[1990] OLRB Rep. November 1135
1010-89-R; 1240-89-G International Brotherhood of Electrical Workers, Local 353, Applicant v. Deluxe Electrical Contractor Ltd., Duplex Electrical Ltd., Respondents; International Brotherhood of Electrical Workers, Local 353, Applicant v. Duplex Electrical Ltd., Deluxe Electrical Contractor Ltd., Respondents
BEFORE: N. B. Satterfield, Vice-Chair, and Board Members W. Gibson and C. A. Ballentine.
APPEARANCES: L. Steinberg and R. Gill for the applicant; James Knight and Joe D'Alessandro for Duplex Electrical Ltd.; Ray Capretta for Deluxe Electrical Contractor Ltd.
DECISION OF THE BOARD; November 1, 1990
The application in Board File No. 1010-89-R is an application for declarations under subsection 1(4) and section 63 of the Labour Relations Act. The applicant seeks a declaration that Duplex Electrical Ltd. ("Duplex") is the successor to Deluxe Electrical Contractor Ltd. ("Deluxe") as a result of a sale of a business within the meaning of section 63 of the Labour Relations Act or a declaration that they should be treated as one employer for purposes of the Act because they carry on related activities or businesses under common control or direction within the meaning of subsection 1(4) of the Act. The application in File No. 1240-89-G is the referral under section 124 of the Act of a grievance in the construction industry for final and binding arbitration. The parties agreed that the hearing into that application should be stood down to await the resolution of the application in File No. 1010-89-R.
The relevant provisions of the Act respecting the application in File No. 1010-89-R state as follows:
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.
- (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 on 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.
Ray Capretta is the sole proprietor of Deluxe. He is an electrician by trade and has worked in the trade since 1971 when he began his apprenticeship with G. W. Smith Electrical ("Smith"). He became a member of the applicant in 1976 when it gained bargaining rights for Smith's employees. Capretta left Smith during 1985 and began his own electrical contracting business under the name of Deluxe. He began performing work under that name in November 1985 and incorporated Deluxe in December. He continued to operate the business as an electrical contractor until November 1987 when one of Deluxe's customers went bankrupt owing Deluxe $15,000.00. Deluxe ceased doing business as an electrical contractor after November 1987, except as noted later in the decision.
Deluxe performed primarily small commercial contracts of around $10,000.00 in value during the two years that it engaged in electrical contracting. It had gross revenues of approximately $99,600.00 in its first year of business and approximately $92,000.00 in the second year. Two of its major customers were Pancor Industries and Retail Enterprises, both of which performed work in retail shopping malls. Pancor was unionized and, in order for Deluxe to obtain and perform contracts for Pancor, Capretta signed a voluntary recognition agreement with the applicant in April 1986. The document is not in evidence in these proceedings, but that is an admitted fact. Since Deluxe was doing commercial work at the time, it is reasonable to infer that the bargaining rights acquired by the applicant included the industrial, commercial and institutional (ICI) sector of the construction industry. Therefore, the statutory effect of the voluntary recognition agreement was to bind Deluxe and the applicant to the collective agreement then in effect between the Electrical Trade Bargaining Agency of the Electrical Contractors Association of Ontario and the International Brotherhood of Electrical Workers and the IBEW Construction Council of Ontario, and its successors ("the Agreement").
Deluxe began performing work for Retail in 1987 and, when Retail went bankrupt owing Deluxe $15,000.00 on a $20,000.00 contract, Capretta decided to close down Deluxe's business and did so in November 1987. A significant additional factor contributing to his decision was the fact that he had been unable to obtain journeymen or apprentice electricians from the applicant and had been working 12 to 14 hours a day six or seven days of the week to perform his contracts. He found that to be risky and to limit the types of jobs Deluxe could undertake. He claimed to have not read the Agreement and to have not understood that he could hire those skills anywhere they could be found if the applicant was unable to supply them within a specified period after Deluxe had made its request.
