Canadian Union of Public Employees - CLC, Ontario Hydro Employees Union, Local 1000 v. Ontario Hydro, 1987 CanLII 3294

Ontario Labour Relations Board

[1987] OLRB Rep. June 915

3295-84-M Canadian Union of Public Employees - CLC, Ontario Hydro Employ­ees Union, Local 1000, Applicant V. Ontario Hydro (Line Work - Tweed Area Office), Respondent V. McBeath Brothers Contracting, Intervener

BEFORE: Thomas S. Kuttner, Vice-Chair, and Board Members I. M. Stamp and R. Wilson.

APPEARANCES: R. Ross Wells and Geoff Holland for the applicant; John B. West, Robert G. Thompson and Raymond W. Barbeau for the respondent; Ronald McBeath for the intervener.

DECISION OF THE BOARD; June 23, 1987

1. Subsequent to the filing of this application, the Board, otherwise constituted, endorsed the record as follows:

(1) This is an application under section 106(2) of the Labour Relations Act in which the applicant seeks a determination of whether certain individuals are "employees" of Ontario Hydro. For reasons enunciated in Ontario Hydro, [1981] OLRB Rep. July 931, the Board is satisfied that this is an appropriate issue for resolution under section 106(2) and accordingly, a Board Officer is hereby appointed to enquire into the status of the disputed individuals and the identity of their employer (if any). The attention of the parties is directed to the principles enunciated in Sutton Place Hotel, [1980] OLRB Rep. Oct. 1538.

2. This is but one of several related applications in which the applicant, CUPE - CLC, Ontario Hydro Employees Union Local 1000 ("the union") seeks such a determination asserting that certain named individuals, in the instant case, Bill and Ron McBeath, are employees of the respondent Ontario Hydro and should be declared so to be, inasmuch as their relationship with the respondent is that of dependent contractors. The McBeath Brothers are in partnership and carry on business under the firm name McBeath Brothers Contracting, and are principally engaged in the business of pole line construction and blasting, which services they have contracted to perform for, inter alia, the respondent. No pretense is made that the two would enjoy employee status other than in a capacity as contractors dependent upon the respondent, and reliance is placed upon the inclusionary provisions of the Act which define an employee as including a dependent contrac­tor (section 1(1)(i)) as the springboard for the section 106(2) application.

3. For reasons here given, the Board is of the view that this application must be dismissed, for neither Bill nor Ron McBeath can be said to be employees of the respondent Ontario Hydro within the meaning of the Act, whether as dependent contractors or in any other capacity. How­ever, prior to considering the evidence adduced before the Board Officer earlier appointed which has led us to this conclusion, it would be apposite to review briefly the jurisprudence of the Board, both with respect to the function of section 106(2) and as to the determination of the status of the dependent contractor and this against the background of the relationship and the dispute now before us.

4. The Board cannot be blind to the fact that the determination here asked to be made masks a more profound dispute between the parties as to the scope of the recognition clause in the series of agreements binding between them, and in particular that in effect April 1,1984 - March 31, 1985 during the time at which the instant dispute arose. Indeed, it was the position of counsel for the applicant that a finding of dependent contractor status as regards Bill and Ron McBeath vis-a-vis the respondent would be determinative of their inclusion in the bargaining unit for whom it holds bargaining rights, for it was asserted the language of that clause is inclusive of dependent contractors. The Board has in the past issued a caveat to those who would use its processes - and in particular that contemplated under section 106(2) to resolve bargaining disputes arising during the currency of a collective agreement, respecting the scope and extent of its terms. The legislature has ordained that "all differences between the parties arising from the interpretation, application, administration or alleged violation of the agreement, including any question as to whether a matter is arbitrable" is to be resolved by final and binding settlement by arbitration - section 44(1). The reach of a recognition clause, that which sets, determines and defines the extent of the bargaining relationship between the parties, is par excellence, an issue best resolved through the arbitral process, particularly where, as here, the relationship is one extending back over four decades dur­ing which not only its contours, but those as well as of the supervening legislation under which it was established have been altered profoundly.

