Service Employees' Union, Local 183 v. Riverview Manor, 1983 CanLII 979

[1983] OLRB Rep. September 1564

0927-83-R Service Employees' Union, Local 183, Applicant, v. Riverview Manor, operated by Daynes Health Care Ltd., Respondent

BEFORE: Richard M. Brown, Vice-Chairman, and Board Members J. D. Bell and C. A. Ballentine.

APPEARANCES: Naomi Duguid, Donald Burshaw II and Carolyn Shaughnessy for the applicant; K. W Kort, E. Daynes and P. Powers for the respondent.

DECISION OF RICHARD M. BROWN, VICE-CHAIRMAN AND BOARD MEMBER

C. A. BALLENTINE; September 15, 1983

1. This is an application under section 63 of the Labour Relations Act. Local 183 of the Service Employees' Union (hereafter "Local 183") contends Riverview Manor, operated by Daynes Health Care Ltd., (hereafter "Riverview") is a successor employer to Balmoral Lodge Nursing Home Ltd. (hereafter "Balmoral"), by virtue of the transfer of a licence, pa­tients, and a parcel of land from one employer to the other.

I

3. Until recently, Balmoral operated a nursing home, Balmoral Lodge, at 293 London Street in Peterborough. Carol Ross is the president of Balmoral which she owns jointly with her husband. Her parents first opened the Balmoral home in 1958, and it closed on August 18, 1983. At that time, Balmoral was licensed to have fifty-one beds. The Ministry of Health had informed Mrs. Ross that the structure on London Street did not meet provincial fire safety standards, and Balmoral hoped to erect a new building on property it already owned at 1155 Water Street in Peterborough, but was unable to obtain financing. At this juncture Balmoral decided to sell its licence.

4. Riverview is operated by Daynes Health Care Ltd., one of several companies of which Earl Daynes is the president and major shareholder. These companies operate seven nursing homes containing a total of 780 beds. Before Riverview commenced operation, there were two Daynes homes in the Peterborough area; Springdale Nursing Home (hereafter "Springdale") located five miles outside the city, and Frost Manor (hereafter "Frost") in Lindsay. Local 183 represents employees at two of Mr. Daynes' homes.

5. Balmoral and Mr. Daynes entered into an arrangement whereby Daynes would pur­chase both Balmoral's licence and the property at 1155 Water Street. Daynes intended to apply the licence to a new home to be constructed on Water Street. An agreement between Balmoral and Earl Daynes was executed on April 16, 1982. Daynes agreed to "purchase the licenced nursing home business and undertaking" of the vendor. The agreement defined "licenced nursing home business" to mean "the 51 bed nursing home presently located ... at 293 Lon­don Street, Peterborough". "Undertaking" was defined as "the right to operate the 51 bed licenced nursing home business, granted in the form of a licence issued under the authority of the Ministry of Health". The contract was conditional on the Ministry of Health approving the transfer. The closing date was the earlier of June 30, 1983 or within 30 days of written notification by the purchaser that it had received approval of the transfer from the Ministry of Health. Mrs. Ross was confident the Ministry would give its permission. A schedule to the April 16, 1982 contract provided for the transfer of the land on Water Street from Bal­moral to Mr. Daynes. The vendor took back a second mortgage, a second chattel mortgage, a second assignment of income, and a second assignment of nursing beds, by way of security. Interest on the second mortgage was to run from the time patients residing at Balmoral Lodge move to the new facility. By an agreement dated April 20, 1983, Daynes and Balmoral agreed that the contract entered into a year before covered only the licence and not any assets, except the land. The amount Daynes paid Balmoral was not disclosed, but Mr. Daynes testified the licence accounted for eighteen per cent of the total cost of Riverview Manor, including land, construction and equipment. This figure was calculated by dividing the cost of the licence, on one hand, and the remaining expenditures, on the other, by fifty-one. However, the other expenditures will be spread over sixty-five beds, the home's current capacity. If these ex­penditures were divided by sixty-five, the percentage figure would be higher.

6. The Ministry of Health was advised Balmoral proposed to sell its fifty-one bed lic­ence to Mr. Daynes for a new home to be constructed by him on Water Street, as this transfer could not be completed without the Ministry's authorization. Daynes submitted what he called a management package to the Ministry, detailing such matters as his experience in the in­dustry, the activities planned for residents, the design of the home, and financial data. Sub­sequently, Earl Daynes and the management team who would operate the proposed Riverview Manor attended an interview conducted by a panel of officials from the Ministry of Health. Daynes was accompanied by his operations manager, administrator/director of nursing, food supervisor, activity director and accountant. In the fall of 1982, the Ministry authorized the transfer of the licence from Balmoral to Daynes. The construction of Riverview Manor began in October 1982, and it was completed on August 10, 1983. On the next day a team of in­spectors from the Ministry of Health visited Riverview Manor and gave final approval for it to open as a home licensed for fifty-one residents.

