United Food and Commercial Workers International Union v. Formula Plastics Inc., 1987 CanLII 3266

[1987] OLRB Rep. May 702

2728-86-FC United Food and Commercial Workers International Union, Applicant v. Formula Plastics Inc., Respondent

BEFORE: Judith McCormack, Vice-Chair, and Board Members J. Sarra and R. M. Sloan.

APPEARANCES: Paul Timmins and David MacMillan for the applicant; F. J. Matthews and Elliot L. Berger for the respondent.

DECISION OF JUDITH McCORMACK, VICE-CHAIR, AND BOARD MEMBER J. SARRA; May 27, 1987

1. This is an application under section 40a of the Labour Relations Act for a direction to settle a first contract by arbitration.

2. On March 31, 1987, the Board issued the following decision:

The majority of the Board finds that the process of collective bargaining has been unsuccessful in this matter because of the uncompromising nature of a bargaining position adopted by the respondent without reasonable justification. We therefore direct the settlement of a first collec­tive agreement by arbitration. Our reasons will follow.

We now provide our reasons.

3. The respondent in this matter operates a small manufacturing plant in which some twelve employees make extruded plastic film. The applicant was certified as a bargaining agent for those employees on September 21,1984.

4. Notice to bargain was given by the union to the employer in October of 1984. The first negotiating meeting between the parties was scheduled in January of 1985, and in December of 1984, the union sent a comprehensive package of proposals to the employer in preparation for that meeting.

5. At the January negotiating session, the parties agreed on a number of ground rules for bargaining, including the stipulation that non-monetary issues would be addressed first. The employer's counsel, F. J. Matthews, acted as its negotiating spokesperson, while the union com­mittee was headed by Dave MacMillan, one of the union's international representatives. The employer notified the union at that time that it would be tabling a document containing its own proposals on contract language shortly.

6. At the next negotiating session, the employer submitted a set of counterproposals on non-monetary items. The parties agreed to work from the employer's proposals and a clause by clause discussion ensued. Considerable progress was made and a number of articles were agreed upon. However, it was also becoming clear that the parties were apart on the following proposal submitted by the employer:

8.08 An employee who has acquired seniority may only be discharged upon the following terms:

(a) for just cause;

(b) upon payment of pay in lieu of notice in the following amounts:

(i) less than one year's seniority - pay of one week in lieu of notice;

(ii) after accumulation of one year seniority - two weeks' pay plus one additional week's pay for each full additional year of seniori­ty.

7. By the time of the third negotiating session on March 6, 1985, the dispute with respect to this clause had crystallized further. All other non-monetary proposals submitted by the employer had been agreed upon, either in their original form or as amended by the parties. Mr. MacMillan asked for some clarification of Article 8.08 which, when provided by Mr. Matthews, demonstrated that the purpose of the article was to allow the employer to discharge an employee without just cause upon payment in lieu of notice. Mr. Matthews confirmed at that time that clauses (a) and (b) should be read as having an "or" between them.

8. Mr. MacMillan then outlined a number of concerns he had about the impact of such a clause on the job security of employees. In his view, the existence of clause (b) as interpreted by Mr. Matthews, would essentially negate clause (a). He told Mr. Matthews that the clause would mean that an employer could circumvent the grievance procedure, as even an employee who had successfully arbitrated a discharge grievance could subsequently be terminated upon payment of one or two weeks' pay. As far as Mr. MacMillan was concerned, if the union accepted such a clause, it would have in essence given up its right to represent its members. He made it clear to Mr. Matthews that the union would never agree to 8.08(b). Subsequently, the employer filed for conciliation with the union's agreement.

9. In May of 1985, the parties met in conciliation in a session which focused almost entirely on 8.08(b). Mr. MacMillan candidly admitted that the union was unwilling to deal with other issues until the just cause issue was resolved. By this strategy, the union hoped to put pressure on the employer to respond to the union's concern about 8.08(b). The employer declined to change its position on the clause, and the union requested a no-board report.

10. The parties attended a mediation meeting several weeks later which was very similar to their conciliation experience. Again it was clear that 8.08(b) was the stumbling block, and that nei­ther party was prepared to change its position. The union also alleged before us that at that time the employer had declined to provide a full offer, including monetary proposals, to the union. The employer argued that this point was res judicata as it had been addressed by the Board in an earlier decision resulting from a bad faith bargaining complaint brought by the union. (See Formula Plas­tics Inc., [1986] OLRB Rep. July 954.) In view of our ultimate decision in this matter, we do not find it necessary to deal with either the res judicata argument or this factual dispute.

