United Brotherhood of Carpenters and Joiners of America, Local 494 v. Metro Century Construction Ltd., 1983 CanLII 832

United Brotherhood of Carpenters and Joiners of America, Local 494 v. Metro Century Construction Ltd. et al.

[1983] OLRB Rep. July 1122

2303-82-R; 2304-82-R United Brotherhood of Carpenters and Joiners of America, Local 494, Applicant, v. Metro Century Construction Ltd. and Chartex Construc­tion Ltd. and C. Mady Leaseholds Ltd., Respondents.

BEFORE: Ian Springate, Vice-Chairman, and Board Members J. Wilson and M. A. Ross.

APPEARANCES: David McKee and James Caron for the applicant; Roy C. Filion, I. Slopen, C. Mady, D. McCulloch and C. Peterson f6r the respondents.

DECISION OF THE BOARD; July 22, 1983

Reasons for Decision

1. File No. 2303-82-R is an application under section 1(4) of the Labour Relations Act. Section 1(4) empowers the Board to treat two or more associated or related businesses that are being carried on under common direction or control as one employer for the purposes of the Act. File No. 2304-82-R is an application under section 63 of the Act. Section 63 provides that an employer who "buys" a "business", or part of a business, is bound by the same collective bargaining relationships as was the "vendor". The section also empowers the Board to decide whether or not a business has been sold.

2. These proceedings involve three separate corporate entities, namely: C. Mady Leaseholds Ltd. ("Leaseholds"), Metro Century Construction Ltd. ("Metro Century") and Chartex Construction Ltd. ("Chartex"). It is acknowledged that both Leaseholds and Metro Century are owned by, and under the ultimate direction of, Mr. Charles Mady. Mr. Mady has for a number of years been active in the real estate development field in the Windsor area.

3. At the time of the hearing into these proceedings, the offices of both Leaseholds and Metro Century were in the same building on Lauzon Road in Windsor. The building was owned by Joy-Cee Management Ltd., a firm owned by Mr. Mady's wife. On February 4,1983 this building had been put up for sale with the idea that in May of 1983 the two firms would be moving to new facilities in Windsor.

4. Leaseholds was incorporated in July of 1977. The firm was originally incorporated to develop a large project known as Pickwick Place. Leaseholds subsequently sold Pickwick Place and in April of 1981 the firm was merged with Iringa Developments Ltd. another firm owned by Mr. Mady. The merged firm continued doing business under the Leaseholds' name. Iringa Developments had previously been active in the real estate and development business, and Leaseholds continued in this field. Leaseholds (and before it Iringa Developments) frequently acted as an owner-client which contracted to have construction work done for it, but the company itself never became actively involved in the construction industry. The applicant trade union holds no bargaining rights with respect to Leaseholds.

5. Metro Century was incorporated in 1978 as a construction industry general contractor under Mr. Mady's control. This company entered into a contractual relationship with the applicant trade union. Until 1980 all of Metro Century's work was done for Leaseholds. However, in 1980 the volume of Leaseholds' development work began to decline and in consequence Metro Century began to do work for other owner-clients. One of these other owner-clients was Southland Canada Ltd. ("Southland") which was then constructing a series of "7-1 1" convenience stores in southern Ontario. Because of Southland's practice of owning, rather than leasing its stores, Leaseholds had no involvement with Southland.

6. Mr. Mady is the president and sole shareholder of Metro Century. The firm's vice-president and solicitor is Mr. Jeffrey Slopen. The day-to-day activities of the company are conducted under the direction of Mr. Jim Boscariol, who was described as the firm's construction co-ordinator. Prior to the fall of 1982, Mr. Boscariol had a number of individuals working under him including Mr. Mario Muscedere, a construction supervisor, and Mr. Daniel McCulloch, a draftsman and expeditor.

7. In 1982 Metro Century entered into contracts to build two large projects in Windsor for owner-clients other than Leaseholds. Mr. Slopen testified that both contracts proved to be "disastrous" for the company due to heavy cost over-runs. In the fall of 1982 liens of over one million dollars were registered against the two projects. To compound Metro Century's difficulties, its bank called in all of the company's loans. Faced with this situation the company returned all of the equipment which it had been leasing and auctioned off most of the equipment which it owned. The company also laid off most of its employees, including Mr. Muscedere and Mr. McCulloch.

