Amalgamated Clothing and Textile Workers Union, Toronto Joint Board v. 529592 Ontario Limited Carrying on Business as Shiffer-Hillman Clothes, 1983 CanLII 907

[1983] OLRB Rep. May 764

2435-82-R Amalgamated Clothing and Textile Workers Union, Toronto Joint Board, Applicant, v. 529592 Ontario Limited Carrying on Business as Shiffer-Hillman Clothes, Respondent

BEFORE: R. A. Furness, Vice-Chairman, and Board Members C. G. Bourne and S. Cooke.

APPEARANCES: James K. Hayes, Giannino Mitrano and Jack Matria for the applicant; R. Michael Power for the respondent.

DECISION OF THE BOARD; May 31, 1983

1. The applicant has applied under section 63 of the Labour Relations Act with respect to the bargaining rights of the applicant as a result of an alleged sale of a business by Shiffer-Hillman Company Limited to 529592 Ontario Limited in January of 1983. In the alternative, the applicant sought relief under section 1(4) of the Act.

2. In its reply, the respondent opposed the claims for relief and adopted the position that it is not a successor employer. It was the position of the respondent that it purchased the assets of Shiffer-Hillman Company Limited ("Shiffer") from the receiver, Peat-Marwick Limited, and no longer carries on the same business. It was also the position of the respondent that it no longer manufactures clothing and that it sells to the public which Shiffer did not do.

3. The premises of Shiffer were formerly located on three and a half floors at 197 Spadina Avenue in the City of Toronto. In 1981, Shiffer owed approximately two million dollars to the Canadian Imperial Bank of Commerce (the "bank"). Mrs. Rachel Hillman, who received her shares from her deceased husband, is the principal shareholder in Shiffer and owns about three quarters of the issued shares. Almost all of the remaining shares are held by Rachel Hillman's daughter, Mrs. Ruth Waldman, with a law firm in Toronto owning a few nominal shares.

4. In 1981 the bank requested additional security to cover the debt of two million dollars. The shareholders of Shiffer declined to provide the added collateral for the debt and the bank appointed Peat-Marwick Limited as receiver in May of 1981. At that time Shiffer also owed about four hundred thousand dollars to trade creditors and buyers. The receiver collected the accounts receivable, continued to operate Shiffer and manufacture all the raw inventory and sold off some four thousand suits which formed the greater part of the finished inventory. Until Shiffer was placed in receivership, Samuel Waldman was its general manager and vice-president. His employment with Shiffer was terminated on December 4, 1982.

5. The receiver auctioned off most of Shiffer's equipment and machinery and the proceeds amounted to between one hundred and twenty-five and one hundred and fifty-five thousand dollars. There were no bids for the items which were not sold. The unsold items consisted of a few clothing racks, sewing machines, old pressing machines and sewing tables. Mr. Waldman attended the auction but did not bid on any of the items.

6. After the auction, the receiver still held about one hundred and fifty suits, one hundred ladies' skirts, clothing racks, two or three sewing machines, patterns, a trade name, some office desks, two typewriters, adding machines and three motor vehicles (a 1975 Cadillac, a 1977 Station Wagon and a 1978 Buick). These items had not been offered at the auction because the receiver was engaged in conducting a public sale and required most of the items referred to in this paragraph in order to conduct the sale. The receiver obtained a valuation of these items and asked Mr. Waldman to put in an offer if he wished to do so. Mr. Waldman did make an offer to the receiver. His offer was better than an offer by Danbury Sales and was accepted.

7. Mr. Waldman arranged the incorporation of 529592 Ontario Limited for the purpose of making this offer. The offer and acceptance by the receiver were in the following form:

Peat Marwick Limited December 10th, 1982 Trustees in Bankruptcy Commerce Court West P.O. Box 31 Commerce Court Postal Station Toronto, Ontario

MSL 1B2

Attention: Mr. Joe Tucker

Dear Sir:

Re: Shiffer-Hillman Company Limited

529592 Ontario Limited is prepared to purchase the assets, fixtures, and inventory of Shiffer-Hillman Company Limited as follows:

1. Inventor

(a) 123 Mens Suits @ $15.00 $1,845.00 (b) 17 Ladies Suits @ $15.00 255.00 (c) 61 Mens and Ladies Jackets @ $10.00 610.00 (d) 196 Mens and Ladies Skirts and Slacks @ $ 5.00 980.00 (e) 23 '' " Specials $10.00 230.00 Total $3,920.00

2. All Fixtures and equipment, patterns, name "Shiffer-Hillman", and any other assets re sale and manufactured by Shiffer-Hillman Company Limited for the total sum of $2,000.00

3. Vehicles

(a) 1978 Buick four-door sedan $1,500.00 (b) 1978 Oldsmobile stationwagon $ 600.00 (c) 1975 Cadillac $ 25.00

$1,000.00 is being held by you as a deposit and balance is to be paid on closing and final inventory.

529592 ONTARIO LIMITED

Per: "Samuel Waldman"

Samuel Waldman - President

All assets described above are sold "As Is; where is", without any Warranty either express, implied or given.

