[1986] OLRB Rep. March 308
0089-85-R United Brotherhood of Carpenters and Joiners of America, Local 1256, Applicant, v. Capricorn Acoustics & Drywall Ltd. and J & J Drywall & Painting, A division of Silver Cloud Construction Limited, Respondents
BEFORE: Harry Freedman, Vice-Chairman, and Board Members B. L. Armstrong and I. M. Stamp.
APPEARANCES: Norman L. Jesin and Ron Carleton for the applicant; Joe Carrier, John Horkits and Olga Horkits for the respondents.
DECISION OF THE BOARD; March 24, 1986
This applicant applies under sections 63 and 1(4) of the Labour Relations Act for a declaration that J & J Drywall, a Division of Silver Cloud Construction Ltd., hereinafter referred to as J & J Drywall, is bound by the provincial agreement to which the applicant and Capricorn Acoustics and Drywall Ltd., hereinafter referred to as Capricorn, are bound.
John Horkits and his wife, Olga Horkits are the principals of both J & J Drywall and Capricorn. J & J Drywall has been a drywall contractor, principally in the residential sector of the construction industry in the Sarnia area since 1973. Its employees have never been represented by a trade union. It has also occasionally done construction work in the industrial, commercial and institutional sector of the construction industry, and in the late 1970's, began to actively seek commercial drywall work. J & J Drywall began as a partnership of John Horkits and Joseph Ranoszstay and later became an operating division of Silver Cloud Construction Limited with Mr. Horkits and Mr. Ranoszstay as the principal shareholders. As a result of the change in business emphasis from residential to commercial work advocated by Mr. Horkits, Mr. Ranoszstay transferred all of his shares in Silver Cloud Construction Limited to Olga Horkits in April, 1978. From that time forward, J & J Drywall actively bid on and was successful in obtaining many commercial drywall contracts while continuing with its traditional residential drywall work. J & J Drywall has held itself out to the public as both a residential and commercial/industrial drywall contractor for many years.
In late 1979, Mr. Horkits learned that a Eaton Centre shopping development would be built in Sarnia and that only unionized sub-contractors would be used on that construction project. Mr. Horkits also wanted to expand his commercial and industrial work by doing work within the industrial plants in Sarnia. In order to be eligible to work on the Eaton Centre project and in the large industrial plants, Mr. Horkits felt that it was necessary to have a collective bargaining relationship with the applicant. To this end, Mr. Horkits asked Mrs. Horkits to get in touch with the applicant to obtain information about the union.
Mrs. Horkits and Gerald Lacasse, the business manager of the applicant at the time, met in early 1980. Mrs. Horkits recalled that the first meeting with Mr. Lacasse occurred in January 1980 while Mr. Lacasse testified that the first time he met with Mrs. Horkits was in April 1980. Capricorn was incorporated in February 1980 and was the vehicle that Mr. and Mrs. Horkits intended to use for operating their unionized drywall business.
Mr. Lacasse and Mrs. Horkits had differing recollections of that initial meeting. It is clear that Mrs. Horkits explained to Mr. Lacasse that she and her husband were interested in expanding their business to get into bigger commercial and industrial jobs. While Mr. Lacasse did not recall any discussion with Mrs. Horkits about J & J Drywall, Mr. Lacasse testified that Mr. Horkits told him about J & J Drywall at some time before the applicant and Capricorn signed a voluntary recognition agreement, and expressed his concern about the effect that a collective bargaining relationship with the applicant would have on J & J Drywall's business. Mr. Horkits told Mr. Lacasse that he did not want J & J Drywall to be a union shop. Mr. Lacasse recalled that Mr. Horkits told him that J & J Drywall was primarily a residential contractor. Mr. Lacasse testified that he did not know about J & J Drywall doing commercial work when he talked with Mr. and Mrs. Horkits in April, 1980, except with respect to one job. Mr. Lacasse stated that Mr. Horkits assured him that any work done in the industrial, commercial and institutional sector of construction industry would be done through Capricorn, and that J & J Drywall would only do residential work. The recollection of Mr. and Mrs. Horkits of those conversations with Mr. Lacasse differed from Mr. Lacasse's recollection. While they agreed that Mr. Horkits expressed concern over maintaining J & J Drywall as a non-union business, Mr. Horkits and Mrs. Horkits recalled advising Mr. Lacasse that they did commercial and industrial work through J & J Drywall and that they wished to be able to continue doing that same type of work as they had before. They said Mr. Lacasse assured them that the applicant would not affect J & J Drywall doing the work it had been doing. They testified that they advised Mr. Lacasse that any union work would be done by Capricorn, and not J & J Drywall.
