[1992] OLRB Rep. May 575
3130-91-R; 3131-91-R; 3443-90-U; 3444-90-G Carpenters and Allied Workers Local 27 United Brotherhood of Carpenters and Joiners of America, Applicant v. Economy Store Fixtures Limited and Flair Woodworking Ltd., Respondents v. Canadian Woodwork Manufacturers Association, Intervener; Carpenters and Allied Workers Local 27 United Brotherhood of Carpenters and Joiners of America, Complainant v. Economy Store Fixtures Limited, Respondent v. Canadian Woodwork Manufacturers Association, Intervener; Carpenters and Allied Workers Local 27 United Brotherhood of Carpenters and Joiners of America, Applicant v. Economy Store Fixtures Limited, Respondent v. Canadian Woodwork Manufacturers Association, Intervener
BEFORE: G. T. Surdykowski, Vice-Chair, and Board Members W. N. Fraser and I. Redshaw.
APPEARANCES: N. L. Jesin and W. Oliveira for the applicant/complainant; Harry Urman for the respondents; no one appearing on behalf of the intervener.
DECISION OF THE BOARD; May 25, 1992
The name of the respondent Flair Woodworking Limited is amended to "flair Woodworking Ltd.".
At the hearing scheduled for these matters, the parties agreed that Board File No. 3444-90-G should be adjourned pending the disposition of the other matters herein. That matter is therefore adjourned sine die for a period not to exceed one year from the date of the hearing (March 25, 1992). If within that one year period no party requests, in writing, that it be scheduled for hearing, and it is not otherwise disposed of by the Board, the grievance in Board File No. 3444-90-G will be dismissed.
The parties also agreed that the Board should defer consideration of the unfair labour practice complaint in Board File No. 3443-90-U and addressed themselves to only the applications for relief under section 1(4) and (what is now) section 64 of the Labour Relations Act in Board File Nos. 3130-91-R and 3131-91-R respectively. Accordingly, the complaint in Board File No. 3443-90-U is also adjourned sine die for a period not to exceed one year from the hearing on March 25, 1992. If no party makes a written request for a hearing within that one year period, and the matter is not otherwise disposed of by the Board, that complaint will be dismissed.
There is no significant dispute between the parties with respect to the facts material to the applications in Board File Nos. 3130-91-R and 3131-91-R.
In 1965, Hillel ("Joe") Frid, together with someone named-Shapiro, caused Economy Store Fixtures Limited, ("Economy") to be incorporated. Subsequently, Shapiro was bought out and Frid operated the business alone (although he was the beneficial owner of 2/3 of the shares of Economy and his wife, Nadia, was the beneficial owner of the remaining 1/3).
At some point, Economy became a member of the Canadian Woodwork Manufacturers Association. At all material times, the applicant/complainant was the exclusive bargaining agent for all employees of the member companies of that Association, including Economy, save and except non-working foremen and persons above the rank of non-working foreman, and office and sales staff, with respect to "all manufacturing of store fixtures and display units performed" by each such company ' 'in its plant and/or plants'' in the geographic area described as ''the counties of Halton, Peel, Ontario and York, which includes the area known as Metropolitan Toronto".
In June, 1989, Peter Sisley purchased all the shares of Economy. Among other things, the Agreement of Purchase and Sale in that respect provided for Frid to continue a relationship with Economy for what appears was intended to be a transition period.
Frid "worked for" Economy until May, 1990 (which we observe was well beyond the "maximum" six month period specified in the Agreement of Purchase and Sale). He then took a prearranged vacation. Upon his return in July, Frid, who apparently had not received a written notice sent in that respect, was told by Sisley that his services had been terminated.
Frid obtained employment as site superintendent with Arjeco Industries, a company with which he was acquainted through Economy. This employment lasted approximately two months.
On or about October 12, 1990, Economy filed an assignment into bankruptcy. The Trustee in Bankruptcy for Economy asked Frid if he was interested in purchasing the business. Frid said no. However, he did decide to get back into the business. For that purpose, Frid, together with someone named Natale Borzi, caused the respondent flair Woodworking Ltd. ("flair") to be incorporated on November 6, 1990. (Frid, his spouse, Borzi, and someone who appears to be Borzi's spouse are the directors of and equal shareholders in flair.) In addition, Frid attended an auction of Economy's equipment held on or about November 9, 1990 and purchased certain equipment, for which he paid between $20,000.00 and $25,000.00 out of total auction sales of approximately $75,000.00, to be used by Flair. On behalf of Flair, Frid negotiated a lease for part of the premises which had been occupied by Economy and from which flair has carried on business ever since.