Per: Peat Marwick Ltd. (Signature illegible)

December 17/82

Witnessed by: "James Price"

JAMES PRICE

9. It was the intention of Mr. Waldman through 529592 Ontario Limited to start a new business of selling directly to the public. The items referred to in the letter dated December 10, 1982, were not sufficient to begin a business. For example, most of the suits were size thirty-six and additional inventory was purchased from other manufacturers in the Toronto area. The respondent commenced business on December 21 or 22, 1982, and has since negotiated and executed a lease for half of a floor of the three and a half floors formerly occupied by Shiffer.

10. At the time of the hearing in March of 1983, the respondent employed six persons —three in sales, two on alterations, and one cutter. Four of these persons are employed full-time with the cutter and one of the persons employed on alterations working part-time. The respondent does not sell to retailers and the three sales staff sell only to the public with minor alterations to clothing. The respondent does not manufacture on its premises. The respondent buys from manufacturers and also obtains suits from separate small companies which manufacture suits to the specifications and patterns which the respondent purchased from Shiffer. In contrast, Shiffer did not purchase clothing from the manufacturers which supply the respondent. Of the respondent's present staff — a tailor, a seamstress, a cutter and three sales staff - all previously worked for Shiffer. The tailor, seamstress and cutter were, and are, members of the applicant. The forty-nine former employees of Shiffer were given the required notice under the Employment Standards Act. At the time of the auction there were two employees working in the tailoring shop. There is no equipment or machinery on the premises other than the items acquired from the receiver.

11. By December 10, 1982, the cutter and the seamstress were terminated by the receiver. However, the tailor was kept on until after December 10 to finish what had been sold the public. Later in December, however, even the tailor was terminated by the receiver. A salesman and another employee were retained by the receiver after December 10 to finish off alterations and sell to the public. On December 12 or 13, 1982, the receiver closed the premises to complete inventory. The respondent is now using the Shiffer-Hillman name as a clothing label. The clothes are produced at small shops according to the Shiffer-Hillman patterns now owned by the respondent and the label is attached. At the present time the name Shiffer-Hillman appears on the respondent's stationery and also appears on the premises. The two small companies which manufacture and provide the clothing to the respondent are in essence contracting companies. The respondent uses the same telephone number as was formerly used by Shiffer.

12. Shiffer was bound by a collective agreement between the applicant and the Men's Clothing Manufacturers Association of Ontario effective from December 1, 1980, until November 30, 1983. The receiver abided by the terms of this collective agreement during the period of its receivership. The respondent commenced its operations on or about December 21 or 22, 1982, and one of its present employees came a few days later before Christmas of that year. Other employees commenced their employment with the respondent at the end of December or the beginning of January, 1983. The respondent entered into the understanding about the lease in December of 1982. The respondent concedes that it is an advantage to stay in the same location because the receiver had engaged in an expensive advertising campaign in the Globe & Mail. The respondent has continued this with a series of advertisements in December, January and February, which proclaim the "Miracle on Spadina Avenue", "Canada's Finest Suitmaster Continues To Sell Direct From The Factory!" and "Thanks to the miracle on Spadina Avenue the NEW Shiffer Hillman is alive and well and is still offering the finest clothing from their factory showroom. We thank our customers who have supported us during the past year and have made this miracle a reality". The name "Shiffer Hillman" is featured prominently in each advertisement and so is the address and telephone number of the respondent. The respondent concedes that the name Shiffer-Hillman was very important in its business. In addition to advertising in the Globe & Mail, the respondent also advertises in Key Magazine, which is placed in hotel rooms in Metropolitan Toronto.

13. The suits which carry the Shiffer-Hillman label are made for the respondent by two companies, one known as Fine Arts and the other known as Joe Celeste Tailors. These companies have been in business for a number of years. Mr. Waldman agreed that these two companies are in essence contracting companies. Some of the men employed by Fine Arts, such as the designer, the foreman and some operatives formerly worked for Shiffer and a man who formerly worked for Shiffer as a foreman now works for Joe Celeste Tailors. One of the foremen with Shiffer in the pant department has now set up his own manufacturing shop and has commenced selling to the respondent. Mr. Waldman is the only person in management employed by the respondent. No one else, of course, uses the Shiffer-Hillman label. Mr. Waldman and Ruth Hillman were married in 1963. However, Mr. and Mrs. Waldman separated after the receiver was appointed but before December, 1982. There was no suggestion before the Board that the relationship, past or present, between Mr. and Mrs. Waldman had any bearing on this application.

14. As the Board observed in Marvel Jewellery Limited and Danbury Sales (1971) Ltd., [1975] OLRB Rep. Sept. 733, section 63 recongizes that collective bargaining rights should have some permanence and that rights created either by the Act or under a collective agreement are not allowed to evaporate with a change of employer. In the instant application, the respondent presently employs six employees (including three employees in the bargaining unit represented by the applicant in collective bargaining with Shiffer) who were formerly employed by Shiffer. However, the employment of former employees is merely one factor which may accompany the sale of a business.