5. Thus, the equation "if an employee under section 106(2), then an employee under the agreement" is one which simply cannot be made and the Board rejects its validity if asserted. The Board is cognizant of the reference in the recognition clause to the definition of employee and its linkage to the statutory definition under the Act, but it is precisely that linkage, coupled with the expansive language of the recognition clause, at once inclusionary and exclusionary, which makes the issue of the scope of the recognition clause such a complex one. That complexity is further compounded by the longstanding recognition on the part of the union of the right of the employer to contract out work of the bargaining unit (see mid-term agreement PW-2, July 18, 1968). All of this only serves to underscore that it lies uniquely within the competence of the arbitral forum to determine the reach of a collective agreement. The Board has said so in the past and it says so here. The question of whether a person is an employee is distinct from that of whether a person is embraced by the terms of a collective agreement, and it is only the former which the Board deter-nines under section 106(2) of the Act, leaving the latter for determination through the process of Arbitration. See Ontario Hydro, [1981] OLRB Rep. July 931, at para. 11, where the cases are col­ected.

6. There is a special reason for concern where, as here, the nexus between bargaining rights and a group of persons in dispute is to be founded on a broad determination of dependent contractor status. It is well known that classical labour relations legislation addressed but imper­fectly the vexing question of employee status, and always the temptation existed to insinuate into its terms the common-law dichotomy between employee and independent contractor. Whether the Boards in cases such as Livingston Transportation Ltd., [1972] OLRB Rep. May 488 could with­stand that temptation without legislative succour is a matter of some debate among the commenta­tors, but it is generally recognized that what Professor Arthurs termed "the paradoxical plight of groups of competitors who may find survival difficult without collective action" precipitated amendments to the Act in 1975 creating the statutory class of dependent contractor. The Act now provides in section 1(1)(h) as follows:

"dependent contractor" means a person, whether or not employed under a contract of employ­ment, and whether or not furnishing his own tools, vehicles, equipment, machinery, material, or any other thing, who performs work or services for another person for compensation or reward on such terms and conditions that he is in a position of economic dependence upon, and under an obligation to perform duties for, that person more closely resembling the relationship of an employee than that of an independent contractor;

7. In Adbo Contracting Company Ltd., [1977] OLRB Rep. Apr. 197, one of its earliest decisions to address the 1975 amendments, the Board through its then Chairman, Professor Carter, identified two purposes to be served by the statutory incorporation of the dependent contrac­t or:

8. This redefinition of the limits of the Labour Relations Act serves two purposes. First, it rec­ognizes that, as a matter of fairness, persons in economic positions that are closely analogous should be given the same legislative treatment. A second purpose, and one no less important, is to protect existing collective bargaining rights from being eroded by arrangements that differ only in form, but not in substance, from the employment relationship. These two considerations provide the justification for the shift of emphasis.

It is fair to assert that the great bulk of cases which have since followed have had as their focus the first of these two stated purposes. And indeed, this is not surprising given its emphasis by Professor Arthurs and the many other commentators who urged such statutory reform. The second purpose, so early identified by the Board as one of equal importance to the first, has not attracted the same degree of attention. However, from what the Board has stated of the instant dispute, it can be seen to be its focus.

8. The Board does not propose here an exhaustive analysis of this, the second declared purpose, of the expanded definition of "employee" in the Act to include the dependent contractor. It does however sound this note of warning. Where, as here, the bargaining relationship embraces an industry - construction - characterized by a high degree of mobility and specialization on the art of both employers and employees which finds expression in the contracting and sub-contract­ing of work by owners/clients to those who ply a specialized trade, and where moreover, as here, explicit recognition is given by the bargaining agent of an owner/client's own work force of its right to contract out work, then a special vigilance must be taken to ensure that recourse to section 106(2) is not being had in order to expand bargaining rights rather than to protect them from an asserted erosion. Section 106(2) is not to become an organizational tool where, as here, the per­sons with respect to whom dependent contractor status is sought, themselves oppose the appli­cation made. All of this is said not by way of judgement, but to underscore the Board's earlier jur­isprudence which gives to section 106(2) and proceedings brought under its terms, a limited scope indeed.

