Labourers' International Union of North America, Local 506 v. Dalton Engineering & Construction Limited, 1988 CanLII 3667

Labourers' International Union of North America, Local 506 v. Dalton Engineering & Construction Limited and Rumble Pontiac Buick (1985) Inc.

[1988] OLRB Rep. June 567

2192-86-R; 2366-86-M Labourers' International Union of North America, Local 506, Applicant v. Dalton Engineering & Construction Limited and Rumble Pontiac Buick (1985) Inc., Respondents; Labourers' International Union of North America, Local 506, Applicant v. Dalton Engineering & Construction Limited and Rumble Pontiac Buick (1985) Inc., Respondents

BEFORE: N. B. Satterfield, Vice-Chair, and Board Members D. A. MacDonald and H. Kobryn.

APPEARANCES: A. M. Minsky, C. Flood and N. Barbieri for the applicant; Bruce Binning, Brian Foote and James Thomson for the respondents.

DECISION OF N. B. SATTERFIELD, VICE-CHAIR, AND BOARD MEMBER D. A. MACDONALD; June 30, 1988

1The application in Board File No. 2192-86-R is made under subsection 1(4) of the Labour Relations Act and requests the Board to declare that Dalton Engineering & Construction Limited and Rumble Pontiac Buick (1985) Inc. be treated as constituting one employer for purposes of the Act. The application in Board File No. 2366-86-M is a referral of a grievance in the construction industry under section 124 of the Act for final and binding arbitration. For ease of reference, the Board will refer to the respondent Dalton Engineering & Construction Limited as "Dalton" and to the respondent Rumble Pontiac Buick (1985) Inc. as "Rumble". The applicant Labourers' International Union of North America, Local 506 will be referred to either as "the Union" or "Local 506".

2Dalton is a general contractor operating primarily in the industrial, commercial and institutional ("ICI") sector of the construction industry and Rumble operates a General Motors automobile dealership. Dalton contracted with Rumble to supply certain construction services for the building of a new automobile showroom and for the renovation of some existing facilities on Rumble's property located on the west side of Bayview Avenue north of Eglinton Avenue East in the City of Toronto ("the Project"). More particularly, the Project involved the demolition of the old showroom and the building of a new one, administration offices and customer service reception area. It also involved alterations to the existing parts department and the cash, customer waiting and storage areas.

3Dalton and Local 506 are bound to the Labourers Provincial Agreement effective from June 25, 1986 to April 30, 1988 ("the Agreement"). They were bound also to the predecessor provincial agreement which was in effect from May 1, 1984 to April 30, 1986. The predecessor provincial agreement was in effect when the Project was started but the work which gave rise to these applications began while the Agreement was in effect. The Agreement limits Dalton to engaging subcontractors who are "in contractual relations" with the Union or its sister affiliated bargaining agents for the performance of work coming within the Agreement's scope. The parties are agreed that, for purposes of this proceeding, the work involved with the demolition of the showroom, certain other demolition and the removal of a concrete slab, was work coming within the scope of the Agreement and was also work covered by Dalton's commercial contract with Rumble. The work was performed by A.B.C. Demolition (hereafter "ABC"). ABC was not in contractual relations with Local 506 or any of its affiliates. The commercial contract for performance of the work was nominally between Rumble, as the owner, and ABC.

4The applicant contends that the performance of the work by ABC was a violation of the Agreement by Dalton because Rumble and Dalton were under common direction or control within the meaning of subsection 1(4) of the Act and should be treated as constituting one employer, making Rumble bound to the Agreement, or, in the alternative, in substance, it was Dalton which contracted with ABC notwithstanding that the form of the contract was between Rumble and ABC. Local 506 counsel claims that the arrangement under which Rumble entered into a contract with ABC to perform the work was a sham designed to allow Dalton's subcontracting obligations to be circumvented. Whether or not that was the intention of the arrangement, the result was still a violation of their Agreement according to applicant counsel. Counsel for the respondents admitted in his opening statement to the Board that the decision to have Rumble enter into the contracts with individual trade contractors came about because of Dalton's subcontracting obligations under the Agreement.

5Both counsel remarked to the Board at the outset that they considered these to be important cases involving subcontracting obligations under construction industry collective agreements and that they were unaware of any reported decisions of the Ontario Labour Relations Board involving the form of commercial contract between the prime contractor on a project and the owner of the project, such as is in evidence here. Union counsel considers the cases important because, in his view, they involve the principle of whether a contractor bound to a collective agreement can rely on the form of a commercial contract to avoid an obligation under a collective agreement to contract work only to contractors who are also in a collective agreement relationship with the Union. For example, Dalton should not be able to hide behind its commercial contract with Rumble, which provides that Rumble and not Dalton will enter into contracts with trade contractors who perform the work on the Project, and be free of liability under the Agreement should work covered by the Agreement be performed by contractors who are not under a collective agreement obligation with the Union or any of its affiliates. Counsel for Dalton, on the other hand, considers them to be important cases because they affect the freedom of owners as purchasers of construction to determine the most advantageous form of commercial contract for purchasing the construction services which they need.

6The commercial events giving rise to these applications began in September, 1985, but the specific work performed by ABC which caused the Union to make these applications was performed in September 1986. On or about October 2, 1986, the Union delivered to Dalton a grievance alleging that Dalton had violated clause 2.05 of the Agreement and, by further letter from its solicitors dated October 28, 1986, the Union advised Dalton that it was joining Rumble as a party to the grievance and was making application under subsection 1(4) of the Labour Relations Act. That application in File No. 2192-86-R was made October 30, 1986. The grievance in File No. 2366-86-M was referred to the Board under section 124 of the Act on November 20, 1986. These proceedings first came before the Board for hearing on January 27, 1987, and were heard over a further nine days of hearing until June 29, 1987.

7The Board heard the testimony of Keith L. Gillam, Gerald A. Wood, Alfred (Nick) Thurston and James Thomson for the respondents, George Cummings and John Stefanini for Local 506. Gillam is senior vice-president of Dalton and Wood is the president of Rumble. Thurston and Cummings are both consultants specializing in the construction industry with many years of experience in the management of construction projects. While each party asked questions about the qualifications of Thurston and Cummings consistent with seeking to qualify them as expert witnesses before the Board, the Board was not asked to rule on whether they were expert witnesses even though some of the evidence admitted was in the nature of opinion evidence. Since it is unnecessary for the Board to rely on any opinion evidence which they might have given, the Board also finds it unnecessary to rule on whether they were properly qualified as expert witnesses. Thomson and Stefanini were called to testify about the recent negotiating history of the parties to the Agreement. Thomson is general manager of the Labour Relations Bureau of the Ontario General Contractors Association, one of several employer organizations which comprise the Labourers employer bargaining agency. Stefanini is business manager of the Labourers Ontario Provincial District Council, which, together with the Labourers' International Union of North America make up the designated employee bargaining agency which is the union party to the Agreement. Theirs was extrinsic evidence and was received subject to the argument of the parties respecting whether it should be admitted in the first instance and, if admitted, the weight to be given to it. Since the Board has found it unnecessary to rely on their evidence in order to determine the issues before it, it is unnecessary to rule on its admissibility. The witnesses were all credible and, subject to the aforementioned exceptions, the findings of fact herein have been made on their evidence, the documentary evidence before the Board and the submissions of counsel respecting the conclusions of fact which the Board should make from that evidence -

8Wood is the president, general manager and sole owner of Rumble. Rumble operates the dealership and is in no other business, except for the fact that, on or about December 31, 1986, the shares, land, buildings and other assets of the predecessor dealer which had been beneficially acquired by Wood on or about November 28, 1985, were transferred to Rumble.

9Peter John Dalton is president of Dalton and his wife, Patricia, is secretary-treasurer. They are its only shareholders and directors. They, Gillam and Keith Williams, are the officers of Dalton. Gillam is senior vice-president and Williams is comptroller. Dalton started in the construction business in 1940. It is a general contractor performing construction projects under a variety of contractual arrangements: stipulated sum; cost plus; construction management and combinations of construction management and stipulated price. It has constructed projects ranging in size from $506,000 to $15,000,000. Eighty-five per cent of its construction projects during the last ten to fifteen years have been performed on a construction management basis, the majority being approximately five to six million dollars in value.

10Gillam described construction management as a contractual arrangement under which the contractor becomes involved from the concept of a project, allowing it to have input to such things as designing and planning the project and selecting mechanical equipment, construction materials and methods. By contrast, under a stipulated sum contract the contractor usually becomes involved at the time construction is ready to begin. Gillam described this latter situation as one in which the contractor has priced and bid the project after its design has been settled and has been bound to a contract at his bid price. The fixed price, Gillam claims, creates a distinct division of interest between the contractor and the owner, the contractor's objective being to bring the project in at or below the bid price and the owner having relatively little to say in the way the construction is performed. The contractor would be the beneficiary of any savings under the bid price. Gillam characterizes that relationship as somewhat adversarial.

11On the other hand, he characterizes the construction management relationship as a co-operative one in which, at least insofar as Dalton's construction management contracts are concerned, the contractor is involved together with the owner right from the beginning, the owner is an integral part of the project management team and the beneficiary of any favourable variance from the budget. Gillam's characterization of the construction management relationship as a co-operative one finds support in Dalton's written proposal to Rumble referred to infra at paragraph 13. It speaks of Dalton acting for Rumble to cause "… the performance by others of architectural and engineering services…". It invites Rumble's participation in the Project from start to finish; proposes that Dalton "... co-ordinate the efforts of Rumble and its Architectural Engineering and Construction Programme." and work with Rumble and its architect to construct the Project.

