United Brotherhood of Carpenters and Joiners of America, Local 27 v. Ian Somerville Construction Ltd., 1988 CanLII 3747

Ontario Labour Relations Board

[1988] OLRB Rep. October 1022

0330-88-R, 0331-88-G United Brotherhood of Carpenters and Joiners of America, Local 27, Applicant v. Ian Somerville Construction Ltd., Robert Ian Somerville, c.o.b. as Somerville Construction Management and 671860 Ontario Inc. c.o.b. as Somerville Construction, Respondents

Parties and Appearances

BEFORE: Ken Petryshen, Vice-Chair, and Board Members M. Eayrs and H. Kobryn.

APPEARANCES: Leanne Chahley and Jim Smith for the applicant; Daniel J. Shields and Ian Som­erville for the respondents.

Decision of the Board

DECISION OF THE BOARD; October 20, 1988

1. This application is amended to reflect the addition of 671860 Ontario Inc. c.o.b. as Somerville Construction as a respondent in both applications.

2. The Board has two matters before it. Board File No. 0331-88-G is a referral of a griev­ance to arbitration pursuant to section 124 of the Act. At the commencement of the hearing, the parties agreed that this matter be adjourned sine die and accordingly, with leave of the Board, Board File No. 0331-88-G is adjourned sine die. Board File No. 0330-88-R is an application under section 63 and subsection 1(4) of the Act. In this application, the United Brotherhood of Carpen­ters and Joiners of America, Local 27 (hereinafter referred to as "Local 27") alleges that there has been a sale of a business from Ian Somerville Construction Ltd. (hereinafter referred to as "ISCL") to 671860 Ontario Inc. c.o.b. as Somerville Construction (hereinafter referred to as "671860"). Local 27 also alleges that ISCL, Robert Ian Somerville c.o.b. as Somerville Construc­tion Management and 671860 constitute one employer for purposes of the Labour Relations Act.

3. Since Local 27 sought to add 671860 as a party subsequent to the posting of the Notice to Employees of the application, the Board raised with the parties at the hearing the question of whether the employees of 671860 received notice of the application. After entertaining the parties' submissions on this point, the Board advised the parties that it would proceed with the hearing but that it would send a notice of the application to each of the employees. The Board did send a notice, with a copy of the application attached, to each employee advising that if any employee wished to make representations to the Board concerning the application, the employee should do so by sending a written statement to the Board no later than October 11, 1988. No employee responded to the notice.

4. The only witness called was Robert Ian Somerville and the facts are not m dispute. Robert Somerville incorporated a company called Robert Somerville Construction Ltd. and in the fall of 1978 changed the name to ISCL since an objection was made to the name of the original company. ISCL started out on a very small scale performing landscaping work and some minor civil work. In its first year, the company operated out of Robert Somerville's home, had two employees, owned no equipment and the dollar volume of its business was $250,000.00. Robert Somerville was the sole officer and director of ISCL. He owned eighty per cent of the common shares while the remaining shares were owned by someone who was not involved in the day to day operation of the company.

5. Until the spring of 1982, ISCL expanded its business and employee complement. In 1980, ISCL moved into commercial premises where it leased space. Between 1979 and 1981, ISCL was engaged in site upgrading, landscaping, some structural repairs, some small civil works and a fair bit of residential work. ISCL's employee complement peaked at approximately twenty-five employees. In addition to office staff, it employed an estimator, a landscape architect, a site super­visor, a couple of operating engineers, a couple of carpenters and labourers. It owned some light earth moving equipment, a dozer, a backhoe and some trucks. Its significant customers were the Metro Toronto Housing Corporation, City Home and Harbour front Corporation. In 1981, the business grossed a little more than $1.2 million. ISCL did perform some work, although not a sig­nificant amount, in the ICI sector of the construction industry. In 1982 it bid on an ICI job at Ontario Place but was not awarded the contract. It also subcontracted out work rather than utilize its own workforce when it was appropriate to do so.

6. In November 1981, ISCL entered into a voluntary recognition agreement with the Ontario Provincial Council, United Brotherhood of Carpenters and Joiners of America for a bar­gaining unit of "all journeymen and apprentice carpenters, other than millwrights, employed by the Employer in the Province of Ontario and engaged in the industrial, commercial and institu­tional sector of the construction industry". This agreement specifically provided that ISCL shall be bound to the Carpenters' provincial agreement. ISCL also had collective agreements with locals of the Labourers and Operating Engineers.

