Service Employees International Union, Local 183 v. Daynes Health Care Limited, 1984 CanLII 1003

[1984] OLRB Rep. August 1091

2053-83-U Service Employees International Union, Local 183, Complainant, v. Daynes Health Care Limited, Earl Daynes, Respondents, v. Group of Employees, Interveners

BEFORE: R. O. MacDowell, Acting Alternate Chairman, and Board Members W. H. Wightman and B. L. Armstrong.

APPEARANCES: Naomi Duguid, Michelle O'Connor, Don Burshaw II and Carolyn Shaughnessy for the applicant; Michael Gordon and Earl Daynes for the respondents; M. Longworth for the interveners.

DECISION OF R. O. MacDOWELL, ACTING ALTERNATE CHAIRMAN AND BOARD MEMBER B. L. ARMSTRONG; August 14, 1984

I

1. This is an unfair labour practice complaint filed under section 89 of the Labour Relations Act and alleging that the respondent employer ("Daynes") has contravened sections 50, 63, 64, 66, and 70 of the Act. The complainant union alleges that Daynes has totally repudiated its obligations under the Act and the collective agreement by which it is bound. It has refused to apply the agreement to employees in the bargaining unit; it has refused to pay the benefits required by the agreement; it has refused to hire, retain, or recall employees in the manner prescribed in the agreement; it has refused to acknowledge or deal with employee grievances alleging a breach of the collective agreement and, it has refused to acknowledge the effect of a Board decision dated September 15, 1983, declaring that Daynes is a successor employer under section 63 of the Act. The union argues that Daynes is willfully flouting the law, and has stated publicly that it will never recognize the union or the rights of the employees it represents. As a result, a large number of employees have been thrown out of jobs which they have occupied for years. These corporate decisions are attributed to Earl Daynes, the owner of the respondent, and the person who has effective control over the business. The union seeks a variety of remedies, including reinstatement and compensation for the employees whom, it says, have been wrongfully denied continued employment.

2. This is the latest in a series of proceedings between the union and Daynes, arising out of Daynes' decision to operate a nursing home business in Peterborough, Ontario. It is framed as an unfair labour practice complaint, and the parties were agreed that the Board has jurisdiction to deal with it on that basis, and to fashion an appropriate remedy should the union's allegations be sustained and the respondent's position be rejected. At the heart of their dispute, however, is the effect of section 63 of the Act, and the extent to which that section protects the rights of employees when the business in which they are working is sold to a successor employer. That question has several aspects:

a) To what extent is a successor employer required to retain the employee complement of his predecessor?

b) What weight, if any, should be given to the fact that the predecessor may have purportedly terminated their employment in contemplation of, or as part of, the sale transaction?

c) Is it significant that prior to the sale the successor may have made efforts to recruit or assemble his own work force which he plans to use in the business?

These are the issues which the parties have put before the Board for its determination through the vehicle of this unfair labour practice complaint; and, for the time being, they are prepared to leave aside more general unfair labour practice considerations.

3. This is not the first time that questions of this kind have arisen. In Emrick Plastics Inc., [1982] OLRB Rep. June 861, the Board held that a successor employer under section 63 of the Act did indeed have an obligation to retain his predecessor's employees unless those employees could be laid off or terminated in accordance with the terms of the collective agreement. The Board found that section 63 preserved the employees' right to trade union representation, their collective agreement, and, most important, their jobs — so long as those jobs were continued in the successor's operation. If a similar obligation obtains in the circumstances of this case, Daynes concedes that it must employ many of its predecessor's employees and compensate them for not doing so earlier. The union asserts that the Emrick view is equally applicable here. However, we should make it clear at the outset that the union also reserves its right to argue, in the alternative, that even if Daynes was not obliged, by law, to retain the services of the predecessor's employees, the reason why it did not do so is its antipathy to the complainant and its objection to hiring individuals formerly working in a unionized context. In other words, the union reserves its right to argue that the case is a "conventional" unfair labour practice, based upon anti-union animus.

II

4. The earlier section 63 proceeding and the Board decision of September 15, 1983, are obviously important events in the chronology of this case, since a number of the issues may turn on the practical effect of the Board's section 63 declaration. We should note, therefore, that notice of the earlier section 63 application was given not only to Daynes, but also to all of the employees who might be affected by the successor rights proceeding (i.e., persons in Daynes' employ who would be represented by the union and be governed by the predecessor's agreement, if the union's successor rights application was successful). The notices were posted in prominent places on Daynes' premises where they would most likely come to the attention of the employees potentially affected. The notices set out the date and place for the hearing, its purpose, and the way in which individuals could intervene. None did so.

5. The present case was filed on December 2, 1983. The initial hearing was scheduled for January 5, 1984. On January 4, 1984, the employer filed a reply, identifying a number of employees whom the employer said were potentially affected by the proceeding. This late filing made it impossible to notify those employees (assuming, without finding, that they were legally entitled to notice); but, as it turned out, the hearing was adjourned for other reasons. Notice was subsequently given to the persons listed on the employer's reply. By decision of the Board dated February 17, 1984, the case was adjourned again, to permit counsel for certain employee interveners a further opportunity to prepare. The matter was eventually rescheduled for hearing on February 24, 1984, before the present (differently constituted) panel of the Board.

6. On February 24, 1984, all parties appeared before the Board with counsel, prepared to argue the case. At that hearing, however, for the first time, the respondent advised the Board that there might be still other employees whom it had not previously identified and who were not among the group of employee interveners who were at the hearing represented by Mr. Longworth. These other employees had not received specific notice of this proceeding, although they had received notice of the section 63 case which is really at the heart of the matter, and it was agreed that their representations would be identical to those of the respondent and the employee interveners who were present. In the circumstances, the parties were all agreed that rather than risk any further delay the Board should proceed to hear their arguments on the effect of section 63 and the earlier Board decision in Emrick.