In our opinion, it is more probable that Mr. Lacasse was told by Mr. and Mrs. Horkits that they wanted the business of J & J Drywall to continue as it had before. We are satisfied that when Mr. Lacasse and Mr. and Mrs. Horkits spoke, Mr. and Mrs. Horkits referred to union work as being the work Capricorn would do, that is, work for unionized general contractors or work for clients that required a unionized work force, such as the industrial plants in the Sarnia area. Mr. Lacasse probably understood union work to mean work coming within the industrial, commercial and institutional sector of the construction industry.
Since the voluntary recognition agreement that was ultimately signed was between Capricorn and the applicant, we are satisfied the applicant knew or ought to have known that the work that J & J Drywall was doing in the industrial, commercial and institutional sector of the construction industry would be the kind of work that J & J Drywall would continue to do. The recognition agreement that the applicant wanted the Horkits to enter into expressly related to only the industrial, commercial and institutional sector of the construction industry. If the applicant's understanding was that all industrial, commercial and institutional sector work would be done under the collective agreement and all residential work would be done non-union, it would have been a simple matter for the applicant to have required that J & J Drywall, and not Capricorn, execute the agreement.
The recognition agreement between Capricorn and the applicant was signed on May 13, 1980. Both before and since that date, J & J Drywall has done drywall and other construction work that falls into both the industrial, commercial and institutional sector and the residential sector of the construction industry. From 1980 to 1985, J & J Drywall undertook many jobs that were within the industrial, commercial and institutional sector of the construction industry, several of which were quite small.
Although the applicant tried to suggest that it was unaware of the work that J & J Drywall was performing in the industrial, commercial and institutional sector, it had specifically investigated work done by J & J Drywall at a church in May of 1984. The applicant initially claimed that J & J Drywall ought not to be performing that work, but took no further action when it learned that J & J Drywall had contracted for that work directly with the owner, and was not a sub-contractor to the unionized general contractor on the job at the time. Furthermore, Mr. Lacasse quite candidly stated in his examination-in-chief that it would be hard for an employer to be working non-union in the industrial, commercial and institutional sector in Lambton County, where Sarnia is located, without being detected by the applicant. While the applicant knew of the church job in May of 1984, nothing was done by the applicant until April 1985 when this application was filed with Board.
The employees of J & J Drywall became members of the applicant some time after the recognition agreement was signed by Capricorn. At that time, they informed the applicant about their experience performing work in the industrial, commercial and institutional sector while employed by J & J Drywall. Furthermore the applicant's evidence that it would be difficult to work as a non-union contractor in the industrial, commercial and institutional sector without the applicant knowing about it, and the church job that took place in May 1984 that the applicant investigated, but did nothing about satisfies us that the applicant knew J & J Drywall was working in the industrial, commercial and institutional sector throughout the period after the voluntary recognition agreement was signed.
Counsel for the respondents conceded at the outset of the hearing that the respondents carry on associated or related activities under common control or direction. He submitted that this case turns on whether the Board would exercise of its discretion under subsection 1(4) of the Act to grant the declaration requested.
Counsel for the applicant argued that the respondents have the burden of persuading the Board not to exercise its discretion to make the declaration sought when the conditions precedent for the declaration have been established. In other words, counsel for the applicant submitted that a declaration under subsection 1(4) should issue once the Board finds, or the respondents concede, that they carry on related activities or business under common control or direction unless the Board is persuaded by the respondents that a declaration should not issue. Counsel cited no authority for that proposition.
In our view, that submission has no merit. It is the applicant that seeks relief by way of a declaration under subsection 1(4) of the Act. Ordinarily, the party that seeks relief has the burden of establishing its entitlement to the relief it seeks. There is nothing in subsection 1(4) that changes that ordinary approach taken in matters before this Board. Indeed, the obligation that section 1(5) imposes on respondents, which requires the respondents to adduce evidence in circumstances in which they might not otherwise do so (see Canada Cement Lafarge Ltd., [1977] OLRB Rep. Jan. 5) suggests that the legislature contemplated some changes in the ordinary procedure used in matters before the Board in applications under subsection 1(4), but chose not to shift the burden of proof or persuasion to the respondents in this type of an application. Had the legislature wanted the respondents to bear the burden that the applicant suggests they have under the Act, it could have done so explicitly as it did in subsection 89(5) of the Act.
In Hexagon Contracting Ltd., [1971] OLRB Rep. Sept. 554, the Board held that the onus that rests upon an applicant in subsection 1(4) cases is the same onus that an applicant has in sale of business cases. The burden of proof in sale of business cases rests with the party alleging that a sale of a business has taken place. (See Super City Ltd., [1964] OLRB Rep. May 93; Super City Discount Foods Ltd., [1969] OLRB Rep. Aug. 666; and Woodway Structural Components, [1971] OLRB Rep. Aug. 545.) The amendments to the Act in 1975, when subsections 1(5) and 63(13) were enacted did not change the burden of proof. Those provisions simply imposed a duty of disclosure on respondents to applications made under those sections of the Act. In the Hexagon Contracting Ltd. decision, supra, the union that sought to invoke subsection 1(4) led evidence to establish that the employers carried on related activities under common control and direction, and submitted to the Board that the onus therefore shifted to the employers. The Board did not accept that submission and held that the onus rested upon the union seeking the declaration to satisfy the Board that the employers should be treated as one employer.
