Ontario Labour Relations Board
File No.: 1799-85-R Date: November 7, 1986
Re: United Food & Commercial Workers International Union, Local 409, Applicant, v. Canada Safeway Limited and Current River Foods Ltd., Respondent, v. Group of Employees, Objectors
Before: N. B. Satterfield, Vice-Chairman, and Board Members W. H. Wightman and S. O'Flynn.
Appearances: W. Dubinsky and Michael Fraser for the applicant; Fred Bickford and Jim Baccan for the respondent; Boyd Joseph Albertini for the group of employees.
DECISION OF THE BOARD
This is an application made under section 63 of the Labour Relations Act. The applicant alleges that Current River Foods Ltd. is a successor to Canada Safeway Limited with respect to part of its business, being the business located at premises known municipally as 320 Arundel Street in Thunder Bay, Ontario. The store was known as the Hodder Avenue store under Canada Safeway Limited but will be referred to hereafter as the Current River store, or the store. For ease of reference, the Board also will refer hereafter to the applicant as "the union", Current River Foods Ltd. as "the employer" and Canada Safeway Limited, as "Safeway".
Section 63 of the Act reads, in part, as follows:
63.-(1) In this section,
(a) "business" includes a part or parts thereof;
(b) "sells" includes leases, transfers and any other manner of disposition, and "sold" and "sale" have corresponding meanings.
(2) Where an employer who is bound by or is a party to a collective agreement with a trade union or council of trade unions sells his business, the person to whom the business has been sold is, until the Board otherwise declares, bound by the collective agreement as if he had been a party thereto and, where an employer sells his business while an application for certification or termination of bargaining rights to which he is a party is before the Board, the person to whom the business has been sold is, until the Board otherwise declares, the employer for the purposes of the application as if he were named as the employer in the application.
(5) The Board may, upon the application of any person, trade union or council of trade unions concerned, made within sixty days after the successor employer referred to in subsection (2) becomes bound by the collective agreement, or within sixty days after the trade union or council of trade unions has given a notice under subsection (3), terminate the bargaining rights of the trade union or council of trade unions bound by the collective agreement or that has given notice, as the case may be, if, in the opinion of the Board, the person to whom the business was sold has changed its character so that it is substantially different from the business of the predecessor employer.
The union is seeking a declaration that there has been a sale of part of Safeway's business to the employer and that the employer, as a result, is bound by the terms and conditions of a collective agreement between the union and Safeway which was in effect at the time of the alleged sale. The employer takes the position that it has merely taken over Safeway's lease with the Royal Trust Company for the Current River store, purchased some assets from Safeway, but has not taken over that part of Safeway's business which had operated in the Current River store. For that reason, according to the employer, there has been no sale pursuant to section 63 of the Act.
The employer sought to and did satisfy its evidentiary duty under subsection 13 of section 63 by calling to testify before the Board James Baccari and Yuri Stezenko. Baccari is a principal of Current River Foods Ltd. Stezenko is a relief district manager for Safeway and, when the Current River store was operated by Safeway, it came within his responsibilities. The union did not call any witnesses to testify on its behalf. The findings of facts herein are based on the Board's assessment of the testimony of the employer's witnesses as they were examined by counsel for the employer and the union and by the representative of the objectors, having regard to the usual criteria respecting credibility. Credibility is not a problem with either witness.
The Board's decisions respecting transactions in the retail food trade which are alleged to be a sale of a business within the meaning of section 63 of the Act fall into two main groups. The first group is represented by the Board's decision in Dutch Boy Food Markets, 65 CLLC 16,051 and the decisions following it until the decision of More Groceteria Limited, [1980] OLRB Rep. April 486. The second group is represented by the Board's decisions in Valencia Foods, [1984] OLRB Rep. May 773; Gilham Foods, [1984] OLRB Rep. Oct. 1423; Queensway Food Ltd., [1984] OLRB Rep. Feb. 358; Keele-Wilson Supermarket Limited, [1985] OLRB Rep. March 425 (Super Tops No. 1) and Super Tops Holdings Inc., [1986] OLRB Rep. Jan. 168 (Super Tops No. 2). The Dutch Boy line of cases attaches major importance to the elements of store locations and premises in finding that there has been a sale of a business under section 63 in transactions involving companies in the retail food business. In the second group of cases, the Board found that there had not been a sale within the meaning of section 63, rather the alleged successor had taken over the premises and idle assets of the prior occupant of the premises and used them to expand an existing, independent business into those premises.
