[1982] OLRB Rep. May 693
1860-81-R Drywall, Acoustic, Lathing and Insulation Local 675 of the United Brotherhood of Carpenters and Joiners of America, Applicant, V. 387098 Ontario Limited and Mandic Bros. Drywall and Const. Ltd., Respondents
BEFORE: N. B. Satterfield, Vice-Chairman and Board Members H. J. F. Ade and H. Kobryn
APPEARANCES: M. Zigler and H. K. Weller for the applicant; no one appearing for 387098 Ontario Limited; M. Goose and Mike Mandic for Mandic Bros. Drywall and Const. Ltd.
DECISION OF N. B. SATTERFIELD, VICE-CHAIRMAN AND H. J. F. ADE, BOARD MEMBER; May 31, 1982
This is an application under section 63 of the Labour Relations Act with respect to the bargaining rights of the applicant Drywall, Acoustic, Lathing and Insulation Local 675 of the United Brotherhood of Carpenters and Joiners of America ("Local 675") as a result of an alleged sale of business by 387098 Ontario Limited ("the numbered company") to Mandic Bros. Drywall and Const. Ltd. ("Mandic Bros.").
Local 675 contends, in the alternative, that the Board should treat the numbered company and Mandic Bros. as constituting one employer for the purposes of the Act because they were carrying on associated or related activities or businesses under common control or direction within the meaning of section 1(4) of the Act.
In either event, the applicant is seeking a direction that Mandic Bros. be bound to the two collective agreements to which Local 675 and the numbered company are bound, that is:
(a) the collective agreement between the Interior Systems Contractors Association of Ontario and Local 675 which expired April 30th, 1982 ("the ISCA agreement"); and
(b) the Provincial Collective Agreement between the Carpenters Employer Bargaining Agency and the Ontario Provincial Council of the United Brotherhood of Carpenters and Joiners of America which expired April 30th, 1982, to which Local 675 and the numbered company are bound as a result of a voluntary recognition agreement signed between them on or about January 13, 1981.
The Board heard neither evidence nor argument with respect to the application under section 63 of the Act and, therefore, insofar as the application pertains to that section it is dismissed. The balance of this decision deals with the alternative request of Local 675 that the two respondents be treated as constituting one employer for purposes of the Act.
Milan "Mike" Mandic appeared and testified on behalf of the respondent Mandic Bros. pursuant to the evidentiary onus under section 1(5) of the Act. While the Board heard the testimony of John Zdunic, the sole owner of the numbered company, he appeared only on the last of three days of hearings at the request of counsel for Mandic Bros. He did not participate otherwise in the proceedings and did not purport to represent the interests of the numbered company. Nor did he produce any documentary evidence pertaining to the ownership, direction or control of the numbered company. In these circumstances, the evidentiary onus established under section 1(5) has not been satisfied by the numbered company. Moreover, there were areas of conflict in Zdunic's testimony with that of Mike Mandic with respect to the relationship between the numbered company, Mike Mandic and Mandic Bros. Having regard to the nature of the testimony of these two witnesses, their demeanor and :he fact that the evidence hereunder will show that Mike Mandic managed the operations of the numbered company insofar as they relate to the construction jobs at issue herein, the Board has accepted Mandic's testimony.
Mandic Bros. is engaged in the construction industry as a contractor for drywall installation. It was incorporated under the Business Corporations Act on April 7th, 1976. Mike Mandic, together with his two brothers Ivan and Mann are the equal and sole shareholders of the operation. They are also the only directors and Ivan is the president and Mann the secretary. Mike Mandic runs most of the daily operations, although, if two or more brothers are working on the same job, they share the supervision of the job and if they have more than one job running at the same time, they divide the responsibility for supervising those jobs between the three brothers. Mike arranges for the invoicing of clients for work performed by Mandic Bros..