Counsel for the applicant submitted that the respondents attempted to camouflage the industrial, commercial and institutional sector construction work performed by J & J Drywall by paying one employee working for J & J Drywall through the Capricorn payroll and making remittances to the union on behalf of that employee. The evidence established that the employee in question requested that particular arrangement in order to obtain credit for hours worked for purposes of his apprenticeship in the applicant. Furthermore, we are satisfied that J & J Drywall carried on its business in the industrial, commercial and institutional sector quite openly. The applicant was not misled by either of the respondents or their principals. Indeed, when the work done by J & J Drywall on the church in May 1984 was investigated by the applicant, there was no attempt to suggest to the applicant that Capricorn and not J & J Drywall was doing that work.
The applicant submits the the Board should issue the declaration requested and relied on the criteria the Board has developed over the years for exercising its discretion under this subsection of the Act. The Board in Ethyl Canada, Inc., [1982] OLRB Rep. July 998 described the purpose of subsection 1(4) in the following terms:
"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 criteria used by the Board in determining whether to exercise that discretion were set out in John Hayman and Sons Co. Ltd., [1984] OLRB Rep. June 822 at 827-28:
(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."
- In Donald A. Foley Ltd., [1980] OLRB Rep. April 436, the Board stated:
"One of the significant purposes of section 1(4) is to guard against the dilution or undermining of bargaining rights already obtained such, for example, as occurs when work is diverted from a unionized employer to an associated, newly created non-union one as in Evans-Kennedy Construction Limited, [1979] OLRB Rep. May 388; or when there is a risk or threat that bargaining rights may be eroded, as in West York Construction Limited, [1978] OLRB Rep. Sept. 879. For a more detailed review of the purpose of section 1(4), however, see Industrial Mine Installations Limited, [1972] OLRB Rep. Oct. 1029 at paragraphs 9 to 13 inclusive."
Counsel for the applicant forcefully argued that the criteria described by the Board in the John Hayman and Sons Co. Ltd. case, supra, should lead the Board in this case to grant the declaration requested. Counsel for the applicant also argued that even if the Board were to find that the applicant, in 1980, gave the assurances as claimed by Mr. and Mrs. Horkits, the subsequent conduct of Capricorn and J & J Drywall, in paying one J & J Drywall employee through Capricorn's payroll and by having, the applicant alleges, J & J Drywall do the work that ought to have been Capricorn's work, a declaration should issue, to be effective from the date of the declaration.
While the payment of the one J & J employee through the Capricorn payroll suggests that the two respondents carried on their activities as if they were one entity to the prejudice of the applicant, a number of factors militate against the granting of the declaration requested by the applicant. The applicant argues that J & J Drywall has encroached upon and performed the work that would otherwise have been done by Capricorn. The facts of this case do not support that argument. Prior to the creation of Capricorn, J & J Drywall had been doing some work in the industrial, commercial and institutional sector of the construction industry. Furthermore, the amount of industrial, commercial and institutional work done by J & J Drywall has declined since Capricorn was incorporated. Capricorn's business, on the other hand, has fluctuated and except for Capricorn's first year of operation, the work done by J & J Drywall in the industrial, commercial and institutional sector of the construction industry has been approximately one-half or less of the amount of work done by Capricorn. Thus, it appears to us that Capricorn has continued to be active in the industrial, commercial and institutional sector, and there is insufficient evidence for us to find that work which Capricorn would have performed was transferred to J & J Drywall.
In addition to the factors of delay and lack of erosion of work militating against the applicant, an additional significant factor that weighs against the exercise of discretion to make the declaration are the circumstances that gave rise to the creation of the applicant's bargaining rights. The applicant, through Mr. Lacasse, was aware of J & J Drywall carrying on some construction work in the industrial, commercial and institutional sector at the time the recognition agreement between Capricorn and the applicant was entered into. The applicant made no effort at that time or subsequently to prevent J & J Drywall from doing work in the industrial, commercial and institutional sector nor did it try to have the industrial, commercial and institutional sector work that J & J Drywall was doing moved to Capricorn until these proceedings were commenced in 1985.
Furthermore, we find it particularly significant that Capricorn had no employees when it signed the recognition agreement in May 1980. J & J Drywall employed several tradesmen engaged in drywall work at that time. Indeed, subsequent to the signing of the recognition agreement, some of the employees of J & J Drywall approached the applicant at the suggestion of Mr. Horkits to become members. When they did so and were accepted into membership, they were referred by the applicant to work for other employers. Capricorn did not begin to employ tradesmen for several months.
