[1984] OLRB Rep. June 822
0594-83-R The Labourers' International Union of North America, Local 1059, Applicant, v. The John Hayman & Sons Company Limited Ontario and King Limited, Respondents
BEFORE: N. B. Satterfield, Vice-Chairman and Board Members C. A. Ballentine and I. M. Stamp.
APPEARANCES: M. Zigler and J. MacKinnon for the applicant; Peter J. Thorup, Carmen McClelland, Bob Hayman and George Hayman for the respondents.
DECISION OF N. B. SATTERFIELD, VICE-CHAIRMAN AND BOARD MEMBER I. M. STAMP; June 14, 1984
The applicant Labourers' International Union of North America, Local 1059 ("Local 1059") is seeking a declaration that there has been a sale of a business within the meaning of section 63 of the Labour Relations Act between the respondents and a declaration under section 1(4) of the Act that they carry on associated or related activities or businesses under common control or direction and constitute one employer for purposes of the Act. Standing behind this application is a referral of a grievance in the construction industry under section 124 of the Act (Board File No. 0732-83-U), the further processing of which must await the disposition of this application.
The respondent John H. Hayman & Sons Company, Limited ("Hayman") has carried on a business in the construction industry in the London area since 1887 and was incorporated in 1913. During the last ten years it has operated as both a general contractor and a sub-contractor, primarily on concrete and masonry construction.
The respondent Ontario and King Limited ("Ontario and King") was incorporated in February 1981 for the purpose of holding real estate formerly owned by Hayman so as to keep the real estate separate from the construction business. Ontario and King earns income from rental properties.
The respondents admit that they are under common control or direction but contend they do not carry on related or associated activities and, if the Board finds that they do, the Board, pursuant to its discretion under section 1(4) of the Act, should not declare that they be treated as constituting one employer for purposes of the Act. That was the main emphasis of the respondents' defense to the application. They contend also that there has been no sale of a business between the two respondents within the meaning of section 63 of the Act.
The applicant is relying primarily on its claim that the respondents should be treated pursuant to section 1(4) of the Act as constituting one employer and, in the alternative, is relying on its claim that there has been a sale of a business between them. In this respect, the Board is of the view that section 63 of the Act has no application to the evidence before the Board in this case. Therefore, in so far as this application relates to section 63 of the Act, it is dismissed.
The parties were substantially in agreement on the facts which are material to this application. Where that was not the case, the Board has weighed the testimony of the witnesses
and assessed their general demeanor and relative credibility in order to resolve the conflicts in the evidence.
The respondents' contention that Hayman and Ontario and King do not carry on related or associated activities is based on the fact that Ontario and King earns income from the real property which it holds, has no employees and, apart from holding real estate, its only activity is bidding on construction projects. The Board is satisfied on the uncontested facts that, not only are Hayman and Ontario and King under common control or direction as admitted, they carry on related activities or businesses and the Board so finds. Their activities, on the evidence, are closely related and Ontario and King's bidding and sub-contracting activities which are closely integrated with those of Hayman, produce revenue for Ontario and King. Therefore, Hayman and Ontario and King not only carry on related or associated activities, those activities are clearly businesses too. Thus the only issue is whether the Board should exercise its discretion under section 1(4) of the Act to declare that they be treated as one employer for purposes of the Act. The facts relevant to that issue are set out below.
Hayman has been a "union" contractor for a long time. Where in this decision the term "union contractor" is used it shall mean a contractor which is in a collective bargaining relationship with and employs members of a building trades union. Hayman was amongst the first two or three contractors in London to grant voluntary recognition to building trade unions and did so with the carpenters, bricklayers and labourers. At the times material to this application, it was bound to provincial agreements with six trades: bricklayers, carpenters, cement masons, labourers, operating engineers and rodmen. Whenever Hayman employed these trades on industrial, commercial and institutional ("ICI") construction, it did so pursuant to a collective agreement, either by direct hire or by sub-contracting work to specialty contractors which were in collective bargaining relationships with the appropriate one of those trades. Hayman was not contractually bound to sub-contract other kinds of building trades work to unionized specialty contractors, but did so as a matter of practice. It is what the building trades refer to as a "fair" contractor. That remained Hayman's practice until shortly before this application was made.