Mandic Bros. maintains a small office and storage space at 929 Pantera Drive, Mississauga, although most of their business is conducted from their homes by themselves and the wives of two of the brothers who are employees of Mandic Bros.. The business records are maintained by the firm's auditor, Henry Slaby. The building at 929 Pantera Drive has 18,000 square feet of space, is owned by the three brothers personally and Mandic Bros. occupies approximately 1,200 square feet of that space. The only employees of Mandic Bros. are the three brothers and two wives. All other persons engaged to do the firm's drywall installation are engaged on a piecework basis and Mandic Bros. makes no statutory deductions and/or remittances for such things as income tax, Canada Pension Plan contributions and unemployment insurance in respect of these persons. During the course of 1981, Mandic Bros. employed a total of 52 sub-contractors, although it seldom had more than seven or eight on any one job. At times it had more than one job running simultaneously. Mandic consistently referred in his testimony to these persons as sub-contractors. For ease of reference the Board will refer to them as such wherever that is necessary. In so doing, the Board does not bestow any particular significance to that term in respect of whether these persons are dependent contractors within the meaning of section l(1)(h) of the Act. Mandic Bros. does an annual volume of business ranging between $250,000.00 and $500,000.00. The unaudited financial statements for its fiscal year ending August 31, 1981 shows total sales of $509,838.00. The firm works primarily for two clients, a small contractor and another referred throughout the proceedings by Mike Mandic as "Inducon". At all material times, Mandic Bros. has operated its business as a "non union contractor. It has never bid on union jobs and has no need to because of its two primary clients.
John Zduni operates a variety of companies in real estate and house building. He bought the numbered company "off-the-shelf' as a shell corporation from one of his lawyers or accountants. Prior to the circumstances set out hereunder which gave rise to this application, the numbered company had not carried on any business. There is no evidence as to who are officers or directors of the company and, while Mike Mandic was asked if he would like to be a director, he does not know whether he was ever made a director. Mandic and Zdunic have known each other since they came to Canada together fourteen years ago and are of the same ethnic origin. They and the other two Mandic brothers have, from time to time, engaged in common business undertakings. For example, Zdunic arranged for the building of the premises at 929 Pantera Drive and for the leasing of those premises on behalf of the three brothers to its major tenant. This was done without charge and, apparently in return, the numbered company occupies a small office space in the building which it uses as a mailing address. There is no lease between the brothers and the numbered company for his space and the numbered company pays no rent to the brothers. It has no telephone there and, in fact, does not have a telephone number. The three brothers personally, together with Zdunic, also own a property in Mississauga, the purchase of which was assisted by a $8,000.00 interest free loan from the numbered company to the three brothers personally. The property is not used in any way in connection with the business of Mandic Bors. or the numbered company.
The first business conducted by the numbered company was as a sub-contractor to the Seaforth Group for labour only on the installation of drywall for a bank building at Warden and Steeles Avenue in the Borough of Scarborough. The job obtained by Zdunic, was valued by him at some $24,000.00 to $26,000.00. Work on the contract began just prior to Christmas of 1980 and was completed during February of 1981. When another friend of Zdunic's who was in the drywall installation business could not perform the job for the numbered company, Zdunic approached Mike Mandic and engaged him personally to undertake the job. Mandic brought with him Stip Bebic, one of Mandic Bros.' sub-contractors. The construction project was a "union job" and when Mandic advised Zdunic of this fact he was told to do whatever was necessary. It is uncontested that Mandic went to the office of Local 675 and, on behalf of the numbered company, signed the two documents referred to above; that is, the ISCA agreement and the voluntary recognition agreement. Mandic joined Local 675 and arranged for Bebich to do the same. He also hired two of the Local's members, James Moore and Lynn Kipen, who were referred by Local 675 to the numbered company to work on the project. Mandic, Bebic, Moore and Kepin were the only persons employed by the numbered company to work on the project. Bebic, Moore and Kepin were told that they were working for the numbered company although there were no signs on the job indicating the company's presence. Mike Mandic used a Mandic Bros. van for his personal transportation while he worked on the job and it had that firm's name on it.
Mardic managed the job for the numbered company in return for payment of wages and a 15% share of the profit, although there is no evidence to support the fact that he was paid that share. A bank account was opened by the numbered company with Zdunic and Mandic having individual signing authority for the account. The account was in the same bank branch where Mandic Bros. maintains its bank account. Mandic signed all of the cheques issued against that account in respect of wages to himself and the other three employees of the numbered company on the bank job and he signed the cheques for income tax, and unemployment insurance and remittances. He prepared and signed the employer contribution reports required under the Provincial Collective Agreement and signed the cheques for the required remittances under that agreement. He did not prepare the returns for income tax, unemployment insurance and workmen's compensation, but believes them to have been prepared by the accountant who did the accounting work for the numbered company. The numbered company does not use the same accountant, Slaby, as Mandic Bros.
