Service Employees International Union, Local 204 v. Kennedy Lodge Inc., 1984 CanLII 3448

[1984] OLRB Rep. July 931

1909-83-U;1910-83-R Service Employees International Union, Local 204 (A.F.L.,C.I.O.,C.L.C.), Complainant, v. Kennedy Lodge Inc., Kennedy Lodge Limited Partnership, Earl Daynes, Daynes Health Care Limited, Medox Health Care Services, a division of Drake International Inc., and Drake International Inc., Respondents; Service Employees International Union, Local 204, A.F.L.­C.I.O.-C.LC., Applicant, v. Kennedy Lodge Inc. and Medox Health Care Serv­ices, a division of Drake International Inc., Respondent

BEFORE: Kevin M. Burkett, Vice-Chairman and Board Members J. Wilson and S. Cooke.

APPEARANCES: G. Charney, Q. C., Jeffrey Sack, Q. C., Brian Sheehan, Steven Barrett and Eugene Laliberte for the applicant/complainant; J. Paul Wearing, Earl Daynes and David Duncan for Kennedy Lodge Inc., B. H. Bresner, Paul Michaels and Robert Butler for Medox Health Care Services and Drake International Inc., John G. Parkinson, Q. C. and Jonathan H. Wigley for Kennedy Lodge Limited Partnership and Paul R. Tretheway for Daynes Health Care Limited and Earl Daynes.

DECISION OF KEVIN M. BURKETT, VICE-CHAIRMAN AND BOARD MEMBER S. COOKE;

1. The name Kennedy Lodge Nursing Home and Medox (A division of Drake Interna­tional) appearing in the style of cause as the names of two of the respondents in Board File 1909-83-R are amended to read Kennedy Lodge Inc. and Medox Health Care Services, a division of Drake International Inc. respectively. The style of cause in Board File 1909-83-R is further amended to delete the names of Ballycliffe Lodge Ltd., and Thompson House Home for the Aged (Don Mills Foundation for Senior Citizens Inc.) as respondents in this matter. The names Kennedy Lodge Limited Partnership, Earl Daynes, Daynes Health Care Limited and Drake International Inc. are added as respondents to this matter.

2. The name of the respondent in the style of cause in Board File 191 0-83-R is amended to read Medox Health Care Services, a division of Drake International Inc. and Kennedy Lodge Inc. has been added as a respondent in this matter.

3. The Board directs that this complaint and this application be and the same are hereby consolidated.

4. This is a complaint filed under section 89 of the Labour Relations Act alleging violations of sections 50,64 and 66 of the Act. In addition, a section 1(4) application has been filed and the complainant relies on section 106(2) of the Act. Although other sections of the Act were pleaded at the outset, these are the sections that have been relied upon.

5. The complainant/applicant is the certified bargaining agent for all full-time and part-time employees of Kennedy Lodge, a nursing home within the meaning of the Nursing Home Act, R.S.O. 1980, c. 320, located in Metropolitan Toronto, save and except office staff, registered nurses, physiotherapists, occupational therapists, supervisors, and persons above the rank of supervisor. As of October, 1983 there were approximately 144 employees in the bargaining unit represented by the complainant/applicant including approximately 92 nurse's aides and health care aides. On November 14, 1983, the respondent Mr. Earl Daynes, the manager of the Nursing Home, notified the union that effective December 16, 1983 the work of the nurse's aides and health care aides at the home would be contracted out to the respondent Medox and the nurse's aides and health care aides would be laid off. As a practical matter this "layoff' was really a termination of their employment as there would be little or no likelihood of their recall.

6. The applicant/complainant maintains that:

(1) The decision to contract out the work of the nursing aides and health care aides was motivated and characterized by a desire on the part of the respondents to avoid their obligations to recognize and deal with the complainant in its role as the exclusive bargaining agent of employ­ees in the bargaining unit in violation of ss. 64 and 66 of the Labour Relations Act.

(2) In addition, the respondent's conduct has been motivated by a desire to avoid the provisions of the collective agreement and its obligations thereunder in violation of ss. 64 and 66 of the Labour Relations Act.

(3) In the alternative, even if the Board determines that the respondent's conduct was not tainted by anti-union animus, in its usual sense there has, nonetheless, been a violation of the provisions of s. 64 of the Labour Relations Act. The decision to contract out the work of the nurses aides and the health care aides will seriously and irrevocably interfere with employee and trade union rights and cannot be justified as a worthy and persuasive managerial decision. Accordingly, in balancing the inter­ests of the employees and the trade union as against the interests of the respondents, the complainant/applicant maintains that this Board must find that the interests of the employees and the union prevail and must declare that the respondents have violated s. 64 of the Act.

(4)In addition, and notwithstanding this Board's determination with respect to the violation of the provisions of the Labour Relations Act, the conduct of the respondent is a massive repudiation of the provisions of the collective agreement and, as such, constitutes a violation of s. 50 of the Labour Relations Act. It is argued that such a determination necessarily involves a finding by the Board that the persons supplied by the respondent Medox to the respondent Kennedy Lodge are, in fact, employees of the respondent Kennedy Lodge.

(5) In the alternative, this Board must, on the basis of the evidence, exercise its discretion to determine and declare that the respondents Medox and Kennedy Lodge are "related employers" under the provisions of s. 1(4) of the Act and are thereby bound by the collective agreement between Kennedy Lodge and the applicant/complainant union.

7. Hearings in this matter were held on January 4, January 10, February 9, March 20, April 10, April 1 7 and April 19, 1984. The parties were given full opportunity to call their evidence at these hearings following which written submissions were made. The evidence was transcribed by a court reporter and runs to some six volumes. It is not our intention, therefore, to summarize all of the evidence, but rather, to paint the background and make the findings of fact that are necessary to our determination. We also observe at this point that although the decision to contract for the services of nursing aides through Medox was announced on November 14, 1983 the respondents agreed not to implement that decision until a determination has been made by the Board in this matter. All parties agreed that the Board's determination should be made on the basis of the proposed agreement between the respondent Medox Health Care Services and the respondent Kennedy Lodge Nursing Home Ltd., which was signed by Medox and introduced as Exhibit #30, and on the basis of the evidence as to how that agreement would be implemented and carried out. There was no objection made that this application/ complaint is somehow premature.

8. By way of background, Earl Daynes signed an offer to purchase Kennedy Lodge Nursing Home Limited from Lawrence Avenue Investments Limited for $7,080,500 on July 6, 1982. Daynes, who operates a number of nursing homes through Daynes Health Care Limited, was given a period of time within which to arrange financing. During this period, Daynes and his partner and accountant, Mr. Gael Northey, entered into discussions with Paul Hellen and Mr. C. Harris Tod, who, through CPA Management Inc., co-ordinate the activities of a number of investors. Messrs. Hellen and Tod expressed an interest in investing in the nursing home field and, therefore, Mr. Northey forwarded to Mr. Hellen the financial information with respect to Kennedy Lodge that he had prepared in advance of the offer to purchase made by Mr. Daynes. Mr. Hellen expressed interest in Kennedy Lodge Nursing Home as an investment and on October 21, 1982 CPA Management Inc. and 452881 Ontario Limited formed the respondent Kennedy Lodge Limited Partnership with CPA as the general partner and the numbered company as the limited partner. CPA arranged for 24 investors to invest $50,000 each toward the purchase of the Nursing Home. Kennedy Lodge Nursing Home Inc. was incorporated on November 24, 1982 with Tod, Hellen and Daynes as its officers. Kennedy Lodge Nursing Home Inc. replaced CPA as the general partner in Kennedy Lodge Limited Partnership and the 24 investors became the limited partners. The Kennedy Lodge Limited Partnership and Daynes Health Care Limited then entered into a management agreement giving to Daynes Health Care the exclusive authority to manage Kennedy Lodge Nursing Home. Daynes acquired a first mortgage with National Life Assurance in the amount of $6,400,000 at an interest rate of 14-1/2% per annum. As a condition of providing the mortgage, National Life Assurance required Daynes and Northey to act as personal guarantors and to obtain CMHC insurance at a cost of $126,987.

9. Under the terms of the management agreement the limited partners were to receive a 14% return per year on their invested capital. In addition, Daynes Health Care was to receive an annual management fee and the remaining profits were to be divided on the basis of 40% to Daynes Health Care and 60% to the investors. The management agreement provided further that the partnership could terminate the management agreement if, in any two consecutive years, revenues from the project were insufficient to maintain the first mortgage, cover the operating expenses and pay to the investors the 14% return.

10. The intricacies of the financial arrangements made in connection with the purchase of the Home are not relevant to our ultimate determination in this matter and do not require further elaboration. It is to be observed, however, that Mr. Northey, when making his initial investigations, calculated the wage expense of operating the Home on the basis of support staff wage rates then in effect. He did not discover until shortly before the transaction was due to close that as a result of a retroactive arbitration award those rates had been increased over time by approximately 40%. Messrs. Daynes and Northey decided to close the transaction but not to advise the limited partnership of the alteration that would be necessary to the initial income projections. It is their evidence that they made this decision on the basis that the first mortgage had been obtained at an interest rate about 4 points below that which had been initially projected and that an increase in government funding would be forthcoming so that the 14% return on investment to the investors could be maintained. In addition, Daynes and Northey were concerned that they stood to lose the $175,000 that Daynes Health Care had already committed to the project if the deal did not close. There is some dispute on the evidence as to whether the income projections were based on a 14.52% first mortgage as referred to in Exhibit #8 or the earlier 18% that was referred to in Exhibit #17. In any event, the sale of the Nursing Home was completed on December 1, 1982 with the vendor agreeing to pay the retroactive portion of the wage increase.

11. Mr. Daynes testified that, as manager of the Home, his objectives are to ensure the highest quality care, to maintain the highest standards and to provide a homelike environment. Towards these ends, the Home was redecorated after the sale, additional wheelchairs and whirlpool baths were purchased, the linen supply was tripled, rugs were replaced with tile in many areas of the Home, a new nurses' charting system was introduced as was a new drug control system and, finally, the reception area was relocated. The provincial Ministry of Health sets and pays 66% of the ward bed fee for each bed in a nursing home. Residents pay the remainder and, in addition, the semi-private or private room surcharge. The projected 1983 budget and the financial results for the first quarter of 1983 were supplied to the limited partners at the end of May, 1983. The 1983 budget projected operating income for the year at $280,273. The original projection for 1983 income had been $403,000. However, the first quarter results showed only a modest profit of $8,463. After the release of an interest arbitration award providing increases in salaries to the registered nurses in September, 1983, Mr. Northey supplied financial statements for the third quarter showing a loss in that quarter of $63,263 and an added expense for earlier periods of $33,310 to reflect the retroactive provisions of the aforementioned nurses' arbitration award. Mr. Daynes returned from holidays on November 9, 1983 and was presented with the third quarter financial statements and the fourth quarter, 1983 projections. The projections showed an operating loss of $46,948 for the fourth quarter of 1983 for a total 1983 loss of $148,277 and a further projected loss of $249,026 for 1984. Mr. Daynes testified that it was at this point that he first considered contracting for the services of ward aides. When asked in cross-examination by counsel for the complainant/applicant trade union why the Home was losing money, Mr. Daynes referred to the high wage rates that Mr. Northey did not project and the abuse of sick leave that was costing the Home $90,000 per year. It is the respondents' evidence that without additional financing the losses that the Home is incurring, if allowed to continue, would put the Home into bankruptcy.

12. At a meeting with the union on April 29, 1983 Mr. Daynes raised his concern with the amount of sick pay that was being expended. He estimated that $10,000 per month was being spent in this regard. The evidence discloses that Mr. Laliberte, a union business represent­ative, who, along with Nora Graham, the business representative with direct responsibility over the local, were present at the meeting, asked Mr. Daynes for a letter from the hospital setting out the names of those who were abusing the sick leave plan. The Home provided such a letter on May 3, 1983 but did not receive any reply from the union. Mr. Laliberte testified that he found the letter ambiguous and asked Nora Graham to contact the Home for clarification. Mr. Laliberte testified further that he heard nothing more until he was asked to meet with Mr. Daynes on October 18, 1983. Mr. Laliberte and Ms. Graham met with Mr. Daynes and Mr. D. Duncan, the administrator of the Home, on October 18, 1983. Mr. Daynes again referred to the abuse of sick leave estimating that the Home was spending about $90,000 a year on this item, proposed to substitute an insured weekly indemnity plan to replace the sick leave plan then in place and, for the first time, raised the possibility of contracting out. It is not disputed that Mr. Laliberte responded by suggesting that he might be able to obtain the agreement of the members of the bargaining unit if the Home was prepared to agree to a no contracting out clause. Mr. Laliberte testified that he attended a union membership meeting on October 27th at which he discussed the implication of an Inflation Review Board ruling that had been made in August and raised the possibility of moving to an insured weekly indemnity type of sick leave plan in return for a no contracting out clause. It is his evidence that the membership agreed to accept weekly indemnity for a no contracting out clause and that he called Mr. Daynes to inform him and was advised that he was on vacation. Mr. Daynes called Mr. Laliberte upon his return from vacation and a meeting was arranged for Novem­ber 14, 1983.

13. It was at that meeting that Mr. Daynes provided the union with written confirmation of his decision to contract for the services of ward aides. Mr. Daynes testified that he asked Mr. Laliberte about the sick leave problem and was told that he had done nothing, had not received the May 3rd letter and that it was unresolved. It is his evidence that at this point he handed Mr. Laliberte the letter confirming the Home's intention to contract out. Mr. Laliberte, on the other hand, maintains that his comment about not receiving the letter of May 3rd was made at the October 18th meeting and asserts that he told Mr. Daynes of his authority to commit the membership to a weekly indemnity plan in return for a no contracting out clause. Mr. Laliberte testified that it was at this juncture that Mr. Daynes gave him the letter.

