[1982] OLRB Rep. May 664
2077-81-R International Ladies' Garment Workers' Union, Applicant, v. Josh Industries Incorporated and L. Davis Textiles Co. Limited, Respondent
BEFORE: M, G. Picher, Vice-Chairman, and Board Members J. D. Bell and W. F. Rutherford.
APPEARANCES: S. B. D. Wahl and W Villano for the applicant; L. Bertuzzi and M. Davis for the respondent.
DECISION OF THE BOARD; May 26, 1982
This is an application under section 63 of the Labour Relations Act. The applicant requests a declaration that the respondent L. Davis Textiles Co. Limited (hereinafter "Davis Textiles") has purchased a business previously run by Josh Industries Incorporated. The applicant also alleges that the respondent Josh Industries Incorporated has violated section 15 of the Labour Relations Act and seeks a remedial order against Davis Textiles, the imputed purchaser of the business. It is common ground that any liability which Davis Textiles might have under section 89 of the Act could flow only from a finding by the Board that the sale of a business has taken place. The threshold issue therefore, is whether Davis Textiles has purchased the business of Josh Industries Incorporated within the meaning of section 63 of the Labour Relations Act.
At tie time of the hearing Josh Industries Incorporated was in receivership. The receiver attended the hearing and volunteered certain facts which were accepted as established on the agreement of the parties. The evidence of Davis Textiles was given by its President, Michael William Davis. There is little, if any, dispute as to the facts.
Davis Textiles manufactures diapers, infant's and children's sleepwear and infant's and children's bedding. Until December 31, 1981, it carried on business exclusively at 187 Geary Avenue in Toronto, employing some 325 employees, 250 of whom are in a unionized bargaining unit. It also has two warehouses in Toronto which employ two persons.
Eighty-five percent of the garment production of Davis Textiles is baby sleepers produced under the trade name of "Snugabye", up to size 6X. The balance of its garment production involves sleepwear manufactured for three large retailing chains under their private labels and for a separate private label, "Sleeptight", belonging to Davis Textiles. Some of the Snugabve sleepwear is produced under license: the three principle licenses are held for the national Hockey League, MacDonalds Restaurants Limited and for a popular children’s figure known as "Strawberry Shortcake".
In 1981 Davis Textiles' volume of sales began to outstrip its production capacity. It faced the choice of either contracting its production to other manufacturers or expanding its own facilities. Because its goods are produced to a high standard by a unique automated method of production it did not wish to jeopardize its product quality by contracting out. It considered the possibility of expanding its Geary Street plant to an adjacent lot and decided that that alternative would be too slow to meet its production commitments. It therefore decided to open a new plant.
The company required a sufficient labour pool in whatever locality would be chosen for its new plant. It therefore placed tentative advertisements in a Mississauga newspaper for experienced sewing machine operators. The company was aware that Josh Industries had closed its plant in Mississauga and one of its advertisements was directly aimed at former employees of Josh Industries. When the advertisements attracted some 32 phone calls the company decided to pursue a Mississauga location and, in particular, to negotiate for the takeover of the plant previously occupied by Josh Industries. Before placing the advertisements the company had viewed the premises vacated by Josh Industries, including some of the machinery in the plant which was then in the hands of a receiver.
Davis Textiles decided to contact the receiver for Josh Industries with a view to purchasing the equipment, including ninety-nine sewing machines, in the Josh facility and taking an assignment of Josh's lease on the premises. On December 18, 1981, Davis Textiles tendered to the receiver a written offer to purchase the equipment on the premises and to assume the lease. The offer was accepted and the transaction closed on December 31, 1981.
Josh Industries went into receivership on November 16, 1981 and it appears that its last payroll was November 4, 1981. Davis Textiles therefore assumed possession of premises which had been vacant and idle for over a month. In the Mississauga plant Josh had produced casual tops, blouses and sweaters for women as well as children and men's sweatshirts. As noted above, the product lines of Davis Textiles were comprised chiefly of infant's sleepwear. The method of production differed between Josh and Davis, the latter being committed to a highly automated and computerized production system using Scandanavian technology and the former being based on the more traditional "bundle" system of textile production.