7. While construction was in progress the Ministry insisted that the top floor of Bal­moral be closed. The eighteen residents who had lived there were transferred to Extendicare's home in Peterborough in February, 1983. Balmoral's legal capacity was temporarily reduced from fifty-one to thirty-three, and Extendicare's licensed capacity was increased correspond­ingly on a temporary basis, to drop back to its original level through attrition.

8. The remaining thirty-three residents of Balmoral Lodge were transferred to Riv­erview Manor between August 15 and 18, 1983. During this brief period the two homes op­erated concurrently with the approval of the Ministry of Health, and when the last residents were moved Balmoral surrendered its licence. Balmoral is now engaged in discussions with Trent University about the sale of the premises on London Street.

9. At present Riverview Manor has forty-two residents of whom thirty-eight previously resided at Balmoral Lodge. Thirty-three moved directly from there to Riverview Manor, and five stopped off at Extendicare for several months. Of the eighteen people who went to Ex­tendicare, one returned to Balmoral Lodge before August 1983, and five died, so that only seven remain at Extendicare. Four Riverview residents transferred there from Sprindale and Frost. Former residents of Balmoral Lodge were under no obligation to move to Riverview Manor. Although demand for beds exceeds supply in the area, according to Mrs. Ross, they could go to Sprindale Nursing Home to fill vacancies there created by people who want to move to Riverview Manor. Those who stopped off at Extendicare were free to stay there.

10. Balmoral employees were terminated on August 18, 1983. Carolyn Shaughnessy had worked at Balmoral Lodge for four years, first as a health care aid and later also as ac­tivity director, and is also chief steward for Local 183. She gave evidence concerning the fate of her fellow workers. To her knowledge, all Balmoral employees were interviewed by Riv­erview. Three members of the bargaining unit were hired by Riverview as aids, and four or five of the seven nurses at Balmoral Lodge, who fell outside Local 183's bargaining unit, also went to Riverview Manor. One person engaged as an aide by Riverview had worked in the laundry and kitchen at Balmoral Lodge, and she, according to Shaughnessy, left Riverview Manor because she experienced difficulty doing her new job after a four-day crash course. A seniority list for the Balmoral work force contains the names of eighteen full-time employees and thirteen part-time employees. Mrs. Shaughnessy testified approximately six of the full-time employees have found work elsewhere, but they are only working part-time. Mrs. Ross described these jobs as permanent.

11. The management team at Riverview was drawn from other nursing homes in the Daynes system. Mrs. Patricia Powers is the operations manager for all nursing homes in the Daynes organization. Denise Howran, the administrator/director of nursing, worked before as a nurse at Springdale. Margaret Boyd is the food supervisor, a job she previously performed at Springdale, and Frost. The activity director is Lyn Patridge who filled the same role at Springdale, upon her promotion from the position of nurse's aide. Joan Hiasman, the laundry! housekeeping supervisor, also held this job at Springdale. Eight nurses aides were brought to Riverview from Springdale and Frost. According to Mrs. Powers these employees were se­lected on the basis of the quality of their work, to ensure the same level prevailed at Riv­erview, both on their part and on the part of others they taught. Mr. Daynes testified his policy was to promote from within to give employees an incentive. When Frost Manor opened a few years ago a similar transfer of employees from Springdale occurred. The remaining positions at Riverview were filled from a pool of 300 applicants, and all of those hired were interviewed by Powers, Howran and Boyd. Employees began an initiation program at Riverview Manor on August 9, 1983.

12. Patricia Powers described the policies and procedures followed at Daynes' nursing homes. The same basic policies and procedures are implemented at each home, although the operations manual is adapted for each in some respects. The manual fills a thick three-ring binder, and the table of contents, which was introduced into evidence, breaks down into the following sections:

I. Organization and Management

II. Personnel Policies

III. Educational Programs

IV. Job Descriptions and Work Schedules

V. Admission Discharge, Transfer and Leave of Absence

VI. Services Provided

VII.Safety and Emergencies.

The policies and procedures set out in the manual are now in force at Riverview, and were the source of the management package submitted to the Ministry in conjunction with the lic­ence transfer from Balmoral. Riverview has not drawn upon the practices followed at Bal­moral.

t3. Earl Daynes plans to expand Riverview Manor in the future. It is presently licensed for fifty-one beds, but is built to accommodate sixty-four. An additional ten to twenty beds could be added by building new bedrooms, without expanding any other facilities. Mr. Daynes hopes to eventually increase the capacity of the home to between one hundred and one hundred and thirty-five residents. He has already entered into a conditional agreement to purchase an­other licence for thirty-three beds, subject to the Ministry of Health's approval, but no man­agement package has yet been submitted to the Ministry to support a request for a licence transfer. In addition, Daynes has bid, along with seven other operators, on a Ministry tender for an additional twenty-five new beds in the Peterborough area. This application has passed the interview stage, and Mr. Daynes expects an announcement of the Ministry's decision later this week.

