[1993] OLRB Rep. June 503

0136-93-R; 3507-92-G Iron Workers District Council of Ontario and the International Association of Bridge, Structural and Ornamental Iron Workers, Local 721, Applicants V. G.B. Metals Limited, Aprich Enterprises Ltd., Arnold Glen Bursey, Responding Parties; International Association of Bridge, Structural and Ornamental Iron Workers, Local 721, Applicant v. G.B. Metals Limited, Responding Party

BEFORE: R. O. MacDowell, Alternate Chair, and Board Members W. N. Fraser and G. McMe­nemy.

DECISION OF THE BOARD; June 9, 1993

I

1. This is an application under sections 64 and 1(4) of the Labour Relations Act, filed together with a related application under section 126 of the Act. Sections 64, 1(4) and 1(5) read, in part, as follows:

64.(1) In this section, "business" includes one or more parts of a business; ("entreprise")

"predecessor employer" means an employer who sells his, her or its business; ("employeur précédent")

"sells" includes leases, transfers and any other manner of disposition; ("vend")

"successor employer" means an employer to whom the predecessor employer sells the business; ("employeur qui succède")

(1.1) This section applies when a predecessor employer sells a business to a successor employer.

(2) If the predecessor employer is bound by a collective agreement, the successor employer is bound by it as if the successor employer were the predecessor employer, until the Board declares otherwise.

(2.1) If the predecessor employer is a party to any of the following proceedings, the successor employer is a party to the proceeding as if the successor employer were the predecessor employer, until the Board declares otherwise:

1. A proceeding before the Board under any Act.

2. A proceeding before another person or body under this Act or the Hospital Labour Disputes Arbitration Act.

3. A proceeding before the Board or another person or body relating to the collective agreement.

(2.2) If the predecessor employer has given or been given a notice relating to bargaining for a collective agreement or has requested the appointment of a conciliation officer or mediator, the successor employer is considered to have given or been given the notice or to have made the request, until the Board declares otherwise.

(13) Where, on an application under this section, a trade union alleges that the sale of a business has occurred, the respondents to the application shall adduce at the hearing all facts within their knowledge that are material to the allegation.

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.

(5) Where, in an application made pursuant to subsection (4), it is alleged that more than one corporation, individual, firm, syndicate or association or any combination thereof are or were under common control or direction, the respondents to the application shall adduce at the hear­ing all facts within their knowledge that are material to the allegation.

2. The purpose of these sections has been discussed in Metropolitan Parking Inc., [1979] OLRB Rep. Dec. 1193 and Brant Erecting and Hoisting, [1980] OLRB Rep. July 945:

[Section 64]

18. ... When a business (or a part thereof) is transferred, or disposed of, the transferee acquires the business subject to the collective bargaining obligations of the transferor, the union retains bargaining rights for the employees in a "like unit" to that which existed prior to the transfer, and the transferee must continue to apply the collective agreement (if any) to the unit until the Board otherwise declares. Since the bargaining structure inherited from the predecessor may be inappropriate, or create conflicts with the successor's pre-existing bargaining obligations, the Board is empowered to define and, if necessary, restructure the unit to suit the new circum­stances. Likewise, if the successor employer significantly alters the character of the business, or intermingles the employees of the purchased business with those in its existing operation, the Board may redefine the bargaining structure or determine whether the union's bargaining rights should be continued (section 55(4)-(6)) [now 64(4)-(6)]. However, until the Board otherwise declares, the transferee stands in the shoes of his predecessor with respect to established bar­gaining rights.

19. In the absence of a successor rights provision any change in the legal entity constituting the employer would destroy subsisting bargaining rights, whether they flow from certification or derive from a collective agreement with the predecessor employer. Incorporation of the busi­ness, its transfer to other individuals, or a change in a partnership, would all effect a change in "the employer" even where the plant equipment, products and work force remain substantially the same. The employees might find themselves working at the same plant, at the same machine, under the same working conditions, with the same supervision, doing exactly the same job as before, but as a result of a transfer (of which they may not even be aware) their collective bargaining rights and their collective agreement would disappear. Section 55 [now 64] avoids this destruction of bargaining rights and prevents a dislocation of the collective bargaining status quo by transforming the institutional rights of the union and the individual rights of the employ­ees, (both of which are grounded upon the statute) into a form of "vested interest" which becomes rooted in the business entity, and like a charge on property, "runs with the business". In Marvel Jewellery, [1975] OLRB Rep. Sept. 733 the Board described the effect of section 55 [now 64] as follows:

"Section 55 [now 64] recognizes that collective bargaining rights, once attained, should have some permanence. Rights created either by the Act, or under collective agreements, are not allowed to evaporate with a change of employer. To provide per­manence, the obligations flowing from these rights are not confined to a particular employer, but become attached to a business. So long as the business continues to function, the obligations run with that business, regardless of any change of owner­ship".

