[1991] OLRB Rep. February 157
1872-90-FA Teamsters Local Union 419, Applicant v. Arrow Games Inc., Respondent
BEFORE: M. A. Nairn, Vice-Chair, and Board Members J. Lear and P. V. Grasso.
APPEARANCES: Dave Watson and Bob McGibbon for the applicant; R. M. Parry, Steven Wilson, Jack Proudman and Peter Cobbold for the respondent.
DECISION OF THE BOARD; February 19, 1991
Two outstanding matters arose in the context of Board File No. 1872-90-FA and pursuant to Minutes of Settlement filed by the parties. The first was the settlement of their first collective agreement. A decision with respect to that matter issued on January 14, 1991. The second matter concerns a dispute between the parties with respect to the legal effect, and remedy if any, of the employer's action in reducing hours of work. It is alleged by the applicant that the employer violated subsection 79(1) of the Labour Relations Act (the "Act") and that compensation is owing to the employees involved. The respondent employer disputes this assertion and also argues that the applicant is estopped from asserting or relying on the absence of "strict and specific" consent under section 79.
Prior to the hearing the parties exchanged and filed written briefs which included an agreed statement of fact and each party's submissions with respect to this issue. Further written submissions were made which the panel has received and considered. There is no dispute that at the relevant times the parties were subject to the "freeze period" established by subsection 79(1).
The respondent employer commenced operations in Mississauga in May of 1988. The essential nature of its business is the processing and distribution of custom-made bingo supplies. There are currently eleven employees in the bargaining unit.
The respondent evaluates its operation by use of a productivity factor measured in cases per hour produced. At one of its parent company's U.S. plants, employees produce on average 4.1 cases per hour. The respondent had set what it felt to be a reasonable, yet minimum, threshold of 3.0 cases per hour for the Mississauga operation. For the first three months of 1989 productivity averaged 2.8 cases per hour. In April 1989 the respondent implemented a productivity bonus plan pursuant to which bonuses were paid. However, in the summer of 1989 following an audit, the respondent discovered that production numbers had been altered intentionally or through gross negligence and actual cases produced were, in fact, closer to 2 per hour than the 3 or more per hour that was being reported. The plant manager was dismissed immediately.
Levels of productivity have not met the respondent's expectation. The applicant does not accept the company's expectation of 3 cases per hour as reasonable. In reviewing the figures provided by the respondent, the case per hour production level over the time of its operation in Mississauga has ranged between 2 and 3 cases per hour with one or two weeks falling on either side of that range.
The applicant was certified on November 23, 1989. Written notice to bargain was given to the respondent on November 28, 1989. The parties met in negotiations beginning on March 27, 1990. There were eight negotiating sessions between March and August of 1990. Subsequently, on August 22, 1990 the parties entered into Minutes of Settlement of a section 89 complaint which ultimately led to this matter being placed before this panel.
Productivity has been a major concern of the respondent since at least the summer of 1989 following the audit. It continues to view it as a serious problem. It has also been an issue in the parties' negotiations. In several of the negotiating sessions the respondent raised the problem of poor productivity and sought the union's assistance in addressing it. Mr. McGibbon, on behalf of the trade union, has attended the plant and spoken directly to employees on at least two occasions and a meeting was held during which both management and Mr. McGibbon addressed the employees on concerns regarding poor productivity.
Prior to commencing negotiations, a meeting was held on February 15, 1990 to discuss productivity. Mr. Proudman, Vice-President, Human Resources, advised Mr. McGibbon, inter alia, that the respondent was forced to cut back from a five-day to a four-day work week effective February 19, 1990. Mr. McGibbon was further advised that the respondent would produce product at its Cleveland head office and forward it to Toronto for distribution in order to meet customer deliveries. Mr. McGibbon did not state that he agreed or consented to the reduction in hours of work. Starting the week of February 19, 1990, the work week was reduced to four days for employees in the bargaining unit, except for the driver and the shipper/receiver who continued to work five 8-hour days.
Subsequently, at the first negotiating session held on March 27, 1990, Mr. Proudman advised Mr. McGibbon that the respondent was moving to a three-day work week commencing April 2, 1990 in response to poor production. During that meeting Mr. Proudman reviewed the respondent's ongoing problem of poor productivity. Mr. McGibbon indicated that he would like some way of checking the respondent's production figures, indicating that the employees were questioning them. At this time, Mr. McGibbon also indicated that the applicant was looking into filing a complaint at the Board against the respondent for reducing the hours of work.