14. The basic rate charged by nursing home operators is -fixed by the Ministry of Health. The Ministry pays two-thirds of the rate for each resident and the resident pays the other third. The Ministry also fixes rates for preferred services (e.g. single rooms), but does not contribute toward them.

II

15. The parties disagree about the proper application of section 63(1) and (2) to the facts at hand:

63.-(l) 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 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.

The parties are agreed that Riverview now stands in the shoes Daynes wore when he entered into the agreement with Balmoral. Counsel for Local 183 contends that a sale of a business is established by the simple fact that a fifty-one bed home on London Street closed during the same month that a home of the same size opened on Water Street. Focusing upon the transfer of the licence, she argued Riverview drew its life from Balmoral. The sale of the land was said to tip the balance even further in the union's favour. Although goodwill was not sold, she said, Riverview attracted Balmoral's former residents because it went out of business. We were urged to find the role played by the Ministry of Health as intermediary was irrelevant. Counsel for Riverview emphasized what was new at Riverview Manor; the management team, the policies and procedures, the building, and all equipment. He noted that the land deal was not contingent on the Ministry's approval of the licence transfer. Counsel also suggested Riv­erview ought to be viewed as an integral part of the larger Daynes organization.

III

16. Amorphous words like sale and business derive a more precise meaning from the purpose they were chosen to serve, and take on a very different hue in the world of labour relations than in a commercial law setting. Section 63 is calculated to balance several com­peting concerns. First, the employees of the predecessor have a claim both to continued em­ployment, under the terms and conditions set out in their collective agreement, and to be represented by their chosen bargaining agent. When they are terminated by the predecessor, they look to the successor for these benefits. However, in some cases, their employment re­lationship w, is strongest when the successor so radically alters the nature of the business that it shifts from one labour ma

17. Next there is the entrepreneurial freedom of the predecessor employer. The mar­ketability of a business is impaired, at least to some degree, by requiring a purchaser to abide by bargaining rights and any collective agreement to which a vendor is bound. Conversely, successor employers would prefer to acquire businesses free of the encumbrances associated with collective bargaining. This interest, shared by both parties to the transaction, is strongest when the successor so radically alters the nature of the business that it shifts from one labour market to another. In this context, neither the vendor's employees nor its collective agreement, may be suited to the new enterprise.

18. Another interest group is introduced when a successor employer already has a work force at the time of the transaction with the predecessor. The business may not provide enough jobs for all of those who previously worked for the two employers. Both work forces assert a claim to continued employment in these circumstances. Job security is not the only interest of the purchaser's employees: they also deserve a say in the choice of their bargaining agent. In some cases, both the predecessor and successor continue to employ the same people as they had at the outset, and the successor's employees to not wish to acquire the union that represents the other work force.

19. These considerations have been taken into account by the Board in its interpretation and application of section 63. In the text book example, the ownership of a business changes hands, but the same employees carry on doing the same work, under the same management team, for the same customers. The successor has no employees before transaction. There can be no doubt this transaction is caught by section 63. If this is not a sale of a business nothing would be! See, for example, Culverhouse Foods Limited, [1976] OLRB Rep. Nov. 691. The successor employer is obliged to recognize the trade union as bargaining agent for the trans­ferred employees, and also to respect the collective agreement in dealings with them.

20. Examining the conflicting interests in the paradigm case of a sale of business helps one to understand why this label is not applied to transactions that involve a dramatically dif­ferent constellation of concerns. In the text book example, the predecessor no longer requires the services of its employees. Section 63 insulates them against unemployment attributable solely to the sale and, at least for the life of a contract, against any deterioration in their terms and conditions of employment. This protection is achieved by curtailing the commercial liberty of the two employers to arrange their affairs by reference only to self-interest. However, since the work performed has not changed, the predecessor's work force and collective agreement are not inappropriate for the successor's enterprise. There are no other employees to be af­fected by the application of section 63. This is the balance of interests struck when the Board finds there has been a sale of a business within the meaning of section 63. The successor employer in the preceding example voluntarily engaged its predecessor's work force, but the competing interests, and the legal result, are no different if all new employees are hired.

IV

21. But not every transaction between two employers constitutes a sale of a business. A substantial shift in the configuration of competing interests has often led the Board to the contrary conclusion. The interests of the successor employer come to the forefront when the sale brings about a change in the nature of the work performed. In this context the Board may issue a declaration under section 63(5):

The Board may, upon the application of any person, trade union or coun­cil of trade unions concerned, made within sixty days after the successor employer referred to in subsection (2) becomes bound by the collective agreement, or within sixty days after the trade union or council of trade unions had given a notice under subsection (3), terminate the bargaining rights of the trade union or council of trade unions bound by the col­lective agreement or that has given notice, as the case may be, if, in the opinion of the Board, the person to whom the business was sold has changed its character so that it is substantially different from the business of the predecessor employer.