Approximately six months after Capretta started Deluxe, he was approached by Joe D'Alessandro, an acquaintance, for advice about whether D'Alessandro should start his own electrical contracting business. He had been a journeymen electrician for about one year and thought that he might benefit more by working for himself than by being an employee of someone else. Their discussions led to a decision to enter into an equal partnership in which D'Alessandro would run the business and Capretta would provide advice whenever D'Alessandro required it. In addition to his advice, Capretta provided D'Alessandro with an interest free loan of $4,000.00 from Deluxe. The cheque for the loan proceeds was made out to an automobile agency for the purchase of a van for the new business.
D'Alessandro began performing work in the name of Duplex in June 1986. He operated Duplex's business out of his home and its telephone number was his home telephone number. At the outset of business, Duplex used the same bookkeeper and accountant as Deluxe. Duplex took on small residential and commercial contracts of $1,500.00 to $2,000.00 in value. D'Alessandro performed all of the work himself. He decided what type of jobs Duplex should pursue without advice from Capretta. He did seek Capretta's advice about matters dealing with the electrical code and, sometimes, how to perform a particular kind of work. Capretta also gave him advice on pricing a couple of jobs and he put D'Alessandro in contact with Dominion Candy and Club Monaco, two of Deluxe's customers, on an occasion when Deluxe was unable to take on work from them. As at April 1987, Duplex's first year end, it had gross revenues of $87,000.00.
Deluxe and Duplex operated parallel businesses as electrical contractors for approximately one and a half years from June 1986 until November 1987, when Deluxe ceased doing business. At that time, Deluxe sold its 1979 van to Duplex for $2,000.00 and its ladders, drills, conduit benders and some electrical supplies for $10,500.00. In addition, Duplex made a payment to Deluxe of $9,600.00 as extra pay for vacation to be taken by Capretta over the next five years because of the greater length of time he has spent in the trade compared with D'Alessandro. Both D'Alessandro and Capretta acknowledged this to be a payment for the expertise which Catiretta was bringing to Duplex in the form of his knowledge of the electrical code and of the electrical trade. They denied that it was for his greater experience in pricing and bidding jobs in a competitive bid market. D'Alessandro claimed that he knew how to cost labour from his experience prior to starting his own business. They both pointed out that, when Deluxe was in business, it was bidding jobs of approximately $10,000.00 in value, whereas, after Capretta began working full-time for Duplex, Duplex was bidding on jobs priced up to $500,000.00, prices with which Capretta had no prior experience.
Capretta and D'Alessandro put up their homes to secure a line of credit for Duplex from the Canadian Imperial Bank of Commerce. Duplex was later able to get a line of credit from another bank without the need of security from Capretta. Capretta did not start working full-time for Duplex until February or March of 1988. At first he just worked at nights with D'Alessandro preparing bids for jobs. When he went to work with the tools, he was paid at an hourly rate, as was D'Alessandro. Capretta took payment either in his own name or by having Deluxe invoice Duplex for his time, depending upon the advice of his accountant. The availability of Capretta to work with D'Alessandro as a journeyman enabled Duplex to go after larger jobs than D'Alessandro was able to handle on his own. Prior to that, D'Alessandro had been unable to hire journeymen electricians to work for Duplex, but with Capretta working with him, Duplex was able to hire and make use of electricians' helpers and apprentices. Shortly after Capretta began working with the tools, Duplex hired two employees and worked with them until September of 1988 when it began hiring additional employees. By June 1989 Duplex had eight employees. At the time of the hearings into this application, four of Duplex's eight employees were journeymen electricians.
