takes the position that Subito is no longer bound to the terms of any collective agreement in the residential sector.
10On November 19, 1978, the same day that Giuliano agreed to be bound by the residential agreement, Matti Rissanen, the business agent of Local 446, forwarded a letter to Giuliano stating that the union would not interfere with the wages and benefits being paid by Subito to its employees for the duration of the project which was then being constructed by Subito. The project in question was completed by Christmas of 1978. According to Giuliano's testimony, Subito then found itself unable to successfully bid on any jobs due to the wage rates in the collective agreement. Quite apart from this problem, however, Subito had acquired debts of some ten or twelve thousand dollars, and its creditors were pressing for the money. In the result, it was decided that rather than have the firm go bankrupt, with the attendant adverse effect on the reputations of both Giuliano and Carlo, Carlo would cover all of Subito's debts and in return acquire ownership of Giuliano's shares in the company. This transaction was completed sometime during December of 1978.
11When giving his testimony, Carlo made it clear that he had paid the ten or twelve thousand dollars in exchange for Giuliano's shares not because he desired to gain control of Subito, but only to head off Subito's bankruptcy and thereby protect the reputation of himself and his brother. Once Carlo gained total control of the firm, it ceased operations entirely, although it still exists as a legal corporate entity. Subsequent to December of 1978, Giuliano acquired and performed a few small residential jobs in his personal name.
12Pioneer was incorporated on February 16, 1979, with Phyllis as its sole shareholder and director. Phyllis was no stranger to the construction industry. When younger she helped her father build homes, and indeed she continued to do so while attending university. Phyllis testified that she had Pioneer incorporated because she wanted to try her hand at running a company. Phyllis borrowed five thousand dollars from the bank to get Pioneer underway. Arrangements were then made with Carlo to transfer the van and office equipment which had been used by Subito over to Pioneer. In return, Pioneer repaid one of Subito's debts to the sum of two thousand dollars, and also paid about one thousand six hundred dollars to the Workmen's Compensation Board to cover the amount still owed by Subito to the Board.
13Pioneer leases an office from CM at 153 Great Northern Road for seventy dollars per month. This sum includes a payment for the use of CM's office equipment. Subsequent to Pioneer's commencing business, all new equipment used at 153 Great Northern Road has been purchased in the name of CM, and it appears that the only office furniture or equipment owned by Pioneer which is still in use is a single filing cabinet. The van which Pioneer obtained from Subito is no longer in use, but has been replaced by a new van now rented by Pioneer. Pioneer owns no equipment of its own, but rather rents drywall equipment from CM for a flat rate of one hundred dollars per month.
14Phyllis works in the office at 153 Great Northern Road three days a week, but does not work in the field. Although paid by Pioneer, Phyllis does the payroll and invoicing for both Pioneer and CM. Mrs. Diotallevi, who previously worked for Subito, now works as an employee of Pioneer four days a week doing office work on behalf of both Pioneer and CM. CM pays Pioneer six hundred dollars per month for the services of both Phyllis and Mrs. Diotallevi.
15When Pioneer commenced its operations, Carlo did all of its estimating work, for which he was not paid. In March of 1980, Pioneer hired its own estimator, who works only for Pioneer. On occasion, Carlo has checked the bids prepared by Pioneer's estimator, but by and large he has ceased any active involvement with the company.
16Pioneer did its first job in May of 1979. To date it has done only residential work, primarily single family homes. It appears that most of Pioneer's jobs have been of very short duration, perhaps two weeks each, and that depending on the work flow, company employees would have been on some job sites for only a couple of hours at a time. Pioneer did not put up company signs at any of the job sites it was involved with, and both its original and new rented vans did not bear the company's name. Mr. Rissanen, the business agent of Local 446, testified that he first heard of Pioneer in September of 1979 when other unionized contractors began to complain about the firm. According to Mr. Rissanen he understood that the Checchin brothers had some involvement with Pioneer and accordingly he approached Carlo when he was on a CM job, and asked him about the firm. According to Mr. Rissanen, Carlo told him that he had no knowledge of Pioneer. Carlo, when giving his testimony, put this conversation sometime in June or July of 1979. According to Carlo, Mr. Rissanen said he felt that either Carlo or his brother Giuliano were involved with Pioneer, to which Carlo replied that it was up to Mr. Rissanen to find out.