7. As a result of financial difficulties, ISCL became insolvent by the spring of 1982 and was wound up. It did not go bankrupt or into receivership. The equipment it had was disposed of by auction and the employees were gradually laid off. No arrangements were made to dispose of the goodwill, there were no customer lists to pass on and no accounts receivable. ISCL's charter was revoked by the Province for the non-filing of provincial tax returns. Between March 1982 and the fall of 1987, Robert Somerville was not a principal of a company engaged in work in the construc­tion industry. During this time, he was an employee of a number of construction companies and worked for some of them in the capacity of a project manager. In March 1984, he registered the name Somerville Construction Management and two of the employers he worked for paid him in the name of Somerville Construction Management. On the evidence before us, we are satisfied that Somerville Construction Management did not carry on business as a construction contractor.

8. In the fall of 1987, 671860 began to carry on business in the construction industry. Linda Somerville, Robert Somerville's wife, is a director, sole officer and shareholder of 671860. Although he does not have an ownership interest in the company, Robert Somerville is in charge of the day-to-day operation of 671860. For example, he is the one who determines what jobs the company will bid on. In addition to employing Robert Somerville, 671860 employs a site supervisor and a labourer. Robert Somerville does not want at this time to have 671860 engage in work which is labour intensive. Most of the work 671860 obtains is subcontracted out. 671860 owns some small tools and a pick-up truck. Between the fall of 1987 and May 1988, 671860 did one residential job and some leasehold improvement work for City T.V. The bulk of 671860's work during this period has been for Ontario Place as a general contractor in the ICI sector of the construction industry. 671860 has entered into four such contracts with Ontario Place for a combined dollar value of approximately one million dollars. Part of the work subcontracted out by 671860 at Ontario Place was carpentry work.

9. We do not propose to set out the submissions of counsel in detail. Counsel for Local 27 argued that her client was entitled to relief under section 63 and subsection 1(4) of the Act. Coun­sel for the respondents argued that there is no basis for either claim. With respect to the subsection 1(4) application, counsel for the respondents took the position that the activities of ISCL and

671860 are not related or associated. As well, counsel argued that even if it should find the two companies to be related or associated, the Board should not exercise its discretion to grant a sub­section 1(4) declaration given the passage of approximately 5V2 years from the winding up of ISCL and the initiation of the business of 671860.

10. The relevant parts of section 63 and subsection 1(4) of the Act read as follows:

63.-(1) In this section,

(a) "business" includes a part or parts thereof;

(b) "sells" includes leases, transfers and any other manner of disposition and "sold" and "sale" have corresponding meanings.

(2) Where an employer who is bound by or is a party to a collective agreement with a trade union or council of trade unions sells his business, the person to whom the business has been sold is, until the Board otherwise declares, bound by the collective agreement as if he had been a party thereto and, where an employer sells his business while an application for certification or termination of bargaining rights to which he is a party is before the Board, the person to whom the business has been sold is, until the Board otherwise declares, the employer for the purposes of the application as if he were named as the employer in the application.

1.-(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.

11. Section 63 of the Act is designed to ensure that when a business or part of a business is disposed of, the purchaser acquires it subject to the collective bargaining obligations of the vendor. Before granting relief under section 63, the Board must be satisfied that a business or a part of a business has been sold. In the instant case, no assets or anything else of significance were transfer­red from ISCL to Robert Ian Somerville c.o.b. as Somerville Construction Management or to 671860. The facts disclose that the business or part of the business of ISCL was not disposed of at all, let alone to Robert Ian Somerville c.o.b. as Somerville Construction Management or to 671860. Accordingly, the application as it relates to section 63 of the Act is dismissed.

12. Before the Board can exercise its discretion under subsection 1(4) to declare that cer­tain entities constitute one employer for the purposes of the Act, three conditions must be satisfied. There must be more than one corporation, firm or individual association or syndicate involved. The entities must be under common control or direction. And finally, the entities must be engaged in associated or related business activities. Subsection 1(4) does not require that related business activities under common control or direction be carried on simultaneously or con­temporaneously.

13. As noted earlier, Local 27 seeks subsection 1(4) relief against ISCL, Robert Ian Somer­ville c.o.b. as Somerville Construction Management and 671860. Since the evidence discloses that Robert Ian Somerville c.o.b. as Somerville Construction Management did not carry on business as a construction contractor, or for that matter, did not carry on any business, the subsection 1(4) application as it relates to Robert Ian Somerville c.o.b. as Somerville Construction Management is dismissed. We turn then to the question of whether ISCL and 671860 constitute one employer for the purposes of the Act.