Subsequent to the bank job, the numbered company did no other work until August 1981. Mandic had suggested that Zdunic seek work on a couple of jobs and, when Mandic thought Zdunic was going to get the work, he ordered a couple of men from Local 675. The local referred, on Mandic's instructions, one person, Bruce Streight to a Mandic Bros.job site. Since the numbered company's job had not materialized yet and in order to keep Streight available, Mandic sublet to the numbered company a small job which was part of some work it was performing for Inducon at another site, the Airway Centre in Mississauga. Streight worked a total of 70 hours during August on that job and was paid by the numbered company on cheques signed by Mandic. Mandic also completed the required employer contribution report and signed and issued a numbered company cheque in payment thereof. Prior to filing the employer contribution report for the hours worked by Streight in August, Mandic had filed on behalf of the numbered company similar reports showing no employees for the months of June and July and later he filed "no employee" reports for the months of September and October. Mandic Bros. billed Inducon for the performance of this work but did not issue any payment to the numbered company, ostensibly because the work was a setoff against some-thing Mandic Bros. had done for Zdunic.
When the anticipated job for the numbered company did not materialize at all, after Streight had worked for the numbered company on the Airway Centre job, he later worked on the same project for Mandic Bros. as a sub-contractor and on a second project as well. During 1981 he was paid slightly in excess of $l 1,000.00 for work which he did on a piecework basis as a sub-contractor to Mandic Bros. Except for Mike Mandic, Streight and Bebic are the only two persons who were employed by the numbered company and worked also for Mandic, although as sub-contractors. Bebic was paid slightly in excess of $12,000.00 for such work during 1981, some of which was for piecework which he did on Mandic Bros.' jobs during the same period of time when he was employed by the numbered company on the bank job. Bebic did not do any work for Mandic Bros. after June 1981.
Early n August of 1981, Mandic Bros. began work on another Inducon project, a retirement home in North York called The Gibsons. The work being performed by Mandic Bros. was completed by the end of 1981, with the exception of a small amount of drywall taping. Mike and his brother Ivan worked on the job and at various times had from two or three to seven or eight sub-contractors working for them. Some of these persons had called Mike Mandic seeking work and others he called on recommendation of other persons. While Mandic was not aware whether any of these persons were members of Local 675, the applicant's own evidence indicates that on two separate occasions there were at least two of its members working as sub-contractors for Mandic Bros. on this project. Except for Mike Mandic, none of the persons who had been employed by the numbered company worked as sub-contractors for Mandic Bros. on the project. It was while Mandic Bros. was working on the project that Local 675 first became aware of this respondent.
It is on these facts that Local 675 asks the Board to find that the numbered company and Mandic Bros. are under common direction or control and therefore should be treated as constituting one employer for purposes of the Labour Relations Act. Counsel for Local 675 contends that these facts support the conclusion that the two respondents are under common direction or control because they reveal the existence of several factors which have been held by the Board to be significant indicators of such a relationship. According to counsel, Mike Mandic was the key man in both operations, particularly with respect to employee relations and job site supervision, and it was only through him that the numbered company became anything more than a shell corporation. The numbered company and Mandic Bros. occupy space in the same premises that are owned by the three Mandic Bros. The entire public identity of the numbered company is through Mike Mandic and Mandic Bros. There was an interchange of employees between the two respondents in the persons of Mike Mandic, who was an employee of both companies and Bebic and Streight, who were employees of the numbered company and sub-contractors of Mandic Bros. Counsel asserts that all of these factors are statutory elements for a finding of a section 1(4) relationship between the numbered company and Mandic Bros.
Were the Board to agree with counsel, the question would remain as to whether the Board should exercise its discretion to treat the two respondents as constituting a single employer for purposes of the Act. Counsel argues that all of the elements are present for the mischief which the section is designed to prevent and, therefore, the Board should declare the numbered company and Mandic Bros. as constituting one employer.
Assuming without finding that the pre-conditions have been met for a declaration that the two respondents are under common direction or control, the Board does not agree with counsel for Local 675 that it should treat them as constituting one employer. The purpose of section 1(4) is well described in the Board's decision in Bramalea Carpentry Associates, [1981] OLRB Rep. July 844, at paragraph II.
