[1985] OLRB Rep. September 1390
1223-84-R; 1457-84-R Teamsters Local Union No. 141, affiliated with the International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America, Applicant, v. Miracle Feeds, a division of Ogilvie Mills Ltd., Idealease (London) Ltd., and 571591 Ontario Inc., Respondents
BEFORE: Harry Freedman, Vice-Chairman, and Board Members L. C. Collins and R. McMurdo.
APPEARANCES: Eric del Junco for the applicant; Derek L. Rogers and George Thompson for Miracle Feeds, a division of Oglivie Mills Ltd., R. M. Parry and Paul Martin for Idealease (London) Ltd. and 571591 Ontario Inc.
DECISION OF HARRY FREEDMAN, VICE-CHAIRMAN, AND BOARD MEMBER R.
McMURDO; September 27, 1985
The applicant originally sought certification in respect of a bargaining unit of drivers nominally employed by the respondent 571591 Ontario Inc., hereinafter referred to as Custom, who operated vehicles owned by the respondent Idealease (London) Ltd., hereinafter referred to as Ideal. Those vehicles were leased to the respondent Miracle Feeds, and all of the work done by the drivers related to the transportation of Miracle Feeds' products. The applicant had submitted that Miracle Feeds was the actual employer of the employees in question, and in the alternative, that the respondents were carrying on related activities or businesses under common control or direction and that the Board should declare, under section 1(4) of the Labour Relations Act, that all of the respondents are one employer under the Act.
By a decision dated May 3, 1985, the Board certified the applicant for the employees of Custom since it had orally ruled at the conclusion of the applicant's argument at its hearing on April 30, 1985, that Custom was the employer of the employees in question. The Board then received the submissions of the parties with respect to the applicant's request for a declaration under section 1(4) of the Act and at the conclusion of argument, reserved its decision.
Miracle Feeds' business is the development, distribution and sale of livestock feed. Miracle Feeds is an operating division of Ogilvie Mills Limited which is a wholly owned subsidiary of John Labatt Limited. The livestock feed which it sells and distributes is the nutritious by-products of the food and beverage industry that it removes from distilleries, breweries, and food processing plants. Its business is time sensitive in that the removal of its suppliers' by-products must be carried out at certain points in time or else its suppliers' plants will be shut down. Its customers' demands for livestock feed, which can fluctuate a great deal, must also be satisfied on short notice. The by-product is taken from suppliers' storage tanks and is loaded into appropriate trucks depending on whether the by-product is wet or dry grain and is then delivered directly to Miracle Feeds' customers.
Prior to April 30, 1984, the transportation of Miracle Feeds' products was performed by Hedley Bennett Trucking Ltd. Hedley Bennett Trucking Ltd. employed the drivers who performed the work and owned most of the equipment used to transport Miracle Feeds' products. Those employees did not engage in collective bargaining with Hedley Bennett Trucking Ltd. It began working for Miracle Feeds in late 1971 until its arrangement with Miracle Feeds was terminated in April 1984.
The respondent Ideal was created on April 11, 1984, (originally as 571514 Ontario Inc.) to carry on the business of full maintenance leasing of heavy equipment. It became known as Ideal in July 1984. Its principals are also the principals of an International Harvester truck dealership in London, Ontario, Forest City International Trucks Limited. Ideal is a member of Idealease Inc. which is a corporation and an association whose members are International Harvester truck dealers and is an organization that enables its members to provide full maintenance leasing services to customers across Canada.
Custom was incorporated on April 26, 1984, approximately two weeks after 571514 Ontario Inc., was incorporated.
Paul Martin is the president of Ideal and is the Vice-President of Forest City International Trucks Limited. While he does not own shares of Custom, Custom was incorporated at his request and Mr. Martin has the effective day to day control of its affairs. It is clear that Custom and Ideal are under common control and direction.
