[1982] OLRB Rep. December 1814
1216-82-R Christian Labour Association of Canada, Applicant, v. Carroll Electric (1982) Limited and J. B. Carroll Electric Limited, Respondents.
BEFORE: Corinne F. Murray, Vice-Chairman, and Board Members S. Cooke and L. Hemsworth.
APPEARANCES: Owen Gray and Hank Beckhuis for the applicant; Donald F. O. Hersey and Pat Carroll for Carroll Electric and R. F Cline for J. B. Carroll Electric, respondents.
DECISION OF THE BOARD; December 20, 1982
This is an application under section 63 of the Labour Relations Act for a declaration that J. B. Carroll Electric Limited ("J. B. Carroll Electric") transferred business in whole or in part to Carroll Electric (1982) Limited ("Carroll Electric") and that Carroll Electric has been and continues to be bound by the terms of the collective agreement between the applicant and J. B. Carroll Electric effective April 1981 to April 1983. As a part of its application under section 63 (Form 26) the applicant also relies, in the alternative, on section 1(4) of the Act to support its request for a declaration that the two respondents carry on associated or related activities or businesses and that they should be treated as constituting one employer for the purposes of the Act from and after September 20, 1982.
At the outset of the hearing the respondent, Carroll Electric, requested an adjournment claiming the application was premature because it occurred a mere 12 days after the incorporation of Carroll Electric. This prematurity has caught Carroll Electric, only partially complete in its development as a company "divorced' from J. B. Carroll Electric. The applicant resisted the adjournment saying that the application was merely made promptly to avoid criticism from the Board for delay in protecting its bargaining rights. The Board ruled that no adjournment should be granted.
The evidence is not significantly in dispute. J. B. Carroll Electric was incorporated in 1945 by J. B. Carroll. Since approximately 1970 the employees of J. B. Carroll Electric have been represented in collective bargaining by the applicant. There is a subsisting collective agreement between them which will terminate April 1983. Up until 5 years ago J. B. Carroll Electric had been largely involved as an electrical contractor in the construction of major shopping malls. When this work declined in 1976, J. B. Carroll Electric was under pressure to diversify into other areas of electrical work. Between 1976 and January 1982, J. B. Carroll Electric's business therefore has been comprised of:
(1) general electrical contracting on a smaller scale than shopping mall construction and bidding related thereto;
(2) construction of substations;
(3) maintenance of high voltage equipment;
(4) service calls from regular customers requiring electrical work.
In January of 1982, consultants were retained by J. B. Carroll Electric to advise on its operations. At this time the staff of J. B. Carroll Electric was down to a minimum and there was such a lull in business activity that the owner and managers of J. B. Carroll Electric did not know whether drastic changes were needed or not. The consultants advised, among other things that J. B. Carroll Electric should not cut its staff any further, it being the consultant's belief that if the company got through the winter of 1982, an economic upturn in the spring would bring sales back. The consultants suggested as well that J. B. Carroll Electric get into annual testing of high voltage substations. Therefore, in May or June of 1982 the company diversified into this new area. This diversification was not without its costs, i.e., $45,000 ($30,000 capital outlay for the equipment and $15,000 of man-hours to sell the service). But even with this new work and other jobs that were picked up during the course of the summer, by August it was apparent that all the contract work would be concluded in 6 weeks.
J. B. Carroll Electric is and has been owned, since its inception, by J. B. Carroll who is currently 59 years old. J. B. Carroll was present at the hearing but did not testify, therefore any information about him or his enterprise must be drawn from other witnesses, one of whom was his 30-year old son, E. Patrick Carroll ("Mr. P. Carroll"). Mr. P. Carroll was never either a shareholder or director of his father's company. He has been employed in a number of capacities with his father's business for approximately 17 years. His association was reduced during the years he pursued a degree in engineering science, but in June 1981, having obtained this degree, he rejoined his father's company. Prior to entering this program, Mr. P. Carroll was a licensed electrician, like his father. Part of the motivation for him returning to school was in response to an allegation by the Association of Professional Engineers that J. B. Carroll Electric was engaged in the practice of engineering.