9. The Board turns now to the issue of substance before it: dependent or independent con­tractors, which term most accurately describes the relationship between Bill and Ron McBeath and the respondent? The statute itself directs us to address the question functionally. Whatever the trappings of the relationship be, the terms and conditions of work or services rendered by one per­son for another dictate the status of dependent contractor where they lead to the two-fold conclu­sion:

(a) that he is in a position of economic dependence upon that person;

(b) under an obligation to perform duties for that person

and in both respects more closely resembling the relationship of an employee than that of an inde­pendent contractor.

10. In its varied jurisprudence, the Board has taken several approaches to the functional analysis demanded by this definition. In The Citizen, [1985] OLRB Rep. June 819, the Board spoke of clusters of factors, three in number. The first of these focus on the identification of the company with the alleged dependent contractor; the second upon ownership of equipment; and the third upon the financial arrangements between the parties. By far the most exhaustive treatment of the issue is to be found in the Board's decision in Algonquin Tavern, [1981] OLRB Rep. Aug. 1057, where a congeries of factors was enumerated to assist in the determination of dependent con­tractor status. These we reiterate here and adopt as our own in the instant enquiry, but of course with reference to the "special environment" within which it arises. The Board there stated at para­graph 64:

11. From this survey of the legal landscape, and the special environment of the entertainment industry, we can now attempt to distil some of the features which individually, or in combina­tion, have been relied upon to support a finding of independent contractor status. It is recog­nized of course, that a listing such as this must necessarily be somewhat artificial. The factors are interrelated, and one is often only the converse of the other. No one factor, in itself, will be significant. However, all of these matters were mentioned or relied upon in one or more of the cases to which we have already referred and, if present, support a finding that an individual is "self employed":

12. The use of, or right to use substitutes. It has been considered inconsistent with an employment relationship if one could fulfill the bargain with some­one else's labour rather than one's own work and skill. This is significant however, only to the extent that it is the alleged employee who makes that decision.

13. Ownership of instrumentalities, tools, equipment, appliances, or the supply of materials. These factors indicate something in the nature of a capital investment so that gains or losses will depend upon something other than the individual's own labour. On the other hand, reliance upon another's financial loss on capital infrastructure for the essential tools necessary for performance of the work is more likely to be associated with an employ­ment relationship.

14. Evidence of entrepreneurial activity. This factor is closely associated with ownership of tools and encompasses self-promotion, advertising, use of business cards, soliciting to develop "clients", the use of agents, and organ­izing one's "business" (by incorporation or otherwise) to take advantage of limited liability or the tax laws. It may be significant whether the individual has a "chance of profit" or "risk of loss": that is whether business acumen, sensitivity to the needs of the market, astute investment, innovation, or risk taking, yield a reward or financial loss.

15. The selling of one's services to the market generally. If the purchasers of individual's services are numerous and of diverse character, the individual looks more like an independent self employed person than an employee. If, on the other hand, an individual has a long standing and consistent relation­ship with one or a limited number of purchasers, he is more likely to be considered a "dependent" contractor or employee - especially if the cir­cumstances or contractual relationship limit his ability to dispose of his skill to other purchasers, or his "prime customer" is given priority.

16. Economic mobility or independence, including the freedom to reject job opportunities, or work when and where one wishes. Of course, few indepen­dent contractors are entirely free in this regard, but the question is one of the degree. A "self-employed" person has more scope for choice than an employee or dependent contractor who must look for the bulk of his work opportunities to one or restricted number of sources with whom he has 'tied his fortunes'.

17. Evidence of some variation in the fees charged for the services rendered. This factor is less helpful when those services are standardized and the market is relatively competitive. In such circumstances, one would expect a uniform fee structure even if the individuals providing the services were doing so as "independent contractors", and individual employees may also bargain about their wage levels; however, the ability to bargain or fix the contract fee in accordance with the work or the purchaser's ability to pay, may indi­cate independent contractor or self employed status.