The relationship between Ideal, Custom and Miracle Feeds arose because Mr. Martin mentioned to George Thompson, the transportation manager of John Labatt Limited, that he was interested in getting into the leasing business. This conversation took place in late 1983. Mr. Thompson, who had been assigned some responsibilities for the transportation function of Miracle Feeds, asked Mr. Martin to give him a quote for the lease of vehicles that would be necessary to meet the Miracle Feeds transportation requirements. Mr. Martin, in his quote of January 1984, indicated that his company, Forest City International Trucks Limited, could not provide drivers for the leased equipment but did suggest a combined rate per mile that would cover both drivers and equipment that was based on his inquiries of driver supply companies. Shortly after the quote was submitted, Miracle Feeds decided that it would use the equipment leased from Mr. Martin's company.
Miracle Feeds had determined in late 1983 that it would no longer continue the arrangement with Hedley Bennett Trucking Ltd., but rather would operate with leased equipment and use drivers employed by a driver supply company. Mr. Thompson advised the Board that such arrangements are not unique and have been used by many businesses that do not want to be a "common carrier" but that do provide trucking services. After the arrangements for the leasing of equipment were made, Mr. Thompson and Mr. Martin discussed obtaining drivers to operate that equipment. It was then that Mr. Martin decided to create Custom and reached an agreement with Mr. Thompson to supply drivers for that leased equipment. There is no written agreement between Miracle Feeds and Custom and their agreement can be terminated by either party at any time.
Neither Miracle Feeds, nor any of the corporations with which it is associated, nor any of their employees or officers, has any financial or proprietary interest in either Ideal or Custom.
It was both Mr. Martin's and Mr. Thompson's desire to maintain continuity of service in the changeover from Hedley Bennett Trucking Ltd. to the new arrangement with Ideal and Custom. In that regard, Mr. Martin, through Forest City International Trucks Limited, hired Patricia Knott, who had worked for Hedley Bennett Trucking Ltd. in its office and knew both the drivers and the Miracle Feeds' operations. Mr. Martin, through Custom, also hired a majority of the drivers who had been working for Hedley Bennett Trucking Ltd. The selection of which drivers were hired was based on recommendations made to Mr. Martin by Ms. Knott. Mr. Thompson was not directly involved in the hiring of the drivers, although Mr. Martin did provide Mr. Thompson with a list of the drivers for insurance purposes since Miracle Feeds was insuring the vehicles it was leasing from Ideal.
Miracle Feeds is Custom's only client. While Ideal has attempted to attract other leasing clients, it only had one other client that had leased a single vehicle. It is clear that Miracle Feeds is the principal source of revenue for Ideal and the only one for Custom and is the entity that is the source of the work performed by the employees of Custom. Ideal has attempted to secure other leasing clients and has submitted quotes to potential customers who are not related in any way to Miracle Feeds. Custom has not yet made efforts to expand its client base. Miracle Feeds has not imposed any restrictions on Ideal or Custom performing work for others.
The applicant seeks to invoke section 1(4) and requests the Board to declare that Miracle Feeds, Custom and Ideal are one employer for purposes of the Labour Relations Act. It is clear to us that much of the day to day work that is performed by the employees of Custom is determined, to a large degree, by Miracle Feeds' needs which are communicated to Ms. Knott, and on occasion to the drivers directly. While Custom establishes the actual wage rate that the drivers are paid, it is beyond doubt that those rates are affected by the payment terms negotiated between Custom, Ideal and Miracle Feeds. The vehicles operated by Custom's employees all carry the Miracle Feeds' colours and logo, but also plainly state from whom they are leased. As the Board stated in its earlier decision in this matter, the employees were made aware that Custom, and not Miracle Feeds, was their employer.