14. Counsel for the respondents agreed that two of the conditions necessary for a subsec­tion 1(4) declaration have been satisfied. Counsel noted that the instant case clearly involves more than one corporation and that ISCL and 671860 are under the common control and direction of Robert Somerville. Robert Somerville ran ISCL and the evidence discloses that he exercises effec­tive direction and control over 671860. As noted earlier, counsel for the respondents contends that there are two questions the Board must answer. The first question is whether the 5½ year gap between ISCL's demise and the start of 671860 affects the determination of whether the two busi­nesses constitute related or associated activities. The second is whether, given the 5'/2 year gap, it is appropriate for the Board to exercise its discretion to grant subsection 1(4) relief. Counsel sub­mitted that if the business of ISCL ceased on a Friday and the business of 671860 began on the fol­lowing Monday~ it would be difficult to conclude that the two businesses in this case are not related. However, given the gap of 5½ years, counsel submitted that the businesses are not related or associated. When it came to the second question concerning the exercise of its discretion, coun­sel submitted that the business of ISCL died in 1982 and the gap of 51/2 years should lead the Board to conclude it was inappropriate to grant Local 27 the relief it requested.

15. In Brant Erecting and Hoisting, [1980] OLRB Rep. July 945, the Board makes the fol­lowing comments concerning the interpretation of the words "associated or related activities or businesses" at paragraph 15:

It is not necessary to have shared participation in a common business endeavour or even con­temporaneous economic activity. The relationship between the business entities is a functional rather than a temporal one. Business 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 of section 1(4) even though their activities are carried on through different corporate vehicles and are not carried on simultaneously. It is evident that the Legislature has created a regime of collective bargaining law which significantly modifies the common law notions of "privity of contract" or "the corpo­rate veil".

16. In determining whether certain respondents are engaged in associated or related activi­ties or businesses, the Board is concerned with the nature of the businesses. If the businesses or activities are related, the existence of a gap of two days or a greater period of time is of little sig­nificance. In other words, the gap in and of itself is not determinative of the relatedness issue. In this case, ISCL was and 671860 is engaged in work in the construction industry. Both ISCL and 671860 performed work in the residential sector. 671860 subcontracts most of its work but ISCL, on occasion, subcontracted out work as well. On the facts of this case, particularly given the nature of the work performed by ISCL and 671860, we are satisfied that ISCL and 671860 carry on associ­ated or related activities or businesses even though a 5½ year gap is present. As the Board has noted in previous decisions, firms engaged in the construction business can easily become involved in various sectors of construction work depending on business opportunities and, when they do, it is difficult to say that the activities are unrelated (see Frank Plastina Investments Ltd., [1986] OLRB Rep. June 720).

17. In arguing the issue of the exercise of the Board's discretion, counsel for the respon­dents referred to the decision in Roy Brandon Construction, [1981] OLRB Rep. Feb. 219 at para­graph 9 where the Board made the following obiter comment: "The two businesses, in other words, although unrelated in time, may be so identical in their essential makeup as to be consid­ered 'associated or related' within the purpose and meaning of section 1(4) (although there may be a point at which the hiatus is so significant that it would be inappropriate to say that the section applies)". We have some difficulty with the view that the length of the hiatus could affect the appli­cation of subsection 1(4) of the Act. In any event, the Board is satisfied that the gap of 5'/2 years on the facts before us should not lead us to decline to grant the relief requested by Local 27.

18. The purpose of subsection 1(4) is set out in the following passage in Brant Erecting and Hoisting, supra, at paragraph 12:

Section 1(4) was enacted in 1971 and deals with situations where the economic activity giving rise to employment or collective bargaining relationships regulated by the Act, is carried out by, or through more than one legal entity. Where such legal entities carry on related business activi­ties under common control or direction, the Board is empowered to pierce the corporate veil. Section 1(4) ensures that the institutional rights of a trade union, and the contractual rights of its members, will attach to a definable commercial activity, rather than the legal vehicle(s) through which that activity is carried on. Legal form is not permitted to dictate or fragment a collective bargaining structure; nor will alterations in legal form undermine established bargaining rights. In this respect the purpose of section 1(4) is similar to that of section 55 [now section 63] which preserves the established bargaining rights and collective agreement when a "business" is trans­ferred from one employer to another....

19. The economic activity of ISCL that gave rise to a collective bargaining relationship with Local 27 is, in effect, now carried on by 671860. The two entities are engaged in related activities under common control and direction. We are unable to discover any labour relations reason in these circumstances for concluding that the bargaining rights of Local 27 should not attach to the "definable commercial activity" simply because that activity is carried on through another legal entity 5'/2 years after ISCL ceased operating. If Robert Somerville revived ISCL in 1987 to carry on the work now performed by 671860, there would be no question that the bargaining rights of Local 27 would continue. The fact that Robert Somerville elected not to revive ISCL but rather to utilize another corporate vehicle to carry on a related business 51/2 years later is not a compelling reason to decline to exercise our discretion in Local 27's favour. After reviewing all of the circum­stances, including the 51/2 year gap, we find that this is an appropriate case to exercise our discre­tion in favour of granting Local 27 the relief it seeks.

20. Accordingly, the Board declares that ISCL and 671860 are one employer for the pur­poses of the Labour Relations Act and that 671860 is bound by the Carpenters' provincial agree­ment.