[1986] OLRB Rep. January 131
2991-84-R Graphic Communications International Union, Local 517, Applicant, v. McColIum Graphics Incorporated, o/a Baxter Press, Hunter Printing London Limited and Baxter Graphix Inc., Respondents
BEFORE: Ian C. Springate, Alternate Chairman, and Board Members F. W Murray and S. O 'Flynn.
APPEARANCES: Geoffrey A. Beasley and Ron Berman for the applicant; Jonathan McKinnon and James Baxter for the respondents.
DECISION OF THE BOARD; January 13, 1986
1This is an application under section 1(4) of the Labour Relations Act.
2Section 1(4) provides as follows:
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.
3The application as filed named as respondents McCollum Graphics Incorporated, a Baxter Press, and Hunter Printing London Limited. An intervention was filed by Baxter Graphix Inc. At the commencement of the hearing into this matter, counsel for the applicant requested that Baxter Graphix Inc. be added as a party respondent. Counsel appearing on behalf of Baxter Graphix Inc. and the other two firms agreed that this would be appropriate. Accordingly, the style of cause of this application is amended to show Baxter Graphix Inc. as a respondent.
4Most of the evidence in this matter was given by Mr. James Baxter, the owner of Baxter Graphix Inc. In the course of giving his evidence, Mr. Baxter referred to a number of his relatives. For ease of reference, members of the Baxter family will be referred to in this decision in terms of their relationship to Mr. James Baxter.
5Hunter Printing London Limited ("Hunter Printing") commenced operations in the City of London in or about 1950 under the control of a Mr. Hunter. Following Mr. Hunter's death in the 1960s, his estate sold the company. Following the sale, control of the company passed to members of the Baxter family. On or about November 13, 1970, almost all of the shares of Hunter Printing became the property of Kincaldrum Estates. The shares of Kincaldrum Estates were held by James Baxter's grandfather, (also named James), his grandmother, and his father Ian Baxter.
6James Baxter testified that Hunter Printing started as a one-colour letter press shop and acquired a reputation as a "black and white shop" capable of performing inexpensive quality work. In the early 1970s Hunter Printing began to produce the racing program for the Western Fair racetrack. In order to perform this work more effectively, in 1974 Hunter Press purchased some expensive equipment that was particularly adapted to medium and long runs in two colours. The equipment could also be utilized for four colour runs and "book work" material. At about this time, Hunter Printing had approximately 20 employees operating some $100,000 worth of equipment. In 1976, however, Hunter Printing lost the Western Fair work and began to run into financial difficulties. Attempts were made to acquire other work which would permit the company to continue to make efficient use of its expensive equipment, but without success.
7In 1976, at about the same time as Hunter Printing began to experience financial difficulties, James Baxter joined the company. He had just graduated from the University of Western Ontario with a degree in History and had no prior experience working in the printing industry. Mr. Baxter began working in sales and customer relations but over time also acquired experience in the printing end of the operation. In April of 1977 James Baxter's grandmother died. Although this point was not specifically referred to in evidence, it appears reasonable to infer that she was predeceased by her husband. Under his grandmother's will, James Baxter became a 25 per cent owner of Kincaldrum Estates. Under the same will, James Baxter's two sisters also became part owners of Kincaldrum Estates. At no point did the sisters, one of whom lives in Richmond Hill and the other in King City, play an active role in the running of Hunter Printing.
8Indications are that during most of the 1970's the actual day to day operations of Hunter Printing were managed by James Baxter's father, who was the company's president. James Baxter testified that his father had a full-time residence in King city but travelled to London on a regular basis to manage the affairs of the company. However, in 1979 his father ceased to travel to London on a regular basis, in consequence of which James Baxter became more active in the running of Hunter Printing. He assumed the title of general manager. James Baxter testified that by 1981 he was effectively in control of Hunter Printing, notwithstanding this his father continued to hold the title of President. At that point in time, the company had only six employees.
9As indicated above, Hunter Printing faced economic difficulties commencing in 1976 with the loss of the Western Fair racing program. Much of the company's difficulties were due to its inability to acquire high-volume work suitable to its relatively expensive equipment. In addition, Hunter Printing had high overhead costs, caused in part by the fact that the mortgage and operating costs of the building it owned amounted to about $3,000 per month. In order to cut costs, the company reduced its work force and sold off certain equipment. As already noted, by 1981 the company had only six employees. This was reduced by James Baxter to four employees by the end of the year. In 1982 Hunter Printing sold off approximately $102,000 worth of equipment. The decision to sell the equipment was made by James Baxter. Notwithstanding the scaling down of the size of the company's work force, Hunter Printing was still unable to make money. The firm's problems were compounded by the economic recession in the early 1980s during which a number of customers did not pay their bills. In 1982 Hunter Printing lost approximately $270,000. In 1983 its losses rose to approximately $323,000. In an attempt to keep the company afloat, in 1983 both James Baxter and his father ceased to draw a wage from the company. James Baxter took a second job as a security guard. In addition, James Baxter and his wife made some direct loans to the company.
