London and District Service Workers' Union, Local 220, S.E.I.U., A.F.L., C.I.O., C.L.C. v. Gordon-Nelson Development Company Limited, 1984 CanLII 971

Ontario Labour Relations Board

[1984] OLRB Rep. 807

2271-83-U London and District Service Workers' Union, Local 220, S.E.I.U., A.F.L., C.I.O., C.L.C., Applicant, v. Gordon-Nelson Development Company Limited, Respondent

BEFORE: R. 0. MacDowell, Acting Alternate Chairman, and Board Members J. Wilson and

S. Cooke.

APPEARANCES: Randy Levinson and Charles P. Davidson for the applicant; Robert A. Macpherson, George Takach and R. S. Gordon for the respondent.

DECISION OF THE BOARD; June 20, 1984

1. The name of the respondent is amended to read: "Gordon-Nelson Development Company Limited".

2. This is an application filed under section 93 of the Labour Relations Act. The applicant alleges that the respondent employer has engaged in an unlawful lockout. Section 72(1) of the Act reads:

Where a collective agreement is in operation, no employee bound by the agreement shall strike and no employer bound by the agreement shall lock out such an employee.

The term lockout is defined in section l(l)(k) as follows:

"lock-out" includes the closing of a place of employment, a suspension of work or a refusal by an employer to continue to employ a number of his employees, with a view to compel or induce his employees, or to aid another employer to compel or induce his employees, to refrain from exercising any rights or privileges under this Act or to agree to provisions or changes in provisions respecting terms or conditions of employment or the rights, privileges or duties of the employer, an employers' organization, the trade union, or the employees.

[emphasis added]

3. The hearing of this application began on January 30, 1984, and was continued on March 28, March 29, April 25, and April 30. During the course of the hearing, the Board issued a subpoena directing the production of certain documents. The respondent challenged the propriety and scope of that subpoena. The Board ruled that the material sought was arguably relevant to the matters in dispute and directed that the documents be produced. The respondent declined to do so. The respondent took the position that it was not prepared to produce the documents requested under any circumstances, or for any purpose, until directed to do so by a Court. The purpose of this interim decision is to set out the background and basis for the Board's ruling so that the applicant can seek such remedy as may be available to it to compel compliance with the Board's subpoena.

4. We will begin by briefly discussing the legal question raised in this application and some of the testimony adduced at the hearing. In order to assess the potential relevance of the documents in question, it is necessary to appreciate the case which the applicant must make, the respondent's "defence", and the scenario which prompted the applicant to seek the produc­tion of particular material. Of course, since the proceeding has not yet been completed, we make no factual or legal findings other than those strictly necessary to deal with the employer's refusal to respond to the subpoena.

5. Section 72 prohibits unions and employers from threatening or imposing economic sanctions during the currency of a collective agreement. The agreement is intended to be a peace pact. Once its terms have been settled, neither bargaining party is entitled to use its economic strength in an effort to get "a better deal". Indeed, so important is this principle, that all collective agreements must contain a mutual no strike/no lockout pledge and the Act provides special procedures for dealing with unlawful strikes or lockouts. There is no dispute here that there is a valid and subsisting collective agreement. In addition, and quite apart from the collective agreement, the Hospital Labour Disputes Arbitration Act, ("HLDA") prohibits strikes or lockouts in nursing homes. Thus, if the employer's conduct constitutes a "lockout" within the meaning of the Act, it will necessarily be an illegal one.

6. It will be seen from a perusal of section 1(1 )(k) of the Act that not all closings, suspensions of work, or refusals to employ will constitute a "lockout" within the meaning of the Act. There must not only be a refusal to employ (etc.), but, in addition, that refusal must be undertaken with a view to compel or induce the employees to forego rights under the Act or agree to changes in their terms and conditions of employment. In the classic case an employer withholds work opportunities to induce his employees to make concessions — just as the employees may collectively withhold their labour in order to achieve concessions for themselves. The former situation is a "lockout". The latter is a "strike". And, as we have already noted, in no circumstances can such activity take place during the term of a collective agreement, or in an enterprise to which the HLDA applies.

7. The parties have had a collective bargaining relationship since June 1977, when the applicant was certified as the employees' bargaining agent. There has never been a negotiated collective agreement. The collective agreements between the parties have all been the result of compulsory interest arbitration, pursuant to the HLDA, which prescribes arbitration as the required alternative to industrial conflict.