22. From a functional point of view, the termination of bargaining rights under section 63(5) assigns less weight to the concerns of the predecessor's employees than to the competing interest of the successor in carrying on a new work process unencumbered by collective bar­gaining obligations tailored for a different setting.

23. The Board has also recognized that persons already in the employ of the successor at the time of the transaction in question have a claim to continued employment. In Dominion Stores Limited, [1979] OLRB Rep. July 626, both employers operated a retail grocery busi­ness. The successor moved out of one store into leased premises previously rented by the predecessor. The lease and one-half million dollars worth of equipment were acquired through an intermediary. The employees who worked for the successor at its original location con­tinued to do so at the new store, and the Board relied heavily upon the fact that the successor retained existing employees, rather than hiring any new ones:

24. Dominion Stores, a retail food chain with no corporate connections to Gordons, closed a Dominion Store outlet at 3830 Dougall Road on a Sat­urday and opened a Dominion Store outlet at 3220 Dougall Road the fol­lowing Monday. The employees from 3830 Dou gall were transferred to 3220 Dou gall Road. In the circumstances of this case the Board views the move by Dominion Stores to premises previously occupied by Gor­dons, including the so-called restrictive covenant, and the purchase of certain of the fixtures used by Gordons as undertakings in conjunction with the transfer of an existing business and not undertakings in con­junction with the purchase of the predecessor's business. The business which presently exists at 3220 Dougall Road is not the "continuum" of the predecessor's and accordingly, the Board hereby declares that there has not been a sale of a business within the meaning of the Act.

(emphasis added)

The conclusion that there had not been a sale of a business rested partially upon a five-month hiatus, between the predecessor's exit from the store and the successors s move into it, that stopped the running of good will between the two employers. An analogous situation led to the same outcome in two other cases: Grand Valley Ready Mixed Concrete Supply Limited, [1981] OLRB Rep. June 663, at para 23; and Norjohn Contracting Limited, [1978] OLRB Rep. May 78, at para. 13.

24. The result reached in these cases preserved the existing employment relationships of the successor's employees, rather than visiting an unwanted trade union on them or per­mitting them to be displaced by the predecessor's employees. This choice favours not only the successor's work force, but also the two employers whose commercial liberty is not cur­tailed. These interests together outweigh the claim of the predecessor's employees to em­ployment and union representation. A commercial lawyer might think the successor's employees have no bearing on whether or not a transaction is properly labelled as a sale of a business. But a labour lawyer who ignored this aspect of a case would be turning a blind eye to one of the interests section 63 is designed to protect.

25. The number of people employed by the successor did not increase as a result of the alleged sale in Dominion Stores, supra. In the converse situation, the predecessor em­ployer's work force is not reduced. In Canada Cement Lafarge Ltd., [1975] OLRB Rep. Dec. 905, the predecessor was forced by a pollution problem to dismantle its cement manufacturing facility, and to move it and all employees to another location. The original site was sold to the successor who quarried the limestone located there, but did not produce cement. The de­termination that there was not a sale of a business was grounded on the different uses to which the property was put, and also upon the predecessor's retention of all of its employees:

Here, neither the bargaining agent nor the employees within the C. C.L. bargaining unit have been affected by the alleged sale. The reason for this is that, on a proper construction of the facts, the business was not sold but was moved to a new location with bargaining rights voluntarily extended to the applicants and individual employment opportunities given to persons formerly employed at the Point Anne site. To go further, as the applicants suggest, and hold their bargaining rights attach to any busi­ness which may be commenced at the former site would be to give a meaning to section 55 [now 63] which, in our view, was not intended by the Legislature. Having regard, therefore, to the mischief rule of sta­tutory interpretation (see Heydon's Case, 76 E.R. 637, cited in Trenton Riverside Dairy Products case, supra), we are fortified in our view that the relief which the applicants request must be denied. (para. 16).

(emphasis added)

In both Grand Valley Ready Mixed and Norjohn Contracting, supra, the predecessor retained all of the employees who had worked for it before the transaction in question. This factor, along with other considerations, led the Board to conclude there had not been a sale of a business.

26. In contrast to these cases, a sale of a business was R und in More Grocerteria Lim­ited, [1980] OLRB Rep. Apr. 486. Once again both employers carried on a retail grocery business. The predecessor moved out of a supermarket and transferred the lease and $14,000 worth of equipment to the successor. Two weeks earlier, the predecessor had opened another store five miles away, and all of the employees who had worked at the vacated premises were moved to this and other stores pursuant to a guarantee of employment circumstances would be to allow a union to expand its bargaining rights by sweeping in the successor's employ­ees was not adverted to in the majority's reasons for decision, but was stressed in the dis­senting opinion.

27. The predecessor's employees stand to loose very little as a result of a commercial transaction if they remain with their former employer and are not deprived of the benefits of collective bargaining. A strong argument can be made that their interests ought to give way to entrepreneurial freedom. Moreover, to find a sale in these circumstances would be to allow a union to expand its bargaining rights by sweeping in the successor's employees who it had not organized. In Canada Cement Lafarge, supra, the Board construed section 63 with an eye to its purpose, and ruled a business had not been sold, even through a commercial lawyer might have disagreed.

