London & District Service Workers' Union, Local 220 v. Caressant Care Nursing Home of Canada Limited, 1984 CanLII 1135

Ontario Labour Relations Board

[1985] OLRB Rep. January 50

1677-84-R; 1678-84-R; 1679-84-U London & District Service Workers' Union, Local 220, Applicant, v. Caressant Care Nursing Home of Canada Limited, VS Services Ltd., Respondents; London & District Service Workers' Union, Local 220, Complainant, v. Caressant Care Nursing Home of Canada Limited, Respondent.

BEFORE: M. G. Mitchnick, Vice-Chairman, and Board Members B. Armstrong and R. D. McMurdo.

APPEARANCES: David Starkman, Paul Middleton and Helen North for the applicant/ complainant; Donald J. McKillop. Q. C. and James Lavalle for Caressant Care Nursing Home of Canada Limited; Paul Jarvis and Rick Ellis for VS Services Ltd.

DECISION OF M. G. MITCHNICK, VICE-CHAIRMAN, AND BOARD MEMBER R. D. McMURDO; November 27, 1984

Decision

1. All three of these applications have arisen in the course of attempts to resolve the matters outstanding in Board File No. 0275-84-R, including, in particular, the question of the appropriate voters' list, and involve a challenge under sections 1(4), 63 and 89 of the bona fides and legal effect of certain subcontracting arrangements between the respondents.

2. The name "Caressant Care of Canada Limited" appearing in the style of causes of these applications as the name of one of the respondents is amended to read: "Caressant Care Nursing Home of Canada Limited" and the name "Versa Services Limited, a Division of VS Services Limited" appearing in the style of cause of File Nos. 1677-84-R and 1678-84-R as the name of one of the respondents is amended to read: "VS Services Ltd."

3. It is the decision of Mr. McMurdo and myself not to call upon the respondent to make further argument upon these matters, and, as well, to render an oral decision for the parties in order to expedite other concurrent deliberations. It was agreed that the lengthy recitation of facts in Board File No. 0275-84-R, including the reference to Caressant Care's plans to contract out the dietary and housekeeping areas at its new Home, could be treated as background to the present applications. Indeed, the most immediate impact of the union's success in these applications would be to increase the number of jobs available at the new Home in St. Thomas for the former unionized employees of the Wilson Nursing Home. It is not easy for complainant's counsel to successfully attack the bona fides of an arrangement months after it became known to the complainant, and while the other matter was being litigated before the Board, when the only "new fact" before the parties is the decision of the Board in the other file directing a vote on the question of union representation. And on the evidence, we do not find the contracting-out arrangement here to be anything less than a bona fide or true contracting-out of employment services for a variety of acceptable business reasons.

4. The fact is that the respondent Caressant Care had committed itself to entering into a contracting-out arrangement with respect to the dietary and housekeeping services as an experiment with respect to the new Home that it was contemplating in St. Thomas, as a cure to some of the problems which it had experienced in the start-up of some of its other Homes, well before the unionized operation of Wilson Nursing Home came into the picture. Contrary to the argument of the applicant, we do not find it curious that a source of dietary and housekeeping employees subsequently coming available from Wilson did not cause Caressant Care to alter its plans to experiment with contracting out in those areas. We note as well in that regard that the number of persons available from Wilson would not in themselves have satisfied the requirement and eliminated the task of training and selecting employees for the new Home. And, recognizing that the Wilson staff were not hired through the Caressant Care organization in the first place, we are prepared as well to accept the evidence of Mr. Lavalle that he was of the view that an upgrading of staff might also result from engaging the services of a specialized and experienced contractor in this field. We find on the evidence that Versa Services and the other established contractors in the business whom Caressant Care approached really did offer a range of managerial and employment services, as well as head office resource personnel and the lower cost of volume food-buying, which caused Caressant Care to find them attractive, and which allowed Caressant Care and its own on-site management to relinquish the time and responsibility for selecting, training and supervising staff for the dietary and housekeeping areas.