In Gerald Davidson Plumbing and Heating Limited, [1984] OLRB Rep. March 462, the Board commented on circumstances somewhat similar to the situation before the Board in this case. In that decision, the Board wrote at page 466:
"In the present case there is no doubt that the statutory preconditions for section 1(4) are met. The numbered company really has no separate or independent existence. It is little more than a bank account and a payroll mechanism for dealing with the few unionized workers that the company has been called upon to hire from time to time. ... This is precisely the kind of situation where, ordinarily, a section 1(4) declaration would be warranted.
However, there are countervailing considerations. This is not a case in which a unionized firm has spawned a non-union offspring designed to siphon away work from the unionized enterprise to the detriment of the union members working there. ... there is little indication that work opportunities destined for the numbered company have been redirected to Gerald Davidson Plumbing & Heating Limited. The latter company has not been used surreptitiously on unionized job sites to the detriment of the numbered company and its potential employees, nor has there been any real departure from its established practice of bidding on non-union jobs. It was and continues to be a non-union contractor with its own field crews, as it has been since 1970.
More important, however, is the fact that at the time of the purported voluntary recognition agreement, the union did not represent any of the employees potentially bound by it - some of whom had been employed by Gerald Davidson Plumbing & Heating Limited for some years. Those employees had no appetite for collective bargaining then and do not want the union now, We see no reason why collective bargaining should be thrust upon them, or why the union's bargaining rights should be thus extended. Indeed, if the agreement had purported to apply to Gerald Davidson Plumbing & Heating Limited and had been challenged, we would be inclined to say that it was void, since the union had no right to represent any of the employees affected at the time the agreement was executed. It was not a "pre-hire" agreement of the kind considered by the Board in Nicholls Radtke, [1982] OLRB Rep. July 1028. Even assuming (without finding) that on August 11, 1980 there was a misrepresentation leading to the execution of the voluntary recognition agreement, we still do not think the circumstances of this case warrant a declaration under section 1(4) of the Act. We would not condone such misrepresentation and it might well justify a union withdrawal from that arrangement. But the remedy in the circumstances of this case is not a section 1(4) declaration."
- In Bramalea Carpentry Associates, [1981] OLRB Rep. July 844, the Board, in dismissing an application for a related employer declaration under subsection 1(4) wrote at page 849:
"In a number of cases the Board has observed that section 1(4) is designed to preserve rather than extend bargaining rights. It is not to be used as a substitute for certification. (See Farquhar Construction Ltd., [19781 OLRB Rep. Oct. 914 and cases cited therein; H. Allaire & Sons Co. Ltd. [1974] OLRB Rep. July 457; Inducon Construction, [1975] OLRB Rep. Apr. 399; and, most recently WM.I. Waste Management, [1981] OLRB Rep. March 409.) In our view, that is precisely what the union is trying to do in this case, where there was an established business and employee complement predating the bargaining relationship, and no evidence of a concrete erosion of the union's bargaining rights. Accordingly, the Board is not prepared to exercise its discretion to issue a section 1(4) declaration. If the union wishes to acquire bargaining rights for the Pinehurst employees, it will be necessary to enroll them into membership, and apply for certification."
Similarly, in this case, J & J Drywall was an established business doing some work in the ICI sector with its own employee complement prior to the applicant's acquiring bargaining rights through a voluntary recognition agreement with Capricorn. If the applicant wishes to represent the employees of J & J Drywall, it must persuade them to join it and then apply for certification. While J & J Drywall has not been active since these proceedings commenced, it may be in the future. Although counsel for the applicant suggested that the respondents could avoid certification of J & J Drywall by simply saying that Capricorn is performing the work, it appears to us that the applicant could ascertain whether employees working on any particular job for either of the respondents are employed pursuant to the collective agreement. If no deductions or remittances are being forwarded to the applicant, or if the persons employed on the job are not members of the applicant, it would be difficult for the respondents to argue that Capricorn is their employer.
On the basis of the foregoing, we are not persuaded to use the discretion that the Board has under subsection 1(4) of the Act to grant the declaration requested.
There was no evidence that would cause the Board to find that there has been a sale of business within the meaning of the Act from Capricorn to J & J Drywall, and counsel for the applicant did not argue that the applicant was entitled to a declaration under section 63 of the Act.
This application is hereby dismissed.
The Board's decision of June 5, 1985 in Board File No. 0428-85-M adjourned a referral of a grievance to arbitration under section 124 of the Act between the applicant and Capricorn pending the disposition of the application in this matter. If either party desires to have the matter in Board File No. 0428-85-M brought back for hearing, that party must file such a request with the Registrar within 15 days of the date of this decision. If no request is filed within that time, that matter will be dismissed.