14. The evidence establishes that sick leave usage in the period July through October, 1983 was less than in the same period the year before and less than in the preceding months of 1983. In fact, $62,000 had been paid out in sick leave benefits up to October 18, 1983, and not the $90,000 suggested by Mr. Daynes on that date when he met with the union. Mr. Daynes had visited Thompson House (another nursing home), in August 1983 for the purpose of observing the contracting out at that operation. Mr. Daynes contacted Medox on November 9, 1983 and met with an official of that company on November 11, 1983. After some discussion with respect to the hourly rate, Medox confirmed with Mr. Daynes, on November 14, 1983, that $6.75 per hour, including supervision, would be a satisfactory rate. Medox was of the view that as of November 14, 1983 it had an oral agreement with Kennedy Lodge subject to signature. Mr. Daynes testified that he told the Medox representative that he would be meeting with the union on November 14 and that if a positive response was not forthcoming he would be going ahead with the contract effective December 16, 1983.

15. The proposed contract between Medox Health Care Services and Kennedy Lodge Nursing Home Ltd. which was agreed between these parties and which both parties acknowl­edge that they are prepared to execute and abide by, is reproduced below:

BY AND BETWEEN:

MEDOX HEALTH CARE SERVICES, A Division of Drake International Inc., (hereinafter referred to as 'MEDOX"),

AND:

KENNEDY LODGE NURSING HOME LTD., (hereinafter re­ferred to as "KENNEDY")

WITNESSETH"

WHEREAS MEDOX maintains a health care aide/nursing aide serv­ice;

AND WHEREAS KENNEDY desires to secure such health care/aide nursing aide service;

NOW THEREFORE KENNEDY and MEDOX mutually agree as follows:

1. LOCATION

Kennedy Lodge Nursing Home Ltd., 1400 Kennedy Road, Scarbor­ough, Ontario.

2. TERM OF AGREEMENT

The terms of this Agreement shall commence on the 16th day of December, 1983, and will continue until the 31st day of December, 1985, subject, however, to the right of either party of the Agreement to terminate this Agreement upon thirty (30) days written notice to the other, except in the case of non-performance on the part of MEDOX, IN WHICH EVENT THIS AGREEMENT MAY BE TERMI­NATED BY KENNEDY without notice.

3. SERVICE(S)

MEDOX agrees that the health care aide/nursing aide services covered by this Agreement shall be performed in accordance with accepted practices and standards, and the conduct of the MEDOX personnel operating under this Agreement shall be guided by MEDOX's standing orders and policies, and by such written rules as may be agreed upon between KENNEDY and MEDOX.

4. BILLING

MEDOX billing shall be thirty (30) days in arrears of service. MEDOX will invoice monthly, by the 10th of each month following the month in which said services were performed.

KENNEDY agrees to process and pay all invoices within ten (10) days after receipt of same.

5. Rates

KENNEDY shall pay to MEDOX, for the services herein granted, the following rates or charges:

For the period, December 16, 1983 — December 31, 1984 inclusive —

Hourly Rate —

Standard $6.75

Statutory and Legal

Holidays 1-1/2 x $6.75

For the period, January 1, 1985 — December 31, 1985 inclusive —

Hourly Rate —

Standard $7.10

Statutory and Legal

Holidays 1-1/2 x $7.10

The rates specified above include all fringe benefits, such as vacation pay, income tax, unemployment insurance, workers' compensation, Canada pension, as well as overtime where not specifically authorized by KENNEDY.

The rates specified above will remain constant, and in effect during the term of this Agreement.

The rates specified above include the costing of a part-time staffing co-ordinator/supervisor who will be located at KENNEDY for a mini­mum period of time each and every week.

6. MEDOX — Accepts Following

Responsibilities:

a) Provide adequate and consistent staffing of health care aides/nurs­ing aides, meeting the requirements of KENNEDY.

b) Ensure all MEDOX personnel assigned to work with KENNEDY have accredited health care aide/nursing aide certificates are medi­cally certified, and are covered by malpractice and liability insur­ance, and protected under the provisions of the Workmen's Compen­sation Insurance.

c) Meet all requirements of the Employment Standards Act, and the Federal Income Tax Act.

d) Provide orientation to new MEDOX personnel, by MEDOX super­visory personnel, after the initial phase-in.

e) Adhere to Kennedy's dress code, as provided to MEDOX by KEN­NEDY.

f) Review and discuss at least hi-weekly with KENNEDY nursing staff the requirements of KENNEDY, and receive progress reports on the services provided and MEDOX personnel.

g) Be responsible for providing the day-to-day supervision of health care aides/nursing aides at KENNEDY, it being understood that the control and direction of all MEDOX personnel in the employ of MEDOX shall at all times be the responsibility of Medox and that MEDOX shall be responsible for the discipline, scheduling or rescheduling of MEDOX personnel, and that KENNEDY person­nel shall have no authority or responsibility for discipline, scheduling and rescheduling of MEDOX personnel, save only in a reporting function to the MEDOX supervisor.

h) Provide twenty-four (24) hour telephone service, seven (7) days per week by qualified MEDOX staffing coordinators.

7. KENNEDY — ACCEPTS FOLLOWING

RESPONSIBILITIES:

a) Ensure that MEDOX supervisory staff is kept fully informed of any special care which residents of KENNEDY may require.

b) Provide concise job descriptions to MEDOX and any special regula­tions and functions specific to KENNEDY.

c) Meet with authorized MEDOX supervisory staff at regular inter­vals to discuss staffing requirements, and to provide reports on services reqired, and given.

d) KENNEDY nursing personnel will coordinate the care require­ments of the residents, and liaise closely with MEDOX supervisory staff in that regard, and in addition KENNEDY will keep MEDOX fully informed as to staffing requirements.

16. Medox Health Care Services is one of approximately seventeen divisions of Drake International Inc. As an unincorporated division of Drake, Medox has no independent legal personality. Drake was incorporated in Ontario in or about 1951 and carries on business through its divisions as a supplier of personnel to various industries. Medox is the division of Drake that supplies personnel to the health care industry, including hospitals, nursing homes and health clinics, physicians' offices, private homes and other health care settings, and as such is in competition with a number of other suppliers of health care personnel in the province of Ontario. The business generated by Medox represents approximately 14% of the business of Drake overall. It is estimated that the contract with Kennedy Lodge will generate 20 — 25% of Medox's total income. There is no corporate or other relationship, except for the proposed contract set out above, between Medox and/or Drake and any of the other respondents in this matter.

17. Mr. Daynes testified that the duties of health care aides include the dressing, feeding, bathing and toileting of residents and the answering of call bells. These are the duties performed by the health care aides employed by Kennedy Lodge under the direction of charge nurses employed by Kennedy Lodge in conformance with job descriptions prepared by Kennedy Lodge. The same duties will be performed by the health care aides supplied by Medox if Kennedy Lodge is permitted to proceed with its plan to contract for these services with Medox. The Nursing Home employs 15 charge nurses, who are qualified R.N's. Six of these charge nurses are assigned on days, six on afternoons and three on nights. They report to a working supervisor, who is the Assistant Director of Nursing on days, who in turn reports to the Director of Nursing. Under the proposed contracting arrangement the Director of Nursing, the nursing supervisors and the charge nurses who are employed by the Nursing Home will remain in place and will continue to be employed by the Nursing Home. The deployment of health care aides, which will not change under the contracting arrangement, has 21 health care aides on days (nine on the third floor, six on the second floor, five on the main floor, and one on the ground floor), 20 health care aides on afternoons (eight on the third floor, and the same complement as on days throughout the remainder of the Nursing Home) and 11 health care aides on nights (four on the third floor, three on the second floor, three on the first floor and one on the ground floor). The ratio of health care aides to charge nurses during a 24-hour working day, which will not change under the contracting arrangement, therefore, is just over 4:1.

18. Kennedy Lodge presently pays its health care aides approximately $11.50 per hour including benefits under the terms of its collective agreement with the complainant/applicant trade union. Under the proposed contract with Medox, Kennedy Lodge will pay $6.75 per hour, including benefits, supervision and administrative cost to Medox. Medox, in turn, will pay the health care aides $4.25 — $5.50 per hour depending on experience. The contract stipulates that the specified rates include the cost of "a part-time staffing co-ordinator/supervisor who will be located at Kennedy for a minimum period of time each and every week." Mr. Daynes testified that Kennedy Lodge will be requiring supervision on an 8-hour per day basis and on call the rest of the time. Mr. Butler, the national marketing manager for Medox, testified that Medox will assign a supervisor to Kennedy Lodge for a total of eight hours per day, forty hours per week and that, in addition, a part-time supervisor will be available. He maintained as well that Medox supervision will be available by phone 24 hours per day. It is the evidence of both Mr. Daynes and Mr. Butler that Medox will hire the aides who will work at Kennedy Lodge, will schedule their hours, supervise their work to ensure that it is in conformity with Kennedy Lodge standards and discipline these aides when required. The daily report will continue to be given by the charge nurse but it is their evidence that in future the charge nurse will report any work-related difficulties or misbehavior by an aide to the Medox supervisor. Mr. Butler also testified that the Medox supervisor will be responsible for job evaluation, on-hands training and in-service programmes. The aides supplied by Medox will wear a Medox name tag and will be paid by Medox.

19. It is not disputed that the procedures to be followed and the standards to be met by the aides referred by Medox will be laid down by Kennedy Lodge. Although the current operating manuals have not been amended to take into account the existence of Medox, Mr. Daynes testified that they will be if the contracting arrangement is carried out. Kennedy Lodge will provide detailed job descriptions. The personnel records for the aides will be kept in the Nursing Home pursuant to section 91 of the Regulations to the Nursing Home Act but these records will be maintained by Medox. The issue of Kennedy Lodge's authority to have an individual aide supplied by Medox replaced was brought up in the examination of both Mr. Daynes and Mr. Butler. The relevant part of Mr. Daynes' cross-examination was tran­scribed as follows:

Q. It doesn't concern you what kind of person might come in to work for that price?

A. I have already testified, sir, that I have taken a hard look at the application form, and the expertise that they are looking for, and I am quite satisfied that these will be good people.

Q. But you are not in the least concerned of what these people are getting paid?

A. Well, for instance, sir, if they are not the people that we want, they won't be there, and Medox will be instructed to get rid of them. I am sure with the track record that Medox has that they won't be sending those people that we are not happy with.

Q. So if you are not satisfied with anybody, you will have Medox get rid of them, is that correct?

A. Medox will be instructed to put them somewhere else, but not in our home, that is correct.

He replied in the affirmative when later asked if Kennedy would act to have an aide transferred or terminated if it didn't like what the aide was doing. The relevant part of Mr. Butler's cross-examination in this regard was transcribed as follows:

Q. One of those items states that although the employees will not be employed by the facility, the administrator retains control over who can work in it, can you tell the Board what happens if the administrator advises you, or somebody from Medox, that he doesn't want a particular employee in the facility?

A. The supervisor would at that point, depending on the reason why they wouldn't want them, remove the employee from the facility and in all likelihood, depending on the nature, if it was an offence or something that would drastically or was drastically affecting the quality of care, they would either be transferred to another facility, or to home care, or terminated.

Q. And let me understand how the discipline works. You both agreed, I think, that the administrator, Daynes, and you agreed that if the admin­istrator wants someone out of the house, you would do something about it, transfer them or fire them, depending on what they did?

A. Yes.

Q. So the ultimate authority to fire them as far as Kennedy Lodge is concerned is lodged with the administrator, is that correct?

A. That would only be if they requested someone out, in most instances our supervisor would be the one who would make the recommendation, and do it. It should never get to the administrator if she is doing her job, or he is doing his job.

Q. Well, as I understand, the director of nursing can come to you, or to your supervisor and say "get that nurse's aide out of here, we don't like her", and you would do it.

A. If it was reasonable, of course, yes.

Q. Even if it wasn't reasonable, you might do it?

A. Well, I don't know if I would do it unless it was reasonable.

Q. Your supervisor would get instructions if they want something?

A. Well, I think the normal event is that so and so is not doing their job, they are not up to par, and they would do an evaluation and report back that they are either capable of doing it or not, and if they felt they were not, they would be removed.

Q. But let us say your supervisor thought that, and this is all hypothetical, but you are a reasonable business man, and you are dealing with a substantial number of nurses, and a substantial portion of your business, and if the administrator says look, I am not happy with this person, and you really felt the administrator wasn't right, you would simply transfer that person from one home to another home to avoid difficulty wouldn't you?

A. It is hypothetical, but probably we would, yes.

20. Mrs. Shirley Robinson, an R.N. with 26 years of experience who has worked as a charge nurse at Kennedy Lodge for the past three years, was called to testify by the applicant/ complainant. She works a steady 7:00 a.m. to 3:00 p.m. shift and is responsible for an area of the 3rd floor of the Home housing 45 residents, many of whom, by her evidence, are confused. She supervises 4-1/2 aides who, it can be taken from her evidence and from the job description of the nurse's aid that was put in evidence, form a part of the nursing care team. The job description for a nurse's aid at Kennedy Lodge reads as follows:

21. The Director of Nurses shall employ Nurses Aides as determined by the approved staffing pattern.

22. It is desirable that Nurses Aides have a "Health Care Aide" certificate, or are prepared to take the Health Care Aide course when it is available.

23. The Nurses Aides shall be responsible to the Charge Nurse for assisting residents to meet all basic needs.

24. The Nurses Aide, under the supervision of the Registered Nurse shall:

25. Assist newly admitted residents in settling into the home routine.

26. Bathe bed residents or assist ambulatory residents in taking tub bath or shower, (each resident to have weekly, tub bath or shower, skin to be checked for abrasions or reddened areas, bruises, etc.). Hair to be washed regularly. Skin cared for.