As a general contractor Hayman is either invited to bid on jobs or, on general tender jobs, it applies to bid. In either case, it invites bids, in other words it gets prices, from specialty contractors employing various construction tradesmen. Being a union contractor it has traditionally attracted bids from union specialty contractors. According to Robert Hayman, who together with his brother, George, controls the respondents, during the 1950's and 1960's there were only a few non-union specialty contractors in the London area so it was always possible to get three or four bids for each trade from union specialty contractors. During the same period there were 10 to 15 union general contractors which would bid on most of the available construction work. This pattern changed substantially through the 1970's when there was a significant increase in the number of new general and specialty contractors in the area which were "non-union". By the time this application was made only four of the major general contracting firms based in the London area were unionized. Consequently, Hayman found that its competition for available jobs was coming increasingly from non-union general contractors. It found also that non-union sub-contractors would tender bids only to non-union general contractors and, when Hayman asked for bids from them, it would not receive any. Hayman's experience was that it could not attract bids from the non-union specialty contractors. On the other hand, the union specialty contractors would tender bids to the non-union general contractors. Robert Hayman claims that the ability of the non-union general contractors to attract bids from both sides of the fence gave them a substantial advantage when bidding on jobs valued in the range of $2,000,000 to $3,500,000.
Hayman continued to be unsuccessful on general tender jobs in getting non-union specialty contractors to tender bids to it. Eventually, in 1980 Hayman was second low bidder by a slight margin on a public sector job of a type which historically had not been available to non-union contractors. Hayman had bid the job with a complete slate of union specialty contractors. The low bidder was a non-union general contractor and four of the specialty contractors it used were non-union. According to Robert Hayman, if he had been able to attract the same bids from those contractors, Hayman would have been the low bidder. That experience convinced the Hayman brothers that Hayman would have to devise a way of attracting bids from and using non-union specialty contractors.
Their decision was to use Ontario and King to bid general tender jobs which were open for bidding to union and non-union firms alike. They placed two specific obligations on Ontario and King. First it must sub-contract to Hayman all of the work which Hayman had historically performed with its own forces; this was primarily reinforced concrete and masonry construction. Hayman, for its part, was committed to perform that work pursuant to the terms of the provincial agreements of the trades with which it had collective bargaining relationships. Second, Ontario and King would not bid jobs where the work was fully unionized. The Hayman brothers expected that Ontario and King would be able to do what Hayman had been unsuccessful in doing, that is, attract bids from non-union specialty contractors.
Ontario and King began bidding general tender jobs in March 1981 but was not successful as low bidder until July 1982 when it won the contract for the St. Thomas Sewage Treatment Plant on which it was low bidder by approximately $16,000 on a total bid of approximately $2,200,000. The difference was attributable primarily to Ontario and King being able to attract a bid from a non-union mechanical contractor. Hayman does not do mechanical work. Its consistent practice has been to sub-contact it to a mechanical contractor. Ontario and King sub-contracted to Hayman all of the concrete work on the project and Hayman used labourers on this work. Robert Hayman's evidence that the labourers did all of the work which they would have performed had Hayman been the general contractor instead of Ontario and King was confirmed by the evidence of Richard Weiss who was the business representative for Local 1059 when the job was executed. This result is not surprising if the intent of the Hayman brothers that Ontario and King sub-contract to Hayman the work which it had historically done and that Hayman perform that work pursuant to its collective bargaining obligations was to be carried out, since Hayman supervised this job for Ontario and King, as it did for another job which Ontario and King subsequently obtained.
The next job won by Ontario and King was an extension to the White Oaks Mall, a London area shopping mall. Hayman had been general contractor on the prior extension in 1978. The price of the job was negotiated between the owners, through their agent, and Ontario and King. Hayman was approached first in late summer 1982 on an informal basis and gave an oral bid on the foundation work alone, on the basis of the owner proceeding with that work first and independently from any other work. That did not happen and Hayman was approached by the owners' agent in early 1983 with orders for some preliminary work. Robert Hayman proposed to him that the owners engage Ontario and King and have greater flexibility in pricing by being able to attract bids from union and non-union specialty contractors on work which
Hayman usually let to sub-contractors. The owners ultimately signed a contract with Ontario and King on February 8, 1983 for the foundation and shell of the mall building.