V

28. In many cases, there is no substantial change in the nature of the work performed, the predecessor ceases to employ some people, and the successor's work force expands. The successor either engages the employees released by the predecessor or hires additional em­ployees from some other source. There is obviously a sale of a business if most of the assets of the enterprise, the vast majority of customers, and management expertise pass from one employer to the other. This is once again the text book example. But often something less changes hands. The predecessor may transfer assets and goodwill to the successor, but not "known how". Alternatively, only assets and "know how" may be transferred. In the ex­treme case, none of these three elements is conveyed; for example, the predecessor merely subcontracts janitorial work to the successor. These types of cases pose the greatest difficulty for labour relations boards. The competing interests are readily identified, but not easily rec­onciled. On the one hand, the predecessor's employees loose the benefits of collective bargaining, including perhaps their jobs, in the event the transaction is not characterized as a sale of a business. On the other, to apply this label is to restrict the economic initiative of both employers. The same conflicting concerns are present when assets, customers and ex­pertise move between employers as when one or more of those factors is not transferred. However, as the law casts its net wider and wider, more employers will be caught more often. The legislature draw the line at the sale of a business, choosing a statutory threshold that lacks precision, because it is phrased in general language.

29. This Board has consistently distinguished a business from its assets. The point was eloquently put in Metropolitan Parking Inc., [1979] OLRB Rep. Dec. 1193:

30. A business is a combination of physical assets and human initiative. In a sense, it is more than the sum of its parts. It is a dynamic activity, a "going concern", something which is "carried on." A business is an organization about which one has a sense of life, movement and vigour. It is for this reason that one can meaningfully ascribe organic qualities to it. However intangible this dynamic quality, it is what distinguishes a "business" from an idle collection of assets.

This proposition is best illustrated by two cases involving transactions between employers in the retail grocery trade. In this industry, the most important assets are premises and mer­chandising equipment: the only other assets a merchant has is inventory, and it is rarely sold to another retailer. In Sunnybrook Food Market, [1966] OLRB Rep. Oct. 531, bargaining rights did not attach to the successor who received equipment and an assignment of a lease from the predecessor. The reason for this conclusion was the successor did not also acquire the customers of the predecessor, because it opened another store near by:

8. In both the Dutch Boy case and the instant case, much was made of the absence of a sale of goodwill and the absence of a restrictive cov­enant. The Board in the Dutch Boy case concluded, and we would with respect agree, that the absence of these items did not of necessity require the conclusion that there had not been a sale of a business. See also the L & M Food Market case, O.L.R.B. Monthly Report, September 1965, p. 440. The determination of the question whether there has been a sale of a business within the meaning of section 47A [now 631 can only be made on the basis of a consideration of all the circumstances of any case. Clearly, as the Board indicated in the Dutch Boy decision, the value of "goodwill" must be assessed having regard to the nature of the enter­prise. We would only add that that assessment must be made in the con­text of the entire circumstances surrounding the transaction. In the Dutch Boy case, since, as the Board found, the predecessor employer, disposed of its entire operation in the area, the inclusion or exclusion of the item "goodwill" made no tangible difference, and the transactions which took place constituted a sale of the business, notwithstanding the absence of any reference to goodwill. In the instant case, however, the absence of any transfer of goodwill does have significance, since the vendor has re­mained in business in the same market area, as a competitor or Sun­nybrook, and, indeed, invoked the "goodwill" of its customers at the time of its relocation.

9. Having regard to all of the circumstances of the instant case, we con­clude that this is not a case (such as the Dutch Boy case was) in which one employer goes out of business and another, purchasing all the sub­stantial assets, opens for business at the same premises. Rather, this is a case in which an employer, changing the location of its business op­erations within a particular market area, disposes of certain unwanted premises and other assets to a competitor. In arriving at this conclusion, we have had regard, inter alia, to the fact that Steinberg's retained the services of certain of its employees, who were transferred from Whitby to Oshawa. This is consistent with the conclusion that Steinberg's has not disposed of its business in the majority of the Board in the Dutch Boy case that the differences or similarities in employment forces as between "predecessor" and "successor" employers would not otherwise be rel­evant to the issue.

A lease and equipment also changed hands in Zehrs Markets Limited, [1974] OLRB Rep. May 331, but goodwill was dissipated by a lengthy hiatus as between the predecessor's closing and the opening of the successor's store. Once again the Board found no sale of a business:

22. However, in this case the premises had been closed for a lengthy period of time and signs had been placed on the premises advertising that it was for rent. This would indicate to habitual and prospective con­sumers not only that Busy B had gone out of business, but also that any other interested third party willing to take possession of the premises would be free to operate a business other than a retail food business at that location. Thus, the signs of the premises together with the lapse of time between the closing of Busy B and the opening of Zehrs indicate a sufficient termination of operations, that little, if any, goodwill arising from the location would accrue. While location per se is a significant factor in the retail food industry, because of the consumer habit of at­tending at a particular locale, the facts in this case are such that any ben­efit derived from local per se had been dissipated.