5. Clearly the representations in Versa Services' promotional material (Exhibit #3) have to be read with the actual contract documents, and the evidence of all witnesses was consistent with that. But those representations are general in nature, and the Board has to look as well at the substance of what has been occurring between the parties, as the Board has always said. There is no doubt that all of the services provided by Versa Services or any contractor, to the licensee of the Home would have to be carried out under the "general direction" of the licensee, and the contractor remain "responsible" to the licensee, as Exhibit 3 stipulates, for it is the licensee itself who at all times remains ultimately responsible for the maintenance of adequate care in the Home. But the specific options reserved to Caressant Care under this arrangement we find to be no more than a customer could normally expect to have access to, either expressly or as a matter of commercial reality, in ensuring that the performance of the contractor continues at all times to meet its general specifications and requirements. We recognize that there is in any business relationship, apart from perhaps fixed-term contracts, the right of termination of the arrangement by the customer which, as a practical matter, requires a contractor to be more or less responsive to, or at least give full and careful consideration to, any complaints by its customers. The question is whether, on an on-going basis, the contractor really has taken over control and responsibility for the selection, training and supervision of the employee workforce, and is truly independent in making the decisions that it does. As the Board stated in Kennedy Lodge Inc. [1984] OLRB Rep. July 931, at paragraph 63:

63. While each case must be decided on its own facts, and while no two cases will be the same, there are certain rebuttable inferences that can be drawn from the nature of the subcontracting arrangement itself.

Where it is shown that under the subcontracting arrangement the employer retains control over the performance of the work and the employment relations of those who perform it, so that the persons performing the work are, in reality, the employees of that employer, and, as in this case, where they have replaced bargaining unit employees, an inference of anti-union motivation may readily be drawn. Where those performing the work that had previously been performed by members of the bargaining unit are in reality the employees of the employer, in the sense that the employer continues to control the performance of the work and the employment relations of those who perform it, an inference can easily be drawn that the employer has acted to replace his bargaining unit employees in order to undermine their collective bargaining rights. However, where control of this type is relinquished so that the work is performed by the employees of the subcontractor under the direction of the subcontractor's organization and utilizing the resources of that organization, the same inference does not necessarily arise. Indeed, in the absence of something more (for example, an express threat to contract out if certain rights under the Act are relied on) it is difficult to draw an adverse inference with respect to motive from the simple fact of a decision to enter into a genuine arm's length subcontracting arrangement.

The present case in our view parallels in its essential respects that of Charming Hostess and Amsterdam Catering Services Limited, [1982] OLRB Reports April 536. There the Board at paragraph 36 remarked, in looking at the contracting-out of certain hospitality functions on the customer's premises:

It is difficult to discern any tangible parts of Molson's business which have actually been transferred. In Charming's case the sub-contractor acquired nothing at all other than the right to supply Molson's requirements with its own personnel. Amsterdam acquired the right to use certain kitchen equipment and dishes on the Molson's premises, and, no doubt, the availability of this equipment is a factor in Amsterdam's ability to efficiently meet Molson's needs; but in view of Amsterdam's established presence in the food service industry, substantial organization in its own right, back-up facilities, and recognized expertise, it is difficult to accord much significance to this fact."

That was a critical passage in the Board's reasons dealing with the application of section 63, the "sale of a business" provision of the Act. With respect to the application of section 1(4), the "related-employer" provision, the Board went on to make some pointed comments as well, comments which continue to be important in the context of what has been evolving in the nursing home industry, and a matter about which the Board continues to have sensitivity. The Board noted in paragraph 42:

Section 1(4) does impose some limits on the degree to which an employer can avoid its obligations under a collective agreement by substituting the employees of another employer for its own — even though the arrangement may not have been undertaken for the purpose of subverting bargaining rights (in which case unfair labour practice considerations might also arise). This is especially the case where the functions performed by the employees of the other employer are carried out on the first employer's premises, with the first employer's equipment, in conjunction with the work performed by the first employer's own employees, and subject to the first employer s overall direction and control.

The Board then went on in that paragraph to note a prime example of what it was referring to, saying:

In the Great Atlantic and Pacific Company of Canada Limited, [1981] OLRB Rep. Mar. 285, for example, legislation required "A & P" to create a new corporate vehicle to run the pharmacy department which it had established in its larger food stores. There was no anti-union motive, but the separate legal identity of the "drug company" was totally artificial from a collective bargaining point of view, and the Board issued a related employer declaration. The drug company was completely dominated by A & P and had no business activities apart from it. The fact that the drug company hired employees, paid them and directed them in their daily activities did not obscure the reality of the situation.

