[1982] OLRB Rep. February 261

1853-81-U Canadian Union of Public Employees, Complainant, v. Sunnycrest Nursing Homes Limited, Respondent.

BEFORE: R.O. MacDowell, Vice-Chairman, and Board Members, J. D. Bell and O. Hodges.

APPEARANCES: J. Egner, R. Whitney and W. Lamoureux for the complainant, J. P. Sanderson, Q.C. and D. I. Forbes-Roberts for the respondent.

DECISION OF THE BOARD; February 15, 1981

I- Evidence

I. This is a complaint under section 89 of the Labour Relations Act, arising from the respondent's decision to subcontract the work of, and terminate, one quarter of the approximately 60 employees in the bargaining unit represented by the complainant union.

2. The union was certified to represent the respondent's employees on October 24, 1980. On November 4, 1980, the union gave formal notice of its desire to bargain with a view to making a collective agreement. On December 3, 1980, at the respondent's request, the union submitted a complete package of proposals on both monetary and non-monetary issues, and pressed the respondent for an early meeting to discuss them. The union also sought further information about the existing employee classifications, rates, and seniority dates, so that it would be in a better position to assess both its own, and the respondent's bargaining position.

3. The parties met on February 3 and February 26, 1981. The discussion focused on the union's language proposals. There is no evidence of any specific counter-proposals advanced by the employer; however, Milton Graham, a consultant representing the respondent, did promise that the employer would submit its initial monetary offer on April 2, the scheduled date for the next meeting. This meeting was cancelled because of the illness of Mrs. H. G. Chalmers, the assistant-administrator for the nursing home, who was its other representative at the bargaining table.

4. Following the cancellation of the April 2 meeting, Russell Whitney, the union negotiator, contacted Graham in order to set further dates. April 28 was convenient for both parties, but Whitney was concerned about the slow course of negotiations, and indicated that he intended to make a formal application for conciliation in order to avoid any further delays. It had been more than five months since the union's certification, and in that time, it had made little headway in its effort to achieve a collective agreement. Since the employees had no right to strike (being prohibited from doing so by the Hospital Labour Disputes Arbitration Act), it was Whitney's view that the tempo of negotiations had to be maintained or they would simply drag on and on without any real progress being made. This has been Whitney's experience in other nursing homes, and was the reason why he wished to set the conciliation process in motion so that a conciliation officer would be available if needed. Graham advised Whitney that if he (Whitney) intended to apply for conciliation, no useful purpose would be served by any further direct meetings.

5. In early April 1981, the union wrote to the Ministry of Labour requesting the appointment of a conciliation officer. By letter dated April 12, 1981, the respondent opposed the union's request on the ground that it was "unwarranted", "premature", and "circumventing collective bargaining". In the respondent's submission, it had not had an opportunity to fully respond to the union's language proposals; nor, because of the cancellation of the April 2 meeting, had it had the opportunity to present its monetary proposal to the union. The employer maintained that conciliation was unwarranted because there had been no serious delay, and, with "the cooperation of the union", it fully intended "to actively work towards a settlement".

6. Despite the employer's opposition, a conciliation officer was appointed and a meeting scheduled for June 2, 1981. By June 2, despite repeated reminders, the union had still not received a response to its request for information; and, notwithstanding Graham's undertaking and the respondent's letter suggesting that the submission of its monetary proposals had only been prevented by the cancellation of the April 2 meeting, the respondent now claimed that it needed more time to study the union's position (which it had had for six months) and to formulate a reply. The conciliation officer urged the respondent to prepare a reply on all outstanding issues. Whitney agreed that any "no board report" (i.e. a recommendation by the officer against the appointment of the Conciliation Board and a necessary pre-condition to arbitration) be withheld until June 16 to allow the employer to respond. The arrangement with the conciliation officer was that if the respondent's opening proposals were unacceptable, a "no board report" would issue, and the parties would then be free to continue negotiations, or proceed to arbitration if they were unable to compromise their differences.

7. On June 15, the respondent submitted its proposals, together with a letter from Graham indicating that he was prepared to meet at any time to discuss them. Those proposals were not immediately attractive to the union, and in early July, the conciliation officer issued his "no board report". In mid-July, Whitney contacted Graham to advise that the union was going to initiate the first step in the arbitration process (which could ultimately result in an arbitrated settlement), but he also indicated that he was anxious to pursue direct negotiations in an effort to achieve a settlement without resorting to arbitration. Graham, who had earlier said he was willing to meet at any time, now said there was no need.

8. In September 1981, the union submitted a further package of proposals with amendments to reflect some of the positions taken by the respondent, and a renewed offer to meet and bargain. Graham was contacted further in October and November 1981, and pressed for a response. Each time, he told Whitney that he had not had an opportunity to consider the union s amended position. An arbitration hearing to resolve the terms of a collective agreement is scheduled for February 1982.

9. There is no evidence that during the course of negotiations, there was ever any discussion of the union s monetary proposals or their potential impact on the respondent. There was no indication of the respondent's need, or intention, of subcontracting the work of employees in the bargaining unit. There was an item in the union's proposals which, according to Whitney, could be construed as restricting the employer's right to subcontract bargaining unit work; but, apparently, this item never figured in the parties' negotiations. Had the respondent raised its concerns at the bargaining table, its subsequent actions would be a little easier to understand.

10. Mrs. Chalmers attended all of the bargaining sessions. She testified that the subcontracting alternative was being considered at the same time as the employer was bargaining with the union, and further that the respondent had had ample opportunity to raise the issue during bargaining. Mrs. Chalmers told the Board that she knew that the impending subcontracting arrangement would be of real concern to the union and the employees it represented, but, she said, she did not consider it necessary to raise the matter.

11. On November 24, 1981, without notice to the union, the respondent called a meeting of his housekeeping, laundry, maintenance and kitchen staff, and advised the employees that their work had been subcontracted to Parnell Foods, and L. and G. Housekeeping Services Limited, and that they were being terminated effective November 30, 1981. The employees were also advised that they would be considered for employment by the subcontractors. After the termination notices were handed out, representatives of the two subcontractors conducted interviews on the respondent's premises. As a result, many of the employees were hired (albeit with different terms and conditions of employment), and continued to perform the same functions very much as before. These functions were, and remained, unskilled and largely routine. L. and G. provides an onsite supervisor. Parnell does not. A representative of Parnell visits the home two or three times a week. The actual co-ordination of the kitchen staff is undertaken by the cook — as it was before.

