Ontario Labour Relations Board
[1983] OLRB Rep. August 1293
0179-83-R; 0178-83-R International Union, United Automobile Aerospace Agricultural Implement Workers of America and its Local 27, Applicant, v. Central Chev. Olds. Inc., and 533556 Ontario Inc., carrying on business as the Complete Car Care Centre, Respondents, v. Pat-Har Holdings Ltd., Intervener
BEFORE: Ian C. Springate, Vice-Chairman, and Board Members W. H. Wightman and S. Cooke.
APPEARANCES: L. A. MacLean and Peter Kennedy for the applicant; Julius Melnitzer, Russell Raikes, Harry Mc Coy and Scott Fallis for Central Chev. Olds. Inc. and Pat-Har Holdings Ltd.; John Foster and Veronica Esbaugh for Extend-A-Life Car Care Centre and 533556 Ontario Inc., carrying on business as the Complete Car Care Centre.
DECISION OF THE BOARD; August 31, 1983
[1]. The names of certain of the respondents appearing in the style of cause of these applications are amended to read: "Central Chev. Olds. Inc.", "Pat-Har Holdings Ltd." and "Extend-A-Life Car Care Centre". "533556 Ontario Inc., carrying on business as the Complete Car Care Centre" is hereby added as a party respondent in both files.
[2]. File No. 0178-83-R is an application under section 1(4) of the Labour Relations Act. This section empowers the Board in certain instances to treat as a single employer two or more business entities that are being carried on under common direction or control. File No. 0179-83-R is an application under section 63 of the Act. Section 63 provides that where an employer bound by a collective agreement sells his business, or part of his business, the purchaser of the business is bound by the terms of the collective agreement. The section also empowers the Board to decide whether or not a business has been sold.
[3]. In July of 1981, Central Chevrolet Oldsmobile (London) Limited, the largest General Motors dealership in the City of London, was sold to Central Chev. Olds. Inc. ("Central Chev. Olds."), a company wholly owned by Pat-Har Holdings Ltd. Pat-Har Holdings Ltd. is, in turn, owned by Mr. and Mrs. H. McCoy. Mr. McCoy, who has been active in the automotive dealership business for some twenty-five years, is responsible for the overall operations of Central Chev. Olds. The actual day-to-day activities of the company are carried on under the direction of a number of departmental managers. Central Chev. Olds. is currently bound to a collective agreement with the applicant trade union.
[4]. Prior to the events giving rise to these proceedings, the service department of Central Chev. Olds. employed about six employees to wash, clean and do rustproofing work on cars. The cleaning and rustproofing was, of course, only one of a number of services provided by the service department. The rustproofing and cleaning work was done on cars'prior to them being delivered to purchasers, as well as on cars brought in for servicing if such was requested by the customer. In addition, a number of cars were brought into the dealership solely to be washed. A certain amount of rustproofing and washing work came into Central Chev. Olds. from other nearby dealerships which did not do this type of work themselves, but rather contracted it out.
[5]. Mr. McCoy took over the operations of Central Chev. Olds. in July of 1981. Shortly thereafter, he decided that the dealership should no longer perform its own washing and rust-proofing work but instead contract it out to other firms. As a result of this decision, in October of 1981, the six employees of Central Chev. Olds. who had been performing the work were laid off, and the work contracted out to a firm called "Q.A.P.". There is little evidence before the Board relating to the activities of Q.A.P. It appears, however, that Q.A.P. carried on business at facilities situated at 2 Bathurst Street in the City of London, some distance away from the Central Chev. Olds. dealership, and that the owners of Q.A.P. had no relationship with either Central Chev. Olds. or Pat-Har Holdings Ltd. The collective agreement binding on Central Chev. Olds. and the union contains no restriction on the subcontracting out of work, and at the time the union raised no legal objections to the contracting of work to Q.A.P. In addition, no claim was made that the transfer of the cleaning and rustproofing functions to Q.A.P. constituted the "sale" of part of a "business" within the meaning of section 63 of the Act.