On March 28, 1990, Mr. McGibbon attended the plant and met with Mr. Cobbold, General Manager and a Mr. Meister. Mr. McGibbon toured the plant and the parties again discussed production levels. That same day the respondent forwarded a letter to Mr. McGibbon confirming their concern regarding poor productivity and the reduction to a three-day work week effective April 2, 1990. A notice to all hourly-paid staff was posted in the plant on March 28, 1990 which addressed the issue of poor productivity and announced the effective date of the three-day work week. That notice indicates that in the respondent's view a reduction in hours of work was preferable to a lay-off.
At no time did the union express its consent to the reduction in the hours of work for the employees in the bargaining unit. On March 14, 1990 (unknown to Mr. McGibbon) the applicant filed a section 89 complaint with the Board objecting to the reduced work week which ultimately led to this proceeding before this panel.
On April 30, 1990 the respondent reverted to a five-day work week. The agreed facts provide no explanation for why this occurred. During the periods of the reduced work week, the respondent arranged for the product it typically produced to be produced in Cleveland.
Subsection 79(1) provides:
79.-(1) Where notice has been given under section 14 or section 53 and no collective agreement is in operation, no employer shall, except with the consent of the trade union, alter the rates of wages or any other term or condition of employment or any right, privilege or duty, of the employer, the trade union or the employees, and no trade union shall, except with the consent of the employer, alter any term or condition of employment or any right, privilege or duty of the employer, the trade union or the employees,
(a) until the Minister has appointed a conciliation officer or a mediator under this Act, and,
(i) seven days have elapsed after the Minister has released to the parties the report of a conciliation board or mediator, or
(ii) fourteen days have elapsed after the Minister has released to the parties a notice that he does not consider it advisable to appoint a conciliation board,
as the case may be; or
(b) until the right of the trade union to represent the employees has been terminated,
whichever occurs first.
[emphasis added]
The purpose of the statutory freeze provision found in section 79 was described in A E S Data Limited, [1979] OLRB Rep. May 368 at para. 10:
The purpose of section 70 is to maintain the prior pattern of the employment relationship, in its entirety, while the parties are negotiating for a collective agreement. This ensures that they will have a fixed basis from which to begin negotiations, and prevents unilateral alterations in the status quo which might give one party an unfair advantage either from the point of view of bargaining or of propaganda. The status quo includes not only the existing terms and conditions of employment but also any other established benefits which the employees are accustomed to receive, and which can therefore be considered to be "privileges." It is clear that express promises, or a consistent pattern of employer conduct can give rise to such privileges and that they are caught by the statutory freeze. It should be noted, however, that section 70 also freezes the "rights and privileges" of the employer. The section requires both parties to maintain the existing pattern of their relationship; that is, to conduct their business as before. In Spar Aerospace Products Limited, [1978] OLRB Rep. Oct. 859, the Board discussed the effect of section 70 in the following way:
The “business as before" approach does not mean that an employer cannot continue to manage its operation. What it does mean is, simply, that an employer must continue to run the operation according to the pattern established before the circumstances giving rise to the freeze have occurred, providing a clearly indentifiable point of departure for bargaining and eliminating the chilling effect that a withdrawal of expected benefits would have upon the representation of the employees by a trade union. The right to manage is maintained, qualified only by the condition that the operation be managed as before. Such a condition, in our view, cannot be regarded as unduly onerous in light of the fact that it is management which is in the best position to know whether it is in fact carrying out business as before. This is an approach, moreover, that cuts both ways, in some cases preserving an entrenched employer right and in other cases preserving an established employee benefit.
[emphasis in original]
That discussion was further refined in Simpsons Limited, [1985] OLRB Rep. April 594 (Tacon panel):
The Board could have interpreted section 79 50 as to freeze the precise conditions extant at the time the statutory provision was triggered. The Board, though, has consistently rejected that approach as an unreasonable interpretation of the legislation. In the Board's view, such an interpretation would effectively paralyze an employer's operations for the duration of the statutory freeze, a period which could be quite lengthy. In effect, the business as before formulation in Spar Aerospace, supra, was the Board's response to too expansive a view of employee privileges. To paraphrase Spar Aerospace, the employer's right to manage its operation was maintained subject to the condition that the operation conform to the pattern established when the freeze was triggered.