When the Custom and Ideal arrangement replaced the Hedley Bennett Trucking Ltd. arrangement for Miracle Feeds' transportation requirements, there was a continuity of service and a continuity of work methods followed by the employees. It was apparent from the evidence that there was no real change in the working relationships of the employees with Miracle Feeds and with Ms. Knott after the employees of Hedley Bennett Trucking Ltd. became employed by Custom. The employees carried on, in large part, as they had done when they had worked for Hedley Bennett Trucking Ltd.
In asking the Board to invoke section 1(4) of the Act, counsel for the applicant submitted that the activities of Miracle Feeds, Custom and Ideal are related and that they are carried on under common control and direction. He further submitted that the Board ought to exercise its discretion to make the declaration in order to ensure that there is some stability to the collective bargaining relationship. He argued that that stability would not exist because of the potential for Miracle Feeds, which is the only source of the work the employees of Custom perform, to terminate its relationship with Custom and have its work performed by others.
Counsel for the respondents both submit that Custom, Ideal and Miracle Feeds are not under common control or direction. They submit that Miracle Feeds is not involved in the management of Custom or Ideal and that there is no control exercised by Miracle Feeds through ownership or financial interest in Custom or Ideal. They further submit that the circumstances that exist in this case do not give rise to the mischief which section 1(4) was intended to cure.
Section 1(4) of the Act empowers the Board to declare that two or more distinct entities are one employer for purposes of the Act when those entities carry on associated or related activities under common control or direction. The Board is not required to make such a declaration even if the conditions set out in section 1(4) are met. The Board will exercise its discretion to do so only when compelling labour relations reasons exist in the circumstances under consideration.
The applicant in this case submits that the bargaining rights held in respect of Custom may be subverted if Miracle Feeds decides to change its method of operation. Therefore, it submits that the Board should make the declaration requested so that Miracle Feeds' economic activity, which is the source of employment for Custom's employees, can be the subject of collective bargaining with it. The applicant relies principally on the Board's decision in Penmarkay Foods Limited, [1984] OLRB Rep. Sept. 1214.
Even assuming, without finding, that the respondents carry on related activities or businesses under common control or direction, we are not persuaded that we should exercise our discretion to make the order requested. There is no pre-existing collective bargaining relationship between the applicant and Miracle Feeds which is being affected by the arrangement that Miracle Feeds has with the other respondents, unlike the situation in Penmarkay Foods Limited, supra, J. H. Normick, [19791 OLRB Rep. Dec. 1176 or Don Mills Bindery, [1983] OLRB Rep. Dec. 2008. Indeed, except for the change of the employees' employer's name, the employees have continued to work in the same way that they had done before. The Miracle Feeds arrangement with Custom and Ideal was not created so as to affect employees covered by a collective agreement, unlike the circumstances before the Board in Kennedy Lodge Inc., [1984] OLRB Rep. July 931. Furthermore, this is not a situation where employees of different entities are working together so that it is difficult or impossible to determine who is their employer and thereby describe an appropriate unit for collective bargaining, as was the situation in Walters Lithographing Company, [1971] OLRB Rep. July 406.
In our view, mere speculation as to what might happen in the future is not sufficient basis to declare that the three entities in this case are one employer. While we have assumed that there is common control or direction of the activities in question, there is simply an insufficient degree of authority possessed or exercised by Miracle Feeds over the business or labour relations of Custom or Ideal to cause us to grant the declaration requested. See Caressant Care Nursing Home of Canada Limited, [1985] OLRB Rep. Jan. 50 at page 51 where the Board wrote, in finding there was no common control or direction:
..... But the specific options reserved to Caressant Care under this arrangement we find to be no more than a customer could normally expect to have access to, either expressly or as a matter of commercial reality, in ensuring that the performance of the contractor continues at all times to meet its general specifications and requirements. We recognize that there is in any business relationship, apart from perhaps fixed-term contracts, the right of termination of the arrangement by the customer which, as a practical matter, requires a contractor to be more or less responsive to any complaints by its customers. The question is whether, on an on-going basis, the contractor really has taken over control and responsibility for the selection, training and supervision of the employee workforce, and is truly independent in making the decisions that it does."