12In recent years, Dalton has acquired substantial experience in the construction of automobile showrooms, particularly for General Motors dealers. At the time of these proceedings, it was currently engaged in, or had recently completed, the construction of showrooms for five dealers, three of which were General Motors dealers. It was through one of the General Motors dealers that Dalton and Rumble came into contact with each other. That contact led to Dalton making a formal proposal for the construction of Rumble's showroom and the related demolition and alteration work. The proposal was made by letter dated September 11, 1985 for Dalton to be construction manager for Rumble on the Project. Part of the construction services which Dalton proposed to supply to Rumble included the setting of bid specifications for trade contractors, evaluating the bid tenders received, recommending to Rumble the trade contractor which should perform the particular work and letting of the contracts to the selected contractor. The proposal called for the contracts to be let in Dalton's name. That was not acceptable to Rumble. While Wood wanted Rumble to have the benefit of Dalton's expertise with constructing showrooms and other facilities for General Motors dealers, he wanted Rumble to let the contracts directly to the trade contractors. This was because Wood wanted to have as much control as possible over how things were done on the Project and he did not want unionized contractors to be used on the Project. Wood told the Board that he had no use for unions and believed that their presence on the Project would compromise his objective of Rumble getting the best price, productivity and quality. He believed also that Dalton would be obligated to engage union contractors.

13Dalton eventually amended its proposal to provide that the contracts with the trade contractors would be between Rumble and the contractor. Dalton and Rumble entered into a formal contract on that basis (hereafter "the Contract"). The Contract was dated to be effective from January 14, 1986 although it is not entirely clear on the evidence when it was actually executed. The type of contractual arrangement with Rumble which Dalton had proposed, as the Board noted above, was what Dalton considered to be a construction management contract. While there are standard forms of contract used in the construction industry in Canada for certain types of general construction services, none exists for construction management. For that reason, Dalton used a standard form of contract approved by The Royal Architectural Institute of Canada and The Canadian Construction Association known as "Document No. 13" "CANADIAN STANDARD FORM OF CONSTRUCTION CONTRACT" for use when the work is being done on a basis of a "COST PLUS CONTRACT". It has been Dalton's practice to use this document format and to amend it as required to suit the construction management contractual conditions - This is usually done by incorporating into the contract document Dalton's proposal setting out all of the services which it would provide as construction manager. To that end, the September 11, 1985 letter containing Dalton's initial proposal to Rumble was made to form part of the Contract, as were later letters.

14In keeping with Dalton's proposed construction management approach, Dalton did become part of the Project management team right from the start of the Project, together with Rumble (in the person of Wood), its architect and its design engineer. The following are some of the specific services which Dalton undertook and performed for Rumble pursuant to the Contract:

Pre-construction Services

(1) Perform, or cause the performance by others of all architectural and engineering services including: the preparation of an architectural, and engineering and construction program as the basic device for controlling the Project; and co-ordinating the preparation of plans and drawings.

(2) Together with Rumble and the architect, prepare a master schedule for the performance of the major phases of the Project.

(3) Prepare for Rumble's approval a preliminary budget, detailed cost estimates and the final budget for the Project.

(4) If the detailed cost estimates require, recommend to Rumble modifications to the design specifications in order to bring the estimated costs within limits acceptable to Rumble.

(5) Organize the work covered by the Contract into trade divisions for competitive bidding and prepare a schedule for the tendering and performance of the work.

(6) Prepare a list of contractors in each trade for bid tendering purposes.

(7) Prepare bid specifications and invitations to bid, and arrange for tenders to be submitted to Rumble.

(8) Evaluate the tenders submitted and recommend to Rumble the awarding of contracts.

(9) Prepare the Contract documents for execution between Rumble and the selected trade contractors.

Construction Services

(10) Monitor and control costs throughout the duration of the Project.

(11) Assume total responsibility for all work covered by the Contract, including scheduling, co-ordinating and supervising the work of all trade contractors and approving their invoices for payment.

(12) Submit monthly progress applications to Rumble for the funds with which to pay the trade contractors for completed work to date.

(13) Be Rumble's disbursing agent for the progress payments to the trade contractors for completed work.

(14) Certify to Rumble that all work contracted for by the trade contractors was completed pursuant to the terms of the Contract and recommend payment of amounts held back from the progress payments.

(15) Warrant for one year the work coming under its Contract with Rumble which was performed for Rumble under its contracts with the trade contractors.

While the Board has grouped the services as "pre-construction" and "construction", one of the reasons why Dalton and Rumble entered into this type of contract was to be able to begin the Project before a final design was available. Therefore, most of the services grouped as "pre-construction" continued to be performed after physical construction had begun.

15The Contract established Dalton's fee for performance of the work at 3 1/2 per cent of the cost of the work covered by the Contract. The cost of the work is defined in Article A-4 of Document No. 13. It includes, amongst other things, the cost of work performed by the trade contractors. The Contract provided for Dalton to receive a 15 per cent overhead charge on the cost of changes made by Rumble in the work covered by the Contract. The terms of the Contract had provided also for a guaranteed upset price to be set when the final budget for the Project was struck. The total budgeted cost of the Project, including Dalton's fee, was to be the guaranteed upset price. When a guaranteed upset price is established under a type of contract such as the Contract is, it is the contractor's guarantee to its client that the "cost of the work" defined in the contract will not exceed that amount. The way Dalton operates, if the guaranteed upset price is exceeded, Dalton bears the cost. If the actual cost is less than the guaranteed upset price, the benefit falls to the client. Each time there were changes to the budget, however, the guaranteed upset price rose as the total budget rose and eventually there were enough changes that the guaranteed upset price ceased to be a factor and, indeed, was abandoned.

16Dalton usually lets the contracts to the trade contractors in its own name under these arrangements, but sometimes the contracts are let in the name of the owner with whom Dalton has contracted. In either event, when the work to be performed by trade contractors is work coming within any of the six collective agreements to which Dalton is bound, it has been let to contractors who were in a collective agreement relationship with the relevant trade union. The Project was the first exception to that practice. In addition to the Agreement, Dalton is bound to the provincial agreements for the following trades: bricklayers, carpenters, cement masons, operating engineers and rodmen. They, together with the Labourers are referred to colloquially as the civil trades.

17The Contract clearly provides for Rumble to let the contracts to the trade contractors and not Dalton. Article 40 of the General Conditions of Document No. 13 has been amended to that end. The article deals with the relations of the contractor and subcontractor. By the terms of the document, Dalton is contractor and a trade contractor would be a subcontractor. The word "owner" has been substituted for the word "contractor" wherever it appears in the preprinted wording of Article 40. The terms of the article obligate Rumble to bind every subcontractor to the terms of the Contract documents between Rumble and Dalton insofar as they are applicable to the subcontractor's work.

18The instructions to bidders in the bid specifications issued by Dalton to the trade contractors being invited to bid on work included the advice that they would be required to sign a contract with Rumble for any work let to them in a form of contract similar to the one used by Dalton when it awards contracts. A copy of Dalton's form of contract was included as part of the bid specifications. The written contracts executed by Rumble and trade contractors were in the same form as the ones Dalton would have signed with them, except for changes made necessary to accommodate the substitution of Rumble for Dalton. The contracts incorporated by reference the Contract, including its General Conditions, drawings and specifications, including the bid specifications.

19The parties put before the Board twenty-seven contracts executed between Rumble and trade contractors pursuant to Article 40, all signed by Wood for Rumble. One of them was a contract with Keith Plumbing & Heating Inc. to supply and install certain plumbing, drainage and gas piping which Wood executed for Rumble without consultation with Dalton. Wood directed Dalton to use Keith because he had used the firm before. According to Wood, Rumble also contracted with two other contractors without entering into written contracts. Wood had done business with both of them before. One was with Electriclee Ltd. for electric work, some of which came within the scope of the Contract between Dalton and Rumble. The other was with P. Tomas Masonry for interior masonry work on renovations to the existing building. It was not part of the budget for the Project. Dalton supervised the work of both contractors, but did not claim any fee for Tomas' work. Rumble paid both contractors directly. Dalton warranted for one year the work of all contractors whose work it supervised, except that of Electriclee. The trade contractors who executed contracts with Rumble warranted their work for two years to both Rumble and Dalton, pursuant to the bid tendering conditions which were made part of their contracts with Rumble.

20Seventy-five to eighty-five per cent of the value of all work performed on the Project was done by contractors in collective bargaining relationships with building trades unions. One exception was the demolition work performed by ABC pursuant to the contract executed between it and Rumble. Dalton had prepared a list of four contractors who were invited to bid on the work, three of whom submitted bids. ABC was the low bidder and Wood directed Dalton to take ABC and prepare a contract for execution between ABC and Rumble. It is implicit in Gillam's evidence that Dalton did not recommend to Rumble to let the contract to ABC. ABC was paid approximately twenty thousand dollars for its performance of the contract.

21Dalton performed all of the services for which it contracted with Rumble, including in particular the services referred to in paragraph 13 above and miscellaneous labouring and carpentry work on the Project site. Dalton employed directly an average of two labourers and carpenters for the on-site work. Dalton was paid approximately $273,000 for its services, of which $115,000 came from management and technical services additional to those covered by the 3 1/2 per cent construction management fee; $88,000 came from the cost of direct labour and materials related to the miscellaneous labouring and carpentry work; $47,000 came from the construction management fee and $23,000 from the overhead charges on change orders. The total cost of the Project coming within the Contract, including the payments to Dalton, was approximately $1,315,000.

22Rumble in the person of Wood was directly and actively involved in the pre-construction and construction phases of the Project. With respect to pre-construction activities, he was involved together with Dalton in the designing, planning and budgeting elements of the Project. His approval was required at each major stage and for any revision to the budget. His was an active involvement. For example, Wood disagreed with the showroom roof design proposed by his architect, Sankey, and had it changed. The design which Wood ultimately accepted was proposed to Sankey by Dalton. It was less costly than the original proposal and was instrumental in bringing the Project budget within Rumble's financial resources. Gillam cited this incident as an example of the value to a purchaser of construction having an experienced contractor involved at the design stage, as allowed by the construction management approach. Gillam also gave an example of how the early involvement of the contractor can influence beneficially the selection of construction materials. Dalton identified a potential problem with the showroom flooring specified by Sankey. Dalton relied on its experience with constructing automobile showrooms to get Rumble's approval to install more durable and less costly flooring. Wood disagreed with his architect's advice on other aspects of the Project's design, leading to changes in its design as the Project developed. These disagreements were usually resolved by Wood and Dalton. True to Wood's objective of having as much control as possible over the Project because, as he put it, he was paying the bills and, as owner, had to live with the result, he visited the Project daily, checking the work, meeting with Dalton's site superintendent and attending the weekly job meetings with Dalton and the trade contractors. Many of the change orders on the Project were the result of Wood's close attention to it. Wood also met directly with the trade contractors to resolve problems. If he was not satisfied with a trade contractor's work, whether or not Dalton had approved it, he had it corrected to his satisfaction either by dealing directly with the trade contractor or going through Dalton. Sometimes Dalton's involvement was critical to resolving disputes with trade contractors about the work.