11. On the same day the mediation meeting was held, the employer sent the following letter and statement to Mr. MacMillan. The union alleges that the statement was also sent to individual employees:

Dear Sir:

RE: Formula Plastics and Local 326

In view of the pending strike deadline we are writing to you concerning the following matters:

a) A statement from management concerning its position at this time is enclosed.

In your deliberations with the employees we would request that you present this state­ment as a means of fairly communicating managements [sic] position at this time.

b) I am sure that you can appreciate that management does not want a strike. The company can appreciate that the employees don't wish one either. If work stoppages do become necessary we would like the opportunity to consult with you about appro­priate arrangements for an orderly wind down of the companys [sic] operations in the event of a contemplated work stoppage. Ultimately the relationship between the par­ties will have to be resolved on some mutually acceptable basis and we suggest there­fore that it would be desireable [sic] to minimize any unnecessary damage to the relationship.

Yours very truly,

TO THE EMPLOYEES OF FORMULA PLASTICS

(Statement of Company Management)

The management of Formula Plastics have as you know been carrying on negotiations with your Union Bargaining Committee for some time.

It is difficult, particularly in these times, to produce, through negotiations, results which will make either workers or management completely happy. We have however been able to agree in principal with your Bargaining Committee on a variety of matters which are intended to and should produce an improved working relationship between the company and yourselves and make Formula Plastics a more effective and better place to work for future years.

Since bargaining commenced the following provisions have been instituted or agreed upon.

a) The institution of an employees [sic] group benefit plan paid for at the companys' [sic] expense;

b) The appointment of shop stewards to represent the workers [sic] interests;

c) A grievance and arbitration procedure to settle any disputes which may arise dur­ing the course of work;

d) A provision to recognize seniority accumulated by long term employees;

e) Provisions to distribute fairly amongst employees job promotions, job transfers, lay offs [sic] and recalls;

f) Establishment of a Health and Safety Committee;

g) Establishment of a Union and Employee bulletin board;

h) Provisions for the granting of leaves of absence to employees.

Your representatives will be able to explain the details of these provisions to you.

Unfortunately it appears that an impasse has been reached with your bargaining committee over the right of the company to terminate employees upon payment of severance pay.

The company has requested that it continue to have the right to adjust its work force by being able to terminate employment whenever it appears to management to be necessary for the best interests of the business in which we are all employed.

In the absence of a specific just cause, however, managements [sic] right of termination could only be exercised upon payment of appropriate severance pay. You may be aware that the Ontario Employment Standards Act gives you certain rights to notice upon termination of your employment.

In effect, the company has offered severance pay equivalent to substantially more than what is provided under the Employment Standards Act. What the company has offered amounts basi­cally to one weeks [sic] pay, plus one additional weeks [sic] pay for each year of service accumu­lated up to the time of any proposed termination. For example, an employee who had worked for the company for four years could not be released without payment of at least five weeks [sic] severance pay. Under the Employment Standards Act provisions that employee would only be entitled to two weeks [sic] pay.

While the company feels that these notice provisions are fair it has also indicated to the Bargain­ing Committee that it is prepared to listen to adjustments to the proposed severance period.

You might ask why we are insisting on this clause, NO - we have no dark sinister intentions like firing someone because we don't like his face or because he has bad breath. Even if we wanted to, you can see that the severance pay requirements would make that action very expensive.

We want it for your own benefit - for the benefit of all honest employees who try their best and pull their weight.

Picture this for a moment - Someone is hired and seems to work fine until after his probationary period is over. Then he changes his attitude entirely, becomes lazy, sloppy, uncooperative and in general has a poor attitude which does not fit in with the others on his shift. You, his co­workers end up having to work twice as hard to do his job.

Without the severance clause that we want, it would take many months and thousands of dollars to correct this situation. It would take formal letters of discipline and a costly and time consum­ing [sic] arbitration hearing (like a court case) requiring you, his co-workers to testify, and attempt to describe to arbitrators (judges) who have never worked with extruders, the aggrava­tion and frustrations you are having with this person. In our opinion, this is not workable for our Company.

This Company has been in operation for just over 1 year. We are still strugging [sic] to make ends meet and hoping one day to make a profit.

To succeed will take a team of dedicated and skillful operators and helpers. We will do every­thing we can to attract this calibre of person for the long term by offering improved benefits and pay as the company grows and becomes more profitable.

You will shortly have to give consideration to our position. You will have to decide whether it is acceptable to you and whether it is consistent with what you feel is in your long term best inter­ests. Specifically you are going to have to decide whether to exercise your right to strike or to come to work. We would ask only that you recognize that we are sincere in addressing you and that you give consideration to our position as it is expressed to you in this statement.