The value of the contract was nearly $3,000,000. Ontario and King sub-contracted to Hayman the work it had historically performed and sub-contracted to specialty contractors the work which Hayman usually let out. Hayman supervised the project for Ontario and King, performed the foundation, concrete floor, masonry and carpentry work with its own forces using the union trades which it customarily employs. Hayman sub-contracted the excavation work to a union contractor. Eighty-five per cent of the value of the Ontario and King contract was performed by building trades union members. At the time of the hearings into this application Ontario and King appears to have been the successful bidder on two smaller jobs, but they had not been executed yet.
When Ontario and King bids on or performs a job, bid and performance bonds, insurance and building permits are issued, accounts rendered to clients and payments made to sub-contractors in the name of Ontario and King. Its name appears on the signs displayed at job sites. Hayman's name is not used by Ontario and King for any of these purposes with respect to Ontario and King bids or jobs.
Hayman has continued to bid in that part of the construction market where it sees itself belonging. The jobs which Hayman has been successful in bidding since Ontario and King started bidding have been ones where union contractors were specified. It has performed these jobs using union trades either directly employed or by sub-contracting to unionized contractors. When Hayman is invited to tender a bid on a job it does so in its own name and not in Ontario and King's. On general tender jobs which would be expected to attract a significant number of bidders, Ontario and King will bid because past experience has shown that Hayman would not likely be successful. Occasionally Hayman will submit a bid on the same general tender job as Ontario and King. Ontario and King does not bid on jobs which Hayman considers to be its part of the market.
Hayman did face challenges from the building trades unions about the bidding arrangement between Hayman and Ontario and King. One incident resulted in a settlement agreement dated April 25, 1983 between Ontario and King, the London and District Building Trades Council and certain of its constituent trade unions, including Local 1059, in which the trade unions through their agents agreed not to engage in unlawful strikes or picketing at the White Oaks Mall and Ontario and King agreed to invite and accept bids from union subcontractors as well as non-union ones. Hayman and Ontario and King were able as well to reach written accommodations on their bidding practices with the bricklayers, carpenters, operating engineers and rodmen unions. Ontario and King has assured those unions that it will subcontract to Hayman all of the work which Hayman has done in the past and Hayman has assured them that it will perform the work which it had done historically and pursuant to the applicable provincial agreement with those trades. The undertaking prohibits Ontario and King from sub-contracting concrete and masonry work to a contractor other than Hayman. The Haymans were prepared to have Ontario and King undertake in writing with Local 1059, as well, that Ontario and King would sub-contract to Hayman all of the work Hayman had been doing as a general contractor and sub-contractor pursuant to the labourers provincial agreement and its predecessor agreements. Local 1059 declined to enter into any agreement and chose to pursue this application, which it was at liberty to do.
Local 1059 is not concerned about the erosion of its bargaining rights with Hayman solely with respect to concrete and masonry construction. Whether or not that work is adequately safeguarded by the undertakings of the Hayman brothers, Local 1059 is concerned about what it claims is labouring work associated with work performed by specialty contractors, union or non-union. James MacKinnon, secretary-treasurer of Local 1059 and the officer responsible for administering its affairs, testified that certain work which was commonly performed by members of Local 1059 in the London area was performed on the White Oaks project by employees of sub-contractors who were not its members. The Board heard testimony about local area practice with respect to this work from MacKinnon, Richard Weiss, Local 1059's former business representative, and Louis Lenssen, superintendent for Hayman on the White Oaks job. Lenssen has worked in construction for 35 years, the last 24 years with Hayman. It is clear from the evidence of Lenssen and Weiss that there have been on-going, conflicting claims in the London area between Local 1059 and a number of the specialty trades for jurisdiction over the work which was the source of Local 1059's concern. The Board prefers Lenssen's evidence with respect to the prevalent local practice and how the work in question was performed on the White Oaks project. He was not present when the other witnesses gave their evidence, his evidence was specific and unshaken in cross-examination. Except for Robert Hayman, who was not directly involved with supervision of the White Oaks project, Lenssen was by far the most experienced of the witnesses with respect to London area construction work practices. His evidence, with respect to the work which MacKinnon claimed was commonly performed by members of Local 1059, was that the predominant practice in the London area was for such work to be performed by employees of the speciality trades contractors rather than by members of Local 1059. Hayman conformed to that practice on the White Oaks job. The Board is satisfied on the evidence that, if the sub-contractors did not execute the work in question with their own forces, members of Local 1059 employed by Hayman performed the work and charged the cost back to the sub-contractor. This applied whether it was a Hayman job or an Ontario and King job.
