[1988] OLRB Rep. August 827
0045-88-R Hotels, Clubs, Restaurants and Tavern Employees Union, Local 261, Applicant v. Skyline Ottawa (1980) Limited and 709212 Ontario Limited carrying on business as Master's Brew Pub & Brasserie, Respondents
BEFORE: Patricia Hughes, Vice-Chair, and Board Members W. H. Wighfman and D. A. Patterson.
APPEARANCES: Sean McGee, Frank Grella, Steve Welchner and John Kearney for the applicant; Eleanor S. Dunn for Skyline Ottawa (1980) Limited; Bryan Carroll, Tom Barton and Grant Dunn for Master's Brew Pub & Brasserie.
DECISION OF THE BOARD; August 12, 1988
At the completion of the hearing in this matter, the Board recessed and then reconvened to give the following oral ruling:
The name of York Hanover Hotels Limited is deleted and the name of Skyline Ottawa (1980) Limited ("Skyline" or "the hotel") is added as a respondent to the style of cause.
The applicant, Hotel, Clubs, Restaurants and Tavern Employees Union, Local 261 ("the union") seeks a declaration under section 63 of the Labour Relations Act ("the Act") that there has been a sale from Skyline of that portion of its business which comprised the food and beverage service in "Initials", a lounge operated by the hotel, to 709212 Ontario Limited carrying on business as Master's Brew Pub & Brasserie ("Master's" or "the Brew Pub") and that Master's is therefore bound by the collective agreement between Skyline and the union.
The thrust of the union's case is that Skyline intended to contract out various aspects of its operation and to that end decided to contract out or sell one of its food and beverage operations, namely Initials, to an entity which would carry on its own food and beverage operation, not in the space occupied by Initials, but in that left vacant when the Skyline's coffee shop, the Trellis Room, was closed January 2, 1987. Master's opened in January 1988, just over a year later. Initials had closed in November 1987. We are satisfied that the Skyline closed Initials because of declining business. The evidence was that the food and beverage operations at the Skyline had not been doing well financially and that various attempts were made to deal with that problem, including changes in theme [(for example, Initials had earlier been called "Ryders" with a sports theme and before that "Diamond Lil's", a "gay nineties" bar)], as well as reduction in hours of operation or in the type of service provided. That was also the case with the Trellis Room which was at one time open for dinner, then no longer offered dinner, and then changed its buffet lunch to sandwiches only and at the time of closing was offering primarily breakfasts. It was decided that the Trellis Room breakfast business would be better channelled to two other rooms on the hotel's second floor, Le Trianon and Light Affair [(previously called "Henry VIII")].
In light of the decision we make in this case we do not have to decide whether the sale of a portion of a business can occur if the successor business occupies different space than the predecessor business. We also assume for the purposes of this case that the nature of the business of Initials, that is, as a food a beverage operation, is the same or similar to that operated by Master's, even though the emphasis is rather different.
The factors and considerations which the Board applies in section 63 cases are set out in Culverhouse Foods Limited, [1976] OLRB Rep. Nov. 691 (see para. 16), and Metropolitan Parking Inc., [1979] OLRB Rep. Dec. 1193; the cases also make it clear that the word "sells" is to be interpreted broadly. The Board will look, for example, at whether there has been a transfer of physical assets, skills or good-will, and at the presence of non-competition covenants, the continuity of the nature of the business and the continuity of employees. As the Board said in Metropolitan Parking, supra, at para. 31, "if the elements formerly used by 'A to carry on business are now in the hands of 'B' and used for the same business purpose, it is difficult to resist the conclusion that there has been some form of transfer from 'A' to 'B'..." Apropos of this case, the Board put the question as follows in Gordons Markets, [1978] OLRB Rep. July 630, at para 18: "whether or not the business carried on by [B] ... is a continuation of [A's] ... or whether it is a separate and parallel business, albeit of the same nature".
The documentary evidence indicates that this is a landlord-tenant relationship. That evidence must be assessed in the context of all the evidence, however, to ensure that what appears tc) be on the surface is in fact what happened. The Board has consistently taken the view that it is the substance of the transaction which matters, not the form: Metropolitan Parking, supra, at para. 27. In our view, however, not only the form but also the substance of this transaction leads us to conclude that there was not a sale of a business from Skyline to Master's.
Master's, or two of its eventual principals, Thomas Barton and Peter Cantelon, became interested in developing a brew pub in downtown Ottawa and were attracted to an advertisement placed in the Ottawa Citizen by the Skyline which explained that the hotel would have vacant space available as a result of renovations. They looked at other space in the downtown Ottawa area, as well as three different spaces in the hotel, but none of it was appropriate for the heavy equipment required for brewing beer which was the raison d'etre of the Brew Pub, except the space vacated by the Trellis Room. After some discussion with Gaeton Rozon, vice-president development of York-Hannover Hotels, a management company with which the Skyline has a management contract, Mr. Barton, Mr. Cantelon, Richard Willan and Jean-Paul Taillefer, who were the eventual shareholders of 709212 Ontario Limited, put forward a proposal to establish and operate a brew pub in the Skyline. Counsel for the union made much of the emphasis in the proposal on the "integration" of the proposed brew pub with the Skyline's own facilities; for example, it read that the menu would not be "in indirect competition with the other elements of the Skyline Hotel, but will be in total co-operation with them so as to ensure an integrated food service for hotel guests and outside clientel."
A commercial landlord's desire for integration of its facilities with those of its tenants or for an assurance that the tenant will not detract from or compete with its own services and operations does not necessarily lead to the conclusion that there has been a sale. It is quite consistent with a landlord-tenant relationship that the landlord would establish rules and standards in harmony with its own self-image as an institution offering services to the public. Nor does the fact that both the Skyline and Master's desired to establish an association in the public's mind, as suggested by reference in the advertising brochures of the Skyline that there was a brew pub on its premises (as there was a beauty salon or car rental agency, both apparently independently established entities) and by reference by Master's to its location in the Skyline's complex in its advertising, mean there has been a sale within the meaning of section 63.
One of Master's shareholders, Richard Willan, had been an employee of the Skyline as a waiter in its food and beverage facility. He did provide know-how to Master's but we are satisfied that in this instance he terminated his employment with the Skyline in order to participate in a new and separate business. Similarly, the hiring by Master's of employees terminated by the Skyline when it closed Initials, does not in itself mean there was a sale. Those employees were interviewed and hired by Master's, along with other persons and as there were few of them, they constitute a small portion of Master's staff. [None of the indicia relevant to a finding that there has been a "sale" are present in the arrangement between the Skyline and Master's to lead to a conclusion that it constitutes a sale under section 63.]
[In sum, we find that Master's is a separate and parallel business to the food and beverage facilities operated by the Skyline both prior to and concurrently with the establishment and operation of the Brew Pub.] We therefore dismiss this application.