[1982] OLRB Rep. July 998

1203-81-R Energy and Chemical Workers Union, Local 300, Applicant, v. Ethyl Canada, Inc. and F.I.R.M., Respondents, v. United Association of Journeymen and Apprentice of the Plumbing and Pipe Fitting Industry of the United States and Canada, Local 663, Intervener.

BEFORE: R.O. MacDowell, Vice-Chairman, and Board Members D.B. Archer and W.H. Wightman.

APPEARANCES: Daniel Ublansky, C. S. Sullivan and T Richardson for the applicant; Edward T McDermott and W. Hoad for Ethyl Canada, Inc.; Joseph Carrier and Norman Fairbairn for F. I. R. M.; L. C. Arnold and W. Robb for the intervener.

DECISION OF THE BOARD; July 22, 1982

1. This is an application under section 1(4) of the Labour Relations Act. That section reads as follows:

1 .-(4) Where, in the opinion of the Board, associated or related activities or businesses are carried on, whether or not simultaneously, by or through more than one corporation, individual, firm, syndicate or association or any combination thereof, under common control or direction the Board may, upon the application of any person, trade union or council of trade unions concerned, treat the corporations, individuals, firms, syndicates or associations or any combination thereof as constituting one employer for the purposes of this Act and grant such relief, by way of declaration or otherwise, as it may deem appropriate.

For ease of reference, the applicant union will be referred to as such, or simply as "the union"; the respondents will be referred to respectively as "Ethyl" and "FIRM"; and the intervener will be referred to as "the U.A.". The applicant contends that Ethyl and FIRM are engaged in related business activities under common control or direction, and that the Board should exercise its discretion to declare the two businesses to be "one employer" for the purposes of the Act.

2. Ethyl is a manufacturer of industrial and pharmaceutical chemicals with production facilities near Sarnia, Ontario. FIRM is a mechanical contractor in the Sarnia area. The production employees of Ethyl are represented for collective bargaining purposes by the applicant. The employees of FIRM directly affected by this application are represented by the U.A.

3. The applicant was certified to represent Ethyl's production employees in October 1979. Notice to bargain was given, and in June of 1980, the parties concluded a two year collective agreement. At the time the agreement was signed, the union was aware of the existence of FIRM and of Ethyl's long standing use of subcontractors. The collective agreement does not contain a restriction on subcontracting. The instant application was made on August 29, 1981.

4. There are approximately 150 hourly rated production employees in the applicant union's bargaining unit. Ethyl also employs about 100 salaried employees. The production group includes the maintenance department which employs about 48 employees. That number varies slightly from time to time. At the time of the hearings in this matter, there were approximately 52 employees in the maintenance department. Among the trades represented are the following: pipefitter, iron worker, boilermaker, millwright, hoisting engineer, vehicle mechanic, carpenter, insulator, electrician, and instrument mechanic.

5. There are currently about 9 or 10 pipefitters in the maintenance department. It is their work jurisdiction which the union claims is being eroded by the subcontracting arrangement with FIRM. While the union was somewhat unclear about the extent of its work claim, it appears to relate primarily to what the parties regard as "supplementary maintenance". The Board notes however that in adopting the parties' terminology in this regard, we do not make any qualitative assessment as to the industrial relations character or significance of the work in question. It is clear that some of the work which the parties describe as "maintenance" is really "repair” or "construction" work, as those terms are used in the construction industry portion of the Labour Relations Act. All of the work done by FIRM is done pursuant to province-wide (ICI) construction agreements.

6. Ethyl has a long history of subcontracting work to specialized trade subcontractors. Prior to 1969, almost all of its "maintenance" requirements, including both "running maintenance" and capital improvements, were provided by Catalytic Enterprises, a large firm which specializes in the supply of such services. The residual maintenance requirements were met by retaining other subcontractors. Ethyl had no maintenance employees of its own.

7. In 1969, Ethyl established its own maintenance department; however, it continued to subcontract capital improvements, modification of existing system, repairs, and "supplementary~~ or "overflow" maintenance jobs which, for one reason or another, could not easily be completed by its own forces. This practice was well established long before the applicant's certification, and continued thereafter. Auxiliary forces were also retained to help with the annual "turn around" when the plant was shut down for general maintenance and repair. In all of these cases, the employees of the subcontractors were working side by side, and sometimes in conjunction, with Ethyl's own employees.