"11. Section 1(4) of the Act is designed to deal with situations where the economic activities giving rise to the employment relationships regulated by the Act, are carried on by or through more than one legal entity. Where such legal entities are engaged in related economic activities under common control and direction, the Board is entitled to "pierce the corporate veil" and treat them as one business or employer for the purposes of the Act. The legislature has determined that legal form should not dictate (and possibly fragment) the collective bargaining structure; nor should corporate restructuring undermine established bargaining rights. Because of section 1(4), those rights need not be treated as coextensive with the legal framework of the business, and to this extent, labour law policy seeks to insulate collective bargaining from uncertainty at the inception of the bargaining relationship, or disruption sho Lild the exigencies of the market prompt the employer to change the number or form of the legal vehicles through which it carries on business. Each of these functions of section 1(4) was referred to by the Board in Industrial Mines Installations Limited [1972] OLRB Rep. Dec. 1029:
'Section 1(4) is obviously contemplated to cure the mischief that results from being unable to properly define and tie down the employment relationship. In many situations where companies have a close relationship an employee may be shifted from one company to another so that his employment relationship, at any given period, is difficult to define in terms of one employer. So too, the number of employees employed by one of those companies at any given time may be impossible to ascertain.
Prior to the enactment of section 1(4), where such situations existed, it was difficult to define the employment relationship and to determine the proper employer for certain purposes under the Act. For example, in certification proceedings it was necessary to determine the proper employer in order to determine whether the union had sufficient membership among the employees to be certified.
Also, in some situations where a union had been granted bargaining rights for the employees of one employer, the employees could be shifted to another associated or related employer with the result that the bargaining rights which had been earned by the trade union for the employees was lost.
So too, in the case where associated or related employers joined in a common enterprise and used one work force, which was shifted and transferred from time to time, the certification with respect to one employer only was, in effect, a certification of a segment of the total enterprise, and could seriously impair the totality of the business operations by inhibiting the shifting of employees between union and non-union segments of the enterprise. It was also possible in situations where associated or related companies carried on a single enterprise that employees of the separate legal entities could be represented by different trade unions so as to cause the bargaining rights within the single enterprise to be unduly fragmented. An example of the type of situation where section 1(4) was applied is found in Walters Lithographing Company Limited, et al, [1971] OLRB Rep. 406.'
It is in these types of situations that the interests of the parties in having the Board treat separate employers as constituting one employer for the purpose of the Act became apparent, and it is for that reason that section 1(4) was enacted."
But a section 1(4) declaration is discretionary. It is not intended to be an automatic response in every situation where its statutory preconditions are met. In determining whether that discretion should be exercised, the Board must have regard to both the michief to which section 1(4) was directed, and the particular context under review.
- While there has been some interchange between the companies of persons who do the drywall installation work, there is no evidence whatsoever that work which had been obtained by the numbered company was performed by Mandic Bros. and Mandic Bros. does not seek to obtain union jobs through the bidding process. In fact, quite the opposite occurred when Mandic Bros. diverted work to the numbered company in order to permit the numbered company to retain Streight in the event the jobs which it had anticipated getting came through. Moreover it was through Mike Mandic, whom Local 675 contends is the key man in both companies, that the local obtained its bargaining rights with the numbered company and it did so on a voluntary basis without having to conduct any organizing campaign. Nor did the numbered company attempt to circumvent its obligations under the Provincial Collective Agreement when it next did work, that is the work performed on the Airway Centre. On that occasion it paid Streight according to the terms of the collective agreement and made the contributions required of it to the welfare trust funds. It was only through the numbered company that Local 675 became aware of the existence of Mandic Bros. which had already been in existence as an incorporated business for 5¼ years before the numbered company executed its first job in the construction industry. The facts in that respect parallel those in Bramalea Carpentry, supra. In that case the applicant trade union was seeking to have a non-union contractor, which the Board had found to be in a section 1(4) relationship with Bramalea, bound by a provincial agreement to which the union and Bramalea were bound. The non-union contractor had been in the construction business for eight years prior to the formation of Bramalea. About which circumstance, the Board commented in paragraph 12 that:
"Had the union been aware of the [non-union contractor] at the inception of the relationship, it would have had to do what it now claims is unnecessary; namely, demonstrate support among [the non-union contractor's] employees. Why should the passage of time improve its position? If anything, the passage of (eight) 8 years suggest that the Board should be reluctant to disturb the industrial relations status quo!"
That observation is entirely relevant to the facts in the case at hand.