7. At the hearing on February 24, 1984, the parties were agreed that it was not necessary to lead evidence. The material facts were agreed upon. The parties were further agreed that the Board could refer to, and rely upon, the findings in the earlier section 63 proceedings. Those decisions speak for themselves and need not be reviewed in detail. However, it may be helpful to sketch in some of the background.

III

8. For some years a company known as Balmoral Lodge Limited ("Balmoral") operated a nursing home at 293 London Street in the City of Peterborough. Balmoral Lodge was operated pursuant to a licence issued by the Ministry of Health under the authority of the Nursing Homes Act. The licence permitted Balmoral to provide care for 51 residents. Balmoral's service employees (i.e., laundry staff, housekeeping staff, dietary staff, nurses' aides, RNA's, etc.) were represented by the complainant union and were covered by a collective agreement.

9. The terms of the collective agreement are unexceptional. There are similar provisions in most collective agreements. Employees cannot be discharged without just cause. In the event of a layoff or a recall from layoff, employees' seniority must be considered. Employees on layoff must be recalled to available job openings before such openings are filled on a regular basis pursuant to the "job posting" procedure. New jobs or permanent vacancies in existing job classifications must be "posted" so that interested bargaining unit employees, with seniority, can apply. No new employees can be hired until all those laid off have been given an opportunity to return to work in accordance with the terms of the agreement. These are fairly typical collective agreement mechanisms designed to protect employee job security and allocate scarce work opportunities.

10. Earl Daynes, the owner of the respondent company, has been in the nursing home business for some time. He operates a number of nursing homes in Ontario. In 1982, he decided to expand into the Peterborough area. To this end, he entered into negotiations with Balmoral with a view to acquiring an undeveloped piece of property not far from Balmoral's existing premises, as well as Balmoral's licence to carry on a nursing home business in the Peterborough area. Without a licence Balmoral could not operate. Daynes hoped to erect a new building to be called "Riverview Manor" which would "fill the gap" when Balmoral decided to withdraw from the nursing home business. Balmoral residents would find accommodation at Riverview Manor.

11. At the time, Balmoral was having difficulties. Its premises on London Street required extensive and expensive renovation. There were good reasons to get out of the nursing home business, and Balmoral was quite content to sell its licence and the vacant land to Daynes, and to facilitate the transfer of the Balmoral residents to the new Riverview facility when it was constructed. It is perhaps indicative of Balmoral's difficulties that in February, 1983, the Ministry of Health insisted that the top floor of Balmoral be closed and 18 of the 51 Balmoral residents were transferred on a temporary basis to a local nursing home run by Extendicare. Eventually, most of the residents remaining at Balmoral would find their way to Riverview Manor, as would a number of the persons who had been transferred temporarily to Extendicare.

12. The negotiations with Balmoral were ongoing and over that period there were changes in the terms and timing of the transactions by which Daynes hoped to make Riverview a viable nursing home business. It is interesting to note that, in its early stages, the documents reflecting those negotiations referred to the acquisition of Balmoral's nursing home "business" (see the decision of the Board dated May 31, 1983 at paragraph 6 and the decision of the Board dated September 25, 1983 at paragraph 5). At this point there was no concern about that characterization of the transaction. Eventually, a satisfactory arrangement was negotiated between Balmoral and Daynes. However, from the point of view of Balmoral's employees, there was real concern. On April 28 1983, they were given notice of the termination of their employment upon completion of the transaction, then expected to close in June. The arrangement between Balmoral and Daynes put their jobs in jeopardy. Their right to continued employment could well depend upon whether Daynes had acquired Balmoral's "business" within the meaning of section 63 of the Act, and whether the employees' collective agreement rights (including those contingent upon seniority) were enforceable against Daynes. Accordingly, the union applied to the Board for a declaration that Daynes was Balmoral's successor and continued to be bound by the collective agreement.

13. The first section 63 application was filed on March 18, 1983 and came on for a hearing before the Board on May 5, 1983. As in the present case, there was no real dispute about what had transpired to that date, or the way in which the transaction was expected to unfold. (See the decision of the Board dated May 31, 1983 now reported at [1983] OLRB Rep. May 632, at paragraphs 3 to 11.) The real question was whether section 63 would have any application — that is, whether it would amount to an acquisition by Daynes of Balmoral's "business" within the meaning of section 63. Daynes took the position that it would not be a successor employer and indicated that it intended to hire employees and conduct itself as if the Balmoral collective agreement had no application. The union took the position that if the transaction went through in the form and manner expected, Daynes would be a successor within the meaning of section 63 and the Balmoral employees would have a claim for continued employment in what was characterized as a continuation of Balmoral's business. However, the Board declined the parties' request to make a preliminary ruling on the effect of a transaction which had not yet been completed. The Board observed:

12. The union and the respondent both acknowledge that, in some sense, this application may be premature because the transaction has not yet closed, the licence to run the Riverview Nursing Home has not been formally acquired, the employee complement has not been settled and none of the residents have actually been transferred. However, both counsel urge the Board to express a preliminary opinion on the question of whether, if the transaction unfolds as it is expected to do, it would amount to a transfer of a business within the meaning of section 63 of the Labour Relations Act. The union takes the position that it would. The respondent asserts the contrary. Both parties point out that the Board's opinion would be helpful to them in planning their affairs. From the union's perspective, it has a number of members who face the prospect of termination in June and who are anxious to know whether their collective agreement rights and hence claim to jobs at Riverview will be preserved. The employer is anxious to ascertain the parameters within which he can establish the employee complement and the terms and conditions of employment of the persons hired to work at Riverview. There is no indication that the employer would abort or alter the form of the transaction depending upon the Board's decision, but it is obviously, and understandably, interested in avoiding any potential liability associated with the legal uncertainty.