27. Brush and comb hair, (each resident to have brush and comb, marked with his name on it). These articles to be kept clean and free of hair.

28. Clean and cut finger nails. Keep nails short. Podiatrist will attend to toe nails.

29. Oral care:- See the resident cleans his teeth, using a toothbrush and dentifrice. Clean dentures as necessary. Soak overnight if possible. (Tooth brush to be marked with name.)

30. Assist with serving meals and Keeding as necessary. Provide be­tween meal nourishment.

31. Assist resident with dressing. Shave as necessary.

32. Give urinals and bed pans as necessary. Toilet residents frequently before and after meals.

33. Collect urine and fecal samples.

34. Answer signal lights as quickly as possible.

35. Assist residents in use of wheelchairs and walkers and assist in activity programs, and reality orientation programs. Walk residents as necessary and assist and participate in exercise programs.

36. Make beds and change linen as necessary. Residents must have at least three complete changes of bed linen per week.

37. Clean utility rooms, medication rooms and linen rooms.

38. Clean resident's bedside table and clothes closet. Tidy drawers (if resident unable to do it).

39. Wash resident's bedstead, mattress, etc. once weekly.

40. Overbed tables, geriatric chairs, wheelchairs, walkers and any other equipment used by resident, to be kept clean.

41. Collect and bag soiled linen, personal laundry to go in proper coloured bag. All soiled linen to be flushed clean first.

42. Store clean linen, including residents' personal clothing.

43. Perform other duties as may be assigned.

The job description for a charge nurse at Kennedy Lodge reads as follows:

The Director of Nursing shall, in consultation with the Administrator, appoint a Registered Nurse for each nursing unit. No person other than a nurse registered with the Ontario College of Nurses shall be eligible for appointment as a Registered Nurse. The Registered Nurse shall be responsi­ble to the Director of Nursing for the day-to-day management of the nursing unit.

Without limiting the generality of the foregoing, the Registered Nurse shall:

1. Supervise the work of all nursing staff assigned to the unit.

2. Become directly involved along with nursing aides in care of residents on his/her nursing unit.

3. Be responsible for the observance of all policies and procedures estab­lished in the home.

4. Ensure that all attending physicians' orders are executed correctly.

5. Ensure that nursing care plans are developed for each resident adequate to meet his/her needs, and are current and readily understood by all nursing staff.

6. Be responsible to the Director of Nursing for the accounting for and

safeguarding of all drugs, narcotics, and medications maintained on the unit.

7. Maintain supplies on the unit at such a level as to ensure efficient operation.

8. Ensure that all information pertaining to residents is protected from unauthorized use while on the assigned unit.

9. Prepare work assignments and ward duties for nursing staff on each unit in accordance with policies of the Home.

10. Report to Director of Nursing any resident who in his/her opinion is not making reasonable progress toward recovery, or is not being visited frequently enough by the attending physician.

11. Prepare such reports as may be requested by the Director of Nursing.

12. Keep the Director of Nursing advised of all matters about which he/she should have knowledge.

13. Participate actively in ward circles with staff members.

14. Ensure that all medical records, i.e. nurses' notes, medicine sheets are kept up-to-date (see policy re: medical records).

15. Perform such other duties as may be assigned.

Mrs. Robinson testified that it is the charge nurse who develops and alters the care plans for each patient, gives a report to the oncoming shift at the end of the shift and assigns the duties for the day to the nursing aides. Although acknowledging that the bathing, feeding and skin care duties of the aides are sometimes routine, Mrs. Robinson testified that supervision of the aides by the charge nurse is ongoing. It is her evidence that she monitors their work and speaks directly to an aid that is not performing as she should be. When asked if one person could supervise all of the aides in the building, she replied that she didn't see that it was possible. Mrs. Robinson agreed that aides supplied by an agency have been called into the Home in the past.

21. The scheme of the Nursing Home Act provides that the nursing homes in the province must be licensed and must operate in accordance with government standards as set out in the Act and the Regulations thereunder. Failure by a licensed operator to comply with the Act, the Regulations and the terms of the licence may result in the revocation of the licence. The Regulations under the Nursing Homes Act place specific responsibilities upon a nursing home and its personnel. Section 56 of the Regulations under the Nursing Homes Act provides as follows:

22. (1) Every resident shall be given nursing care in accordance with his needs and the care shall be given under the supervision of a registered nurse or a registered nursing assistant as directed by a physician.

(2) A thorough assessment of each resident's needs shall be made on a regular basis by the registered nursing staff and a care plan shall be devised for every resident.

(3) A reassessment of each resident's needs shall be made on a regular basis and the resident's care plan shall be revised where the reassessment indicates that this is required.

(4) Where a resident's attending physician so requires, a resident's vital signs shall be observed and recorded regularly by the registered nursing staff and the information shall be reported to the physician as he directs.

(5) The nursing staff shall provide restorative nursing care to a resident who requires such care and in particular to one who requires bladder or bowel training, gait training, care of weak or paralyzed limbs, or maintenance of range and joint movements.

(6) The nursing staff shall give to a resident who is confined to bed or to a bed-chair, care that includes turning every two hours, positioning and measures to prevent skin disorders or care for skin disorders.

(7) The nursing staff shall instruct residents in the use of self-care devices.

(8) The nursing staff shall ensure that residents who are confined to bed or who are incontinent have a complete bath daily or more frequently where necessary to maintain cleanliness and that ambulant residents have a com­plete bath at least once a week.

(9) The nursing staff shall ensure that proper and sufficient care of each resident's body is provided to safeguard the resident's health and to maintain personal hygiene.

(10) Each resident's bed clothing shall be kept clean and free from odours and residents' bed linen shall be changed at least twice a week.

(11) The nursing staff shall use proper sterile nursing techniques at all times.

(12) All nursing equipment shall be maintained in a good state of repair, be properly cleaned and be readily available for use and a supply of nursing equipment adequate to meet the needs of the nursing home shall be on hand at all times.

Section 57 of the Regulations provides as follows:

57. (1) Every nursing home shall provide a minimum of one and a half hours of nursing and personal care each day to each extended care resident and the care shall be given under the supervision of a registered nurse or registered nursing assistant and under the direction of a physician.

(2) Subject to subsection (3), the minimum amount of nursing and personal care that shall be given to each extended care resident each week by a person referred to in column 1 of the following Table shall be that amount of time set out opposite thereto in column 2 of the following Table:

TABLE

COLUMN 1 COLUMN 2 ITEM STAFF CATEGORY MINIMUM AMOUNT OF TIME 1 Registered Nurse 1/2 hour

2 Registered Nursing

Assistant 1-1/2 hours

3 Health Care Aide 8-1/4 hours

4 TOTAL 10-1/2 hours

(3) The Director may, having regard to the mental and physical condition of a resident, require that an extended care resident receive an amount of care in excess of that set out in subsection (2).

(4) Notwithstanding subsection (2), an extended care resident shall be given the nursing and personal care in accordance with his needs that is ordered by his physician.

(5) Time given to housekeeping, laundering or cooking duties by a registered nurse, registered nursing assistant or health care aide shall not be included in calculating the nursing and personal care time of a registered nurse, registered nursing assistant or health care aide required to be given under subsection (7).

Sections 60(1) and (2) of the Regulations provide:

60. (1) Every nursing home shall have a registered nurse who is designated as the director of nurses, and who is responsible for,

(a) the organization, direction and evaluation of nursing care; (b) directing the work of the nursing staff in the nursing home; and

(c) the organization and direction of in-service training programs for nurs­ing staff.

(2) Every nursing home shall conduct in-service training programs for all nursing staff in the nursing home at least once a month.

Section 61 of the Regulations provides:

61. Every extended care unit shall have at least,

(a) one registered nurse on duty during each day shift;

(b) one registered nursing assistant on duty during each afternoon shift; and

(c) one registered nursing assistant on duty during each night shift.

22. Kennedy Lodge is party to a collective agreement with the Ontario Nurses' Associa­tion covering its registered nurses. Article 2.02 of that agreement reads:

2.02 In order to protect the standard of nursing care, the Employer agrees that no one outside of the above-mentioned bargaining unit shall perform the work normally performed by members of this bargaining unit except:

(a) in cases of emergency;

(h) for the purposes of performing experimental work;

(c) when instructing nurses or other employees;

(d) when nurses are not available due to being late for work or absent from work for any reason, except layoff.

23. Article 2.03 of the collective agreement between Kennedy Lodge and the applicant/ complainant trade union provides:

2.03 No Contracting Out

Where the Employer finds it necessary to contract out work performed by the bargaining unit, and where such contracting out results in a lay-off of employees, the Employer undertakes to meet with the Union no less than thirty (30) days in advance of such lay-off to consider what might be done to minimize the adverse affects upon the employees concerned.

24. The relevant provisions of the Labour Relations Act are set out below:

25. (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.

26. A collective agreement is, subject to and for the purposes of this Act, binding upon the employer and upon the trade union that is a party to the agreement whether or not a trade union is certified and upon the employees in the bargaining unit defined in the agreement.

106(2) If, in the course of bargaining for a collective agreement or during the period of operation of a collective agreement, a question arises as to whether a person is an employee or as to whether a person is a guard, the question maybe referred to the Board and the decision of the Board thereon is final and conclusive for all purposes.

64. No employer or employers' organization and no person acting on behalf of an employer or an employers' organization shall participate in or interfere with the formation, selection or administration of a trade union or the representation of employees by a trade union or contribute financial or other support to a trade union but nothing in this section shall be deemed to deprive an employer of his freedom to express his views so long as he does not use coercion, intimidation, threats, promises or undue influence.

65. No employer, employers' organization or person acting on behalf of an employer or an employers' organization,

(a) shall refuse to employ or to continue to employ a person, or discrimi­nate against a person in regard to employment or any term or condition of employment because the person was or is a member of a trade union or was or is exercising any other rights under this Act;

(b) shall impose any condition in a contract of employment or propose the imposition of any condition in a contract of employment that seeks to restrain an employee or a person seeking employment from becoming a member of a trade union or exercising any other rights under this Act; or

(c) shall seek by threat or dismissal, or by any other kind of threat, or by the imposition of a pecuniary or other penalty, or by any other means to compel an employee to become or refrain from becoming or to continue to be or to cease to be a member or officer or representative of a trade union or to cease to exercise any other rights under this Act.

77. Nothing in this Act prohibits any suspension or discontinuance for cause of an employer's operations or the quitting of employment for cause if the suspension, discontinuance or quitting does not constitute a lock-out or strike.

SUBMISSIONS

25. The Board received written submissions from the parties that extend to approximately 230 pages. The Board has carefully considered these submissions which are summarized below.

26. The applicant/complainant argues firstly that the evidence establishes a breach of sections 64 and 66 of the Act. The applicant/complainant reminds the Board at the outset that the onus is upon the respondents to establish on the balance of probabilities that there has not been a breach of these sections and further that it is not sufficient to establish legitimate business motivation if there coexists anti-union motivation. The applicant/complainant relies on Consolidated Bathurst, [1983] OLRB Rep. Aug. 1411 and C. E. Lummus Canada Ltd., [1983] OLRB Rep. Oct. 1685 in support of the proposition that the failure of an employer to meaningfully consult with a trade union about a business decision having such a profound impact on the bargaining unit constitutes a breach of section 64 of the Act. The applicant/ complainant maintains that in this case there was such a failure to discuss. The applicant/complainant also argues that a business decision that results in a refusal to employ or continue to employ a person solely for the purpose of avoiding the provisions of the collective agreement, and in particular the wage provisions, consti­tutes a violation of section 66 of the Act. Westinghouse Canada Limited, [1980] OLRB Rep. Apr. 577, K Mart Canada Ltd., [1983] OLRB May 649, Humber College [1979] OLRB Rep. June 520 and Carroll Electric (1982) Limited, [1982] OLRB Rep. Dec. 1814 are cited in support of this proposition. The applicant/complainant submits that no reason has been advanced by the respondent Kennedy Lodge for its decision to contract out the work in question, other than a desire to avoid the monetary provisions of the collective agreement. The applicant/complainant maintains that the Board failed to distinguish between business decisions made for reasons of technologi­cal advancement, change in production methods, automation etc. which have as a side effect the loss of jobs in the bargaining unit and a decision made for no other reason than to extricate an employer from the provisions of the collective agreement in both Kennedy Lodge Nursing Home, [1980] OLRB Rep. Oct. 1454 and Heritage Nursing Home Limited, [1981] OLRB Rep. Jan. 31. The applicant/complainant asks the Board to make this distinction and to find a violation. Finally, the applicant/ complainant, citing International Wallcoverings, [1983] OLRB Rep. Aug,. 1316 and Canadian Imperial Bank of Commerce, [1979] 1 Can. LRBR 266, argues that even in the absence of anti-union animus, where there is no persuasive or worthy counter­balancing employer interest to support a decision which involves the replacement of union with non-union labour, but does not result in any other significant advantage to the employer, the Board is entitled to balance the competing interests and make a finding of a violation under section 64. It is submitted that the nature of the subcontracting arrangement in this case does not evidence a "persuasive or worthy" purpose sufficient to justify the impact which it will have on the bargaining unit.