8. The recent bargaining history need not be reviewed in detail. It suffices to say that the previous collective agreement expired in March, 1981. The current collective agreement is based upon an arbitration award by Professor Gorsky issued in August, 1982. That arbitration award applies only to the respondent. The respondent did not participate in a process of joint negotiation with other nursing homes in the London area. Those other nursing homes, including one named "Meadow Park Nursing Home", bargained together and, upon impasse, went before another arbitrator. He issued his award in March, 1982 — some five months before the Gorsky award. Professor Gorsky was urged to follow the pattern. He declined to do so. In consequence, the terms in the Gorsky award are somewhat more generous. Not surprisingly, this is a matter of some concern to the respondent. The applicant's position is that if the respondent wished to achieve local parity, it should have participated in the joint negotiations with the other homes.

9. Following release of the Gorsky award, the respondent refused to abide by its terms or incorporate them into a collective agreement. The existing collective agreement was eventual­ly ordered into effect pursuant to the terms of the HLDA (see section 5). The respondent still did not comply. It took the position that the Inflation Restraint Act announced September

28, 1982, and proclaimed December 15, 1982, rendered the earlier arbitration award void.

10. The status of the Gorsky award was canvassed before an arbitrator (P. C. Picher) constituted under the agreement, and also before the Inflation Restraint Board. In August, 1983, both tribunals rejected the employer's position. They held that agreement was valid and binding for its designated term from March, 1981 to March, 1983, as well as for the additional one-year extension period to March, 1984 prescribed by the Inflation Restraint Act. However, since the employer had never been paying the rates prescribed in the award, it immediately found itself liable for a substantial sum in respect of retroactive and unpaid wages. That merely complicated what the respondent characterized as an already difficult economic situation.

11. Witnesses on behalf of the applicant testified that Mr. R. S. Gordon, the administrator and part-owner of the respondent, notified a number of employees that they would be laid off, but indicated that the layoff would be cancelled if the employees were prepared to accept a wage reduction to the level paid at Meadow Park Nursing Home — that is the rate prescribed by the other arbitrator and the position which Professor Gorsky ultimately rejected in his own arbitration award. C. P. Davidson, a union official, testified that Mr. Gordon told him that the layoff would be cancelled and employees could have their jobs back, if the employees were prepared to reduce the wage rates to the Meadow Park level, and pay back all of the retroactivity which they had been paid following the failure of the respondent's challenge to the Gorsky

award. When no agreement from the union was forthcoming, some employees had their hours reduced and at least one who was not prepared to accept the reduction in hours was laid off. In the union's submission the employer has imposed economic sanctions because the employees refused to give up rights which had been established in the arbitration award. Having failed to persuade Professor Gorsky of the merits of its position, and having failed in its legal challenge, the employer has now "locked out" its employees to achieve its bargaining goals.

12. The union points out that the respondent has not reduced the scope of its activities as might be the case in a "normal" layoff, nor has it reduced its demand for the health care and dietary services formerly performed by the union members whose hours have been reduced. The employer has reduced the hours of employees in the bargaining unit and increased its use of a subcontractor who supplies employees to perform the work. The employer is able to obtain the services of those substitutes at an hourly rate substantially less than that paid to the bargaining unit employees. In the union's submission, this is not a case where the work is not available; rather, it is a situation where the respondent has refused to employ bargaining unit members to do such work because they, in turn, rejected the respondent's demand to forego wage rates and retroactive wage payments to which the employees were entitled by virtue of the Gorksy award and their collective agreement. There was also testimony that, even after the wage reduction, a member of the respondent's management told an employee that her hours could not be increased until she acceded to Mr. Gordon's demand. The union asserts that both elements of the lockout definition have been met: there has been a refusal to employ its members, and the purpose of such refusal was to compel them to accept a reduction to the Meadow Park wage level and repay their retroactive wages. The lockout is merely an extension of the previous bargaining and is unlawful. It is an effort to secure what the respondent failed to achieve at the bargaining table or in the arbitration process prescribed by law. If the union cannot strike to improve upon the terms in the Gorsky award, the employer cannot lock out employees to achieve a change to its advantage.

II

13. The nursing home in London is one of three nursing homes run by the respondent in various Ontario communities. However, the London nursing home occupies the same building as a "rest home" also operated by the respondent. These two parts of the business operate under a different regulatory framework but they have a number of common facilities or shared services. According to Mr. Nelson, a co-owner of the company, the various phases of the business are treated as independent divisions or profit centres, each of which is expected to be financially viable in its own right. But Gordon-Nelson Development Company Limited is a private company and Mr. Nelson testified that there are no separate financial statements for its various aspects. In the case of the London facility, costs are apportioned between the nursing home and the rest home on the basis of a formula or "rule of thumb". Mr. Nelson did not indicate whether, over all, and considering the potential appreciation in the value of its capital assets, management fees, salaries and so on, the company as a whole could be considered profitable or successful.

