[1984] OLRB Rep. October 1433
1805-83-R;1806-83-R Canadian Union of United Brewery, Flour, Cereal, Soft Drink and Distillery Workers, Local 304, Applicant, v. Harley Transport Limited, Bryan Cathcart, and Ottor Forwarders Ltd., Respondents
BEFORE: Corinne F. Murray, Vice-Chairman, and Board Members I. M. Stamp and B. L. Armstrong.
APPEARANCES: John McNamee for the applicant; Martin Addario and Harley Cathcart for the respondent Harley Transport; Bryan Cathcart on his own behalf and Alexander R. Hammond for Ottor Forwarders.
DECISION OF THE BOARD; October 23, 1984
These are applications pursuant to section 1(4) and section 63 of the Labour Relations Act arising out of the commencement of certain trucking operations by Bryan Cathcart (hereinafter referred to as "Bryan") on October 1, 1983 and thereafter which had, prior to October 1, 1983, been carried out by Harley Transport Limited (hereinafter referred to as "Harley Transport").
The evidence the Board received was by way of agreed facts and by way of the viva voce evidence of Harley Cathcart, President of Harley Transport and father of Bryan. No evidence was led on behalf of Bryan or Ottor Forwarders Ltd. (hereinafter referred to as "Ottor"). Counsel for the applicant chose to call no evidence and agreed that the disclosure required by section 1(5) and section 63(13) of the Act had been satisfied.
It is agreed that from at least 1973, the time when Harley Transport purchased a trucking operation from Eagle Transport, the applicant represented a bargaining unit of truck drivers, maintenance men, dockmen and helpers employed in connection with these operations. In 1975 Harley Cathcart sold Harley Transport's trucking operations to Ottor. Between 1975 and March of 1982, when Ottor sold the business back to Harley Transport, we have no evidence as to what activities, if any, Harley Transport carried on or precisely what Mr. Harley Cathcart himself did during this time. None of the details of what was sold by Ottor to Harley Transport in March of 1982 were put into evidence. It is clear that Ottor continued to exist after March of 1982. It is an undisputed fact that Harley Transport entered into an agreement with Ottor, at the time of the sale in 1982, whereby Harley Transport agreed to haul Ottor's freight between Toronto to Peterborough, to do local (Peterborough) pickup and delivery on Ottor's behalf and to lease for a monthly payment all of the space, including office space, in Ottor's Peterborough terminal. It can be inferred that aside from the Toronto to Peterborough run, Ottor engages in some other trucking business. After the 1982 sale and continuing up to the time of the hearing before this Board, there were two telephone lines into the terminal leased by Harley Transport from Ottor — one line for Harley Transport and one line for Ottor. This is so even though there are no Ottor personnel at the terminal — the "switchboard" owned and operated by Harley Transport simply answers one line as "Harley Transport" and one line as "Ottor". It is undisputed that there is no corporate link between Harley Transport and Ottor and that there are no common officers or directors.
Prior to October 1, 1983, Harley Transport had 13 employees and a relationship (left undescribed to us) with an independent broker, Alexander Hammond, who appeared before this Board as Vice-President of Operations on behalf of Ottor. Mr. Hammond and two of the 13 employees, Mr. Kelly and Mr. Black, serviced the Ottor's Toronto to Peterborough run. Mr. Hammond was recognized by the applicant to be an independent broker but Messrs. Kelly and Black were both represented by the applicant. Mr. Kelly was not licensed to drive a tractor-trailer on the highway, and hence did the local delivery aspect. One of the 13 employees of Harley Transport was Bryan Cathcart who began driving full-time for Harley Transport in the spring of 1983. Although the applicant and Harley Transport had reached agreement that Bryan Cathcart should join the applicant and pay dues, all that occurred was a monthly dues check-off. Harley Cathcart agreed with the counsel for the applicant that Bryan was at the bottom of the seniority list and therefore would not have been entitled to drive a tractor-trailer on the highway for Harley Transport because of his place on the seniority list.
Mr. Cathcart's evidence indicates that Harley Transport billed Ottor, on average, $10,000 — $11,000 monthly and on a good month as high as $13,000. We did not receive any evidence comparing this revenue with other sources Harley Transport has. He testified that the rates Harley Transport would charge were agreed at the time of the March 1982 sale. There was no time limit set on the arrangement. Ottor pays on a per trip basis and there is no guarantee of the number of trips or loads. No written agreement between Harley Transport and Ottor was produced. While Mr. Cathcart disagreed with the notion that Ottor's business was a separate part of Harley Transport's business, he did agree that it entailed a separate body of work which could be transferred.
After the sale in March of 1982, Harley Transport operated under the terms of a collective agreement which was to expire in August of 1982. In July one of Harley Transport's major customers, Domtar, commenced a strike which was to last until December. Mr. Cathcart testified that during 1982 Harley Transport lost money on a lot of fronts, Domtar and Ottor work included. He said he became concerned enough during the strike about these losses to consider ways to "turn the business around". Steps to do so, however, were not taken until after the conclusion of negotiations for the 1983/84 collective agreement. In August of 1982, a one-year renewal of the collective agreement between Harley Transport and the applicant was negotiated which included a new provision (Article 20.14). This new provision appeared as a part of a grouping identified as "Article 20 — General". It provided as follows:
20.14 The Company shall not contract out any work normally performed by the bargaining unit or employ brokers. However this prohibition shall not apply to Otter [sic] Freightways Ltd.