23. Accordingly, we determine that the assignment of lease and the trans­fer of the assets in this case does not constitute a sale of business in the sense that there has not been a continuum of the business or the enter­prise within the meaning of the Act. The application is dismissed.

24. But assets and customers together do constitute a business. There are several cases in which the Board has enforced collective agreements and bargaining rights against a suc­cessor who purchased all or most of a predecessor's assets and began to service its former clientele. A review of some of these decisions demonstrates that a successor may acquire its predecessor's customers in several different ways. Two that are obvious are a covenant not to compete and the purchase of a name or trademark. In Dennis Moran Limited, [1977] OLRB Rep. Apr. 237, the successor bought virtually all of the predecessor's assets — including a gravel pit, equipment and licences — as well as its name. However, the Board has recognized that customers can pass between employers by other means. The habits of consumers with respect to grocery stores were discussed in Dutch Boy Food Markets, 65 CLLC 16,051, in which a store lease and all leasehold improvements passed between employers:

Had Kitchener Food only purchased the contents of the premises at 274 Highland Road and moved them into other premises we would have no difficulty in finding that the transaction was only the sale of assets. In the instant case, however, Kitchener Food acquired not just assets, but Steinberg's entire interest in the premises. Stated another way Steinberg's disposed of its entire operation in the Kitchener area which obviously must have had some effect on its operations in Ontario. If by the terms of the transaction Steinberg's had been restricted from carrying on busi­ness in the same area we would have no hesitation in saying that there was a sale of a "business" within the meaning of section 47a [now 63] of the Act. The absence of such covenant, however, is not by any means conclusive that there was not a sale of a "business".

A retail food supermarket, unlike some other businesses, has no cus­tomer orders or lists which can be transferred to a purchaser who intends to carry on the same type of business. By the very nature of a retail food business, with the exception of the name, a vendor has no goodwill which he can effectively give or withhold from a purchaser. The success of a food supermarket is dependent, on large measure, upon the support of the people who live in the area in which the store is located. Accordingly, any goodwill consists in the habit of customers of the vendor continuing to patronize the food market located on the same premises. If there was any goodwill to be acquired by Kitchener Food it was inherent in the premises themselves in which Steinberg 's had carried on the same type of business as that carried on by Kitchener Food. Accordingly, the ex­emption of goodwill from the purchase price, in our opinion, has no real meaning.

(emphasis added)

The peculiar nature of customer relations in the storage business was acknowledged in Big Bear Storage, [1979] OLRB Rep. Mar. 164, a case involving the transfer of a warehouse lease and associated equipment:

10. In this case the respondent purchased certain assets of the successor (two motors, racks, office equipment) necessary to the operation of a warehouse business and in a separate transaction acquired leased access to the same premises as the predecessor under almost identical terms and conditions. The significance of the second transaction cannot be over­stated in the context of the warehousing industry where goods stored on the premises by the predecessor's customers remain there as of the date the successor occupies these premises.

(emphasis added)

In all of these cases, both assets and clientele passed from one employer to the other, and a sale of a business was found to have occurred.

31. In Bermay Corporation, [1979] OLRB Rep. July 608 the Board ruled that assets and management personnel comprise a business. The predecessor purchased the successor's lease, equipment and materials, and employed its office foreman and two of its five production supervisors:

32. When the replacement of one undertaking by another is marked by a continuity of production and sales in the same area of endeavour, out of the same location using the same physical equipment and human re­sources to do the same kind of work, the Board may conclude that there has been the sale of a business. In this instance the premises of 920 Ca­ledonia Drive previously occupied by Golderest for the purpose of man­ufacturing furniture are now occupied by Bermay for the purpose of manufacturing the same kind of furniture. There are virtually no hiatus in production save for a few days' adjustment period to change over from the manufacture of Golderest products to the manufacture of Sealy prod­ucts. At the time of the transfer the equipment and raw materials used by both companies was substantially the same and a number of the em­ployees and production supervisors used by both companies was and con­tinues to be the same. In substance the respondent has taken over an essential part of its predecessor's business — its production capacity and location. While the respondent did not acquire its predecessor's name, goodwill or customers, it nevertheless acquired both capital and human resources which were an intrinsic part of the business of Goldcrest Fur­niture Limited. From the standpoint of a production employee very little has changed; a worker who continues to work in the same location on the same machinery using the same skills to make the same kind of ma­terials into the same kind of product could not be faulted for concluding that the business in which he continues to work has been transferred from one employer to another. In the light of all of the foregoing the Board therefore finds that the transactions in question constitute the transfer of part of the predecessor's business within the meaning of section 55 [now 63] of The Labour Relations Act.