In the event that you do exercise your right to strike we would warn you, for your own benefit of the following circumstances:

a) Employees away from work on strike will not be eligible to receive the benefits of the group insurance plan. Coverage will cease at the time when the employee ceases to work and therefore anyone on strike should make arrangements to obtain their own independent coverage if desired. There may be a waiting period as well to requa­lify upon return to work.

b) OHIP payments in respect of employees who are on strike will not be remitted directly by the company for the period that the employee is on strike. It will therefore be necessary for each employee affected to make his own arrangements to have the OHIP payments for he and his family paid directly to OHIP.

Management has no intention of causing the company to be shut down or locking out the employees. Management intends to do everything it can to ensure that operations continue in as orderly a fashion as possible. If you choose to come to work your pay and benefits will continue. We sincerely hope that you will choose to do so.

12. The statement makes it clear (and this was confirmed in cross-examination by Mr. Mac­Millan) that the employer was prepared to move on 8.08(b) but only with respect to the amount of payment in lieu of notice. Since this did not address the union's concerns about job security, the union was not interested in exploring this approach.

13. A strike vote was held and a legal strike commenced on June 21,1985. It was evident from both Mr. MacMillan's testimony and the employer's letter that both sides conceived of the strike as focusing on 8.08(b). Active picketing took place for some two months, tapering off by August. During this period, the union filed the complaint referred to earlier, alleging that the employer was not bargaining in good faith and in violation of section 15 of the Labour Relations Act. Among other things, the complaint alleged that the employer had not presented its position on monetary issues. After it was filed, the employer sent a letter to the mediator with a copy to the union referring to the complaint, and setting out its monetary position as "the current wages and other monetary benefits".

14. On August 30th, the parties met again in mediation. Clause 8.08(b) was discussed with­out success, and little else was accomplished. By that time, two employees had returned to work and the remainder were no longer picketing.

15. A series of hearings into the bad faith bargaining complaint were held, culminating in a decision by the Board dated July 4, 1986, in which the union's complaint was dismissed. It appears that during this period, the parties did little to attempt to resolve their differences as they were waiting for the decision on the complaint.

16. In December of 1986, the union filed the instant application. The employer requested an adjournment with the union's consent, and the parties agreed to extend the time limits under section 40a. In the interim, an application for a declaration terminating the union's bargaining rights was filed.

17. The parties met again in mediation on February 17, 1987. Their respective positions on

8.08(b) were unchanged and little progress was made. The employer did agree to the union's request to provide a full package of proposals, including monetary items, to the union by a partic­ular deadline. However, no such package was provided.

18. These proceedings were resumed at the request of the union and scheduled to be heard together with the termination application. The termination application was dismissed on March 2, 1987 because the applicants failed to appear at the hearing. (See Formula Plastics Inc., Board File 2898-86-R, unreported, March 5, 1987.)

19. The union alleges that this sequence of events discloses that the conditions stipulated in sections 40a(2)(a), (b), and (c) have been met. Section 40a(1) and (2) provides as follows:

40a.-(1) Where the parties are unable to effect a first collective agreement and the Minister has released a notice that it is not considered advisable to appoint a conciliation board or the Minis­ter has released the report of a conciliation board, either party may apply to the Board to direct the settlement of a first collective agreement by arbitration.

(2) The Board shall consider and make its decision on an application under subsection (1) within thirty days of receiving the application and it shall direct the settlement of a first collective agreement by arbitration where, irrespective of whether section 15 has been contravened, it appears to the Board that the process of collective bargaining has been unsuccessful because of,

(a) the refusal of the employer to recognize the bargaining authority of the trade union;

(b) the uncompromising nature of any bargaining position adopted by the res­pondent without reasonable justification;

(c) the failure of the respondent to make reasonable or expeditious efforts to conclude a collective agreement; or

(d) any other reason the Board considers relevant.