27. The applicant/complainant also relies on sections 50 and 106(2) of the Act. The applicant/complainant submits that the Board has the authority under section 106(2) of the Act to determine if the persons supplied by Medox are employees of Kennedy Lodge. It is submitted that if they are employees of Kennedy Lodge and remain so at a time when more senior employees covered by the collective agreement are on layoff there exists a massive breach of the collective agreement, thereby constituting a breach of section 50 of the Act. Maple Leaf Taxi Limited, [1982] OLRB Rep. Nov. 1671, Eastern Sheet Metal and Mechanical Contractors, [1981] OLRB Rep. Jan. 26 and Carroll Electric (1982) Limited, supra, are cited in support of the Board's authority to find a breach of section 50 of the Act where a party to a collective agreement "massively, totally and in a wholesale manner" repudiates its provisions. The applicant/complainant asks the Board to follow the approach adopted in the arbitration cases, and in particular, AmplitrolElectronics Limited, (September 2, 1969) unreported (Weiler), Goodyear Tire and Rubber Company, 1977 CanLII 2969 (ON LA), 16 L.A.C. (2d) 177 (Gorsky), Riverdale Hospital, 1974 CanLII 2341 (ON LA), 7 L.A.C. (2d) 40 (Schiff) and Regional Munici­pality of Waterloo, (1977) 1977 CanLII 2965 (ON LA), 16 L.A.C. (2d) 280 (Brandt), and to find that the persons supplied by Medox are employees of Kennedy Lodge. The applicant/complainant submits that where, as in this case, there is an ongoing collective bargaining relation­ship the arbitral jurisprudence is more helpful than the jurisprudence of the Board in attempting to identify the employer in certification cases. The applicant/complain­ant relies on the caution expressed by the Board in Re K Mart, supra, against applying the factors relied upon by the Board in certification matters "where an employer has structured its affairs in a manner which deliberately attempts to evade collective bargaining obligations in respect of a substantial number of individuals performing bargaining unit work on the premises."

28. In the final alternative it is submitted that Kennedy Lodge and Medox are related employers within the meaning of section 1(4) of the Act and, therefore, are both bound by the provisions of the collective agreement. Charming Hostess, [1982] OLRB Rep. April 536, J. H. Normick Inc., [1979] OLRB Rep. Dec. 1177, Complete Car Care Centre, [1983] OLRB Rep. Aug. 1293 and Don Mills Bindery Inc., [1983] OLRB Rep. Dec. 2008 are cited in support of the proposition that the Board will determine whether there is common control or direction of "activities" as well as business and will do so on the basis of functional interdependence as well as corporate interrelationship. It is submitted that, at the very minimum, the nursing care activities carried out at Kennedy Lodge are so integrated as to necessarily be under the common control and direction of both Kennedy Lodge and Medox. The Nursing Home Act and Regulations are cited in further support of this conclusion. The reasoning expressed in Acto Builders (Eastern) Limited, [1979] OLRB Rep. June 645 and Rivard Mechanical, [1981] OLRB Rep. May 550 is relied upon in support of the exercise of the Board's discretion under section 1(4). The applicant/complainant maintains that the only effective way of ensuring the continuance of collective bargaining rights to the affected employees is to issue a section 1(4) declaration.

29. The respondents Kennedy Lodge Nursing Home Inc., Daynes Health Care Ltd. and Earl Daynes submit, in response to the allegation that sections 64 and 66 have been violated, that, absent any express authority, it is accepted that it is management's prerogative to unilaterally change working conditions for business reasons during the term of a collective agreement. Russell Steel Ltd. (1967) 1966 CanLII 853 (ON LA), 17 L.A.C 253 and Kennedy Lodge Nursing Home, (1981) 1980 CanLII 3978 (ON LA), 28 L.A.C. (2d) 388 are cited in support of this argument. In this case, however, where article 2.03 of the collective agreement contemplates contracting out of work performed by the bargaining unit "where the employer finds it necessary" it is argued that there is express authority for the very action that has been taken; that is, to contract out the work in question for the legitimate business reason of improving profitability. These respondents submit that the existence of a clause giving the employer the express authority to contract out along with the consultation which took place, distinguishes this case from Westinghouse Canada Limited, supra. The respondents submit that there is nothing untoward in the arrangements and undertaking made in connection with the decision to purchase the Home. These respondents argue that the events which unfolded commencing with a retroactive wage increase of 40% awarded to health care aides in August, 1982, through the first eleven months of business (December, 1982 to

October, 1983), to the preparation of the third quarter 1983 financial statements (showing a loss over the first three quarters of $68,019) and a projected loss of $46,948 for the fourth quarter of 1983 and a further $249,026 for 1984 created a financial crisis which caused Mr. Daynes to consider contracting out of nursing aid work on November 9, 1983. These respondents suggest that an economic crisis exists where the Home is unable to cover its expenses in any year or is unable to pay the basic return on investment in two consecutive years so that the management agreement may be terminated. These respondents submit that there was consultation by manage­ment with the union beginning on April 29, 1983 when Mr. Daynes made the union representatives aware of the "excessive operating costs" and, in particular, the abuse of the sick pay provisions of the collective agreement. These respondents ask the Board to find that the union did not follow up or attempt to co-operate with management in responding to the financial crisis. It is argued that where the evidence of Mr. Daynes, as corroborated by Mr. Duncan, is in conflict with that of Mr. Laliberte with respect to what transpired at the union/management meetings of April 29, October 18, October 27 and November 14 an adverse interest must be drawn against the union because of its failure to call Norah Graham who was present at these meetings and could have corroborated Mr. Laliberte's testimony. It is submitted that the respondents led evidence which establishes that the reasons for contracting out were legiti­mate business reasons and to also establish that there were no other reasons. These respondents rely on Heritage Nursing Home Limited, supra in support of its initial submission that if a union wishes to protect itself from the risk of contracting out it may attempt to do so at the bargaining table. It is argued that where, as in this case, there is a clause which expressly gives the employer the right to contract out and where, as in this case, the decision is taken for a legitimate business reason, there can be no finding of a violation of section 64 or 66 of the Act. Finally, in response to the applicant/complainant's submissions with respect to the balancing of interests, these respondents read International Wallcoverings, supra, as suggesting that a breach of section 64 may be found without a finding of anti-union motive only in ''instances of clear mistake or for discipline clearly out of all proportion to the misconduct in issue". In any event, it is argued that the assertion that there is a significant imbalance in favour of protected employee rights completely ignores the fact that the employees' bargaining agent bargained for the express rights in the collective agreement from which the employer in this case derives its authority to contract out.

30. In response to the allegation that it has violated section 50 of the Act, these respondents maintain that Kennedy Lodge, at all material times, acted within the terms of the collective agreement and specifically article 2.03. It is further submitted that the applicant/complainant now seeks to resile from the language of article 2.03 that it agreed to during bargaining. These respondents concede that the individuals who will perform the aide work under the contract with Medox will be employees within the meaning of section 1(3) of the Act. However, it is argued that section 106(2) empowers the Board to conduct duties and responsibilities examinations to ascertain if a person is an employee within the meaning of section l(3)(b) of the Act and that the issue of the identification of the employer in this case is not a matter for reference within the ambit of section 106 of the Act. These respondents maintain that the arbitration cases relied on by the applicant/complainant in support of its contention that Kennedy Lodge remains as the true employer are distinguishable on their particular facts. It is submitted that in the Riverdale Hospital award, supra, there was evaluation of the performance of the individuals in question by the hospital staff and there was a clause in the collective agreement purporting to give job security to members of the bargaining unit.

31. With respect to the application under section 1(4) of the Act these respon­dents argue that the business of Kennedy Lodge is to provide food and shelter together with medical care to its clients while the business of Drake International, of which Medox is a division, is to provide a wide range of personal services and, therefore, the nature of the business or profit-making activities of the two are entirely different and distinct. It is submitted that no finding can be made on the evidence that either entity functionally controls or directs the other entity. These respondents submit that on the evidence, functions pertaining to personnel policies, salaries, scheduling, and discipline of health care aides will be in the exclusive domain of Medox. Applying the criteria set out in Re Walter's Lithographing Company Limited, [197l] OLRB Rep. July 406 these respondents submit that a finding of common control or direction under section 1(4) of the Act cannot be made. It is further submitted that the facts in this case lack the ''economic and organizational imbalance'' between the firms that was found in the Normick case, supra. It is submitted that Charming Hostess Inc., supra, is the most analogous to the facts at hand. It is submitted that Drake International Inc. (Medox) functions independently and economically apart from Kennedy Lodge Nursing Home Inc.

32. Insofar as it is claimed that the persons to be supplied will be employees of Kennedy Lodge, these respondents rely on York Condominium Corporation, [1977] OLRB Rep. Oct. 642, Templet Services, [1974] OLRB Rep. Sept. 606, Ralston Purina Canada Inc., [1979] OLRB Rep. June 552 and Sutton Place Hotel, [1980] OLRB Rep. Oct. 1538 as standing for the proposition that the employer is the entity exercising fundamental control over the employment relationship. In the face of evidence which establishes that Medox screens the job applicants, provides an orientation package, maintains job descriptions, provides those assigned to Kenne­dy Lodge with a Medox name tag and issues paycheques and slips, these respondents maintain that Medox would be seen as the employer. When reference is had to the evidence that Medox will be responsible for discipline, for determining the level of wages and that the job is essentially routine, it is submitted that Medox will enjoy effective control and is, therefore, the real employer.

33. The respondent Medox makes essentially the same argument as the respon­dents Kennedy Lodge, Daynes Health Care, and Daynes in respect of the identifica­tion of the employer. Although acknowledging that Kennedy Lodge will have the right to refuse to permit any given Medox employee to work in the Nursing Home, the respondent Medox relies on the evidence of Mr. Butler that Medox will investigate the reasons underlying the Home's rejection of the employee and, depending on the results of the investigation, will either transfer the employee to another facility or home care, or discipline or discharge. Furthermore, while also acknowledging that the Kennedy Lodge charge nurses will remain responsible for the medical care of the residents, Medox relies on the evidence that the charge nurse will be relieved of administrative tasks relating to the aides such as the authorizing of time off, discipline and "more generally the supervision of the aides." The respondent Medox cites Sutton Place Hotel, supra, The Tower Company (1961) Ltd., [1979] OLRB Rep. June 583 and Ford Motor Co. of Canada Ltd. and Plant Guard Workers, (1981) 1981 CanLII 4460 (ON LA), 1 L.A.C. (3d) 141 (McDowell) in support of its position that on the evidence in this case Medox will be perceived as the employer by the individuals assigned to Kennedy Lodge and will exercise fundamental control over these individuals. The respondent Medox maintains that K Mart, supra, is distinguishable from the case at hand because in this case Medox will be responsible for the hands-on direction and supervision of the individuals assigned to Kennedy Lodge, will schedule and determine the hours of these individuals, will grant casual time off, will determine if rotation between departments will take place, will discipline these individuals and will invoice Kennedy Lodge monthly and not, as in K Mart, supra, immediately for each hour worked. Medox submits that if the contract is such that the degree of supervision required in practice is significantly greater than currently intended so as to render the contract unecon­omical to Medox, Medox would either attempt to renegotiate the hourly rate or terminate the contract on 30 days' notice.

34. The respondent Medox states that the regulations under the Nursing Home Act do not in any way affect the issues to be determined in that relief staff from personnel agencies have been used in the past as charge nurses without it ever being suggested that such a practice was contrary to the regulations. In any event, it is submitted that there is no requirement that the extended care supervision to be provided by an R.N. or R.N.A. must be provided by an employee of Kennedy Lodge. It is pointed out that there is no requirement in the definition of "nursing staff' in section 1 of the Regulations that there be an employment relationship with the nursing home. Finally, it is submitted that there is nothing in the Act or Regulations that prohibits the Director of Nursing from delegating her responsibilities under section 60 of the Regulations to R.N.'s or aides employed by Medox.

35. The respondent Medox, in addressing the application under section 1(4) of the Act, acknowledges that Drake, through its Medox division, would be engaged in an associated or related activity with Kennedy Lodge if the contracting out was to proceed. Medox submits, however, that the section must be interpreted as requiring common control or direction of the entities themselves (i.e. Drake and Kennedy Lodge) and, therefore, it is submitted that the question of whether the specific activities of the entities are carried on under common control or direction is not critical to the section 1(4) determination. The respondent Medox, also relying on the criteria set out in Walter's Lit hographing Company Limited, supra, argues that in the absence of common ownership, financial control or management of the corporations, there is no common control. Although conceding that the work to be performed by Medox will have to be integrated with the other work performed at Kennedy Lodge, it is submitted that this is inherent in any "contracting in" situation and that such integration falls well short of establishing common control and direction of the businesses. The J. H. Normick case, supra, is distinguished on the basis that the subcontractor in this case will not be wholly dependent in an economic sense and that the other party will not maintain defacto operational and economic control over the activities to be performed. The respondent submits that there are striking similarities between the relationship of the two entities in Charming Hostess, supra, and the relationship of the two entities in this case and asks the Board to make the same finding in this case. Complete Car Care Centre, supra is also commended to the Board. It is submitted that the Regulations under the Nursing Home Act are irrelevant to our determination and cannot be relied upon by the applicant/complainant in support of a finding of common control. Similarly, it is submitted that standards required of registered nurses by the College of Nurses of Ontario indicate that a registered nurse may delegate responsibilities to nurse's aides which would include delegation to or from the registered nurse employed as a supervisor by Medox. As regards the Board's discretion to issue a declaration under section 1(4), it is submitted that such discretion should not be exercised in favour of the union if for no other reason than because the union is attempting to use section 1(4) to avoid the consequences of article 2.03 of the collective agreement and to obtain the benefit of a prohibition against contracting out without having to make any concessions at the bargaining table.