12. Mrs. Chalmers, the assistant-administrator of the home, and Mr. LeRoy, its owner, both gave evidence about the decision to engage subcontractors. We did not find Mr. LeRoy a very credible witness. The subcontracts themselves were not produced in evidence, and LeRoy was evasive and reluctant to explain either the terms of those agreements or the previous rates which the home had paid to its staff when they were employed directly. Yet it was the terms of the subcontracts — as compared to the existing rates and the possibility of an increase through negotiation or arbitration — which according to LeRoy, figured in his decision to terminate his employees' services.

13. Mrs. Chalmers testified that Parnell Foods had approached the company in 1978, but there was no serious discussion of subcontracting food services until the spring of 1981 —that is, contemporaneous with the union's efforts to negotiate a collective agreement. Chalmers listed a number of reasons why the subcontracting was ultimately undertaken: the respondent's concern that it would have to retain a dietician on a part-time basis in order to comply with the Ministry of Health guidelines concerning the preparation of therapeutic diets; the impending retirement of one of the respondent's supervisors which would shift the supervisory burden to Mrs. Chalmers if the supervisor were not replaced; and, Mr. LeRoy's back problems. But is it difficult to accept that these were the primary reasons for the two subcontracts. Mrs. Shane, the supervisor who retired, had been ill periodically since 1979, yet the home had never regarded this as sufficient grounds for altering its work arrangements, and had made no effort to seek a replacement. No doubt the subcontracting arrangement relieved Mrs. Chalmers of some supervisory responsibilities, but as we have already noted, the Kitchen supervision remains unchanged, and the cleaning staff do not require much supervision. Mrs. Chalmers admitted that there were no specific complaints with respect to the housekeeping employees not doing their work, and she still does "rounds" to ensure that the work is being done to the home's satisfaction. The Ministry of Health guideline to which she referred has been in effect since the spring of 1980. These regulations were being phased in, and there was no pressure or order from the Ministry of Health for immediate compliance. Similarly, Mr. LeRoy has had back problems for years, and since he can still work a regular day (so he testified), and is not involved in direct supervision of the employees, it is difficult to see how his back problems have much to do with the decision to subcontract his employees' work. While the home may have faced certain administrative problems, we do not think they explain the timing and manner of its subcontracting arrangements.

14. As owner and administrator of the home, it was LeRoy's decision to subcontract the housekeeping, laundry, kitchen and maintenance work, and to determine the employees performing those functions. He too cited his back problems, and the supervisory responsibilities of Mrs. Chalmers — although, in the latter case, it was not the supervisory burden with which LeRoy was concerned, but the absence of any "back up" should an illness recur. He also cited projected "cost savings" arising from the subcontracting arrangements. It is necessary to look at LeRoy's considerations in this regard in a little more detail.

15. LeRoy told the Board that the "cost savings" arise from a comparison between the union's monetary proposals (i.e. its opening demand which the company had had since December 1980, but about which there had been no negotiations), and the price charged by the two subcontractors. In the case of Parnell Foods, this price consists of a service charge of $1000.00 per month, the actual wage costs paid by Parnell to its employees, and a percentage of the employee benefits paid by Parnell. In addition, a small portion of the "savings~~ arises from the bulk buying power of Parnell. The situation with L. and G. is unclear, because the agreement provides for a global fee, and LeRoy said he could not recall the breakdown. He also said he did not know the wage rates payable to Parnell employees (for which Sunnycrest will ultimately be responsible), or what the payment to Parnell would be for December 1981, the first and most recent month of the arrangement. Nor could LeRoy recall the rates which Sunnycrest had paid to its own employees for the same work. He did admit on cross-examination, however, that the respondent was paying more to L. and G. and Parnell than it had been paying to its own employees. How much more is uncertain because of the sketchy evidence concerning the previous wage rates and the sums payable to the subcontractors. Such evidence as there is is almost entirely hearsay.

16. Chalmers testified that Parnell retained the same number of employees working the same number of hours, while L. and G. had the same number of employees working longer hours. Whitney told the Board that he had been advised that three individuals formerly employed by the respondent and now employed by Parnell had had a wage increase while three remained at the same wage rate, and all had received certain benefits not paid by Sunnycrest. It was his understanding that all of the L. and G. employees had suffered a wage cut. The only direct evidence is with respect to the cook, Lilian Norris, who was paid $6.25 per hour by the respondent and now is paid $7.81 per hour by Parnell. This represents a 25% increase over what the respondent previously paid, but of course, because of the arrangement with Parnell, it is a wage rate for which the respondent remains fully responsible. Thus the respondent is not only paying more for the subcontracting arrangement, as LeRoy admitted, but the only direct evidence suggests it is paying substantially more. It is clear moreover, that whatever the magnitude of the "cost savings" referred to by LeRoy, they were entirely "notional", being a comparison between the existing wage rates (whatever they were), and the union s opening bargaining position.

17. LeRoy testified that he had considered subcontracting his employees' work since the spring of 1981, and firmly decided to do so during the summer as a result of the above-mentioned calculations. Parnell had contacted the respondent some years before, and as it turned out, provided an acceptable alternative. According to Chalmers, L. and G. was approached and negotiations took place in the last week of August. The Parnell contract was agreed to in September, signed in November, and took effect on December 1, 1981. The L. and G. contract was finalized in October, signed in November, and also took effect on December 1, 1981. LeRoy testified that both contracts can be cancelled on notice and without penalty.

II — Argument

18. The union argues that the respondent's decision to subcontract the work of, and terminate, a substantial number of its employees, — taken unilaterally, without notice to their bargaining agent, and with barely a week's notice to the employees affected, is a breach of a number of statutory provisions. The sections of the Labour Relations Act and the Hospital Labour Disputes Arbitration Act upon which the union relies, and to which we will refer, read as follows:

Labour Relations Act

" 3. Every person is free to join a trade union of his own choice and to participate in its lawful activities.

64. No employer or employers' organization and no person acting on behalf of an employer or an employers' organization shall participate in or interfere with the formation, selection or administration of a trade union or the representation of employees by a trade union or contribute financial or other support to a trade union, but nothing in this section shall be deemed to deprive an employer of his freedom to express his views so long as he does not use coercion, intimidation, threats, promises or undue influence.