17Mr. Rissanen testified that the first time he actually came across Pioneer was shortly prior to the filing of this application when he met Giuliano on a large apartment and townhouse development in Sault Ste. Marie, and that this meeting prompted the filing of the instant application. It is undisputed that the job in question was the largest one that Pioneer had been involved with up to that time.
18It is against this background that Local 446 seeks to have the Board find that either sections 1(4) or 63 of the Act are applicable. What Local 446 is in fact seeking is to have its bargaining rights for employees of either CM or Subito also apply to employees of Pioneer. Section 1(4) and the relevant portions of section 63 provide 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.
63(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) Where 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.
(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 14 or 53, 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 14 or 53, as the case requires.
19In dealing with this matter, we turn first to consider the relationship between CM and Pioneer. We are satisfied that there has not been a transfer of any assets or operations from CM to Pioneer, and that accordingly section 63 has no application. With respect to a possible application of section 1(4), it is to be noted that the ownership of the two firms is different. CM is owned solely by Carlo, whereas Pioneer is owned solely by Phyllis. Although as the Board indicated in United Shelters Ltd. [1981] OLRB Rep. June, 796 when different corporate entities owned and operated by principals with close family ties co-operate closely with each other, a section 1(4) declaration may well be appropriate, we do not believe such to be the case with respect to CM and Pioneer. At the time of the filing of this application, Carlo had ceased doing the estimating work for Pioneer. Further, and more importantly, it is clear that in the past Local 446 accepted the existence of two separate companies owned by the Checchins, one, CM primarily engaged in commercial work and another, Subito, exclusively engaged in the residential field. CM and Subito operated side by side with integrated office and administrative operations, and, indeed, the relationship between CM and Subito raised all of the issues of common direction and control now present in the relationship between CM and Pioneer. Local 446 did not, however, seek to have the Board declare CM and Subito to be a common employer. Indeed, to the contrary the union acquired bargaining rights separately for the two companies and also treated them as separate entities for collective bargaining purposes. In these circumstances, we feel the status quo of CM being treated as a separate employer for the purposes of the Act should be maintained. Accordingly, even if we were to assume that the statutory requirements for making a section 1(4) declaration were present in this case, we would, nevertheless, decline to exercise our discretion to treat CM and Pioneer as a single employer for the purposes of the Act.
20This, then, brings us to the relationship between Subito and Pioneer, two corporations which have carried on business at different points in time. The Board addressed itself to this type of situation in the Brant Erecting and Hoisting case, [1980] OLRB Rep. July 945 as follows:
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 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. However, it should be noted that section 1(4) is discretionary. The Board need not make a 1(4) declaration even when the conditions precedent are present; and has not done so, for example, where a trade union is seeking to extend rather than preserve its bargaining rights.
A more difficult question is whether Brant Erecting and Hoisting and Provincial Steel can be said to have engaged in "associated or related activities or businesses" since, for practical purposes, Brant Erecting ceased to exist as a going concern prior to the establishment and subsequent incorporation of Provincial Steel. The respondent contends that the two businesses cannot be "related" within the meaning of section 1(4) because they were never engaged in any joint ventures or business endeavours, nor were they carrying on business at the same time. The respondent argues that such overlap as there may have been between the activities of Provincial Steel and Brant Erecting, was solely for the purpose of winding up the latter company, and cannot be regarded as the kind of related activity to which section 1(4) is directed. But for the 1975 amendment to the Act, this argument would have considerable force; but it is now clear that the "associated or related activities or businesses" need not be carried on simultaneously. The amendment extends the ambit of section 1(4) to situations in which one business entity is actively carrying on business and the other is not. It is not necessary to have shared participation in a common business endeavour or even contemporaneous economic activity. The relationship between the business entities is a functional rather than a temporal one. Businesses or activities are "related" or "associated" because they are of the same character, serve the same general market, employ the same mode and means of production, utilize similar employee skills, and are carried on for the benefit of related principals. If these criteria are met, two businesses may be "related" within the meaning of section 1(4) even though their activities are carried on through different corporate vehicles and are not carried on simultaneously. It is evident that the Legislature has created a regime of collective bargaining law which significantly modifies the common law notions of "privity of contract" or "the corporate veil".