8. At the time of the hearing, Metro Century had managed to discharge all of the liens registered against the two projects, but it still had outstanding unsecured debts of approximately $250,000.00. Under the direction of Mr. Boscariol the company was finishing off the two projects with the expectation that once they were finished the company would be able to collect certain "hold backs" from the owner-clients. Given the company's precarious financial situation, it has not bid on any new work. At the hearing, counsel for the company indicated that notwithstanding the company's somewhat improved financial condition, the future of Metro Century still remained highly uncertain.

9. As already noted, one of the individuals laid off by Metro Century was Mr. Daniel McCulloch, a draftsman and expeditor. As part of his duties with Metro Century, Mr. McCulloch was responsible for lining up and dealing with various sub-contractors. Both Mr. McCulloch and Mr. Slopen testified that Mr. McCulloch had not been considered part of the management of Metro Century, and in this regard noted that he had been paid an annual salary of only $18,000.00. Mr. McCulloch was given one month's notice of lay-off on December 1, 1982. Shortly thereafter he decided to explore the possibility of establishing his own construction company. Lacking the necessary funds to establish such a company Mr. McCulloch entered into a partnership with a friend, Mr. Gary Dupuis, who was the manager of a grocery store. Because Mr. Dupuis had no construction industry background it was agreed that his role would be limited to providing the financial backing for the new company and assisting with its financial affairs.

10. Prior to actually incorporating a new company, Mr. McCulloch sought assurances that such a company would likely be able to obtain work. Early in December of 1982 Mr. McCulloch had discussions with a representative of Southland who agreed that Southland would be receptive to bids from a firm led by Mr. McCulloch. In his testimony, Mr. McCulloch acknowledged that Southland had come to know about him due to his employment with Metro Century. Mr. McCulloch also had a discussion with Mr. Mady, who indicated that Leaseholds would be willing to receive bids from a company led by Mr. McCulloch. Mr. McCulloch testified that he sought and received a similar favourable response from a local bulk warehouse firm, and that Mr. Dupuis received a similar response from the supermarket chain that employed him. Armed with these assurances, Mr. McCulloch arranged for the incorporation of Chartex.

11. Chartex was incorporated on December 24, 1982. The legal work connected with the firm's incorporation was handled by Mr. Slopen, who, in addition to his involvement with the various Mady companies, also carries on a law practice. Mr. McCulloch testified that he asked Mr. Slopen to do the legal work because he knew that Mr. Slopen was experienced in dealing with construction industry matters. Mr. Slopen billed Mr. McCulloch and Mr. Dupuis for his work. Reflecting Mr. Dupuis' financial commitment to the new firm, at the time of its incorporation he received 67 of its common shares compared to 33 received by Mr. McCulloch. Mr. McCulloch, as the person who would actually be directing the affairs of the company, was named its first president.

12. Chartex owns no major construction equipment although it did purchase some small tools from local suppliers. Chartex did not acquire any of the equipment which Metro Century sold by auction. Chartex did, however, obtain from Metro Century a drafting table and blueprint equipment for which it paid about $10,000.00. By dealing with a local bank Chartex also obtained a lease on a pick-up truck which had formerly been leased by Metro Century.

13. At the time of the hearing Chartex was carrying on business out of Mr. McCulloch's home. The drafting table and blueprint equipment were still located at Metro Century's office on Lauzon Road, where Mr. Mady had agreed they could be kept until the end of May, 1983 when Metro Century would be moving. Mr. McCulloch testified that he was actively looking for another location to keep the equipment. According to McCulloch, at the time of the hearing he was putting in a regular work week of about 60 hours. He testified that he spent about 25 to 30 hours per week in "the field", 20 to 25 hours in his office at his home, and 15 to 20 hours at the Lauzon Road facility using the drafting table and blueprint equipment. In cross-examination Mr. McCulloch testified that he had met with certain sub-contractors at Metro Century's offices on Lauzon Road, but explained that he had done so in part because dealings with sub-contractors generally involve using the blueprint equipment.

14. Mr. McCulloch handles the administrative and bidding end of Chartex's operations, as well as arranging for sub-contractors. About 80 per cent of Chartex's work is sub-let. The firm's construction projects are run by Mr. Muscedere who Mr. McCulloch hired. It will be recalled that Mr. Muscedere was laid off by Metro Century at the same time as Mr. McCulloch. Mr. Muscedere was given a free hand in hiring any required construction employees. There is no evidence before us as to whether or not he hired former employees of Metro Century. To assist with its payroll administration, Chartex uses a firm called Zena Business Consulting. Mr. McCulloch testified that Zena did similar work for Metro Century but that to his knowledge Zena is not a "Mady company".