65. No employer, employers' organization or person acting on behalf of an employer or an employers' organization,

(a) shall refuse to employ or to continue to employ a person, or discriminate against a person in regard to employment or any term or condition of employment because the person was or is a member of a trade union or was or is exercising any other rights under this Act; ...

(c) shall seek by threat of dismissal, or by any other kind of threat, or by the imposition of a pecuniary or other penalty, or by any other means to compel an employee to become or refrain from becoming or to continue to be or to cease to be a member or officer or representative of a trade union or to cease to exercise any other rights under this Act.

70. No person, trade union or employers' organization shall seek by intimidation or coercion to compel any person to become or refrain from becoming or to continue to be or to cease to be a member of a trade union or of an employers' organization or to refrain from exercising any other rights under this Act or from performing any obligations under this Act.

89(5)On an inquiry by the Board into a complaint under subsection (4) that a person has been refused employment, discharged, discriminated against, threatened, coerced, intimidated or otherwise dealt with contrary to this Act as to his employment, opportunity for employment or conditions of employment, the burden of proof that any employer or employers' organization did not act contrary to this Act lies upon the employer or employers' organization.

Hospital Labour Disputes Arbitration Act

10. Notwithstanding subsection I of section 70 of the Labour Relations Act, where notice has been given under section 13 or 45 of that Act by or to a trade union that is the bargaining agent for a bargaining unit of hospital employees to which this Act applies to or by the employer of such employees and no collective agreement is in operation, no such employer shall, except with the consent of the trade union, alter the rates of wages or any other term or condition of employment or any right, privilege or duty of the employer, the trade union or the employees, and no such trade union shall, except with the consent of the employer, alter any term or condition of employment or any right, privilege or duty of the employer, the trade union or the employees, until the right of the trade union to represent the employees has been terminated.

11. The union's argument has three related branches. The union argues first, that the subcontracting arrangement is a straightforward unfair labour practice designed to rid the respondent of a significant portion of those of its employees who have opted to engage in collective bargaining. Why else, asks the union, would the respondent pay more than its current rates for the services of the same employees, while at the same time avoiding any mention of subcontracting at the bargaining table, or any discussion of those employees' wage rates. The union acknowledges that, in appropriate circumstances, negotiated wage rates might prompt an employer to seek to minimize its costs by subcontracting, the introduction of technological change, or other means. But that is not the situation here. In this case, the respondent is purportedly reacting solely to the union's bargaining position, and without any effort to negotiate a wage rate within the employer's legitimate cost parameters. The evidence is that the decision to subcontract began to crystallize before the employer made any response at all to the union's wage proposals, and it has made no effort through bargaining to accommodate its economic concerns with the wage objectives of its employees. The union asks the Board to conclude that the respondent's real objective was to avoid the obligation to bargain collectively and to divest itself, insofar as it was possible to do so, of those employees who had opted for trade union representation. It could not discharge these employees directly, nor could it dispense with all of them, or completely replace the services they provide. But to the extent that it was able to do so, the respondent has accomplished precisely the same purpose by means of the subcontracting arrangement.

12. The union's second proposition is closely related to the first. The union argues that the respondent has failed to "bargain in good faith and make any reasonable effort to make a collective agreement". The union contends that the employer cannot be negotiating in good faith if, at the same time as it is bargaining with a view to setting the new terms and conditions of employment~ for its employees, it is settling the terms of a major subcontracting arrangement which will eliminate those jobs, or, as here continue them on different terms through the agency of a subcontractor. Can it be bargaining in good faith, asks the union, to tender a proposal which ultimately will have no application to many of the employees to which it ostensibly applies; or to jettison a quarter of the employees in the bargaining unit —purportedly because of the union's wage demand, — but without ever raising the subcontracting alternative or bargaining about the employees' wage levels? The union relies upon Westinghouse [1980] OLRB Rep. April 577, and argues that the respondent was under an obligation to reveal that it was undertaking initiatives which would significantly impact upon the bargaining unit (both those remaining and those facing termination), and make much of the previous bargaining nugatory. Without this information, the union argues, it was unable to assess its own priorities or formulate a meaningful bargaining response to matters of fundamental importance to the employees it represents. In the union's submission, the unilateral termination of one quarter of the employees in the bargaining unit, without notice or discussion, constitutes a repudiation of the collective bargaining process and a breach of the respondent's bargaining duty.

13. The union's final submission involves the so-called statutory freeze which prevails from the time the union gives notice to bargain until a collective agreement is in effect between the parties. The union submits that the freeze is an important adjunct to collective bargaining designed to preserve the labour relations status quo while that process is continuing. To eliminate a significant part of the bargaining unit fundamentally alters the status quo —especially when the decision is motivated by a union bargaining proposal rather than any external market conditions and, in the new arrangement, the work continues to be done by the same employees, very much as before, but on different terms and conditions. The employer is not here carrying on "business as before" or responding to economic exigencies in accordance with its established practice. On the contrary, argues the union, it is responding to the union and the collective bargaining process. In the union s submission, it would make nonsense of the concept of a "freeze" if an employer were prohibited from making minor adjustments in employee benefits (example: parking privileges — see Scarborough Centenary Hospital [1978] OLRB Rep. July 679 and [1979] OLRB Rep. Jan. 56), but remained free to significantly alter the composition and structure of the bargaining unit itself. And why have a statutory freeze at all if the employer need only to carry on "business as before" provided it is not motivated by anti-union animus? If the employer is free to change things that go to the heart of the collective bargaining relationship and process, the statutory freeze becomes meaningless.

14. The employer bases its position on its inherent management rights. It submits that it has the unfettered right to run its business as it sees fit unless or until its rights are circumscribed by the terms of a collective agreement. It had the right to subcontract the work of its employees before, and, in its submission, nothing in the statute changes that situation. With respect to the unfair labour practice allegations, the employer contends that it has bona fide economic and administrative reasons for divesting itself of the housekeeping, laundry, maintenance and food services aspects of its business. The respondent argues that there is nothing improper in an employer anticipating an arbitration award granting its employees a wage increase, and acting upon that expectation by subcontracting their work before such award can issue. Finally, the employer argues that since it was exercising a pre-existing right to carry on its business, it was under no obligation to notify the union or bargain about either the exercise of that right or its consequences. Counsel for the respondent notes that, although the union is not permitted to call a strike, it can submit all of its concerns to an arbitrator.

