[1987] OLRB Rep. March 413
2066-86-R International Union of Operating Engineers, Local 796, Applicant v. Metropolitan Life Insurance Company, Respondent v. Allen Maintenance Ltd., Intervener
BEFORE: J. Harold Brown, Q.C., Vice-Chair, and Board Members A. Hershkovitz and R. M.
Sloan.
APPEARANCES: Peter I. Waldmann for the applicant; D. Churchill-Smith, J. D. Roffey and D. E. Gibson for the respondent; Eliot Supino for the intervener.
DECISION OF THE BOARD; March 10, 1987
This is an application made under section 63 of the Act.
In its application, the applicant simply stated that the intervener is the successor employer to the respondent and further, that as a result of a sale of a business the intervener is bound by a collective agreement entered into by the applicant and the respondent. In its application (as amended at the Board hearing on January 6 and 7, 1987), the applicant stated that a change in the character of the business so that it is substantially different from the business of the predecessor employer had not taken place. The application further states that an intermingling of employees of one business with employees of another business represented by the applicant has not taken place. The relief claimed by the applicant is an order and declaration that the intervener is bound by a collective agreement in existence between the applicant and the respondent.
By letter dated January 5,1987, in response to a request for particulars made by the respondent dated December 19, 1986, the applicant stated as follows. The respondent carries on the business of a landlord. It has obligations central to its business as a landlord regarding the provision of the cleaning and janitorial services of its tenants. These obligations require the respondent to maintain control and direction of the provision of such cleaning services and that such cleaning and janitorial services are provided within the respondent's own premises. Further, such cleaning and janitorial services are provided, using material and equipment belonging to the respondent, under the supervision and control of the respondent's own employees. In its particulars, the applicant asserts that in subcontracting the provisions of cleaning and janitorial services to the intervener the respondent acted in bad faith.
The respondent denies that a sale of business by it to the intervener has taken place as alleged by the applicant and the intervener denies that there was any transfer, lease, sale or any other manner of disposition under section 63 of the Act.
All of the evidence adduced at the hearing was given by David Gibson, the assistant counsel with the respondent in its Canadian head office in Ottawa, and Eliot Supino, the president of the intervener. Based on their evidence, the Board makes the following findings of fact.
The respondent is in the business of producing and marketing life and health insurance and annuities.
The respondent owned a building, 180 Wellington Street in Ottawa, from 1924 to 1976, which premises housed its head office staff. It occupied the entire building and no offices were leased to tenants. In 1976, the federal government confiscated these premises for its own use.
The respondent acquired land on which was built the first of two twin towers. The building which is known as 99 Bank Street has continued to house the Canadian head office of the respondent. There are fifteen (15) floors in the tower at 99 Bank Street. The top floor is occupied by the Rideau Club under a condominium arrangement. The expenses in operating the physical premises are allocated on a pro-rated basis between the respondent and the club. The respondent occupies for its own purposes thirty percent (30%) of the building. The remainder of the fourteen (14) floors are occupied by tenants, of which there are approximately twenty-four (24). Since it occupied the 99 Bank Street tower, the respondent has provided maintenance and cleaning services for its own offices and those of its tenants. Until the fall of 1985, this service was provided the respondent's own employees.
The respondent acquired land on which was built the second of the two twin towers. The building, which is known as 50 O'Connor Street, contains offices occupied by the respondent. However, the building is largely occupied by tenants under lease. The respondent took possession of the building on November 1, 1984. Prior to the commencement of business at 50 O'Connor Street, the respondent invited tenders from various office cleaning service companies to perform this function for all of the occupants of the building. Based on the tenders submitted by the intervener, it was awarded a two-year contract.
Because of the satisfactory maintenance and cleaning services provided by the intervener, it was invited by the respondent in 1986 to submit a bid to provide the same services at 99 Bank Street. The management committee of the respondent approved the bid, which resulted in the respondent and the intervener entering into a Building Cleaning Contract dated September 22, 1986. The contract was signed by Andre Vauclair, the vice-president of real-estate investment for the respondent. The intervener commenced to provide cleaning services for the respondent and its tenants on October 15, 1986 for a twenty (20) month period.