While considerable evidence and argument was directed to the differences in products and production methods between the two companies we do not find those to be determinative in this case. In our view this case can be disposed of without determining whether there has been a change in the nature of the business, a proposition which we would in any event be inclined to doubt.
The evidence establishes that the respondent Davis Textiles assumed the lease on a vacant plant in Mississauga. While it purchased the textile production machinery and equipment in that plant, that equipment was of limited use to it. Of some ninety-nine sewing machines on the premises approximately thirty-nine were kept for use in the transition period prior to the automation of the plant. The balance of the sewing machines were of little or no use to Davis Textiles, and a large portion of that capital equipment was sold.
Davis Textiles did not purchase any of the raw materials, finished goods or work in progress belonging to Josh Industries. Nor did it purchase or seek to acquire any of the trade marks or licenses previously owned by Josh. The evidence establishes that these were assigned to another manufacturer in the textiles industry. The finished goods on the premises were sold by the receiver to some eleven separate purchasers, none of which was Davis Textiles. Similarly, Davis had no interest in the raw materials which were sold to some five other purchasers.
The staffing of the Mississauga plant by Davis Textiles does not support the conclusion that there has been the sale of a business. It is not disputed that Josh Industries at one time had a work force in excess of fifty employees, and that for a substantial period of time its compliment of personnel remained fairly constant, declining to the level of ten production employees immediately prior to the receivership. None of the supervisory staff of Josh Industries was recruited by Davis Textiles. While sixteen of the twenty-one employees at the Mississauga plant at the time of the hearing had previously been employed by Josh the evidence does not establish a taking over of the work force of Josh as such. The former Josh employees wh3 became employed by Davis Textiles were among other applicants who applied, were interviewed and were hired on the basis of their skills. It is not disputed that a number of former Josh employees who did apply for work with Davis Textiles were not hired. The fact that laid off employees of Josh Industries formed part of the labour pool in Mississauga and found employment with Davis Textiles is not of itself enough to bring the facts of this case within section 63 of the Act.
Counsel for the union argued that in effect Davis Textiles had taken over the capacity to pr)duce previously in the hands of Josh Industries. In this regard he stressed the Board's analysis and conclusions in Berma Corporation Limited, [1979] OLRB Rep. July 608. The facts in Bermay differ from the instant case in a number of significant respects. In that case Bermay purchased a furniture manufacturing facility from Goldcrest Furniture Limited. In what was described as a "friendly deal" Bermay purchased virtually all of the capital assets, equipment, tools and raw materials of Goldcrest. As part of the transaction it undertook to fulfill a number of contracts outstanding with Goldcrest, using the vendor's raw materials for that purpose. Several members of Goldcrest's personnel were loaned to Bermay to train its staff in the production of Goldcrest products which, for a six week period, constituted approximately one-third of Bermay's production. The evidence also established that both supervisors and employees of Goldcrest remained in the employment of Bermay, having been recruited virtually off the floor of Goldcrest while it was still in operation. There was a smooth transition from one employer to the other with little hiatus in production.
As the Board noted in Culverhouse Foods Limited, [1976] OLRB Rep. Nov. 691 at 697 there can be no rigid formula for determining which factors or mix of factors will determine the sale of a business within the meaning of section 63 of the Act;
No list of significant considerations, however, could ever be complete; the number of variables with potential relevance is endless. It is of that most importance to emphasize, however, that none of these possible considerations enjoys an independent life of its own; none will necessarily decide the matter. Each carries significance only to the extent that it aides the Board in deciding whether the nature of the business after the transfer is the same it was before, i.e. whether there has been a continuation of the business.
- Each application under section 63 of the Act must be assessed on its own merits. On the whole of the evidence before us we are satisfied that Davis Textiles Limited cannot be said to have acquired the business of Josh Industries. The fact that it has rented premises previously occupied by Josh, that it uses a small portion of equipment once used by that company and has employed persons previously laid off by Josh falls short of establishing that there has been a sale of a business. For the foregoing reasons the application must be dismissed.