18. Whether the individual can be said to be carrying on an "independent business" on his own behalf rather than on behalf of an employer or, to put it another way, whether the individual has become an essential element which has been integrated into the operating organization of the employing unit. Integration in this sense usually presupposes a stable rather than a casual relationship and also involves the nature, importance and "place" of the services provided in the general operation of the employing unit. The more frequent the re-engagement or longer the duration of the relationship, the more likely the individual will be regarded as part of, or integrated into, the employer's organization. In the case of entertainers, the cases suggest that it may be useful to determine the extent to which the artist's material or co­workers are influenced by the employer; that is, whether the artist is left to entertain in his own right, or whether his talents are moulded to conform with the employer's artistic vision or interests. Even an individual engaged for a short time may be considered "integrated" into the employer's opera­tion in the manner of an employee, if he is required to devote the whole of his working time during the period to the service of the employer, promote its organization, or fill in his "non-performing" time with unrelated ancil­lary duties. (See: Whittaker, supra.)

19. The degree of specialization, skill, expertise or creativity involved. If these are dominant elements in the relationship, the control test becomes less useful as an indicator of employee status, and in the absence of "integra­tion" into the respondent's organization, the disputed individual is "self­employed" professional.

20. Control of the manner and means of performing the work - especially if there is active interference with the activity. However, it is the right to interfere rather than the ability to do so which is significant. The fact that a partic­ular occupation involves technical skill, putting control of the details beyond the capacity of the employer, does not preclude a skilled employee from being so regarded, since the right to control may exist even though the ability to do so does not. Similarly, the power to discipline, withhold rewards, or terminate the relationship at will and without cause may indi­cate an employment relationship whether or not the employer exercises this power.

21. The magnitude of the contract amount, terms, and manner of payment. If the financial terms of the relationship approximate wages (for example, if deductions are made for income tax or other benefits are provided or if an individual is paid by the hour rather than the result) an employment rela­tionship may be indicated. The magnitude of the contract amount can sometimes be significant, (although sports celebrities and professionals may be very highly paid yet still be "employees"; and independent professionals may charge an hourly rate rather than a block fee).

22. Whether the individual renders services or works under conditions which are similar to persons who are clearly employees. The employer's established employee complement may provide a useful benchmark against which the activities of its alleged independent contractors can be measured. If the so-called independent contractor substitutes for a firm's employees, or per­forms duties out of his ordinary line of work and similar to those of employ­ees (for example, a trapeze artist also acting as a usherette, or a dancer also acting as a waitress) it is more likely that s(he) will be considered an employee.

23. Viewed against those factors, what are the facts here before us? Ron and Bill McBeath have carried on business as a partnership under the name McBeath Brothers Contracting since August 1984. Both are journeymen electricians and experienced linemen in the industry who have worked for a variety of utilities and private contractors. Bill was an employee of the respondent for a twelve-month period between October 1980 and October 1981, whereas Ron has never been so employed. Each is certified for the work in which they engage by the Association of Municipal Electric Utilities (AMEU), a certification not normally possessed by employees of the respondent engaged in line work.

24. The business of McBeath Brothers Contracting is pole line construction. This is a spe­cialized sub-trade within the construction industry which could be said to fall within several of the sectors defined by work characteristic under the Act. The work is straightforward. An owner/client requires poles constructed to specification for the stringing of power and other lines. Holes are dug, poles placed, anchored by guy wires, framed in and the hardware for lines affixed - all this to job specifications dictated by the owner/client, in this case the respondent.

25. It should not surprise that the purchasers of the services of McBeath Brothers Contract­ing are few in number. The erection of poles for stringing lines serves a limited, albeit important function and the economic structure of public utilities services in Canada dictates that the user class will be limited. To a great extent, users, such as the respondent, engage in pole line construction themselves, using an internal work force. To the extent that users do not do so, they form a small oligopoly purchasing this service from contractors whether large or small such as McBeath Broth­ers Contracting. The evidence reveals that in the fourteen-month period prior to October 1985, sixty percent of the time spent by McBeath Brothers Contracting in pole line construction was in performing such services for the respondent; a further twenty-five to thirty percent of their work was performed for Bell Canada and the remaining ten to fifteen percent for a variety of purchasers including the Belleville Utilities Commission, Domtar of Canada, Public Works Canada, and Pigden's Mechanical Limited, a private contractor for whom such work was performed on a sub-contacting basis. The great bulk of this work was performed personally by the two McBeath Brothers, a .though occasionally the partnership would engage employees on a "piece-work" basis to meet contractual requirements, and this was the case, from time to time, in the performance of services for the respondent.