In addition, facts herein show that during 1981 Mandic Bros. engaged some 52 persons as sub-contractors on its various jobs, whereas the numbered company employed only a total of five persons during that year. Even though Mandic Bros. seldom had more than seven or eight employees on any one job, the same facts also reveal that it sometimes ran more than one job at a time. The result of a section 1(4) declaration would be to sweep a potentially larger group of persons into the bargaining unit, assuming that they would be found to be employees within the meaning of the Act, and into union membership, assuming that the union would admit them to membership. In the alternative, it would serve to deprive these persons of the source of work which they have had from Mandic Bros.
The Board has been reluctant to apply section 1(4) so as to extend bargaining rights in view of the ['act that it is designed to preserve them and the Board has often said that section 1(4) is not to be used as a substitute for certification. A recent example of this is found in W.M.L Waste Management, [1981] OLRB Rep. March 409. In the instant case, Local 675 cannot be said to have lacked the opportunity of organizing Mandic Brothers. Not long before making this application, on each of two occasions when one of Local 675's business representative'; visited The Gibsons project, there were two members of the local already at work for Mandic Brothers. There being no evidence of any erosion of Local 675's bargaining rights and Mandic Bros., the non-union employer, having been established in the business of drywall installation in the construction industry for 5¼ years before any bargaining rights were created with respect to employees of the numbered company, the Board, in the absence of any compelling reason for rationalizing the collective bargaining relationship between Local 675 and the numbered company to include Mandic Bros., would not be prepared to exercise its discretion to issue a section 1(4) declaration even were it to find, as Local 675 contends, that the two respondents are under common direction or control.
One of the Board decisions cited by counsel for Local 675 in support of its argument that the Board should exercise its discretion to declare the two respondents to be one employer for purposes of the Act was Donald A. Foley Limited, [1980] OLRB Rep. Apr. 436. That case is distinguishable from this one on this facts, particularly with respect to the degree to which the non-union respondent's identity was inter-twined with that of the unionized respondent, which respondent also substantially pre-dated the existence of the non-unionized respondent in the construction business.
For the foregoing reasons, the application is dismissed with respect to both sections 1(4) and 63 of the Labour Relations Act.
DECISION OF BOARD MEMBER H. KOBRYN;
This is a section 1(4) complaint that the two companies were engaged in the same type of construction business and are under common control and direction.
Facts in the case. Milan (Mike) Mandic is key man in both companies. Both companies use the same address, phone number and premises which are located at 929A Pantera Drive, Mississauga, Ontario. Both companies use the same bank branch and Mike Mandic wrote all the cheques for the numbered company. Mike Mandic took care of the Labour Relatic'ns and was the job supervisor for the numbered company. He also did the management functions and supervision for Mandic Bros. Mike Mandic is the brother with most of the expertise, he finds most of the jobs and signs most of the cheques and he is the key force behind both companies. Mike Mandic signed two collective agreements with Local 675 the ISCA Collective Agreement and the voluntary Recognition Agreement on behalf of 387098 Ontario Limited.
Under section 1(5) the Company did not totally meet its onus. Mr. Zdunic decided not to appear and after he did he brought no evidence about the numbered company and then declined to participate in the hearing. He left all activity dealing with Labour Relations and Drywall work to Mike Mandic. He had some concern about the financial arrangements but derived very few benefits from the profits of the numbered company.
The indicia or criteria which the Board considers relevant in making a determination under section 1(4) has been set out in Walters Lithographing case [1971] OLRB Rep. July 406, paragraph 21. This criteria is as follows:
(1) common ownership or financial control,
(2) common management,
(3) interrelationship of operations,
(4) representation to the public as a single integrated enterprise, and
(5) centralized control over labour relations.
"No single criterion is likely to decide the issue. Rather, it has been stated, the Board's determination undoubtedly will be based on an appraisal of all of them in the light of the particular facts before it."
(1) Common ownership or financial control. This is not a case of common ownership and it is not necessary to be a key factor. In Donald A. Fokey, [1980] OLRB Rep. April 436, paragraph 27 at 446-447 in part: "The most significant is the absence in this case of any ownership connection, either direct or through a third party, of any form of corporate inter-relationship including common directors, officers, solicitors or corporate familiar [sic] relationship between Foley and Kingston Aggregates". Even though the key man is not a shareholder or there is no common directorship there was no documentation brought by Zdunic on this point. Zdunic felt that since Mike Mandic was asked to manage the company this was the same as being a director. Because of no documentation Zdunic did not satisfy the onus as required by section 1(5) so we have to draw a negative inference in that Mike Mandic is a director, authorized to sign the bank resolution and enter into a collective agreement with the union.