23The Board has reviewed and weighed the able submissions made by both counsel, but will attempt neither to set them out in full nor to make a comprehensive summary of them. Instead, the Board will refer to and summarize particular aspects of their submissions as required by the decision. It will deal first with the grievance referral. While it contains allegations of violations of the hiring provisions of the Agreement as well as the subcontracting provisions, the entire focus of the Union's evidence and representations was on the allegation that Dalton had violated clause 2.05 of the Agreement by failing or refusing to engage only subcontractors who are in contractual relations with Local 506 and/or its affiliated bargaining agents. Clause 2.05 provides that:

[t]he Employer agrees to engage only sub-contractors who are in contractual relations with the Union and/or its affiliated bargaining agents for all work covered by this Agreement, or work forming part of an I.C.I. General Contract,...

[emphasis added]

Counsel for the parties agrees that the demolition work which ABC performed is work covered by the Agreement. What they do not agree on is whether, in the particular context of the contractual relationship between Dalton and Rumble, the work comes within the reach of clause 2.05. Local 506's counsel says it does because it is work coming within the scope of the Agreement, and, in the words of clause 2.05, forms "...part of an I.C.I. General Contract..." between Dalton and Rumble, a contract under which Dalton took on all of the responsibilities of a general contractor for the work of the Project. According to counsel, that was the substance of the contractual relationship between them and that substance was not changed by the form of the relationship which called for Rumble to let the trade contracts. Counsel for Dalton and Rumble, on the other hand, takes the position that the demolition work was not Dalton's to let. It was Rumble's work and Rumble is not bound to the Agreement. Therefore, the work is beyond the protection of clause 2.05.

24Union counsel's primary argument was that Dalton cannot circumvent the clause 2.05 subcontracting obligation by having a third party like Rumble let the subcontracts for the work coming within their Contract. In other words, Dalton cannot do through Rumble that which clause 205 prohibits Dalton from doing itself. Counsel submits that, regardless of whether Dalton's contractual relations were those of a general contractor on a fixed-price contract, a cost plus contract or a construction management contract, it is obvious that Dalton was responsible to Rumble for ABC's work in the same manner and to the same extent as any general contractor under any form of contract. The only thing which Rumble did with respect to ABC was to select it from amongst the three contractors who bid the work and execute the contract prepared by Dalton. Therefore, the substance and reality of the arrangement was that ABC's subcontract, while nominally with Rumble, was effectively with Dalton. The mere formality of Rumble signing the trade contract with ABC alters neither the substance of the arrangement nor Dalton's obligation under clause 2.05. In those circumstances, counsel argues, the subcontract let through Rumble to ABC for the demolition work was a violation of clause 2.05 by Dalton.

25Union counsel relies on Litwin Construction (1973) Ltd., [1982] 2 Can LRBR 349, as authority for his primary argument. It is a decision of the Labour Relations Board of British Columbia ("the B.C. Board"). Litwin was bound to a collective agreement with the Carpenters Union which included a subcontracting clause generally similar to clause 2.05 of the Agreement. Litwin was the owner of property on which residential units were being constructed for marketing in a series of units as income tax shelters. Litwin was the developer of the project and responsible for bringing it to substantial completion within a stipulated maximum cost. O'Brian Financial Corporation was the marketer of the project, responsible for attracting individual investors who would purchase the units and qualify under the Income Tax Act as developers of those units. One of O'Brian's responsibilities to these individuals was to enter into a construction contract for the project. It entered into a construction contract with Absolon Construction Ltd. Absolon was not bound to any agreement with the Carpenters. Absolon had made it possible for Litwin to acquire the property for the project, in return for which Litwin had made a business commitment to Absolon for it to construct the project. O'Brian did not represent any individual investors at the time it let the contract to Absolon, although a few of them became involved in the project before construction commenced.

26The Carpenters claimed Litwin was in breach of the subcontracting clause of their agreement by allowing Absolon to construct Litwin's project. The Carpenters applied under section 37 of the B.C. Labour Code for a declaration that Litwin and O'Brian constitute a single employer and requested the B.C. Board's assistance under subsection 96(1) of the Code respecting the alleged breach of the collective agreement binding on the Carpenters and Litwin which underlay the section 37 application. That subsection gave the B.C. Board jurisdiction to inquire into the difference, if the Board believed the difference to have been arbitrable at the time it was referred, and make an order for final and conclusive settlement of the difference.

27The B.C. Board acknowledged that the individual investors may be developers for purposes of the Income Tax Act, but found that, for purposes of the Code, Litwin had put the project together, controlled it and was the developer. One of the steps Litwin had taken in putting the project together, according to the Board, was its "... decision to utilize Absolon Construction as the construction contractor.". While the contract for the construction of the project was nominally between O'Brian and Absolon, the B.C. Board decided that, in substance, it was Litwin which had engaged Absolon. The Board commented as follows at page 363 in finding that Litwin had breached the Carpenters collective agreement.

. . .The language of Clause 3.02, it will be recalled, commits the employer not to "contract or subcontract any work within the jurisdiction of the... Carpenters... unless the contractor is bound by the Carpenters' standard agreement. The facts of this case constitute a compelling statement of the reasons why the scope of this language must not be confined to work contracted or subcontracted pursuant to a formal written contract. If it were restricted in that manner, then obviously the obligation could be effectively ignored by not entering into a formal, written contract or by arranging for another party to make the formal contract. Clearly, the collective agreement provision must be interpreted so as to prevent the employer signatory to the collective agreement from avoiding its obligation by means of a manipulation of the form of contract; the language must be interpreted to prohibit the employer from informally or indirectly granting or committing work within the Carpenters' jurisdiction to contractors not bound by the Carpenters' standard agreement. Here, the decision to contract with Absolon Construction at the time it was made was effectively Litwin's. By honouring its "business commitment" to Absolon Construction, the substance of what occurred was a breach by Litwin Construction of its collective agreement subcontracting clause.

28Counsel for Local 506 takes the position that the B.C. Board's decision is a direct, legal precedent for the piercing of commercial relationships that avoid collective agreement obligations, even absent any intent of avoidance. Or, put another way, counsel relies on Litwin for the proposition that a contractor cannot do indirectly through another party that which it is prohibited from doing itself under a collective agreement.

29In the alternative, counsel argues that, even if Dalton is construction manager of the Project for Rumble, it is the general contractor of the project as well. Under the Contract, Dalton contracted to do everything on the project that any general contractor would do except award and execute the formal contracts with the trade contractors. Moreover, even though Dalton did not award and execute the formal contracts, the value of those contracts was part of the cost of the work on which Dalton's fee was calculated and paid and Dalton was independently liable for the quality of the work done under the trade contracts. Those conditions, counsel submits, place Dalton in essentially the same position as an independent general contractor. In that position, Dalton was independently liable for the demolition work awarded to and performed by ABC. Since the Contract was ".. an I.C.I. General Contract..." as contemplated by clause 2.05, under which Dalton was the contractor, and since the demolition work formed part of the Contract, the demolition work falls within the protection of clause 2.05. Thus, when Dalton agreed by the Contract to allow Rumble to award the work to ABC, Dalton breached clause 2.05 of the Agreement.

30Counsel for the respondents argues, in the first instance, that the Board's jurisdiction respecting the alleged violation of clause 2.05 of the Agreement is that of an arbitrator established under a collective agreement. While the Board has available to it all of its usual statutory authority respecting its composition and how it will proceed when acting under section 124, it sits and gives its decision as an arbitrator (Re International Association of Heat & Frost Insulators & Asbestos Workers Local 95 and Master Insulators Association of Ontario et al, 1979 CanLII 1622 (ON HCJ), 25 O.R. (2d) 8). Therefore, the Board is restricted to the facts before it when interpreting and applying clause 2.05 of the Agreement. Since Rumble, not Dalton, let the contract which is alleged to create the violation of clause 2.05 there can be no doubt that Rumble, not Dalton, engaged ABC. Thus, Dalton could not be bound by the clause and could not have breached it. Counsel submits that the circumstances of this case are no different in principle than where an owner lets a contract to a unionized general contractor and, before the work is performed, takes back a parcel of work and awards it to a non-union contractor. The parcel of work has been awarded by the owner, not the general contractor, and, counsel claims, the general contractor cannot be held in breach of a subcontracting clause as a result of the owner's actions.

31The second branch of counsel's argument is that the terms of the Contract established Dalton as Rumble's agent. Counsel referred the Board to numerous authorities, including general texts and case law, respecting the establishment and effect of an agency relationship. The Board has reviewed them in the context of counsel's particular references in his submissions, but will not set them out in this decision. Counsel submits that, since an agent acting within the terms of its agency relationship is acting for the benefit of its principal, if the agent enters into a contract with a third party, the contract is only binding on the principal, not on the agent. Therefore, even if Dalton had awarded and executed the trade contracts, they would have been binding only on Rumble, not on Dalton, and it would be as though Rumble had made the contracts. Rumble is not bound by the Agreement and cannot violate its subcontracting provisions. Thus, there would be no violation of clause 2.05 by either Dalton or Rumble. The trade contractors who were invited to bid on the parcels of work would have been aware of the contractual relations between Dalton and Rumble and the fact that Dalton was Rumble's agent, according to counsel, because the contractors were supplied with all of the contract documents between Rumble and Dalton.

32The Board does not share union counsel's enthusiasm for the precedential value of the B.C. Board's decision in Litwin Construction, supra, in deciding the instant case. The cases are readily distinguishable on their important facts. Litwin, the party having the collective agreement obligation, was also the owner of the property being developed, put the project together and was in control of the project when it selected Absolon to be the construction contractor and arranged with O'Brian to let the formal contract to Absolon. In the instant case, Rumble, the party which owned the property and put the project together, had no collective agreement obligations when it let the contract to ABC for the demolition work.