In August of 1983 negotiations for a renewal of the collective agreement proceeded without mention by Mr. Cathcart of any losses he was experiencing on the Ottor runs notwithstanding that these losses dated back to 1982. Article 20.14 remained as a term of the collective agreement, which was signed on August 20, 1983. This collective agreement also had a one-year term. At the time the collective agreement was signed, Mr. Cathcart disclaimed having any intention of "brokering" Ottor work. Mr. Catheart claimed that an integral part of the Ottor work going to Bryan was a rejection by Ottor of any rate increase chargeable by Harley Transport. Mr. Cathcart's evidence is ambiguous as to when he first approached the President of Ottor, Mr. Kerr, to get this increase. At one point he seemed to be testifying to the effect that he approached Mr. Kerr two months prior to September 1983, which would have made it at least July, but he later revised this to have occurred in the period August or September of 1983, and then further revised this to indicate that he was not certain about whether it was before or after the signing of the 1983/84 collective agreement. Ultimately, he testified that he thought he approached Mr. Kerr after the last negotiating meeting with the applicant. Mr. Cathcart admitted that he signed the collective agreement and then sat down to see where he could cut down. One area was the Ottor runs. An increase in the rate paid by Ottor was refused by Mr. Kerr. Mr. Cathcart testified that in response to his request for a rate increase Mr. Kerr indicated that Ottor could use its own trucks and trailer to do what Harley Transport was doing for Ottor. Mr. Cathcart then suggested to Mr. Kerr that Ottor's work be "brokered" instead to his son, Bryan. Mr. Cathcart suggested that Mr. Kerr let Bryan try to service Ottor's Peterborough to Toronto runs and deliveries by Harley Transport leasing Bryan the truck and trailer necessary. Mr. Kerr agreed. As to the rationale behind this arrangement, Mr. Cathcart testified that if Harley Transport brokered to Bryan, then Harley Transport would save money because "waiting time" in Toronto would be eliminated. While Mr. Cathcart reiterated on several occasions that the saving would be achieved as a result of the "waiting time" being eliminated, it was never made clear to the Board in sufficient detail precisely how this would be. It appeared after all the evidence was in that the saving was going to be that Harley Transport would no longer have to live with the collective agreement, i.e., either the rates or the method of calculating hours worked. Suffice it to say that Harley Transport was going to be put at an economic advantage if Bryan did the work rather than have Mr. Kerr take the account away entirely.
It took two weeks for Bryan to become operational on October 1, 1983. There was no written agreement or contract between Harley Transport and Bryan. It is fair to say that the financial arrangements between them evolved over a period of months. Initially, Harley Transport agreed to rent to Bryan one truck and two trailers, both of which continued to have Harley Transport's colours and logo on them. While only one truck is assigned to him, he can use others if need be. Initially the only amount Bryan agreed to pay was $2,500 monthly for the use of the truck and trailers. In addition, Bryan agreed to pay Harley Transport for fuel used. Invoices for the month of November 1983 only were produced and reflect separate charges for each of these items (along with antifreeze). No mention was made either in examination-in-chief or on invoice of any payment for anything else than the rental of truck and trailers being included within the $2,500 payment. In reply Mr. Cathcart testified that the costs of insurance and the necessary "C" licence was taken into account when the $2,500 was calculated. In December Bryan began to pay certain additional amounts — $50.00 per month for miscellaneous mechanical work Harley Transport did and would do in connection with the Ottor vehicles that Bryan used to make the local deliveries on behalf of Ottor and $100.00 per month for secretarial services paid for by Harley Transport and used by Bryan. Bookkeeping services are performed for Harley Transport and Bryan by one person and each one pays her separately for her services. The amount paid was not disclosed. No invoices or cheques were produced in connection with these latter three amounts that have evolved. There is no evidence that Bryan pays anything to anyone for the use of Ottor trucks; indeed, we had no evidence whether Harley Transport paid Ottor anything for them. Bryan operates out of the same terminal as Harley Transport. There is no evidence that Bryan pays either Harley Transport or Ottor for the rental of this dock area. There is no evidence that Bryan concluded any kind of an agreement directly with Ottor. Occasionally, a Harley Transport truck has taken some of Ottor's freight on a Harley Transport run from Toronto to Peterborough and Harley Transport bills Ottor directly for this. Bryan pays nothing to Harley Transport for his use of the dispatcher employed by Harley Transport. The Ottor trucks are insured by Ottor, as they had been while Harley Transport operated them. There was evidence that Harley Transport and Ottor split the cost of the "city licence" necessary to make deliveries in Ottor's trucks. There was no evidence that there was any splitting arrangement between Bryan and Harley Transport.