8. Sometimes these contracts were let at a fixed price. Sometimes they were let on a cost plus basis. Sometimes the contracts were tendered and the subcontractor selected through a competitive bidding process; and sometimes Ethyl would simply select a contractor known to be reliable. Ethyl had both periodic and continuing relationships with a number of contractors in various trades.

9. Ethyl documents its work requirements by means of work orders which identify the work to be done and are coded so that, for accounting purposes, the work can be charged to the appropriate budget. Thus, what Ethyl considers to be capital improvements can be readily distinguished from maintenance, which is chargeable as an ongoing production cost. The maintenance budget contains a special subcomponent or fund for "supplementary maintenance" performed by outside subcontractors. This has always been the case, for as already noted, Ethyl has a longstanding practice of subcontracting such work.

10. In order to illustrate its subcontracting practices, Ethyl tendered a list of some 25 contractors who had recently been involved in supplementary maintenance or repair work on the Ethyl site. This list includes one or more contractors in the following areas of specialization: sheet metal, electrical, sandblasting, painting, structural, roofing, insulation and instrumentation. Thus, for example, sheet metal contractors were retained from time to time to repair or replace existing duct work for heating, ventilation and exhaust systems. Similarly, in order to illustrate its relationship with other mechanical subcontractors, Ethyl tendered the work orders performed by T. Moore Mechanical, one of FIRM's competitors, over the period 1978 to 1981. During that period, Moore was involved with quite a number of work orders relating to maintenance, repair, and capital jobs (in Ethyl's terms) having an aggregate value of approximately one half million dollars.

11. The company advanced a number of reasons for using outside subcontractors rather than its own forces. In each case, it was a matter of economy and efficiency. Sometimes, its own employees (or some of them) did not have the requisite skills to perform the work. Sometimes Ethyl's equipment was inadequate. Sometimes, its own forces were already fully occupied with their ongoing maintenance duties, and could not be spared for supplementary maintenance or repair — especially if the job had to be done quickly (as, for example, the removal of a potential safety hazard). Of course, the company could have tried to hire more tradesmen on a part-time or full-time basis, but William Hoad, the plant manager, told the Board about the company's frequent unsuccessful efforts in this regard. Experienced tradesmen were difficult to find. In any event, the company was unwilling to permanently expand its maintenance department, preferring instead to meet its fluctuating needs by employing its own forces on overtime and, where necessary, engaging outside contractors to fill in the gaps. FIRM is one of these contractors.

12. Ethyl asserts that its relationship with FIRM is not much different from that of the various other subcontractors with which it deals from time to time, and that there is no basis for a section 1(4) declaration. The union argues that this particular subcontracting relationship does meet the requirements of section 1(4) and that a declaration is necessary in order to prevent an erosion of the union's bargaining rights and work jurisdiction. In order to fully appreciate the union's claim, it is necessary to examine the evolution of Ethyl's dealings with FIRM, as well as the special relationship which T.N. Fairbairn has with the two companies. Mr. Fairbairn is both Ethyl's maintenance superintendent and the principal owner of FIRM.

13. From 1956 to 1969, Fairbairn was employed by Catalytic and worked as a maintenance supervisor on the Ethyl site. During this period, it will be recalled, Catalytic fulfilled virtually all of Ethyl's maintenance requirements. When Ethyl set up its own maintenance department in 1969, it hired Fairbairn as its job superintendent. Fairbairn worked in this capacity until 1976 when he left Ethyl's employ to work for Shell and Polysar. Bill Smith, FIRM's current site supervisor and a part-owner, also worked for Catalytic until 1969, and for Ethyl until 1978 when he too sought employment elsewhere with another mechanical subcontractor.

14. In late 1979, Ethyl became increasingly concerned about the performance of its maintenance department. There was a back log of some 1300 incomplete work orders and in Hoad's view, costs in that area were out of control. The department simply had to improve its efficiency in order to minimize the resort to expensive outside contractors hired on a cost plus basis. Moreover, the seeming inability of the maintenance department to keep up with its ongoing responsibilities resulted in costly down time for Ethyl's production equipment. Hoad decided that part of the problem was a lack of effective managerial control and after some discussion, it was decided to bring Fairbairn back as a "consultant" to run that department as he had before. On January 23, 1980, Ethyl and Fairbairn entered into a renewable six month agreement to this effect.