It is not necessary for us to determine if the degree of authority over Custom and Ideal that exists in this case meets the statutory condition of common control or direction. Such a finding and the Board's exercise of discretion are often difficult to separate. Indeed, the Board stated in Penmarkay Foods, supra, at 1230-31:
"The discretionary power to treat two or more entities as one employer can only be exercised where two criteria are satisfied: the entities concerned must be under 'common control or direction' and they must carry on 'associated or related activities'. When both of these criteria are met, the Board issues a section 1(4) declaration if there are sound industrial relations reasons for doing so. Standing alone, phrases like 'common control or direction' and 'associated or related activities' are linguistically capable of bearing more than one interpretation.... The only way to ... assign a precise meaning to the statutory criteria is by reference to the policy objectives underlying the statutory language."
[emphasis added]
The exercise of the Board's discretion is entirely a function of labour relations policy. In our opinion, the factors the Board considers in determining whether there is common control or direction over two or more entities are also particularly relevant in deciding whether the Board should exercise its discretion under section 1(4) of the Act.
- The Board has previously examined contracting arrangements that are similar in principle to the relationships before us. In Complete Car Care Centre, [1983] OLRB Rep. Aug. 1293, the Board described the applicability of section 1(4) to a sub-contracting arrangement at pages 1298-99:
"The Board has previously accepted the proposition that sub-contracting relationships can under certain circumstances bring two nominally independent firms within the ambit of section 1(4). As was stated in the Charming Hostess case [1982] OLRB Rep. April 582, the more closely a firm which has contracted out work controls when, where, how, by whom and at what place the work is to be done, the more the activities of the two firms will appear to be under joint control or direction. Indeed, the degree of control may be so great as to lead to the conclusion that the firm allegedly contracting-out certain work is in fact the true employer of the individuals performing it, and that they are not employees of the 'sub-contractor' at all. See: K Mart Canada Limited, [1983] OLRB Rep. May 649. In addition, a section 1(4) declaration may be appropriate in instances where a sub-contractor is effectively dominated by the firm letting out the work, and it appears the true purpose of the sub-contract was not to provide the dominant firm with independent managerial or employee skills, but rather to provide it with a separate 'non-union' corporate vehicle with which it could continue performing the same work as before but outside of any collective bargaining obligations. See J. H. Normick Inc. [1979] OLRB Rep. Dec. 1176 and Donald A. Foley Limited, [1980] OLRB Rep. Apr. 436."
The Board held that sub-contracting in that case did not give rise to common control or
direction over the businesses. The Board also stated at page 1299:
"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."
- The Board in Caressant Care Nursing Home of Canada Limited, supra, also discussed a contracting-out arrangement and the effect of section 1(4) on that arrangement at page 53-54:
"In Kennedy Lodge,, the Board introduced the terms 'core' and 'peripheral' functions, in commenting upon the question of community perception. ... Without seeking to define any further the terms score' and 'peripheral', we would simply observe that the contracting out of the kind of work involved here, in terms of food services and housekeeping services, would not seem to offend the sensibilities of the labour relations community in the way that the purported contracting-out of direct nursing care does. And indeed the history of companies like Versa Services in providing these services within the health care industry of the province makes it difficult for anyone to argue 'surprise' over a development like the present. In any event, as the Board noted at the end of its comments with respect to community perception in Kennedy Lodge, the question before the Board and arising under the Act remains one of intent, and of 'control', and we find nothing in the evidence before us to suggest anything but a bona fide intent to hand the responsibility for these severable aspects of the Home over to the business organization of Versa Services. Whether these are areas, as they obviously are, which are integral to the continued operation of a nursing home, and with respect to which a strike could obviously cause disruption, and whether as a result the employees engaged in these on-site activities fall under the Hospital Labour Disputes Arbitration Act, as they obviously do, does not assist the Board in assessing on a case by case basis the degree of responsibility given up in a particular 'subcontracting' arrangement, and that remains the issue for the Board under section 1(4) of our Act."