Common financial control. Financial arrangements between Mike Mandic and the numbered company were made verbally in that Mike Mandic would be paid a salary and be given a share of the profits. It was not necessary for Mike Mandic to obtain profits from the numbered company through dividends or capital gain. He got all the profit from this company through an interest free loan to engage in a real estate venture with Mr. Zdunic. The profits were not too advantageous to Mr. Zdunic because the financial benefits and profits occur to Mike Mandic and the Mandic Bros. who were all partners in this real estate venture. Mike Mandic has some financial control over Mandic Bros. There is no difference, this can be seen when he hired Bruce Streight for the Airway job of Inducon and the numbered company paid his salary and profits. Mandic Bros. bill Inducon for the work and there was no interchange of money with the numbered company. Mike Mandic had full rein over the numbered company and Mr. Zdunic did not participate at all in the numbered company.
(2) Common Management. Mike Mandic managed the bank project at Imperial Bank of Commerce for the numbered company. He managed it in every respect and ran the affairs of the numbered company. He signed the collective agreement, he received the bank statements, he signed the cheques he did the hiring and firing in the same way as he did at Mandic Bros. and not much evidence can be given that these employees were independent contractors, they were carrying out the work of employees. You have here a union company giving out work to subtrades which could be dependent contractors or employees under terms where Mike Mandic of Mandic Bros. negotiated the pay, estimated the jobs, prepared the bids and did the hiring and firing. Zdunic's testimony is that Mike Mandic did all the work for the numbered company and probably had another union job when Bruce Streight was hired. When the job was not a fact he was sent to work on the Airway Center of Inducon, Mike Mandic was the key man. The key man factor is dealt with in the Kustom Insulation Ltd. case [1979] OLRB Rep. June 531 paragraph 12 at p. 534.
"There are certain key areas, however, where Kustom is completely dependent on Mr. Schumann. He reads the blueprints and does the takeoffs which is a fundamental starting point in preparing a bid. Furthermore, Mr. Schumann alone has the practical knowledge and expertise required to supervise the work performed on the construction sites. Although Mrs. Schumann may technically carry the respon-sibility for firing employees, she must rely on her husband's assessment of an individual's capabilities. Furthermore, the Board concludes from the evidence that a large portion of Kustom's goodwill emanates from the reputation and expertise of Mr. Schumann. In view of all the evidence, Mr. Schumann cannot accurately be characterized as a mere employee."
In the case of the numbered company and Mandic Bros. the only person represented to anybody is Mike Mandic the key man.
(3) Inter-relationshzp of Operations. The numbered company is totally without personnel, people, office or equipment. It is nothing more than a shell. Mandic Bros. supplied the address, the telephone number, the management, the expertise, the truck, the labour relations, negotiating ability, they did the hiring and firing and supplied some of the employees in the persons of Mr. Mike Mandic and Mr. Steve Bebic.
(4) Representation to the public as a single integrated enterprise. The numbered company has no discernible identity. In the Donald A. Foley case the Board had this to say in paragraph 27 at p. 446:
"Another unusual feature of this case is the virtual absence of any public identity of Kingston Aggregates. While the Board occasionally deals with a section 1(4) case involving a party or parties the public identity of which is obscure (see for example Del Zotto Enterprise Limited, [1973] OLRB Rep. Aug. 533), in most instances the Board is dealing with circumstances where all the parties have some public identity unlike the situation before us where there is no outward appearance of Kingston Aggregates' existence.