15. It will be convenient to deal with these arguments in the order in which they were presented.

Interference With Statutory Rights

24. In this jurisdiction, the Legislature has mandated collective bargaining as a socially desirable means by which employees, through self-organization and collective representation, can participate in the determination of their terms and conditions of employment. To support this process, the Labour Relations Act proscribes various employer practices which could undermine the freedom of employees to select a trade union and engage in collective bargaining. The principal employer unfair labour practice provisions are set out in paragraph 18 above. These sections, together with the broad remedial authority granted to the Board, shore up the exercise of employee rights and protect freedoms which, without them, would be largely illusory. So important are these employee rights that the Legislature has considered it appropriate to cast a legal onus upon the employer to demonstrate that he has not interfered with their exercise. (See section 89(5).)

25. It is self evident, of course, that an employer can carry on his business as he sees fit, so long as he does not contravene a collective agreement or the applicable labour legistation. An employer is entirely free to expand or contract his enterprise, close down all or part of it, transfer operations, change the methods of production, or "contract out" work so long as in so doing, he is motivated by genuine business considerations, rather than a desire to defeat or impede his employees in the exercise of their statutory rights.

26. The onus cast upon an employer to demonstrate the propriety of its conduct has been succinctly stated by the Board in The Barrie Examiner [1975] OLRB Rep. October 745, at paragraph 17:

.... . the appearance of a legitimate reason for discharge does not exonerate the employer, if it can be established that there also existed an illegitimate reason for the employer's conduct.

This approach effectively prevents an anti-union motive from masquerading as just cause. Given the requirement that there be absolutely no anti-union motive, the effect of the reversal of the onus of proof is to require the employer to establish two fundamental facts first, that the reasons given for the discharge are the only reasons and, second, that these reasons are not tainted by any anti-union motive. Both elements must be established on the balance of probabilities in order for the employer to establish that no violation of the Act has occurred."

It will be noted that the anti-union motivation need not be the sole reason for the employer's decision. A contravention is also established in cases of mixed motives — some lawful, others unlawful. (Cf. section 382 of the Criminal Code R.S.C. 1970 Chap. C-34; and see: R v Bushnell Communications et al (1973)1 OR. (2nd) 422 (O.H.C.), affd 1974 CanLII 559 (ON CA), 4 OR. (2d) 288 (C.A.); Sheehan and Upper Lakes Shipping Limited et a/(1977) 1977 CanLII 3060 (FCA), 81 D.L.R. (3d) 208; Westinghouse Canada Limited[1980] OLRB Rep. April 577—application for judicial review dismissed, 80 CLLC 91 14,062 (Ontario Divisional Court).) The issue of motivation is decisive, and the Board must draw inferences and reach a conclusion on that issue in light of the established facts.

27. We do not think it is necessary to review the many Board cases in which the employer's conduct has been impugned because its decision-making — otherwise lawful —has been tainted by anti-union animus, an attempt to avoid its statutory obligations, or a desire to undermine the exercise of its employees' statutory rights. The cases are legion, and each, to some extent, turns on its own facts. It will be sufficient in our view, to refer briefly to several cases which, in various ways, resemble the instant one. As will become apparent, the situation here is by no means novel. Several previous Board decisions have involved business decisions not unlike those currently before us.

28. In Academy of Medicine, [1977] OLRB Rep. December 783, the Board found that an employer's decision to close its telephone answering service (one of a variety of services it provided to its clientele) "was motivated in whole or in substantial part by anti-union considerations" and was therefore an unfair labour practice. In that case, the employer, as it said it would, shut down a part of its operation because its employees had decided to join a trade union and participate in collective bargaining. In Humpty Dumpty Foods Limited, [1977] OLRB Rep. July 401, the Board found that an employer's decision to transfer its warehouse operation beyond the scope of the union's recognition and set up remote satellite warehouses to serve the same market was an unlawful lockout. It was "motivated by a desire to compel or induce its employees to refrain from exercising rights or privileges under the Act". In Humber College of Applied Arts and Technology, [1979] OLRB Rep. June 520, the Board found that an employer's decision to subcontract the work of its security guards was unlawful because its purpose was "to insulate itself from the natural and inevitable consequences of the exercise by the security guards of their right to strike". It was an attempt by the employer to avoid its obligation to bargain, and abrogate the employees' right to participate in the bargaining process. In Consolidated Sand and Gravel, [1978] OLRB Rep. March 264, a decision by a quarry operator to switch from a system of direct hiring of its drivers to one in which the drivers were assigned through a broker was found to be actuated by anti-union animus and "an attempt to ensure that the respondent would not be required to deal with its employees through a trade union". In Westinghouse Canada Limited (supra), the Board found that a partial plant closure and relocation was motivated by anti-union considerations, and amounted to an unlawful refusal to continue to employ a number of its employees. In Doral Construction Limited, [1980] OLRB Rep. May 693, an employer's decision to subcontract the maintenance and security work performed by some of its employees, was found to have been induced, in part, by their decision to opt for trade union representation. The resulting decision to terminate the employees was held to be a breach of section 58(a) [now section 66(a) of the Act. Finally, in Dr. Hillers Peppermint Canada Limited, [1979] OLRB Rep. May 375, an employer in the construction industry — where subcontracting is a common and accepted practice, was found to have engaged in a particular subcontract to impede its own employees in their efforts to join a union and bargain collectively. In each of these cases, therefore, an employer's "business" decisions were found to be illegal because they were motivated, in whole or in part, by a desire to avoid its statutory obligations, or frustrate the exercise of its employees' statutory rights. (See also: C.A.L.E.A. and North Canada Air Ltd., [1979] 3 Can L.R.B.R. 239.)

29. In the instant case, the impact of subcontracting of the employees' bargaining rights is obvious. For one quarter of them, those rights were eliminated by their discharge. But was the subcontracting arrangement motivated by business considerations having their origin in the marketplace, or was it simply the means by which the respondent could rid itself, in part, of both its obligation to bargain collectively, and the employees who had opted to exercise that right? Bearing in mind the onus cast upon the respondent to demonstrate the propriety of its conduct, the Board was impressed by the absence of credible evidence to justify the timing and magnitude of its subcontracting decision.