While the evidence before the Board was sufficient to decide that issue, it has chosen not to identify the specific nature of the work at issue because this is not a jurisdictional complaint. In a jurisdictional complaint, the Board would normally have more extensive and more specific evidence about local area practice than was necessary here. Therefore, the Board's findings with respect to Local 1059's claim is not to be taken as a conclusive finding with respect to local area work practice.
An application like this one in which it is alleged that two distinct legal entities carry on related activities or businesses and should be treated as one employer for purposes of the Act calls into play two subsections of the Act. These are subsections 4 and 5 of section 1 which provide as follows:
(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.
(5) Where, in an application made pursuant to subsection (4), it is alleged that more than one corporation, individual, firm, syndicate or association or any combination thereof are or were under common control or direction, the respondents to the application shall adduce at the hearing all facts within their knowledge that are material to the allegation.
Robert Hayman's testimony was forthright and refreshingly candid and fully satisfied the evidentiary onus imposed by section 1(5). The fact that the critical facts were so substantially in agreement is in a very large measure attributable to his total demeanor as a witness. Applicant counsel acknowledged in his argument Mr. Hayman's refreshing candor as a witness, a point with which respondent counsel readily agreed. That is about the extent of agreement between the two counsel, however, because they are at 180 degrees to one another on their interpretation of the facts. Applicant counsel contends that the facts describe the classic erosion of bargaining rights which section 1(4) was designed to shield against and cry out for the exercise of the Board's discretion to declare that the respondents be treated as one employer for purposes of the Act. Respondent counsel argues on the other hand that, if ever there was a case where the Board should not make such a declaration, it is on the facts of this case. Their diametrically opposite positions only serve to show the pivotal significance of the facts in this case to its ultimate determination.
The Board's decision in Industrial-Mine Installations Limited, [1972] OLRB Rep. Dec. 1029 refers to the general purpose of section 1(4) as being to avoid the frustration of acquired bargaining rights or of an attempt to acquire them. How the Act meets that purpose is described succinctly nearly ten years later in the Board's decision in Ethyl Canada, Inc., [1982] OLRB Rep. July 998, at paragraph 37:
Section 1(4) of the Act deals with situations where the economic activity giving rise to the employment is or can be carried out through more than one legal entity. In such circumstances an alteration in legal form, or a transfer of work from one legal entity to another, can undermine established collective bargaining rights. Section 1(4) ensures that the institutional rights of the trade union and the contractual rights of its members, will attach to a definable commercial activity rather than the particular legal vehicle(s) through which that activity is carried on. Legal form is not permitted to obscure economic and collective bargaining realities. In this respect section 1(4) creates a regime of collective bargaining law which significantly modifies common law notions of privity of contract or the corporate veil. However, while the language of section 1(4) is very broad, the section is not intended to apply in every case which in a general or linguistic sense meets its statutory criteria. The Board has a discretion concerning the application of section 1(4) and, in the past, it has exercised that discretion carefully, in light of the circumstances of each case, and labour relations policy considerations.
The Board's decisions in the ten years intervening those two decisions show the Board to have considered a variety of factors in deciding the exercise of its discretion:
(1) whether the applicant is seeking to acquire bargaining rights by means of section 1(4) in order to avoid the certification procedures of the Act;
(2) whether a declaration would disturb existing bargaining rights;
(3) whether a declaration would interfere with the interests and rights of employees to select their own bargaining representative or to remain unrepresented;
(4) whether the application has been made within a reasonable time after the applicant became, or with reasonable diligence, should have become aware that the two or more entities were closely related; and
(5) whether a scheme exists which would effectively defeat bargaining rights by transferring work from one related entity to another.
See the Board's decision in Ado Builders (Eastern) Limited, [1979] OLRB Rep. June 465 and the cases referred therein at paragraph 1 5.