Bryan is an unincorporated sole proprietorship which was set up and registered with the Ministry of Consumer & Corporate Affairs with the assistance of Harley Transport's lawyers. Bryan has the same accountant as Harley Transport. No evidence was given as to whether Bryan has paid them for these legal and accounting services or what arrangements had been made for their payment. A $3,000 loan for operating expenses was given by Harley Transport's banker. Neither Harley Transport nor Mr. Cathcart co-signed the loan or put up any capital. Bryan Cathcart's experience in the trucking industry has been gained over a period of 2 to 3 years of part-time work with Harley Transport while he attended university. As the transfer of Ottor's business to him became a reality, he approached Mr. Black and another Harley Transport employee, Mr. Steinoff, to come and work for him. Both agreed. Mr. Hammond continued to function as an "independent broker" vis-a-vis Ottor's work as before. Mr. Cathcart indicated that he could veto the hiring of a driver or the continuation of a driver's employment if there were problems which concerned the safe operation of Harley Transport's trucks. Mr. Kelly, an employee who had previously worked for Harley Transport doing Ottor's Peterborough deliveries, was not hired by Bryan and, consequently, was laid off on October 1, 1983 by Harley Transport. Bryan pays Messrs. Black and Steinoff directly and makes WCB payments on his personal cheques. Mr. Cathcart said he was not consulted by Bryan as to what ought to be paid to Messrs. Black and Steinoff. While he had no idea precisely how much they are paid, he admitted knowing that they are paid less than they were paid when covered by the collective agreement. In cross-examination Mr. Cathcart revealed that while Bryan himself is covered under Harley Transport's benefit plan for its employees, Bryan's employees are not covered. Although Mr. Cathcart said Bryan is billed by Harley Transport for the cost of the plan, we received no evidence of this or payments thereof. Bryan is solely devoted to servicing Ottor's needs for Toronto to Peterborough freight forwarding and deliveries. Harley Cathcart testified that he would expect Bryan to advise him if he commenced hauling for anyone else. He would not allow Bryan to take business away from Harley Transport. Mr. Cathcart testified that Bryan would consult him on any "major decision".
There is no evidence to suggest that Ottor and Harley Transport or that Ottor and Bryan are related employers within the meaning of section 1(4). The evidence also does not support a finding of a "sale of a business" pursuant to section 63 as between either Harley Transport and Ottor or Ottor and Bryan. Therefore, these applications in respect of Ottor are dismissed.
The only issue is whether Harley Transport and Bryan are related employers and/or whether there has been a sale of a business. Both of these issues must be considered against the backdrop of Article 20.14. The respondent, Harley Transport, conceded that Harley Transport and Bryan were carrying on associated or related businesses but denied there was common control.
Relevant portions of sections 63 and 1(4) provide as follows:
63.-( 1) In this section,
(a) "business" includes a part or parts thereof;
(b) "sells" includes leases, transfers and any other manner of disposition, and "sold" and "sale" have corresponding meanings.
(2) Where an employer who is bound by or is a party to a collective agreement with a trade union or council of trade unions sells his business, the person to whom the business has been sold is, until the Board otherwise declares, bound by the collective agreement as if he had been a party thereto and, where an employer sells his business while an application for certification or termination of bargaining rights to which he is a party is before the Board, the person to whom the business has been sold is, until the Board otherwise declares, the employer for the purposes of the application as if he were named as the employer in the application.
(3) Where an employer on behalf of whose employees a trade union or council of trade unions, as the case may be, has been certified as bargaining agent or has given or is entitled to give notice under section 14 or 53, sells his business, the trade union or council of trade unions continues, until the Board otherwise declares, to be the bargaining agent for the employees of the person to whom the business was sold in the like bargaining unit in that business, and the trade union or council of trade unions is entitled to give to the person to whom the business was sold a written notice of its desire to bargain with a view to making a collective agreement or the renewal, with or without modifications, of the agreement then in operation and such notice has the same effect as a notice under section 14 or 53, as the case requires.
1.-(4) Where, in the opinion of the Board, associated or related activities or businesses are carried on, whether or not simultaneously, by or through more than one corporation, individual, firm, syndicate or association or any combination thereof, under common control or direction, the Board may, upon the application of any person, trade union or council of trade unions concerned, treat the corporations, individuals, firms, syndicates or associations or any combination thereof as constituting one employer for the purposes of this Act and grant such relief, by way of declaration or otherwise, as it may deem appropriate.
It is well established in Board decisions that both sections were enacted to preserve bargaining rights. Neither was intended to extend bargaining rights nor to extend liabilities that arise under them, when bargaining rights have not in fact been transferred or undermined (see Re Cassin-Remco Ltd. (1980) 1979 CanLII 2013 (ON HCJ), 105 DLR (3d) 138 (Ont. H.C.) and Valdi, [1979] OLRB Rep. Aug. 833). Despite this common goal, they were not enacted simultaneously. Section 63 pre-dates section 1(4), in its original form, by approximately 9 years. Section 63's broad definition of "sale" encompasses a large variety of commercial transactions and arrangements. In Thurco Manufacturing Ltd., 65 CLLC ¶ 16,052, the Board set out the fullest catalogue of them at page 787:
According to its strict signification, the term sells is usually taken to describe a transaction involving the disposal of property by one to another in consideration of a sum paid or agreed to be paid by the recipient in money or its equivalent. As used in section 47a, however, the word sells has been given a wide definition which includes lease, transfers and any other manner of disposition of the business or part thereof. In legal parlance the word lease generally denotes a specific kind of contract by which one party, called the lessor, for a consideration in money or its equivalent, confers on another, called the lessee, the exclusive possession of certain property for a period of time. The word transfers, however, is obviously a term of wide signification and unless restricted by the context is capable of describing a multitude of transactions whether by sale, exchange, gift, trust or otherwise by which property, rights, or interests, etc. are transmitted absolutely, conditionally, etc. or by operation of law from one person to another. We are unable to find anything in the language of the section to denote any legislative intention to restrict the meaning of the word transfers to any particular kind of transfer. Also, having regard to the particular language used and the remedial object sought to be attained by and the wide meaning which must be attributed to the preceding word transfers, it is our opinion that the generality of the words any other manner of disposition is not intended to be in any way limited by or interpreted e]usdem generis with the words leases, or transfers. In our opinion, it is more in harmony with the language of and the remedy envisaged by the enactment to interpret the words and any other manner of disposition as an omnibus or saving provision intended to include dispositions of the business or a part or parts thereof by any mode or means whatever which are not appropriately described by the preceding words which state that sells includes leases or transfers.