[Section 1(4)]

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 64] which preserves the established bargaining rights and collective agreement when a "busi­ness" is transferred from one employer to another. Section 55 [now 64] has been part of the scheme of the Act since the mid 1960's. Neither remedial provision requires a finding of anti-union animus; their primary application is to bona fide business transactions which incidentally undermine or frustrate established statutory rights. Since the two sections are complementary, it is not unusual, as in the present case, for an applicant to rely on both.

13. Section 1(4) does not require that related business activities under common control or direc­tion be carried on simultaneously or contemporaneously. This issue was clarified in 1975 by the addition to section 1(4) of the phrase "whether or not simultaneously". The amendment reflects a legislative recognition that the essential unity and identity of an economic activity (which gives rise to employment) may be preserved even though the legal vehicles through which the activity is carried on will not operate simultaneously; and, business may be effectively transferred from one corporate entity to another, without any of the indicia of a "transfer of a business" which might trigger the application of section 55 [now 64]. This is especially the case in the construc­tion industry where many of the employers will not have the permanence or investment in fixed plant and equipment characteristic of a manufacturing concern. A small construction company can move from jobsite to jobsite or place to place, assembling tools, equipment and a labour force as required after it has made a successful bid. There may be no established economic orga­nization, labour force or configuration of assets. A single principal may have several companies which are used, more or less interchangeably, so that bidding is done and work performed through whichever company is convenient. In such circumstances there may be an effective transfer of business between related businesses without any apparent disposition of assets, inventory, trade names, goodwill, employees, etc. Similarly, where capital requirements are minimal and business relationships transitory, it is relatively easy to wind up one business, and create another one which carries on essentially the same business as before. Indeed there will often be good commercial reasons for doing so unrelated to any express desire to undermine the union's bargaining rights. The earlier company may have run into financial difficulties, or lost its reputation, or there may be legal, accounting or tax advantages in establishing a new vehicle through which the business, or related business activities can be conducted. Again, it is quite possible to do this without a clear and concrete disposition between the two firms so as to call section 55 [now 64] into play. To ensure that the industrial relations status quo is preserved, the Legislature has provided that where two employers carry on related economic activities, under common control and direction, whether or not simultaneously, they can be treated as one for the purposes of the Act.

(See generally: Sack & Mitchell (Ontario Labour Relations Board Practice Butterworths, Toronto 1985 and updating supplement.)

3. In summary, sections 64 and 1(4) both involve the labour relations consequences of business transactions or corporate relationships; and both sections modify common-law notions of "privity of contract", and the independent legal identity of a corporation. Put simply: collective bargaining rights and obligations attach to a business organization or undertaking and its real principals, rather than the legal envelope through which business is carried out. Taken together, these sections continue bargaining rights when a business is transferred from one party to another, and prevent an owner from avoiding collective bargaining obligations by simply spinning off a new cor­porate vehicle.

II

4. This particular application was filed on April 14, 1993, and alleges that G.B. Metals Limited has either transferred its business to the other responding parties or, in the alternative, that those parties are "related" within the meaning of section 1(4). In essence, the applicants con­tend that the business activities of GB. Metals Limited are continuing under the umbrella, or through the auspices, of Aprich Enterprises Ltd. and Arnold Glen Bursey, one of the owners of G.B. Metals Limited. The applicant sets out the following material facts:

i) The applicant Iron Workers District Council of Ontario (the "District Council") and the International Association of Bridge, Structural and Ornamental, Iron Workers, Local 721 ("Local 721") are parties to a collective agreement with the Ontario Erec­tors Association, Incorporated et al. covering the employment of iron workers in all sectors of the construction industry in the Province of Ontario (the "collective agree­ment"). The most recent collective agreement was entered into on August 24, 1992. Its term will expire on April 30, 1995 (Schedule "A").

ii) The responding party G.B. Metals Limited ("G.B. Metals") is a corporation incorpo­rated pursuant to the laws of Ontario carrying on business from 265 Belfast Court, Oshawa, Ontario (Schedule "B"). It is engaged in the installation of metal decking in the construction industry. The registered officers and directors of G.B. Metals are Arnold Glen Bursey ("Bursey") and his spouse Yvonne O'Neil. The directing mind and manager of G.B. Metals is Bursey. Its field operations are directed by Bursey.

iii) The applicant obtained bargaining rights for employees of G.B. Metals by voluntary recognition agreement dated May 15, 1990 (Schedule "C").

iv) Since or about May 1,1992 G.B. Metals did not pay the proper rates to its employees and did not remit pension and benefit contributions or union dues on their behalf. The situation worsened to the point where by December 1992 most of G.B. Metals' employees were not paid at all for work performed. All this resulted in a grievance and decision of the Board dated February 19, 1993 (OLRB File No. 3001-92-G) (Schedule "D"). As of the filing of this application, G.B. Metals has not complied with the Board's order in that case.