14. The respondent denies that there has been a lockout. The respondent denies the statements attributed to Mr. Gordon. The respondent claims that it was merely responding to the economic consequences of the Gorsky award. The respondent asserts that there is no clause in the collective agreement restricting its right to subcontract bargaining unit work, and further that it has been doing so for some years without protest from the union. In the respondent's submission, all that has occurred here is an increase in its utilization of the

subcontractor's employees in order to effect cost savings. The respondent asserts that it is in a regulatory "bind": the prices it can charge its residents are strictly controlled by the government, while, at the same time, it cannot freely negotiate the wages of its employees using such bargaining power as may be available to it. It must accept the revenues which the legislation allows, and pay the wages which the statutory arbitrator requires — even if those wages may be above what would be paid on a "free collective bargaining" basis. To meet this dilemma, it has decided to increase its use of the subcontractor's services.

III

15. The first witness called on behalf of the employer was R. H. Nelson, one of its co-owners. He was not directly involved in the day-to-day administration of the nursing home, but professed a general understanding of the financial difficulties faced by the home which, he said, prompted its decision to reduce the hours of bargaining unit employees and substitute the services of the employees of a subcontractor. In direct examination he testified that, after the Gorsky award, he concluded that the home would never be able to operate on a sound financial basis. He said this pessimistic assessment was confirmed by the company's accountant. The home had been in a precarious position since the first arbitration award in 1978. There had been a history of financial difficulties. The Gorsky award was merely the "last straw". Something had to be done. It was necessary to reduce costs. A layoff of bargaining unit members and increased utilization of the subcontractor were the only viable alternatives.

16. In the early part of Mr. Nelson's cross-examination (which took place over several days with some weeks in between), he testified that there were a number of mortgages outstanding on the nursing home with different mortgage companies. He could not recall the amounts or servicing charges. He was not aware of any management fees applicable to the nursing home and payable to the respondent company. He was unsure if there was any formal agreement with the subcontractor to supply services and he was not aware of any payment schedule. He could not recall the amounts of profit or loss, if any, incurred in recent years by the company as a whole or the London nursing home. Nor could he recall the amount of the anticipated saving in wages which, he said, was the reason for reducing the employees' hours. He said that the home might lose $50,000 that year so that some management response was imperative. He indicated that there were audited financial statements for the company, but no specific subdivision or breakdown for the nursing home and he was reticent about revealing the details of the company's financial affairs. He said that a reduction to the Meadow Park rate — the respondent's position before arbitrator Gorsky and the concession which the union alleges was sought in the fall of 1983 — would not make very much difference to the overall viability of the nursing home.

17. The initial hearings concluded without completing Mr. Nelson's cross-examination. Following that hearing, the applicant requested, and the Board issued, a subpoena directed to Mr. R. Gordon requiring the production of certain financial and business documents. The subpoena was properly served. The documents related to the subcontracting arrangement and the financial situation of the home — that is, those matters which the respondent was asserting prompted its decision to reduce the employees' working hours and which Mr. Nelson had testified about in his direct evidence. The applicant's counsel proposed to put those documents to Mr. Nelson for his identification and to ask questions about them. The documents sought are described in Schedule "A" of the subpoena which reads as follows:

1. all notes, memoranda, correspondence, drafts of contracts and contracts relating to the contractual relationship between Nel-Gor Castle Nursing Home with Para-Med Health Services;

2. all internal notes and memoranda including but not limited to any financial arrangements between Nel-Gor Castle Nursing Home and Nel-Gor Castle Rest Home, including agreements with respect to serv­ice contracts; and including any documents or correspondence concern­ing agreements between Nel-Gor Castle Nursing Home and Gordon-Nelson Development Company Limited including but not limited to leasing, financing and service arrangements;

3. any other communication with any other party relating to the aforemen­tioned contracting out of work;

4. all financial statements, annual reports and any other financial report of Gordon-Nelson Development Company Limited and Nel-Gor Castle Nursing Home for the years 1981, 1982 and 1983;

5. copies of all mortgage documents concerning mortgages between Nel­Gor Castle Nursing Home or Gordon-Nelson Development Company Limited and Morguard Trust, William Clarfield and Hedgco Invest­ments;

6. copies of all communications between the Ministry of Health and the Ministry of Labour including but not limited to copies of correspondence as set out in the letter dated November 1, 1983 from Gordon-Nelson Development Company Limited to the Ministry of Health; and

7. copies of the exact amount of retroactive pay owing to employees pursuant to the Gorsky award.