(emphasis as in original text)
In the vast majority of cases dealing with section 63 there has been no difficulty in deciding there was or was not a "sale" (see Abbey Crest, [1973] OLRB Rep. Mar. 136; D.H.I. Ltd., [1964] OLRB Rep. Aug. 237; Goodtime Toys Inc., [1971] OLRB Rep. July 360; Marvel Jewelry, [1975] OLRB Rep. Sept. 733; R.W.S. Delivery Services Ltd., [1972] OLRB Rep. June 632; Thunder Bay Ambulance Service, [1978] OLRB Rep. May 467 and Marathon Investments Ltd., [1979] OLRB Rep. July 682 for examples of a variety of transactions which have raised the question of whether a "sale" has occurred). However, the companion concept of "business" required careful, often difficult, analysis to ensure that bargaining rights were not simply attaching to the transfer of equipment or assets, i.e., a mere ''idle collection of assets'' (see Metropolitan Parking Inc., [1979] OLRB Rep. Dec. 1193) or the work of the bargaining unit (see British American Bank Note Company, [1979] OLRB Rep. Feb. 72). In The Charming Hostess Inc., [1982] OLRB Rep. April 536, at page 542, the Board summarized this analysis as follows:
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. This responsibility has been accorded exclusively to the Board (see sections 63(12), 108, and R. exrel. Kitchener Food Market Ltd. et al. (1966), 1965 CanLII 165 (ON HCJ), 54 DLR (2d) 219); and in view of the broad language of section 63 and its intended remedial thrust, the Board has always been disposed to give it a liberal interpretation. The Board has not placed much reliance on the legal form which the business disposition happens to take as between the predecessor and successor. On the other hand, not every business decision which prejudicially affects bargaining rights will fall within the ambit of section 63, nor will every commercial disposition be a transfer of "part of a business" resulting in a continuation of bargaining rights. The task faced by the Board in any particular case is to give section 63 an interpretation which is consistent with its language and intent, and is also fair to the labour relations context under review.
It is seldom very difficult to determine that a predecessor has disposed of "something", nor is it difficult to discern when a trade union's bargaining rights have been prejudicially affected. A more complex question, however, is whether the nature of the disposition and what is disposed of, bring the transaction within the scope of section 63. This requires an assessment of the transaction in its totality and a consideration of its labour relations (rather than commercial law) perspective. In addition to the continuity of the work or jobs (without that, a continuation of the collective bargaining relationship would make little sense) a number of other factors may be relevant to the successor rights issue. In Culverhouse Foods Ltd. [1976] OLRB Rep. Nov. 691, the Board listed some of these:
"In each case the decisive question is whether or not there is a continuation of the business . . . the cases offer a countless variety of factors which might assist the Board in its analysis: among other possibilities the presence or absence of the sale or actual transfer of goodwill, a logo or trademark, customer lists, accounts receivable, existing contracts, inventory, covenants not to compete, covenants to maintain a good name until closing or any other obligations to assist the successor in being able to effectively carry on the business may fruitfully be considered by the Board in deciding whether there is a continuation of the business. Additionally, the Board has found it helpful to look at whether or not a number of the same employees have continued to work for the successor and whether or not they are performing the same skills. The existence or non-existence of hiatus in production as well as the service or lack of service of the customers of the predecessor have also been given weight. No list of significant considerations, however, could ever be complete; the number of variables with potential relevance is endless. It is of utmost importance to emphasize, however, that none of these possible considerations enjoys an independent life of its own; none will necessarily decide the matter. Each carries significance only to the extent that it aids the Board in deciding whether the nature of the business after the transfer is the same as it was."
If many of the elements that made up the predecessor's business organization can be found in the hands of the successor, and are used for the same business purposes, there is usually a strong inference that there has been a "sale of a business" to which section 63 should apply. If, on the other hand, the alleged successor has its own established business organization by which it services the predecessor's customers, the inference may be otherwise —even if it has acquired some assets or other incidental elements which might be traced to the predecessor. (See also Kenmir v. Frizzel et al., [1968] 1 All E.R. 414, and R. v. B.C. Labour Relations Board Ex parte. Lodum Holdings Limited (1969), 1968 CanLII 586 (BC SC), 3 DLR (3d) 41.)