15. The designation "consultant" is a little misleading. Essentially, Fairbairn became an employee of Ethyl occupying the position of maintenance supervisor. He was paid on an hourly basis and expected to put in a regular day's work for Ethyl. Fairbairn was fully responsible for the day-to-day maintenance of all units at the Sarnia plant including preventive maintenance, the preparation of spare parts, and cost control in the maintenance department, as well as the supervision and assessment of the Ethyl employees who reported to him. Fairbairn was performing the same job functions as the previous maintenance supervisor. He had the same job description, and his authority approximated that of other department heads in the Ethyl operation with whom he had to co-ordinate his activities. Fairbairn was responsible for imposing any employee discipline which might be required, and he represents management in the grievance procedure. The original consulting contract was periodically extended with appropriate revision in compensation but no other significant change in Fairbairn's duties and responsibilities.

16. FIRM was incorporated on January 25, 1980, shortly after Fairbairn had taken over Ethyl's maintenance department, Fairbairn is a 70% owner of FIRM. His brother owns 20% and Bill Smith owns 10%. FIRM is a member of the Mechanical Contractors Association of Ontario, has a bargaining relationship with the U.A., and is a party to the Provincial Pipe Trades collective agreement. Pursuant to that agreement, FIRM meets its employee needs through the U.A. Hiring Hall, and pays the negotiated wage rates. There is no interchange of employees between Ethyl and FIRM.

17. FIRM operates from a small office in Sarnia in a building in which Fairbairn's brother operates a moving business. FIRM pays no rent for this space, nor is there any evidence that anyone receives a salary from FIRM other than Bill Smith, and of course, the hourly rated tradesmen who are employed and paid in accordance with the U.A. collective agreement. Fairbairn draws no salary from FIRM nor does FIRM receive the benefits of the consulting fees paid to him by Ethyl. Such clerical work as FIRM requires is done by employees of the moving company, and Smith assumed that they were paid by the moving company as well. Smith was unaware of any clerical salaries paid by FIRM.

18. Smith runs the day-to-day operations of FIRM doing both the onside supervision and preparation of the bids. Smith determines the number of employees to be hired and the mix of trades. Smith handles all labour relations and payroll issues. Fairbairn has no direct involvement in any of these activities. The three principals meet every week or so to discuss the company's situation, but its ongoing activities are left entirely to Smith.

19. Save for one recent job for Liquid Carbonic (which was also at the Ethyl site), all of FIRM's business has come from Ethyl. FIRM has solicited work elsewhere but to date has been unsuccessful. G.R. Mills, Hoad's superior, described FIRM as a "labour broker" giving Ethyl access to A.F. of L. tradesmen which would not otherwise be possible without a direct relationship with their respective unions. This is not an inaccurate description of FIRM's position although it might be noted that the same could probably be said for some of Ethyl's other subcontractors. The difference, of course, and the fact upon which the applicant relies, is that Fairbairn is both the manager of Ethyl's maintenance department, and the principal owner of one of its maintenance subcontractors. In this respect, FIRM's position is somewhat different from that of its competitors.

20. Apart from the role of Fairbairn, and the series of subcontracts between Ethyl and FIRM, there are no business or other relationships between the two companies, and none of the usual indicia of control. There is no common share ownership. There are no common directors. Ethyl has no financial interest in FIRM whatsoever. It has neither lent money to FIRM nor guaranteed FIRM's debts. It receives no particular benefit if FIRM prospers, and suffers no particular prejudice if FIRM does not. If FIRM were to go out of business, Ethyl would simply employ another subcontractor as it has done before, and continues to do when FIR M's bid are too high, or for some other reason Ethyl decides to use another mechanical subcontractor. Ethyl has no control over FIR M's employees or their terms and conditions of employment. The businesses do not share banking, accounting, or legal services, or office space. Ethyl provides FIRM with certain facilities on site, but we are satisfied on the evidence that these do not differ significantly from what it provides for other subcontractors retained from time to time. There is no interchange of employees, common signs or logos, letterhead, or office staff. As already noted, Ethyl is in the business of manufacturing chemicals. FIRM is a mechanical contractor. Ethyl does not even guarantee FIRM any particular volume of work. Jobs are let periodically as Ethyl's needs require, and the evidence indicates that, on balance, Ethyl would usually prefer to have that work done by its own forces. As Hoad put it, Ethyl is not in the business of keeping FIRM in business.

21. Ethyl's relationship with FIRM began with a service contract wherein Bill Smith was retained as a consultant to do an inventory of existing spares, and assess servicing needs and priorities. This job consumed about six weeks. It was directed to FIRM because none of Ethyl's own employees could be spared to do it, and because Smith had considerable specialized knowledge of Ethyl's operation. At the time, all of Ethyl's own employees were fully engaged doing running maintenance.