Once Capretta started to work full-time with Duplex, it began to advertise in the Daily Commercial News and to contact general contractors and builders for opportunities to bid on work. In this manner, Duplex successfully bid on jobs from Go Transit, the Province of Ontario, some municipalities, Woolco Stores and a general contractor who specialized in the construction of service stations. Go Transit, the Province of Ontario and the municipalities together accounted for approximately 60 per cent of its gross revenues, Woolco Stores approximately 25 per cent and the general contractor approximately 15 per cent. For the year ending April 1989, the first full year in which Capretta was working full-time with Duplex, its gross revenues were $665,275.00, about double of what it had been for the prior year. Duplex got its first opportunity to bid on work for Woolco Stores as a result of a personal contact of Capretta. Woolco had been a major client of Smith and Capretta had spent most of his time while employed with that company working in Woolco stores. Duplex got its first job from Woolco approximately a month after Capretta started working full-time for Duplex.
It was Duplex's work for Woolco Stores which brought it to the applicant's attention. Capretta was working on Duplex's first job for Woolco on April 20, 1988 at its store at Sheppard Avenue and Weston Road when Robert Gullins, a business representative of the applicant, called on Capretta. There is no dispute about that being the applicant's first contact with Capretta after he began working full-time with Duplex. The evidence is in conflict, however, respecting whether that was when the applicant became aware of the alleged facts on which this application is based, as the respondents claim, or whether it was in February 1989, as the applicant claims. The Board heard the testimony of Capretta, D'Alessandro and Tom Capretta for the respondents and Robert Gullins and Larry Venning for the applicant. Gullins and Venning were business representatives employed by the applicant. Gullins was employed from October 1987 to October 1988 and Venning from September 12, 1988 to June 9, 1989. The Board has considered their testimony and assessed their credibility as witnesses in accordance with the usual criteria, including what is reasonably probable in the circumstances. The Board is satisfied that the applicant knew by November 1988 the circumstances on which it has relied to make this application.
Applicant counsel argued that the foregoing facts bring its bargaining rights with respect to Deluxe within the protection of both subsection 1(4) and section 63 of the Act. Counsel for Duplex argued that the facts do not support a finding that Duplex is either a related or a successor employer to Deluxe within the meaning of those sections.
Counsel for Duplex argued the following reasons why the Board should not find Duplex to be the successor employer to Deluxe as a result of a sale of its business, or part of it, to Duplex. Nothing but a few assets have passed from Deluxe to Duplex and they were not its business or a part of its business. Nor was Capretta's transfer to Duplex a situation where the owner of an active company for whose employees a trade union has bargaining rights went over~to a key position in another company. Rather, it was a situation in which Capretta simply decided to put Deluxe on the shelf and to go to work for Duplex because the applicant failed to fulfill his request for the journeymen and apprentice electricians which he needed in order to perform Deluxe's contracts. In addition, Deluxe had been a one-person show, and had employed only Capretta, its owner. That makes the entire fact situation unique because the purpose of section 63 is to protect a union's bargaining rights for employees. Since there never had been any Deluxe employees for the applicant to represent there was nothing to protect and no need for the Board to give section 63 the liberal interpretation asked for by applicant counsel in order to find a section 63 sale of a business. In that respect, counsel pointed out to the Board that applicant counsel had not referred to any Board jurisprudence involving businesses which were a one person operation even though he was arguing that the facts of this application fit comfortably with the principles of the Board's jurisprudence dealing with section 63 applications. Finally, Duplex counsel argued that, were the Board to find a section 63 sale of Deluxe's business to Duplex, that result would be tantamount to telling Capretta that there were only two choices for him after shutting down Deluxe: become someone else's employee, or start another unionized business. Counsel contends that would be a result not required by the statute.
With respect to the applicant's request for a "one employer" declaration under subsection 1(4) of the Act, Duplex counsel submitted that the circumstances do not warrant such a declaration even were the Board to find that it had the discretion to make it. That, according to counsel, is because there is no good labour relations purpose to be served by making a declaration and, to do so, would have the effect of extending the applicant's bargaining rights from a company where the applicant has never had any of its members employed to a company whose employees it has never attempted to organize and some of whom it may not even want as members because they are neither journeymen nor apprentice electricians.