30. This is a "first contract" situation. It is the first time the respondent's employees have sought to bargain collectively. It is also the first time that the respondent has sought to significantly change its method of operation by eliminating, through subcontracting, the jobs of a number of its employees. There is no past practice in this regard, and the business justification is at best very thin, for what, in light of its past history is a radical change in the respondent's method of carrying on business. We do not accept that Mr. LeRoy's back problems or Mrs. Chalmers' supervisory responsibilities provide an explanation for the respondent's decision. There is no credible evidence that the existing method of carrying on business was posing real problems for the respondent which warranted such an immediate and far reaching solution. Indeed, there is not even any evidence that the respondent's actual or potential labour costs were a major burden or seriously impinged on the business' profitability. Mr. LeRoy was unable to recall the rates he previously paid his employees, and he admitted that both subcontracting arrangements were more expensive than the previous method of operation. Not only does the respondent remain responsible for the wage costs payable by the subcontractors in addition to their management fees, but in the case of Parnell — the only subcontract about which there is clear evidence — the respondent has undertaken direct responsibility for a wage rate which, in one instance at least, is 25% higher than what Sunnycrest paid to the same employee, for substantially the same work. In the circumstances, it is difficult to accept a purely economic motivation for the respondent's decision, or resist the conclusion that it was trying to rid itself of as much of its unionized workforce as it could. This inference is reinforced by the fact that the decision was taken without any notice to the union whatsoever, and with really no effort to negotiate about the wage levels against which the efficacy of a subcontracting arrangement might be measured. Surely, if the union's bargaining posture posed a potential threat to the viability of the respondent's business, one would expect it to raise that matter at the bargaining table, and explore the possibility of accommodation. Instead, the respondent decided, in secret, to jettison a quarter of the bargaining unit's employees, and subcontract their work on terms which on the evidence may be more costly than the settlement which might have been achieved.

31. In the circumstances of this case, we cannot accept the employer's assertion that the decision to subcontract its employees work and discharge them, was motivated solely by legitimate economic concerns. On the contrary, we find that the subcontracting decision was actuated by a desire to avoid collective bargaining as far as it could, and subvert the bargaining process in which it was then engaged. Moreover, the secrecy and timing of the decision support the conclusion that it was made, and intended to be effective, before the statutory procedure which the employees were bound to follow could result in a collective agreement. We find that the respondent's decision to dispose of a number of its employees and their jobs, was taken in order to avoid its obligation to bargain collectively, defeat the statutory rights of those employees terminated, and provide a salutary example to its other employees of what could happen to them as a result of their decision to join a union. Indeed, it is difficult to imagine conduct more drastic or more likely to have lingering eradicable effects on employees than the sudden elimination of a significant portion of their bargaining unit. We find that the respondent has breached sections 64, 66(a), 66(c), and 70 of the Act.

The Bargaining Duty

32. As we have noted above, this is not the first time in which a subcontracting arrangement has been held to be a device for avoiding statutory obligations or defeating employee rights. Nor is it the first time that the Board has had to consider the extent of an employer's obligation during bargaining to reveal decisions which significantly impact upon the employees in the bargaining unit. This issue was addressed at length, in Westinghouse, supra, where, as here, the Board had before it both a "standard" unfair labour practice complaint alleging a breach of sections 64, 66(a), 66(c) and 71 of the Act, together with a separate but related allegation of a failure to bargain in good faith.

33. Westinghouse involved an employer's decision to close part of its operation and relocate it beyond the scope of the union's jurisdiction. The Board found on the evidence that the employer's decision was motivated, in part, by anti-union considerations, and, on this basis, the unfair labour practice complaint was sustained. With respect to the bargaining complaint and the employer's bargaining duty, the Board had this to say:

"39. Collective bargaining during the prescribed "open period" is the preferred vehicle for establishing terms and conditions of employment in this jurisdiction. With the exception of union recognition and inter-union jurisdictional disputes the scope of matters which may be bargained to impasse in this jurisdiction, as contrasted to bargaining under the National Labour Relations Act, is virtually unlimited as is seen from the statutory definition of collective agreement. A collective agreement is defined in the Act as an agreement in writing containing provisions respecting terms and conditions of employment or the rights, privileges or duties of the employer, the employer's organization, the trade union or the employees and under section 14 of the Act the parties are required to bargain in good faith and make every reasonable effort to make a collective agreement. Once an agreement is reached, however, the parties are bound to it for its stipulated term and are prohibited from engaging in economic sanctions during its term regardless of changing economic conditions or management initiatives. The restrictions placed upon a trade union in this regard are to be contrasted with the freedom allowed under section 152 of the Canada Labour Code, C. L-l which permits a trade union to bargain to impasse about the effects of technological change occurring during the term of a collective agreement. Having regard to the importance of the exercise, the requirement for full and open discussion, the scope of matters open to bargaining and the statutory framework which binds the parties to the terms of their agreement for its full term, can there be any doubt that the section 14 duty requires an employer to respond honestly when asked in bargaining if he is contemplating initiatives of the type which have a real likelihood of significantly impacting on the bargaining unit. Similarly, can there be any doubt that an employer is under a section 14 obligation to reveal to the union on his own initiative those decisions already made which may have a major impact on the bargaining unit. Without this information a trade union is effectively put in the dark. The union cannot realistically assess its priorities or formulate a meaningful bargaining response to matters of fundamental importance to the employees it represents. Failure to inform in these circumstances may properly be characterized as an attempt to secure the agreement of the trade union for a fixed term on the basis of a misrepresentation in respect of matters which could fundamentally alter the content of the bargain.

40. The more difficult question is whether there is an obligation on the employer to reveal on his own initiative plans which are not finalized at the time of bargaining but which, if implemented during the term of the collective agreement, would have a significant impact on the economic lives of bargaining unit employees. On one side the Board must be concerned with potential distortion of the bargaining process by the imposition of an obligation which requires the employer to advise the union on his own initiative of plans which may never become decisions. On the other side, however, the Board must be sensitive to the purpose of the collective bargaining process and to the role of the trade union as exclusive bargaining representative of the employees who might be affected if these plans resulted in decisions being made by the company.