Between June of 1981 and September of 1982, Mr. P. Carroll was aware of his father's company's declining position and was concerned about the very continued existence of J. B. Carroll Electric. Not only was the business itself stagnating, but the morale of the employees was deteriorating. Mr. P. Carroll testified that there was a lack of respect between the employees and his father. He did not say why this had occurred. One of the recommendations of the consultants retained in January of 1982 was that Mr. P. Carroll eventually take over J. B. Carroll Electric and his father's involvement be phased out until he became simply an advisor. It is unclear whether this suggestion was the cause of or was merely coincidental with Mr. J. B. Carroll's intention to retire within two years. Early in January Mr. P. Carroll met with J. B. Carroll Electric's employees to discuss the direction of J. B. Carroll Electric would be taking in the future and to this end distributed a proposed organizational chart. This showed Mr. P. Carroll as Vice-President of J. B. Carroll Electric reporting to his father who would continue as President. Mr. P. Carroll described his role as a buffer between his father and the rest of the organization and acknowledged that he was known as Vice-President of J. B. Carroll Electric, even though this is not shown in a formal way "on the books". Mr. P. Carroll went along with the consultants' plan and worked with the employees of J. B. Carroll Electric throughout the spring and summer of 1982 to convince them that he could run his father's business.
However, by late August or early September 1982, Mr. P. Carroll considered it necessary to set up his own company. He explained his decision to have been a choice from among several options. One was to take the "high voltage" business and set up a division in his father's company or to set up a whole new company devoted strictly to this work. Mr. P. Carroll rejected the latter because he felt certain "obligations" to his father, and if he had left his father at this time, his father would have had to liquidate inventory. He thought this would make it harder for him to get equipment for the high voltage work he wanted to do. He also said if he left his father and his father had to liquidate, it would have been hard for him to get a start and "we would have lost all our old customers". He acknowledged having advised his father in August that if something was not done, the bank would seize the assets of J. B. Carroll Electric. Mr. P. Carroll stated that he decided not to "take over" J. B. Carroll Electric and retained his father as a consultant, because he had failed to convince the employees he could do this and he was losing their respect in the process. Mr. P. Carroll also acknowledged that one of the liabilities he would have if he took over J. B. Carroll Electric was the rates he would have to pay to its employees. He claimed that if he was to remain in Tillsonburg and do electrical contracting and high voltage work, he had to have "competitive wages". His competitors were non-union and could, as a result, pay less. In Mr. P. Carroll's estimation, employees of J. B. Carroll Electric had taken the company's size for granted and had resisted wage concessions, choosing layoff and UIC payments instead or going to work for a competitor who was non-union. As a result of these high levels of wages, Mr. P. Carroll stated that outside of Tillsonburg, no one could afford "us" - meaning J. B. Carroll Electric.
Early in September Mr. Carroll, accompanied by his father, visited a lawyer to discuss his plans to incorporate a new company. The lawyer was a partner of the counsel for J. B. Carroll Electric in these proceedings. The actual incorporation of Mr. P. Carroll's new company was done by a Mr. Greg Mansell who was acknowledged to have filed the Reply on behalf of J. B. Carroll Electric in these proceedings. The name Mr. P. Carroll chose for his new company was Carroll Electric. In order to use this name he required his father's consent which was obtained September 9, 1982. Carroll Electric (1982) Limited was incorporated on September 17, 1982. The financial arrangements to start up Carroll Electric were a $10,000 demand loan, advanced September 23, 1982 from a chartered bank, an assignment of book debt to the same chartered bank on October 29, 1982, and a running credit line of $5,000 on Mr. P. Carroll's personal guarantee. Mr. P. Carroll is the President, and aside from signing officers, there are no other officers or directors. On or about September 16th or 17th Mr. P. Carroll ordered business cards to be printed showing the company's business address as 17 Bloomer Street and the business telephone number as (519) 842-9021. The address of J. B. Carroll Electric was acknowledged to be 17 Bloomer, and the business number 842-9021 to be the first of 4 trunk lines leased by J. B. Carroll Electric. Exhibit 6 was a sample of this business card which Mr. P. Carroll testified had been revised by inking in "5" over the "7" so that the address would read "15" Bloomer Street and the telephone number was similarly changed so that the number was another trunk line of J. B. Carroll Electric. Mr. P. Carroll candidly admitted that these changes took place after he received the instant application. The letterhead of Carroll Electric was created by "cutting and pasting" from J. B. Carroll Electric's letterhead, i.e., deletion of the initials "J. B.", the lightning bolt logo with "J. B." on it and adding "(1982)". The address and telephone number shown on both letterheads are the same. Mr. P. Carroll testified that after September 17, 1982, a shared receptionist answers the phone "Carroll Electric" and no one is confused. This receptionist had been employed