13. We are not unsympathetic to the parties' concerns, but we have concluded that we should not express any opinion or make any determination about the application of section 63 until the transaction said to constitute a transfer of a business has been completed. Any desire to provide guidance to the labour relations community in a difficult area of the law must be tempered by a recognition that preliminary opinions based on hypothetical facts could create as much mischief as they resolve, if not more. Not only would such opinions encourage a rescission or restructuring of transactions to which section 63 might otherwise apply but, in addition, there could be litigation about the effect of the opinion itself and whether the transaction was actually consummated in the form upon which the Board's opinion was based. Since close cases will often turn on subtle shadings of fact, in our view, it would be unwise to render opinions on what will inevitably be less than complete information. In today's volatile business climate there is a real likelihood that various components of "the deal" will change (for example, to accommodate financing or licencing requirements) between its initial conception and its completion, and we are by no means convinced that the injection of a preliminary Board opinion at one stage or another in this process would really facilitate the promotion of orderly collective bargaining or the interest which section 63 was designed to protect. Finally, we are constrained to note that section 63 is not the only provision of the Act which occasionally gives rise to interpretive difficulties. The same could be said of the duty to bargain in good faith, the so-called statutory freeze (see section 79), and certain of the unfair labour practice provisions. It is an unfortunate fact that, like other areas of the law, the law regulating employer-employee relations has become increasingly complex and in manycases there is room for argument about how the law should be interpreted or applied. However, we do not think that the answer to this complexity or to the business planning problems faced by the labour relations community lies in this Board giving preliminary opinions on hypothetical fact situations.

14. For the foregoing reasons, we have determined that this application must be dismissed as premature. Such dismissal, of course, is without prejudice to either party bringing a fresh application at an appropriate time in the future.

14. The transaction proceeded more or less as planned — although the closing date was postponed from June until August and the employees were not terminated as anticipated in the April 28th notice. They continued to work at Balmoral as before. However, in view of the earlier proceedings, the parties were agreed that immediately upon completion of the deal, a new section 63 application would be made. That application was filed in July in anticipation of an expected August 1st closing. The hearing was adjourned to August 25th, when it became apparent that, once again, the transfer would have to be postponed, and would not actually be completed until mid-August.

15. Between the dismissal of the first section 63 application on May 31, 1983, and the hearing of the second one on October 25, 1983, Daynes elected to proceed as if it had no special responsibility to consider the claims of Balmoral employees or their trade union. In June, 1983, Daynes advertised for, and received, applications for positions at Riverview Manor. To protect themselves, most of the Balmoral employees applied for those positions — even though the union continued to maintain that they should not have to "apply" for "their own jobs". By July 16th, Daynes had selected those individuals whom it wished to employ. These included a few employees already working for Balmoral, a few individuals already employed in other Daynes' facilities, and a much larger group of persons hired "off the street". Daynes was aware, of course, that there would shortly be a second successor rights application. Daynes was also aware of the union's claim that Daynes was acquiring and carrying on Balmoral's nursing home business, and that Balmoral's employees had a preferred right to the work opportunities generated by that business. Daynes was taking a risk that its legal position would not be sustained before the Board. Daynes was prepared to take that risk.

16. Between Tuesday, August 9 and Friday, August 12, 1983, Daynes conducted a paid training programme for the individuals whom it had selected to work at Riverview. The construction of the Riverview facility was completed on August 10, 1983. On Thursday, August 11th, the Riverview premises were inspected by an official of the Ministry of Health who indicated that, subject to a later inspection, the Riverview premises were satisfactory and that a transfer of residents from Balmoral could begin. The Ministry issued a "licencing status" document to this effect, over the signature of one of its officials. However, no formal licence was issued at that time. Between Monday, August 15th and Wednesday, August 17th, residents were transferred from Balmoral to Riverview. For this short period, both Balmoral and Riverview were providing nursing home care to some of Balmoral's residents or former residents.

17. The terms of the transaction with Balmoral were not fulfilled until all of the residents had been transferred. That condition was met by August 17th. Riverview's licence was issued on August 17th. The final aspects of the transaction closed on August 18, 1983, with the registration of a mortgage in favour of Balmoral. Balmoral's licence expired on August 18, 1983. From that date forward, Riverview was fully operational and Balmoral ceased to carry on business.

18. On August 25, 1983, the Board (differently constituted) held a hearing to determine whether there had been a transfer of a business from Balmoral to Riverview within the meaning of section 63 of the Labour Relations Act. The Board heard the parties' evidence and representations, and reserved its decision. In a decision dated September 15, 1983, (now reported at [1983] OLRB Rep. Sept. 1564) the Board reviewed the details of the transaction as well as the policies and principles underlying section 63. The Board concluded that the respondent was a successor employer within the meaning of the Act. Board Member J. D. Bell dissented. A request for reconsideration of this decision was considered and dismissed. There was a subsequent application for judicial review. There has been no application to the Court for a "stay" or other interim relief. The decision of the Board speaks for itself and the details of its reasoning need not be reproduced here.

19. The Board decision of September 15th did not alter the respondent's stance. The respondent did not accept the section 63 declaration. The respondent did not acknowledge the collective agreement or apply its terms to the employees working at Riverview. The respondent did not recall or reinstate any former Balmoral employees. When those employees filed grievances under their collective agreement, asserting that their seniority (etc.) entitled them to continued employment, the grievances were ignored. The respondent did not process them. The respondent sought judicial review of the Board decision. The union filed this complaint.

20. With this background then, we turn to an examination of section 63 and its consequences — assuming, as we must, that there has already been a final and binding determination by another panel of the Board that Daynes is a successor employer within the meaning of the Act. The correctness of that decision is not now in issue. This is not an appeal. The question before us (at this stage, at least) is the effect of a successor rights declaration, and the extent to which it enures to the benefit of the predecessor's work force, and bolsters their claim to continued employment in what has become the successor's business.