[6]. Mr. McCoy testified that in June of 1982, Central Chev. Olds. stopped doing business with Q.A.P., and began to contract out its rustproofing and car washing work to a firm named "Permashine". There is almost no evidence before the Board relating to either the ownership or operations of Permashine. Mr. McCoy did, however, indicate that neither he, nor the companies under his control, had any direct involvement with Permashine.
[7]. In July of 1982 Ms. Veronica Esbaugh purchased the business of Q.A.P., along with its assets at 2 Bathurst Street, and changed the name of the business to Extend-A-Life Car Care Centre ("Extend-A-Life"). Central Chev. Olds. then stopped contracting out its washing and rustproofing work to Permashine and began to contract it out to Extend-A-Life. Ms. Esbaugh is employed as a nurse, and accordingly hired Mr. J. Foster to act as Extend-A-Life's manager. Ms. Esbaugh indicated that Mr. Foster had served in the same capacity with respect to other companies that had been performing work for Central Chev. Olds. Most of Extend-A-Life's work came from Central Chev. Olds., although the firm also obtained a certain amount of work from other dealerships.
[8]. During or about March of 1983, Ms. Esbaugh entered into a "partnership" with a Dr. Fred Sexton. On or about March 24, 1983, Ms. Esbaugh and Dr. Sexton incorporated 533556 Ontario Inc. with the intent of having it continue the business of Extend-A-Life under the name of the Complete Car Care Centre ("Complete Car Care"). On April 12, 1983, the numbered company formerly registered the Complete Car Care name as the name under which it was carrying on business.
[9]. The action of Central Chev. Olds. in contractingout its rustproofing and washing work in October of 1981 resulted in five of the dealership's bays becoming vacant. These bays remained vacant from October of 1981 until March of 1983, when they, along with part of the Central Chev. Olds. parking lot, were leased by Complete Car Care. Ms. Esbaugh testified that she and Dr. Sexton had decided to lease the space and have it serve as the base of operations for Complete Car Care since the facilities at 2 Bathurst Street had not proved very satisfactory. Complete Car Care pays Central Chev. Olds. $1,800 per month in rent. At the time of the hearing, the parties were in the process of entering into a written lease to formalize this arrangement.
[10]. Along with the five bays, Complete Car Care also acquired the use of a hoist, a compressor and a power washer. Complete Car Care brought to the site certain of its own equipment, including two vacuums, a compressor and a power washer. Complete Car Care provides all of the supplies that it uses in its operations. The day-to-day operations of Complete Car Care are carried on under the direction of Mr. Foster, although Ms. Esbaugh also spends some time at the site. Complete Car Care employs, and pays, approximately six employees, none of whom had previously worked for Central Chev. Olds. Direction and control over these employees is exercised only by the management of Complete Car Care, although Central Chev. Olds. does set a minimum standard for the work performed for the dealership.
[11]. Currently about sixty per cent of Complete Car Care's work emanates from Central Chev. Olds. The dealership's customers deal only with the staff of Central Chev. Olds. and have no contact with the employees of Complete Car Care. Central Chev. Olds. contracts work to Complete Car Care by way of individual purchase orders, there being an arrangement relating to how much is to be charged by Complete Car Care for various types of work. Although Central Chev. Olds. currently contracts out all of its washing and rustproofing work to Complete Car Care, it is under no legal obligation to do so. The dealership is free to at any time start contracting out the work elsewhere or (apart from space considerations), to once again start doing the work itself.
[12]. As already noted, Central Chev. Olds. accounts for about sixty per cent of the work performed by Complete Car Care. Most of the remaining forty per cent is work that is contracted to Complete Car Care by other automotive dealerships as well as by the London Public Utilities Commission, which in April of 1983 entered into a contract to have Complete Car Care do work on its vehicles. Ms. Esbaugh testified that Complete Car Care is seeking to increase its work from sources other than Central Chev. Olds.
[13]. The union takes the position that pursuant to the provisions of section 63 of the Act, Central Chev. Olds. either "sold" the rustproofing and washing part of its business to Complete Car Care, or there occurred a series of "sales" between various firms which accomplished the same result. The relevant portions of section 63 provide as follows:
"63.-(1) In this section,
(a) 'business' includes a part or 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 thereto 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."