Ontario and King does not have any employees at all, let alone any who are construction labourers, so there are no bargaining rights which would be disturbed if the Board declares the two respondents be treated as one employer. Nor are there any employees whose interests would be interfered with if the applicant is successful. That success, however, would allow the applicant to achieve bargaining rights for prospective construction labourers should any be hired by Ontario and King, something it could not achieve by means of certification now because Ontario and King has no employees who are construction labourers. The question of whether the application was brought within a reasonable period of time after the applicant became aware of the close relationship between the respondents is an issue raised by counsel for the respondents as ground for the Board declining to exercise its discretion. The Board is satisfied on the evidence that Local 1059 was aware of Ontario and King's existence and relationship to Hayman early in Ontario and King's bidding activity and it was aware not later than the St. Thomas job of the undertaking of the Hayman brothers that the corporation Hayman would continue to perform on any job obtained by Ontario and King the construction work it had done in the past using members of Local 1059 as it had done in the past. Local 1059 appears to have been willing to take a "wait and see" posture with respect to the St. Thomas job. Its perception of the way Ontario and King/Hayman conducted the White Oaks job, however, was that its members lost work which customarily they would have done on a Hayman job. That is when Local 1059 acted to bring this application. While the Board's findings of fact disagree with the applicant's perception, we are satisfied that it has been diligent and acted promptly. In the result, consideration of the first four factors set out above raises nothing which would deter the Board from exercising its discretion to declare the two respondents be treated as one employer. Whether the Board should so declare rests, therefore, on the fifth factor. Has the entry of Ontario and King into the construction business and the way Hayman and Ontario and King have operated in tandem to bid and execute general tender jobs created a scheme which would effectively defeat Local 1059's bargaining rights for Hayman's construction labourers?
Counsel for the parties herein have referred the Board to many of its reported cases which have been decided since Industrial-Mine as authorities supporting their respective arguments as to how the Board should decide that question. As the Board pointed out in its decision in Kusrom Insulation Ltd., [1979] OLRB Rep. June 531, many of these cases involve the transfer of work which would have been performed by the union company to its associated non-union company (Evans-Kennedy Construction Limited, [1979] OLRB Rep. May 388); or the transfer of employees from the union to the non-union company (Evans-Kennedy, supra; Inducon Construction of Canada Limited, [1975] OLRB Rep. April 399); or coincident
with the erosion of bargaining rights, the unionized employer's business has declined as the non-union employer's business expands (Farquhar Const. Ltd., [1978] OLRB Rep. Oct. 914; Elwall and Sons Construction Limited, [1978] OLRB Rep. June 535). The facts in this case do not put it amongst those examples. There has been a transfer of bidding activity from Hayman to Ontario and King, but no transfer of work or employees. Hayman has obtained from Ontario and King the same kind of work it has traditionally performed but been less able to attract in recent years. It has performed that work with the same trades directly or by sub-contract as it always has. More specifically, it has employed members of Local 1059 to do the work sub-contracted to it by Ontario and King on the St. Thomas and White Oaks jobs. Hayman's business volume has not declined as a result of Ontario and King acquiring work. Rather Hayman's volume has been protected and possibly enhanced as a result of the transfer of work from Ontario and King. The facts in this case do not support the conclusion that there has been an actual erosion of the applicant's bargaining rights in any of the forms which concerned the Board in the foregoing decisions or by not respecting Local 1059's established work jurisdiction in the London area.
- The fact that there has been no actual erosion, however, does not obscure the potential which exists for erosion of Local 1059's bargaining rights with Hayman for construction labourers. For example, it is Ontario and King which bears the legal responsibility for the letting of any sub-contracts on the jobs which it acquires. In exercising that responsibility it is not obligated by any direct collective bargaining responsibility to sub-contract to Hayman or any other contractor which is obligated under a collective agreement to employ members of Local 1059. So in that sense the "control" of sub-contracting on Ontario and King jobs is with it and not Hayman, the employer which is bound together with Local 1059 to the labourers provincial agreement. That agreement contains the following limitation on sub-contracting work coming within its scope:
2.05 The Employer agrees to engage only sub-contractors who are in contractual relations with the Union and/or its affiliated bargaining agents for all work covered by this Agreement, or work forming part of an I.C.I. General Contract, except the work described in Schedule "D" hereof.