21. In order to appreciate the significance of these issues, it is useful to review the structure and purpose of section 63 of the Act. In undertaking this review, of course, we will not repeat the analysis which led the other panel of the Board to conclude that, in the circumstances of this case, there had been a "transfer of a business" within the meaning of section 63. As we have already noted, this is not an appeal. However, it may be useful to comment on section 63 generally, so that the parties' positions can be put in their proper perspective. As will be seen infra, the result in this case is not of interest only to the immediate parties, and the Balmoral employees who found themselves unemployed when Daynes decided not to retain them. There may be broader ramifications, potentially touching the rights of the predecessor's employees in every sale transaction. The main provisions of section 63 are as follows:

[Sections 63(1) to 63(6) inclusive omitted]

IV

22. When a business, or "part" of a business, is transferred or disposed of, the transferee acquires it subject to the collective bargaining obligations of his predecessor. The union retains bargaining rights for the employees in a "like unit" to that which existed before, and the successor must continue to apply the collective agreement (if any) to that unit of employees until the Board otherwise declares. Section 63 creates a legal regime which is quite different from what would obtain in an ordinary commercial context, and the employees' collective bargaining rights are not merely contractual. Since the bargaining structure inherited from the predecessor may be inappropriate, or create conflicts with the successor's pre-existing bargaining obligations, the Board has certain powers to define and, if necessary, restructure the unit to suit the new circumstances. Likewise, if the successor employer significantly alters the character of the business, or intermingles the employees of the purchased business with those from its other operations, the Board may redefine the bargaining structure or determine whether the union's bargaining rights should be continued at all (see sections 63(4)(6).

23. The principal thrust of section 63 is to preserve the labour relations status quo, by transforming the employees' collective bargaining rights into a form of "vested interest" which attaches to the business entity and like a charge on property "runs with the business". To accomplish this objective, the statute gives an unusual and extended meaning to the term "sale", envisages the continuation of bargaining rights even in a "part" of the predecessor's operation, abrogates the notion of privity of contract, and virtually eliminates the significance of the separate legal identity of the new owner. Collective agreements are not treated like ordinary commercial contracts, nor are collective bargaining rights co-extensive with commercial ownership. Both rest ultimately on the statute itself, which also ensures that they will "flow through" the business transfer and bind the transferee as if he had been an original party to the collective bargaining relationship. Thus, it is up to the prospective transferee to investigate the terms of the agreement its predecessor has made with his employees and take that into account in the terms of the acquisition. Here, of course, Daynes was well aware of this problem, since section 63 was raised long before the transaction finally closed. From the outset, the union has claimed that Balmoral employees, with the requisite ability and seniority, should be given preference to the jobs at Riverview.

24. The terms "sale" and "business", have not been exhaustively defined in the Act, in recognition, we think, of the great variety of commercial relationships to which they might be applied, and the need for a case by case elaboration of the law in light of labour law policy considerations. In view of the broad language of section 63 and its intended remedial thrust, the Board has always been disposed to give section 63 a liberal interpretation. The Board has not placed much reliance on the legal form which the business transfer happens to take as between the predecessor and successor. Nor has the Board been unduly influenced by the assertion that there has merely been a "transfer of assets". It is recognized that one can acquire a "business" just as surely by an asset transfer as by an acquisition of shares. On the other hand, not every commercial disposition or transfer of "something" will trigger section 63 and result in a continuation of bargaining rights. The task faced by the Board in any particular case is to give the statute an interpretation which is consistent with its language and intent, and is also fair to the labour relations and commercial context under review.

25. Over the years there have been numerous successor rights decisions, as the Board has sought to apply section 63 in different industrial contexts. In most of those cases (as here, initially) the question has been whether the commercial transaction is one to which section 63 applied. In resolving that question, the position of the employees is only one factor to be considered. A decision not to retain the predecessor's employees cannot, in itself, avoid the application of section 63, nor does the hiring of some of the predecessor's employees, in itself, determine the "sale" issue. However, as might be expected in a labour relations statute, the Board does pay particular attention to the nature of the work performed in the business before and after the alleged transfer. The trade union represents certain work groups, the collective agreement regulates the conditions of work for employees in those work groups, and the purpose of section 63 is to preserve both the bargaining relationship and the collective agreement. If the work and jobs performed subsequent to the transaction are similar to the work and jobs performed before, this would usually be one factor supporting an inference that there has been a "sale" of a "business" to which the Labour Relations Act should apply. In R. v. B. C. Labour Relations Board ex parte Lodum Holdings Limited (1969), 1968 CanLII 586 (BC SC), 3 D. L.R. (3d) 41 Dyer J. observed:

One must keep in mind that the problem before the Labour Relations Board was one of labour relations and consequently, though as pointed out above the whole law must be considered, the weight to be assigned to various factors and the inferences to be drawn from certain evidentiary facts are not necessarily the same as would be the case if the problem were one of, say, taxation or control of assets. The importance of the "business" in its labour relations aspect is the jobs it provides for the employees. One factor to be considered therefore, is whether the same or substantially the same jobs are being performed. That depends on a number of factors such as whether the jobs are being performed at the same or substantially the same times and places, in respect of the same or substantially the same goods or services, and for the same or substantially the same customers or patrons, etc. These matters are, in my opinion, more important than the form of transfer.

[emphasis added]

Unless there is a continuation of the work and jobs, it would make little sense to preserve the union's bargaining rights and the employees' collective agreement. Conversely, if the work, the jobs, the bargaining rights and the employees' collective agreement are all continued, would it not be anomalous if a successor could reject all of those employees, and completely fill the bargaining unit with strangers of its own choosing? That is the respondent's position in this case. If accepted, it would substantially blunt the apparent remedial thrust of section 63. Now, obviously, the consequences of a particular interpretation cannot be permitted to confute the clear meaning of a statute; but the Board would be remiss if it did not consider which of two competing interpretations urged upon us seems to be most consistent with the statutory scheme and intent.