10As already noted, the costs associated with operating its building were a financial drain on Hunter Printing. The building had about 8,800 square feet of space, which was more than required for the company's scaled-down operations. In October of 1983, some of the space was leased out to another firm. Additional space was leased out in February of 1984, bringing the area actually occupied by Hunter Printing down to 5,800 square feet. This was apparently still in excess of the company's requirements. The building was put up for sale, and a potential purchaser found. It was arranged that title to the building would pass on July 27, 1984. However, the potential purchaser failed to close. James Baxter testified that had the building been sold, he would have changed the name of the business and continued operations from new and smaller facilities. However, with the failure of the sale, James Baxter decided that Hunter Printing was no longer a viable entity, and that it would be best for him to get a fresh start.
11As indicated above, by the end of 1981 Hunter Printing was down to four employees. These employees worked primarily on the printing of envelopes, letterheads and flyers, although they also performed some larger jobs, most notably the printing of a large order of books. In contemplation of the proposed sale of the building, the employees were laid off on July 11, 1984. Hunter Printing actually continued operations until August 31, 1984. Between these two dates, the work was either performed by James Baxter himself, or he contracted it out to other firms.
12On March 31, 1981 McCollum Graphics Incorporated was incorporated. McCollum is James Baxter's middle name. The directors of the company were James Baxter, his wife (who was also the firm's president) and a family friend who took no part in the operation of the business. McCollum Graphics initially operated out of its own premises at a separate location in London. There is very little evidence before us concerning the first year of McCollum Graphics' operations. However, it appears that under the direction of James Baxter, it provided graphic services to Hunter Printing, and perhaps to other firms as well. About one year after McCollum Graphics commenced operations, it moved to the Hunter Printing building. It did not pay any rent to Hunter Printing. In January 1984 McCollum Graphics purchased approximately $9,900 worth of equipment from Hunter Printing. This equipment included some office equipment, an A. B. Dick Press, a Heidelberg Platen Press, and some other assorted printing equipment. It appears that James Baxter made the decisions with respect to the sale on behalf of both Hunter Printing and McCollum Graphics. James Baxter testified that he decided upon the purchase price for the equipment based upon discussions with second-hand equipment dealers. Proceeds from the sale were used by Hunter Printing to repay at least part of the loans which James Baxter and his wife had made to the company. The equipment purchased by McCollum Graphics was not moved out of the Hunter Printing building. To the contrary, it continued to be operated by the employees of Hunter Printing for approximately seven months prior to their being laid off. It should be noted, that after the sale of this equipment, Hunter Printing continued to own approximately $25,000 worth of other equipment.
13In consequence of the decision made by himself not to continue Hunter Printing, on or about October 1, 1984 James Baxter commenced to operate a printing business utilizing the corporate entity McCollum Graphics Incorporated. At this point, he operated McCollum Graphics under the name of Baxter Press. On or about October 26, 1984 this printing operation was taken over by a newly incorporated firm, Baxter Graphix Inc. (originally, Mr. Baxter had wanted to continue utilizing the name Baxter Printing, but it was not available to be used by an incorporated company). James Baxter is the sole owner and director of Baxter Graphix Inc. Baxter Graphix operates out of a new facility with approximately 1,200 square feet of space. The cost of operating this space is approximately $800 per month. The company uses the equipment which McCollum Graphics purchased from Hunter Printing. Title to this equipment remains with McCollum Graphics. Baxter Graphix also makes use of between $7,000 and $8,000 worth of equipment purchased elsewhere. The equipment owned by Hunter Printing which was not purchased by McCollum, was sold by Hunter Printing to an outside buyer. The Hunter Printing building was eventually taken over by Canada Trust pursuant to the terms of a mortgage it held on the property.
14At the time of the hearing into this matter, Baxter Graphix had three staff members. Among them were James Baxter who did most of the printing work. The only other full-time staff member was a woman who looked after the running of the office. She had previously performed the same duties for Hunter Printing. The third staff member was a woman who James Baxter described as a "go-fer". She made deliveries, did packing work and picked up film. Originally, Baxter Graphix started with a fourth person, a printer who had worked for Hunter Printing. He worked for Baxter Graphix on a part-time basis until early May 1985 when he quit because of health problems.