- The term "business" is at the heart of section 63, but it is this concept which is the most difficult to define. One usually thinks of a business as a profit-making economic activity, but in the Labour Relations Act, the term cannot be so restricted. The Act applies to municipalities, public libraries, universities, school boards, hospitals, and other non-profit service undertakings which have employees and engage in collective bargaining. The economic activities of these entities are of an entirely different character from those of commercial enterprises, yet the definition of "business" must be broad enough to include them. And in the case of undertakings in the service sector, such things as "know how", managerial systems, and other intangibles may be much more important factors in the overall organization than a particular physical plant or configuration of assets [sic]. In The Tat ham Company Limited, [1980] OLRB Rep. March 366, the Board suggested the following approach:
"A business is a combination of physical assets and human initiative. It is an economic organization which, in a sense, is more than the sum of its parts. In Raymond Cote [1968] OLRB Rep. Mar. 1211, the Board put it this way:
"The meaning to be attached to the word 'business' depends to a great extent on the facts and circumstances in each particular case. It cannot be said that any one facet of an enterprise taken by itself necessarily comprises a business. It has been expressed that a business is "the totality of the undertaking". The physical assets of buildings, tools and equipment used in a business are not necessarily the undertaking perse but are, along with management and operating personnel and their skills, necessary in the operations to fulfill the obligations undertaken with a hope of producing profit to assume its success. The total of these things along with certain intangibles such as goodwill constitute a business.
(emphasis added)
A business is a commercial vehicle which has been rationally constructed to produce certain goods or services for a defined market —profitably, in the case of private sector enterprises [sic] but, in any event, efficiently. It is one harmonious whole consisting of many interrelated parts. From a labour relations perspective, however, the employer-employee relationships take on a special significance. From this viewpoint, the importance of the business is that it generates work for employees. The entrepreneurial activities of the business require it to enter the labour market as an employer and, this in turn, may give rise to the collective bargaining relationships to which The Labour Relations Act is directed. Section 55 preserves the stability of those established collective bargaining relationships if the business, or a coherent part of it, are transferred to a new owner.
The successor rights provisions can also be triggered by the transfer of "part of a business".. . . But what meaning should be ascribed to the words "part of business"? Clearly, a successorship can arise from the disposition of something less than the whole business; but to what extent can the business be sensibly subdivided? In The Tatham Company Limited case, supra, the Board defined a "business" as an integrated combination of elements all of which contribute to the business' existence as a going concern, and all of which, in a literal sense, could be described as a "part" of the business. But if this organization is dismantled (in whole or in part) and its elements are dispersed, would bargaining rights always attach to each of the "pieces"? Surely it could not have been intended that a union's bargaining rights would be rooted in any single fragment of the respondent's business organization (see the list of such potential "pieces" in Culverhouse, supra).
The Board has found a transfer of "part of a business" where one of a chain of retail stores has been sold to a competitor (Loblaws Groceterias Limited, [1973] OLRB Rep. Jan. 72; More Groceteria Limited, supra; where there was a transfer of certain milk delivery routes in a particular geographic area (Borden Company Limited, [1970] OLRB Rep. Jan. 1244), where there was a transfer of the oil burner and installation service of a firm which was primarily engaged in the sale and delivery of fuel oil (Automatic Fuels Limited, [1972] OLRB Rep. May 515); and where a slaughter house, which was formerly part of a much larger integrated meat packing company, was transferred to a new owner, (Beef Terminal, [1980] OLRB Rep. Aug. 1167)); and where a firm transferred the division or department responsible for one of its product lines (Canac Shock Absorbers, [1973] OLRB Rep. Oct. 508, Alcan Building Products, [1968] OLRB Rep. May 213). In Vaunclair Meats Ltd., [1981] OLRB Rep. May 581, the Board summarized the earlier jurisprudence:
"In each of the cases to which we have referred, the Board found that the predecessor had transferred a coherent and severable part of its economic organization — managerial or employee skills, plant, equipment, "know-how" or goodwill, definable part of the economic functions formerly performed by the predecessor. This economic organization undertook activities which gave rise to employment, and the terms and conditions of employment, together with the union's right to bargain about them, were preserved. The part of the predecessor's business which it no longer wished to continue, provided the business opportunity which the successor was able to pursue to its own advantage. In all of the cases, there was a transfer of a distinct part of the predecessor's configuration of assets, and no material change in the character of the work performed by employees within that asset framework. There was a continuation of the work performed, the essential attribute of the employment relationship, the skills of employees, and the functional coherence of at least a part of the employee complement; and but for section 55, the established bargaining and collective agreement rights would have been lost. This was the very mischief to which section 55 is directed, and the Board was satisfied on the evidence in each case that it should be applied."