20. The Board set out its analysis of these provisions in Nepean Roof Truss Limited, [1986] OLRB Rep. July 1005 as follows:

i) "The process of collective bargaining". The use of the word 'process' imports into the deliber­ation an examination of the interaction between the two parties. It is a truism that the negotia­tion of any contract involves a considerable range of bargaining positions and tactics. It is a dynamic exchange, with each party relying as extensively as possible on those postures most likely to induce the other side to accept a tolerable result. The Board must therefore be sensitive to this bargaining reality when considering how each party has conducted itself. It is the totality of the process that is under scrutiny, and the Board must be cautious not to examine the com­plaint in a factual vacuum. The conduct of both parties is therefore relevant, not only for under­standing why the process has been unsuccessful, but also for assessing whether it has been unsuccessful for any of the enumerated reasons. This does not intend to suggest that the appli­cant's conduct will be a bar to the imposed settlement of a first contract, but rather that its con­duct is relevant in assessing the reason for the failure of the process.

ii) "The process ... has been unsuccessful because of...". This language makes it clear that sec­tion 40a contemplates a cause-and-effect oriented assessment. Unless the applicant can demon­strate that the reason for the unsuccessful process is the employer's refusal to recognize the union's bargaining authority, the respondent's unreasonably uncompromising bargaining pro­posals, the respondent's dilatory or unreasonable efforts to reach an agreement, or any other reason the Board deems relevant, then notwithstanding the failure to conclude an agreement, the Board is not entitled to direct its imposition. In the infancy of this legislation, it has yet to be determined what other reasons the Board may consider relevant within the meaning of section 40a(2)(d), but logic and the spirit of section 40a suggest that this will involve a case-by-case anal­ysis of whether there is a causal connection between the "reason" in question and the failure of the collective bargaining process.

iii) "Irrespective of whether section 15 has been contravened". Section 15 of the Labour Rela­tions Act imposes the duty to "bargain in good faith and make every reasonable effort to make a collective agreement". The reference to section 15 in this way can only be interpreted as making a distinction between bad faith bargaining and first contract assessments. The Board is not to be bound by whether or not the conduct complained of violates section 15. Given the Board's juris­prudence pursuant to section 15, wherein the Board has held that hard bargaining is not neces­sarily bargaining in bad faith (T. Eaton Company Limited [1985] OLRB Rep. March 491; Radio Shack [1985] OLRB Rep. Dec. 1789), one is left with the inescapable conclusion that the legisla­ture has intended a different standard to apply in the determination of first contract disputes, a standard peculiar to section 40a adjudications. This does not suggest that contravention of sec­tion 15 is irrelevant. A contravention of section 15 may well be a factor to consider in assessing why the process was unsuccessful. But the absence of sufficient facts upon which to find a con­travention of section 15 does not preclude the application of section 40a. Hard bargaining may not violate section 15, but rigid bargaining proposals may, if they fall within subsections (a) - (d) of section 40a(2), justify the imposed settlement of a first collective agreement.

21. Turning first to the union's allegations with respect to section 40a(2)(b), we note that the employer expressly conceded both that collective bargaining had broken down, and that it had broken down as a result of the deadlock over 8.08(b). We must therefore consider whether the employer's adherence to 8.08(b) was "uncompromising" and "without reasonable justification".

22. There can be little doubt on the evidence before us that the employer's position was uncompromising. The only area of flexibility indicated by the employer was in regard to the

amount of pay in lieu of notice. This did not address the union's apprehensions with respect to the job security of employees, and was essentially peripheral to the real dispute embodied in the clause. While counsel for the employer suggested that the clause might have been acceptable to the union had the payment in lieu of notice provisions been generous enough, he used as an example a figure of $50,000. We find this of little assistance where there was no evidence that the employer was prepared to agree to figures in this range which might provide a type of de facto job security. We note that the employer chose to call no evidence at all with respect to the parties' negotiations.

23. In any event, the employer maintained the same position on 8.08(b) for over two years through the course of a strike directed primarily at this clause, a bad faith bargaining complaint which had 8.08(b) as its subject, and throughout the instant proceedings which were chiefly cen­tered around this provision. Under the circumstances, the respondent's position can be fairly char­acterized as uncompromising.

24. But was the employer's position taken without reasonable justification? Much depends on our interpretation of "reasonable" in this regard. Obviously the employer in this matter did have reasons for taking this position in the sense that it hoped to achieve a contract provision of benefit to itself. However, in our view, "reasonable" must mean something more than simply a rational relationship between a bargaining position and a party's self-interest. This test is so mini­mal that it would make the relief provided by section 40a(2)(b) virtually inaccessible, a result which we find inconsistent with the remedial nature of this provision. Reviewing the section as a whole, and having regard to the Board's analysis in Nepean Roof Truss, supra, and Juvenile Deten­tion Centre (Niagara), [1987] OLRB Rep. Jan. 66, we find it difficult to conclude that the legisla­tion was designed to do no more than ensure that parties were looking after their own interests in a logical way.

25. Rather, in our view, the word "reasonable" imports an objective element into our con­sideration of the respondent's justification for its position. It is not simply a matter of whether the justification is reasonable from the respondent's point of view, or even from the applicant's. The legislation draws us into an unavoidable assessment of whether a given proposal or position is rea­sonable in objective terms, a task which to some extent takes the Board into uncharted waters.