41. The competitive nature of our economy and the ongoing requirement of competent management to be responsive to the forces at play in the marketplace result in ongoing management consideration of a spectrum of initiatives which may impact on the bargaining unit. More often than not, however, these considerations do not manifest themselves in hard decisions. For one reason or another, plans are often discarded in the conceptual stage or are later abandoned because of changing environmental factors. The company's initiation of an open-ended discussion of such imprecise matters at the bargaining table could have serious industrial relations consequences. The employer would be required to decide in every bargaining situation at what point in his planning process he must make an announcement to the trade union in order to comply with section 14. Because the announcement would be employer initiated and because plans are often not transformed into decisions, the possibility of the union viewing the employer's announcement as a threat (with attendant litigation) would be created. If not seen as a threat the possibility of employee overreaction to a company initiated announcement would exist. A company initiated announcement, as distinct from a company response to a union inquiry may carry with it an unjustified perception of certainty. The collective bargaining process thrusts the parties into a delicate and often difficult interface. Given the requirement upon the company to respond honestly at the bargaining table to union inquiries with respect to company plans which may have a significant impact on the bargaining unit, the effect of requiring the employer to initiate discussion on matters which are not yet decided within his organization would be of marginal benefit to the trade union and could serve to distort the bargaining process and create the potential for additional litigation between the parties. The section 14 duty, therefore, does not require an employer to reveal on his own initiative plans which have not become at least de facto decisions."

42. The "open period" to which the Board referred in paragraph 39 of its decision, is the period following the giving of notice under section 14 or 53 of the Act. It is the giving of notice which triggers the obligation to bargain in good faith, and, unlike the situation in the United States, that bargaining duty is confined solely to the period preceding the making of a collective agreement. American law provides for an ongoing obligation to bargain about matters of concern to employees, which does not terminate, as in Ontario, by the actual signing of an agreement. In the United States, the bargaining obligation continues and extends to those issues not already covered by the parties' agreement. In addition, in the United States, there is no absolute prohibition on the right to strike during the currency of a collective agreement, so that, within that framework, the parties can still resort to economic sanctions to resolve any bargaining impasse which may arise. In Ontario, in contrast, the bargaining obligation terminates with the signing of a collective agreement, and the statute forbids any resort to economic sanctions, for any reason, during the currency of a collective agreement. It should also be noted that the arbitral approach to subcontracting expressed in Russelisteel (1966), 1966 CanLII 853 (ON LA), 17 LAC 253 (Arthurs) is now widely accepted so that once an agreement is signed, an employer acting for bona fide business reasons, remains free to subcontract bargaining unit work unless it is expressly prohibited from doing so by the collective agreement. Within this legal framework, therefore, it is of particular importance, from an employee perspective, to address and deal with any issue which may impinge upon the employment relationship during the term of the agreement. If such matters are not specifically dealt with, employees may find themselves prohibited from mounting a collective response to important employer initiatives touching on their job security.

43. The differences in statutory framework mean that one must exercise some care in the use of American jurisprudence; however, insofar as the bargaining duty is concerned, those differences only highlight the important role which section 15 must play in this jurisdiction in respect of the bargaining preceding a collective agreement. Once these negotiations are concluded, there is no further obligation to bargain until the end of that agreement (which will be at least a year away and is often longer), and throughout this period management initiative is fettered only to the extent that the previously negotiated agreement so provides. But the interests of employees in their livelihood and continued tenure of employment are not diminished. They may be vitally affected, and therefore particularly interested, in the employer's business decisions.

44. It was these considerations, which prompted the Board in Westinghouse to stress its concern for the quality of bargaining during the open period, and conclude that an employer is under an obligation, on its own initiative, to reveal those decisions which will significantly impact its employees so that their union can respond to them at the only time when bargaining is legally required. In the Board's view, the union should not be "kept in the dark" on matters of fundamental importance to the employees it represents. In the Board's opinion, it would be tantamount to a misrepresentation and not conducive to orderly industrial relations if a union were induced to enter an irrevocable agreement for a fixed term without being advised of matters which could fundamentally alter the content of that bargain.

45. These general considerations are also relevant in the instant case, where employees must bargain a first collective agreement with an unwilling employer, but unlike other employees of private businesses are forbidden from resorting to economic sanctions to buttress their bargaining position. The Hospital Labour Disputes Arbitration Act provides compulsory arbitration as the ultimate means for resolving any bargaining impasse. The employees have no right to strike, and as this case illustrates, the bargaining process can become protracted. In these circumstances, the Board must be especially careful to ensure that the employer has complied with its statutory obligations.

46. There is no doubt that the decision taken by the employer in the instant case falls within the parameters outlined by the Board in Westinghouse. The subcontracting decision directly affected one quarter of the workforce, and while the employees may have no absolute right to continued employment, their interest in their job security or tenure of employment is obvious. Employees are vitally and legitimately concerned about the way in which a necessary termination will be affected, the amount of notice given, the compensation payable on termination (if any), the right to exercise "bumping" rights in respect of jobs in other parts of the operation, etc. These are all issues which can be, and frequently are, dealt with in collective bargaining. Such matters are of interest to employees who remain as well as those who may ultimately, and, from the union's point of view, the decision to eliminate one quarter of its members, and their jobs, strikes at the very root of the bargaining relationship — the bargaining unit itself. A mass termination simply cannot be equated with a decision to terminate individual employees. It is a decision affecting employees collectively, and it is in this context that we must decide whether the union should have been given reasonable notice and a fair opportunity to bargain about the subcontracting decision and its consequences.

47. The respondent employer asserts that notwithstanding section 15 or the ongoing bargaining process in which it was engaged, it was entitled to unilaterally eliminate the job opportunities of its employees, without notice or negotiations with their bargaining representative. We cannot accept this proposition. Even if the employer's decision in this case were wholly free of anti-union animus, in our opinion, a decision, made during bargaining, to eliminate so many bargaining unit jobs should have been raised and discussed at the bargaining table. It is implicit in the employer's obligation to bargain in good faith.