(emphasis added)

32. Often the successor acquires the predecessor's assets, and begins to service its cus­tomers, without any direct dealings between the two employers, but that had not deterred the Board from finding a sale pursuant to section 63(1). Situations of this type were reviewed in Metropolitan Parking Inc., supra, at para. 28:

The Board has found a transfer of a business, through a "chain" trans­action, or sequence of sales (Culverhouse Foods Ltd., [1976] OLRB Rep. Nov. 691; Trenton Riverside Dairies, [1964] OLRB Rep. May 72), a cor­porate reorganization and merger, (Eaton Yale Ltd., [1971] OLRB Rep. Oct. 667; Westeel-Rosco Ltd., [1966] OLRB Rep. Dec. 718) and through the offices of a receiver where "the business" has been transferred as a going concern (Marvel Jewelry Ltd., [1975] OLRB Rep. Sept. 733; Field-Price Ltd., [1973] OLRB Rep. Oct. 543; Parnel Foods Ltd., [1971] OLRB Rep. Nov. 715.) The manner of disposition is irrelevant so long as a transfer has, in fact, taken place. The interposition of a third party, acting as an agent or conduit, does not affect the result.

VI

33. To this point the focus has been on private enterprise. The introduction of gov­ernment, either as economic regulator or as a party to commercial agreements, gives rise to new considerations. A licence issued by one level of government or another is required to carry on many types of commercial activities; including transportation, broadcasting, com­munication, and health services, to name a few. Other sorts of businesses are ancillary to public enterprise, and so are dependent upon a contractual arrangement with government. For example, the federal government operates airports and contracts for the provision of food serv­ices at air terminals. The role of the state in our twentieth century economy creates new forms of property, licences and government contracts, property that is essential to the life of a busi­ness. An intraprovincial trucking firm cannot operate without licencing approval from the On­tario Highway Transport Board, and a catering company cannot offer food services in an airport except by agreement with the federal crown. From time to time, this new property passes from one employer to another, and the Board is called upon to apply section 63.

34. This is what happened in Thunder Bay Ambulance Services Inc., [1978] OLRB Rep. May 467. Two hospitals had operated separate ambulance services in the same city, but the Ministry of Health determined this was an inefficient arrangement. The hospitals were not prepared to enter into an amalgamation, deciding instead to discontinue their services. The Ministry called for bids, and the successful applicant was the former director of ambulance services at one of the hospitals. All vehicles and ancillary equipment, but not linen and to­iletries, previously used by the two hospitals were owned by the provincial government and were passed on to the new licencee. The Board concluded a business had been sold:

35. In view of the Board, the two essential elements of the predecessor's businesses were transferred to the alleged successor. Firstly, the exclusive use of the assets owned by the Ministry of Health was transferred. Al­though the same licence or piece of paper was not transferred between the two, the Board has no hesitation in finding that the exclusive enti­tlement, as embodied in a Ministry of Health Licence, was transferred. Secondly, the predecessors' management and orgaions filled by the same persons as were employed by the predecessors must weigh heavily with the Bopredecessors' ambulance operations were largely managerial and organizational in nature and it follows that the transfer of managerial skills, albeit through a request for proposal system and competition, and the continuation of identical job functions filled by the same persons as were employed by the predecessors must weigh heavily with the Board.

36. Having regard to the transfer of the exclusive right to use the Min­istry 's assets, to the transfer of managerial skills and to the uninterrupted continuation of the identical job functions, the Board must conclude that the Ministry of Health, the entity charged with maintaining an ambulance service in the Municipality of Thunder Bay, did not facilitate the estab­lishment of a similar or parallel business but rather it served as the nec­essary link in the transfer of the predecessor's businesses to the successor. ft is the finding of the Board, therefore, that a sale of a business within the meaning of section 55 has occurred and that the bargaining rights of the union, which were established in respect of the predecessors' businesses, should be preserved. The applicant trade union was entitled to give notice to the predecessors under section 45 of the Act and accord­ingly, the Board declares, pursuant to the provisions of section 53 of the Act, that the trade union is entitled to give the respondent a written no­tice of its desire to bargain with a view to making a renewal collective agreement.

(emphasis added)

35. The contrary conclusion was reached in Metropolitan Parking Inc., supra. The predecessor operated an airport parking lot pursuant to a three-year contract with the federal government. The lot and virtually all equipment were owned by the government which also supplied maintenance and snow removal services. All monies collected from customers were remitted to the crown, and the operator received a fixed fee for its services. When the three-year term expired, and a new contract was let by public tender, the predecessor's bid was less attractive to the crown than the successor's. The successor hired the predecessor's general manager at the airport lot and six of its supervisors, but "real management authority" in the organization of both employers resided at a higher level. The Board distinguished the facts in this case from the situation in Thunder Bay Ambulance, supra, on three grounds; First, the contract to operate the parking lot was limited to a three-year term, whereas the ambulance licence was not temporally restricted. In addition, all of the successor's "know how" was derived from the predecessor's organization in Thunder Bay Ambulance, supra, in the person of the former director of ambulance services at one of the hospitals, but not in the later case. Finally, the two parking lot operators competed for the government contract, but the hospitals voluntarily relinquished their licence to their successor.