22. After this initial contract, FIRM did a number of different jobs for Ethyl of both a capital and non-capital nature — some of a fixed price, some of a cost plus basis, some with bids, and some without bids. But FIRM did not fulfill all of Ethyl's mechanical subcontracting needs, and where there were jobs put out to tender, FIRM did not necessarily win. For example, the opportunity to work on the installation of a new "scrubber system" (an environmental protection system) was lost to its competitor T. Moore Mechanical.

23. The Board had before it a great deal of evidence about each of the projects in which FIRM was involved, from its incorporation to the filing of the instant application. Those projects were documented by a number of purchase orders upon which Mr. Hoad was closely cross ­examined. We see little point in reproducing the details of that evidence here. It will suffice to outline its general character.

24. As already noted, FIRM worked on both capital and non-capital jobs — although again, it should be noted that these terms are little misleading since they are employed for Ethyl's accounting purposes, and do not necessarily correspond to the actual character of the work. Nor do they properly describe the division of labour between maintenance and non-maintenance, functions. Some of what Ethyl describes as "maintenance", and much of what it describes as supplementary or overflow maintenance, involves the fabrication of the piping systems and is really repair or construction work. In addition, its own maintenance forces have clearly worked on construction or capital projects when their time permitted. Ethyl maintenance forces have done such things as concrete forming work, and the wiring in a new building being erected on the site. It is difficult to characterize this as maintenance work.

25. For the most part, FIRM was retained on a job by job basis to perform a particular project. In one instance, it obtained a "blanket purchase order" covering a number of jobs, but it appears that this was an effort by Ethyl to secure a kind of "volume discount". Sometimes FIRM was chosen simply because of its previous involvement and familiarity with an earlier job. On the so-called "D.R. — 1 Debottling Project" FIRM had been involved in the first phase, so when a problem arose which had to be handled quickly FIRM was retained. FIRM was already on the site at the time for another purpose. The relationship between FIRM and Ethyl is one of mutual convenience.

26. FIRM can work as both a mechanical and general contractor. In July of 1980, when the company added a new centrifuge to its pharmaceutical unit, FIRM did the piping work and arranged the subcontractors of the other trades (including masonry, excavation, heating and ventilation). Whether or not it is acting as a general contractor, FIRM typically works in conjunction with other subcontractors, and also in either close proximity to, or in conjunction with, Ethyl's own employees. In April of 1981, for example, FIRM was engaged to repair organic lead leaks. It did some of the installation work, while Ethyl's own forces did certain other aspects of the job. Often the work which FIRM did was of the kind which historically has been subcontracted; and in the gray area of "shared jurisdiction", FIRM was only used when Ethyl's own complement could not handle the job. Typically, the few non-capital jobs given to FIRM involved work orders originally assigned to Ethyl's own maintenance department which, after weeks or months, still had not been completed. In the case of the annual turn arounds, Ethyl simply could not hire enough skilled employees for this short period of time, whereas, through FIRM, it had access to the U.S. Hiring Hall, and could easily augment its forces. On the turn around, Ethyl and FIRM employees worked side by side. In 1979, (long before FIRM's incorporation), Ethyl had employed another mechanical subcontractor to help with the annual turn around.

27. Ethyl provides FIRM with small hand tools, space in a warehouse on the site, and access to its shop tools if Ethyl employees are not using them. The same use and access is given to other subcontractors. FIRM employees also use the Ethyl punch-clock, as do other subcontractors, and as did Catalytic. FIRM has its own trailer/office, lunch room, pick-up truck, welding machines, sanders, pipestands, drill, and fabrication benches.

28. The hourly wage rates paid to FIRM employees are considerably higher than those paid to Ethyl's own employees, so prima facie, it might be argued that it is more expensive to use FIRM rather than to employ its own forces. However, usually, Ethyl's own employees are already fully occupied so that more intensive use of its own employee complement would involve overtime. Moreover, the diversion of its employees from their usual duties could result in more production down time. Consequently the actual economics of the situation are difficult to assess. Hoad thought, on balance, that it was more efficient to use a subcontractor to meet periodic work overloads, although he preferred fixed price contracts let on competitive tender. Unfortunately, this was not always possible because Ethyl's engineering department has been chronically understaffed and unable to prepare tender documents for all of the work required. And since FIRM was already on site, it was frequently convenient to either shop around informally to ensure that a proposed price charged by FIRM was competitive, or simply to give FIRM the contract on a cost plus basis. It was a process of "shopping around" which preceded the issuance of the blanket purchase order mentioned above. The evidence does not demonstrate that Ethyl is consciously attempting to undermine the bargaining unit by diverting work to FIRM. On the contrary, the evidence suggests that Ethyl would generally prefer not to do so.