The employer seeks to place its transaction with Safeway within the second group of decisions. To that end, it relies on what it characterizes as significant differences between the business which it carries on in the Current River store and the business carried on by Safeway when it operated the store in order to argue that the employer has used the premises and assets which it acquired so as to establish its own new business, distinct from the business of Safeway.
Baccari is a partner in the employer's business with his son-in-law, Jed Albertini. Prior to entering into that partnership, Albertini was in the real estate business and Baccari had been employed by Safeway for nearly 35 years. He had management responsibility during 27 of those years for various of Safeway's Thunder Bay stores, either as a store manager, district manager for Thunder Bay or relief district manager for its stores from Sault Ste. Marie west. Baccari was familiar with the Current River store. It was one of six operated by Safeway in the Thunder Bay area, two of which recently had been purchased from Dominion Stores Limited. The purchase had required the approval of the Foreign Investment Review Agency and one of the conditions of approval was that Safeway divest itself by September, 1985 of one of the stores which it had owned prior to the purchase. Baccari knew of that condition well before the deadline and that the store which would be disposed of was to be the Current River store. During a vacation visit to Thunder Bay in the late summer of 1984, he discussed with Albertini the possibility of taking over the premises and operating a retail food store there. They agreed that he should investigate that possibility with Safeway. His inquiry led quickly to an offer and acceptance of a sublease agreement for the premises.
Baccari and Albertini formed the corporation Current River Foods Ltd. on August 7th, 1985. In the person of the corporation they entered into a sublease agreement with Safeway to take over its lease with the Royal Trust Company until April 30, 2009. The agreement was made July 19, 1985 to have effect from September 8, 1985. Part of the agreement was that Safeway would sell and the employer would buy $91,000.00 worth of fixtures and equipment in the store, and a parcel of land adjacent to the store for $30,000.00. The employer also purchased all of the store inventory, except perishables. This purchase was made at Baccari's request because he did not want to delay reopening of the store and wanted to take advantage of customers' habits of coming to the store to do their food shop.
Safeway closed the store at the end of business on Saturday, September 7th, 1985. Prior to closing, there had been a sign displayed at the exit from the store giving notice of its pending closure. Safeway also advertised several times in the Thunder Bay papers the fact that the Current River store would be closing and sought the patronage of the store's customers for the three closest Safeway stores. These advertisements mentioned the fact that a new food store would be opening on the premises shortly in the name of Current River Foods. Baccari described the Current River area as being segregated from the City by the Current River and Boulevard Lake. The nearest Safeway store is ten minutes drive away, driving half the distance at 50 km/h and half at 80 km/h. He says there are quite a few elderly people in the area with no means of transportation who walk to the store to do their shopping. He acknowledged in cross-examination that local residents were upset with news of the store's closing.
The store was closed for one business week and was reopened on September 16th in the name of Current River Foods with all new employees. The employees of the former Safeway operation had been offered a chance to relocate at Safeway's other Thunder Bay stores. During the week when the store was closed, the employer cleaned and re-decorated the premises, made alterations to its layout and erected its own signs on the exterior of the store and property. The re-decorating involved putting a cedar facing across the front and top of the refrigerated products case, installing a fifteen foot flower and plant stand faced with cedar and eight orchard bins, also faced with cedar, for displaying fruits and vegetables. The grocery display area was reduced in size in order to make room for the new produce cases and also to make more room at the check-out counters. The effect of the physical changes was to open up the store so that more of it would be visible from its entrance and to provide more walking space. According to Baccari, the differences visible to the customers, compared with the way Safeway had the store set up, were the changes to the produce display fixtures, different locations for the food items and there would be nothing stacked in cases on the floor for sale. They would also see a new 'deli' counter in the meat section where a variety of luncheon meats would be available. The Safeway store did not have this feature.
The store continued to serve the same market area as Safeway had served. The employer sought to reach that market by distributing weekly flyers featuring the weekly specials which would be available at the store. These were distributed by mail to the rural parts of the area and by hand to the other parts. Safeway, on the other hand, had advertised in the daily newspapers and on local television. The employer did not use these media. From the opening of the store, the employer aimed at being different from Safeway when it operated the store by giving more personal service, including offering fresh meats cut to the customers' requirements instead of prepackaged meats, by offering deli meats and by trying to target the groceries and produce available in the store to suit customers' tastes. This was done by inquiring of the customers what were their preferences.