26. Contracts for pole construction are obtained in two different manners. Some projects are put up for tender by owner/clients and contractors in the industry bid on a competitive basis. Such a bid would be on an all-inclusive basis after estimate by the contractors of the work required for the job. Bill McBeath estimated that fifty percent of the work performed by McBeath Brothers Contracting for the respondent in the fourteen-month period preceding October 1985 was on such a tender bid basis. An alternative mechanism for the setting of contracts was the unit price meth­od. Each year, McBeath Brothers Contracting would establish a unit price for each function associ­ated with pole construction, i.e. delivering poles, augering holes, setting poles, anchoring, guying, cribbing, framing, stringing conductors, installing transformers and pole removal. In addition, con­tract prices could be set by reference to an hourly rate for the performance of certain skilled work, i.e. backhoe operator, compressor operator, chain saw, matting, etc. Often, where contracts were set on a unit price basis, the term of the contract was not stipulated specifically, payment being on an hourly rate and the total number of hours required to perform the job determined only on an as completed basis.

27. Such was the case with one particular job, ultimately of thirteen weeks duration, in which thirteen separate weekly contracts were set as the work progressed. In that particular set of contracts, the setting of fifty-nine poles on a priority basis, McBeath Brothers Contracting was retained specifically because of the expertise of the two brothers in blasting. Employees of the res­pondent are not trained in the use of explosives~ and their experience with dynamite is limited in tie words of the area foreman, David Marshall, "to know enough to stand back." Not only was blasting expertise and experience required for that particular project, but in addition specialized equipment including a compressor. This like other equipment such as the back-hoe, trucks, hand tools etc. are routinely used by McBeath Brothers Contracting in the performance of pole con­struction work and such equipment is owned, maintained and insured by them - or alternatively, rented if required. The annual unit price list indicates that McBeath Brothers Contracting could supply poles if needed, although in the case of the respondent these are supplied from its own in-house inventory.

28. Much pole construction work is carried on in tandem with the owner/client's own in-house work force, and this is the case with the respondent. However, McBeath Brothers Contract­ing sets its own terms and conditions of work. Needless to say, hours of work must be coordinated with the employer's own work crew if performance of the contract is to be efficient. However, the contractor makes the ultimate determination of the rate at which the work is to be performed, whether on a daily basis or otherwise, the days on which the work is to be performed and the inte­gration of the particular contract with the many others in which it might be simultaneously engaged. In other words, it is the contractor who sets his contract priorities, although often, as in tie case of the setting of the fifty-nine poles earlier referred to, this contract was awarded on a first priority basis, and was treated as such by McBeath Brothers Contracting. Work methods are left for determination by the contractor, although the finished product must comply with the detailed specifications established by the owner/client, in this case the respondent. In the ordinary course of events, the owner/client has indicated in general terms the extent of work required and the manner in which it wishes it performed. This is the "lay-out" and one was set for this particular job - the setting of the fifty-nine poles. Present throughout the thirteen weeks required for the completion of that project was a journeyman lineman acting as sub-foreman for the respondent's crew - Stan Stein. Work was coordinated upon a daily basis between Stein and the McBeath Brothers, and it was one of Stein's functions to ensure that the respondent's job specifications were complied with. However, despite his perception of supervisory authority over the two brothers, such was not in fact exercised by Stein or vested in him. Certainly he had no control of a supervisory nature over their relationship with the respondent, whether disciplinary or otherwise. Nor did his authority extend to control over their work methods. This could not be the case given his lack of expertise in the very skill for which they had been retained - the blasting work and operation of the compres­sor.