Although characterized by counsel for Flair as a "new" business, flair is operating substantially the same business as Economy, although on a reduced scale. flair uses the Economy equipment it purchased at the auction as aforesaid and operates out of part of the premises formerly occupied by Economy. The work Flair does is substantially the same as Economy's and its customers are substantially the same as well.
Section 1(4) of the Labour Relations Act provides that:
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.
(emphasis added)
Section 1(4) is a remedial provision intended to prevent the intentional or incidental erosion of bargaining rights consequent upon changes in structure or form of what is, for labour relations purposes, a single business activity. To put it another way, whatever separation may exist between two or more entities for corporate, tax or other purposes, this Board is entitled to treat them as one employer for purposes of the Labour Relations Act where such entities carry on associated or related activities or businesses under common control or direction. The purpose of the provision is to prevent form, or an alteration in form, from undermining a trade union's bargaining rights and the rights of employees to bargain collectively with their employer through that trade union. As the Board observed in Brant Erecting and Hoisting, [1980] OLRB Rep. July 945 and October 1353, section 1(4) extends to situations where one business entity is actively carrying on business and another is not:
- ... 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. 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 of section 1(4) even though their activities are carried on through different or corporate vehicles and are not carried on simultaneously. It is evident that the Legislature has created a regime of collective bargaining law which siguificantly modifies the common law notions of 'privity of contract" or "the corporate veil".
(See also, Metro Century Construction Ltd., [1983] OLRB Rep. July 1122.)
Until Sisley purchased the company, Economy was in every sense controlled and directed by Frid. Indeed, for all practical purposes, Frid was Economy. After the sale, Frid relinquished corporate control of Economy to Sisley. However, and while Frid tended to play down the significance of his role to Economy after Sisley purchased the company, his presence was clearly important to the commercial well-being of Economy. The Agreement of Purchase and Sale itself specifically provided that the purchase was being completed by Sisley in reliance on Frid remaining with Economy on the terms and conditions set out in Schedule "G" to that Agreement. Further, Frid remained with Economy well beyond the maximum transition period contemplated in the Agreement of Purchase and Sale. There is nothing in the evidence to suggest that Economy did poorly subsequent to the sale until after Frid's relationship with the company was terminated. Indeed, Frid's departure looks very much like the water-shed in the fortunes of Economy in the sense that the company rapidly descended into bankruptcy after he left.
The fact that there was a hiatus between the time Frid controlled and directed Economy and the birth of Flair does not detract from the fact that Economy and Flair are more than one entity engaged in a related activity or business under common control and direction, the key in that latter respect being Frid. As we have already noted, section 1(4) of the Act specifically provides that associated or related activities or businesses can be treated as constituting one employer for purposes of the Act even when they are not operating at the same time. The mere fact that an employer for whose employees a trade union holds bargaining rights ceases to operate will not cause those bargaining rights to disappear or become inert. If another entity controlled or directed by a person (or other entity) which exercised control or direction over the first one subsequently becomes engaged in an associated or related activity or business, the bargaining rights which attached to the first employer will also attach to the second, unless there are compelling labour relations reasons why they should not. Under the Labour Relations Act, bargaining rights attach to an activity or business, not merely to the legal vehicle through which the activity or business is carned on. Alterations in legal form, whatever the reasons or motivation for them, are not allowed to undermine or frustrate existing bargaining tights, either directly or incidentally.
On the evidence before the Board, Frid appears to be the key player in flair. It appears that for all practical labour relations purposes he controls and directs that company (indeed, there was no real suggestion that he does not). In our view, Flair is, in effect, Economy reborn. And Flair, like Economy, is the vehicle for Frid's business activity, an activity in which others have joined but primarily his nonetheless. Although it operates on a smaller scale, Flair is objectively indistinguishable from Economy for labour relations purposes. It is in the same business, operates from the same location, uses the same equipment, and its customers, with a few very minor exceptions, are the same as Economy's. And, just as Economy was under Frid's managerial control, so now is Flair.
Finally, the applicant/complainant's bargaining rights are at risk of disappearing along with Economy. This is precisely the sort of erosion of bargaining rights which section 1(4) of the Act is designed to prevent.