by J. B. Carroll Electric immediately prior to becoming receptionist for Carroll Electric. All of the premises located between 9-17 Bloomer Street are owned by J. B. Carroll personally and he rents them in its entirety to J. B. Carroll Electric. In turn J. B. Carroll Electric sublets a portion (one-third) of the premises to Cunningham Sheet Metal, a separate enterprise from either of the respondents. Aside from a residence at 9 Bloomer Street, the remaining area is comprised in major part of inventory owned by J. B. Carroll Electric. Carroll Electric occupies only 5% of this area. The rent Carroll Electric will pay for this had not been finalized at the date of the hearing. A common reception area for all three companies exists behind a door with "17" on it. This area is located in a trailer linked to the main premises. Recently a nearby door has had a "15" affixed to it but no evidence was given as to where this door led. Pictures of this portion of the premises show that the external signs indicating "J. B. Carroll Electric Ltd." remain and that the trucks show the same name and number. Carroll Electric uses these trucks along with tools and equipment belonging to J. B. Carroll Electric but rental or purchase price of them had not been worked out. Carroll Electric has used inventory of J. B. Carroll Electric and has been invoiced for materials used but has not paid for them as of the date of hearing. Mr. P. Carroll testified that he purchases as much as he can to help J. B. Carroll Electric reduce its inventory which is valued at over half a million dollars.
On Monday, September 20, 1982, Carroll Electric had 7 employees. All except one (Wayne Beard) had been employed until Friday, September 17, 1982, by J. B. Carroll Electric and four of these six employees were in the bargaining unit represented by the applicant. They, along with other bargaining unit employees, had been advised on September 9, 1982 by Mr. P. Carroll, on behalf of J. B. Carroll Electric, and by letter signed by J. B. Carroll that "due to economic pressures and lack of sufficient work" they were being laid off effective September 17, 1982. The other 2 not a part of the bargaining unit which were hired from J. B. Carroll Electric by Carroll Electric were the receptionist and operations manager. Mr. P. Carroll said that he alone hired all of these employees and set their rates of wages which are less than what they received at J. B. Carroll Electric and a little higher, though compatible, with competitors. Carroll Electric also does not provide the benefits previously provided pursuant to a collective agreement by J. B. Carroll Electric. Until November 5, 1982, J. B. Carroll Electric retained management employees who were working out their notice period and who will not be employed by Carroll Electric (1982) Ltd. After their departure, there will be no employees remaining at J. B. Carroll Electric.
Between September 20th and the date of the hearing, all of these former employees of J. B. Carroll Electric have been engaged in essentially the same sort of work as they had done with J. B. Carroll Electric prior to September 17, 1982. Most of the work described as service calls, have come from former customers of J. B. Carroll Electric. Indeed, the way in which most of this work appears to have come to Carroll Electric was through these customers calling by telephone. Carroll Electric has also been engaged in bidding and doing general contracting work, some of which being work J. B. Carroll Electric was initially involved in. The only employee who had not been employed formerly by J. B. Carroll Electric, Wayne Beard, came looking for a job on September 16, 1982, and "came on staff' with Carroll Electric approximately September 23rd. Mr. Beard is an electrical technician with 6-8 months to go before becoming a certified electrical technician (C.E.T.). As a former employee of Westinghouse, he has been successfully selling Carroll Electric's ability to conduct high voltage testing on a larger scale than done by J. B. Carroll Electric and coordination studies, a service J. B. Carroll Electric never provided. He also has proved invaluable in dealing with an emergent problem at the Simcoe P.U.C. which Mr. P. Carroll could not be sure could have been done by the other electricians. Mr. P. Carroll is interested in expanding this area of the business to take advantage of and to develop his own newly-acquired engineering training and also to have "something extra" that other electrical contractors do not have. Notwithstanding J. B. Carroll Electric having no employees beyond the 2 remaining managers, J. B. Carroll Electric does a "little bit of bidding" along with counting inventory and collecting accounts. There was some conflict in the evidence between what Mr. P. Carroll claims he said to one Ed Hill, a former employee of J. B. Carroll Electric, and what Mr. Hill says he heard Mr. Carroll say regarding how J. B. Carroll Electric and Carroll Electric would operate in future. Mr. Carroll says that he told Hill that "together we had 2 companies; that he would bid on non-union jobs and J. B. Carroll Electric would bid on union jobs". By using "we" at the time, he claims to have meant his father and himself, and that now "we" meant Wayne and himself. Mr. Hill claims that Mr. Carroll, prior to October 2, 1982, told him that basically there were two companies; he was taking over the company as a bidding contractor and there was no union. Mr. Hill claimed that Mr. Carroll said if he got a union job, he would take one employee from the shop and hire men from the area. He did not know whether Mr. Carroll said union people from the area or not and under cross-examination claimed not to understand what Mr. Carroll was telling him at all.