The numbered company is not known to anybody. Mandic Bros. is known in the industry. Employees know and the union knows and Burza said to Business Agent Redemeier that the numbered company and Mandic Bros. is all the same. One must ask why Redemeier would say the same thing, he is not versed in Corporate Law. He was bound to conclude this because he only saw one company. There is no outward sign that the numbered company is in business. There is no discernible difference to the public. Just as Inducon the General Contractor for the Airway job, did not know anything about the numbered company. Mike Mandic could hire someone for the numbered company and nobody would know the difference. Until such time he told some employees that it was not a union job. Then the employees complained to the union, this very thing happened on the North York Retirement Lodge "the Gibson". This is the evidence of Redemeier when he visited this job no one said to him that he had no business on the job to look at the employees' union cards. When he raised the matter with Mike Mandic about employer using the tools, Mike did not bother to explain that this was not a union job. Mike said when he talked to Redemeier they only discussed the economy in general. Mike also answered "no" when questioned if any union had made an applica-tion for certification with the Board. In fact, an application was pending before this Board by the Painters, for drywall tapers employed by Mandic Bros. He also said "no" when asked if he employed any union employees after the bank job. In fact, Ex. #7 Benefit Remittance Form dated Sept. 8/81 shows Bruce Streight worked in August for the numbered company on the office building being built by Inducon. He also said the Mr. Zdunic sent him to the union to sign the collective agreement. Zdunic testified that he never knew anything about the union and was not aware that the bank job was a union job and did not suggest to Mandic to be union and could not recall any discussion with Mike about union and if it was discussed it was not an important matter to him. These few facts, question the credibility of Mr. Mike Mandic. Mike Mandic took advantage of the numbered company's lack of identity when he entered into a collective agreement with the applicant; this way he could maintain a union and non-union operation. He thought he had a union job when he ordered Bruce Streight from the union. Gave the union the name of two jobs, Airway and Minnesota Court. When he did not get the union job, had he sent Streight back to the union because he had no work for him, then the union would have found out he was using two companies.
(5) Centralized control over labour relations. Mike Mandic was the key man. He hired, fired, signed collective agreements and the cheques for the payment of employees.
On the question whether the Board should exercise its discretion in this case Zdunic said he could fire Mike Mandic. Mandic was more than an employee, he was involved with Zdunic in joint ventures, some personal and some for the numbered company. He was the most senior employee of the company and had the authority to bind that company. The union never asked Mandic if he had another company nor was Mandic forthright to tell them. A union entering into a bargaining relationship especially if the employer who is coming in and wants an agreement expects the bargaining relationship will be for that employers' entire enterprise. As to the charge that the union permits its members to go out and sub-contract work. Article 3.03 of Ex. #1 the Collective Agreement states "that no member is permitted to contract work unless he be bound by the provisions of this contract." An employee referred by the union to the numbered company and Mike Mandic made arrangements with employee to work for Mandic Bros. on piecework. The applicant said it does not approve or condone this. Rememeir admitted that it exists but it's not anything the union gives its blessing to, such a practice is contrary to the principles of the union.
Counsel for the respondent stated that it was not the intention of the Act to make a non-union company into a union company. The purpose of section 1(4) is clearly stated in the Industrial Mine Installation case [1972] OLRB Rep. Oct. 1029, paragraph 9 at p. 1031 states as follows:
"Section 1(4) is obviously contemplated to cure the mischief that results from being unable to properly define and tie down the employment relationship. In many situations where companies have a close relationship, at any given period, is difficult to define in terms of one employer. So too, the number of employees employed by one of those companies any given time may be impossible to ascertain."
Mr. Bebic and Mr. Streight worked for the numbered company immediately after working for Mandic Bros., this was an interchange of employees. Streight returned to the same job site te do the same work. In this way union bargaining rights are erroded away. Bargaining relationships will have no meaning in the future because the same people covered by a collective agreement work for the other company which is not bound to a collective agreement.
Counsel for the respondent contends that the union is trying to use section 1(4) instead of getting certified for Mandic Bros. The Atlantic & Pacific Company of Canada Limited case, [1981] OLRB Rep. Mar. 285, paragraph 15 at p. 289 deals with this subject matter as follows:
"We have considered the respondent's arguments with respect to "foisting" a union upon a group of employees who may not wish to be represented; however, we do not think that the wishes of the employees are the only, or even the predominant factor to be considered in a section 1(4) application. If such were the case, the very erosion of bargaining rights which triggered the proceeding, (and which section 1(4) was designed to cure) could be raised as a bar. It is entirely typical that the employees of a related company will not be union members for it is the creation of job opportunities ostensibly beyond the scope of the collective agreement which constitutes the "erosion" of the union s bargaining rights. But for the creation of a separate vehicle, the work opportunities associated with the related business activity, and the conditions of employment of the employees engaged in that activity, would be regulated by the collective agreement. The very purpose of section 1(4) is to ensure that the union's bargaining rights and the scope of the collective agreement will not be restricted simply because an employer chooses to expand through a new corporate vehicle rather than its existing one. Nor do we think we can attach much significance to the fact that upon learning of the existence of a related employer, a union opts to utilize section 1(4) rather than apply for certification. The statute contemplates both types of applications, and if the circumstances are such that section 1(4) can be applied, we do not consider it a proper exercise of our discretion to raise a bar simply because a union might have applied for certification. Indeed, if the two corporate entities otherwise satisfy the requirements of section 1(4), there are good labour relations reasons for making a section 1(4) order so that the collective bargaining structure will accord with the economic and industrial relations reality."