The cleaning services were contracted out by the respondent to the intervener at 99 Bank Street for reasons of economy. By the calculation of the respondent, the cost of the intervener providing the cleaning services with the intervener's own materials, equipment and labour was some fifty percent (50%) cheaper than the cost of providing the same services with the respondent's own employees.
At no time was the intervener involved in discussions with the respondent in respect of the transferring, acquiring or hiring of any of the employees of the respondent. All staffing was done by the intervener in the same manner as for any other job site, i.e., through the personnel department of the intervener and advertising in the local newspapers.
The intervener has some two hundred (200) clients in Ottawa and Hull to which it provides cleaning services. Most of them are developers and owners of buildings. The respondent's cleaning service contract covering 50 O'Connor Street and 99 Bank Street constitutes less than five percent (5%) of the business of the intervener.
Upon taking over the cleaning operations at 99 Bank Street on October 5, 1986, the intervener assumed full control and established the requirements of the respondent and its tenants as well as their complaints in log books. The respondent had previously followed the same procedure. The intervener deals directly with the property management staff of the respondent. However, any tenant requirements or complaints made to the respondent are referred directly to the intervener. The intervener maintains an on-site supervisor on the premises to direct the work force of the intervener.
As a result of the takeover of the cleaning services at 99 Bank Street by the intervener pursuant to the September 22, 1986 Building Cleaning Contract, the respondent terminated the services of some 48 part-time employees, as well as ten (10) full-time employees. The respondent retained in its employ 2 painters, 3 electricians and 6 porters. There is a current collective agreement in force between the applicant and the respondent, covering building maintenance and cleaning operations. This agreement which is in force from July 1, 1985 until June 30, 1987 encompasses the eleven Local 796 members who remain in the employ of the respondent at 99 Bank Street.
Former cleaning employees of the respondent were allowed to apply for employment with the Intervener under the same terms and conditions available to all job applicants. Some six former employees of the respondent did make inquiries concerning employment, but none of them wanted to work on evening shifts or meet the productivity rates of the intervener. The intervener did not buy or receive any equipment or materials from the respondent. The intervener only received a contract to perform cleaning services at 99 Bank Street.
The intervener hired twenty-five (25) employees for light duty cleaning at 99 Bank Street when it took over cleaning operations for the building.
The applicant union did not object to the contracting out by the respondent to the intervener of the cleaning services at 50 O'Connor Street for a two-year term commencing November 1, 1984. Further, the applicant union has not filed a grievance under the current collective agreement covering its own maintenance and cleaning staff at 99 Bank Street protesting the contracting out of the cleaning services to the intervener.
There is no relationship between the respondent and the intervener in the sense that there are no common owners, directors or staff. The intervener has carried on an independent cleaning services business since 1967.
Article 7(b) of the Building Cleaning Contract dated September 22, 1986 covering 99 Bank Street between the respondent as "owner" and the intervener as "contractor" provides as follows:
Any person employed on the work who is disorderly, incompetent or unacceptable to the Owner for security reasons shall be removed immediately when required by the Owner and no such person shall be re-employed on any part of the work without the consent of the Owner.
The above is a standard clause in building cleaning contracts. It appears in the Building Cleaning Contract dated February 15, 1985 between the respondent and the intervener covering 50 O'Connor Street.
The intervener provides its own supervisory staff for its cleaning employees and takes any disciplinary action that is called for in respect of them.
Counsel for the applicant made the following submissions. The respondent is in the business of being a landlord for a large number of tenants at 99 Bank Street that have leased space on the premises. While the respondent claims to be solely in the life and health insurance and annuities business and characterizes the rental of a majority of the building that it owns at 99 Bank Street as an investment, the applicant took the position that the respondent is in the businesses of both insurance and of being a landlord. In other words, being a landlord is a part of the respondent's business. Indeed, the applicant pointed out, the respondent has a Real Estate division which handles the respondent's leasing operations at both 99 Bank Street and 50 O'Connor Street, including a Vice-President who is responsible for that division. Further, the respondent has a property management department.
Since being a landlord is a part of the respondent's business, the applicant contends that by contracting out the janitorial and cleaning services provided to its tenants the respondent has made a disposition of a part of its business. In section 63 of the Act, "business" includes a part thereof. Further, "sells" includes leases, transfers and any other manner of disposition. While it was conceded that no assets have been taken over by the intervener from the respondent, it was argued that equipment and supplies are a minor part of the business. The major part is the labour.