26. This is so, in part, because reasonableness is a relative concept; what is reasonable depends largely, if not entirely, upon the context in which such an examination is to be made. In considering section 40a(2)(b), such a context will include both the general landscape of labour rela­tions and the specific labour relationship between the parties. In many cases such an assessment will also require the weighing and balancing of the opposing interests of the parties which they seek to pursue by way of their negotiating positions.

27. Moreover, while the Board has had occasion to scrutinize negotiations in the past, not­ably in the course of determining bad faith bargaining complaints, the nature of our inquiry under section 40a is significantly different. The jurisprudence developed under section 15 reflects a cons­cious intention to avoid reviewing the fairness or reasonableness of negotiating proposals as an exercise in itself (see for example, Canada Trustco, [1984] OLRB Rep. Oct. 1356). Rather, the Board's interest on a section 15 inquiry centers on whether a manifestly unreasonable proposal indicates the presence of bad faith on the part of a party, or a failure to make every reasonable effort to make a collective agreement. To the extent that section 40a requires us to examine the intrinsic reasonableness of a negotiating position, it represents a departure from the jurisprudence which has evolved under section 15.

28. The variety and social authority of the competing interests involved, together with the complex dynamics of the collective bargaining process make this task a difficult one. It requires a

delicate assessment of the many differing factors which may be operating in and upon a given labour relationship, an assessment which must be approached from a perspective closely attuned to the practices and climate of labour relations at any particular point in time. Indeed, it is fair to say that this is a provision which will require the Board to draw heavily on its own expertise in labour relations.

29. With this in mind, we turn to the employer's justification as set out in the statement directed at employees. It appears from the evidence before us that this statement represents the only occasion throughout the entire course of bargaining, and up to and including the present pro­ceedings on which the employer advanced any justification for 8.08(b).

30. The employer sets out that it would be costly and time-consuming to be constrained by a system of progressive discipline and arbitration in discharge cases. We have no doubt that the employer would prefer to avoid this kind of structure, and there is little question that arbitration can be expensive and time-consuming. However, these concerns must be balanced against the job security of employees, one of the more fundamental rights that employees seek to obtain through collective bargaining.

31. Laskin, J. A. noted in Regina v. Arthurs, Exp. Port Authur Shipbuilding (1967), 1967 CanLII 30 (ON CA), 62 DLR (2d) 342, [1967] 2 O.R. 49, 67 CLLC ¶14,024 that the employment security provided by seniority and discharge provisions in a collective agreement is essential to the distinction between the common law and a regime of collective bargaining:

it is sometimes forgotten that collective bargaining and the collective agreement have given the individual worker security of continuing employment, depending by and large only on his seniority in relation to the employer's production needs (in terms of numbers of workers and their skills) and on his good behaviour which avoids giving just or proper grounds for discharge. What are generically called seniority and discharge clauses represent the employees' charter of employment security; and it is reinforced by removing from the employer, not his initiative in acting against an employee, but his previously unreviewable right to rid himself of employees, even if it cost money damages to do so.

32. The Board has commented on the importance of this kind of security in another context in Swing Stage Limited, [1983] OLRB Rep. Nov. 1920:

33. Discharge is the ultimate sanction in collective bargaining. Through it an employee forfeits not only his livelihood but also valuable accrued rights including seniority and benefits, acquired sometimes over years of service. For this reason the law in some jurisdictions gives discharged employees an absolute right to have their termination reviewed at arbitration. (See Division V.7 (Unjust Dismissal) Section 61.5 of the Canada Labour Code, R.S.C. 1970, C. L-1, amended S.C. 1977-78, C.27, applicable to employees not covered by a collective agreement). Some maintain that the duty of fair representation should be interpreted as requiring a union to carry the grievance of any discharged employee to arbitration (see Weiler, P. Reconcilable Differences, (1980) pp. 137 ff.). In Brenda Haley [1980] 3 Can. LRBR 501; (1980), 41 di 295, [1981] 2 Can. LRBR 121; 41 di 311 (Plenary Board Review), however, the Canada Labour Relations Board declined to adopt Professor Weiler's view.