Therefore, if Ontario and King for any reason decides not to sub-contract to Hayman the concrete and masonry construction work which Hayman has done on its own jobs in the past, Local 1059 has no direct avenue of redress through the provincial agreement because Ontario and King is not bound to it. The potential for erosion of Local 1059's bargaining rights posed by the absence of any contractual obligation on Ontario and King similar to clause 2.05 alone is sufficient reason for the Board to issue a declaration according to Local 1059's counsel. He argues that, in face of similar threats to a trade union's bargaining rights, the Board has exercised its discretion to declare related employers be treated as one employer for purposes of the Act in its decisions in West York Construction Limited, [1978] OLRB Rep. Sept. 879; Kustom Insulation Ltd., [1979] OLRB Rep. June 581 and Donald A. Foley Limited, [1980] OLRB Rep. April 436.
In its West York decision the Board was dealing with an application under section 1(4) brought by, amongst others, the International Union of Bricklayers and Allied Craftsmen, Local 2. The related company, Bau Canada Limited, had been dormant since its incorporation more than five years before the application was made. It had been activated to perform as a general contractor for small commercial renovations. That was not the work in which it was engaged when the application was brought, although the job was its first. The two persons who were equal owners of the two companies were also equal owners of a commercial property. Those persons were acting as their own general contractor in constructing industrial condominium units on the property and engaged Bau as project manager. It supplied the jobsite supervisor who was its only employee on the project. The only other evidence of Bau's activities was that it had let the sub-contract for the supply and installation of masonry on the project. Before declaring that West York and Bau be treated as one employer for purposes of the Act, the Board commented as follows:
The Board has some concern about the consequences of granting bargaining rights by means of section 1(4) declaration in a situation where there are no employees in one of the related companies. However, having regard for one purpose of section 1(4) (the protection against the frustration of bargaining rights already earned by a trade union) the Board is concerned that its refusal to grant a section 1(4) declaration in the instant case would leave open to frustration the existing bargaining rights with respect to West York employees. If Bau were to be used to take the same kind of jobs as West York has been doing and then to sub-contract them to contractors other than those permitted by the collective agreement binding West York, then the result would be a circumvention of existing bargaining rights.
The focus of the Board's concern in that case was clearly the sub-contracting activity of Bau and the potential for that activity to result in circumventing existing bargaining rights of the applicants. One of the applicants was the International Union of Bricklayers and Allied Craftsmen, Local 2. The facts show that Bau had sub-contracted the masonry work on the job to a particular contractor. The facts show also that West York was bound to sub-contact only to contractors whose employees were members of the Bricklayers Local 2 and other trade unions affiliated with The Toronto Building and Construction Trades Council, as it was then. It is reasonable to infer from those facts that the Board had in front of it evidence that the limitations placed on West York's sub-contracting of work had been breached already and was concerned about the erosion which would occur by the diversion of sub-contracts from West York through Bau.
In Kustom Insulation, supra, it was one of two separate legal entities incorporated on the same day, the other one being H. S. Insulation, Inc. The sole owner of H. S. Insulation had operated a business under the name of a third company until the two new companies were incorporated. On that day he sold the third company to Kustom Insulation, of which his wife was sole owner. Kustom did mechanical insulation work on union projects as a unionized contractor the same as its predecessor had done. The value of the work it performed in 1978 was more than 10 times the value of H. S. Insulation's work for that year. H. S. Insulation did both mechanical and house insulation, bidding only to non-union contractors. It had one employee in 1978 and Kustom employed from 10 to 13. The Board found that the two companies, one union and the other non-union, satisfied the legal pre-conditions for a declaration under section 1(4). The Board found for the following reasons that the existence of H. S. Insulation undermined the union's bargaining rights with Kustom and declared that the two companies be treated as one employer:
Despite the present well-being of Kustom's business, the Board is of the view that H. S. Insulation is eroding the bargaining rights of the union because it effectively carves out from Kustom's business the work that Kustom might otherwise at least try to get and the work in respect of which the union would otherwise represent the employees. The existence of H. S. Insulation effectively nullifies the need for Kustom to try to compete with non-union contractors as other unionized employers are required to do. The double-breasted arrangement allows the respondent to avoid the applicant when doing house insulation and some kinds of mechanical insulation which is work which Kustom is fully equipped and able to perform.