29. Neither Hoad nor other members of Ethyl management were entirely satisfied with the relationship with FIRM. They were sensitive to the charge of favoritism or conflict of interest because of Fairbairn's dual role. They were also aware of their own employees' concerns. But because of the problems in the engineering department, introducing more competition through competitive bidding, was not readily feasible. And there was no doubt that Fairbairn was doing a good job running the maintenance department. A backlog of some 1300 purchase orders in existence when he was hired had been reduced to almost 250.

30. Hoad was concerned that if FIRM was engaged simultaneously on a fixed price and cost plus job there could be leakage from one to the other; and he was also concerned lest Fairbairn misrepresent the capacity of the maintenance department and thereby divert work to FIRM. However, to meet this potential problem Hoad and Mills, his superior, resolved that in addition to the usual checks by the purchasing and engineering departments, Hoad himself would make a special effort to scrutinize all work given to FIRM — especially work of a non-capital nature which could conceivably be done by Ethyl's own forces. This would ensure that proper priorities and cost controls were being maintained, and that sub-contracting decisions were ultimately made by persons other than Fairbairn. In addition, it was decided to press the engineering department to increase its effort to prepare suitable documentation so that bids for mechanical contracting jobs could be tendered.

31. These concerns were expressed in an exchange of confidential memos between Hoad and Mills in the Fall of 1980 (i.e. long before the commencement of the present proceedings). After detailing the problems which the relationship with FIRM created, Hoad went on to say:

"Recently, however, Fairbairn's use of his position as Maintenance superintendent became excessive. He gave me a pile of 6 or 8 work orders with drawings for pipe fabrication and installation, and requested that this work be assigned to F.I.R.M. on a "cost-plus" basis. I refused to do this because (a) Fairbairn would be diverting work into his own company on a "cost-plus" basis, and (b) he would be operating a fixed price contract and a cost-plus job on the plant simultaneously and, from an auditor's viewpoint anyway, I would be hard-pressed to guarantee that some of the fixed price work and costs didn't slip into the cost-plus work and costs. This does not imply that it would happen, but it could. In the fixed price contract, the labour and tools, welding machine, truck and trailer etc., rentals are all included. In the cost-plus situation, they can all be viewed as extra costs.

There were several other ways to get the work done —

(1) F.I.R.M. on fixed price

(2) another contractor on fixed-price or cost-plus

(3) Ethyl maintenance on straight time or overtime

Of these I chose the latter, primarily because of the time constraint in preparing for the ETCL-EDC turnaround. It is not the least expensive route. However, in addition to the primary reason it will show our own employees that they have job security and their work is not being given away. It should also demonstrate that neither Ethyl or any of its management has any interest in F.I.R.M. receiving contracts.

The above decision was not well received by Fairbairn. As I understood what he said, he claimed that he had been promised this type of work. The F.I.R.M. situation is very vulnerable to criticism, justified or not. Critics could be other contractors in the area. Several people in Ethyl are concerned about the ethics of the situation and if conflict of interest exists.

The eighties may be the decade of protecting your donkey. Until someone can describe what is ethical and what is not, and where conflict of interest starts and ends, I plan to protect mine and Ethyl's. There is nothing but trouble in compromising decisions in favour of a supplier."

It is evident that FIRM is not the alter ego of Ethyl, nor was Ethyl insensitive to its employees' concerns. Despite the obvious utility of the relationship with FIRM, Ethyl management was determined to maintain an arm's-length, business-like arrangement.

32. Following this exchange of memos, the additional controls were put in place. Hoad personally examined the flow of work to FIRM. Despite his suspicions, he was satisfied that each job let to FIRM did indeed have to be handled by an outside contractor, and that using FIRM was the most efficient way of having the work done.