33The fact that the Board does not find the Litwin Construction decision to be of assistance in deciding this case, however, does not relieve the Board from the task of deciding whether Dalton engaged ABC for the demolition work in violation of clause 2.05 of the Agreement.

34The Board long has recognized provisions in construction industry collective agreements like clause 2.05 of the Agreement to be significant union security provisions. The Board also has found that such provisions do not violate any section of the Act. See The Metropolitan Toronto Apartment Builders Association, [1978] OLRB Rep. Nov. 1022, at paragraph 45. The decision also deals extensively with the underlying rationale and purpose of such clauses in construction industry collective agreements. Much of what the Board said is succinctly summarized in the following statement from another Board decision, Brant County Board of Education, [1986] OLRB Rep. Sept. 1187, at paragraph 6:

The very origin of the subcontracting clause is to prevent an employer bound by a collective agreement from avoiding that collective agreement by contracting out the work rather than performing the work with its own employees. Such clauses have been regarded by this Board (see, The Metropolitan Toronto Apartment Builders Association, [1978] OLRB Rep. Nov. 1022) as valid "union security" provisions in that they attempt to protect a legitimate concern of the trade union, i.e. rendering bargaining rights meaningless by subcontracting. The impact of the clause then is to say to the employer "you don't have any employees in the construction industry but you ought to have our members working on the job and therefore you have violated our collective agreement." Almost by definition then, it will be seen that in subcontracting cases, such as the present, there is no employment relationship to place the respondent in the construction industry.

Clause 2.05 seeks to protect Local 506's bargaining rights by avoiding having them rendered meaningless by subcontracting the work on which they are founded to a contractor who is not obligated to employ members of Local 506, or its affiliated bargaining agents to perform the work.

35The place of clause 2.05 in the Agreement shows it to be an integral part of broad union security provisions, all of which focus on preserving to members of the Union work coming within the Agreement's scope. Clause 2.05 is part of Article 2 - Union Security, Work Jurisdiction, Assignment of Work, Subcontracting. Clause 2.01 commits Dalton to employ only members in good standing of the Union or its affiliates "... for work covered by the Agreement.". In clause 2.03 Dalton "...acknowledges and agrees that work covered by this Agreement is within the exclusive jurisdiction of the Union.. .notwithstanding the claim of any other Trade Union.". Further, in clause 2.04, Dalton agrees that ".., it shall assign exclusively to members of the Union…all of the work covered by this Agreement." notwithstanding the claims of any other trade union. The attempt to secure the "work covered by the Agreement" to the members of the Union is continued in Article 3 - Hiring of Employees. Clause 3.01 obligates Dalton to obtain its employees for work under the Agreement by referral from the Union. If the Union cannot supply employees within the stipulated time limit, Dalton is free to find its own supply, but anyone it hires must either be or become a member. Finally, clause 2.06 operates in conjunction with Article 8 - Jurisdictional Disputes to attempt to safeguard the Union's claimed work when its claim is challenged by another trade union.

36The language of clause 2.05 commits employers like Dalton who are bound to the Agreement to "…engage only subcontractors who are in contractual relations with [Local 506] for all work covered by [the Agreement], or work forming part of an I.C.I. General Contract...". Dalton was fully aware of this commitment when it accepted the Contract with the condition that Rumble would award the trade contracts. Dalton knew also that work covered by the Agreement likely would be let to contractors not bound by the Agreement and that Dalton would have the same responsibility to Rumble for the trade contractors' performance of the work as would have been the case had Dalton been responsible for executing the formal contracts with them. The question for the Board is whether, by entering into and fulfilling those terms of the Contract with respect to the demolition work done by ABC, Dalton, not Rumble, engaged ABC to perform the work.

37The parties to the Agreement, in adopting the language of clause 2.05, did not specify what constitutes engaging. Union counsel submits that engage means to bind by contract, but not necessarily by a formal written contract directly between the two contracting parties. As the Board understands counsel's primary argument, he is saying that, because of the terms of the Contract and the work which Dalton was required to perform for Rumble under those terms, when Rumble executed the trade contract with ABC for the demolition work, the two documents operated to bind Dalton and ABC to a contract for ABC to perform the work for Dalton. In his alternative argument, the Board understands counsel to be saying that, by entering into the Contract with Rumble, Dalton had contracted with Rumble to have Rumble engage ABC to perform the demolition work for Dalton. While a strong argument can be made that, having regard to the purpose of clause 2.05 and its place in the overall union security regime of the Agreement, the language of the clause should be construed broadly so as to capture the various ways in which contractors are engaged to perform work, the question of whether the clause has captured a particular fact situation requires a factual finding that the contractor having the obligation to "engage" has done the engaging. In this case, that obligation rests on Dalton.

38The language of the Agreement referred to above at paragraph 35 clearly gives any employer who, like Dalton, is bound by it, a choice of performing work with his own employees or engaging ". - .sub-contractors who are in contractual relations with [Local 506]...". It is implicit in that language that, in order to be in a position to make that choice, the employer must have control over the work. If the employer is not the owner of the project, this means that the employer must have acquired some right or obligation to perform the work. The facts of this case are clear: Rumble owned the Project and, at the point when it contracted with Dalton for the construction services described at paragraph 14 of this decision, it was Rumble and not Dalton which was in the position of deciding whether to construct the Project by hiring its own tradesmen or by contracting to have it constructed by the tradesmen of another employer or other employers. When Rumble decided to enter into the arrangement with Dalton, it expressly reserved to itself the choice of the contractors who would construct the Project and the right to bind them directly to Rumble for the performance of the work. Wood's conduct with respect to awarding and executing the trade contracts for Rumble was wholly consistent with that express reservation. Under the terms of the trade contracts, the trade contractors warranted their work to Rumble for two years. It was only after each trade contract was executed by Rumble that Dalton became responsible for supervising the performance of the trade contract and for warranting to Rumble for one year the quality of the finished work. The fact that Dalton made itself independently liable for the work of the trade contractors who had been selected by Rumble and bound by contracts with it to perform the work of constructing the project does not alter the fact that Rumble, having exercised the initial choice to have the work done by the employees of other employers, expressly withheld from Dalton the right, obligation or opportunity to make that choice or to choose the employers whose employees would construct the Project. On the facts of this case, Dalton did not acquire the right or obligation to make those choices. Consequently, at the time each trade contractor was engaged, Dalton did not have control over the work being awarded essential for it to have engaged the contractor either directly or indirectly. Nor, on the facts of this case, can it be said that Rumble did nothing more than sign the trade contracts, that its awarding and executing of contracts was a mere matter of form and a subterfuge. Rumble, through Wood, engaged three contractors, Keith Plumbing, Electriclee Ltd., and Tomas Masonry, because Wood knew them. Even with ABC, without waiting for any recommendation from Dalton, Wood simply instructed it to prepare a contract for Rumble to execute with ABC, the obvious low bidder.

39The substance of the contractual arrangement between Dalton and Rumble, on the facts of this case, was that Rumble and not Dalton engaged the trade contractors regardless whether the form of the arrangement was that of a construction management contract, a cost plus general contract or a general contract. Therefore, in all of the foregoing circumstances, the Board finds that it was Rumble Pontiac Buick (1985) Inc., and not Dalton Engineering & Construction Limited which engaged A.B.C. Demolition to perform the demolition work. In the result, Dalton Engineering & Construction Limited has not violated clause 2.05 of the Labourers Provincial Agreement which was in effect from June 25, 1986 to April 30, 1988.

40That leaves to be decided the applicant's request that the Board declare, pursuant to subsection 1(4) of the Act, that Dalton and Rumble be treated as constituting one employer for purposes of the Act. Even were the Board to find that the preconditions exist for the Board to have the discretion to make the declaration requested, in the circumstances of this case, the Board would not make the declaration. Rumble was not under any statutory or contractual prohibition from seeking to have the Project constructed with non-union labour. Dalton's contractual obligation under the Agreement was to engage only subcontractors who are in contractual relations with Local 506 for work covered by the Agreement. That obligation is not a prohibition against Dalton selling its construction expertise to purchasers of construction in such a manner as to not require or cause it to engage subcontractors. If, when the parties to the Agreement negotiated clause 2.05, their objective was to prohibit employers from entering into contracts like the one between Dalton and Rumble, it was open to them to negotiate language which would achieve that purpose. Building trades unions have demonstrated an ability to negotiate a wide variety of conditions aimed at preserving employment opportunities for their members and protecting the bargaining rights of the unions. For example, clauses have existed in construction industry collective agreements in Canada for many years which allow employees to refuse to work with materials which have not been fabricated by members of the union party to the collective agreement. Similarly, there are agreements in the construction industry which permit members of a trade union employed by an employer under collective agreement with the union to refuse to work for the employer on a project where "non-union" trades are employed. In the Board's view, the bargaining table is the appropriate forum for a union to seek those kinds of protections for its bargaining rights.

41Were the Board to declare that Dalton and Rumble be treated as constituting one employer for purposes of the Act, the effect would be to bind Rumble to the Agreement and make it in breach of clause 2.05 for having engaged ABC to do the demolition work. That would have the effect of giving the parties to the Agreement a result which they failed to negotiate and would be analogous to the Board using its discretionary powers under subsection 1(4) to extend bargaining rights rather than to preserve them. The purpose of subsection 1(4) is to preserve rather than extend bargaining rights. Accordingly, the Board has consistently declined to exercise its discretion and declare that two or more entities be treated as one employer for purposes of the Act where the effect of the declaration would be to extend bargaining rights.