V

26. Because the legislation has confided successor rights determinations to the exclusive jurisdiction of the Labour Relations Board, the Ontario Courts have not had much occasion to comment upon the meaning of section 63. But there is one recent exception which deserves brief mention. In that case, the Court confirmed the broad remedial thrust of section 63 and the special status which the statute accords to collective agreement rights. And there too, the focus of the Courts was on the rights of employees vis-a-vis the successor employer.

27. In Re United Brotherhood of Carpenters and Joiners of America, Local 3054 and Cassin-Remco Ltd. et al. (1979), 1979 CanLII 2013 (ON HCJ), 105 D.L.R. (3d) 138, the business of Cassin-Remco had been sold, through a receiver, to a company which this Board found to be a successor employer under section 55 [now section 63] of the Act (see Re Fashion Crafts Kitchens Inc., [1979] OLRB Rep. Oct. 967). Prior to the sale, an arbitrator had found the predecessor, Cassin-Remco, liable in damages for certain breaches of the collective agreement, and the issue before the Court was whether the successors ("ASSAF" and "Fashion Craft") "inherited" responsibility for those arbitration awards — awards which, we repeat, were based upon breaches of the agreement committed by the predecessor, Cassin-Remco, prior to the sale. The Court held that the successors were liable because the Act put the successor in the same position as the original signatory of the collective agreement. Thus, the employees were entitled to pursue their claim against the successor. Steele J. observed:

I am of the opinion that the Labour Relations Act creates a special status for collective agreements outside the purview of the general law.

Section 55 [now section 63] of the Labour Relations Act provides that the purchaser of a business shall be deemed to be the original signatory to the collective agreement. Therefore, both the union and the purchaser are bound by the terms of the agreement including its benefits and detriments. A benefit may be wage rates differing from those prevailing in the industry. A detriment may be an outstanding grievance or, in this case, an execution filed as a result of an arbitrator's award. In other words, the terms and conditions of a labour agreement flow with the business and once the purchaser has acquired the business then he is obligated to all of the matters that are included with it.

In this case, the purchasers are liable as a party to the award and, by reason of Rule 546, it is appropriate that the order go granting leave to issue execution against Assaf and Fashion Craft in the amounts set out in the writs of execution against Cassin-Remco Limited including interest as specified therein from October 17, 1978.

To hold otherwise would frustrate the intent of the Labour Relations Act and would impede the processing of grievances that are ongoing within a collective agreement. It would mean that while companies were in financial difficulties, no grievances under the agreement would be pursued because there would be a danger that any decision resulting therefrom would be nullified by a subsequent sale of the assets whereas if the grievance were not filed until after the sale then the usual results would flow from it.

We are obviously not concerned about a precise point of insolvency law. What is interesting from our perspective is the Court's recognition that section 63 is designed to protect the rights of the predecessor's employees and requires the successor to recognize their pre-existing collective bargaining claims. (See also: Maritime Life Assurance Co. v. Chateau Gardens (Hanover) Inc. et. al 83 CLLC ¶ 14,070.)

28. As we have already mentioned, the position taken by Daynes in this case is very similar to the one taken by the respondent employer in Emrick Plastics Inc., [1982] OLRB Rep. June 861 — so similar, in fact, that counsel for Daynes conceded that Daynes' position could not be sustained unless Emrick were distinguishable or this panel of the Board was persuaded to reject the Emrick reasoning. In Emrick the predecessor company was in financial difficulties and its business was ultimately sold through the offices of a receiver-manager. The successor's offer to purchase was accepted on February 5, 1982, and the deal eventually closed on or about March 1, 1982, when the successor formally took over the operation. In the interim, the successor interviewed a number of the predecessor's employees, who were advised that they would be notified later if the successor decided to hire them and if they should report for work on March 1st. There was some question whether these individuals had been properly terminated by the predecessor, but the more critical question addressed by the Board was whether the obligations of the successor did, indeed, turn on the actual or purported termination prior to the sale of the individuals employed by the predecessor. The successor insisted that it was under no obligation to hire any of the predecessor company's employees, and that the seniority and service of those employees that it did hire, dated only from the point of such hire. The successor asserted that it was under no obligation to apply the terms of the collective agreement to any of the predecessor's employees until such time as it actually decided to hire them, and that even then, they were entitled to no credit for their accumulated service or seniority with the predecessor.

29. The Board disagreed. After reviewing some of the authorities relied upon by the respondent, the Board concluded:

16. Nowhere in the Kelly Douglas decisions [[1974] 1 C.L.R.B.R. 77] did the B. C. Board suggest that a successor employer was free to select its employment complement free from the provisions of the governing collective agreement. On the contrary, that Board in M. M. Pruden, supra, [[1976] 1 C.L.R.B.R. 138] stated, at page 143:

On the other hand, it is implicit in s. 53, and in the reasoning of Chairman Weiler in Kelly Douglas, that any discontinuance of employment must be for a legitimate business reason. That is, it must be for "just cause". A successor employer must continue to employ those employees whose jobs survive a succession under the Code, notwithstanding its opinion as to their suitability for continued employment. In other words, the Code should not be interpreted so as to give successor employers a licence to weed out "undesirable employees".

The Board's ultimate decision in Pruden was quashed on an application for judicial review, but only because the Court found a repugnancy between section 53 of the Labour Code and the overriding Assessment Authority of British Columbia Act, a piece of special legislation passed to govern the specific transaction before the Board in that case. Indeed, it was precisely the passage quoted above from the Board's decision which satisfied the Court of the repugnancy between the normal impact of section 53 of the Code and the special provisions of the Assessment Authority Act,, which explicitly granted the new Authority the discretion to designate those employees whom it wished to hire.