33. Ethyl generates approximately 8000 work orders per year. Throughout the hearing of this matter, the applicant was pressed to specify precisely what work was being improperly diverted to FIRM, and precisely how its work jurisdiction was being eroded. Its answer was not entirely clear but, as noted above, focused on supplementary maintenance or repair work which in the view of Ethyl management, its own employees had difficulty getting around to. Ironically, over the period of FIR M's existence, and despite the professed concern about its presence, employees have periodically complained about too much as well as too little overtime. No Ethyl employee gave any direct evidence of work which, in his opinion, he should have done but which was done by employees of FIRM. Moreover, there is apparently no complaint about subcontracting per se — only subcontracting to FIRM. In the circumstances, the respondents submit that the employee concerns are related as much to their antipathy to their boss, as to the loss of potential work. In any event, since the company began using FIRM, there has been no decrease in the employee complement in the maintenance department; and all of the evidence suggests that if FIRM were not available, another subcontractor would be used (and, indeed, was used from time to time). Success in the instant application therefore would not necessarily enhance the job opportunities for Ethyl employees. It would only mean that supplementary maintenance was done by another subcontractor. And, for reasons which we will explore below a section 1(4) declaration might well result in a net loss of work which the employees have traditionally done. After sifting through all of the evidence, heard over several days of hearing, it appears to the Board that the union's concern is related solely to about a dozen non-capital work orders performed by FIRM over the 18 month period from February 1980 to August 1981. This number must be considered in light of the thousands of work orders performed in the same period by Ethyl's own employees or the employees of other subcontractors.

34. The evidence also indicates that the union and its members were well aware of FIRM's existence. C.S. Sullivan, a representative of the Union, testified that he learned about FIRM in the winter of 1980 while engaged in negotiations for the parties' first collective agreement. FIRM's employees were frequently on the site, and worked side by side with Ethyl employees on the turn-around in the summer of 1980. Sullivan raised the role of FIRM in discussions with Ethyl management in January 1981, and at that time, suggested that the union would file a section 1(4) application. Yet that application was not filed, in fact, until 8 months later. If the union were seriously concerned about the erosion of its work jurisdiction, it certainly did not move very quickly to protect its exposed position — perhaps because the bulk of FIRM's work really was of the kind that the company usually subcontracted, and really was beyond the capacity of Ethyl's existing complement. Meanwhile, of course, FIRM developed an established commercial relationship with Ethyl, and various collective bargaining relationships with the U.A. and other trade unions whose members it employed. The applicant union, by this application, seeks to set aside those established relationships.

35. The union argues that FIRM is a mere instrumentality of Ethyl which provides its sole source of work. The capital structure of FIRM is minimal, and in the union's submission it depends largely on the use of inside information and equipment owned or traceable to Ethyl. The union argues that FIRM's separate legal identity is entirely artificial. In substance, FIRM is merely Ethyl's supplementary maintenance department which, by its existence, permits the diversion of work opportunities outside the bargaining unit. The union acknowledges Ethyl's right to subcontract work but, it argues, it must be a bona fide subcontract to a truly independent business. It cannot subcontract to itself or what, in the union's view, amounts to the same thing, to a company owned by a member of Ethyl's management working solely for Ethyl's benefit. Finally, the union maintains that it did not condone this arrangement. When it became aware of the potential erosion of its bargaining rights, it brought the matter to Ethyl's attention, sought to reach an accommodation through negotiations, and as early as January 1981. put the company on notice that it would seek relief under section 1(4) if necessary.

36. The respondents argue that the relationship with FIRM does not alter the status quo nor does it undermine the applicant's bargaining rights. The relationship with Ethyl is no different from that with other subcontractors and the company has a long and well established practice of subcontracting precisely the kind of work that FIRM has been doing. The union's claim is limited to only about a dozen work orders over a two year period, yet during this time, there has been no reduction in the employee complement in the maintenance department. At one time all maintenance was done by subcontractors, and the evidence indicates that if FIRM did not do the work in question, another mechanical subcontractor (such as T. Moore Mechanical) would. The evidence further indicates that in each instance work went to FIRM because it had not been, or could not be done by Ethyl's own employees. Not a single union witness was called to refute this proposition. Despite Hoad's suspicions, even he was convinced of the need to subcontract work to FIRM; moreover, in the respondents' submission the controls put in place by Hoad establish both an arm's length relationship with Ethyl, and Ethyl's real concern to maintain it. In Ethyl's submission, it is merely a purchaser of specialized services from a small contractor. It is not a common employer. None of the usual indicia of common control are present in this case nor is there even any guarantee of work. The respondents also point to the potential anomaly which might result. Would Ethyl be plugged in to the U.A. collective agreement and become part of the province-wide bargaining agency? Would FIRM have to use Ethyl maintenance employees on construction work, or would both companies have access to the U.A. Hiring Hall? How would such questions be resolved? What conditions would prevail: the terms in the production agreement or the more generous provisions in the construction agreement? And, since the applicant does not claim all of the work done by FIRM, how would that work be divided? A section 1(4) declaration could merely exacerbate what is essentially a jurisdictional dispute and raise a host of new industrial relations issues. Finally, having delayed seeking a 1(4) application for more than a year, the respondents argue that it is now too late.