15. The Board, in determining whether a sale of a business has occurred, has examined the totality of the transaction and has not had regard merely to the outward form of the transaction. In Culverhouse Foods Limited, [1976] OLRB Rep. Nov. 691, the Board at page 698 listed some considerations in determining whether a sale of a business had occurred and stated:

En route to a determination of the above essential questions the cases offer a countless variety of 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 a 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 before, i.e. whether there has been a continuation of the business.

16. The key person in the transaction before the Board is Mr. Waldman. He was formerly the vice-president and general manager of Shiffer. He arranged the incorporation of 529592 Ontario Limited for the purpose of this transaction. Mr. Waldman operates out of the same location as Shiffer with the same telephone number and with the same name of Shiffer appearing on the outside of the premises and on the stationery. Moreover, 529592 Ontario Limited carries on business as Shiffer-Hillman Clothes. The respondent has the right to use and uses the patterns acquired from Shiffer. The work of producing clothing in accordance with these patterns has been sent out to shops with the finished product being sold by the respondent with a label bearing the name Shiffer-Hillman being affixed to the garment. In considering the factors set forth in Culverhouse Foods Limited, supra, there has been de facto transfer of goodwill with the purchase and transfer of the name Shiffer-Hillman. While there was no evidence of the existence of customer lists, much less a transfer of such lists, the respondent is endeavoring to serve the same type of market. There was a partial sale of inventory and while there was no actual covenant not to compete this was not necessary because Shiffer has gone out of business. As mentioned earlier, Mr. Waldman and six former employees of Shiffer are now working for the respondent and are using the skills formerly exercised in the service of Shiffer. There was virtually no hiatus in production. The major factor which has played no part in the transaction is the disposition of the accounts receivable. In the circumstances of this application, however, the accounts receivable were taken over by the major creditor, the bank, and were not available to transfer to anyone.

17. In deciding whether a transaction is a sale of assets or a sale of a part of a business, the Board pointed out the difficulties in The Tatham Company Limited, [1980] OLRB Rep. March 367 at pages 376-7:

All of the cases to which we have referred recognize that there are no easily administered mechanical tests which permit the Board to readily distinguish between a "mere sale of assets" and a sale of "part of a business". As the Board commented in Metropolitan Parking, Inc., [1979] OLRB Rep. Dec. 1194 at paragraph 34:

"This distinction is easily stated, but the problem is, and always has been, to draw the line between a transfer of a 'business' or 'a part of a business' and the transfer of 'incidental' assets or items. In case after case the line has been drawn, but no single litmus test has ever emerged. Essentially the decision is a factual one, and it is impossible to abstract from the cases any single factor which is always decisive, or any principle so clear and explicit that it provides an unequivocal guideline for the way in which the issue will be decided."

The issue of employer successorship arises out of a seemingly endless variety of factual settings, with each new case presenting some of the factors considered relevant to the resolution of prior cases while raising other materially altered, entirely omitted, or newly-added facts which arguably should affect the decision on the merits. Much of the confusion which attends successorship results from the facility with which each case can be distinguished on its facts from all former cases; but to dismiss the confusion so lightly would be to disregard the fundamental differences inherent in the various business contexts in which the successorship issue arises. Factors which may be sufficient to support a "sale of a business" finding in one sector of the economy may be insufficient in another. In some industries, particular configuration of assets - physical plant machinery and equipment - may be of paramount importance; while in others it may be patents, "know-how", technology expertise or managerial skills which will be significant. Some businesses will rely heavily on the goodwill associated with a particular location, company name, product name or logo; while for other businesses, these factors will be insignificant. The Labour Relations Act applies equally to primary resource industries, manufacturing, the retail and service sector, the construction industry and certain public services provided by municipalities and local authorities. In each of these sectors the nature of the business organization is different, yet in each case section 55 [now section 631 must be applied in a manner which is sensitive to both the business context and the purpose which the section is intended to accomplish.

18. In the instant application in viewing the substance of the transaction in the context of the clothing industry, the Board views the activities of the respondent as carrying on a restructured business based upon the necessary parts of the business of Shiffer in order to attain these ends. The most important components of the respondent's business were the location and the name of Shiffer-Hillman. The respondent's heavy reliance on these components is readily identified by the advertising campaign in the Globe & Mail and in a magazine. Without the name of Shiffer-Hillman the respondent would be just another wholesaler of clothing with a sales outlet to the public. The Board finds that the respondent is operating a scaled down buisness consisting of a part of the business formerly operated by Shiffer. The fact that the respondent has varied the manner of merchandising and in reaching the ultimate purchasers of Shiffer-Hillman clothing by contracting out the manufacturing and selling directly to the public rather than on a wholesale basis does not change the fact that the respondent now operates a part of the business formerly operated by Shiffer.

19. Having regard to the foregoing, the Board finds that there was a sale of a part of a business within the meaning of section 63(1) of the Act and declares that the respondent continues to be bound by the collective agreement between the Man's Clothing Manufacturers Association of Ontario and the Toronto Joint Council Board Amalgamated Clothing and Textile Workers Union made on December 1, 1980, with respect to the employees in the bargaining unit contained in that collective agreement.

20. The parties did not pursue the request for relief under section 1(4) and in the circumstances of this application, this matter is dismissed in so far as it relates to section 1(4).