- Two important propositions emerge from the cases.. . . The first is one we have already mentioned; namely that the way in which a transaction is labelled or characterized has little bearing upon the application of section 63. To describe the relationship between parties as a lease, franchise, or "merely contractual" does not advance the issue one way or the other. Thus it does not assist the respondents to assert ... that the situation is "just contracting out". In Metropolitan Parking Inc., supra, for example, the Board specifically adverted to a situation which might be described as "subcontracting" but which nevertheless could arguably support an inference of a transfer of "part" of a business:
"The present case involves a form of subcontracting, and subcontracting arrangements always involve the transfer of work. Work or services performed by A's employees within A's own organization are 'contracted out' to B, and B uses his own managerial skills, plant, equipment and 'know how' to supply to A, for a price, the product, services, facilities or components formerly produced by A's employees. A, therefore, is contracting for the use of B's economic organization in lieu of his own. A is generating a particular demand, or market, for B's product, and it is implicit in the arrangement that, thereafter, the two businesses will remain in a kind symbiotic relationship, bound together by close economic ties. The continuity of the work, and the preservation of a close economic relationship, between the two parties is implicit in subcontracting and does not, in itself, establish a transfer of all, or part of a business. If it is clear on the evidence, however, that B is unable to fulfill A's requirements with his existing equipment or organization, and received from A a transfer of capital, assets, equipment, managerial skills, employees, or know how, then the transaction no longer looks like a simple contracting out of work. A may not be making use of B's economic organization, rather A may be transferring part of his economic organization to B (and recall that section 55 is triggered by the transfer of 'part of a business') or merely permitting B to make use of A's organization while retaining control and direction of the related economic activity. Of course, it is to be expected that when A phases out part of his operation there may be certain equipment or assets which are now surplus and which can be disposed of on the market. These assets may, as a matter of convenience, be purchased by B. None of these factors unequivocably demonstrates or forecloses the application of section 55 (or section 1(4)). If, however, 'but for' the transfer of such assets, licences, know-how or property interests from A, B would be unable to fulfill the contract, then it is easier to infer a transfer of part of A's business — albeit a part which A no longer wishes to operate itself."
The Board went on to hold on the facts of that case that a change of subcontractors did not trigger a successorship as between them, even though there was a continuity of the employees' work.
- The second proposition emerging from the cases is much more concrete, and was the point upon which Metropolitan Parking Inc. turned; namely, that while from a labour relations perspective the importance of the business is the jobs it provides for its employees, "the business" itself is not synonymous with the employees or their work. A transfer of work, by itself, is insufficient to trigger section 63:
"Despite the labour relations focus of the statute 'the business' is not synonymous with its employees or their work. In exceptional circumstances the accumulated skills, ability, know how or business contacts of the employees may be so crucial, or irreplaceable, that their loss would mean the demise of all or part of the business as a going concern; but these cases are rare. For the most part, the continued employment of the predecessor's employees is only one factor to be considered. The reason for this is a succinctly stated by the Canada Labour Relations Board in N.A.B.E.T. v. Radio CJYQ Ltd. etal.,(1978) 1 Can. LRBR 565:
The purpose of the successorship provisions is to preserve bargaining rights in spite of changes in the ownership or control of an enterprise. Bargaining rights are typically granted to a trade union as bargaining agent for a unit of employees or an employer employed in certain classifications or at a certain location, or for all employees with specified exceptions. Bargaining rights do not attach to certain specific employees as individuals. Therefore, in defining the concept of business for the purpose of successorship, it would be incorrect to focus upon whether certain identifiable persons formerly in the employ of A are now in the employ of B. Furthermore, to focus on that question would invite employers to avoid the successorship provisions by refusing to maintain continuity of the individuals employed. A key to the protection of bargaining rights must be whether there is continuity in the nature of the work done (i.e. in classifications or job content for which the union was certified) not in the actual persons who perform it ...
But continuity of the work done is not sufficient alone to satisfy section 144. There must be some nexus between two employers other than the fact that one employed persons to do certain work that the other now does or will do, before one can be declared the successor of the other. Otherwise a loss of work to a competitor employer would result in a successorship. There must be some continuity in the employing enterprise for which a union holds bargaining rights as well as continuity in the nature of the work. The two go hand in hand.
(emphasis added)
A continuity of the work and/or the employees is significant, but it is not always sufficient, to sustain a finding of successorship. This Board adopted a similar view in British American Bank Note Co. Ltd., [1979] OLRB Rep. Feb. 72 — a case which, like the present one, involved the consequences of a loss of a contract:
There are limits, however, to the extent to which section 55 can 4 be used to preserve collective bargaining rights. It is clear that the provisions of this section do not attach bargaining rights to the work being performed by a business but only to the business itself. While this distinction may not be easy to draw in some cases, it is essential that it be maintained since section 55 cannot be interpreted as guaranteeing to a bargaining agent an absolute right of property in the work performed by its members. Section 55 serves only to preserve bargaining rights that have become attached to a business entity so that when that business entity is transferred, either in whole or in part, those bargaining rights survive and bind the successor employer.
This focus of section 55 is the business entity — the employer's total economic organization — not simply the work which the employees perform."