34. For these reasons, discharge has sometimes been referred to as "industrial capital pun­ishment". As one labour commentator notes (Weiler, P. Reconcilable Differences, (1980) p. 138):

At several points on earlier pages, I have touched on the reasons why the protection against unjust dismissal is perhaps the critical job interest provided by the collective agreement. Espe­cially in the case of the long service employee, being fired as a result of an immediate contretemps with his employer can have a devastating impact on his life. Not only is it difficult for older workers to find another job of any kind, but it is just about impossible to replace the benefits and amenities that are associated with lengthy seniority. It is for precisely that reason that the arbitration process has developed a broad remedial authority which requires that employees be given credit for their earlier service records, that employers follow systems of pro­gressive discipline, that they be sparing in the use of discharge instead of suspension (even for serious offenses such as deliberate insubordination, a physical altercation with the foreman, or dishonesty). That body of industrial jurisprudence which has civilized the use of management's ultimate authority over workers is at the heart of the case for collective bargaining.

[emphasis added]

34. Moreover, there is widespread recognition of the significance of these rights within the labour law community, as reflected in the presence of just cause clauses in an overwhelming num­ber of collective agreements in Ontario. And indeed, there is some merit to the union's argument that the absence of a just cause clause can weaken the labour relationship by undermining the administration of the collective agreement. The clause proposed by the employer is an unusual one and no specific circumstances were cited which would differentiate this workplace from the many others where a just clause provision is standard. Applying the analysis set forth earlier, we con­clude that the employer's insistence on clause 8.08(b), was without reasonable justification.

35. The employer argues that the conditions of section 40a(2)(b) have not been met because bargaining broke down, at least in part, due to the fact that the union was equally uncom­promising in its insistence upon a just cause clause. We do not find this a persuasive proposition. The multi-dimensional and reciprocal nature of the bargaining process means that when negotia­tions break down, it will frequently be as a result of adamancy on both sides. There is no require­ment in section 40a(2)(b) that the respondent's position be the sole cause of the failure of negotia­tions, a choice of syntax which recognizes the complex realities of collective bargaining. Rather, as the Board points out in general terms in Nepean Roof Truss, supra, the emphasis is on the exis­tence of a causal connection between the uncompromising position taken by the respondent and the parties' lack of success in collective bargaining.

36. In addition, section 40a(2)(b) requires us to analyze the respondent's negotiating stance to see whether the conditions set out in the provision have been satisfied. There is no particular threshold test which the applicant's conduct must also meet before relief will be granted. Of course, bargaining is a dynamic process and the applicant's conduct in negotiations will form a part of the total picture from which the Board must draw its conclusions. Nevertheless, the primary focus of the Board's inquiry remains on whether bargaining has been unsuccessful because of the uncompromising nature of a bargaining position adopted by the respondent without reasonable justification. The applicant's conduct is relevant primarily to the extent that it sheds light on that central issue.

37. In this case, it is conceded that bargaining foundered on clause 8.08(b), and we have found that the respondent's insistence on that clause was both uncompromising and without rea­sonable justification. As a result, the requisite nexus has been established. It is not surprising that the union was so adamant upon a just cause clause, given its importance to employees and the crit­ical role it plays in a collective bargaining relationship. We do not find the union's perseverance in this regard operates to explain or justify the respondent's position. Furthermore, while the union's strategy of concentrating on the just cause issue may have crystallized the dispute at an earlier stage of negotiations than might otherwise have been the case, on balance we find that bargaining broke down because of the substance of that dispute, and not because of the point at which the dis­pute emerged.

38. The employer also argued that the Board had previously "approved" the employer's position in rejecting the bad faith bargaining complaint directed towards 8.08(b), and that it would be inappropriate for the Board to now find that the position was unreasonable. We note that sec­tion 40a expressly contemplates the possibility that its criteria may be met in the absence of bad faith bargaining by the words "irrespective of whether section 15 had been contravened". As the Board pointed out in Nepean Roof Truss, supra, in the passage referred to earlier, the legislation has set out a different standard for section 40a. Circumstances which fall short of the relatively restrictive standard of bad faith bargaining may still trigger the application of section 40a.

39. We note particularly that the provisions of 40a(2)(b) are not necessarily predicated on any egregious conduct on the part of an employer. There is no requirement of bad faith or anti-union animus (although these factors may be relevant) and a direction to settle a first contract by arbitration is not a penalty visited upon an employer. Rather, section 40a as a whole represents the identification of a series of situations in which the Legislature has determined that a malfunctioning labour relationship requires a special mechanism to repair or strengthen it. Indeed, it may well be that some of the provisions of section 40a will apply even where the respondent's conduct stems from ignorance, inexperience or ineptitude. Thus a finding that the conditions of section 40a(2)(b) have been met does not necessarily carry with it the same stigma that might attach to a finding that a party has violated the Act, and is not inconsistent with the Board's dismissal of the section 15 complaint in the circumstances of this case.