17. The interpretation given to its successorship legislation by the British Columbia Labour Relations Board makes eminent good sense to this Board as well. Collective bargaining legislation is designed primarily for the benefit of employees, not trade unions. Can it really be said that the Legislature in enacting section 63 of our own Act intended that the rights of the bargaining agent selected by the employees would "run with the business" (cf., for example, Marvel Jewelry, [1975] OLRB Rep. Sept. 733), that the collective agreement bargained for and ratified by those employees would run with the business, but that the very employees who had made these choices would not? The Board would need unmistakable language in its statute to come to that conclusion...

18. We conclude, similar to the British Columbia Labour Relations Board, that section 6 3(2) of our own Act continues the effect of a collective agreement over a sale transaction without hiatus, and that the purchaser stands literally in the shoes of its predecessor with respect to any rights or obligations under that agreement. The purchaser, in other words is given no opportunity to "weed out undesirable employees" contrary to the provisions of the collective agreement, nor to decline to recognize any of the seniority or other rights accrued by employees under the collective agreement than the vendor would have been. The obligations of neither employer are determined by whether the employer on its own chose to treat a severance at a given point in time as a termination or a lay-off.

The complainant union asserts that the Emrick reasoning is equally applicable in the circumstances of this case and Daynes was obligated to retain the Balmoral employees.

VI

30. There is no lack of clarity in the Court decisions, or in the decisions of the Board, or, indeed, in the statute itself. Section 63 requires a successor employer to recognize the trade union that represents the predecessor's employees, and to apply the terms of the collective agreement to the bargaining unit until the Board otherwise declares. Here, despite a Board declaration of successor status, the respondents did neither; and, given the course of proceedings, it can hardly be said that Daynes was unaware of its potential "exposure" or liability. The Board decision of September 15, 1983 stands until set aside by the Court, and the mere filing of an application for judicial review does not alter the result or suspend the effect of the statute which, by its terms, operates until the Board otherwise declares. As of the date of this decision, the application for judicial review has still not been perfected, and there has been no application for a "stay" or other interim relief. Accordingly, it is difficult to understand Daynes' refusal to recognize the union or the collective agreement — quite apart from the merits of its argument respecting its obligations to the predecessor's employees, and its chagrin at losing what even the Board regarded as a difficult case. However, because of the way this case developed, counsel for the respondent did not seek to justify the respondent's repudiation of the collective agreement, the employees' grievances, or the union's position as bargaining agent. Rather, his argument centred on the corporate respondent's obligation to retain in its employ the individual workers employed by Balmoral, the predecessor employer under section 63. If such obligation flowed naturally from section 63, the employees of Balmoral would have to be retained, and it is unnecessary to consider whether Daynes' refusal to retain them constitutes an independent unfair labour practice.

31. Daynes argues that section 63 might require a continuation of the union's bargaining rights, and the terms and conditions of employment for bargaining unit employees, but there is no guarantee that any of the predecessor's employees will continue to keep their jobs in the bargaining unit. There was no obligation to give any special consideration to the predecessor's employees and, in fact, none was given. Of the many Balmoral employees seeking work at Riverview, only three or four were hired. Approximately 19 "new employees" were hired "off the street". The rest of the employee complement is composed of individuals transferred from other Daynes operations. Daynes asserts that in the circumstances of the instant case, it was entitled to meet its staff requirements by hiring employees entirely of its own choosing —whether or not they previously worked for Balmoral. The Balmoral employees were given notice of termination and the Riverview employees were assembled prior to the actual completion of the "sale" transaction. Daynes argues that there is no right to displace the "pre-existing employees" whom it selected to work at Riverview prior to the actual closing of the deal. Daynes argues that Emrick is distinguishable because, in this case, there was a period prior to the completion of the transfer when both facilities were operating simultaneously.

32. The union points out that Daynes has never applied the terms of the collective agreement to any of the employees at Riverview, whether they were former employees or new hires. In practice, Daynes has conducted itself as if section 63 and the collective agreement had no application whatsoever. In the union's submission the collective agreement required Daynes to give special preference or consideration to Balmoral employees and the respondent has clearly refused to do so. That is what Emrick stands for. The union submits that it is implicit in the scheme of section 63 of the Act that, if the collective agreement and bargaining rights "flow through", there must also be a continuation of the employees unless the employees are discharged or laid off in accordance with the terms of the collective agreement. Even if there were employees in place prior to the sale, the union submits they were temporary or probationary employees with no seniority, who should have been laid off immediately when there was insufficient work for Daynes' work force — a work force which, by operation of section 63, included the Balmoral employees.

VII

33. In answering this question, we should begin by reiterating that we are not here dealing with the employees' common law rights; but rather employee rights established in a collective bargaining regime, embodied in a collective agreement, and founded ultimately upon the statute. The law of master and servant no longer obtains, nor can an employer rid itself of unwanted employees, without cause, upon the mere giving of notice. In Port Arthur Shipbuilding Co. v. Arthurs 1967 CanLII 30 (ON CA), [1967], 2 O.R. 49 (C.A.), Laskin, J.A. (as he then was) put it this way:

Matters familiar in a master and servant context have taken on different dimensions under collective agreements. ... In all the understandable concern about union-management relations as reflecting in part an economic struggle between two giant forces, it is sometimes forgotten that collective bargaining and the collective agreement have given the individual worker security of continuing employment, depending by and large only on his seniority in relation to the employer's production needs (in terms of numbers of workers and their skills) and on his good behaviour which avoids giving just or proper grounds for discharge. What are generically called seniority and discharge clauses represent the employees' charter of employment security; and it is reinforced by removing from the employer, not his initiative in acting against an employee, but his previously unreviewable right to rid himself of employees, even if it cost money damages to do so.