Counsel submitted that it is simply necessary to show that there has been a transfer of a part of a business, which there has been in the instant case. Counsel relied on the Toronto College Street Centre Limited [19861 OLRB Rep. June 913 case in support of its position.
Counsel for the respondent made the submission that the respondent is in the insurance and annuity business and acquired the building at 99 Bank Street not only for the location of its head office but also as an investment peripheral to the respondent's business. The decision to contract out the cleaning services by the management committee of the respondent was based solely on economic considerations. More particularly, this service could have been provided by the intervener for half the price it was costing the respondent.
The respondent noted that the contract for cleaning services was given to an independent cleaning firm and constituted only five percent (5%) of the intervener's total business. What was done by the respondent with respect to its cleaning services at 99 Bank Street was exactly what was done at 50 O'Connor Street in 1984 without protest by the applicant. That is, the respondent contracted out its cleaning services to the intervener. There was no sale of any assets and no employees were transferred from the respondent to the intervener. It was entirely an arms-length transaction. It was submitted that the respondent is not in the business of being a landlord for purposes of these proceedings and there was no sale of a business within the meaning of section 63 of the Act.
In support of the respondent's position, counsel relied on the following Board cases: Complete Car Care Centre, [1983] OLRB Rep. Aug. 1293; The Corporation of the City of Stratford, [1985] OLRB Rep. June 923; W. F. Stevens Reproductions Inc.,[1984] OLRB Rep. Apr. 674; Caressant Care Nursing Home of Canada Limited, [1985] OLRB Rep. Jan. 50; The Charming Hostess Inc., [1982] OLRB Rep. Apr. 536.
The applicant's request that the Board find that the respondent sold part of its business to the intervener is based on section 63 of the Act. The relevant portions of that section provide:
63.-(1) In this section,
(a) "business" includes a part or palts 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 unton ... 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...
In order for the applicant to establish its entitlement to a declaration that the respondent sold part of its business to the intervener, it must persuade the Board that the leasing of premises to tenants at 99 Bank Street is a part of its business.
In The Corporation of the City of Stratford, supra, the Board set out the principles that are applicable in a section 63 application, commencing at page 934, as follows:
Section 63 of the Act does not define the term "business" other than by stating that it "includes a part or parts thereof'. Therefore, it is left to the Board to interpret the term "business", as used in section 63 of the Act, in a way which is sensitive to the purposes of the Act as a whole, and section 63 in particular, but having regard to the almost infinite variety of economic relationships to which the Act applies. The Board recognized that the activity of the entity which is subject to an application under section 63 will affect, to a substantial degree, the significance the Board will ascribe to the various parts of that entity that have been transferred when less than all of it is sold, in assessing whether there has been a sale of part of a business...
At page 935 in the same decision, the Board went on to say:
The Board has previously indicated that the purpose of section 63 of the Act is to provide a much higher degree of stability to a collective bargaining relationship than would otherwise exist if collective agreements or bargaining rights were treated in law in the same way as are commercial contracts or rights created under commercial agreements. Collective agreements and bargaining rights are different. They are accorded significant protection by the Labour Relations Act...
Where a vendor sells every element of its business directly to one purchaser who continues the vendor's business, the Board will find that such a transaction constitutes a sale of a business within the meaning of the Act. However, where one purchaser obtains less than all of the elements of the vendor's business, the Board may or may not find a sale of a part of a business, and the Board's determination will ultimately depend on what elements of the predecessor's business were sold to the purchaser...