[14]. The effect of section 63 is to preserve the labour relations status quo by transforming collective bargaining rights into a form of "vested interest", which attaches to the business entity. To accomplish this objective the statute gives a special meaning to the term "sale", envisages the continuation of bargaining rights in a severable "part" of an employer's operation, abrogates the notion of privity of contract, and virtually eliminates the significance of the separate legal identity of the new employer. In Marvel Jewelry Limited [1975] OLRB Rep. September 733, the Board summarized the effect of section 63 (then section 55) as follows:
"Section 55 recognizes that collective bargaining rights, once attained, should have some permanence. Rights created either by the Act, or under collective agreements, are not allowed to evaporate with a change of employer. To provide permanence, the obligations flowing from these rights are not confined to a particular employer, but become attached to a business. So long as the business continues to function, the obligations run with that business regardless of any change of ownership."
[15]. Given the purpose and broad language of section 63, the Board has given the section a liberal interpretation and not placed undue reliance on the legal form which a business disposition happens to take. This does not mean, however, that every business decision which prejudically affects a union's bargaining rights will be viewed as falling within the ambit of section 63. In particular, as the Board indicated in the Metropolitan Parking Inc. case [1979] OLRB Rep. Dec. 1193, the transfer of work standing by itself will generally not be sufficient to trigger the application of section 63:
“Despite the labour relations focus of the statute "the business" is not synonymous with its employees or their work. In exceptional circumstances the accumulated skills, ability, know how or business contacts of the employees may be so crucial, or irreplaceable, that their loss would mean the demise of all or part of the business as a going concern; but these cases are rare. For the most part, the continued employment of the predecessor's employees is only one factor to be considered. The reason for this is succinctly stated by the Canada Labour Relations Board in N.A.B.E.T v. Radio CJYC Ltd. et al, (1978) 1 Canadian LRBR 565:
The purpose of the successorship provisions is to preserve bargaining rights in spite of changes in the ownership or control of an enterprise. Bargaining rights are typically granted to a trade union as bargaining agent for a unit of employees or an employer employed in certain classifications or at a certain location, or for all employees with specified exceptions. Bargaining rights do not attach to certain specific employees as individuals. Therefore, in defining the concept of business for the purpose of successorship, it would be incorrect to focus upon whether certain identifiable persons formerly in the employ of A are now in the employ of B. Furthermore, to focus on that question would invite employers to avoid the successorship provisions by refusing to maintain continuity of the individuals employed.
A key to the protecting of bargaining rights must be whether there is continuity in the nature of the work done (i.e. in classifications or job content for which the union was certified) not in the actual persons who perform it...
But continuity of the work done is not sufficient alone to satisfy section 144. There must be some nexus between two employers other than the fact that one employed persons to do certain work that the other now does or will do, before one can be declared the successor of the other. Otherwise a loss of work to a competitor employer would result in a successorship. There must be some continuity in the employing enterprise for which a union holds bargaining rights as well as continuity in the nature of the work. The two go hand in hand.
(emphasis added)
A continuity of the work and/or the employees is significant, but it is
not always sufficient, to sustain a finding of successorship. This Board adopted a similar view in British America Bank Note Co. Ltd., [1979] OLRB Rep. Feb. 72 — a case which, like the present one, involved the consequences of a loss of a contract.
There are limits, however, to the extent to which section 55 (now section 63) can be used to perserve collective bargaining rights. It is clear that the provisions of this section do not attach bargaining rights to the work being performed by a business but only to the business itself. While this distinction may not be easy to draw in some cases, it is essential that it be maintained since section 55 cannot be interpreted as guaranteeing to a bargaining agent an absolute right of property in the work performed by its members. Section 55 serves only to preserve bargaining rights that have become attached to a business entity so that when that business entity is transferred, either in whole or in part, those bargaining rights survive and bind the successor employer.
This focus of section 55 is the business entity — the employer's total economic organization — not simply the work which the employees perform.”