It is precisely this body of employee rights which the Legislature has decreed should "flow through" a "sale" transaction and bind a successor employer. To clarify what this means in the instant case, we must necessarily trespass, a little, on the territory usually occupied by an arbitrator.

34. When Balmoral gave its employees notice of termination, that notice did not effect a termination of their employment. It could not do so, because Balmoral was not entitled to discharge its employees unless it had "just cause", and no just cause was asserted, other than the impending sale, and the possible desire of Daynes to take over the business free from the incumberence of Balmoral's employees. But, in our view, that is not just cause for discharge under the collective agreement when the business is to be continued in the hands of the successor, there is no real change in the character of the work, and both the collective agreement and the bargaining rights are preserved. Section 1(2) of the Labour Relations Act provides that an individual does not cease to be an employee by reason only of his being dismissed by his employer contrary to the terms of a collective agreement. Section 50 gives the agreement statutory force and section 63 makes it binding upon Daynes. Thus, the employees purportedly dismissed by Balmoral have a valid claim to continued employment which they are entitled to assert against Daynes, just as the employees in Cassin-Remco and Maritime Life Assurance, supra, were able to pursue their claims against successor employers in those cases.

35. When Daynes acquired the business, it stood precisely in the shoes of its predecessor. It inherited an established complement of employees with established contractual rights. Some of these employees were on layoff and had recall rights which they could assert before there could be any new hires. More importantly, there was a much larger group of employees who had been actively employed right up to the date of the sale. Those employees were not, and could not have been, terminated without just cause — which cause could not be based solely on the impending sale. Nor could they be "laid off' from their jobs when those jobs and their work continued. If it were otherwise, the purpose and intended effect of section 63 would be substantially undermined. Employees with years of service and a legal stake in the predecessor's business could be cast aside by the simple expedient of having the predecessor employer purport to terminate them prior to the sale and having the successor pre-assemble a work force of "new" employees with no established contractual claims (e.g. seniority) and no previous contact with the union. It does not take much imagination to foresee the likely result of packing the bargaining unit with strangers adverse in interest to both the union and the predecessor's employees who could rely upon their seniority in the competition for scarce work opportunities. In practice the protections of section 63 would be illusory and short lived. As the Board put it in Emrick: could the Legislature have intended a continuation of the union's bargaining rights for a group of employees and the continuation of the employees' collective agreement, but not those employees' own right to continued employment in accordance with the terms of their agreement? Could the Legislature have intended the preservation of bargaining unit rights in the abstract, but not the protection of the positions of the members of the bargaining unit who might be able to benefit from or exercise those rights? Certainly that would be a perverse result and one which we would not lightly embrace. This is not to say that a successor employer cannot reorganize its work force, introduce new methods, or even trim the employee complement —provided it does so in accordance with the terms of the collective agreement. But the successor's rights are limited in precisely the same way as the rights of the predecessor.

36. Does the purported recruiting of the Riverview staff prior to the business transfer make any difference? Daynes asserts that its employee complement was assembled and in place prior to the sale transaction which, by its terms, could not have been completed until all of the residents had been transferred to the Riverview facility on August 18,1983. The "new hires" were undergoing a training programme and being paid from August 9th onwards. For at least a few days, they were already working for Daynes, and, at that point, most of the Balmoral employees were still actively at work in the Balmoral premises and remained so until the transfer was completed. Daynes maintains that Riverview was fully staffed prior to the sale. There were no job openings. At the highest, the Balmoral employees may have a claim to recall to future openings if there are any.

37. This submission misconceives the effect of section 63 and its interplay with the terms of the collective agreement (leaving aside, for now, the fact that the employer refused to acknowledge or apply that agreement in any event).

38. When the sale of a business occurred, the Balmoral employees did not revert to the status of "laid off employees" or employees who had been properly terminated. They were actively employed by Balmoral until its business had been completely transferred to Daynes, and, upon the acquisition of Balmoral's business, they became employees of Daynes with full seniority rights and a claim to any work opportunities then available. Their status as employees in the bargaining unit did not change, and Daynes had no more right to change it than its predecessor had. Nor does it matter that, in reality, the actual acquisition of Balmoral's business took place in stages over a three-day period, as Balmoral gradually withdrew from the business of providing nursing home care to its residents, and Daynes gradually assumed that responsibility. Notionally, this means only that Daynes gradually acquired parts of Balmoral's business and by August 18, 1983, it had finally acquired the whole. That could not affect the rights of Balmoral employees who, as the transfer of business unfolded, became employees of Daynes. The Balmoral employees could not be discharged without just cause, and if Daynes suddenly found itself with too many employees for the available work, it was required to reduce its work force in accordance with the layoff provisions in the collective agreement, taking into account the seniority rights of all of its employees.

39. In contrast, if the individuals selected by Daynes to work at Riverview can be considered employees of Riverview prior to the transfer of Balmoral's business (and, it might be argued that they were merely "prospective employees" until then), they were certainly not employees in the bargaining unit until the transfer actually occurred. At that point, they would become employees in the bargaining unit and subject to its terms. But one of those terms was that newly hired employees would not go on the seniority list and would not be credited with seniority under the agreement until after they had completed a three-month probationary period of employment. Even the most generous construction of the agreement would appear to give the new hires only a few days of seniority, and it can plausibly be argued that until they had completed the stipulated probationary period, they had no seniority under the agreement at all. Accordingly, only the most exceptional of circumstances would justify the preference of these new hires over individuals having experience in the job classifications continued at the Riverview facility and having established seniority under the terms of the collective agreement. No such exceptional circumstances were identified by the respondent; thus if the respondent had applied the agreement as it was required to do, most, if not all, of the Balmoral employees would have been retained. In the competition for the limited employment opportunities available, the new hires simply would not have prevailed. If Daynes had complied with its contractual and statutory obligations, rather than ignoring them, the bulk of the Balmoral employees would be working at Riverview today.