The respondent's principal concern is with the material described in paragraph 4. The other documents either do not exist or were not produced.

18. There is no dispute that Mr. Gordon was properly served with the subpoena, or that, as a co-owner and the administrator of the nursing home, he could have control and be able to produce such documents mentioned in Schedule "A" as may exist. Mr. Gordon has been present to advise counsel throughout these proceedings and will be one of the witnesses called by the respondent in its defence. Mr. Nelson would also be expected, in the ordinary course, to be able to identify and explain the financial statements concerning his business. He has already given evidence about the company's financial affairs. The union claims that, once the respondent has raised the question of its financial position, the union is entitled to these business documents to test that defence — particularly where, as here, Mr. Nelson's recollection was less than perfect. The union argues that it need not accept, as true, viva voce statements concerning the financial health of the business when such statements were markedly lacking in detail. It is entitled to cross-examine the employer's witnesses on their assertions, and to have the business records available for that purpose.

IV

19. Following the receipt of the subpoena, the respondent did produce a document (exhibit

10. which purported to set out its current revenues and expenditures together with certain cost projections based upon different degrees of utilization of the subcontractor's employees. Counsel advised that this document was prepared for the purposes of this litigation based upon journals, bills, receipts, and other raw financial data. The figures could then be compared to the wages established in the collective agreement. However, the document presented did not constitute an audited financial statement for this or any previous year, nor was the complainant content to simply accept it without question. For example, it disclosed a projected loss (revenue minus expenses) of almost one hundred thousand dollars — twice the sum which Mr. Nelson had mentioned on the previous day. Moreover, when the hearing resumed, the respondent advised that there were not several mortgages on the premises, as Mr. Nelson had testified, but rather one consolidated mortgage. Mr. Nelson's recollection was apparently inconsistent with the respondent's own documentary evidence. The union argued, again, that once the respondent had put its deteriorating financial position in issue as the purported reason for reducing the hours of its employees, the union was entitled to test that assertion in cross-examination and to require the production of such financial records as might bear out or contradict the witnesses' oral evidence. The union argued that it was entitled to see the company's audited financial statements.

20. The Board agreed. It was the respondent which put its financial situation in issue. It was the respondent which asserted that its decision to lay off and reduce the hours of employees was not motivated by an intention to secure economic concessions or induce employ­ees to give up established rights, but rather a response to deteriorating business conditions. It is the respondent which put in a document which purports to be accurate but which it not entirely consistent with its own witnesses' recollection on the previous day. It is the respondent which refuses absolutely to produce its audited financial statements, or make clear the economic dilemma which, it says, motivated its conduct. The respondent does not say that its financial situation is irrelevant, yet it refuses to produce the only independent and pre-existing material

— the company's financial statements — which might put its assertions into their proper economic perspective.

21. The respondent contended that the records in question are "confidential". It is said that a private company such as the respondent should not have to make public its annual financial statements. But the documents in question, or the information in them, are not privileged in a legal sense. Nor is the production of such material unusual in a case where a company's financial affairs may be relevant — even though a litigant may be reluctant to produce them. In Riddick v. Thames Board Mills, [1977] 3 All E.R. 677 (C.A.), Lord Denning had this to say (at page 687):

Discovery of documents is a most valuable aid in the doing of justice. The court orders the parties to a suit, both of them, to disclose on oath all documents in their possession or power relating to the matters in issue in the action. Many litigants feel that this is unfair. I have often known a party, faced with such an order, saying to his solicitor: 'Need I disclose this document to the other side? It will damage our case greatly if they get to know of it.' The solicitor's answer is, and must be: 'Yes, you must disclose it, however much it damages your case.' Again I have known a party to say to his solicitor: 'But these are my own confidential papers, my own personal diary, our own inter-departmental memoranda. Must I disclose them?' The answer of the solicitor again is: 'Yes, you must disclose them.' Confidential information has no privilege from disclosure: see Alfred Crompton Amuse­ment Machines Ltd. v. Customs & Excise Comrs (No. 2). The court insists on your producing them so as to do justice in the case.