(emphasis added)

The Board then went on to say in paragraph 44:

The more closely the purchaser of employee services controls when, where, how, by whom and at what price the employee services are provided, the more the activities will appear to be under joint control or direction. If at the same time the subcontractor is effectively dominated by the purchaser and it appears that the notion of a subcontract is introduced not to provide independent managerial and employee skills but rather a separate "nonunion corporate vehicle which permits the purchaser to have the same work performed in much the same way as before but beyond the ambit of its collective agreement, a section 1(4) declaration might well be warranted. It was considerations such as these which appear to have prompted the Board to issue 1(4) declarations in Donald E. Foley Limited, [1980] OLRB Rep. Apr. 436 and]. H. Normick Inc. [1979] OLRB Rep. Dec. 1176, even though there was no direct financial ownership of the subcontractor in either case.

The Board then went on to note, at paragraph 45:

However, in the Board's view it is both undesirable and unnecessary in the instant case to speculate about the potential reach of section 1(4), or catalogue the many factors distinguishing the present situation from that before the Board in Normick or Foley. It is clear on the evidence that Charming and Amsterdam are independent businesses, with their own established employee complement, operated for the benefit of their own principals, and providing their specialized services to a variety of purchasers of which Molson's is only one. Both businesses were in operation long before the Molson's contract, and, no doubt, they will continue thereafter. Neither is a mere shell or a device to avoid collective bargaining obligations, and neither can be regarded as an instrumentality of Molson's. We do not think the situation here falls within the intended ambit of section 1(4).

As well, in cases involving the kind of contracting-out proposed in, e.g., Kennedy Lodge, the pre-existence and independence of the corporate subcontractor did not prevent the Board from once again carrying out an analysis of the critical issue of "control", and in that case the Board found that control in fact had not passed from the operator to the nominal contractor.

6. We are satisfied in this case, even bearing in mind the kind of options reserved to the customer in the "promotional" document, that Versa Services has in fact assumed responsibility for providing through its own organization the Home's food and housekeeping requirements, and, in the words of its contracts with Caressant Care, for "all rules, controls, working conditions, hiring, firing and direction of Versa employees". The evidence discloses that the assumption of these responsibilities has been more than a matter merely of "form", i.e., as spelled out in potentially self-serving contract language. Contrary to Kennedy Lodge, where the operator of the Home purported to delegate its primary responsibility, being the provision of nursing care, but at the same time retained its entire staff of nursing supervisors and charge nurses in their normal capacities, Caressant Care no longer has any dietary or housekeeping supervisors for this Home. The evidence establishes further that all hiring, supervision and disciplining of the staff for these areas has been carried out by Versa Services itself, through its on-site supervisor, acting either on her own or in consultation with her District Manager, and without the approval of Caressant Care. All menus are planned by Versa Services' head office, and any complaints by residents or the Home are handled by the Versa Services supervisor, Ms. Cornish (who is an employee chosen out of Versa Service's own existing organization). Ms. Cornish has decided on her own to both discipline and terminate Versa Service employees employed at the Home, the latter in consultation with her District Manager. Ms. Cornish was also asked by Caressant Care to fire an employee with whom Caressant Care was unhappy, but after speaking with the employee, Ms. Cornish decided that further counselling and a warning would be sufficient. Versa Services also asserts that it has flexibility on the question of increases or decreases in wage rates, although it acknowledges that it would have to think carefully before passing on any increase in the "bottom-line" set out its "cost plus" proposal to Caressant Care.

7. In Kennedy Lodge, the Board introduced the terms "core" and "peripheral" functions, in commenting upon the question of community perception. The Board wrote, in general terms, at paragraph 61:

The essence of the argument put forward by the applicant/complainant in this matter is that, apart altogether from the collective agreement, a decision to subcontract, if undertaken for no other reason than to avoid the wage rates in the collective agreement, breaches the unfair labour practice provisions of the Labour Relations Act. If this is so an employer who contracts for security, janitorial, cafeteria or any number of other functions that are peripheral to the core activities of his business, because he can have these services performed less expensively by a subcontractor than under the collective agreement, would be in breach of the Act. This type of subcontracting arrangement, usually undertaken to reduce costs, has become quite common and it would surely come as a surprise to the community if we were to find that it was in breach of the Act. However, it would be no less of a surprise to the community if we were to find that a decision taken to use a subcontractor, in place of bargaining unit employees, to perform a part or all of the employer's core activity on the employer's premises utilizing the employer's equipment, and under the employer's control, as in this case, was not in breach of the unfair labour practice provisions of the Act.