36. The respondent Medox argues in response to the alleged violation of sections 64 and 66 of the Act that there is no evidence that Medox has violated section 66 of the Act or section 64 of the Act insofar as it may be alleged that it acted with an anti-union motive. Insofar as the applicant/complainant argues that the effect of the contracting out is enough to trigger the protections of section 64 of the Act, Medox maintains that there is no evidence that it has engaged in a conspiracy with Kennedy Lodge to defeat bargaining rights (of the type found in Plastics CMP Limited, [1982] OLRB Rep. May 726) as would allow the Board to make a finding of a section 64 violation against it. Medox commends Kennedy Lodge Nursing Home, supra, and Heritage Nursing Home Limited, supra, to the Board as setting out the proper approach to be taken in the case of contracting out for legitimate business reasons. Finally, it is submitted that Medox should not be considered as a "person acting on behalf of an employer" within the meaning of sections 64 and section 66 of the Act in circumstances where it is merely pursuing its own legitimate business interests without any knowledge whatsoever of improper motivation on the part of Kennedy Lodge.

37. By way of reply argument Medox points to the failure of the applicant/ complainant to have distinguished Kennedy Lodge Nursing Home, supra, and Heri­tage Nursing Home Limited, supra. Medox also points to the collective agreement between the union and Kennedy Lodge and maintains that acceptance of the union's argument would destroy the delicate balance of rights and obligations (as between Kennedy's obligation to pay the wage rates contained therein and its right to contract out). Within the meaning of the Westinghouse decision supra it is argued that the decision to contract out cannot be taken to have been made "to defeat legitimate collective bargaining aspirations" when the parties to the collective agreement and the employees covered by it have known all along, by virtue of article 2.03 of the collective agreement, that contracting out was a real possibility. In any event, it is submitted that Medox has considerable expertise so that the benefits accruing to Kennedy under the contract go beyond the mere saving of wages. The respondent Medox asks the Board to carefully read the International Wall Coverings case, supra, relied upon by the union especially the conclusion in that case that a non-motive approach to section 64 of the Act should be reserved for instances of clear mistake or for discipline clearly out of all proportion to the misconduct in issue. In any event, even if a balancing approach is adopted, it is the position of Medox that where a failure to contract out will result in bankruptcy and the loss of employment of all the employees of Kennedy Lodge and the loss of a place of residence for the residents, the balancing should be done in favour of the decision that was made.

38. Kennedy Lodge Limited Partnership appeared as a party and was repre­sented by separate counsel in these proceedings. The Board received from counsel for the limited partnership thorough and well reasoned submissions. However, other than for the few comments that follow, it is not necessary to detail the arguments made as, for the most part, they have been dealt with in the submissions of Kennedy Lodge and Medox. It is to be observed that Kennedy Lodge Limited Partnership relies on Diversey (Canada) Limited, [1978] OLRB Rep. Sept. 814 in support of the proposition that section 1(4) is not intended to bind independent or unrelated enter­prises. The respondent Kennedy Lodge Limited Partnership emphasizes that where, as in this case, the evidence establishes that the business entity will go into bankruptcy if it does not take a business decision to cut costs, it is acting in response to an economic crisis within the meaning of the Westinghouse decision, supra and therefore, it cannot be said that it is acting to avoid the trade union. It is submitted that if an employer is not permitted to contract out for reasons of economic survival, as distinct from an attempt to simply improve profits, the right of an employer to reasonably conduct his business means nothing. Finally, it is submitted in its reply argument that the Amplitrol Electronics Limited arbitration award relied upon by the union can and should be distinguished on the basis of Medox's different methods of supervision, training, timekeeping, pay methods, clothing and identification, discipline, record-keeping, hiring and the perception of the individuals themselves.

DECISION

39. It is our intention to determine firstly, if we are dealing with a contracting out as contemplated by article 2.03 of the collective agreement or whether the work in question will continue to be performed by employees of Kennedy Lodge such that the terms and conditions of the collective agreement will apply and any attempt to circumvent the seniority and wage provisions of the collective agreement in respect of the performance of this work will constitute a breach of section 50 of the Act and consequentially a breach of section 64 of the Act and thereby bring into play the remedial authority of the Board. It is our intention to then determine, in the alterna­tive, whether Kennedy Lodge and Medox will constitute related employers under the terms of the arrangement between them in respect of the activities carried on in connection with the provision of nursing care at Kennedy Lodge. If they are and the Board chooses to exercise its discretion to issue a section 1(4) declaration, the same result will obtain as would be the case if Kennedy Lodge was found to be the employer; that is, the collective agreement between Kennedy Lodge and the applicant/complain­ant trade union will apply and any attempt to circumvent the seniority and wage provisions in respect of the performance of this work will constitute a breach of sections 50 and 64 of the Act. It is only after having examined the structure of the arrangement that is to be put in place, both from the perspective of whether Kennedy Lodge remains as the employer and from the perspective of whether Kennedy Lodge will operate with Medox as a related employer, that we intend to examine the motivation behind the arrangement vis-a-vis the prohibitions in the Act against acting for anti-union reasons.

40. Article 2.03 of the collective agreement, the clause that gives Kennedy Lodge the right to contract out where it considers necessary, does not provide a complete answer to the legality of the actions contemplated by Kennedy Lodge in this case, as is argued by the respondents. In the face of the seniority, wage rate and recognition provisions of the collective agreement, it could never have been intended by the parties in agreeing to article 2.03 that Kennedy Lodge could rely on the clause

and at the same time remain as the employer of those contracted to perform bargaining unit work in place of the existing bargaining unit employees. Assuming no anti-union motivation, the clause enables Kennedy Lodge to contract to have work performed by the employees of another employer. It cannot be read as permitting Kennedy Lodge to enter into an arrangement under which the only change to its organization is that its unionized employees are replaced by non-union employees. The first question to be determined, therefore, is who will be the employer of the nurse's aides supplied by Medox?

41. Before proceeding further it is useful to establish the statutory basis upon which we make this inquiry. The applicant/complainant relies upon section 106(2) of the Act and upon section 50 in asking us to make the aforementioned inquiry in order to identify who will be the employer of the aides supplied by Medox. While the Board has not used section 106(2) of the Act to determine whether a person is an employee within the meaning of a recognition clause in a collective agreement, the Board has made it clear in a number of decisions that section 106(2) empowers it not only to decide whether a person is an employee within the meaning of the Act, but also whether a person is an employee of the employer who is a party to the application or complaint before it. (See Re Ontario Hydro, [1981] OLRB Rep. July 931 and the decisions referred to in paragraph 12 of that decision). Furthermore, although the Board has a long history of deferring to arbitration in matters of contract interpretation, the Board has, in recent years, as a result of its expanded remedial authority and policy responsibilities, refused to defer to arbitration where the alleged violation of the collective agreement would, if proven, constitute a repudiation of the collective agreement or involve, as well, violations of the Act. (See K Mart Limited, [1983] OLRB Rep. May 649, Nelson Quarry [1983] OLRB Rep. Sept. 1531 Dufferin Aggregates, [1983] OLRB Rep. July 1031.) In disposing of this type of case, therefore, the Board may rely on section 50 of the Act in addition to the unfair labour practice sections of the Act. (See Re Maple Leaf Taxi Limited, supra, Carroll Electric, supra, at page 1289.) Inherent in the Board's authority to determine if a party has breached a binding collective agreement contrary to section 50 of the Act is the authority to determine if certain persons are employees covered by that agreement.

42. The authority to identify the employer is also inherent in the Board's authority to define bargaining units and to measure union support in a certification application. In York Condominum Corporation, supra, a certification case, the Board isolated seven factors to assist it in determining which of two or more entities is the employer for the purposes of the Labour Relations Act. These are:

(1) The party exercising direction and control over the employees perform­ing the work.

(2) The party bearing the burden of remuneration.

(3) The party imposing discipline.

(4) The party hiring the employees.

(5) The party with the authority to dismiss the employees.

(6) The party which is perceived to be the employer by the employees.

(7) The existence of an intention to create the relationship of employer-employee.

The Board was careful not to rank these criteria but rather, made it clear that each must be considered and assessed on the particular facts of the case. There are a number of certification cases in which the Board has applied these criteria, or variations of them, in identifying the employer. (See Re Ralston Purina Canada Inc., supra, Sutton Place Hotel, supra, The Tower Company (1961) Ltd., supra, Templet Services, supra, and Welland County Roman Catholic Separate School Board, [1972] OLRB Rep. Oct. 884.) While in all of these cases, regardless of the outcome, the Board has attempted to weigh the relative importance of each factor having regard to all of the surrounding circumstances, the Board made it clear in Sutton Place, supra, that the object of the exercise is to identify, for labour relations purposes, the party exercising "fundamental control over the working lives and the working environment of those in dispute." The Board said in that case:

43. The weight to be accorded the various indicia of employer status set out in York Condominium cannot be assigned in a vacuum. When one of the factors is combined with another in the hands of one company, the Board may conclude that they accurately identify the employer, though while standing alone or in some other combination they may not. The significance of each indicator can only be ascertained through an appreciation of how they all fit together within the facts of each case. It is only then that the Board can decide which factors in the particular case most accurately reflect and identify the employer for collective bargaining purposes.

44. A particularly important question answerable through an evaluation of all of the factors set out in York Condominium is who exercises fundamen­tal control over the employees. In some cases control over hiring may reflect fundamental control. In other situations, reminiscent of a hiring hall, it may not. In some cases day-to-day supervision may suggest fundamental control, in others it may not. Similarly with the payment of wages: in the factual mix of some cases the payment of wages may, along with other factors, suggest who holds the fundamental control while in other cases it may be of minor significance. No single factor listed in York Condominium inevita­bly points to the possession of fundamental control. The Board's ultimate evaluation of who holds fundamental control in any particular fact situation, however, is generally the single most determinative question in identifying the employer. In a word, to find the seat of fundamental control is generally to find the employer for the purposes of the Labour Relations Act.

(See also Ford Motor Company of Canada, (1981) It L.A.C. (3d) 141 (McDowell).)

43. The Board's decision in K Mart, supra, is instructive for our purposes because in that case the Board had to determine if individuals who had been supplied to work in a K Mart warehouse by an agency were in fact employees of K Mart and, therefore, entitled to grieve under the collective agreement in effect between K Mart and the union and to be protected under the Act from reprisals for having exercised the right to grieve. In reviewing the cases that we have cited in the previous paragraph the Board, in that case, concluded that:

The cases have generally not assigned any particular order or priority to those factors, but rather have tended to indicate that the weight to be given to each factor must depend upon the facts of each case. However, the Board has tended to attach considerable significance to "overriding control" in determining which of two or more entities is the employer of certain persons. Moreover, the Board has consistently found that neither private arrangements as to who is the employer, nor administrative paymaster arrangements, are indicative of the true employer.

In determining that K Mart was the employer, the Board analyzed the factual context in the following terms:

In the present case the respondent exercises a high degree of control over the workers in question. The respondent's supervisors not only tell them what tasks they are to perform, but also direct them in the manner in which they are to be performed. It is the respondent which determines what hours will be worked by those workers at its premises, when they will take their breaks, and when they will eat lunch. Although the particular workers to be assigned to the respondent's premises are initially determined by the various employ­ment agencies as the respondent's agents, it is the respondent which makes the ultimate determination concerning whether an individual will be permit­ted to continue to work at the Centre or will be discontinued or replaced. Thus, the respondent exercises substantial control over those workers, simi­lar in many respects to the control which it exercises over regular full-time K Mart employees. Although the agencies serve as paymasters for K Mart in respect to the workers which they supply to the Centre, it is the respondent that bears the ultimate burden of their remuneration: as indicated above, after paying the workers, the agencies immediately invoice K Mart for each hour of work performed by them at the Centre. The evidence concerning imposition of discipline is of little assistance to the Board in resolving this matter since little or no disciplinary action is taken against any of the employees in question by either the respondent or the agencies. Instead of using any form of progressive discipline, the respondent simply removes any unsatisfactory agency worker from the Centre through a direction that the agency cease referring that person to the respondent's premises. That removal is tantamount to a discharge vis-a-vis the respondent, although the individual in question may thereafter be assigned by the agency to provide services to another client. Thus, the respondent clearly has the authority to direct that any of the employees in question cease working at its premises.

The Board went on to comment that perception and intention are not conclusive criteria where an employer has structured its affairs in a manner designed to avoid collective bargaining obligations in respect of a substantial number of individuals doing bargaining unit work on its premises. The Board also commented that because collective bargaining has an economic impact, "cost saving" is not, in and of itself, a valid defence to such a restructuring of the business.

44. The issue of who is the employer under a collective agreement where a purported subcontract arrangement is entered into has been extensively dealt with in grievance arbitration. The analysis and approach taken in the arbitration cases, because it has been made in the context of an ongoing collective bargaining relationship, is particularly relevant to the matter at hand. In Amplitrol Electronics Limited, supra, security guards were provided by an independent supplier to Amplitrol. The supplier paid the employees' wages, supervised them by periodic visits and relayed instructions to them from Amplitrol. In finding that Amplitrol was the employer Prof. Weiler looked to the following factors:

(a) the contract itself provided for a fixed hourly rate, with a relatively fixed mark-up for profit purpose;

(b) The equipment and premises used were those of Amplitrol.

(c) while the security guards were visited by the supplier's inspectors and reported to them, the job itself involved the application of certain standards prescribed by Amplitrol;

(d) there was no evidence of significant independent control function by the inspectors;

(e) if Amplitrol did not like the manner in which a routine was performed, it advised the inspector or employee involved, and if Amplitrol wanted a particular employee taken off the job, he was removed;

(f) the inspectors were not at all times on the premises, unlike the managerial employees of Amplitrol.