40. We conclude that the process of bargaining has been unsuccessful because of the uncompromising nature of a bargaining position adopted by the respondent without reasonable justification.

41. The employer also argued that, in any event, the union had abandoned its bargaining rights and was therefore not entitled to a remedy under section 40a. We do not find support for this proposition in the evidence before us. While there were indeed periods of time during which the union did little, it is not clear that anything in particular could have or should have been done. When it became apparent that the strike was unsuccessful, the union brought a bad faith bargain­ing complaint. It is evident that both parties found it difficult to take any steps until the decision in that matter was issued, precisely because the clause in question played such a pivotal role in their difficulties. After the bad faith bargaining decision was issued, there was a gap of some five months before this application was brought. While we agree that the union's conduct was lethargic, it is apparent that it was stymied by the events in this matter, and that it was at the same time in the throes of the merger described below. In these circumstances, we cannot conclude that the union abandoned its bargaining rights.

42. The employer suggests that the union should have called for further negotiating sessions during the period in question. Again, we do not find this a compelling argument. By the end of August, there had been three meetings dominated by the discussion of this clause in which no pro­gress had been made. We are drawn to the reasoning of the Board in Nepean Roof Truss, supra, in these circumstances:

43. Finally, the company argues that the union has made no serious attempt to reopen bargain­ing since October or November of 1985. It is difficult to see what further efforts the union could have made in the circumstances. Having been categorically informed by the company that it would not recede either from the 3 year term or the merit clause, both of which were under­standably unacceptable, and the union having compromised on almost all other major matters, it is not surprising that it determined that further negotiations would be futile without a finding by the Board that the company had bargained in bad faith and should return to the bargaining table. It is now almost two years since the union was certified, and during that time, the union has made reasonable efforts to conclude an agreement. This does not suggest that a union is absolved from the duty to continue bargaining attempts whenever it has instituted proceedings before the Board under section 89, but where the bargaining realities make such attempts obvi­ously meaningless, it ought not to be penalized for invoking the Board's jurisdiction in this way or for recognizing the futility of the exercise.

44. The employer argued as well that the union had made no effort to contact employees in the plant for long stretches of time. While we venture no opinion on the wisdom of the union's lack of activity, we would not be surprised to find that the relationship between the union and employ­ees was somewhat awkward, given that most of the employees presently working in the plant were hired during the strike to cross the union's picket lines. This does not in itself suggest to us either that the union had abandoned its bargaining rights or that an application which otherwise meets the requirements of section 40a should not be granted. The fact that employees presently in the bargaining unit did not originally choose the union is of little assistance, since this may well be the case in almost any mature bargaining relationship where there is a turnover of employees. In this situation, where the turnover was occasioned by the hiring of replacements during a strike, we find this argument even less persuasive.

45. Finally, the employer argued that the applicant was not the party holding bargaining rights for the employees in question, and thus had no status to bring this application. The certifi­cate for this bargaining unit was issued to the Canadian Union of United Brewery, Flour, Cereal, Soft Drink and Distillery Workers (hereinafter called the "BFCSD"). The Board heard evidence that a merger occurred in March of 1986 between this union and the applicant, the United Food and Commercial Workers (hereinafter called the "UFCW") and the applicant alleged that as a result, it had acquired the rights, privileges and duties of the BFCSD within the meaning of section 62 of the Labour Relations Act.

46. In support of its claim, the union led evidence through Walter Lumsden with respect to the circumstances of the merger. Mr. Lumsden was previously the secretary- treasurer of the BFCSD and is now an assistant to the Canadian director of the UFCW. He told the Board that the subject of a merger was raised by the general executive board of the BFCSD at a national conven­tion in Halifax in 1984, at which time the membership delegates instructed the general executive board to study the matter and bring forward its recommendations to a subsequent convention. The general executive board investigated and researched a number of proposals from different unions and at the end of their labours, voted unanimously to call a special convention for the purpose of considering its recommendation to merge with the UFCW. A convention call was sent out to locals accompanied by three resolutions prepared by the general executive board which were oriented towards a merger with the UFCW. The first resolution provided for certain contingencies with respect to locals in the event of a merger. The second resolution amended the constitution to elimi­nate obstacles to a merger, and approved such a merger in general terms. It should be noted that even prior to the adoption of the second resolution, the constitution expressly contemplated the possibility of a merger. The third resolution provided for a merger specifically with the UFCW.