15James Baxter testified that the work performed by Baxter Graphix includes the printing of letterheads, business cards and flyers in one or two colours. According to Mr. Baxter, he seeks work from people such as doctors and lawyers since their work generally involves fairly short runs, and a rapid turnaround time. Indeed, he testified that he does not take on any work which he cannot turn out within three days. The company keeps a small inventory of items such as paper. Most supplies are purchased as and when required.
16Baxter Graphix has some of the same customers that James Baxter dealt with at Hunter Printing. It also has some new customers. Mr. Baxter testified that he makes a point of not dealing with any customers that were slow in paying their accounts to Hunter Printing.
17The applicant trade union dates its interest in Hunter Press back to June of 1983. Following negotiations in which the company was represented by James Baxter, Hunter Printing and the Graphic Arts International Union, Local 517 entered into a collective agreement which was to run until July 15, 1984. At the time the collective agreement was entered into, Hunter Printing was down to four employees and had its building up for sale. On May 17, 1984 Graphic Communications International Union, Local 517 (the applicant in these proceedings) served notice to bargain on Hunter Printing for a new collective agreement and proposed certain amendments to the provisions of the existing agreement. It is the contention of the applicant, not disputed by the respondents, that Graphic Communications International Union, Local 517, is a successor trade union to Graphic Arts International Union Local 517. Hunter Printing did not respond to the notice to bargain. By way of this application, the applicant seeks a finding that the three respondents should be treated as a single employer, and that its bargaining rights with respect to employees of Hunter Printing continue with respect to the employees of Baxter Graphix.
18The purpose of section 1(4) of the Act was discussed as follows in the B rant Erecting and Hoisting case, [1980] OLRB Rep. July 945 at p. 948:
Section 1(4) was enacted in 1971 and deals with situations where the economic activity giving rise to employment or collective bargaining relationships regulated by the Act, is carried out by, or through more than one legal entity, where such legal entities carry on related business activities under common control or direction, the Board is empowered to pierce the corporate veil. Section 1(4) ensures that the institutional rights of a trade union, and the contractual rights of its members, will attach to a definable commercial activity, rather than the legal vehicle(s) through which that activity is carried on. Legal form is not permitted to dictate or fragment a collective bargaining structure; nor will alterations in legal form undermine established bargaining rights. In this respect the purpose of section 1(4) is similar to that of section 55 which preserves the established bargaining rights and collective agreement when a "business" is transferred from one employer to another. Section 55 has been part of the scheme of the Act since the mid 1960's. Neither remedial provision requires a finding of anti-union animus; their primary application is to bona fide business transactions which incidentally undermine or frustrate established statutory rights.
19Section 1(4) does not require that related business activities that are under common control or direction be carried on simultaneously or contemporaneously. This point was made clear by the 1975 addition to section 1(4) of the phrase "whether or not simultaneously". In the B rant Erecting and Hoisting case, the Board commented on the addition, as follows:
The amendment reflects a legislative recognition that the essential unity and identity of an economic activity (which gives rise to employment) may be preserved even though the legal vehicles through which the activity is carried on will not operate simultaneously; and, business may be effectively transferred from one corporate entity to another, without any of the indicia of a "transfer of a business" which might trigger the application of section 55.
20Section 1(4) indicates that it applies only to "associated or related activities or businesses". In that Hunter Printing, Baxter Graphix and McCollum Graphics when operating as Baxter Press were all printing shops, serving the London area market, we are satisfied that they were carrying on associated or related activities or businesses.