The Board is of the view that it need not decide whether it has the discretion under subsection 1(4) of the Act to issue a one employer declaration. In the Board's opinion, the facts support the conclusion that there has been a sale of Deluxe's business, or part of it, to Duplex, a company in which Capretta and D'Alessandro are equal partners.
Section 63 is in the Act to preserve bargaining rights and to protect the collective bargaining status quo. With that purpose in mind, the Board has given a liberal rather than narrow interpretation to the definition of sale of a business in subsection 63(1) of the Act. See Stucor Construction Ltd., [1987] OLRB Rep. April 614, at paragraph 16. The Board must answer two questions when deciding whether there has been a sale of a business under section 63. The first question is whether there has been a sale within the statutory definition of the word. The second question is whether what has been sold constitutes a business or part of a business. In this respect see the Board's decision in The Tatham Company Limited, [1980] OLRB Rep. Mar. 366, paragraph 22. In the case at hand, there is no doubt that there has been a sale; all of Deluxe's tangible assets were sold to Duplex. A short while later, Duplex also acquired the services of Capretta, D'Alessandro's equal partner in Duplex, and paid Deluxe $9,600.00. The Board finds that payment to have been made in recognition of Capretta's greater experience in the electrical trade. The more difficult question is whether, by means of those transactions, Deluxe's business or part of it transferred to Duplex.
Deluxe and Duplex operated parallel electrical contracting businesses for approximately one and a half years while Capretta and D'Alessandro were equal partners in Duplex. When Capretta decided that he no longer wanted to engage in that type of business through Deluxe, he sold immediately to Duplex the tangible assets which had been used for the conduct of Deluxe's business. Approximately three months later, Duplex also acquired Capretta and with him his eighteen years experience in the electrical trade, along with the experience he acquired in running Deluxe's business. Duplex recognized the importance of that experience to it by paying Deluxe $9,600.00. D'Alessandro testified that it was simply Capretta's availability to Duplex as a journeyman electrician that enabled Duplex to expand its business as quickly as it did, and not any expertise in bidding electrical work or his experience in the trade. It is noteworthy, however, that Capretta's first work for Duplex after joining it full-time in February 1988 was preparing bids together with D'Alessandro. There is no doubt that the trades skills which Capretta brought to Duplex could have been provided by any journeyman electrician of similar experience and skill. The extra benefit which Duplex got from Capretta, however, was his experience in applying those skills as a proprietor of a business which operated in a bid-oriented market. Most of the work which Deluxe had performed had been acquired on the basis of competitive bidding. Once Capretta joined Duplex, it began to compete successfully for work in a bid-oriented market. The degree of its success may be seen in the doubling of Duplex's sales revenues in its first complete year of business after Capretta joined Duplex.
The Board has commented before on the significance of management expertise in bid-oriented divisions of the construction industry. The Board put it this way in Construction P. H. Grager Inc., [1985] OLRB Rep. Feb. 233 at paragraph 10:
. . . . the essence of a 'business' in a bid-oriented sector of the construction industry frequently resides in the experience and expertise of its management personnel, rather than, for example, in the physical assets such as tools or a specific location.
Furthermore, as the Board noted in Stucor, supra, that expertise is essential not just for bidding and pricing jobs, but also for executing the acquired jobs within the cost constraints of the bid. Capretta and D'Alessandro both played down Capretta's contribution in that respect, both in his advice giving capacity while he was still carrying on business as Deluxe as well as after he moved over to Duplex. It is to be noted, however, that D'Alessandro came to Capretta at Deluxe whenever he needed advice about the electrical code or about performing electrical work with which he was not experienced. That knowledge is important to both bidding and executing work and it was part of the experience for which Duplex paid $9,600.00 to Deluxe. At that point, Duplex already had bought all of Deluxe's tangible assets and, with the addition of Capretta, all of the significant resources which Deluxe had used to carry on business as an electrical contractor.