The reason for compelling discovery of documents in this way lies in the public interest in discovering the truth so that justice may be done between the parties. That public interest is to be put into the scales against the public interest in preserving privacy and protecting confidential information. The balance comes down in the ordinary way in favour of the public interest of discovering the truth, i.e. in making full disclosure.

While these remarks pertained to the discovery stage of civil proceedings, and there is no exact Labour Relations Board equivalent, the public policy considerations are the same.

22. This does not mean that a party is entitled to go on a fishing expedition or use the power of the Board to obtain disclosure for a purpose other than the litigation itself. Again the words of Denning, L.J. are instructive:

Compulsion is an invasion of a private right to keep one's documents to oneself. The public interest in privacy and confidence demands that this compulsion should not be pressed further than the course of justice requires. The courts should, therefore, not allow the other party, or anyone else, to use the documents for any ulterior or alien purpose. Otherwise the courts themselves would be doing injustice. Very often a party may disclose docu­ments, such as inter-departmental memoranda, containing criticisms of other people or suggestions of negligence or misconduct. If these were permitted to found actions of libel, you would find that an order for discovery would be counter-productive. The inter-departmental memoranda would be lost or destroyed or said never to have existed. In order to encourage openness and fairness, the public interest requires that documents disclosed on discovery are not to be made use of except for the purpose of the action in which they are disclosed. They are not to be made a ground for comments in the newspapers, or for bringing a libel action, or for any other alien purpose. The principle was stated in a work of the highest authority 93 years ago by Bray J:

'A party who has obtained access to his adversary's documents under an order for production has no right to make their contents public or communicate them to any stranger to the suit: nor to use them or copies of them for any collateral object.... If necessary an undertaking to that effect will be made a condition of granting an order.'

Since that time such an undertaking has always been implied, as Jenkins J said in Alterskye v. Scott. A party who seeks discovery of documents gets it on condition that he will make use of them only for the purposes of that action, and no other purpose. The modern authorities are well discussed by Talbot J in Distillers Co. (Biochemicals) Ltd. v. Times Newspapers Ltd., and I would accept all he says, particularly as to the weighing of the public

interests involved.

This approach was recently adopted by this Board in Shaw-Almex Industries Limited [1984] OLRB Rep. Apr. 659 with the following comment:

In our view, there is an implied undertaking by a party to whom documents are produced as a result of the use of summons duces tecum issued by the Board. It is an undertaking to the Board as much as to the party from whom production is compelled. The undertaking is that the documents will not be used for collateral or ulterior purposes. The undertaking is similar in scope and effect to the undertaking discussed in the cases cited above. Breach of the latter undertaking is a contempt of court, as is the breach of any undertaking given to a court. By virtue of section 13(c) of the Statutory Powers Procedures Act, breach of an undertaking to the Board may be the subject of contempt proceedings in the Supreme Court of Ontario; that court's power to punish for "contempt of the Board" is not limited to cases of failure of witnesses to attend, testify or produce docu­ments: Re Ajax and Pickering General Hospital et al. and Canadian Union of Public Employees et al. (1981) 1981 CanLII 1917 (ON HCJ), 32 OR. (2d) 492 (Ont. Div. Ct.); reversed on other grounds at (1982) 1981 CanLII 1849 (ON CA), 35 O.R. (2d) 293; 82 CLLC ¶ 14,164 (Ont. C.A.).

While all of these cases relate to production at discovery or prior to trial, and different considerations may relate to documents properly admitted at a public hearing, it is our view that there is sufficient protection for the respondent against any abuse of the Board's subpoena, and, where, as here, arguably relevant documents are sought, they should be produced. With respect to the respondent's concern about confidentiality, we might note that this issue is addressed in section 9(1 )(b) of the Statutory Powers Procedure Act dealing with in camera hearings. By implication, it does not relieve a party of the obligation to disclose such matters.

23. For the foregoing reasons then we are satisfied that the financial documents sought by the union, and particularly those described in paragraph 4 of the subpoena, are arguably relevant to the issues in these preceding and should, therefore, be produced. The admissibility of those documents and the weight (if any) that should be given to them, is a matter for argument at the hearing. The respondent's blanket refusal to produce this material under any circum­stances, makes the Board's original order to produce academic. The fact is that the respondent refused to do so then, and has indicated that it will continue to refuse. The propriety of that refusal will be for the Court to decide, as well as the remedy — given that a litigant who takes this position will at the very least produce a delay potentially prejudicial to the other party. At this point, if suffices to direct that the documents in question be deposited forthwith with the Registrar of the Board, so that they will be available for inspection upon reasonable notice, and for the continuation of the hearing in this matter.