In response to Amplitrol's argument that there was no other way that the subcontractor could be retained, arbitrator Weiler reasoned as follows:

However, this contention misses the whole point and significance of the requirement and its tests. When an employer negotiates an agreement with a union, he accepts certain standards by which his employment relations will be governed. He is permitted to exclude certain work from the operation of these standards if he arranges to have it performed by men who are employed by another company. However, his obligation to respect the agreement in connection with his own employees cannot be avoided by the simple colourable device of saying that certain men are not his employees. These men must really be someone else's employees, not his own, and, to this end, the law has established certain tests for determining when the employment relations exists.

Hence, there is nothing incongruous about the Company being unable to achieve its subcontract in this case. It wants to have certain men working continuously on its premises, operating its equipment, under routine stan­dards or specific instructions which largely stem from its own supervision, and paid for out of a fund of hourly payments which is closely related to the hourly wages of these men. At the same time, it wants these men not to be considered its employees so that it need not respect the collective agreement it has freely negotiated and accepted. Unfortunately it cannot 'have its cake and eat it too'. It must make real organizational and opera­tional changes which are consistent with the actual performance of the work by another company or see itself become the actual employer of men the latter merely supplies. Up to now, the changes have been quite marginal and we must find that the present monitors have been employees of Ampli­trol. To use them instead of the grievors is to be in breach of the seniority provision and requires immediate restoration and compensation of the latter.

(emphasis added)

45. In Riverdale Hospital, (1974) 1974 CanLII 2341 (ON LA), 7 L.A.C. (2d) 40 (Schiff) registered nurses and registered nursing assistants were provided by an outside agency (Medox) to the Hospital. The facts in that case are set out at page 41 of the award as follows:

.The Hospital does not ask the agencies for any particular person by name; rather it orders them to send registered nurses and nursing assistants to fill stated numbers of shifts. Personnel who are sent in this way wear their own uniforms and exercise their professional skills gained through their previous professional education and experience. The Hospital does not directly remu­nerate them, nor has it purported to suspend or discharge any. On the other hand, the Hospital's senior supervisory staff evaluate the job performance of the nurses and assistants sent by the agencies and inform the agencies about who has proved satisfactory and who the Hospital will not accept again. As a result, certain nurses have not returned after a first experience but the agencies have sent others on a regular basis. While the agency personnel all supply their own uniforms, the same is true of nurses and nursing assistants the Hospital permanently employs. Moreover, and this is particularly important, nurses and nursing assistants sent by the agencies are integrated identically with their permanently-employed counterparts into the on-going, detailed routine of the Hospital for providing around-the-clock nursing care to the patients on the Hospital's premises and with the Hospital's facilities and equipment. Indeed, as far as the senior officials of the Hospital and the permanent nursing staff are concerned, once a nurse or nursing assistant arrives to work — be she a permanent employee or someone sent by an agency — she performs the nursing functions for which she has been trained subject always to the policies and procedures of the Hospital and to the supervision from the Hospital's head nurses and supervi­sors appropriate to her category.

The arbitrator, in concluding that the persons in dispute were employees of the Hospital, analyzed the relevant arbitral jurisprudence as follows:

As these awards reveal, in almost all arbitrations of grievances similar to that presented here, arbitrators have determined whether a person is the employee of the party-employer by weighing in the context of the particular situation the relative importance of four factors: the party-employer's con­trol over the person's performance of the job, the ownership of the tools used, who has the chance of profit from the work, and who bears the risk of loss. In many arbitrations the last two factors have been unimportant while the factor of "control" has been decisive. To weigh the significance of control arbitrators have assessed the degree of the party-employer's right to direct the person's job performance appropriate to the nature of the particular job and the person's skill. In many awards, the party-employer did not choose the person, did not pay him directly and did not purport to discipline him on the spot. Nevertheless, arbitrators defined the person as an employee if he performed the job with the party-employer's materials on the party-employer's premises with the party-employer exercising to a substantial degree the right to direct the job performance.

46. Similarly, in Regional Municipality of Waterloo, (1977) 1977 CanLII 2965 (ON LA), 16 L.A.C. (2d) 280 (Brandt), the arbitrator found that an individual referred to the Sunnyside Home for the Aged by an outside agency on an hourly rate basis to replace a bargaining unit employee, was an employee of the Home. The Board in that case concluded as follows:

It is clear that in the instant case all the elements of control which were present in the Riverdale Hospital case are also present here. Indeed the instant case is even stronger in that the sense in which the employer herein had the power to discipline is more direct than in the Riverdale Hospital case. As indicated above all that the employer herein need do if dissatisfied with someone supplied by the agency is to communicate that fact to the agency and the relationship would be terminated forthwith. In effect, the arrangement between the employer and the agency is one wherein the agency becomes the agent of the employer in regard to the termination of the services of unsatisfactory personnel. We therefore do not need to consid­er in this case the issue as to whether or not the element of control requires more than a mere power to issue daily work assignments and must extend to include a power to discipline and ultimately to discharge. Even on a strict view as to the meaning of "control" the test would, in this case, be met.

(See also Goodyear Tire and Rubber Company, supra, and Hydro Electric Power Commission of Ontario, (1971) 1971 CanLII 1913 (ON LA), 23 L.A.C. 111 (Weatherill) and Thompson House, (May 18, 1984), unreported, (P. Picher).)

47. In this case the respondents rely on the fact that Drake International and Medox, a division of Drake International, are wholly separate and independent entities from Kennedy Lodge and that it is Medox that screens and selects the persons in dispute, provides orientation, maintains job descriptions, will schedule, assign and supervise the work through the full-time Medox supervisor and, also through the same full-time Medox supervisor, will be responsible for the discipline of these persons. The respondents also rely on the fact that these persons will wear Medox name tags and will be paid by Medox on the basis of wage rates established by Medox. Having regard to these facts the respondents argue that Medox will be perceived to be the employer and will enjoy effective and fundamental control over the employment relationship and, therefore, should be found to be the employer.

48. On a one-dimensional analysis we might be persuaded to agree that Medox is the employer of these persons. However, when we place the proposed arrangement in context and contrast, from the perspective of the Kennedy Lodge organization, what has been with what is intended to be, we are forced to a different conclusion. Where there has been a pre-existing collective bargaining relationship, as in this case, and where, also as in this case, the employer party to that relationship has chosen to utilize persons who are ostensibly non-bargaining unit employees to perform the same functions at the same work stations as had previously been performed by bargaining unit employees, we must also assess the nature of the arrangement put in place to accomplish this result from the perspective of the employer party to the collective agreement. It is the employer party to the collective agreement that relies on his right to contract out part of his organization and we must determine if this is really what he has done.

49. The work in dispute is hands-on nursing care which is the core activity of Kennedy Lodge and has heretofore been performed by nurse's aides employed by Kennedy Lodge under its collective agreement with the union. Where the nurse's aides form a part of the health care team (see regulations under the Nursing Home Act and the Kennedy Lodge job descriptions) and where their function is to provide hands-on nursing care in the form of bathing, grooming, feeding, walking etc., we do not accept that a meaningful differentiation can be made between control over nursing care generally and control over the employment of the nurse's aides who provide an important part of this nursing care, as it appears has been attempted in the contract between Medox and Kennedy Lodge. The task that falls to the Board is to assess the substance of the arrangement, as distinct from its form, as it will be carried out within the Kennedy Lodge premises and against the backdrop of the existing collective bargaining relationship.

50. The aides employed by Kennedy Lodge have been subject to the policies and proce­dures laid down by Kennedy Lodge in the running of its Home and have been directly supervised by charge nurses (on a 4.5 to 1 ratio) in the employ of Kennedy Lodge. On the evidence, the Kennedy Lodge organization, including all of the charge nurses, the nursing supervisors and the Director of Nursing, will remain intact except for the replacement of the 92 nurse's aides who are presently employed by 92 nurse's aides from outside and a single on-site supervisor. Furthermore, on the evidence, Kennedy Lodge will continue to establish policies and procedures under which nursing care is provided in the Home — the same resident care policies and procedures under which the aides provided by Medox will work. Kennedy Lodge, in compliance with the Nursing Homes Act, will continue to determine the number of aides required within the Home. Finally, on the evidence of Messrs. Daynes and Butler it is clear that Kennedy Lodge will continue to enjoy the ultimate authority with respect to having any unsatisfactory aide removed from Kennedy Lodge. The authority of Medox to reassign an aide found unsatisfactory by Kennedy Lodge is irrelevant to our determination. The aides supplied by Medox will continue to be under the direct supervision of the Kennedy Lodge charge nurse who will continue to make reports, prepare the care plans for each patient and monitor the day-to-day work of the aides. Indeed, it is acknowledged that it is the charge nurses who will report any occurrences involving a Medox aide to the Medox supervisor. Furthermore, under regulations 60(1)(a) and (b) the Director of Nurses, who is a Kennedy Lodge employee, is responsible for "the organiza­tion, direction and evaluation of nursing care" and "directing the work of the nursing staff in the nursing home". In the context of an arrangement under which the Kennedy Lodge organization will remain intact, under which Kennedy Lodge, through its charge nurses, will continue to provide direct supervision to the aides and will maintain overriding authority in the form of its power to make the policies and procedures under which the aides will work and to have any unsatisfactory aide removed from Kennedy Lodge, we do not attach a great deal of significance to the role played by the Medox supervisor. Indeed, it is not physically possible for a single person to provide direct hands-on supervision over the 92 aides working in the home and, as we have observed, under the regulations ultimate authority rests with the Kennedy Lodge Director of Nursing. Finally, under the terms of an arrangement that requires payment by Kennedy Lodge on the basis of the number of hours worked by the aides in the Home, we must conclude that Kennedy Lodge continues to bear the burden of the remuneration in respect of the aides supplied by Medox.

51. Applying the primary test developed in both the Board and the arbitral jurisprudence, and relying on substance over form, we are satisfied that Kennedy Lodge will maintain "fundamental control" over the employment of the aides working at the Kennedy Lodge Nursing Home. Indeed, given the nature of Kennedy Lodge's business, the care of the elderly, and the regulations which govern it, it would be difficult to conceive of circumstances under which the employment of persons providing any part of the hands-on care of patients carried on in the Home would not be under the fundamental control of the owner of the Home. The fact that many of the functions performed by the nurse's aides are routine in nature does not detract from the importance to be attached to the identification of who provides direct supervision of and maintains ultimate authority over those who provide this hands-on care. In this case the evidence points conclusively to Kennedy Lodge and accordingly, we hereby find (in contrast to the finding made in Re Preston Springs Gardens Retirement Home and Health Office and Professional Employees Local 206 (June 5, 1984), unreported, (Lerner)) that Kennedy Lodge would be the employer of these aides and that the arrangement with Medox is not a contracting out within the meaning of article 2.03 of the collective agreement. In these circumstances an attempt to employ outside aides in preference to those with established seniority rights under the subsisting collective agreement with the applicant/complainant trade union, would constitute a serious breach of the collective agreement and of sections 50 and 64 of the Act and we hereby so find.

52. If we are somehow wrong in focusing on the Kennedy Lodge organization and in concluding that the arrangement between Kennedy Lodge and Medox will not result in a "contracting out" within the meaning of the collective agreement and that Kennedy Lodge will exercise "fundamental control" over and will continue to be the employer of the aides working on its premises, we are satisfied in the alternative that Kennedy Lodge and Medox, a division of Drake International, are related employers within the meaning of section 1(4) of the Act.

53. The purpose of section 1(4) of the Act is aptly summarized in Brant Erecting and Hoisting Limited, [1980] OLRB Rep. July 945 as follows:

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 entities 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.

We reject the suggestion that the section must be interpreted as requiring common control or direction of the corporate entities (Drake and Kennedy Lodge in this case) and that the question of whether the specific activities carried on by these entities are under common control or direction is not critical to a section 1(4) determination. The plain language of the section, which speaks in terms of "activities or businesses" evidences a contrary legislative intention and furthermore, in that it is specific activities that give rise to employment, the purpose of the section would not be well served by such an interpretation. The Board made it clear in J. H. Normick Inc., supra, that the common control and direction referred to in the section relate to activities as well as businesses and that functional interdependence as well as corporate interrelationships must be considered. The Board stated in that case:

14. The section extends to cover not only related business but related activities as well. The Board, therefore, is not restricted to considering corporate interrelationships but must also look to functional interdepen­dence in determining if two or more entities are related within the meaning of the section. The second pre-condition to the issuance of a declaration is that the Board find that the related entities are 'under common control or direction'. In so far as 'direction' refers to the impact of personal or corporate authority, the Board must also look to whatever contractual arrangements exist and to the economic reality in deciding if the related activities or businesses are under common 'control'

(emphasis added)

and went on to comment:

21. Section 1(4) recognizes that the business activities which give rise to the employer-employee relationships regulated by the Act, can be carried on through a variety of legal vehicles or arrangements; and it may not make 'industrial relations sense' to allow the form of such arrangements to dictate, and possibly fragment, the collective bargaining structure. In order to have orderly and stable collective bargaining, the bargaining structure must have some permanence and accord with underlying economic and industrial relations realities. Where two employers are nominally independent but are functionally and economically integrated, the essential community of inter­est between them and the employees employed by one or both of them may make it appropriate to treat them as one employer for some or all collective bargaining purposes. This is not to say, however, that common economic control of related business activities will automatically cause the Board to issue a section 1(4) declaration. The Board having satisfied itself that the businesses or activities before it are under common control or direction, is given a discretion as to whether or not to issue a section 1(4) declaration. If the scheme of the Act would be better served or the collective bargaining structures placed on a sounder footing by refusing to make a section 1(4) declaration the Board will exercise its discretion accordingly. (See Zaph Construction Ltd. [1976] OLRB Rep. Nov. 741 and ElIwall and Sons Construction Limited [1978] OLRB Rep. June 535.) In view of the broad language of the section which extends to cover such a wide range of business relationships, the labour relations considerations which govern the exercise of the Board's discretion are paramount in determining whether the Board should declare two or more businesses or activities to be one employer for purposes of the Labour Relations Act.