- In this case some employees were union, Bebic and Streight represent 50% of the employees of the numbered company. In such a small company, the numbers in terms of interchange are significant. Particularly in the construction industry, numerous companies are used and interchanging is easily done because it's very easy to close one business down and start another, this is clearly stated in the Brant Erecting case [1980] OLRB Rep. July 945, paragraph 13 at p. 948 which states as follows:
"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 employees will not have permanence or investment in fixed plant and equipment characteristic of a manufacturing concern. A small construction company can move from job site to job site or place to place, assembling tools, equipment, a labour force as required after it has made a successful bid.... In such circum-stances there may be an effective transfer of business between related businesses without any apparent disposition of assets, inventory, tradesmen, goodwill, employee, etc.".
- The risk of future erosion of bargaining rights exists from the opportunity for Mandic Bros. to use the dual vehicle and tell General Contractors that they will perform the work through a union vehicle and then do it by the non-union vehicle. There is a risk of erosion of bargaining rights because Mandic is looking for other work for the numbered company. This is referred to in the Donald A. Foley case [1981] OLRB Rep. Apr. 436 at page 447 the Board has this to say in part of paragraph 28:
"The question now is whether the Board should exercise its discretion under section 1(4) to declared that the two companies constitute one employer for the purposes of the Act. One of the significant purposes of section 1(4) is to protect bargaining rights gained by a trade union from being eroded by work being diverted by one means or another from an unionized business to a related non-unionized one. One of the results of the total relationship between Foley and Kingston Aggregate is that Foley can go projects as a "union” contractor and through Kingston Aggregates perform work with non-union labour with no visible indication of Kingston Aggregates' presence on the project. At the same time, it permits Kingston Aggregates to operate under Foley's umbrella and gain access to large jobs which it would not otherwise be able to do. A potential effect of this practice is to erode the bargaining rights of the applicant. The Board does not have evidence before it that such erosion has taken place, although a strong inference exists from the fact that Foley employed an average combined force of 15 engineers and labourers in 1979 while Kingston Aggregates had a work force of some 30 to 55 employees. It is true that similar risk of erosion would result from Foley entering into a bona fide, arms-length relationship with another non-union contractor and section 1(4) could not protect the applicant. The fact is that it is Foley's control of Kingston Aggregates, a firm carrying on related business, which presents the risk of erosion of the applicant's bargaining rights. It is not necessary for there to have been an actual erosion of those rights before the Board exercises its discretion. As the Boarc. stated in Kustom Insulation Ltd., [1979] OLRB Rep. 531:
'It is not necessary, however, for the union company to fall apart before concluding that an employer's scheme of operating a business through a union and non-union company has undermined a union's bargaining rights.'
While the respondents argue that there was no scheme or intent to avoid or dilute the applicant's bargaining rights, it is the reality that erosion has resulted or that there is a risk of erosion of bargaining rights which may cause the Board to exercise its section 1(4) discretion to remedy the situation. In this case the applicants have acted promptly upon learning of Kingston Aggregates' existence to bring these applications before the Board and the Board concludes that in all the circumstances of this case, it is an appropriate one in which to exercise its discretion and grant a declaration."
As in this case the union did not sleep on its rights, on November 9, 1981. Business Representative Redemeier visited the North York Retirement Lodge ("the Gibson") project of Inducon and for the first time discovered some employees who were not members of the applicant and as a result discovered that the employer was not the numbered company but rather Mandic Bros. Representatives met with Mr. Mike Mandic on the Project on November 19, 1981 to resolve the problem. When unable to do so filed the complaint with the Board on November 26, 1981.
Either by omission or silence, the employer was able to convince the union he had only one company and that it was the numbered company. When the union Business Representative came on the job site, the employees indicated to him that they were working for a union company. The one employee who knew of the numbered company thought it and Mandic Bros. were the same. Everything Mandic did pointed towards one company and the union relied on this conduct to their detriment. It took an incident to discover that there were two companies under the effective control of Mr. Mike Mandic.
The Board should conclude that in all the circumstances of this case, it is an appropriate one in which to exercise its discretion and grant a declaration under section 1(4) that 387098 Ontario Ltd. and Mandic Bros. Drywall & Construction Ltd. are one employer for the purposes of the Act.