We do not find cost-savings to have been the controlling factor in any event in the present case (where the decision to contract-out was made prior to the time that the higher rates called for under the Wilson collective agreement had become a possibility), but cite the above passage only because of its observations on community perception. Without seeking to define any further the terms "core" and "peripheral", we would simply observe that the contracting out of the kind of work involved here, in terms of food services and housekeeping services, would not seem to offend the sensibilities of the labour relations community in the way that the purported contracting-out of direct nursing care does. And indeed the history of companies like Versa Services in providing these services within the health care industry of the province makes it difficult for anyone to argue "surprise" over a development like the present. In any event, as the Board noted at the end of its comments with respect to community perception in Kennedy Lodge, the question before the Board and arising under the Act remains one of intent, and of "control", and we find nothing in the evidence before us to suggest anything but a bona fide intent to hand the responsibility for these severable aspects of the Home over to the business organization of Versa Services. Whether these are areas, as they obviously are, which are integral to the continued operation of a nursing home, and with respect to which a strike could obviously cause disruption, and whether as a result the employees engaged in these on-site activities fall under the Hospital Labour Disputes Arbitration Act, as they obviously do, does not assist the Board in assessing on a case by case basis the degree of responsibility given up in a particular "subcontracting" arrangement, and that remains the issue for the Board under section 1(4) of our Act.

8. Nor do we find the provisions of the Nursing Home Act and its Regulations dispositive of this issue. We find the regulations not so clear on their face as to disclose an intent on the part of the Legislature to necessarily alter by apparently minor amendments to the regulations a long-standing option to contract-in professional dietary services in this industry. And more important to the issue before us, we do not find these regulations so clear as to suggest to us that the intentions and conduct of the parties to this arrangement must be "deemed" to be something other than that which has been demonstrated in the evidence before us.

9. Alternatively, the complainant relies upon the case of International Wall-coverings, [1983] OLRB Rep. Aug. 1316, in asking the Board to find a violation of the Act solely on the basis of the effect that a contracting-out arrangement will have on the rights of a trade union and its members. The Board at paragraph 66 of Kennedy Lodge dealt with this argument as follows:

66. Finally, in International Wallcovers, supra, the Board indicated that it would be prepared in appropriate circumstances to adopt a "non-motive approach to section 64", such as in instances of "clear mistake" or "discipline clearly out of all proportion to the misconduct in issue", where a clear imbalance in favour of protected activity exists. However, it is doubtful that this non-motive approach will be of assistance in deciding cases involving subcontracting since, as indicated above, where the persons performing the service for the employer under such contracts are, in reality, the employees of that employer, anti-union motivation can readily be inferred. Where, on the other hand, for purposes of economy and efficiency, control is relinquished so that work that had been performed by members of the bargaining unit is performed by the employees of a genuine arm's length subcontractor, under the direction of the subcontractor's organization and utilizing the resources of that organization, it would be difficult to find a clear imbalance in favour of protected activity.

10. Finally, we do not find it persuasive to argue at this point that the Board can infer from the scope clauses of the collective agreement a prohibition against contracting-out during the life of the agreement, in the absence, as here, of any express prohibition in the agreement to that effect. Both sides of this issue have been canvassed most recently by the Board in Kennedy Lodge itself, and the Board, at paragraph 61, wrote:

This leads us to a discussion of subcontracting; an arrangement under which an employer contracts for certain services that he is already or could otherwise perform himself. Given the effect upon the employer's complement of employees, it is not difficult to understand why decisions to subcontract often generate a vigorous response from trade unions. However, it has long been accepted in the arbitral jurisprudence in this jurisdiction that, absent an express prohibition in the collective agreement, an employer is free to contract out. (See Kennedy Lodge Nursing Home, (1980) 1980 CanLII 3978 (ON LA), 28 L.A.C. (2d) 388 (Brunner) for the most recent review of the cases). In this connection we have been careful to point out that in order to fit within this presumption and to be a proper exercise of management rights under a collective agreement the contracting out must be real, in the sense that the work in question is moved within the subcontractor's organization where it is performed by the subcontractor's employees. If the work is performed by the subcontractor's employees there will be no breach of a collective agreement which does not expressly prohibit contracting out.

11. The Board, in all of the particular circumstances of this case, is not persuaded that any basis for relief has been made out, and the applications and complaint are hereby dismissed.