II

37. Section 1(4) of the Act deals with situations where the economic activity giving rise to the employment is or can be carried out through more than one legal entity. In such circumstances an alteration in legal form, or a transfer of work from one legal entity to another, can undermine established collective bargaining rights. Section 1(4) ensures that the institutional rights of the trade union and the contractual rights of its members, will attach to a definable commercial activity rather than the particular legal vehicle(s) through which that activity is carried on. Legal form is not permitted to obscure economic and collective bargaining realities. In this respect Section 1(4) creates a regime of collective bargaining law which significantly modifies common law notions of privity of contract or the corporate veil. However, while the language of section 1(4) is very broad, the section is not intended to apply in every case which in a general or linguistic sense meets its statutory criteria. The Board has a discretion concerning the application of section 1(4) and, in the past, it has exercised that discretion carefully, in light of the circumstances of each case, and labour relations policy considerations.

38. The Board accepts the applicant's submission that section 1(4) may impose some limits on the degree to which an employer can avoid its obligations under a collective agreement by substituting the employees of another employer for its own. There is something to the notion that a company cannot subcontract to itself, or what may be the same thing, to an entity totally controlled by it.

This is especially the case where the functions performed by the employees of the other employer are carried out on the first employer's premises, with the first employer's equipment, in conjunction with the work performed by the first employer's own employees, and subject to the first employer's overall direction and control. The A & P decision provides a case in point (see The Great Atlantic & Pacific Company of Canada Limited [1981] OLRB Rep. March 285). In A & P, regulatory legislation prevented the well known food chain from entering directly into the pharmacy business, and prompted it to create a new corporate vehicle to run the pharmacy department which it had established in some of its larger stores. That corporate vehicle was nominally run by an independent pharmacist; but in reality, was wholly controlled by A & P. There was no anti-union motivation, but the separate legal identity of the "drug company" was totally artificial from a collective bargaining point of view, and in the result, the Board issued a related employer declaration. The drug company had no independent existence and no business activities apart from A & P. The fact that it hired its own employees, paid them, and directed them in their daily activities did not obscure the reality of the situation.

39. The application of section 1(4) to a relationship described as "merely subcontracting" was also discussed in The Charming Hostess Inc. [1982] OLRB Rep. April 536. In that case, Molson's had subcontracted food and hospitality services formerly provided by its own employees to two subcontractors specializing in this business. As in the instant case, the subcontracting arrangement was entered into because of Molson's conclusion that the specialized subcontractors could do a better job than its own employees; and also, as in the instant case, the employees of the subcontractor worked on Molson's premises with some of Molson's equipment to provide services to Molson's detailed specification. There too, the Board observed that there may be limits on the extent to which an employer could substitute the employees of another employer for its own while retaining close control over their activities:

"43. The union argues that the language of section 1(4) is broad enough to cover a variety of subcontracting arrangements — especially those which do not involve "contracting out", but which might more appropriately be described as "contracting in", or "labour only" subcontracting. Where A enters into a relationship with B whereby B comes into A's premises to perform functions to A's specifications formerly undertaken by A's own employees, there will inevitably be what the Board in Metropolitan Parking inc., supra, described as a "symbiotic relationship" between the two business entities. The activities carried on by the two firms will be complementary. They will obviously and necessarily be "related", and efficiency will usually require that there be some degree of coordination, common control, or direction. That is the applicant's characterization of the situation in the instant case.

44. The Board accepts that there may be subcontracting relationships which can be characterized as a form of joint venture and could fall within the ambit of section 1(4). The Board adverted to that possibility in Ontario 474619 Ltd., supra. The more closely the purchaser of employee services controls when, where, how, by whom and at what price the employee services are provided, the more the activities will appear to be under joint control or direction. If at the same time the subcontractor is effectively dominated by the purchaser and it appears that the notion of a subcontract is introduced not to provide independent managerial and employee skills but rather a separate "non-union" corporate vehicle which permits the purchaser to have the same work performed in much the same way as before but beyond the ambit of its collective agreement, a section 1(4) declaration might well be warranted. It was considerations such as these which appear to have prompted the Board to issue 1(4) declarations in Donald A. Foley Limited[1980] OLRB Rep. Apr. 436, and J.H. Normick Inc. [1979] OLRB Rep. Dec. 1176, even though there was no direct financial ownership of the subcontractor in either case."