VII

36. The case at hand is not on all fours with either of these two earlier decisions. In contrast to Metropolitan Parking Inc., supra, a nursing home licence is a long-term arrange­ment. Although a licence must be renewed annually, all concerned clearly contemplate that Riverview will be granted the legal authority to operate a nursing home for many years to come, unless its licence is voluntarily relinquished. This licence is decidedly different than a parking lot contract that is let, at three-year intervals, to whoever submits the lowest bid. As­suming that the word business connotes some degree of permanence, we find this criteria to be satisfied here. Unlike Thunder Bay Ambulance, supra, there has been no transfer of man­agement personnel between Balmoral and Riverview.

37. As there is no precedent which exactly matches this case, we are driven back to the general language of the statute and the basic principles the Board has developed to guide the application of section 63. The nature of the work performed at Riverview Manor is not substantially different from what was done at Balmoral Lodge. Consequently, Balmoral's work force and collective agreement are not ill suited to Riverview. Riverview would of course pre­fer to be free to select its employees according to its own standards, but this is true of many successors, and to bow to this preference would be to negate section 63. The Daynes orga­nization was not able to meet its manpower needs in August, 1983 at Riverview Manor and other homes with its existing work force. New employees were hired, employees who had no claim to continued employment. On the other hand, all of Balmoral's employees were ter­minated at the time one home closed and the other opened.

38. This is a typical hard case, the entrepreneurial freedom of both employers is pitted against the employment security of the predecessor's work force. The Board's determination as to whether or not a business has been sold will allow one to prevail over the other. Ap­plying section 63 to the unregulated private sector, the Board has consistently ruled that a successor who acquires all or most of a predecessor's assets and its customers, also inherits a trade union and any collective agreement. The same criteria ought to be applied to the case at hand, and lead us to the conclusion that a business has been sold. As to customers, the vast majority of the former residents of Balmoral Lodge are now residing at Riverview Manor. That is not surprising. An employer who gives up a licence or government contract, vol­untarily or otherwise, can no longer service its former clientele. Along with the licence or contract, the successor often receives a captive market that is free of competition, not only from the predecessor, but also from others who lack the necessary authorization to carry on business. Riverview obtained two major assets from Balmoral, the licence and the land. The transfer of the licence is particularly significant, because it led most Balmoral residents to move to Riverview Manor. (Both parties to the transaction contemplated residents would move from one home to the other, as evidenced by the contract that ties the date from which interest runs to the transfer of patients.) In this sense, the licence is the essence of the business. There was little else Balmoral could have conveyed to Riverview. Balmoral Lodge could no longer be used as a nursing home, and Balmoral's only other assets were equipment and supplies. The transfer of the licence was subject to the approval of the Ministry of Health. But the role of this third party is of no relevance: see the cases referred to at paragraph 33, supra.

39. Two arguments made by counsel for Riverview remain to be addressed. He con­tended his client had not acquired Balmoral's business, because the Daynes organization fol­lows very different practices and policies than these previously in effect at Balmoral Lodge. No doubt, there has been a substantial change in management style, but this is not sufficient to overcome the transfer of the licence, land and residents. In addition to the cases referred to above, counsel relied upon Ottawa Thuck Centre, [1982] OLRB Rep. Nov. 1704, but in that case the successor purchased only a very small portion of the predecessor's assets, and there was no assurance of a continuity of customers. This case is clearly distinguishable.

40. We find the transaction between Balmoral and Riverview constitutes a sale of busi­ness within the meaning of section 63 of the Labour Relations Act.

DECISION OF BOARD MEMBER J.D. BELL;

1. I disagree with the decision of the majority.

2. It is my opinion that this case is not like Thunder Bay Ambulance, supra except in one sense i.e., it must be licensed by the government in order to exist. In Thunder Bay, sup ra, the licence, the physical assets, the management expertise, the staff and the site of op­eration all changed hands at once without a minutes interruption in the services.

3. This case is most similar to Metropolitan Parking, supra, where the only thing that changed hands was the right to operate the parking lot. The decision to change operators was based on the competitive bid system.

4. In this case the only thing that changed hands was the right to operate fifty-one beds in a nursing home. This reason for the change was that Balmoral failed to meet the standards

set by the licencing body and was advised its licence would not be renewed. Riverview made a bid to Balmoral and to the licencing body for the right to operate the fifty-one beds in ques­tion. Its success in receiving these operating rights was based on its ability to meet all the standards of the licencing body and to satisfy the economic demands of Balmoral. The pur­chase of the land referred to in the majority decision was incidental to the arrangements and should not be considered a factor in the decision.

5. Therefore I would find that a sale, under the terms of section 63 of the Act, did not occur and I would dismiss the application.