- Whether or not this fact situation is unique, as Duplex counsel suggests, because Deluxe was a one person business, the Board still must apply section 63 to those facts. Even Duplex counsel did not suggest that section 63 did not apply to such businesses, but he did argue that the Board should not give section 63 too liberal an interpretation when applying it to this fact situation. The Board recognizes the need to be sensitive to the business context in which it is asked to apply the section as well as to the purpose of the section. That recognition was clearly and succinctly reflected in the following observations at paragraph 26 of Tatham, supra:
The issue of employer successorship arises out of a seemingly endless variety of factual settings, with each new case presenting some of the factors considered relevant to the resolution of prior cases while raising other materially altered, entirely omitted, or newly-added facts which arguably should affect the decision on the merits. Much of the confusion which attends successorship results from the facility with which each case can be distinguished on its facts from all former cases; but to dismiss the confusion so lightly would be to disregard the fundamental differences inherent in the various business contexts in which the successorship issue arises. Factors which may be sufficient to support a "sale of business" finding in one sector of the economy may be insufficient in another. In some industries, particular configuration of assets - physical plant machinery and equipment - may be of paramount importance; while in others it may be patents, "know-how", technological expertise or managerial skills which will be significant. Some businesses will rely heavily on the goodwill associated with a particular location, company name, product name or logo; while for other businesses, these factors will be insignificant. The Labour Relations Act applies equally to primary resource industries, manufacturing, the retail and service sector, the construction industry and certain public services provided by municipalities and local authorities. In each of these sectors the nature of the business organization is different, yet in each case section 55 [now section 63] must be applied in a manner which is sensitive to both the business context and the purpose which the section is intended to accomplish.
[emphasis added]
When Deluxe found itself in the position where it had to be a "unionized" contractor in order to perform work for Pancor, Capretta found it convenient to enter into a voluntary recognition with the applicant. That agreement recognized the applicant as the exclusive bargaining agent for any journeymen and apprentice electricians employed by Duplex and bound the applicant and Duplex to the Agreement. Clearly Capretta expected that any journeymen and apprentice electricians which Deluxe might require would be obtained through the applicant under the terms of the Agreement. It was not for lack of need that Deluxe had no journeymen or apprentice electricians other than Capretta. Deluxe's inability to get them from the applicant was a significant factor in Capretta's decision to close Deluxe. In those circumstances, the fact that Duplex did not at any time employ journeymen or apprentice electricians under the Agreement is not reason for the Board to give a restrictive reading to section 63 when applying it to the facts at hand. It is undisputed that Deluxe was still bound to the Agreement when its tangible assets and Capretta, everything with which Deluxe had carried on the business of an electrical contractor, were transferred to Duplex and were used in its electrical contracting business, a business in which Capretta was an equal partner from its start. With the acquisition of Capretta, Duplex substantially bolstered its capability to bid and execute successfully contracts acquired in a bid-oriented division of the construction industry. In the Board's view, these circumstances warrant protecting the bargaining rights which the applicant acquired when it signed the voluntary recognition agreement with Deluxe binding them to the Agreement and also make it appropriate to find that Deluxe's business continues in Duplex and, as a result, there has been a sale of Deluxe's business to Duplex within the meaning of section 63 of the Labour Relations Act.
In the result, as at the date of the sale, Duplex became bound to the collective agreement between the Electrical Trade Bargaining Agency of the Electrical Contractors Association of Ontario and the International Brotherhood of Electrical Workers and the IBEW Construction Council of Ontario effective May 24, 1988 to April 30, 1990. Since the applicant was relying on subsection 1(4) of the Act in the alternative, the Board considers it unnecessary to decide whether it has the discretion to make a one employer declaration and, if so, whether it ought to make such a declaration. Therefore, insofar as this application relates to subsection 1(4) it is dismissed. The application in File No. 1240-89-G may be brought on for hearing at the written request of any of the parties to the application.