Baccari told the Board that the employer was particularly aiming at Ukrainian customers whom he believed made up the dominant ethnic group in the stores' market area. He was unable to give any measure of the proportion of the market which they represented. When asked in chief what were the business implications of a "mostly Ukrainian population", Baccari replied that it meant trying to identify what foods they were used to buying. He testified as to certain produce and meats which he perceived to be their preferences. There is little to distinguish these from what one would expect to find in any food store of comparable size. The items which he identified as being preferred by his Ukrainian customers were not featured in any of the flyers in evidence before the Board. Baccari also testified in cross-examination that he was not aware, when he acquired the rights to use this location, that Ukrainians were the dominant ethnic group. During the week when the store was closed, the employer took no special steps to serve any particular ethnic group in preparing the store for opening. Baccari learned from his customers after the store had opened that Ukrainians were the dominant ethnic group in the area. He also stated in cross-examination that, since the store had been in operation, in order to serve the special interests of its Ukrainian customers, Baccari asks them if they have any special requests. He admitted that he does this with all of the store's customers.
The store's major supplier of grocery items is Macdonald's Consolidated, a subsidiary of Safeway. Approximately half of the grocery products available in the store are supplied from that source, whereas Safeway obtained 95 per cent of its grocery products from Macdonalds. The store continues to offer for sale some of Safeway's private brands. On the other hand, the employer tries to offer specialty grocery products not available elsewhere in Thunder Bay and brand goods not available in chain supermarkets, by dealing with specialty suppliers which sell only to independent operators.
Employer counsel submits that these facts are very similar to the facts in the Super Tops No. 1 decision, supra. Therefore, in the instant case, the Board should find that there has not been a sale of a business or of part of a business between Safeway and the employer for the same reasons that the Board reached that conclusion in the Super Tops No. 1 decision. The Board decided in the latter case, that the alleged successor had acquired the physical premises and some assets from Safeway which it then used to expand its own, existing successful business. Therefore, section 63 had no application to the transaction. It is useful to quote the Board's full reasons for reaching that conclusion:
- The circumstances of this case are substantially similar to two recent "food store" cases where the Board had occasion to review in some detail the relevant legal principles (see Queensway Foods Ltd., [1984] OLRB Rep. Feb. 358, and Valencia Foods, [1984] OLRB Rep. May 773). We see little purpose in repeating that analysis here. It suffices to say that we adopt, as our own, the reasoning in paragraphs 4 and 5 of Queensway and 23 to 28 in Valencia. We would only point out the ultimate conclusion enunciated in Valencia:
The lesson of the cases is that while location and premises are important elements of a retail food business, they are not themselves the business; even location and premises can be or become mere "surplus assets" which alone, or even in combination with other assets, can lack the dynamic or organic quality which distinguishes a business from an idle collection of assets....
That single sentence highlights the issue here: has the company acquired part of Safeway's "business", or has it merely acquired the right to use certain premises, formerly, used by Safeway?
We do not doubt the importance of location in the retail food industry - particularly since the habit of shopping locally can be an important element of good will and can be the key to business success even if good will is not expressly recognized in the transaction by which the location is acquired. There is no doubt that in this case, there are indications which, when considered in the context of the retail food industry, do tend to point towards a sale of a business within the meaning of section 63. The company continues to carry on a food business from the same location as Safeway which has effectively withdrawn from that local market. The hiatus period between the closing of Safeway and the opening of Super Tops is relatively small (six weeks). The premises and general store layout are similar.
But there are also a number of factors which point in the other direction. Mr. Chetti had no intention of acquiring Safeway's business. Indeed, quite the contrary. He already operated two ethnically-oriented supermarkets in Metropolitan Toronto and was anxious to open a third. Safeway's business, as such, was unprofitable and not worth buying.