22. The respondents rely on Charming Hostess, supra and Complete Car Care Centre, supra, two cases in which the Board dealt with subcontracting arrangements under section 1(4) of the Act. In Charming Hostess Molson's Brewery contracted with two companies to staff and operate a hospitality suite on the brewery premises. There was no other connection between Molson's and the subcontractors. The subcontractor who undertook to provide the food service had full responsibility for the employment and supervision of its personnel. Molson's paid the subcontractors a management fee together with a sum based on the number of hours worked by the subcontractor's employees and provided the kitchen facilities and equipment. The contract was for one year terminable on notice. The Board had this to say:

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. In the Great Atlantic and Pacific Company of Canada Limited, [1981] OLRB Rep. March 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 or 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.

The union argues that the language of Section 1(4) is broad enough to cover a variety of sub-contracting arrangements — especially those which do not involve "contracting out", but which might more appropriately be described as "contracting in, or labour only" sub-contracting. Where A enters into a relationship with B whereby B comes into A's premises to perform functions to A's specifications formerly undertaken by A's own employees there will inevitably be what the Board in Metropolitan Parking Inc., [1979] OLRB Rep. Dec. 1193] described as a "symbiotic relationship" between the two business entities. The activities carried on by the two firms will be complementary. They will obviously and necessarily be "related" and efficiency will usually require that there be some degree of coordina­tion, common control or direction. That is the applicant's characterization of the situation in the instant case.

The Board accepts that there may be sub-contracting relationships which can be characterized as a form of joint venture and could fall within the ambit of Section 1(4). The Board adverted to that possibility in Ontario 474619 Ltd., [[1982] OLRB Rep. Oct. 1452]. 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 sub-contractor is effectively dominated by the purchaser and it appears that the notion of a sub-contract is introduced not to provide independent managerial and employee skills but rather a separate "non-union" corporate vehicle which permits the purchaser to have the samework 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 A. Foley Limited, [1980] OLRB Rep. Apr. 436, and J. H. Normick Inc., [1979] OLRB Rep. Dec. 1176, even though there was no direct financial ownership of the sub-contractor in either case.

(emphasis added)

In finding that section 1(4) of the Act did not apply, the Board concluded:

.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 Molsons is only one. Both businesses were in operation long before the Molsons 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 Molsons. We do not think the situation here falls within the intended ambit of Section 1(4).

55. Similarly, in Re Complete Car Care Centre, supra, the issue before the Board was whether an automobile dealership and its subcontractor for the washing and rustproofing of cars should be deemed to be one employer for purposes of the Act. There was no common ownership or management. The subcontractor leased part of the dealer's premises for its operations and received about 60% of its business from the dealer. However, the work was performed at a fixed price and the subcontractor would decide how the work was to be performed and by whom and supervise its own employees in the performance of the work. In deciding that section 1(4) did not apply the Board found:

56. In assessing the circumstances of the case before us, we consider it noteworthy that there is apparently an accepted practice in the automotive dealership field of contracting out the washing and rustproofing of cars. One can infer from this that the work involved is not viewed as being so integral or "core” to the operation of a dealership that the management of the dealership must keep direct control over the performance of the work. This is demonstrated by the practice of Central Chev. Olds. The firm contracts out the work to Complete Car Care at a fixed price, with Complete Car Care deciding how the work is to be performed and by whom. Complete Car Care supervises and pays its own employees. This is not a case where it can reasonably be said that Central Chev. Olds. is the true employer of the individuals performing the work, or that the two firms are being carried on under joint control or direction. In addition, Complete Car Care is not under the type of domination of Central Chev. Olds as would justify a section 1(4) declaration. Fully 40 per cent of Complete Car Care's work comes from other dealerships and from the London Public Utilities Commission, and the firm is currently seeking to expand its work from sources other than Central Chev. Olds. In the result, we do not believe that this is the type of situation in which section 1(4) is applicable.

57. In contrast to the two cases referred to above, the activities with which we are concerned in this case form part of the core activity of Kennedy Lodge. It is one thing to contract out the performance of peripheral activities (a hospitality suite where brewing is the core activity or the washing and rustproofing of automobiles where the selling of cars is the core activity) over which fundamental control can be easily relinquished, as it was in those cases. It is much more difficult to relinquish fundamental control over the core activities of the business. If we are somehow mistaken in our conclusion that Kennedy Lodge retained fundamental control over the nursing activities carried out by the aides, then, at the very least, the evidence establishes that Kennedy Lodge and Medox share control over these activities, as they are carried on as part of Kennedy Lodge's business. The contract between Kennedy and Medox contemplates that there will be a significant degree of common control and direction, and, in addition, the policies and procedures laid down by Kennedy, the ongoing consultation between Kennedy and Medox and the conditions laid down in the regulations to the Nursing Home Act leave no doubt that the activity of Medox in supplying nursing aides to Kennedy Lodge and the activity of Kennedy Lodge in providing nursing care for its residents are related activities within the meaning of section 1(4) of the Act and are under common control within the meaning of the same section.

58. In deciding whether or not to exercise our discretion under section 1(4) of the Act, we are guided by the words of the Board in Re Rivard Mechanical, supra:

59. The first point to be commented on, in the above facts, is the extent of the emphasis placed by the respondents on the fact that what occurred here arose solely as a matter of economic survival. While the Board is not insensitive to such problems, it must be stated unequivocally that the Labour Relations Ac; nevertheless does not contemplate or permit the unilateral withdrawal by one party from its obligations under the Act, or the achieve­ment of this end simply by choosing to carry on the same business in a different form. Indeed, the provisions of section 1(4) in particular were designed to eliminate such action. While the Board is given an important measure of discretion under section 1(4), to exercise that discretion on the basis that an employer party was unable to fulfill its legal obligations on a competitive basis would undermine the scheme of the Act, and the very provisions of section 1(4) itself. Counsel for Rivard Mechanical argues: 'There is not intent to interfere with the union but economic realities require that they must maintain a non-union operation'. Clearly nothing is more fundamentally destructive of a union's rights and interests than operating non-union, and 'economic realities' simply cannot be used to justify this.

The evidence supports the conclusion that the arrangement with Medox was entered into for no other reason than to allow Kennedy to replace its unionized employees with non-union employees and thereby to extricate itself from its collective bargaining obligations in respect of its aides and to thereby avoid having to pay the wages and benefits under the collective agreement. Indeed Mr. Daynes acknowledged as much. In these circumstances, a section 1(4) declaration is in order and accordingly, we hereby declare that Kennedy Lodge and Medox, a division of Drake International, are related employers within the meaning of the Act in respect of the activities carried on by the nursing aides at the Kennedy Lodge Nursing Home over which they share common control. The employees performing these activities, therefore, are covered by the collective agreement between Kennedy Lodge and the applicant/complainant trade union and Kennedy Lodge and Medox are bound to it in respect of the performance of the work in question at Kennedy Lodge. While we are sympathetic to the financial difficulties faced by Kennedy Lodge, (although we do not agree that a financial crisis exists when the return to investors falls below 14%) the answer does not lie in a unilateral withdrawal from its collective bargaining obligations in respect of the 92 nurse's aides which it has heretofore employed.

58. Having determined that Kennedy Lodge will be the employer of the aides supplied by Medox, or alternatively that Kennedy Lodge and Medox, a division of Drake International, are related employers within the meaning of section 1(4) of the Act in respect of these activities, we do not have to go any further. However, we are of the view that some comment pertaining to the legality of the subcontracting arrangement that is the subject of this decision vis-a-vis the unfair labour practice provisions of the Act would be of assistance to the parties in structuring their affairs and to the nursing home industry generally where recent decisions to subcontract have generated a great deal of union/management friction.

59. We accept that Kennedy Lodge faces a serious financial crisis. Regardless of whether it can be said that this crisis is of Kennedy Lodge's own making, and in this regard we make no comment, the financial difficulties facing Kennedy Lodge are real and they are pressing. When reference is had to the size of the retroactive wage increases which were a cause of concern to Daynes and Northey immediately before the deal to purchase Kennedy Lodge was closed, to the size of the actual and projected operating losses facing the Home, to the projected savings in wage costs that would result from the subcontract, to the absence of any technological or organizational benefits accruing from the subcontract and indeed from the evidence of Mr. Daynes himself, there can be no doubt that the primary purpose of the arrangement, as we have found, is to allow Kennedy Lodge to extricate itself from the wage rate and benefit provisions of the collective agreement as they apply to nurse's aides and to thereby improve the financial position of the home. It is to be observed that although Kennedy engaged the union in discussion with respect to sick leave abuse, at no time did Kennedy advise the union that it needed additional relief in order to avoid insolvency.

60. The Board made reference to the inevitable economic impact of collective bargaining and to the prohibition against an employer acting for no other reason than to get out from under his legally imposed collective bargaining obligations in Westinghouse, supra. The Board said:

61. The purpose of the Labour Relations Act is to provide a statutory framework within which employees are encouraged to join together and bargain collectively with their employer. The underlying assumption is that employees who bargain collectively are on a more equal footing with their employer than unorganized employees and have a greater say in determining their terms and conditions of employment. It is axiomatic, therefore, that collective bargaining as established under the Act has an economic impact in terms of both the price of labour and the scope of the employer's unilateral authority. Under our Act the employees' share of the economic pie and the scope of management's authority vis-a-vis employee relations must be deter­mined at the bargaining table and against the backdrop of possible economic sanctions by either side. An employer whose employees have decided to bargain collectively cannot escape his obligations under the Labour Rela­tions Act and any decision taken to avoid these obligations or to defeat legitimate collective bargaining aspirations of his employees is in violation of the Act. Under our statute accommodation is sought at the bargaining table. An employer who contracts out his work, relocates or closes his plant or takes any other major business decision to avoid having to deal with his employees collectively through a trade union or to avoid the possibility, in the abstract, of being subject to economic sanctions is guilty of an unfair labour practice and the Board has so found in a number of cases including Academy of Medicine, [[1972] OLRB Rep. Dec. 783], Humber College, supra, and Consolidated Sand and Gravel, [[1978] OLRB Rep. March 264].

Insofar as Kennedy Lodge, supra and Heritage Nursing Home, supra, may be read as standing for the proposition that so long as an employer can point to cost savings in justifying the business decision he has made, it cannot be found that he has breached the Act, we disagree.

61. 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. 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.

62. Notwithstanding these perceptions, sections 64 and 66 of the Act contain specific prohibitions against acting for anti-union reasons that must be applied having regard to the underlying purpose of the Act. Given, on the one hand, the intended economic effect of collective bargaining and the clear prohibition against terminating or otherwise interfering with the employment opportunities of employees because they have chosen to bargain collectively, and, on the other hand, the freedom of an employer under section 77 of the Act to suspend or discontinue any part of his operation for cause in order to maintain or improve the competitiveness of the business, the Board is faced with a difficult task in ascertaining the true motive of the employer in the subcontracting cases. This is so because neither the reduction in costs nor the elimination of bargaining unit jobs in and of themselves point conclusively to anti-union motivation. It is to be observed as well that it is not likely that there will often be direct evidence of anti-union motivation in these cases. The Board therefore, will usually be required to draw inferences from the evidence as to true or real motive.

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.

64. It does not take a great deal of insight to recognize that it may be very difficult for an employer party to a collective bargaining relationship to relinquish control and thereby avoid having the Board draw a rebuttable inference that he has acted for anti-union motives where he contracts to have a core function or functions performed on his premises (i.e. "contracting in"). On the other hand, it will be less difficult for an employer to relinquish control and thereby avoid having the Board draw a rebuttable inference that he has breached the Act where he contracts to have peripheral functions (such as janitorial, security, cafeteria etc.) performed on his premises by a contractor. These peripheral functions, in contrast to the core functions of the business, are less critical to the successful running of the employer's business so that the employer may be more willing and is certainly in a better position to relinquish control over them. Similarly, it will be less difficult for an employer to relinquish control and thereby avoid having the Board draw a rebuttable inference that he has breached the Act where he contracts to have core functions performed off premises (i.e. "contracting out") utilizing the subcontractor's organization, capital, technology, and managerial expertise. In this latter situation the employer usually relinquishes control over the performance of the work and the employment relations of those who perform it so that it cannot readily be found, in the absence of something more, that the employer has simply replaced his bargaining unit employees with non-bargaining unit employees in an attempt to avoid his collective bargaining obligations.

65. In this case Kennedy Lodge has chosen to have a core function performed on its premises by a subcontractor with the resultant termination of a large number of bargaining unit employees. There can be no dispute that the provision of hands-on nursing care is a core function of Kennedy Lodge's business. We have found on an extensive analysis of the evidence that Kennedy Lodge will not relinquish control over the work or the employment relations of those who will perform it. That analysis resulted in a finding that in reality Kennedy Lodge will continue to be the employer and indeed, as is obvious, there is a direct relationship between finding that those who perform the work under a subcontract are the employees of the employer and the drawing of an adverse inference as to the motive of the employer in entering into the arrangement which he has. Notwithstanding the very substantial cost-saving that would accrue to Kennedy Lodge under the terms of its arrangement with Medox, Kennedy Lodge must be presumed to have intended the consequences of its actions and in the absence of any evidence to suggest the contrary, we must draw an adverse inference as to motive and find that Kennedy Lodge terminated its bargaining unit employees in breach of sections 64 and 66 of the Act.