47. Subsequent to the issuance of the convention call, each local held a membership meet­ing at which the three resolutions were discussed and a draft merger agreement with UFCW was circulated. In total, three notices were sent to locals with respect to the convention: a warning of the coming of the convention call, the convention call, and a reminder. Duly accredited delegates from each local then attended the special convention on January 17th, where the draft merger doc­ument was again circulated. The three resolutions effecting approval of the merger with the UFCW were passed by the requisite majority and the merger agreement was then signed by the authorized officers of both unions.

48. The UFCW notified the BFCSD that it had formally recognized the merger on March 3, 1986, and all affected members of the BFCSD became members of the UFCW. In addition, BFCSD affected locals were issued new charters from the UFCW and the staff of the BFCSD were absorbed into the staff of the UFCW.

49. Mr. Lumsden's evidence was comprehensive and it was subjected to a thorough and vig­orous cross-examination. On the material before us, we are satisfied that the merger took place properly and in accordance with the BFCSD's constitution.

50. However, the employer argued that even if we found that the merger had properly taken place, we should decline to find successor status in the UFCW with respect to this local. The rationale for this argument was directed at the involvement of the local in the merger process and the disaffiliation options available to it. We find these comments of little assistance since the certi­ficate was issued to the national union and it is the applicant international with which the former merged which claims successor rights in the course of this application. Moreover, we note that the BFCSD local of which this bargaining unit formed a part did hold a membership meeting to discuss the resolutions and the draft merger agreement, attended the special convention in question, and voted in favour of the merger. There was no evidence that the local disaffiliated, or took any steps which might bring other considerations into play.

51. We therefore declare that pursuant to section 62 of the Labour Relations Act, the appli­cant UFCW has acquired the rights, privileges and duties of its predecessor the BFCSD by reason of a merger. As a result, we declare that the applicant succeeded to the bargaining rights for this bargaining unit originally granted to the BFCSD, and has standing to bring this application. We note in passing that the successor rights issue appears to have played no role in the breakdown of negotiations.

52. In light of our decision with respect to section 40a(2)(b), we do not find it necessary to address the applicant's claims with respect to section 40a(2)(a) and section 40a(2)(c). Neither do we find it necessary to determine the factual dispute with respect to whether the employer's letter was sent directly to employees or delivered to the union for presentation to employees, since this allegation is related to the applicant's arguments with respect to section 40a(2)(a).

53. We therefore direct the settlement of the parties' first collective agreement by arbitration.

DECISION OF BOARD MEMBER R. M. SLOAN;

1. My colleagues and I agree upon the basic facts in this case. The area of disagreement involves the interpretation of those facts insofar as they support the union's application for a direc­tion under section 40a(1).

2. Section 40a(2)(b) deals with "the uncompromising nature of any bargaining position adopted by the respondent without reasonable justification". This section does not appear to rec­ognize that the reason behind the unsuccessful negotiations may well be a bargaining position adopted by the applicant.

3. The issue, as I see it, is not the content of the company's proposal, but the process of negotiations which was brought to a halt by the ultimatum issued to the respondent by the appli­cant, at only the second meeting, requiring that subsection (b) of the subject discharge clause (see paragraph 6 of the majority decision) be withdrawn before the union would enter into any further negotiations.

4. It is not necessary for present purposes to comment on the nature of any proposal advanced by either party other than to state that difficult issues are part and parcel of the negotia­tion process. However, each party has to be willing to at least consider the other party's position and make some effort at compromise. Such was not the case here. The applicant, having decided that the respondent's proposal was unacceptable, effectively terminated the process.

5. The applicant frankly admitted that it failed in its strategy to force the respondent to withdraw its discharge clause. This strategy included the ultimatum, the strike vote, the strike itself, and the section 15 complaint. Having thus failed to achieve its goals by applying pressure upon the respondent, the applicant sought the imposition of a collective agreement through the arbitration procedures of section 40a. Is the Board to direct first contract arbitration whenever an applicant finds a respondent's proposal unacceptable and therefore refuses to enter into, or to con­tinue, negotiations? It is my contention that this would be the wrong message to send to parties engaged in first collective agreement negotiations.

6. In this instant case - a) the parties had, in only two meetings, successfully negotiated articles 1 through 13 (except for 8.08 (a) and (b)); b) evidence at the hearing confirmed that the respondent had proposed maintaining the current wage and benefit levels and that the applicant would find this acceptable if section 8.08 (b) was withdrawn; and c) there was optimism that arti­cles 14 to 27, inclusive could be settled without difficulty if an acceptable discharge clause could be negotiated, and the evidence indicated a willingness on the part of the respondent to negotiate on this contentious issue. In view of the foregoing, there is reason for optimism that further direct negotiations would result in an early resolution of the dispute.

7. For the reasons expressed in the aforementioned paragraph, I would have dismissed the application.