We are therefore satisfied, that on the evidence before the Board, Economy and Flair constitute one employer for purposes of the Labour Relations Act. We are also satisfied that there is no cogent reason to not so declare.
Section 1(4) and 64 are not necessarily mutually exclusive in their operation or effect. In appropriate circumstances, both may apply. In this case, the associated or related businesses of Economy and Flair were not active at the same time. Further, the applicant has requested that the Board remained seized with respect to remedial consequences other than declaratory relief. Accordingly, and because the effects of a successful section 1(4) application will not always be identical to the effects of a successful section 64 application, we find it necessary to deal with the latter as well.
For purposes of section 64 of the Act, a sale of business includes any disposition of any part of a business. A sale of business for labour relations purposes can be quite different from a sale of business in the judicial commercial sense. Like section 1(4), section 64 is intended to preserve bargaining rights along a business continuum and many of the comments we have already made with respect to the applicability of section 1(4) apply equally to section 64. A business is a dynamic combination of human initiative and physical assets. It is the human quality which gives a sense of life to a business and which separates it from a collection of assets. Bargaining rights attach to a business as an economic force or organization, not merely to employees, equipment or work performed. As the Board observed in Gallant Painting, [1991] OLRB Rep. Sept. 1051 in that respect:
A "business" is the totality of the undertaking. A "business" may include such tangible assets as tools, equipment, machinery, physical buildings together with such less tangible assets as skilled management and operating personnel and intangibles such as goodwill (see Metropolitan Parking Inc., [1979] OLRB Rep. Dec. 1193). A "business" must be distinguished from the work performed or carried out by the business. This is particularly true in circumstances such as the present which involve a business which obtains its work by being the successful bidder on contracts which are regularly sent out for tender (either public tender or invited tender).
Frid was the key human dynamic force in Economy and is now in Flair. He is clearly a "key man" within the meaning of that term in the Board's successor employer jurisprudence. The movement of a key man will not always have labour relations consequences. Whether or not such consequences follow depends on the circumstances. In this case, the question is whether there has been any disposition such that Flair is, for labour relations purposes, continuing with any part of Economy's business.
Frid declined to purchase back Economy as a "going concern". This decision made business sense since it was undoubtedly apparent to him, as it is to us, that he could, as indeed he did, pick up Economy's "business" without paying for it. Frid could pick up the equipment he required at distress sale prices, and Economy's business premises were ready made and available for his purposes. That, together with his experience and previous association with Economy enabled Frid, through the vehicle of Flair, to, in effect, pick up where Economy had left off; that is, to continue Economy's business. The speed with which Economy foundered after Frid departed demonstrates his importance to the business. In effect, Frid was Economy. Now Frid is flair. As we have already noted, Flair operates in the same commercial arena, from the same location, uses the same equipment, and deals with the same customers as did Economy. Further, although there are now others involved, it is apparent that it is Frid's knowledge and expertise which makes Flair a going concern. It is Frid, and his movement from Economy to Flair which provides a nexus between the two companies such that, as a business, Flair is Economy. It is Frid's presence in the equation which distinguishes this from a situation in which a stranger seizes a commercial opportunity to obtain some or all of another entity's market share. We are satisfied that the bargaining rights which attached to Economy should therefore also attach to Flair.
Accordingly, in the alternative and in addition to our finding that Economy and Flair constitute one employer for purposes of the Act, we find that there has been a sale of business from Economy to Flair within the meaning of section 64 of the Act.
In the result, the Board:
(a) declares that the respondents Economy Store Fixtures Limited and Flair Woodworking Ltd. constitute one employer for purposes of the Labour Relations Act;
(b) declares that the Carpenters and Allied Workers Local 27 United Brotherhood of Carpenters and Joiners of America holds bargaining rights for employees of Flair Woodworking Ltd. in the bargaining unit defined in the collective agreement between the member companies of the Canadian Woodwork Manufacturers Association and Carpenters and Allied Workers, Local 27 - United Brotherhood of Carpenters and Joiners of America;
(c) declares that there has been a sale of a business from Economy Store Fixtures Limited to Flair Woodworking Ltd.
- The Board shall remain seized, for a period of ninety days from the date hereof, with this matter, for the purpose of dealing with any difficulties with the implementation of this decision and with any other remedial consequences which the parties are unable to resolve between themselves.