48. We do not think the duty to bargain about a major subcontracting decision imposes an unreasonable or unfair burden upon the employer involved. It does not unduly restrain him from formulating or implementing an economic decision to terminate a phase of his business operations, nor does it obligate him to yield to a union's demand that the subcontract should not be let, or should be let on terms inconsistent with management's business judgment. The duty to bargain is not an obligation to agree. It is a requirement to engage in a full and frank discussion with the employees' representative, and make a bona fide effort to explore alternatives, if any, that may achieve a mutually satisfactory accommodation of the interests of both the employer and his employees. lf such efforts fail, the employer remains free (absent other unfair labour practice considerations based upon anti-union animus) to go forward with his decision. But experience has shown that candid discussion about mutual problems by labour and management frequently result in their resolution with attendant benefit to both sides. A union confronted by a proposed loss of jobs can often make a useful contribution to the decision-making process. The recent bargaining in the automotive industry provides a good example. Business operations can profitably continue, and jobs may be preserved. And as professor Cox has observed:

"Participating in [collective bargaining] debate often produces changes in a seemingly fixed position either because new facts are brought to light or because the strength or weaknesses of the several arguments become apparent. Sometimes the parties hit upon some novel compromise of an issue which has been thrashed over and over. Much is gained even by giving each side a better picture of the strength of the other's convictions. The cost is so slight that the potential gains easily justify legal compulsion to engage in the discussion".

(See: Cox, The Duty to Bargain in Good Faith, 71 Harv. Law Rev. 1401.) In our view, prior discussion of decisions of this nature is all that the Act contemplates. But it commands no less.

41. Apart altogether from the other unfair labour practices considerations which are present in this case, it is our view that the nature of the subcontracting decision and the business situation of the respondent amply illustrate the propriety of submitting that subcontracting decision to the mediating influence of collective bargaining. The respondent's subcontracting decision meets all of the Westinghouse parameters (i.e. a firm decision, rather than a contingency plan, which significantly impacts upon the bargaining unit); moreover, there is no evidence of any economic factors so compelling that bargaining itself would not alter them, and no indication that such bargaining would be futile. The respondent did not advance any reason why it could not raise the subcontracting issue at the bargaining table, nor is any such reason apparent to the Board.

42. In the circumstances of this case, and in addition to our other unfair labour practice findings, the Board finds that the respondent has failed to bargain in good faith and make every reasonable effort to make a collective agreement.

The Statutory Freeze

43. Like the statutory duty to bargain in good faith, a statutory freeze on working conditions is triggered by the union's notice to bargain. (See: section 79(1) of the Labour Relations Act upon which section 10 of the Hospital Labour Disputes Arbitration Act is modeled.) Broadly speaking, the freeze is intended to preserve the status quo during the interim period after the union's certification and the establishment of a collective bargaining regime, but before the parties have formally expressed their respective rights and responsibilities in a collective agreement. Accordingly, the freeze can be regarded as an adjunct to the bargaining process maintaining the status quo during bargaining in respect of those matters which can be dealt with in negotiations and the provisions of a collective agreement. (Note that the language of the freeze is framed in the same terms as the definition of a collective agreement.) The union complains that the respondent's subcontracting arrangement has improperly altered the status quo in that it was an unprecedented employer action taken in response to the union itself, and not part of the previous pattern of the parties' relationship.

44. The freeze provisions give rise to difficult problems of interpretation for if treated as a total prohibition on any employer actions taken in the ordinary course of business which impinge upon the employment relationship, the freeze would effectively paralyze the employer's operations during the bargaining process; while, if the preexisting but now frozen entrepreneurial rights are given too broad an interpretation, they would render the section meaningless. In the circumstances of this case, however, we do not consider it necessary to review the Board's jurisprudence in this area, or its attempts to accommodate the conflicting interests embodied in the general language of the freeze provisions. (See: Spar Aerospace Limited, [1978] OLRB Rep. Sept. 859 and compare Bank of British Columbia, [1980] 2 Can. L.R.B.R. 441 and Royal Bank of Canada, [1978] 2 Can. L.R.B.R. 159.) Here, we have already found that the respondents subcontracting arrangements involves a contravention of a number of statutory provisions; and for the reasons set out infra, requires a restoration of the "status quo ante". It is therefore unnecessary to determine whether the respondent has also contravened the statutory freeze.

Remedy

45. Section 89(4) of the Labour Relations Act gives the Board a broad authority to fashion an appropriate remedy for any breach of the substantive provisions of the Act. In this regard, the legislative imprint has been lightly laid. Because of the dynamic context of labour relations, and the variety of factual patterns which it was expected would before the Board, the Legislature has not attempted to enumerate fixed remedies for each of the substantive violations committed. Nevertheless, it seems obvious that the Legislature did not intend to engage in the empty gesture of creating rights without parallel remedies. The obvious implication of the language of section 89(4) is that the Board should attempt to fashion relief which is adapted to the situation which calls for redress (For a general discussion of the Board's remedial authority see: Radio Shack, [1979] OLRB Rep. Dec. 1220; applications for judicial review dismissed sub no mine Tandy Electronics Ltd. v. United Steelworkers of America Ontario Labour Relations Board, 80 CLLC 91 14,017, Ontario Divisional Court.)

46. It is axiomatic that remedial action, if it is to afford an effective redress for the commission of a statutory wrong, must be tailored to restore the person wronged to the position he would have occupied but for the action of the wrongdoer. Nothing less would effectuate the policies of the Act. In the case of employees who have been wrongly discharged, the Board typically orders that they be reinstated and made whole for any loss if pay or benefits suffered from the date of their termination until their reinstatement, and in addition, will usually require some affirmative action on the part of the employer — such as the posting of notices —- in order to dispel the chilling effect on the exercise of statutory rights which the unfair labour practice may have caused. (See: Valdi Inc., [1980] OLRB Rep. Aug. 1254, Fotomat Canada Limited, [1980] OLRB Rep. Oct. 1397, Radio Shack, supra, and Westinghouse, supra, for examples of remedial orders fashioned by the Board and in the case of Radio Shack and Westinghouse approved by the Courts.) It is recognized that to accomplish the reinstatement of illegally terminated employees, the employer may well have to terminate replacements who have been hired or rescind business arrangements which flowed from or followed the unfair labour practice. Only when such action is taken however, can it be truly said that the wrong has been righted.