15. The union called as a witness Mr. James Caron its business representative. Mr. Caron testified that on one project he noticed Mr. Muscedere using a loader on which the Metro Century name had been painted over. Mr. Caron further testified that he asked Mr. Muscedere if the job in question was a Metro Century project, to which Mr. Muscedere had replied that in one way it was, and in one way it was not. For his part Mr. McCulloch testified that if Mr. Muscedere had used a loader it had been without his knowledge or approval, and further that he had several times reminded Mr. Muscedere that Chartex is a different company than Metro Century.

16. Chartex has been the general contractor on a number of different projects. Two of these projects were pursuant to contracts with Leaseholds. One contract, valued at about $40,000.00 was for the renovation of both an ice-cream store and a convenience store. The other contract, valued at about $80,000.00, was for the renovation of a convenience store. In both instances Chartex had received the work after agreeing to lower its original bid price. Chartex also put in a bid for a plaza being constructed by a firm 70 per cent owned by Leaseholds and 30 per cent by Mr. Slopen. Chartex's bid was higher than that of another firm and this other firm was awarded the contract. Chartex has bid on a number of projects not connected with Leaseholds. The company has been awarded a contract by Southland to build a 7-11 store, as well as a contract for $97,000.00 from Maiden Petroleums Ltd. to build a gas bar on the same site as one of Leaseholds renovation projects. At the time of the hearing the company was awaiting a response to certain other bids it had made.

17. During the hearing, the applicant trade union established that the building permit for the 7-11 store being built by Chartex had been taken out in the name of Leaseholds, and that the permit for the installation of the gas bar was in the name of Metro Century. Mr. McCulloch testified that he personally had taken out the building permit for the 7-11 store while in the employ of Metro Century. According to Mr. MeCulloch, Metro Century had been asked as a favour by Southland to take out the permit, but in light of the liens registered against Metro Century he had decided to avoid any potential problems with the relevant municipal officials by taking out the permit in the name of Leaseholds. As for the gas bar, Mr. McCulloch testified that he thought that the permit had been taken out in the name of Metro Century because that firm was licensed to install gas facilities. As already noted, the gas bar was being installed on a Leaseholds' site.

18. In his final submission, counsel for the union indicated that given the facts involved, the union was not now seeking to bind Leaseholds to a collective agreement. Counsel indicated, however, that the union desired an order that would bind Chartex to the agreement that Metro Century was bound to. In this regard counsel contended that Leaseholds and Metro Century had been carrying on a "composite business" and that the Metro Century part of this composite business had been sold to Chartex. In the alternative, counsel contended that Metro Century, Leaseholds and Chartex should be treated as a single employer for the purpose of the Act in that Chartex had been created to take the place of Metro Century after it had run into financial difficulties.

19. We propose to first deal with the allegation that there has been a sale from a "composite business" of Leaseholds and Metro Century to Chartex within the meaning of section 63 of the Act. The effect of section 63 to ensure that when a business, or part 6f a business, is disposed of, the purchaser acquires it subject to the collective bargaining obligations of the vendor. For the section to apply, however, a "business" or part of a business must have changed hands and not simply certain assets. As the Board noted in The Charming Hostess Inc. case [1982[ OLRB Rep. April 536, the decision as to whether or not a business or part of a business has been transferred, as opposed only to) certain assets, is often a difficult one:

"28. It is seldom very difficult to determine that a predecessor has disposed of "something", nor is it difficult to discern when a trade union's bargaining rights have been prejudicially affected. A more complex question, however, is whether the nature of the disposition and what is disposed of, bring the transaction within the scope of section 63. This requires an assessment of the transaction in its totality and a consideration of its labour relations (rather than commercial law) perspective. In addition to the continuity of the work or jobs (without that, a continuation of the collective bargaining relationship would make little sense) a number of other factors may be relevant to the successor rights issue. In Culverhouse Foods Ltd. [1976[ OLRB Rep. Nov. 691, the Board listed some of these:

'In each case the decisive question is whether or not there is a continuation of the business.. .the cases offer a countless variety o)f factors which might assist the Board in its analysis: among other possibilities the presence or absence of the sale or actual transfer of goodwill, a logo or trademark, customer lists, accounts receivable, existing contracts, inventory, covenants not to com­pete, covenants to maintain a good name until closing or any other obligations to assist the successor in being able to effectively carry on the business may fruitfully be considered by the Board in deciding whether there is a continuation of the business. Additionally, the Board has found it helpful to look at whether or not a number of the same employees have continued to work for the successor and whether or not they are performing the same skills. The existence or non-existence of hiatus in production as well as the service or lack of service of the customers of the predecessor have also been given weight. No list of significant considerations, however, could ever be complete; the number of variables with potential relevance is endless. It is of utmost importance to emphasize, however, that none of these possible considerations enjoys an independent life of its own; none will necessarily decide the matter. Each carries significance only to the extent that it aids the Board in deciding whether the nature of the business after the transfer is the same as it was.

If many of the elements that made up the predecessor's business organization can be found in the hands of the successor, and are used for the same business purposes, there is usually a strong inference that there has been a "sale of a business" to which section 63 should apply. If, on the other hand, the alleged successor has its own established business organization by which it services the predecessor's customers, the inference may be otherwise — even if it has acquired some assets or other incidental elements which might be traced to the predecessor. (See also Kenmir v. Frizzel et al., 11968! 1 All E.R. 414, and R. v. B.C. Labour Relations Board Ex parte. Lodum Holdings Limited (1969), 1968 CanLII 586 (BC SC), 3 DLR (3d) 41.)"

20. In the instant case the only assets of Metro Century that were transferred to Chartex were a drafting table and blueprint equipment. Chartex has not acquired the facilities, construction equipment or name of Metro Century. On these facts, we are led to conclude that Mr. McCulloch, with the financial backing of Mr. Dupuis, established a new business and that Chartex did not acquire either the business of Metro Century, or part of the business of a "composite" of Leaseholds and Metro Century. Accordingly, we are satisfied that the application under section 63 o)f the Act cannot succeed.

21. This then leaves the application under section 1(4) of the Act. As noted earlier this section empowers the Board to declare two firms under common direction and control to) be a single employer. The union contends that given the facts present here, and in particular Mr. McCulloch's involvement with both Metro Century and Chartex, a section 1(4) declaration would be appropriate. In the Brant Erecting and Hoisting case [1980] OLRB Rep. July 945, the Board recognized that in the construction industry a single individual may well be central to a firm's operation. In that case the "key figure" in one company that had suffered certain financial reverses established a new company under his control. Due to the fact that the same individual had been "key" to both companies, the Board concluded that section 1(4) of the Act should apply to bind the new company to the bargaining rights applicable to the earlier company. The facts of the instant case, however, are much different. Mr. McCulloch was neither the owner nor the controlling force" behind Metro Century. The experience he acquired at Metro Century, and the contacts he made while there, have doubtless proved to be of assistance to him at Chartex. However, the mere fact that an individual on forming his own company has certain advantages due to his experience with a previous employer does not by itself result in the two companies being under common direction or control. Accordingly, we do not believe a section 1(4) declaration to be appropriate simply on the basis of Mr. McCulloch's earlier employment with Metro Ccutury.

22. As an alternative position, the union contends that there exists a functional interdependence between Leaseholds and Chartex and that through this interdependence Leaseholds in fact exercises control over Chartex. The Board has recognized that two nominally independent employers may in certain circumstances be so functionally and economically integrated as to in reality be under common direction and control and appropriately treated as one employer. See: J. H. Normick Inc. I [1979] OLRB Rep. Dec. 1176. Certain facts in the instant case do suggest a close relationship between Chartex on the one hand and Leaseholds and its sister company Metro Century on the other. These facts include Chartex's acquisition of two large contracts from Leaseholds which in the past would likely have been awarded to Metro Century, Mr. Muscedere's operation of a Metro Century loader and the way the permits for certain of Chartex's jobs were acquired. Certain other considerations, however, suggest that Chartex is not so interrelated with Leaseholds as to be under its control. In particular, it is clear that Chartex has acquired work from firms other than Leaseholds and that it has placed bids on other non-Leaseholds projects. The evidence also establishes that Chartex sought, but failed, to obtain the contract for a project being built by a company 70 per cent owned by Leaseholds and 30 per cent owned by the Vice-President of Leaseholds. Taking this evidence as a whole, we are, on balance, led to the conclusion that Chartex is not so functionally integrated with Leaseholds as to justify the Board making a section 1(4) declaration.

23. Having regard to the above, both of these applications are hereby dismissed.