- Section 1(4) was first enacted in 1971 to have bargaining rights attach to the appropriate corporate entity where the activities, in which persons are employed, are associated or related and are controlled by more than one corporation or entity. The classic case to which section 1(4) was applicable is the situation described in Walters Lithographing Company Limited, [1971] OLRB Rep. July 406. It was in the crucible of that fact situation that the basic criteria for finding a related employer relationship pursuant to section 1(4) were forged:
The indicia or criteria which the Board considers relevant in making a determination as to whether the activities of businesses of one or more corporations, individuals, firms, syndicates or associations, or any combination thereof are carried on under common direction and control and therefore may be treated as one employer are: (1) common ownership or financial control, (2) common management, (3) interrelationship of operations, (4) representation to the public as a single integrated enterprise, and (5) centralized control of labour relations. No single criterion is likely to decide the issue. Rather, as has been stated, the Board's determination undoubtedly will be based on an appraisal of all of them in the light of the particular facts before it. It hardly need be said that in applying the above criteria, the greater the degree of functional coherence and interdependence which the Board finds among the associated or related activities and businesses the more probable it is that the Board will conclude that the entities carrying on these activities should be treated as one employer. We would mention here also that the indicia or criteria themselves obviously overlap. For that reason, in applying them to the facts of the instant case we have not attempted to deal with each other criterion on an individual basis.
The underlying requirement of section 1(4) at that time was that these criteria were required to be present in contemporaneously conducted economic or business activities. In 1975 section 1(4) was amended so that bargaining rights could be preserved even where there was serial ownership or control but where there may not have been a "transfer" of the tangible indicia of a "business" as defined in section 63 because there are no assets. The best example of this is offered by the construction industry where very little by way of ownership of tangible or fixed assets is necessary to carry on business. In Brant Erecting and Hoisting Limited, [1980] OLRB Rep. July 945, the Board summarized the origin and purpose of section 1(4) at paragraph 12:
Section 1(4) was enacted in 1971 and deals with situations where the economic activity giving rise to employment or collective bargaining relationships regulated by the Act, is carried out by, or through more than one legal entity. Where such legal entitles [sic] carry on related business activities under common control or direction, the Board is empowered to pierce the corporate veil. Section 1(4) ensures that the institutional rights of a trade union, and the contractual rights of its members, will attach to a definable commercial activity, rather than the legal vehicle(s) through which that activity is carried on. Legal form is not permitted to dictate or fragment a collective bargaining structure; nor will alterations in legal form undermine established bargaining rights. In this respect the purpose of section 1(4) is similar to that of section 55 which preserves the established bargaining rights and collective agreement when a "business" is transferred from one employer to another. Section 55 has been part of the scheme of the Act since the mid 1960's. Neither remedial provision requires a finding of anti-union animus; their primary application is to bonafide business transactions which incidentally undermine or frustrate established statutory rights. Since the two sections are complementary, it is not unusual, as in the present case, for an applicant to rely on both.
- Section 1(4) does not require that related business activities under common control or direction be carried on simultaneously or contemporaneously. This issue was clarified in 1975 by the addition to section 1(4) of the phrase "whether or not simultaneously". The amendment reflects a legislative recognition that the essential unity and identity of an economic activity (which gives rise to employment) may be preserved even though the legal vehicles through which the activity is carried on will not operate simultaneously; and, business may be effectively transferred from one corporate entity to another, without any of the indicia of a "transfer of a business" which might trigger the application of section 55.
With the amendment of section 1(4) in 1975, it became possible that both section 63 and section 1(4) could be applicable to the same fact situation. The variety of transactions and business arrangements which have been found to be a "sale" within the meaning of section 63 also could entail a sufficient retention of ongoing control over the business activities to bring into play section 1(4), (see Don Mills Bindery Inc., [1983] OLRB Rep. Dec. 2008; Carroll Electric, [1982] OLRB Rep. Dec. 1814 and [1983] OLRB Rep. Aug. 1282). We note in passing that even prior to section 1(4) being amended to apply to serial or sequential control or ownership, the Board had found section 63 and section 1(4) to be simultaneously applicable to the same fact situation (see Canac Shock Absorbers Limited, [1973] OLRB Rep. Oct. 508). It is fair to say that both sections can only have simultaneous application if all or part of a "business" is involved. Where a partial change has occurred in the ownership or control of an operation, the Board has generally applied section 63 where there is proof that a "severable, coherent and independent" operation or part of a going concern has been transferred (see Vaunclair Meats Ltd., [1981] OLRB Rep. May 581 and The Charming Hostess, supra) or that a "discrete, cohesive portion of the economic organization or activities" which comprise the totality of the business has been severed or transferred (see Metropolitan Parking Inc., supra). Where the partial change does not satisfy the requirements of section 63, section 1(4) may still apply if there is sufficient retention of control over the core functions of an operation. It is clear then that there may still be legitimate contracting out, the end product of which is the cessation of bargaining rights (see Kennedy Lodge Inc. et al, [1984] OLRB Rep. July 931 and Metropolitan Parking Inc., supra).
The parties to the collective agreement in this instance have agreed to a provision prohibiting legitimate contracting out. Obviously, the first sentence of Article 20.14 is not a prohibition against "selling" in the sense of disposing of the total business. It is directed at the legitimate contracting out or "brokering" (a term used in the trucking industry virtually synonymously with "contracting out") of a part of the operations, whether that part is a "part of a business" within the meaning of section 63 or not. The second sentence exempts "Ottor Freightways Limited" from this prohibition. While the applicant argued that this sentence means that Ottor can take its business elsewhere, we cannot accept this as a sensible interpretation. It goes without saying that every customer, including Ottor, can take its business elsewhere. The applicant's interpretation would have been reasonable if Ottor had been a party to the collective agreement. The only other way the applicant's contention would have been reasonable is if Ottor had been found by this Board to be a related employer and therefore joined as a party to both the prohibition and the exemption in Article 20.14. In view of the conclusion to which we have come regarding Ottor, the only reasonable interpretation we can place on Article 20.14 is that the Ottor account, which otherwise could not be legitimately contracted or brokered out, could be split off from the bargaining unit/rights held by the applicant. This is perhaps in recognition of the purchases and sales which have taken place between Ottor and Harley Transport over the years and a recognition of the resultant close relationship.