We observe that in this case Miracle Feeds had not previously performed the transportation function with its own employees. Miracle Feeds was not in and did not want to engage in the trucking business before entering into its relationship with Custom and Ideal. The contracting out of trucking services to licenced common carriers or entities which both lease vehicles and provide drivers is quite common.
- We are also satisfied that the mischief that section 1(4) was enacted to deal with does not exist in the circumstances of this case at the present time. The Board in Industrial Mine Installations Limited, [1972] OLRB Rep. Dec. 1029 suggested the following situations in which a Board declaration under section 1(4) would be appropriate:
"Section 1(4) is obviously contemplated to cure the mischief that results from being unable to properly define and tie down the employment relationship. In many situations where companies have a close relationship an employee may be shifted from one company to another so that his employment relationship, at any given period, is difficult to define in terms of one employer.
So too, the number of employees employed by one of those companies at any given time may be impossible to ascertain.
Prior to the enactment of section 1(4), where such situations existed, it was difficult to define the employment relationship and to determine the proper employer for certain purposes under the Act. For example, in certification proceedings it was necessary to determine the proper employer in order to determine whether the union had sufficient membership among the employees to be certified.
Also, in some situations where a union had been granted bargaining rights for the employees of one employer, the employees could be shifted to another associated or related employer with the result that the bargaining rights which had been earned by the trade union for the employees was lost.
So too, in the case where associated or related employers joined in a common enterprise and used one workforce, which was shifted and transferred from time to time, the certification with respect to one employer only was, in effect, a certification of a segment of the total enterprise and could seriously impair the totality of the business operations by inhibiting the shifting of employees between union and non-union segments of the enterprise. It was also possible in situations where associated or related companies carried on a single enterprise that employees of the separate legal entities could be represented by different trade unions so as to cause the bargaining rights within the single enterprise to be unduly fragmented."
In summary, we are not persuaded that sound labour relations reasons exist for making the declaration sought by the applicant. Miracle Feeds has no proprietary or financial interest in either Ideal or Custom, and the management of Custom and Ideal is clearly separate from the management of Miracle Feeds. Miracle Feeds had no role whatever in the creation of either Custom or Ideal. Custom is the actual employer of the employees. It decides who is hired, disciplined, and scheduled to work. The collective bargaining rights of employees have not suffered by reason of the relationship between Miracle Feeds and Custom and Ideal nor was any pre-existing collective bargaining structure adversely affected by the arrangement. While Miracle Feeds' status as Custom's only customer is an important factor in affecting the way in which Custom carries on business and how it may deal with its employees, it does not have the kind of significant role in the conduct of Custom's business or labour relations that would cause us to make the declaration requested by the applicant.
For these reasons, this application under section 1(4) is dismissed.
DECISION OF BOARD MEMBER, L. C. COLLINS;
I concur with the majority's findings of fact. In my opinion, the wide difference between the economic power held by Miracle Feeds and Custom and Ideal persuades me that Miracle Feeds and Custom and Ideal carry on business under common control and direction.
However, I dissent from the majority's refusal to exercise their discretion under section 1(4) of the Act. The arrangement between Miracle Feeds and Custom and Ideal, although clearly undertaken for bona fide business reasons unrelated to any union activity on the part of the employees, is a fragile one. The applicant's bargaining rights should not depend on any corporate manoeuvres that Miracle Feeds or Custom and Ideal might decide to engage in. The applicant's bargaining rights should attach to the economic activity that creates the work performed by the employees of Custom, and not to a corporate entity that may be substituted at any time. Therefore, I would have exercised the discretion under 1(4) to declare that Miracle Feeds and Custom and Ideal are one employer for purposes of the Act.