In Foley, supra, Donald A. Foley Limited ["Foley"] was a general contractor primarily engaged in road building. The Board found, even though Foley's owner had no ownership interest in and was not an officer or director of Kingston Aggregates, one of its sub-contractors, the economic reality was that Foley exercised effective control over Kingston Aggregates. It was a non-union company. One of the effects of Foley's economic control of Kingston Aggregates was that the latter company did not need to hold itself out to the public as a business. It had no readily discernible presence on Foley's construction projects on which it was a sub-contractor. The Board declared that they be treated as one employer for purposes of the Act because:
One of the results of the total relationship between Foley and Kingston Aggregates is that Foley can go on projects as a 'union' contractor and through Kingston Aggregates perform work with non-union labour, with no visible indication of Kingston Aggregate's presence on the project. At the same time, it permits Kingston Aggregates to operate under Foley's umbrella and gain access to large jobs which it would not otherwise be able to do. A potential effect of this practice is to erode the bargaining rights of the applicants. The Board does not have evidence before it that such erosion has taken place, although a strong inference exists from the fact that Foley employed an average combined workforce of 15 engineers and labourers in 1979 while Kingston Aggregates had a workforce of some 30 to 55 employees. It is true that similar risk of erosion would result from Foley entering into a bona fide, arms-length relationship with another non-union contractor and section 1(4) could not protect the applicants. The fact is that it is Foley's control of Kingston Aggregates, a firm carrying on related business, which presents the risk of erosion of the applicant's bargaining rights. It is not necessary for there to have been an actual erosion of those rights before the Board exercises its discretion. As the Board stated in Kustom Insulation Ltd., [1979] OLRB Rep. 531,:
'It is not necessary, however, for the union company to fall apart before concluding that an employer's scheme of operating a business through a union and non-union company has undermined a union's bargaining rights.'
While the respondents argued that there was no scheme or intent to avoid or dilute the applicants' bargaining rights, it is the reality that erosion has resulted or that there is a risk of erosion of bargaining rights which may cause the Board to exercise its section 1(4) discretion to remedy the situation…”
The instant case can be distinguished on its facts from the Board's decisions in those three cases. There is no intentional scheme to circumvent the labourers provincial agreement or otherwise defeat, dilute or erode Local 1059's bargaining rights. There is no evidence to cause the Board to suspect that Ontario and King has sub-contracted work which Hayman would have performed with labourers to a contractor which has no collective bargaining relationship with Local 1059, as appears to have been the situation in West York. Unlike Kustom Insulation wherein the Board was concerned with the unionized employer Kustom being diverted by its related non-union business from seeking certain kinds of ..... work which Kustom is fully equipped and able to perform.", Ontario and King is being used to obtain for Hayman work which, in recent years, it had been unsuccessful in getting. In Foley the Board found that the total relationship between the unionized entity, Foley, and Kingston Aggregates, the non-union one, allowed Foley to ..... go on projects as a 'unions contractor and through Kingston Aggregates perform work with non-union labour, with no visible indication of Kingston Aggregates presence on the project.". There is no evidence of that problem existing in the arrangements between Hayman and Ontario and King.
There is no evidence before the Board of actual erosion of Local 1059's bargaining rights in the sense that work which was previously performed by Hayman employing its members is now being done by contractors who are not in a collective bargaining relationship with Local 1059. In fact, Hayman/Ontario and King have started to recover some of the kind of work which Hayman had been losing to non-union general contractors. To that extent the arrangement has preserved work for Local 1059's members. Counsel for Local 1059 argued that its members had lost work opportunities because non-union specialty contractors had assigned work for which it claimed jurisdiction to persons who were not its members. The evidence does not support that conclusion. While concern about loss of work opportunities by means of improper assignment of work is an entirely legitimate one, it exists whether unionized or non-unionized specialty trades are employed on Ontario and King jobs. Section 91 of the Act protects Local 1059 when it has a legitimate claim to a work assignment whether the work at issue is being performed by persons other than its own members.