40. The position of the long-term Daynes employees transferred to Riverview from its other locations may raise different considerations under the collective agreement with respect to the effect (if any) of their previous service with Daynes outside the bargaining unit, and whether under the terms of the agreement (and absent anti-union animus), they would be in a better position than the new hires and the previous Balmoral employees in the competition for limited work opportunities. But we need not address that matter at this stage, nor do we have to consider, in detail, how (again, absent alleged anti-union considerations) the agreement should have been applied to particular individuals with particular claims to jobs at Riverview. It suffices to say that we do not think this case is distinguishable from Emrick, and, accordingly, that the respondent had a prima facie obligation to retain the predecessor's employees who could only be terminated or laid off in accordance with the terms of the collective agreement.

41. In view of the foregoing, the Board will remain seized in the event that the Board's opinion does not resolve the issues remaining between the parties, and it is necessary to continue with this case.

DECISION OF BOARD MEMBER W. H. WIGHTMAN;

1. In the earlier case (Board File No. 0927-83-R) Board Member J. D. Bell dissented from the majority and would have found that a sale did not occur. I agree with my colleague and would stress that the problem the Board faces in the case at hand results from attempting to pursue the illogical premise created by the earlier case to a logical conclusion.

2. The plight of all parties involved in this matter should be viewed in the context of all the events dating back to October of 1982 when Daynes purchased some land from Balmoral in anticipation of Balmoral losing its licence to operate a nursing home. We are entitled, I think, to take judicial notice that nursing homes have little control over income (the amount paid per patient per day being fixed by government) or a substantial portion of their costs (bargaining unit rates of pay being determined through interest arbitration). Balmoral had not allocated the differential between income and costs in such a manner as to have satisfied the licensing authorities with respect to the physical condition of the facility. Daynes assessed the situation and it is significant that they decided they could operate a nursing home in the locality but that to do so would require a fresh start using a new facility and their own policies and procedures. Though this would involve a major capital committment, they were prepared to do so assuming they could operate it in the initial stages at least along the same lines they have been operating their other existing facilities. As mentioned in the majority award (para. 11), Daynes attempted to outline their intentions to this tribunal in hopes of getting what would have amounted to prior approval in a labour relations sense. In the decision of May 31, 1983 (Re File No. 2639-82-R), Daynes learned that the Board could not deal with a prospective question and notwithstanding failure to obtain pre-clearance from the OLRB, Daynes decided to proceed with what it thought to be a reasonable plan. Balmoral, knowing it was going out of business, gave notice of termination in accordance with employment standards legislation on April 28, 1983.

3. In June 1983 Daynes began interviewing prospective employees; (including persons then employed at Balmoral), anticipating staff requirements beyond those persons already in their employ whom they intended to transfer to the new facility.

4. On July 16, 1983 Daynes notified successful applicants for the new (Riverview) facility.

5. On August 9, 1983 Daynes engaged employees for Riverview and embarked on a training program for them which continued through August 12.

6. On August 11, 1983 the Ministry granted licensing status to Daynes for the Riverview Facility. It is significant that the Balmoral licence continued in existence concurrently. (For obvious reasons nursing home licences are not bought, sold, rented or leased in the fashion of taxi-cab plates).

7. On August 18, 1983 Balmoral's licence expired, the facility ceased operations and Riverview registered a mortgage in favour of Balmoral. Thus, upon completion of the transaction between Daynes and Balmoral, the RiverviewEacility on August 18, had been staffed since August 9.

8. In its decision of September 15, 1983 the Board found the transaction to have been the sale of a business, and that Riverview had inherited Balmoral's collective agreement and concomitant obligations vis-a-vis the employment of personnel from the Balmoral bargaining unit. In the words of counsel for union: "Daynes took a chance — gambled and lost as of September 15th".

9. Daynes was not the only "loser". The public interest in residential nursing home care in this Province fared poorly as well, in that these decisions will reduce the likelihood of private interests being willing to provide the capital necessary to replace facilities which deteriorate in circumstances such as Balmoral. Inadvertently the Board may have pre-empted the Legislature and embarked us upon a de facto public policy of Crown ownership of nursing homes.

10. Daynes employees transferred from other locations to Riverview, as well as persons hired directly at Riverview on August 9 also appear to be "losers". They will have known that as of August 11 they were employees of a nursing home, that they subsequently began receiving residents from a nearby home (August 15th to 18th), and that their jobs are now claimed by employees of the home from which they have received some of their residents. However, with this knowledge they may not be able to understand why they are not among the people referred to in the Emerick decision (supra), which opines that "Collective bargaining is designed primarily for the benefit of employees, not trade unions". (See page 21 of the majority decision). They may wonder how their circumstances would have been affected had they been represented by a competing trade union, or by another Local of the complainant union. Indeed, they may wonder if the Legislation is not being construed in such a manner as to suggest that employees not represented by a trade union are to be less favourably treated than those who are. Such a construction would surely fly in the face of Section 3 of the Act and the Charter of Rights guarantee of freedom of association both of which must implicitly guarantee an equal and concurrent freedom not to associate and not to be penalized for exercising that freedom.

11. It should also be noted than when this complaint came on for hearing the respondent offered to proceed immediately to expedited arbitration with respect to all grievances regarding employment entitlement. In light of the earlier decision regarding the "sale of the business", this seems to me to have been a wise and fair approach. By insisting that this Board resolve the matter the complainant has caused a denial of natural justice to at least some of the employees now employed at Riverview.

12. This decision may be a "logical" outcome flowing from the earlier decision but since its effect is to deny a freedom guaranteed under Section 3 of the Act, I must dissent.