42The Board long has recognized that bargaining rights and the employer obligations flowing from them attach to a business or activity which gives rise to employment. In the present case, the Agreement defines Local 506's bargaining rights and Dalton's obligations in respect of those rights. The business or activity carried on by Dalton to which those rights and obligations attach is its performance of work covered by the Agreement. As the dissent correctly points out at paragraphs 29 and 30, an employer like Dalton who is bound to the Agreement and acquires work covered by it, is obligated to have the work performed by members of Local 506. However, it is implicit in all of the clauses creating Dalton's obligation under the Agreement that, in order to be bound to the terms of the Agreement, Dalton first must have acquired in the commercial sense the right or obligation to determine whether to hire and assign the work or to engage another contractor to do the work with that contractor's employees. As the dissent recognizes at paragraph 31, Dalton did not acquire the right or obligation to perform the demolition work at issue. In the view of the majority, that fact is as pivotal a consideration to the exercise of the Board's discretion under subsection 1(4) as it was to finding that Dalton had not violated clause 2.05. This is because subsection 1(4) can be triggered to protect bargaining rights when a business or activity to which they attach is transferred to a related business or activity without any of the usual indicators of a transfer of a business which would attract section 63 of the Act. See Brant Erecting, supra, at paragraph 14. Were one to agree with the dissent that Dalton and Rumble carried on associated or related activities under common control or direction, and had Dalton transferred to Rumble a business or activity in the form of work covered by the Agreement which it had the right or obligation to perform, a one employer declaration well may have been an appropriate remedy. On the facts before the Board in this case, however, Dalton did not have any business or activity to transfer to Rumble.

43While the Board has concluded that it should not issue a single employer declaration on the facts presented by this particular case, such a conclusion does not preclude the Board, in the appropriate circumstances~ from finding that contracts between purchasers of construction and contractors in the nature of the Contract form an appropriate basis for making a single employer declaration under subsection 1(4). Different facts might well lead the Board to the conclusion that a contractor had acquired work protected by a subcontracting clause, had circumvented its subcontracting obligation by entering into a scheme to have the purchaser award the work and that a one employer declaration should issue as relief to the offended trade union.

44In summary, in the circumstances of these applications and for the reasons given above, the Board finds that Dalton Engineering & Construction Limited has not violated clause 2.05 of the Labourers Provincial Agreement which was in effect from June 25, 1986 until April 30, 1988, and the Board declines to exercise its discretion pursuant to subsection 1(4) of the Labour Relations Act to declare Rumble Pontiac Buick (1985) Inc., and Dalton Engineering & Construction Limited to be treated as one employer for purposes of the Act. Therefore, these applications are dismissed.

DECISION OF BOARD MEMBER H. KOBRYN; June 30, 1988

1. The facts as presented are not in dispute. The Board had meticulously noted the arguments put forward by both sides and took a lengthy time to study these arguments thoroughly. Then the Board agonized over the various conclusions that were possible to attain given the undisputed facts.

2. Further, in the interest of promoting and maintaining stability in the construction industry in this province, through provincial bargaining, wherein wages, fringe benefits and working conditions will be uniform for all contractors bidding for construction work in this province, the only difference that should exist between bidding contractors would be their varying degree of experience, skill and ability to perform the bid work efficiently. This is achieved when the experienced contractors plan and schedule their work in a professional manner in order to fully utilize his skilled work force, equipment and building materials. Also schedules all his subcontractors in the same professional manner. Together with his bidding experience, this should secure for him his share of the work available.

3. This decision as written and accepted by the majority would return the construction industry in the I.C.I. sector back to the world of jungle warfare, of the dog eat dog world of the distant past. This would definitely injure our fair minded contractors who do not play this bidding game with the owner-clients in order to avoid using unionized subcontractors with their unionized work force at the insistence of the owner-client, as was the case here. This avoidance of using unionized subcontractors would have a definite advantage over the fair minded contractors in this bidding war. In turn, if our fair minded contractors are injured by these tactics and are unable to secure work for their unionized skilled work force, then all the affected building construction trade unions and their members are also hurt, wherein, their work opportunities will be diminished and eventually could disappear if this is allowed to continue unchecked.

4. My dissent will deal with two conclusions: (1) that Dalton and Rumble should under subsection 1(4) of the Act be treated as one employer for the purposes of the Act and that Dalton/Rumble as one employer would be in breach of clause 2.05 of the agreement, and (2) that Dalton as a unionized general contractor engaged ABC for the demolition work in violation of clause 2.05 of the Agreement.

5. I have reviewed and weighed counsels' very able submissions, but is neither going to set them out in full nor attempt a comprehensive summary of them. I will refer instead to particular aspects of their submissions as required by my dissent. While these are two applications made under separate sections of the Act, the Union has made them for a single purpose; that is, to attempt to preserve its bargaining rights contained in the Agreement by preserving for its members the work covered by the Agreement. The subcontracting provisions in clause 2.05, on which Local 506 is seeking to found its grievance, have the purpose of preserving to members of Local 506 work covered by the Agreement. Clause 2.05 provides that:

[t]he Employer agrees to engage only sub-contractors who are in contractual relations with the Union and/or its affiliated bargaining agents for all work covered by this Agreement, or work forming part of an ICI. General Contract,...

[emphasis added]

The Union has joined Rumble as a party to its grievance, but Rumble is not bound to the Agreement and obviously cannot be found independently liable for a breach of it. That is the reason why Local 506 has pleaded subsection 1(4) of the Act. It wants Rumble and Dalton to be treated as constituting one employer for purposes of the Act so that Rumble would be bound to the Agreement and Rumble/Dalton as one employer would be in breach of clause 2.05 because of the engaging of ABC to perform the demolition work. Union counsel argued subsection 1(4) in the alternative. I will deal first with the issues raised in the application under subsection 1(4). It provides as follows:

(4) Where, in the opinion of the Board, associated or related activities or businesses are carried on, whether or not simultaneously, by or through more than one corporation, individual, firm, syndicate or association or any combination thereof, under common control or direction, the Board may, upon the application of any person, trade union or council of trade unions concerned, treat the corporations, individuals, firms, syndicates or associations or any combination thereof as constituting one employer for the purposes of this Act and grant such relief, by way of declaration or otherwise, as it may deem appropriate.

As applicant counsel pointed out, the Board has found that those words give it the discretion to declare that two or more entities be treated as constituting one employer for purposes of the Act if three preconditions exist. In this respect he referred to the Board's description of the conditions in its decision in Donald A. Foley Limited, [1980] OLRB Rep. April 436, at paragraph 17:

17. Subsection 1(4) of the Act grants discretion to the Board to treat two or more entities as though they constitute one employer for the purpose of the Act if:

(a) more than one corporation, firm individual, association or syndicate is involved;

(b) the entities are engaged in associated or related businesses or activities, whether or not simultaneously; and

(c) the entities are under common control or direction.

6. It is a given fact that the first condition has been satisfied, Dalton and Rumble are separate entities. With respect to the second condition, Dalton's principal business or activity is construction; Rumble's is operating a General Motors automobile dealership. Those are not associated or related businesses or activities. The Board's decisions have made it clear, however, that "associated or related activities or businesses" do not have to be the only activities or businesses carried on by the entities for whom a one employer declaration is sought (Brantwood Manor Nursing Homes Limited), [1986] OLRB Rep. Jan. 9, at paragraph 105), and, as those words are employed in subsection 1(4), they are to be liberally construed and are not to be applied solely to the principal businesses or activities of the entities. In Elmont Construction Limited and Bruce N. Huntley Contracting Limited, [1974] OLRB Rep. June 341, the Board found Elmont and Huntley to be carrying on associated or related activities or businesses even though they were "readily distinguishable on the basis of their "main purposes" and "chief businesses". The Board found the "...common meeting ground [of the businesses to be] in the area of construction...". It also found the construction element of their businesses to be the "...precise point that the issue before the Board with respect to section 1(4) arises.". Elmont's main purpose or business was that of a building contractor, while Huntley's was the purchase of land on which it erected buildings and derived income from their rent. The Board found those to be associated or related businesses or activities and ultimately declared that Elmont and Huntley be treated as constituting one employer. The Divisional Court dismissed an application for judicial review, holding the Board to have acted within its jurisdiction in making that declaration "...for the purposes of that related activity, however minor it may be in the totality of the activities of the companies concerned." [emphasis added]. Elmont Construction Limited and Bruce N. Huntley Contracting Limited v. Toronto Building and Construction Trades Council et al, 75 CLLC ¶ 14,270 at p. 528.

7. Twelve years later in Frank Plastina Investments Ltd., [1986] OLRB Rep. June 720, at paragraph 20 the Board relied on and cited with approval the Elmont decision for the proposition that the related activity need not be the employers~ main or principal business concern:

8. Given the remedial thrust of section 1(4) and the broad language chosen by the Legislature ("associated" or "related", "activities" or "businesses"), it is apparent that the section was intended to apply to a wide variety of commercial activities, even when an employer's main or principal business concern may be something else. That was the opinion of the Board in Elmont Construction Limited, [1974] OLRB Rep. June 342 (application for judicial review dismissed, sub nomine, Elmont Construct Limited and Bruce Huntley Contracting Limited v. Toronto Building and Construction Trades Council et al., 75 CLLC ¶14,270), and it is one with which we respectfully agree...

Plastina Investments was a concrete and drain contractor in a collective bargaining relationship with two unions. The second company, Sherwood, was the developer of a housing subdivision and contracted out all construction work on the subdivision. Plastina Investments was one of its subcontractors. The Board found those to be related activities under subsection 1(4) of the Act.

8. Counsel for the respondents contends that Dalton and Rumble cannot be seen to carry on associated or related businesses. One is a construction contractor and the other an automobile dealer who have come together as strangers in a temporal, contractual relationship. In this respect, counsel points to the indicia of businesses being related within the meaning of subsection 1(4) described in Brant Erecting and Hoisting, [1980] OLRB Rep. July 945, at paragraph 15:

.The relationship between the business entities is a functional rather than a temporal one. Businesses or activities are "related" or "associated" because they are of the same character, serve the same general market, employ the same mode and means of production, utilize similar employee skills, and are carried on for the benefit of related principals. If these criteria are met, two businesses may be "related" within the meaning f section 1(4) even though their activities are carried on through different or [sic] corporate vehicles...

Counsel refers the Board as well to its decision in Arbis Construction Ltd., [1983] OLRB Rep. Dec. 1959, at paragraph 14, in which the Board relied on the Brant criteria in considering the nature of the business activities of two entities in order to answer the question of whether they were "associated or related". One had been a property developer and small general contractor but had become insolvent and inactive. The other was a masonry contractor which the Board found to represent "...a new business disassociated from [the insolvent one]". In applying the Brant Erecting criteria, the Board found the two entities to be "...neither of the same character nor serve the same market".