The freeze provisions catch two categories of events. There are those changes which can be measured against a pattern (however difficult to define) and the specific history of that employer's operation is relevant to assess the impact of the freeze. There are also first time events and it is with respect to that category that the business as before formulation is not always helpful in measuring the scope of employees' privileges. Some first time events have been readily rejected by the Board, where, for example, the employer has instituted parking fees for the first time during the freeze: see Scarborough Cententary [sic] Hospital, [1978] OLRB Rep. July 679; St. Joseph's Hospital, September 1984, unreported, File No. 0965-84-U(A). On the other hand, the Board has upheld an employer's right to lay-off employees during the freeze (assuming there is no anti-union animus in the decision): Simpsons, supra; Burlington Carpet Mills, supra; The Winchester Press, supra; Grey Owen Sound, supra; Deacon Brothers, supra; Airline (Malton) Credit Union, supra. This right has been confirmed even where the first instance of layoff occurred during the freeze (see Grey Owen Sound, supra; The Winchester Press, supra; and where the layoffs had occurred elsewhere in the employer's operation but not at the specific location in question (see Simpsons, supra). The respondent in the instant case cited Corporation of the Town of Petrolia, supra, for the proposition that the employer may also contract out work for the first time during the freeze.
Instead of concentrating on business as before, the Board considers it appropriate to assess the privileges of employees which are frozen under the statute and thereby, delimit the otherwise unrestricted rights of the employer, by focussing on the reasonable expectations of employees. The reasonable expectations approach, in the Board's opinion, responds to both categories of events caught by the freeze, integrates the Board's jurisprudence and provides the appropriate balance between employer's rights and employees' privileges in the context of the legislative provisions.
Reasonable expectations language has appeared in a number of decisions dealing with the freeze section. See, for example, Corporation of the Town of Petrolia, supra; Scarborough Centenary Hospital, supra; Oshawa General Hospital, York-Finch Hospital, supra; St. Mary's Hospital, [1979] OLRB Rep. Aug. 795 (Decision omitted from [1979] OLRB Rep. March); A ES Data Limited [19791 OLRB Rep. May 368. In the latter case, for example~ the Board found that the employer was entitled to re-assign job functions since the employees could not reasonably expect to continue performing their jobs in exactly the same way despite changes in the mode of production and market conditions. Thus, in the Board's view, the reasonable expectations of employees as the appropriate measure of the employees' privileges which are protected by the freeze is a common thread running through the earlier decisions. In the instance case, the Board is expressly articulating the test.
The reasonable expectations approach clearly incorporates the practice of the employer in managing the operation. The standard is an objective one: what would a reasonable employee expect to constitute his or her privileges (or, benefits, to use a term often found in the jurisprudence) in the specific circumstances of that employer. The reasonable expectations test, though, must not be unduly narrow or mechanical given that some types of management decision (e.g., contracting out, workforce reorganization) would not be expected to occur everyday. Thus, where a pattern of contracting out is found, it is sensible to infer that an employee would reasonable [sic] expect such an occurrence during the freeze. The Board in Simpsons, supra, although the cleaning was contracted out before the company itself took over that operation, did not conclude there was such a pattern.
The reasonable expectations approach also integrates those cases which affirm the right of the employer to implement programmes during the freeze where such programs have been adopted prior to the freeze and communicated (expressly or implicitly) to the employees prior to the onset of the freeze: Le Patro d'Ottawa, [1983] OLRB Rep. Feb. 244. The Board considers that the upholding of the right to contract out during the freeze period in Corporation of the Town of Petrolia, supra, does not establish an unrestricted right of the employer to contract out work during the freeze but, rather, recognizes that the employer in that case had embarked on a programme leading to the contracting out well in advance of the freeze and that the employees would reasonably have been aware of his programme in the circumstances (see par. 20, in particular).
The reasonable expectations approach also distinguishes between layoffs and contracting out. Where there was a pattern of contracting out, of course, there would be no violation of section 79 where work was contracted out during the freeze. However, in the Board's opinion, while an employee would reasonable expect a layoff where there was no demand, i.e., where there was an economic downturn, an employee would not reasonably expect that the work would continue to be performed for the benefit of the employer's operation but through contracting out. This is not to say that the employer does not have the right to contract out work during non-freeze periods, except as limited by a collective agreement. During the freeze, however, and unless there is a practice of contracting out, the employer's right to contract out is limited by the employees' privilege of performing the work if the work is to be performed for the benefit of the employer's operation. Contracting out is merely one of the ways an employer might otherwise increase productivity or efficiency which is caught by the freeze; reducing wages, instituting parking fees, ignoring its policy manual are other means of achieving such goals which are proscribed by the statutory provision.