Assets are part of a business, as are the services the business provides. A sale of a part of a business within the meaning of the Act does not arise every time a discrete element of that business, such as a single piece of equipment, is sold. Section 63 of the Act is concerned with preserving bargaining rights when there is a disposition of a combination of elements that create employ
In The Corporation of the City of Stratford, supra, the applicant union alleged that the arrangement by the respondent, The Corporation of the City of Stratford, to have the majority of its garbage collection that the City's employees represented by the union had been doing, performed by someone else amounted to a sale of a business pursuant to section 63 of the Act. The award of the contract was made to the successful bidder after tenders were invited. Many of the elements of the contract entered into with the successful bidder and the City are similar to those in the instant case. The employees were hired by the successful contractor and their supervision was carried out by its foreman. Their wage rates and hours of work were determined by the contractor. The Board concluded that the contractor exercised the fundamental control over the working lives and working environment of the employees and noted that the contractor was a pre-existing entity with its own management structure, capital assets, employees, entrepreneurial initiatives and business skills. Further, the Board was satisfied that the City transferred to the contractors the work it no longer wished to perform. The Board found that the contractor was an established employer who had carried on the business of garbage collection for several years, contracted to perform the work for the City. The Board concluded that there was a transfer of work from the City to the contractor, but not a transfer of a part of the City's business to the contractor.
In Metropolitan Parking Ltd., [1979] OLRB Rep. Dec. 1193, the Board considered the various ways in which one employer could arrange its affairs so that another employer could perform the work that had been previously performed by the first employer. At page 1210-1211, as to the application of section 55 (now section 63), the Board stated as follows:
The present case involves a form of subcontracting, and subcontracting arrangements always involve the transfer of work. Work or services performed by A's employees within A's own organization are 'contracted out' to B, and B uses his own managerial skills, plant, equipment and 'know how' to supply to A, for a price, the product, services, facilities or components formerly produced by A's employees. A, therefore, is contracting for the use of B's economic organization in lieu of his own. A is generating a particular demand, or market, for B's product, and it is implicit in the arrangement that, thereafter, the two businesses will remain in a kind symbiotic relationship, bound together by close economic ties. The continuity of the work, and the preservation of a close economic relationship, between the two parties is implicit in subcontracting and does not, in itself, establish a transfer of all, or part, of a business. If it is clear on the evidence, however, that B is unable to fulfill A's requirements with his existing equipment or organization, and received from A a transfer of capital, assets, equipment, managerial skills, employees or know how, then the transaction no longer looks like a simple contracting out of work. A may not be making use of B's economic organization, rather A may be transferring part of his economic organization to B (and recall that section 55 is triggered by the transfer of 'part of a business') or merely permitting B to make use of his (A's) organization while retaining control and direction of the related economic activity. Of course, it is to be expected that when A phases out part of his operation there may be certain equipment or assets which are now surplus and which can be disposed of on the market. These assets may, as a matter of convenience, be purchased by B. None of these factors unequivocably demonstrates or foreclose the application of section 55 (or section 1(4).) If, however, 'but for' the transfer of such assets, licences, know how or property interests from A, B would be unable to fulfill the contract, then it is easier to infer a transfer of part of A's business - albeit a part which A no longer wishes to operate itself.
Similar considerations apply where A, for his own business reasons, chooses to change subcontractors and purchase his requirements elsewhere. Here also there would be a continuation of the work performed, and the new subcontractor may find itself in the same position of economic interdependence vis-a-vis A as a previous subcontractor. Again, these factors do not, in themselves, determine the applicability of section 55. Essentially the matter remains one of characterization. Is the transfer, if any, from the predecessor merely incidental, or is it integral, to the successor's ability to produce the goods or supply the services formerly produced by the predecessor? Has the successor acquired all, or a coherent and severable part, of the predecessor's economic organization? And to repeat the words of Widjery, J. in Kenmir, supra, has the transaction put the successor in possession of a going concern, the activities of which he could then carry on without interruption? A transfer of work, by itself, is simply not enough to ground a section 55 finding.
[emphasis added]
In our view, an analogy can readily be drawn between the fact situation in the Corporation of the City of Stratford, supra, and the case presently before the Board. We find that a similar analogy can also be drawn between the instant case and the Complete Car Care Centre, supra. We would add that the fact situation in the Toronto College Street Centre Limited, supra, is distinguishable from that in the instant case.
In the result, on the evidence we do not find that the contracting out arrangement here was anything less than a bona fide or true contracting out arrangement of the cleaning services at 99 Bank Street in Ottawa. See, Caressant Care Nursing Home of Canada, [1985] OLRB Rep. Jan. 50.
Accordingly, there has not been a sale of a business within the meaning of section 63 of the Act.