[16]. At the time Central Chev. Olds. contracted out its cleaning and rustproofing work to Q.A.P. nothing was transferred to Q.A.P. except the work itself. In our view, this transfer of work cannot reasonably be characterized as having been a sale of all or part of Central Chev. Olds.' business. See: Ontario 474619 Ltd. [1981] OLRB Rep. Oct. 1452. At the time in question the union appears to have been of the same view since it made no attempt to bind Q.A.P. to its collective agreement. Central Chev. Olds. subsequently contracted out the work involved to a succession of firms, including Extend-A-Life at 2 Bathurst Street. The movement of the work to Extend-A-Life did not, in our view, involve a sale of all or part of the business of Central Chev. Olds. The question, accordingly, becomes whether the setting up of Complete Car Care to continue the business of Extend-A-Life and the movement of its operations from 2 Bathurst Street into space leased from Central Chev. Olds. was sufficient to turn the existing sub-contracting arrangement into a sale of a business from Central Chev. Olds. to Complete Car Care. We think not. Rather the more reasonable interpretation of what occurred is that Complete Car Care continued to carry on the pre-existing business of Extend-A-Life, but from a different location than before. In these circumstances, we are satisfied that there has not been a sale of a business from Central Chev. Olds. under section 63 of the Act.
[17]. As an alternative argument, the union contends that section 1(4) is applicable. In the view of the union, Central Chev. Olds. and Complete Car Care are carrying on associated or related activities under common direction or control, and accordingly, the Board should treat the two firms as a single employer and declare that Complete Car Care is bound by the terms of Central Chev. Olds.' collective agreement. On the evidence, it is apparent that the two firms are not under common ownership, and that they carry on their day-to-day operations under different management. Central Chev. Olds. is ultimately owned by Mr. and Mrs. McCoy and Mr. McCoy, with the assistance of a number of departmental managers, directs the affairs of the company. Complete Car Care, on the other hand, is ultimately owned by Ms. Esbaugh and Dr. Sexton, and its activities are carried on under the day-to-day direction of Mr. Foster. The union does not dispute these facts, but contends that through their sub-contracting arrangement Central Chev. Olds. does in reality control the operations of Complete Car Care.
[18]. The Board has previously accepted the proposition that sub-contracting relationships can under certain circumstances bring two nominally independent firms within the ambit of section 1(4). As was stated in the Charming Hostess case [1982] OLRB Rep. April 582, the more closely a firm which has contracted out work controls when, where, how, by whom and at what place the work is to be done, the more the activities of the two firms will appear to be under joint control or direction. Indeed, the degree of control may be so great as to lead to the conclusion that the firm allegedly contracting-out certain work is in fact the true employer of the individuals performing it, and that they are not employees of the "sub-contractor" at all. See: K Mart Canada Limited, [1983] OLRB Rep. May 649. In addition, a section 1(4) declaration may be appropriate in instances where a sub-contractor is effectively dominated by the firm letting out the work, and it appears the true purpose of the sub-contract was not to provide the dominant firm with independent managerial or employee skills, but rather to provide it with a separate "non-union" corporate vehicle with which it could continue performing the same work as before but outside of any collective bargaining obligations. See: J. H. Normick Inc. [1979] OLRB Rep. Dec. 1176 and Donald A. Foley Limited [1980] OLRB Rep. Apr. 436.
[19]. In assessing the circumstances of the case before us, we consider it noteworthy that there is apparently an accepted practice in the automotive dealership field of contracting out the washing and rustproofing of cars. One can infer from this that the work involved is not viewed as being so integral or "core" to the operation of a dealership that the management of the dealership must keep direct control over the performance of the work. This is demonstrated by the practice of Central Chev. Olds. The firm contracts out the work to Complete Car Care at a fixed price, with Complete Car Care deciding how the work is to be performed and by whom. Complete Car Care supervises and pays its own employees. This is not a case where it can reasonably be said that Central Chev. Olds. is the true employer of the individuals performing the work, or that the two firms are being carried on under joint control or direction. In addition, Complete Car Care is not under the type of domination of Central Chev. Olds. as would justify a section 1(4) declaration. Fully 40 per cent of Complete Car Care's work comes from other dealerships and from the London Public Utilities Commission, and the firm is currently seeking to expand its work from sources other than Central Chev. Olds. In the result, we do not believe that this is the type of situation in which section 1(4) is applicable.
[20]. Both of these applications are hereby dismissed.