9. It does appear that what the Board had to say about whether "...associated or related activities or businesses are carried on..." in the Brant Erecting and Arbis decisions is somewhat at odds with what it said earlier in Elmont and later in Plastina. Insofar as that apparent conflict relates to the instant case, however, the Board's focus in Arbis seems to have been on the businesses of the two entities, rather than their activities, which is the focus in this case. Moreover, the Board in Arbis had already concluded that the two entities were not under common control or direction. That conclusion alone deprived the Board of the discretion to treat the two entities as one employer, so it was unnecessary for the disposition of the application to decide whether the entities carried on associated or related activities or businesses. With respect to the indicia set out in B rant Erecting, in my view, they are not exhaustive of conditions which point towards activities or businesses being associated or related. Nor are they to be taken as criteria all or any one or more, of which must be met for two businesses or activities to be associated or related. As the Board observed in Brantwood, supra, at paragraph 105, "[t]he focus of subsection 1(4) is on circumstances '[w]here, in the opinion of the Board, associated or related activities or businesses are carried on...' by two or more entities.". [emphasis added]. A fair reading of Board decisions which have preceded and followed Brant Erecting in time reveal that, in forming an opinion as to whether associated or related activities or businesses are being carried on, the Board has not limited itself to particular combinations of indicia. Rather, in keeping with the legislative intention that subsections 1(4) apply to a wide variety of commercial activities (see B rant Erecting, supra), the Board has formed its opinion on the particular blend of facts in each case.

10. In the case at hand, Dalton and Rumble have been brought together by the Contract for the purpose of planning and constructing the Project. In keeping with that purpose, through Wood, Rumble engaged directly in the pre-construction and construction activities described at paragraph 22 above, selected the trade contractors who were to be awarded the contracts, awarded the contracts and executed them, much as a general contractor would, and engaged Dalton to supervise the performance of the contracts for it as well as to carry out some of the site construction work. Dalton performed those responsibilities much as a general contractor would. In other words, Dalton and Rumble shared in planning, developing and performing the Project, including controlling its costs, all pursuant to their respective responsibilities under the Contract and in keeping with Dalton's initial proposal to make Rumble, together with Dalton, an integral part of the project management team. Clearly, both Dalton and Rumble have engaged in construction activities in their performance of the Project. In my opinion, those are associated or related activities within the meaning of subsection 1(4) of the Act.

11. I turn next to the third precondition, that is, whether Dalton and Rumble were under common control or direction in carrying on their associated or related activities. Union counsel argues that the Board's jurisprudence establishes four principles for determining if common control or direction exists between two or more entities. A summary of his argument in this respect, and some of the legal authorities on which he relies follows.

12. First, two entities can be under common control or direction without sharing common owners, shareholders, directors and officers. These indicia of common control or direction can be totally absent, but the Board will still examine the contractual and economic arrangements between them to see if their functional interdependence shows them to be under common control or direction. (Donald A. Foley Limited, supra, at paragraph 20.)

13. Second, the wording of subsection 1(4) shows that the Legislature intended that the Board assess the meaning to be given to "common control or direction" and that it not be limited to circumstances of common corporate ownership or other forms of corporate relationships (see McCollum Graphics Incorporated, [1986] OLRB Rep. Jan. 131, at paragraph 21, and Brantwood Manor Nursing Homes Limited, [1986] OLRB Rep. Jan. 9, at paragraph 93 and 94). In McCollum, the Board stated that ". - .two corporations can be under common direction even though legally owned by different individuals." - Approximately three weeks later, the Board in Brantwood concurred in that view when, after having observed at paragraph 93 "...that the 'common direction or control' on which subsection 1(4) focuses is direction and control over businesses or activities, which may include control over employees but need not require it...", the Board concluded at paragraph 94 that the Board's discretion to make a one employer declaration was not confined to circumstances where the connection between entities ". . .is a relationship by blood, marriage, degrees of corporate ownership or a combination of these." Counsel argues that these cases demonstrate that common direction does not need to be exercised with respect to corporate relationships in order to satisfy subsection 1(4), it is sufficient that there be common control over their related activities. In this respect, he relies on Kennedy Lodge Inc., [1984] OLRB Rep. July 931, at paragraph 53, wherein the Board rejected the proposition that subsection 1(4) "…must be interpreted as requiring common direction of the corporate entities..." which were the respondents to the applications and rejected as well the associated proposition "...that the question of whether the specific activities carried on by these entities are under common control or direction is not critical to a subsection 1(4) determination.":

We reject the suggestion that the section must be interpreted as requiring common control or direction of the corporate entities (Drake and Kennedy Lodge in this case) and that the question of whether the specific activities carried on by these entities are under common control or direction is not critical to a subsection 1(4) determination. The plain language of the section, which speaks in terms of 'activities or businesses’, evidences a contrary legislative intention and furthermore, in that it is specific activities that give rise to employment, the purpose of the section would not be well served by such an interpretation. The Board made it clear in I. H. Normick Inc., supra, that the common control and direction referred to in the section relate to activities as well as businesses and that functional interdependence as well as corporate interrelationships must be considered.

[emphasis added]

14. Third, the Board's jurisprudence makes it clear that common control or direction can be found where the basis of the relationship between the entities is a joint venture or where they are sharing in a commercial activity. That principle, according to counsel, flows from the Board's decision in Kennedy Lodge, supra, Braniwood Manor, supra, particularly at paragraph 99, and J.D.S. Investments Limited, [1981] OLRB Rep. Mar. 294, at paragraphs 16 and 17. Counsel views J. D. S. Investments as being generally similar to the instant case in the facts of the relationships involved. Counsel emphasizes that the Board was prepared, on the basis of a single project joint venture, to find the two respondents in the case to be engaged in associated or related activities (paragraph 15) and then went on to conclude that they were under common control and direction based on the way they shared responsibility for the project (paragraph 16 and 17).

15. Fourth, the Board's decisions in Foley Limited, Kennedy Lodge and Brantwood Manor, supra, stand for the principle that common control or direction can be found between two entities which are in a contracting relationship, in other words as contractor and subcontractor or as owner (Rumble) and contractor (Dalton), as does J.H. Normick Inc., [1979] OLRB Rep. Dec. 1176. In that case, Normick had let certain tree cutting work to another person whom the Board assumed, without finding, was not part of the Normick organization. In the process of finding that they were under common control or direction, the Board observed at paragraph 21 that subsection 1(4) recognizes business activities giving rise to employment relationships can be carried on through a variety of legal arrangements and that "...the broad language of the section extends to cover. - , a wide range of business relationships".

16. In summary, counsel argues that those legal principles constitute a legal framework which recognizes that common control or direction of two or more entities can exist or be found in four quite different circumstances:

(1) where there is no common ownership, directors, officers or shareholders;

(2) where the control or direction is exercised over activities and not over corporate entities or relationships;

(3) where the entities are engaged in a joint venture or are sharing in a commercial activity; and

(4) where the parties are in a contracting relationship; for example, as contractor and subcontractor or owner and contractor.

That legal framework applied to the facts of this case, applicant counsel submits, establishes that Dalton and Rumble shared control or direction of the Project because of the close interrelationship of their roles respecting the Project.

17. The four circumstances are identifiable in the Board's decisions on which Union counsel has relied. They are ones in which the Board did find the entities in question, and/or their activities or businesses, to be under common control or direction. They are also cases in which the Board ultimately found that it had the discretion to declare they be treated as constituting one employer for purposes of the Act, and so declared. The factual basis on which the Board made its findings of interdependency of the entities in those cases, particularly respecting the activities to which the bargaining rights were attached, bear no similarity to the instant case. Without cataloguing all of the factual differences between those cases and this one, it is clearly distinguished on its facts from those decisions and I do not rely on them to find Dalton and Rumble to be under common control or direction. For example, in Foley Limited, supra, the decision on which counsel relied for the first point of his legal framework, the Board found that the non-union subcontractor was so bound up in the business of the unionized contractor (Foley) that the subcontractor had no economic life of its own or no control over its own fortunes. Similarly, in Kennedy Lodge and Normick, upon which, together with Foley Limited, counsel relies for the fourth point, the Board found that the unionized contracting party in each case (Kennedy and Normick) had contracted work to which bargaining rights attached to apparently independent, non-union subcontractors without giving up real control over the work. In J.D.S. Investments, the principals of J.D.S. and Martin Ross Construction became partners in a joint venture project. Martin Ross Construction had no collective bargaining relationships. J.D.S. was bound to the Carpenters provincial agreement. While Martin Ross Construction was the nominal general contractor on the project, personnel of J.D.S. performed duties on the project normally performed by a general contractor. The Board relied on those facts to conclude that J•D.S. and Martin Ross Construction were carrying on associated or related activities (the joint venture project of their principals) and, because the construction activities of Martin Ross Construction were being carried on by J.D.S. personnel, the Board concluded also that the related activities were being carried on under common control or direction.

18. That does not end the matter, however. It remains to answer the question of whether the Project is under the "common control or direction" of Dalton and Rumble, as those words are used in subsection 1(4) of the Act. Moreover, the question must be answered on the unique facts of this case. Dalton and Rumble, in the ordinary sense, are owned, directed and controlled completely independently of each other. But, as the Board observed in Braniwood, supra, at paragraph 104:

The right or power to exercise control or direction over the activities of a legal entity can arise as easily from the terms of a contract as from the legal incidents of ownership. The language of subsection 1(4) does not distinguish among the means by or through which direction or control may arise or be exercised. We are satisfied that "common control or direction" as contemplated by subsection 1(4) can be the result of a contractual relationship even if there is no other connection between the parties to that relationship.

Thus, for common control or direction to be found between Dalton and Rumble, it must be found in the control or direction which they shared for the Project as evidenced by the Contract and the manner in which they carried out its terms, particularly as they relate to the work to which the bargaining rights attach. That work is the demolition work let by Rumble to ABC.