66. Finally, in International Wallcoverings, 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.

67. Where then does this leave Kennedy Lodge in dealing with its financial difficulties? If the wage rates in the collective agreement are preceived as the root cause of an employer's financial difficulties it is open to the employer to enter into full and open discussions (which did not take place in this case) with the union in an attempt to obtain some relief. While the union does not share the employer's goal of maximizing profit and may well dispute that the provision of a 14% return to investors is a priority, it does have a very real interest in preserving the employment of its members through the continued operation of the business. It is also open to the employer to wait until the expiry of the agreement and to then press for relief in bargaining with the trade union. What the employer cannot do is replace his bargaining unit employees with non-union employees because they have or might exercise rights under the Act.

68. The Legislature in its wisdom has decided that the interest of society generally to uninterrupted service in the province's nursing homes supercedes the right of the employees working in these homes to strike and the right of the owners of these homes to lockout in pursuit of their respective collective bargaining objectives. The final method of dispute resolution in the nursing home industry is interest arbitration. An employer in this industry, therefore, does not have the power to unilaterally force agreement of terms and conditions that are in his best interest. Instead the employer must make an open and reasoned presentation to an arbitrator who has the ultimate authority in this regard. Where, in the public interest, the element of ultimate self-determination is removed from the collective bargaining process and where, at the same time, funding is largely from the public purse, a realistic assessment of the impact of these interest arbitration awards should be made in determining the level of funding required to operate. However, notwithstanding the suspension of the right to strike or lockout, there can be no dispute that the employees who work in these homes and have chosen to bargain collectively are entitled to the same protections under the Labour Relations Act as any other employees. We reiterate, therefore, that under the Labour Relations Act an employer cannot replace his bargaining unit employees because they have or might exercise rights under the Act, as Kennedy Lodge has done in this case.

REMEDIAL ORDER

69. Having regard to all of the foregoing, we hereby declare that under the terms of the arrangement between Kennedy Lodge and Medox —

(i) Kennedy Lodge will continue to be the employer of the aides working within the Home, whether or not supplied by Medox.

(ii) Any attempt to utilize the persons supplied by Medox in this capacity in place of the aides presently employed by Kennedy Lodge will consti­tute a breach of the collective agreement between Kennedy Lodge and the applicant/complainant trade union, which continues in full force and effect, and consequently a breach of sections 50 and 64 of the Act.

Finally, we hereby declare that the arrangement between Kennedy Lodge and Medox is in breach of sections 64 and 66 of the Act.

DECISION OF BOARD MEMBER J. WILSON;

1. The union has come before the Board to seek relief for the loss of jobs caused by Kennedy Lodge trying to reduce its costs in order to remain in business and provide a reasonable profit to its shareholders. The union's complaint and application raise the fundamental labour relations problem of an employer reducing its costs by taking actions that will have a devastating impact on its employees in a bargaining unit represented by a union. In assessing whether the conduct in this case entitles the Board to provide a remedy to the union the Board has to resolve three issues:

(i) Has the collective agreement been violated by Kennedy Lodge contract­ing with Medox to provide much of the services that it had previously done with its own bargaining unit employees?

(ii) Does the relationship between Medox and Kennedy Lodge give rise to a declaration by the Board under section 1(4) of the Act that they are one employer?

(iii) Does subcontracting to reduce the level of costs which exists primarily because employees have engaged in collective bargaining violate the Labour Relations Act?

2. Section 50 of the Act, which is relied upon by the union, provides in part:

A collective agreement is... binding upon the employer and upon the trade union that is a party to the agreement ... and upon the employees in the bargaining unit defined in the agreement.

The entire collective agreement is binding on the parties. While the collective agreement between Kennedy Lodge and the union contains many provisions that protect employees, the agreement does not purport to insulate the employees from the consequences of management initiatives that are carried out in response to financial difficulties. Sections 2.03 and 6.01(d) of the collective agreement state:

Article 2.03, No Contracting Out

Where the employer finds it necessary to contract out work performed by the bargaining unit, and where such contracting out results in a layoff of employees, the employer undertakes to meet with the union no less than thirty days in advance of such layoff to consider what might be done to minimize the adverse affects upon the employees concerned.

Article 6, Management Rights

6.01 The union acknowledges that all management rights and prerogatives are vested exclusively with the employer and without limiting the generality of the foregoing it is the exclusive function of the employer:

(d) to have the right to plan, direct and control the work of the employees and the operations of the Nursing Centre. This includes the right to introduce new and improved methods, facilities, equipment and to control the amount of supervision necessary, combining or splitting up of departments, work schedules and the increase or reduction personnel in any particular area or on the whole.

[emphasis added]

The rights of the union and the obligation of the employer with respect to the subcontracting of work are spelled out in the agreement. The agreement requires the employer to meet with the union at least 30 days prior to a layoff caused by the subcontracting of bargaining unit work. It does not prohibit Kennedy Lodge from subcontracting; indeed, sections 2:03 and 6:01(d), when read together, clearly contemplate that Kennedy Lodge might eliminate bargain­ing unit jobs by subcontracting a large portion or all of the work performed by bargaining unit employees. This Board had previously come to this same conclusion in a case between the same parties. In Kennedy Lodge Nursing Home, [1981] OLRB Rep. Oct. 1454 the Board wrote:

This article (6) together with article 2, headed "Scope and Recognition" are the major clauses embodying the trade-offs arrived at between manage­ment rights, union rights and employee rights .

The Board went on to conclude in paragraph 26:

In our view, article 6 is sufficiently broad to give the respondent the right to contract out work and there is no express language placing any limits on such right. That being so, the complainant cannot now be heard to say that such contracting out strikes at or delimits rights of the union's recogni­tion.

[emphasis added]

3. In my view that result is not a startling one. There are many industries where the services required by an employer can be provided by subcontractors in accordance with the employer's specifications on a lump sum firm price basis or on a unit price basis. The construction industry is probably the prime example where a general contractor can subcontract all the work to specialty contractors and supervise an entire project with one on-site superin­tendent. Municipalities will often have subcontractors provide services, which may only be a matter of labour and supervision that could be performed by their own employees.

4. Where a union is fearful of job loss through subcontracting, it should protect itself by attempting to negotiate subcontracting provisions into a collective agreement. In this case the union obtained the right to discuss the adverse impact of subcontracting with the employer. The right to discuss the impact of subcontracting implies the existence of the right to subcon­tract. Kennedy Lodge went even further than required by raising the issue of the cost of sick leave payments and the need to reduce that cost some seven months before the decision was made to subcontract work. No resolution of the sick leave pay issue was forthcoming over that period. In his testimony about what transpired over those months, Mr. Laliberte was most evasive and, in my view, his evidence was not credible. In the light of the union's reluctance to address itself to this particular issue and its failure to appreciate that Kennedy Lodge was in financial difficulties, it is not surprising that Kennedy Lodge's decision to subcontract was made, as envisioned by the collective agreement.

5. I agree with the majority that the collective agreement contemplates a "bonafide" subcontracting of work, not the mere replacement of bargaining unit employees by other employees willing to work for less than what the agreement provides. However, I believe that such a bonafide subcontracting has taken place. Medox will exercise the day-to-day supervision of its employees to ensure that they perform to the standards prescribed by Kennedy Lodge which, to a very great degree, are set by the Government under the Nursing Home Act and Regulations. It seems to me that all Kennedy Lodge is concerned with in its subcontracting is that the standards and conditions it prescribes and enforces through its employees are met by the employees of Medox. Kennedy Lodge is not concerned with the identity of the employees performing the work, their experience, hours or vacation schedules. It is Medox which hires, trains, monitors, and pays them. Their hourly rate is set by Medox which is also responsible for the costs associated with employing employees, i.e. income tax, U.I.C. and C.P.P. remit­tances, Workers' Compensation Board premiums, and the maintenance of the payroll and work records required under the Employment Standards Act and Nursing Home Act. The ultimate disciplinary authority rests with Medox and not with Kennedy Lodge. In my opinion, Kennedy Lodge does not become the employer of the employees of Medox merely because it sets certain standards of performance which must be met. Certainly it is open to a contractor to stipulate the type and quality of service it expects from a subcontractor without becoming the employer of the employees hired by the subcontractor to do the work required. Therefore, I believe that Medox, on the facts as found by the majority, is the employer of the employees in question, and that the subcontracting arrangement is permitted by the collective agreement between Kennedy Lodge and the union.

6. The union also asks the Board to invoke section 1(4) of the Act to declare Kennedy Lodge and Medox one employer. It is conceded that they are separate corporate entities operating at arm's length. While the activities which they carry out are related, I do not think that those activities are carried out under common control or direction. The primary purpose of section 1(4) is to preserve for bargaining unit employees and their unions their bargaining and collective agreement rights in the face of corporate and business transactions which change the legal, but not the actual identity of the employer. Finding two employers related is relatively easy when the two employers are not at arm's length in their relationship. However, in the case of two pre-existing, entirely separate businesses, the Board is, quite properly, more reluctant to find that the two employers are related for purposes of the Labour Relations Act. In the Charming Hostess and Complete Car Care Centre cases a section 1(4) declaration was refused, but was granted in J. H. Normick. In my view, those decisions, which deal with section 1(4) proceedings arising out of a subcontracting relationship, can stand together because they rest on the degree of control over the labour relations of the subcontractor. The mere fact that a contractor stipulates the level and quality of service to be provided and exercises "control" over the subcontractor to the extent that the subcontract may be cancelled if the stipulated levels of service are not maintained is not, in my opinion, the kind of direction or control contemplated by section 1(4). That section is only concerned with common control or direction over employers' labour relations, and not necessarily with control and direction of the methods used by a subcontractor to perform the services required under a subcontract. In my opinion, the control that Kennedy Lodge exercises over Medox relates to the quality and level of service provided. It has no control over the labour relations of the Medox employees. For that reason, I do not believe that a section 1(4) declaration is warranted.

7. Turning finally to the unfair labour practice aspect of this matter, since I find no violation of the collective agreement, I would dismiss the complaint as it relates to section 50. I agree with the majority's analysis of sections 64 and 66 as they relate to subcontracting to the extent that an employer that merely substitutes its own unionized employees with non-union employees in order to avoid its collective bargaining obligations is in violation of the Act. However, the Labour Relations Act does not guarantee that unionized employees will continue to hold jobs with their employer as long as their employer remains in business. An employer is entitled to try and remain competitive and receive a fair return on investment. Where the costs associated with the exercise of collective bargaining rights cause an employer to become uncompetitive or to operate at a loss, that employer must look at ways to reduce costs within the framework of the Labour Relations Act. Bona fide subcontracting to reduce costs does not give rise to an anti-union inference. Employees and their unions must be as sensitive to these harsh economic realities as employers are. Demands may be made of an employer, which, if accepted, may eventually render the employer uncompetitive, or the business unprofitable. In those circumstances, an employer's response in order to remain in business and provide jobs must be the reducing of costs. It may be unfortunate if cost reduction adversely affects employees, but so long as the impact on the employees is the consequence, and not the purpose of the employer's action, no violation of the Act exists. In my view, there must be direct evidence of employer anti-union motive, and not simply evidence that the wages of the subcontractors' employees are lower than what was paid previously by the employer to sustain a finding that subcontracting violates the Labour Relations Act.

8. It has been observed in the majority decision that Kennedy Lodge faces a serious financial crisis. It is not alone. Many other nursing homes, some presently before the Board, are in the same predicament. Some of them may go bankrupt. Some will keep their heads above water because they have other sources of income, e.g. a retirement home as an adjunct to the nursing home. This problem is not new but it has been exacerbated in the past few years. The reasons are twofold:

1. The funding of the nursing homes by the Ministry of Health has been held within guidelines set by the Province that have imposed severe financial problems on the industry.

2. As a result of interest arbitrations under the Hospital Labour Disputes Arbitration Act, wages and benefits for the employees have risen at a rate that bears no resemblance to rates allowed by the Ministry. As a result, the squeeze has come on the nursing homes and consequently they have looked at cost -conserving measures.

9. It must be appreciated also that an enterprise like a nursing home is quite labour-intensive. It is apparent that nursing home patients in general need little care at the start but that as time passes and they move into a requirement for greater care, then "intermediate care" gives way to "extended care" which is much more costly. This is evidenced by some nursing homes requiring R.N.A.'s rather than N.A.'s in the "heavy care" areas. A greater problem arises when the "extended care" patient requires care which really falls into the category of "chronic care

10. It would seem that answers are necessary if the nursing home industry is not to wind up in complete chaos. And as an aside, municipal control of such services as against the private nursing home does not seem to be a viable answer; they are in trouble too as witness the recent arbitration at Thompson House in Don Mills. The union members having achieved great gains over the last six years must be prepared to curb their ambitions or risk losing their places of employment. The nursing homes' administrators need to curb expenditures and live within their budgets. That may be difficult in view of their basic dedication to the welfare of the residents but it must be attempted. In future negotiations between union and management there must be a realistic attempt to arrive at workable agreements. The use of interest arbitration to achieve certain desired results is a poor substitute for collective agreements reached through negotia­tions.

11. The normal constraints on negotiations conducted under the Labour Relations Act are not as effective in this industry because the parties are subject to the Hospital Labour Disputes Arbitration Act. If the parties cannot come to an agreement, then resort is had to arbitration, not strike or lockout. Furthermore, these employers' revenues are strictly controlled by the Ministry of Health. They are faced with both revenues and wage costs that are beyond their control. In order to continue in business, a reduction in costs had to be effected. It seems to me that the decision was made by Kennedy Lodge in this case to subcontract for proper business reasons and not to deprive employees of their legal rights under our labour legislation. While it is indeed unfortunate that job losses to these employees will result, the remedy does not lie with this Board, but rather with the Ministry of Health to ensure adequate funding is maintained, and with the employees and their union to either seek protection from layoff under the collective agreement or agree to wage levels that will reflect the level of revenues received by the employer.