Section 63(1) and (2) provide:
63.-(l) In this section,
(a) "business" includes a part of parts thereof;
(b) "sells" includes leases, transfers and any other manner of disposition, and "sold" and "sale" have corresponding meanings.
(2) Where an employer who is bound by or is a party to a collective agreement with a trade union or council of trade unions sells his business, the person to whom the business has been sold is, until the Board otherwise declares, bound by the collective agreement as if he had been a party thereof and, where an employer sells his business while an application for certification or termination of bargaining rights to which he is a party is before the Board, the person to whom the business has been sold is, until the Board otherwise declares, the employer for the purposes of the application as if he were named as the employer in the application.
(emphasis added)
Section 1(4) provides:
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.
Both sections are directed at the preservation of bargaining rights and allow the "tracing" of these rights through corporate changes and transfers of elements of a business (see Culverhouse Foods Ltd., [1976] OLRB Rep. Nov. 691). Section 1(4) differs notably from section 63 in that there need not be a transfer of "business" from one employer to the related employer. For this reason section 1(4) has been mainly useful in the construction industry where many of the employers generally do not have the permanence of an investment in a 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 and a labour force as required after it has made a successful bid. There may be no established economic organization, labour force or configuration of assets. A single principal or configuration of principals may have several companies which are used, more or less interchangeably, so that bidding is done and work performed through whichever company is convenient. Similarly, where capital requirements are minimal and business relationships transitory, it is relatively easy to wind up one business, and create another one which carries on essentially the same business activity as before (Brant Erecting and Hoisting, [1980] OLRB Rep. July 945 at paragraph 13). In such circumstances there would be a continuation of the same business activity without any indicia of a "sale of business" i.e., the apparent disposition of assets, inventory, trade names, goodwill, employees, etc. Section 63 has been largely useful in the industrial sector of collective bargaining where usually there are dispositions of assets, inventory, trade names, goodwill and employees, to name only partially the list of indicia the Board has looked to in order to determine whether a "sale" has taken place.
From the evidence presented to the Board it is clear that two corporate entities are involved, thereby bringing both section 1(4) and section 63 potentially into play.
In view of the fact that this application was brought under section 63 and that the request for the application of section 1(4) is an alternative ground, the Board has considered primarily whether there has been a "sale of a business" within the meaning of the Act. In most cases the determination of whether a "sale" within the meaning of section 63(1)(b) has taken place is not an issue because the fact that there has been a disposition of some variety is usually clear. The usual question is whether the elements disposed of constitute a "business". In light of the timing of this application and the familial connection between the two respondents, the full dimensions of the disposition in this case are not totally clear. Notwithstanding this lack of clarity, the Board has concluded that a "sale of a business" within the ambit of section 64(1)(b) of the Act has taken place. It has been established for some time that the definition of "sale" in section 63(1)(b) of the Act is capable of describing a multitude of transactions "whether by sale, exchange, gift, trust or otherwise by which property, rights or interests, etc. are transmitted absolutely, conditionally, etc. or by operation of law from one person to another" (see Thorco Manufacturing Ltd., 65 CLLC ¶16,052). While the totality of the details of the transaction between the two companies has not been finally concluded, a sufficient number of the key elements are clear. Carroll Electric rents a portion of the premises formerly occupied by J. B. Carroll Electric. Carroll Electric's name is close enough to J. B. Carroll to require Mr. J. B. Carroll to have given his permission for its use. Carroll Electric has been purchasing the inventory of J. B. Carroll Electric as necessary and there is a clear intention to continue to do so in order that J. B. Carroll Electric's huge inventory be reduced. The financial arrangements, if any, for the use of J. B. Carroll Electric's trucks, tools and equipment have yet to be made. If there are no financial arrangements, then the transaction would constitute at least a conditional gift. Virtually all the remaining employees of J. B. Carroll Electric have been hired by Carroll Electric with only a weekend intervening. Carroll Electric uses the telephone system of J. B. Carroll Electric, for which the latter receives reimbursement, and it is through this system that Carroll Electric has gained access to customers who require service work. No payment has yet been arranged to compensate J. B. Carroll Electric for value of this "goodwill" or these contracts. There is no doubt Carroll Electric has been using these calls as a foundation for starting to build its business.