Mr. Chetti learned of the possibility of acquiring the Safeway premises from an independent real estate agent. The company did not acquire any managerial or other expertise from Safeway. The entrepreneurial initiative, managerial talent, and employee skills were all derived from Mr. Chetti's pre-existing operations or were assembled following the sale. A substantial sum was expended so that the new store would conform to Mr. Chetti's business concept rather than that of Safeway. Mr. Chetti knew that his success depended upon expanding, serving and developing his own market which was not being served by Safeway or the other local chain stores. He was able to do this with dramatic success because he was able to bring to bear his own business organization to attract customers whom Safeway never reached. That is why he was able to instantly triple the sales volume. He was not acquiring and reviving an ailing "part" of Safeway's business. He was expanding his own business from premises formerly occupied by Safeway.
We accept the union's submission that in the retail food business location is important, and the acquisition of physical premises will in many cases be sufficient to trigger a finding of "successorship"; moreover, when a "severed part" of a business has been transferred it would be an unusual purchaser who did not undertake any new initiatives, or try to put his own imprint upon his recent acquisition. On balance, however, we do not find a sale of a business in the facts of this case. In our view, the presence of Super Tops at Safeway's former location represents the expansion of an already well-established business in which some assets of Safeway came to be used. Those assets did not alone constitute a business or part of a business, and it cannot be said in this case that the company has expanded by purchasing a competitor's business and refurbishing it. It has merely purchased some idle and uneconomic assets which it has used to expand its own successful going concern. Section 63 has no application. This application is accordingly dismissed.
The facts supporting those reasons are set out in paragraphs 4 through 18 of the decision. Some of those facts reveal that the alleged successor already was operating a successful retail food business in two Super Tops stores. It set out to create a third store in the former Safeway premises at issue in that case. The store was closed for six weeks while extensive renovations were made at a cost of three quarters of a million dollars in order to bring about a significant change of emphasis in merchandising techniques. These included stocking the store with a large inventory of goods offering varieties which could not be found in the stores of the supermarket chains, and such things as fresh meats displayed in the European style. As the Board observed at paragraph 12, "[t]he focus, emphasis and selection were entirely different, particularly in the way that Super Tops sold meat, dairy products and produce". Super Tops' advertising was specifically targeted to the particular ethnic populations which they had identified as their market, and was done in the languages of those populations. The employees in the store were selected for their ability to serve customers in English as well as the languages of the ethnic populations which the store aimed to serve. Those facts and all of the facts set out in the decision make it clear that Super Tops directed its efforts from the start towards reaching an entirely different market than the one previously served by Safeway.
The Board in the instant case disagrees with employer counsel that the facts of this case are similar to those in Super Tops No. 1. They are so different as to readily distinguish it from the Super Tops decision. The employer did not have a plan to target a particular market not served by Safeway. It learned after it opened the Current River store that its market included a large number of Ukrainians and it tried to find out what special interests they had, just as it did for all customers.
That was part of the employer's attempts to personalize service in the store. While it was a deliberate effort to present a different service than Safeway had, it falls into the normal kind of initiatives one would expect of a new occupant trying to place its own stamp on the premises. While these are entirely understandable and sensible initiatives, they are not aimed at developing a new market, rather they are aimed at consolidating the existing market by hanging on to present customers and trying to attract others already in the market area. The employer was clearly responding to the location of the premises. It specifically sought to buy Safeway's inventory, excluding perishables, so that it could open the store as Current River Foods Ltd. with hardly skipping a beat. The employer had acquired from Safeway everything in the way of fixtures, equipment and inventory, except for perishables, to do so the moment it closed the transaction. The employer's efforts after opening the store were clearly directed towards consolidating the existing customers of the store and trying to recapture the ones which Safeway may have lost.
This case falls squarely within the Dutch Boy line of cases which emphasized the importance of location for a retail food store and of the support of the people who live within its area. Baccari recognized this importance when he said that he did not want to delay the opening of the store because he wanted to take advantage of the customer's habits of coming to the store.
The Board adopts the reasoning in the Dutch Boy line of cases and finds on the facts of the instant case, that the employer, in acquiring the right to use the former Safeway premises complete with its furnishings, fixtures and inventory became the "buyer" in the sale of part of Safeway's business within the meaning of section 63 of the Act. Therefore, Current River Foods Ltd. is the successor employer to Canada Safeway Limited respecting the Current River store and is bound to the collective agreement between Canada Safeway Limited and United Food & Commercial Workers International Union, Local 409 which was in effect at the time of the sale.