21In order to apply section 1(4), the Board must be of the opinion that two or more entities which carry on associated or related activities or businesses are under common control or direction. Common control or direction over two corporate entities is generally demonstrated by showing that the corporations have common shareholders and officers. However, the Board has in a number of cases held that two corporations can be under common direction even though legally owned by different individuals. The Board reached such a conclusion in Evans-Kennedy Construction Ltd., [1979] OLRB Rep. May 388 where a Mr. Kennedy operated a company owned by himself while at the same time directing the affairs of a second company owned by a lady with whom he had a close personal relationship. A similar conclusion was reached in J. D. S. In vestments Ltd., [1981] OLRB Rep. Mar. 294. In that case a project nominally being constructed by a small development company was in fact built under the direction of an official of a much larger construction company who utilized the know-how and resources of the larger company. The owners of the two companies were friends, and, in their personal capacities, joint owners of the project under construction. While in these and certain other cases, the Board has indicated that it will look beyond mere ownership to ascertain who, in fact, directs or controls activities that give rise to employment, it has also indicated that the type of control involved must involve a real ability to "call the shots", as opposed to acting under the direction of more senior officials within the organization. This point was expressed in Jen-Ry Utility Contracting Company Limited, [1984] OLRB Rep. Dec. 1724, as follows:
- All of these cases make it clear that the test for "control" under section 1(4) of this Act envisions the ultimate power to "call the shots" where necessary, as counsel for the respondent put it, with respect to the labour relations of the two enterprises, and not simply the authority and responsibility to direct the activities of employees in the field. were it otherwise, a totally independent and established company hiring the manager of field services from another company would inevitably find itself in the position of being a "related employer" for the purposes of the Labour Relations Act. Rather, we accept the submission of the respondent that the section contemplates a point of central decision-making control with the ultimate power to, for example, say "yes" or "no" to a wage proposal from the union for both entities.
22James Baxter testified that by 1981 he was effectively in control of Hunter Printing. Although only part owner (through Kincaldrum Estates) of Hunter Printing, two of the other owners, namely his sisters, never played a role in its operation. His father, who was also a part owner, ceased to play an active role in the company's affairs once he ceased travelling to London from his home in King City on a regular basis. In his role as the company's general manager, James Baxter made decisions relating to the laying off of employees and selling equipment as a way of coping with the firm's financial difficulties. It was he who negotiated a collective agreement on behalf of Hunter Printing with the trade union. It is particularly noteworthy that he negotiated this agreement some seven years after Hunter Printing had lost the work for the Western Fair and after the company had cut its work force to four employees. It is also noteworthy that it was James Baxter who made the decision to have Hunter Printing cease operations. When it ceased operations Hunter Printing was performing work similar in most respects to that which was subsequently performed by Baxter Graphix.
23It will be recalled that it had been James Baxter's intent to move Hunter Printing to a new building and change its name to Baxter Press. James Baxter did not, however, move Hunter Printing and change its name. He did move to new facilities but rather than changing the name of Hunter Printing he commenced operations utilizing McCollum Graphics Incorporated which he operated under the name of Baxter Press. Later he utilized a newly incorporated firm, Baxter Graphix Inc. Both of these firms primarily used equipment formerly owned by Hunter Printing. Much of Hunter Printing's equipment was sold elsewhere, but this equipment was not required for a scaled-down printing operation. It is clear that Hunter Printing, McCollum Graphics operating as Baxter Press and Baxter Graphix all conducted their operations under the direction of James Baxter. Given these considerations, we are satisfied that all three firms were being carried on under common direction.
24The respondents contend that it would be inappropriate to bind Baxter Graphix to the applicant's bargaining rights with respect to Hunter Printing in that the companies were involved in totally different operations both in terms of scale and type of product. The evidence, however, indicates that at the time it ceased operations, Hunter Printing was performing generally the same type of work that is now being performed by Baxter Graphix. Further, the predecessor to the applicant trade union acquired its bargaining rights with respect to Hunter Printing at a time when it was under the direction of James Baxter and long after the company had scaled down its operations. Given these considerations, we believe it appropriate to continue the union's bargaining rights by treating the three respondents as a single employer. In reaching this decision, we have rejected the respondents' contentions that the Board should exercise its discretion not to make a declaration under section 1(4) because there are currently no employees in the bargaining unit. The respondents contend that should Baxter Graphix hire any printing employees in the future, the union could at that time apply to be certified to represent them. Quite apart from our general concerns that such an approach might encourage employers to purposefully leave bargaining units' 'empty" pending the outcome of section 1(4) proceedings, it is our view that the absence of employees in the bargaining unit should not defeat the instant application. If Hunter Printing had continued to operate without any employees in the bargaining unit, the bargaining rights of the applicant trade union would have continued, although these rights would have had little meaning unless and until either former employees were recalled to work or new employees hired. Given the facts of this case, in our view it is appropriate that the applicant be put in the same position with respect to Baxter Graphix.
25Having regard to the foregoing, the Board, pursuant to the provisions of section 1(4) of the Labour Relations Act, will treat McCollum Graphics Incorporated, o/a Baxter Press, Hunter Printing London Limited and Baxter Graphix Inc., as constituting one employer for the purposes of the Act. The Board further declares that Graphic Communications International Union, Local 517, is the current bargaining agent for employees of Baxter Graphix Inc.