Ultimately however, the Board concluded that the subcontractors were independent businesses operated for the benefit of their own principals, and could not be considered a mere shell or the alter ego of Molson's. The Board also noted that the union had never had an unequivocal claim to the body of work now done by the subcontractors and in consequence, the Board was reluctant to permit section 1(4) to be used as a springboard for the extension of bargaining rights or work jurisdiction.

40. The situation in the instant case bears some similarities with both A & P and Mo/son's, however we are satisfied that it more closely resembles the latter case. While we accept that there may be some cases characterized as "subcontracting" which would be susceptible to the application of 1(4), we are not satisfied that this is one of them, or that even if the situation meets the linguistic parameters of section 1(4), the Board should exercise its discretion to make a section 1(4) declaration. In reaching this conclusion, we have taken a number of factors into account.

41. We note first the respondent's well established practice of subcontracting the very kind of work which the union, through the vehicle of this proceeding, is now claiming. That practice of subcontracting continued both before and after the applicant's certification and there is nothing in the parties' collective agreement to prevent it. Given this established past practice, the applicant's members do not have an unequivocal claim to the work in question nor are we satisfied on the evidence that there has been any significant erosion of their work jurisdiction. The applicant's claim relates at most, to about a dozen of the thousands of work orders issued by Ethyl and eventually completed by its own employees as by other contractors in accordance with Ethyl's longstanding practice. Moreover, such functions are peripheral to Ethyl's main activity and are of the kind which, in the industry, are typically subcontracted —often to established businesses like Catalytic. The applicant would have a stronger case if Ethyl purported to "subcontract" its core functions or, as in A & P, had the work of one of its departments done by a totally dominated corporate entity. It was situations like these which prompted the Board to pierce the corporate veil, in the Foley and Normick cases (cited supra).

42. The evidence indicates that if the work were not done by FIRM or if FIRM ceased to exist as a going concern, it would be done by one of FIR M's several competitors. In fact, it is by no means clear that the issuance of a section 1(4) declaration, would, in itself, create any redistribution of work or foreclose Ethyl from continuing very much as before. What it would clearly do, is create a legal anomaly since, two separate legal entities bound by two separate collective agreements would become a single entity for labour relations purposes. The legal uncertainties that that would create, and the potential for friction, jurisdictional disputes, and further litigation, are all obvious — especially since the line between construction and maintenance work is a hazy one, and some of the work which is done by Ethyl's own employees is clearly in the construction category and would arguably be subject to the province-wide bargaining scheme prevailing in the ICI sector of the construction industry. We are not aware of any case in which the Board has made a section 1(4) declaration in respect of a related employer with a well established collective bargaining relationship, and there are a good labour relations reasons why we should not do so.

43. We also note that this case is novel in a number of respects. There are none of the traditional indicia of common control or direction (interlocking directorships, common shareholders, shared facilities, etc.). What the union relies upon is the economic dependence of FIRM, and the role of Fairbairn.

44. There are 2 or 3 cases which ground a section 1(4) declaration on familial or economic relationships which permit one firm to exercise actual direction and control over another even in the absence of legal control or a formalized partnership or joint venture; however, these cases are a minority and none of them are similar to the present case. Here, not only are there different collective bargaining relationships, different terms and conditions of employment, and no intermingling of employees, but in addition, Ethyl has taken special steps to maintain an arm's length relationship. We are satisfied that these steps were taken bona fide, in an effort to ensure that work was not subcontracted unless it was absolutely necessary. Not only is Ethyl not intentionally using FIRM to avoid its existing bargaining obligations, it is resorting to FIRM with some reluctance, and only in circumstances where it cannot be avoided. These circumstances, when viewed as a whole, are quite remote from the problem to which section 1(4) is usually addressed, and as we have already noted, the evidence of concrete "mischief' is less than compelling.

45. Finally, the Board notes that even though the applicant was aware of FIRM's existence for more than a year, it did not file the instant application until August of 1981. Meanwhile, FIRM developed settled commercial and collective bargaining relationships. Even if we were satisfied that Ethyl's relationship with FIRM falls within the parameters and mischief of section 1(4) (and we reiterate that we are not convinced that it represents any significant alteration of the status quo) delay is a factor to be considered — especially when a direction under section 1(4) might be difficult to implement or precipitate further litigation.

46. Having regard to the totality of the evidence in this case, the Board is not persuaded that a section 1(4) declaration is warranted. The application is therefore dismissed.