19. Dalton prepared the bid specifications for the demolition work, selected the contractors who would be invited to bid, prepared and issued the invitations to bid, and arranged for the tenders to be submitted to Rumble. Wood selected the lowest bidder, ABC, and directed Dalton to prepare a contract with ABC for execution by Rumble. Rumble executed the contract. Dalton supervised ABC's work, approved its invoices for payment by Rumble and disbursed payments to ABC on Rumble's behalf. The manner in which Wood selected ABC for the demolition work and had Rumble enter into a contract with it is similar to Wood's selection of Keith Plumbing for the plumbing and drainage work and consistent with the way he unilaterally let contracts between Rumble, Electriclee and Tomas. Wood's actions leave no doubt that, in addition to signing the 27 written contracts executed by Rumble with trade contractors, he controlled for Rumble the selection of the contractors whether or not they were recommended by Dalton, although it is reasonable to infer from all of the evidence that Rumble accepted Dalton's recommendations for awarding the other 25 contracts. Once contracts were executed, Dalton exercised primary control over everything else from scheduling when work under a particular contract would commence through to the approval of and payment for completed work. Wood, for Rumble, also exercised a degree of control over the performance of the trade contracts by meeting thrice weekly with Gillam, attending the weekly job meetings between Dalton and the trade contractors and by visiting the Project daily. During these visits he met with Dalton's site superintendent and, when Wood deemed it expedient, he dealt directly with the trade contractors to correct or change work which was not acceptable to him, whether or not Dalton had approved it. That is not to say, however, that Dalton was not responsible for the rate and quality with which construction progressed. There is no evidence that Wood had the construction expertise to evaluate the work beyond its physical appearance. Rumble was dependent on Dalton's expertise for that aspect of the Project. That was one of the reasons why Rumble got Dalton to agree to warrant the trade contractors' work. The pre-construction services described in items 1 to 4 of paragraph 14 provided by Dalton and Rumble's preconstruction activities described at paragraph 22 are further incidents of their shared control or direction of the Project. On those facts, I find that the construction activities in which Dalton and Rumble engaged while performing the Project, including those specifically involved with the demolition work performed by ABC, were under the common control of Dalton and Rumble.

20. Accordingly, in my opinion, with respect to the Project, Dalton and Rumble carried on associated or related activities under common control or direction within the meaning of subsection 1(4) of the Act. That establishes the discretion to treat them as constituting one employer for purposes of the Act and it remains only to decide whether the declaration should be made in the circumstances at hand.

21. Counsel for Local 506 submits that, on the facts of this case, the conduct of Dalton and Rumble has resulted in the erosion of Local 506's bargaining rights. The erosion occurred when Rumble let the demolition contract to ABC and not to one of the other two bidders who were bound to the Agreement. As a result of the demolition contract going to ABC, Local 506 members did not get the work even though the Agreement requires Dalton to engage only contractors who are in contractual relations with Local 506 or one of its affiliated bargaining agents. The very reason for that requirement, according to counsel, is to preserve to the Union's members the work on which it’s bargaining rights are founded. Thus the protection intended by that requirement was frustrated by Dalton entering into a contract with Rumble providing for Rumble and not Dalton to let the trade contracts. That consequence of their contractual relationship is precisely what subsection 1(4) is intended to protect against. Therefore, counsel submits, the Board should exercise its discretion under the subsection to declare them to constitute one employer for purposes of the Act. Counsel argues that a "single employer" declaration would be the appropriate exercise of the Board's discretion whether or not Dalton and Rumble intended that ABC get the demolition contract. It is even more appropriate in this case because, when Dalton and Rumble entered into a contract providing for Rumble and not Dalton to let the trade contracts so that Rumble could engage non-union contractors, they had in mind the purpose of avoiding Dalton's subcontracting obligations under the Agreement. It was also the first time for Dalton that work covered by any of its collective agreements was let "non-union" under a construction management contract, whether or not the trade contracts had been let by Dalton or its clients. That arrangement worked to the detriment of the Union's bargaining rights and to allow such arrangements would mean that any contractor bound by the subcontracting clause would be able to avoid its obligations by contracting as a construction manager and having its client let the contracts. Therefore, counsel argues, the Board should exercise its subsection 1(4) discretion and declare as constituting one employer parties to schemes, like the one created by the contractual relations between Dalton and Rumble, which circumvent subcontracting obligations by having a third party let contracts.

22. Counsel for Dalton and Rumble takes the position that the Board should not make a "single employer" declaration because a declaration is not warranted by the circumstances and, should the Board disagree with him, because of the consequences to business generally and the construction industry in particular of making a declaration in the context of this application.

23. Counsel submits that none of the purposes which subsection 1(4) is intended to serve arise on the facts of this case. In particular, there has been no erosion or dilution of the Labourers' bargaining rights respecting Dalton because the relationship between Dalton and Rumble is a "once only" relationship under a construction contract. The demolition work at issue herein belonged to Rumble. Rumble has no collective bargaining obligation to the applicant, or for that matter to anyone else. Rumble contracted with Dalton to supervise the performance of the work by a third party to whom Rumble had contracted it. That, counsel contends, is quite unlike Braniwood or Kennedy, supra, where the owner had collective bargaining obligations and sought to avoid them totally by contracting the underlying work to another party without relinquishing control over the work. Nor is it like the type of case where an owner under collective bargaining obligations transfers work and control over it to another party.

24. Moreover, counsel argues, it was clear from Wood's evidence that, had Dalton not been prepared to have Rumble let the trade contracts in its own name, the Labourers' members who were directly employed by Dalton would not have had any work on the project. Nor would the members of the building trades unions who were employed by other trade contractors with whom Dalton was successful in persuading Rumble to contract for Project work.

25. The consequences for businesses of issuing a declaration in the context of this case would be several, counsel submits. It would operate to hamper the businesses of third parties never intended to be captured by subsection 1(4). In the construction industry in general, it would limit owners without any collective bargaining obligation whatsoever from choosing how they want to conduct their businesses. In the industrial, commercial and institutional sector of the construction industry, it would result in major purchasers of construction becoming bound to the provincial agreements with the effect that a building developer or bank, for example, doing renovating or decorating work on one of its properties would be bound by the subcontracting provisions of those agreements.

26. Subsection 1(4) gives the Board discretion to trade two or more entities as constituting one employer for purposes of the Act without offering any express limitation or guidance to the exercise of that discretion. Nor is there any express guidance to be found elsewhere in the Act, beyond the broad policy statement of the Act's preamble. For that reason, the Board has developed its own guidelines through its case by case application of the subsection based on the labour relations policy objectives underlying the language of the subsection. In other words, the Board looks to the labour relations policy or purpose which would be served were it to exercise its discretion to issue a "one employer" declaration.

27. One policy objective of subsection 1(4) is to prevent the erosion or frustration of bargaining rights already obtained. Union counsel contends that there has been an erosion of Local 506's bargaining rights because of the loss to its members of the demolition work which was performed by ABC. Bargaining rights attach to work, as the Board has observed frequently in its decisions under the subsection and under section 63 which complements subsection 1(4) by preserving bargaining rights when a business, or part thereof, is transferred from one employer to another. See Brant Erecting, supra, at paragraph 12. The parties to the Agreement also have recognized that bargaining rights are attached to work, as witnessed by the emphasized words "...all work covered by this Agreement..." in clause 2.05 quoted above at paragraph 5.

28. The Board has long recognized subcontracting provisions in construction industry collective agreements to be a significant union security protection. The Board's decision in Brant County Board of Education, [1986] OLRB Rep. Sept. 1187, at paragraph 6, describes succinctly the purpose of such provisions:

The very origin of the subcontracting clause is to prevent an employer bound by a collective agreement from avoiding that collective agreement by contracting out the work rather than performing the work with its own employees. Such clauses have been regarded by this Board (see, The Metropolitan Toronto Apartment Builders Association, [1978] OLRB Rep. Nov. 1022) as valid "union security" provisions in that they attempt to protect a legitimate concern of the trade union, i.e. rendering bargaining rights meaningless by subcontracting. The impact of the clause then is to say to the employer "you don't have any employees in the construction industry but you ought to have our members working on the job and therefore you have violated our collective agreement.".

In the Metropolitan Toronto Apartment Builders Association decision referred to in the quotation from Brant County, the Board concurred with the views of other labour relations jurisdictions in Canada and the courts that "...the primary purpose of the subcontracting clause is to protect a union's claim to a particular work jurisdiction." (paragraph 39) and further, that such provisions do not violate any provision of the Labour Relations Act (paragraph 41). Earlier in the decision, at paragraph 35, the Board had contrasted union security provisions in industrial settings and in the construction industry and observed that, in the construction industry, "...union security appears to be more related to contractual provisions recognizing the union's claim to particular work.".

29. In that respect, it is instructive to examine the locus of clause 2.05 in the Agreement. It is part of Article 2 - Union Security, Work Jurisdiction, Assignment of Work, Subcontracting. Clause 2.01 commits Dalton to employ only members in good standing of the Union or its affiliates "...for work covered by the Agreement.". In clause 2.03 Dalton "... acknowledges and agrees that the work covered by this Agreement is within the exclusive jurisdiction of the Union.. .notwithstanding the claim of any other Trade Union.". Further, in clause 2.04. Dalton agrees that "…, it shall assign exclusively to members of the Union…all of the work covered by this Agreement." notwithstanding the claims of any other trade union. The attempt to secure the "work covered by the Agreement" to the members of the Union is continued in Article 3 - Hiring of Employees. Clause 3.01 obligates Dalton to obtain its employees for work under the Agreement by referral from the Union. If the Union cannot supply employees within the stipulated time limit, Dalton is free to find its own supply, but anyone it hires must either be or become a member. Finally, clause 2.06 operates in conjunction with Article 8 - Jurisdictional Disputes to attempt to safeguard the Union's claimed work when its claim is challenged by another trade union.

30. Those clauses, read together, demonstrate that the Union has successfully bargained safeguards for work covered by the Agreement to assure that, when an employer like Dalton who is bound to the Agreement acquires work which is covered by it, the work will be done by the Union's members. To put it another way, the Union has bargained successfully to secure work opportunities for its members. A contractor bound by the Agreement acquires work by entering into a commercial contract with a purchaser of construction for the performance of work covered by the Agreement. The contract can take the form of oral agreement on the terms for a performance of the work and a handshake, a purchase order or a more complex and extensive document or series of documents like the Contract.