[emphasis added]
There is no dispute that working conditions were altered. Nine of eleven employees in the bargaining unit had their hours of work substantially reduced for a period of time. There is also no dispute that the applicant did not expressly consent to the reduction in hours of work. Can the reduction in hours of work be described as business as usual taking into account the reasonable expectations of the employees?
While the employees were aware that the respondent had concerns with respect to productivity, the respondent had not previously contracted out the work. It had implemented a productivity incentive scheme which, unfortunately, was less than successful as a result of the Plant Manager's conduct. The respondent did, as it argues, have the right to reduce hours of work prior to the freeze (and retains that right subject to what is negotiated between the parties in their collective agreement) but the question is whether it can exercise that right during the freeze. It had not exercised it before. There is, in essence, a pattern - a five-day work week. Under what circumstances might a reasonable employee expect that to change?
Arguably where there has been a reduction in the amount of available work, a reasonable employee might expect that a layoff would occur even in circumstances where there had been no layoffs prior to the onset of the freeze (see Simpsons Limited [1985] OLRB Rep. Mar. 469 (Springate panel) and the cases cited therein). However in this case, there was no reduction in the amount of available work. Because of its concerns about productivity the respondent chose to have the work done elsewhere and in turn, reduced the hours of work of the employees in the bargaining unit. This falls squarely in our view within the discussion in Simpsons Limited (Tacon panel) supra.
The conclusion that employees would not reasonably expect to have their hours of work reduced during the freeze in response to the respondent's concern about productivity is underlined here by the fact that the same concern was being dealt with by the respondent in negotiations. The respondent in its submissions acknowledged that the issue of productivity was very much tied to its position on wages. Wages was an issue the parties were unable to resolve in their negotiations. Similarly, hours of work is a fundamental issue for bargaining. Whether those negotiations were actually frustrated by the respondent's action in reducing hours of work does not requtre an answer. Section 79 is a strict liability provision that anticipates and forecloses debate about what may or may not frustrate the conduct of negotiations. The absence of anti-union animus or the existence of bona fide business reasons is irrelevant. The freeze preserves the employment relationship until such time as the issues have been successfully negotiated and the parties can then direct their conduct accordingly, or alternately, the issues remain unresolved and the parties make use of the economic tools available to them.
We are satisfied that in reducing the hours of work to initially four days per week and subsequently to three days per week, the respondent altered a term or condition of employment in violation of subsection 79(1), subject to the parties' submissions on the issue of consent.
The second issue is whether the applicant trade union is estopped from relying on the absence of specific consent. As indicated, at no time did the trade union expressly consent to the reduction in hours of work. The respondent argues that because there is no evidence of anti-union animus on its part and that the issue of productivity was being dealt with openly between the parties, the applicant had a duty to expressly advise the respondent of its lack of consent to the reduction in hours of work. Otherwise the respondent argues, it has been allowed to go out on the proverbial limb in order to have it sawn off.
The respondent is asking that we infer consent from the applicant's silence. We are not prepared to do so. Relying on a lack of express consent so as to apply an equitable doctrine of estoppel in the face of the statutory language of section 79, is imaginative but ultimately a misapprehension of that language and its purpose. Subsection 79(1) requires consent as a pre-condition for change. The other party is to be put to a decision - "we want to do X - will you consent?" With the advent of the freeze comes a requirement that alterations to "business as usual" can occur only with agreement. More accurately in this case the respondent has chosen to go out on a limb by taking action before it had consent.
We note that the trade union, by filing its complaint, indicated in a timely way that it was not consenting to the change. Although both Mr. McGibbon and the respondent were unaware of that complaint on March 27, 1990 when they met, Mr. McGibbon did indicate that the applicant was "looking into filing charges". The respondent implemented the change to three days per week notwithstanding.
Consequently, we find that the respondent violated subsection 79(1) of the Act in reducing the hours of work to four days per week on February 19th, 1990 and the further reduction to three days per week on April 2, 1990, until April 30, 1990 when the respondent reverted to a five-day work week. We hereby order the respondent to pay to employees in the bargaining unit full compensation for wages and seniority lost including benefits and interest.
We will remain seized in the event that the parties are unable to resolve any issue of compensation.