As for whether the "business" of J. B. Carroll has been transferred through the above arrangements or not, the Board has concluded that the core of what J. B. Carroll was doing is now being done by Carroll Electric. The employees who testified for the applicant confirmed this and indeed Mr. P. Carroll himself confirmed this. While a new direction or emphasis in the high voltage work is planned, the basis upon which Carroll Electric has thus far been built is J. B. Carroll Electric's general electric contracting and service business together with high voltage substation contacts. It is clear that if Carroll Electric were a company incorporated by a manager of J. B. Carroll Electric who was not also J. B. Carroll's son, the Board would have no difficulty in concluding that the business had been transferred within the meaning of sections 63(1) and (2). As the Board stated in Raymond Cote, [1968] OLRB Rep. March 1211:
It has been expressed that a business is "the totality of the undertaking". The physical assets of the buildings, tools and equipment used in a business are not necessarily the undertaking per se but are, along with management and operating personnel and their skills necessary in the operations to fulfill the obligations undertaken with a hope of producing profit to assume its success. The totality of these along with certain intangibles such as goodwill constitute a business.
Mr. P. Carroll was second in command to J. B. Carroll and was involved with his father's business for 17 years. This, combined with the fact that virtually all of the same customers of J. B. Carroll Electric are now being served by Carroll Electric through the conduit of a shared telephone system and through the skill and know-how of the former employees of J. B. Carroll Electric, has led the Board to conclude that at least part of the "business" of J. B. Carroll Electric has been disposed of. Except for the difference in the form of disposition, these facts are similar to those of Tatham Company Limited, [1980] OLRB Rep. March 366 where the Board concluded that an excavating "business" had been disposed of because of the simultaneous transfer of essential assets, know-how of employees and instrumental management people, all of which served the same market from the same physical location. The Board in that case concluded that the transferral of these combinations of elements eliminated the former company as a competitor. While in this case Mr. J. B. Carroll may be continuing to do some bidding, which he formerly did, the nature and scale of it presumably has changed in view of the fact that no employees remained in his employ, and there is an intention on his part to retire within 2 years. In any event, the continuation of the major parts of his business is now accomplished by Carroll Electric.
It has been said that while no anti-union animus must be proved to succeed under either section 1(4) or section 63, it is nevertheless a relevant consideration (see Grand Valley Ready Mix, [1981] OLRB Rep. June 663; Moore Groceteria Limited, [19801 OLRB Rep. April 486.) In this instance it is clear that an important reason why Mr. P. Carroll wished to incorporate his company was in order to avoid the collective bargaining obligations under which J. B. Carroll Electric operated. He testified that if he were to remain in the Tillsonburg area and do contracting and high voltage work, he would have to have competitive wages. Since his competitors were non-union, he needed to be non-union. Two years before, J. B. Carroll Electric employees in this bargaining unit had been asked to make wage concessions to be more competitive, but this had been rejected. In light of this the only route to competitiveness was through a non-union work force. Section 63 was enacted to block this very type of avoidance. While the content of a collective agreement always has an impact on competitiveness, any negative impact must be resolved in the normal course of collective bargaining, not through avoidance thereof. This is not a situation where a company is formed to compete with another. The formation of his own company meant that Mr. P. Carroll was not "leaving" his father. In his own testimony he chose not to leave him because if he did, it would have been hard for him to get started. After all, J. B. Carroll Electric was a going concern with customers, "goodwill", inventory and the kind of equipment best suited to the high voltage work Carroll Electric wished to increase. Therefore, it is the Board's conclusion that incorporation of Carroll Electric was intended in part to avoid one of the two significant liabilities J. B. Carroll Electric had - a collective bargaining relationship.
For all these reasons the Board has concluded that there has been a sale under section 63(2) and the Board so declares. In view of the Board's conclusion, it is unnecessary to deal with the applicant's alternate ground resting on section 1(4) of the Act.
The Board will remain seized if there is any difficulty implementing this decision.