31. The parties agree that the demolition work performed by ABC was work covered by the Agreement. It was also work covered by the Contract. Thus Dalton had acquired work covered by the Agreement, although what it acquired did not include either the direct performance of the work or the awarding of its performance to another contractor. The latter task fell to Rumble pursuant to Article 40 of the General Conditions of the Contract and Rumble awarded the direct performance of the work to ABC. Dalton acquired through the Contract, and carried out, all of the other work associated with ABC's demolition contract, excluding recommending to Rumble the awarding of the contract to ABC. Dalton applied its construction expertise to organize the work for bid tendering, identify the contractors who would be invited to tender bids, prepare the bid specifications and invitations to bid, evaluate the tenders received, prepare the contract documents for execution, schedule, co-ordinate and supervise the contractor's performance of the work, approve the work for payment and arrange payment. In short, with respect to the demolition work and all of the work covered by the Contract, Dalton performed all of the services which it has usually done whenever it acquires work covered by the Agreement or its other collective agreements, except awarding and executing the formal contracts with the trade contractors.

32. Dalton knew, when it accepted the Contract with the condition in it that Rumble would award the trade contracts, and that the work covered by the six provincial agreements to which it was bound would likely be let to contractors not bound by them. That risk was realized respecting the Agreement when the demolition work was awarded to ABC. As a result of that award, the members of Local 506 suffered a loss of work opportunity with respect to work covered by the Agreement and work to which the protection of the clauses discussed in paragraph 29 applies. Dalton is bound by those clauses as well and, when it acquires work covered by the Agreement, Dalton is bound by those clauses to make sure that those protections are fulfilled; that is, to make sure that members of Local 506 do the work.

33. Thus, by entering into a commercial arrangement with Rumble providing for Rumble to award and execute the trade contracts with the result that the demolition work was performed by ABC, Dalton has caused the erosion of work opportunities for Local 506 members. That has operated to the detriment of its bargaining rights. The Contract clearly was an arrangement between Dalton and Rumble to enable Rumble to use Dalton's construction expertise and still avoid having union construction forces on the Project. Those circumstances make this an appropriate case in which to treat Dalton and Rumble as constituting one employer for purposes of the Act.

34. In this member's view, to argue that the work was Rumble's to award, and not Dalton's, is not a deterrent to making a one employer declaration. Before entering into the Contract with Dalton, Rumble was not under any statutory or contractual prohibition from seeking to have the Project performed non-union, whatever the reasons. It was free also to choose whether to proceed by hiring its own tradesmen or contract the work so as to be performed by the employees of another employer. However, for the reasons described at paragraph 12 of the majority decision, Rumble chose to enter into an arrangement with Dalton. That arrangement allowed Rumble to retain control over the awarding of the work to the trade contractors, but once awarded, Rumble had relinquished control over its performance. Moreover, Rumble contracted to Dalton all of the other construction services essential to assuring the proper performance of the work covered by the trade contracts. The Contract (with Dalton) also committed Rumble to bind all of the trade contractors to the contract documents between Dalton and Rumble to the extent that they were applicable to the work covered by the trade contracts. Therefore, by virtue of the trade contracts and the Contract, Rumble has relinquished independent control of the work and the terms of the Contract and the trade contracts will determine its performance.

35. The Contract divided between Dalton and Rumble the construction functions that Dalton commonly has performed when it has taken contracts which include work covered by the Agreement. In so doing, Dalton put itself in a position where, having acquired work covered by the Agreement, it could not meet its obligation under the Agreement to assure that the work was done by the Union's members. In other words, Dalton has failed to protect the members' work opportunities which it is committed by the Agreement to protect. In my view, a one employer declaration in these circumstances would serve the labour relations purpose of causing Dalton to conduct the commercial elements of its construction business so that, when it acquires work covered by the Agreement, it meets its obligations under those clauses of the Agreement which are there to assure that the Union's members will have the opportunity to perform the work. I particularly disagree with the view of the majority expressed at paragraph 41 that, to make such a declaration, "...would have the effect of giving the parties to the Agreement a result which they failed to negotiate and would be analogous to the Board using its discretionary powers under subsection 1(4) to extend bargaining rights.". The Union was not trying to extend bargaining rights. On the contrary, it was only trying to preserve to its members the work on which it’s bargaining rights are founded. It is not surprising why the Union found it necessary to do so when you take into account Wood's reasons for wanting Rumble and not Dalton to let the contracts directly to the trade contractors. The majority decision at paragraph 12 outlines his reasons in the following terms:

This was because Wood wanted to have as much control as possible over how things were done on the Project and he did not want unionized contractors to be used on the Project. Wood told the Board that he had no use for unions and believed that their presence on the Project would compromise his objective of Rumble getting the best price, productivity and quality. He believed also that Dalton would be obligated to engage union contractors.

Subsection 1(4) is intended precisely to protect against such mischief and that mischief did result as a consequence of the contractual relationship between Dalton and Rumble. Accordingly, this member of the Board would have declared that Dalton Engineering & Construction Limited and Rumble Pontiac Buick (1985) Inc. be treated as constituting one employer for purposes of the Labour Relations Act, to take effect from when they began to perform the Project pursuant to the Contract.

36. In the result, I would have found that Rumble is bound together with Dalton to the Agreement and, in particular, to clause 2.05 which requires Dalton/Rumble "...to engage only sub-contractors who are in contractual relations with the Union and or its affiliated bargaining agents for all work covered by this Agreement,...". The work awarded to A.B.C Demolition was work covered by the Agreement. A.B.C Demolition was not in contractual relations with Local 506 or any of its affiliated bargaining agents. Therefore, by awarding the work to and having it performed by A.B.C Demolition, in my view, Dalton/Rumble has violated clause 2.05 of the Labourers Provincial Agreement effective from June 25,1986 to April 30, 1988.

37. The above completes the subsection 1(4) conclusion and now I will deal with the second conclusion of deciding whether Dalton engaged ABC for the demolition work in violation of clause 2.05 of the Agreement quoted at paragraph 5 of this dissent.

38. As I have commented at paragraph 28, the Board long has recognized provisions in construction industry collective agreements like clause 2.05 of the Agreement to be significant union security provisions. The Board also has found that such provisions do not violate any section of the Act. In the words of the Brant County Board of Education decision quoted in that paragraph, clause 205 seeks to protect Local 506's bargaining rights by avoiding having them rendered meaningless by subcontracting the work on which they are founded to a contractor who is not obligated to employ members of Local 506, or its affiliated bargaining agents to perform the work. Furthermore, as paragraph 29 demonstrates, the place of clause 2.05 in the Agreement shows it to be an integral part of broad union security provisions, all of which focus on preserving to members of the Union work coming within the Agreement's scope.

39. The language of clause 2.05 commits employers like Dalton who are bound to the Agreement to "...engage only subcontractors who are in contractual relations with [Local 506] for all work covered by [the Agreement], or work forming part of an I.C.I. General Contract...". Dalton was fully aware of this commitment when it accepted the Contract with the condition that Rumble would award the trade contracts. Dalton knew also that work covered by the Agreement likely would be let to contractors not bound by the Agreement and that Dalton would have the same responsibility to Rumble for the trade contractors' performance of the work as would have been the case had Dalton been responsible for executing the formal contracts with them.

40. That likelihood became reality with respect to the demolition work ultimately performed by ABC. Dalton prepared the bid specifications for the work, selected the contractors who would be invited to bid, prepared and issued the invitations to bid and arranged for the bid tenders to be submitted to Rumble. Wood selected ABC, the lowest bidder, and directed Dalton to prepare a contract with ABC for execution by Rumble. Wood executed the contract for Rumble. Dalton scheduled the work, supervised ABC's performance of it, approved ABC's invoices for payment by Rumble and disbursed payments to ABC on Rumble's behalf. Dalton warranted ABC's work for one year, as it did for the other trade contractors, making it independently liable for ABC's work. In short, the services which Dalton performed with respect to the demolition work included all of the services which it usually would have performed as an independent general contractor, except awarding and executing the contract.

41. It is obvious that Dalton and Rumble have structured an arrangement for constructing the Project under which Dalton did everything necessary to identify the trade contractors who would be engaged to carry out the construction work, but Rumble made the formal contracts with the trade contractors. Once a formal contract was executed, Dalton was responsible for making sure that the contractor performed the work in compliance with the contract's terms and, by approving and warranting the finished work, made itself independently liable to Rumble for the work. When Dalton entered into the arrangement, it was aware that it had a positive obligation"...to engage only sub-contractors who are in contractual relations with [Local 506] for all work covered by this Agreement…". It is to be noted that the parties to the Agreement, in adopting that language, have not specified how the engaging is to be done. Having regard to the clear purpose of this type of clause in collective agreements and the place of clause 2.05 in the regime of union security in the Agreement, it is reasonable to construe the language broadly so as to prevent an employer from circumventing his obligation by such devices as delegating his "engaging" power to a third party or arranging with a third party to do the engaging for him. I am satisfied that the facts of this case, particularly those facts respecting Dalton's responsibilities preparatory to and following upon the awarding of the trade contracts, including accepting independent liability for their finished work, support the conclusion that Dalton entered into an arrangement with Rumble, the effect of which had Rumble engaging the trade contractors on Dalton's behalf. Therefore, when ABC was awarded the demolition work, the engaging of ABC was effectively Dalton's.

42. In reaching that conclusion, I have not lost sight of the argument made by counsel for the respondents that Dalton could not have violated clause 2.05 on the facts of this case because, even if the facts were that Dalton had executed the formal contract with ABC, Dalton would have done so as Rumble's agent. Even were we to assume that Dalton had contracted with Rumble to be its agent, that relationship would not shield Dalton from violating clause 2.05 when it executed the contract with ABC. In my view, when a party like Dalton having a contractual obligation to a second party, Local 506, enters into a contract with a third party, Rumble, which calls for Dalton to breach its prior obligation, it cannot then rely on its contract with the third party to escape the prior obligation and the consequences of its breach.

43. For all of the foregoing reasons, I would have found that Dalton Engineering & Construction Limited engaged A.B.C Demolition for work covered by the Labourers Provincial Agreement which was in effect from June 25, 1986 to April 30, 1988, contrary to the provisions of clause 2.05 of that agreement.