The fact situation before us is one of those to which section 63 and section 1(4) are simultaneously applicable. There has been enough of a transfer of components necessary to service the Ottor account to constitute a sale of a part of a business under section 63. There also is the retention of sufficient control by Harley Transport over Bryan's business activities to allow the application of section 1(4). Harley Transport has permitted Bryan to make use of its organization while retaining ultimate control over him. Everything from the arranging of the agreement with Ottor, to the providing of access to knowledgeable employees, to the evolving nature of payments for the use of all the services and equipment necessary to fulfill Ottor's requirements, to the limitation on the expansion of the business of Bryan was imposed by Harley Transport or was implemented unilaterally by Harley Transport. It is clear then that this is not legitimate contracting out as contemplated by Article 20.14 of the collective agreement (see Metropolitan Parking Inc., supra).
One of the major differences between section 63 and section 1(4) is the fact that the application of section 1(4) in any given situation is discretionary. The Board may, even in the face of a clear related employer situation, decide against making a declaration to this effect. Some of the reasons for not granting a section 1(4) declaration have been delay (see Farquhar Construction Limited, [1978] OLRB Rep. Oct. 914), avoidance of certification process (see Ellwall & Sons Construction Limited, [1978] OLRB Rep. June 535 and Inducon Construction of Canada Limited, [1975] OLRB Rep. April 400), lack of necessity (see Carroll Electric, supra, August 1983) and abuse of process (see Total Marketing Inc., [1983] OLRB Rep. April 616). The decision to exercise the Board's discretion and apply section 1(4) is necessarily inseparable from a consideration of the question of whether it will achieve, in a better way, the preservation of bargaining rights than section 63. The respondent argued that our discretion ought not to be exercised because
(1) if there has been an improper contracting out, Article 20.14 can be the subject matter of a grievance under the collective agreement, and
(2) the applicant has not been able to prove that the setting up of Bryan Cathcart to service Ottor was an "end run" on the applicant.
Dealing with the latter point first, this argument is based on the assumption that if no anti-union motivation or intention is shown, section 1(4) ought not to apply. This assumption is incorrect. It has been pointed out by the Board repeatedly that while section 1(4) is meant to preserve bargaining rights and is often doing so in circumstances which have been created to try to ignore or circumvent collective bargaining obligations, the Board does not require this in order for section 1(4) to be applicable (see Brant Erecting and Hoisting, supra, quoted in The Charming Hostess, supra.) In any event the respondents have not succeeded in persuading us that the arrangement with Bryan was anything more than a means of escaping two inconvenient aspects of the collective agreement, i.e., the rates (together with calculation of hours of work to include waiting time in Toronto for the Ottor loads) and the seniority provisions. We did not have enough information to be able to conclude with certainty that the methods by which Bryan did the Ottor work could not have been used or implemented by Harley Transport itself and thereby reduce the costly waiting time to which Harley Transport felt its losses were in part attributable. It seems to us that the greatest saving to Harley Transport was the cessation of the obligations to pay the rates under the collective agreement. Under the arrangement with Bryan, Harley Transport still received revenue from the operation of the truck and trailer and Harley Cathcart's son's continued remuneration was ensured, notwithstanding his relatively low seniority in the bargaining unit, which otherwise would have led to his layoff, if the Ottor work disappeared entirely. The first argument of the respondent is also faulty because it is clear that an arbitrator could only give a remedy against Harley Transport, as party to the collective agreement, and Bryan would not, strictly speaking, be a part of any of its proceedings. We have decided not to defer to the arbitration process for the reasons cited in Valdi, [1980] OLRB Rep. Aug. 1254, i.e., arbitration will be remedially inadequate. We think that our remedy, pursuant to section 1(4), will result in a more comprehensive resolution of the erosion of the applicant's bargaining rights which have occurred as a result of the arrangements Harley Transport has made with Ottor and Bryan and recognize that Bryan is not a sufficiently separate organization from Harley Transport. While a declaration of a sale, pursuant to section 63, would confirm bargaining rights in the hived-off portion and confirm the creation of a separate bargaining unit, the bargaining rights of the applicant would not, in the circumstances, be appropriately protected. For one thing, a declaration pursuant to section 63 would result in a separate seniority list and the dilution of bidding rights for Mr. Black and Mr. Steinoff. These things should not occur unless a truly separate organization does the work.
- Therefore, for all these reasons, we have determined that the applicant should succeed under section 1(4) against Harley Transport and Bryan. The Board hereby declares that Harley Transport Limited and Bryan Cathcart are related employers and that Bryan Cathcart is bound by the collective agreement since the commencement of his operations on October 1, 1983.