The emergence of Ontario and King as a bidding and sub-contracting agent for Hayman has erected a legal entity through which the work of Hayman could be carried out. Clearly it has not been used in that manner, however. There has been no transfer of work from Hayman to Ontario and King. Nor has Ontario and King acted or attempted to divert to contractors not in a collective bargaining relationship with Local 1059 work which its members would otherwise have performed, either as employees of Hayman or employees of a subcontractor engaged by Hayman. To the contrary, the evidence points more to a conclusion that Ontario and King has been used to preserve work for Hayman. In essence, the two entities have conducted business in a manner which, were Ontario and King bound to the provincial agreement, would not have given Local 1059 cause to enforce clause 2.05, the sub-contracting clause of the provincial agreement. In effect, the evidence does not support a conclusion that Hayman, through its arrangement with Ontario and King, has circumvented the labourers provincial agreement or has defeated, diluted or eroded Local 1059's bargaining rights. In these circumstances the Board is satisfied that, as yet, neither the institutional rights of Local 1059 nor the contractual rights of its members have been disturbed by the arrangement between Hayman and Ontario and King.
Accordingly, in all of the circumstances of this case, the Board declines to declare that The John Hayman & Sons Company, Limited and Ontario and King Limited be treated as one employer for purposes of the Labour Relations Act. Should Hayman deviate, however, from its present business conduct in a manner which would threaten or disturb the institutional rights of Local 1059 or the contractual rights of its members, or allow Ontario and King to do so, Local 1059 would be able to bring a fresh section 1(4) application as soon as it became aware of the changed circumstances. Should there be any issue of timeliness, it would be determined according to when the changed circumstances occurred and when Local 1059 reasonably should have become aware of them.
The application for a declaration under section 63 of the Labour Relations Act was dismissed for the reasons given in paragraph S of this decision.
DECISION OF BOARD MEMBER C. A. BALLENTINE;
I disagree with my colleagues. I believe that the Board should exercise its discretion to declare that The John Hayman & Sons Company, Limited and Ontario and King Limited are one employer for the purpose of the Labour Relations Act.
The preconditions of section 1(4) have been established in this case. It was admitted by Hayman that the companies are associated and are under common control and direction and the Board has declared they carry on related businesses. See paragraph 7 of the majority decision. I concur with that finding.
The only reason that the majority have for not declaring them to be one employer is that they find there has been no erosion of the applicant's bargaining rights. I am not satisfied that is so. It is a fact that Local 1059's bargaining rights have not been eroded in regard to three sub-contracts on the "White Oaks" project, namely precast, masonry and concrete forming work which was performed by Hayman engaging members of Local 1059 in accordance with the Labourers' provincial agreement. However, standing behind this section 1(4) case is a referral of a grievance in the construction industry under section 1 24 of the Act. Local 1059 is alleging in part that the on-site preparation work and the clean-up work covered by its provincial agreement was not performed by its members on the White Oaks project; (it is clear from the evidence that Ontario & King, the prime contractor on this project, had no direct employees).
From my experience in the construction industry, it is the general practice that on-site labourers are employed directly by the prime contractor for on-site work including clean-up. This is the case whether it is a general contractor, project manager, or an owner builder, and regardless of whether it is a union or non-union project. This is why I have a strong suspicion that at least in this area the applicant's bargaining rights probably have been eroded by Ontario and King.
The applicant in this case has two options as I interpret the majority decision. Firstly, it can wait and see how the Haymans perform in the future. If it finds any violations of its collective agreement on an Ontario and King project it can file with the Board a new section 1(4) application and a grievance under section 124. If the applicant can establish that work normally done by its members was done by others, the Board would be obliged to issue a section 1(4) declaration and declare that Hayman and Ontario and King are one employer for the purpose of the Act. Secondly, it could proceed with the pending grievance under section 124, Board File No. 0732-83-U. However, if it decided on this course, I trust that the quality of its evidence would be better than what it presented in the instant section 1(4) proceeding.
It is my finding that there is no justification for this Board to refuse to declare that the two companies are one for the purpose of the Act, considering that the reason given by Hayman for structuring Ontario and King was to stay clear of what is commonly known as the unionized "Mechanical Trades" who have no contractual relations with Hayman, and also considering that Hayman is in a contractual relationship with the "general trades" and bound to their various provincial agreements and has purportedly reached a written understanding as it would relate to Ontario and King projects; therefore, such a declaration would only apply to the applicant union. In the interest of saving time and expenses for the Board and the parties, a section 1(4) declaration should have been issued in this case, that The John Hayman & Sons Company, Limited and Ontario and King Limited are one employer for the purpose of the Labour Relations Act and that Ontario and King Limited is bound to the Labourers International Union of America's provincial agreement.