21All of the shares of Subito are currently held by Carlo, but the firm has not carried on business subsequent to Carlo becoming its sole owner. When Subito was an operating entity, majority control was held by Giuliano, who also served as the firm's president. All of the shares of Pioneer are now held by Phyllis, Giuliano's wife, and Phyllis serves as its president. The affairs of both entities have presumably been carried on for the benefit of the Giuliano-Phyllis household. Pioneer started operations by acquiring certain of Subito's assets and paying off certain of its debts. Subito and Pioneer have both carried on business as residential drywall and painting contractors in the Sault Ste. Marie area, working out of the same premises and utilizing similar employee skills. Giuliano continues to direct the field forces of Pioneer in exactly the same manner as he did the field forces of Subito. Taking these circumstances into account, we are satisfied that although Subito and Pioneer are unrelated in time, they are so identical in their essential makeup as to be considered associated or related businesses. We are further satisfied that they have been carried on under common direction and control. It follows, in our view, that all of the statutory preconditions for the application of section 1(4) have been met in this case.
22The fact that all the statutory preconditions for a section 1(4) declaration have been met is not determinative of this matter. The Board still retains a discretion as to whether or not it should treat the two legal entities as a single employer. One of the purposes of section 1(4) is to protect a union's existing bargaining rights. We are satisfied that the rights which Local 446 acquired with respect to the employees of Subito would be protected by Subito and Pioneer being treated as a single employer. Counsel for the respondents contended that the Board should decline to apply the section because of Local 446's delay in filing the application. The Board has in a number of cases declined to apply section 1(4) in instances where a trade union had actual knowledge that a related company was undermining its bargaining rights, or was willfully blind to this fact and, without cause, failed to seek a remedy under section 1(4) within a reasonable period of time. However, as the Board noted in The Great Atlantic & Pacific Company of Canada Limited case, [1981] OLRB Rep. March 285, the Board should not exercise its discretion to create an unreasonable high standard of due diligence. A union's resources are not unlimited, and this limitation must be considered in assessing how quickly a union should become aware of, investigate and respond to, situations which might call for the application of section 1(4). Mr. Rissanen is responsible for overseeing Local 446's affairs across all of the District of Algoma south of the 49th parallel of latitude. As early as 1979, Mr. Rissanen, on the basis of second hand information, made inquiries about the status of Pioneer to Carlo. Where one accepts Rissanen's or Carlo's account of that conversation, it is clear that Carlo did not advise Mr. Rissanen as to the true state of affairs. Mr. Rissanen testified that until shortly prior to this application being filed, he did not come across Pioneer on any job site. This is entirely possible due to the short-term nature of most of Pioneer's work, as well as the fact that Pioneer did not advertise its presence on job sites or have the Pioneer name on its truck. It was only when Pioneer became engaged on a major apartment and townhouse project that Mr. Rissanen actually came across Giuliano heading up a crew of Pioneer employees. Shortly afterwards, this application was filed. In our view, it is not the case that Local 446 failed to seek a remedy under section 1(4) in the face of knowledge that its bargaining rights were being eroded away by a company related to Subito. Accordingly, we are of the view that the Board should exercise its discretion to apply section 1(4).
23Having regard to the foregoing, the Board is satisfied that Subito and Pioneer should be treated as constituting a single employer for the purposes of the Labour Relations Act.
24Local 446 was certified by this Board as the bargaining agent for all carpenters and carpenters' apprentices in that portion of the District of Algoma south of the 49th parallel of latitude, without reference to sector. Having regard to the province-wide bargaining provisions of the Act, the Board is satisfied, and so declares, that both Subito and Pioneer are bound by the current carpenters' provincial agreement insofar as the industrial, commercial and institutional sector is concerned. With respect to all remaining sectors, including the residential sector, the Board is satisfied, and so declares, that Local 446 holds bargaining rights for carpenters and carpenters' apprentices employed by both Subito and Pioneer, but that neither corporation is bound by the terms of a subsisting collective agreement.