29. Finally, a word must be said on the entrepreneurial activity of the two brothers. Adver­tising is kept to a minimum, and although McBeath Brothers Contracting does sponsor a sports team, a stock car, and a hockey player - all of which involves some degree of advertising, both vis­ual and through radio, the bulk of their business depends on direct contact with potential and ongoing customers. This is understandable given the small pool of owner/clients who would require their services. Business cards are distributed to public utilities companies and other contractors in the business, and at the same time, these are provided with the annual inventory unit price list. Bill McBeath estimated that some twenty to twenty-five hours per month would be spent in soliciting contracts, and this sufficed to keep the two sufficiently busy so that on occasion work must be turned down. McBeath Brothers Contracting invoices for work and services performed as noted above, either on the unit price basis or in accordance with a tender. The two brothers themselves are then reimbursed by the partnership and it is through McBeath Brothers Contracting that U.I.C., Workmen's Compensation, Canada Pension Plan and Income Tax deductions are made.

30. How do these facts, which reveal a successful small business in this specialized field of pole construction, measure against the factors enumerated in Algonquin Tavern, supra? That McBeath Brothers Contracting has in the past used and asserts the right to use substitutes has been testified to, although it is fair to say that in the great bulk of contracts awarded the bargain is ful­filled with the labour of the two brothers, rather than with that of someone else. Generally, the partnership supplies its own tools, equipment, appliances and instrumentalities indicating some­thing in the nature of a capital investment, although such might not be said to the same extent in the supply of materials and in particular the poles erected. There is significant evidence of entre­preneurial activity in the soliciting of clients and shaping of a viable and specialized business. The services of McBeath Brothers Contracting are sold to the market generally, and although the mar­ket is, as noted above, an oligopsonistic one, this is not so much indicative of a relationship of dependency approaching that of the dependent contractor, as it is of the structuring of public utili­ties within our economy. There is much economic mobility and independence, including the free­dom to reject job opportunities and to work when and where the contractor so desires within the limited geographic area in which McBeath Brothers Contracting chooses to operate. Fees charged for services rendered are determined by McBeath Brothers Contracting on a unit price basis, although the standardization of the services rendered and the competitive nature of the market would tend to lead to a uniform fee structure. Nevertheless, the tendering process through which much contract work is attained indicates an independent contractor. The work of McBeath Broth­ers Contracting is not so integrated into the organization of the respondent as to be described as an essential element of its operating organization. Rather, it is work and services available to the res­pondent from a variety of sources. There is a significant degree of specialization, skill, expertise and creativity associated with the services performed by McBeath Brothers Contracting, and indeed it is that very skill and expertise which has led the respondent to engage them. Work is per­formed to detailed contract specifications, but McBeath Brothers Contracting reserves to itself control over the manner and means of such performance. There is little interference with the activ­ity of the brothers except to assure compliance with the job specifications. The terms and manner of payment of contract indicate an independent contractor. Finally, the services rendered by McBeath Contracting, although related to those performed by elements of the respondent's own work forces differ sufficiently from them and are performed under conditions significantly different as to make it clear that they are separate and distinct from that work force.

31. These facts reveal a relationship far different from that facing these same parties either in the tree removal case (Ontario Hydro, Bancroft Area, [1986] OLRB Rep. June 790), or in the meter reading case (Ontario Hydro, Meter Reading: Kingston area office, OLRB File #3294-84-vi)' in both of which the Board was of the view that the relationship between the respondent and he disputed contractors was such as to constitute the latter dependent contractors unto the Act. Here, there can be no doubt but that the statutory definition has not been met under either of its heads. Neither Ron nor Bill McBeath perform work or services for the respondent for compensat­ion or reward on such terms and conditions such that they can be said to be in a position of eco­nomic dependence upon, and under an obligation to perform duties for the respondent more closely resembling the relationship of an employee than that of an independent contractor. The two, carrying on business under the name McBeath Brothers Contracting, are independent con­tactors, and neither is an employee of the respondent for the purposes of the Act. Accordingly, and in view of the foregoing, this application is dismissed.