47. In our view, the situation is no different, and the need for a reinstatement remedy no less compelling, where an employer illegally subcontracts work performed by its employees and, in so doing, effects their termination. In both bases, the employees have been punished for exercising their statutory rights. The wrong is the same, and we can perceive no reason why the remedy should not be the same as well. In order to give effect to the reinstatement of his employees, the employer may be required to terminate his subcontract, but we do not believe such a requirement is unfairly imposed. But for the employer's breach of the Act, his employees would have remained in his employ.

48. We are reinforced in our view that reinstatement of the status quo ante is the only appropriate remedy in this case, by our separate but related finding that the respondent has breached section 15 of the Act. It would be an exercise in futility to attempt to remedy this kind of violation if the employer's decision to subcontract were to stand. No genuine bargaining over a decision to terminate a phase of its operations can be conducted where that decision has already been made and implemented. Nor would it make much sense to direct an employer to bargain with a union representing its employees over the termination of jobs which those employees no longer hold. The subsequent provision of a bargaining opportunity cannot cure the violation inherent in the elimination of unit work without notice or consultation. No meaningful negotiation could take place over a fait accompli, where the possible reinstatement of unlawfully terminated employees could be used by the employer as bargaining bait to induce acceptance of its terms. An order framed in this way would aggravate rather than cure the employer's delinquent bargaining conduct. Since the loss of employment stemmed, (in part), from their employer's unlawful action in bypassing their bargaining agent, we believe that a realistic bargaining order can be fashioned only by directing the employer to restore his employees to the positions which they held prior to their termination.

49. In summary therefore, even were we to find (which we do not) that the respondent had subcontracted its employee's work for reasons untainted by anti-union animus, the magnitude, nature, and timing of that decision, together with the absence of any countervailing economic or remedial considerations, would require a direction to abrogate its subcontract, reinstate the employees and bargain about its subcontracting decision with the employees' representative.

50. While we have found that, in the circumstances of this case, the respondent's subcontracting arrangement involved a breach of several provisions of the Labour Relations Act, we wish to reiterate our earlier observation that there is nothing improper in subcontracting per se, provided it is exclusively motivated by bona fide business considerations and, if undertaken during the course of bargaining, the employer complies with its section 15 obligations. In our competitive market economy, a trade union must be cognizant of the economic implications of its bargaining position, and if that position threatens the competitiveness profitability or viability of the enterprise, it should not be surprised if the employer seeks to preserve its competitive edge. Nor do we think the Legislature intended such bona fide business responses to be illegal practices under the Labour Relations Act.

51. For the foregoing reasons, and having regard to the totality of the evidence in this particular case, the Board makes the following remedial orders and directions:

(a) The Board declares that the respondent has terminated a number of its employees contrary to section 64, 66(a), 66(c), and 70 of the Labour Relations Act,

(b) The Board declares that the respondent has contravened section 15 of the Act in that it has failed to bargain in good faith and make every reasonable effort to make a collective agreement.

(c) The Board directs that the respondent shall forthwith reinstate in employment all of the employees whom we have found were unlawfully terminated, and compensate them for any wages or benefits lost as a result of their termination, together with interest calculated on the basis set out by the Board in Practice Note No. 13. dated September 8, 1980.

(d) The respondent shall, subject to the dispute resolution procedures of the Hospital Labour Disputed Arbitration Act meet with the complainant union forthwith, and bargain with a view to concluding a collective agreement covering all of the individuals in the union's bargaining unit, including those reinstated pursuant to paragraph (c) above.

(e) The respondent is directed to post without comment copies of the attached notice marked "Appendix A" after being duly signed by the respondent's owner, in conspicuous places at its place of business where they are most likely to come to the attention of the employees in the bargaining unit, and to keep such notices posted for 60 consecutive working days. Reasonable steps shall be taken to ensure that such notices are not defaced, altered, or covered by other material. Reasonable access to the respondent's premises shall be given to two representatives of the complainant union so that they can satisfy themselves that this posting requirement has been and is being complied with.

(f) The respondent is directed at its own expense, to mail a copy of "Appendix A" to the residence of each of its employees.

52. The Board will remain seized of this matter should there be any difficulty in implementing its remedial orders.

Appendix

The Labour Relations Act 279

NOTICE TO EMPLOYEES

Posted by Order of the Ontario Labour Relations Board

WE HAVE ISSUED THIS NOTICE IN COMPLIANCE WITH AN ORDER OF THE ONTARIO LABOUR RELATIONS FOARD ISSUED AFTER A HEARING IN WHICH BOTH THE COMPANY AND THE JNION HAD THE OPPORTUNITY TO PRESENT EVIDENCE. THE ONTARIO LABOUR RELATIONS BOARD FOUND THAT WE VIOLATED THE ONTARIO LABOUR RELATIONS ACT AND HAS ORDERED US TO INFORM OUR EMPLOYEES OF THEIR RIGHTS

THE ACT GIVES ALL EMPLOYEES THESE RIGHTS;

TO ORGANIZE THEMSELVES

TO FORM, JOIN OR HELP UNIONS TO BARGAIN

AS A GROUP, THROUGH A REPRESENTATIVE OF

THEIR OWN CHOOSING

TO ACT TOGETHER FOR COLLECTIVE BARGAINING

TO REFUSE TO DO ANY AND ALL OF THESE THINGS.

WE ASSURE ALL OF OUR EMPLOYEES THAT;

WE WILL NOT DO ANYTHING THAT INTERFERES 'WITH THE

CANADIAN UNION OF PUBLIC PMPLOYEES AS THE

CERTIFIED BARGAINING REPRESENTATIVE OF OUR

EMPLOYEES.

WE WILL NOT DO ANYTHING THAT INTERFERES 'WITH THE

RIGHT OF OUR EMPLOYEES TO BARGAIN COLLECTIVELY

AND TO EXERCISE THEIR RIGHTS JNOER THE ACT

WE WILL REINSTATE INTO EMPLOYMENT AND COMPENSATE

THOSE EMPLOYEES TERMINATED FROM OUR EMPLOY AS A

RESULT OF THE SUBCONTRACTING CF THEIR WORK.

SUNNYCREST NURSING HOMES LIMITED

This is an official notice of the Board and must not be removed or defaced.

This notice must remain posted for 60 consecutive working days.

DATED this 15TH day of FEBRUARY 1982