v) Subsequent to the Board's hearing into the said grievance, it came to the applicant's attention that G.B. Metals is operating under a new name, Aprich Enterprises Ltd. ("Aprich").

vi) It is the applicant's understanding and belief that the directing mind of Aprich is Arnold Glen Bursey. He apparently has employed some of the same persons who for­merly worked for G.B. Metals. It is engaged in the same type of work as G.B. Met­als, that is, the installation of metal decking. A corporate search has revealed that Aprich was incorporated in Ontario on January 7, 1993 (Schedule "E"). The sole director and officer listed on the incorporation form is "April Bursey". We assume from the name that April Bursey is a relative of Arnold Bursey. April Bursey is not Arnold Bursey's wife. Those persons who have been employed by Aprich have informed the applicant that Arnold Glen Bursey was in fact their employer. Aprich's registered head office is the same as that of G.B. Metals. It is also the principal resi­dence of Bursey.

vii) It is the applicant's position that Aprich was established for the purpose of avoiding G.B. Metals' obligations under the collective agreement. Since there is no apparent reason for the incorporation of a new company performing the same type of work, utilizing the same forces under the same direction, the applicant believes that Aprich was established in an attempt to avoid the obligations of G.B. Metals to pay its employees, former employees and possibly other creditors

viii) It is the applicant's further position that Arnold Glen Bursey is Aprich and G.B. Met­als. There are no other management persons directly involved in either company. Bursey is engaged in a scheme to avoid his legal obligations through the legal vehicle of incorporation. There is strong indication from Bursey's past practices that he has every intention to create yet another corporate entity in an attempt to avoid the appli­cant and its collective agreement obligations. In these circumstances, it is the appli­cant's position that Glen Bursey is himself acting as a business or activity within the meaning of the Act in association with G.B. Metals and Aprich. All three entities are under his direction and control.

ix) It is the applicant's position that there has been a sale of businesses between G.B. Metals, Aprich and Bursey.

x) In the alternative, it is the applicant's position that the responding parties, at all mate­rial times, were carrying on associated or related business or activities under common direction and control within the meaning of section 1(4) of the Act.

5. The applicant also submits corporate reports in respect of the responding companies and a decision of the Board in File No. 3001-92-G. In that decision, the Board considered an appli­cation under section 126 of the Labour Relations Act, concluded that G.B. Metals Limited had failed to comply with a collective agreement by which it was bound, and directed the payment of damages. We might note that G.B. Metals Limited did not file a Reply in that proceeding nor appear at the hearing.

6. Notice of the present application under section 64 and 1(4) of the Act was given to each of the responding parties in Form B-23. That Notice advised the responding parties, inter alia, that the application had been made, and that if they wished to participate in the case they should file their response or intervention by April 28, 1993. The Notices to the responding parties all include this "IMPORTANT NOTE" in bold face capitals:

THE BOARD'S RULES OF PROCEDURE DESCRIBE HOW A RESPONSE MUST BE FILED WITH THE BOARD WHAT INFORMATION MUST BE PROVIDED AND THE TIME LIM­ITS THAT APPLY.

IF YOU DO NOT FILE YOUR RESPONSE AND OTHER DOCUMENTS IN THE WAY REQUIRED BY THE RULES, THE BOARD MAY NOT PROCESS YOUR APPLICATION AND DOCUMENTS, YOU MAY BE DEEMED TO HAVE ACCEPTED ALL OF THE FACTS STATED IN THE APPLICATION, AND THE BOARD MAY DECIDE THE CASE ON THE MATERIAL BEFORE IT WITHOUT ANY FURTHER NOTICE TO YOU.

PLEASE CONSULT THE BOARD'S RULES OF PROCEDURE BEFORE COMPLETING THIS RESPONSE. COPIES OF THE BOARD'S RULES MAY BE OBTAINED FROM THE BOARD'S OFFICE LOCATED ON THE 4TH FLOOR, 400 UNIVERSITY AVENUE, TORONTO, ONTARIO (TEL. (416) 326-7500).

YOU HAVE THE RIGHT TO COMMUNICATE WITH, AND RECEIVE AVAILABLE SER­VICES FROM, THE BOARD IN EITHER ENGLISH OR FRENCH.

PLEASE INDICATE WHETHER YOU WILL REQUIRE ANY SPECIFIC SERVICES, INCLUDING TRANSLATION SERVICES FOR WITNESSES, OR SERVICES FOR PERSONS WHO ARE HEARING OR VISION IMPAIRED, OR OTHER SERVICES. THE BOARD WILL ATTEMPT TO ACCOMMODATE YOU, BUT MAY NOT BE ABLE TO MEET YOUR SPE­CIFIC REQUEST(S).

The Notice makes it clear that if a party does not reply, it "may be deemed to have accepted all of the facts stated in the application ...". That warning is in accordance with Rules 19 and 20 which provide:

19. If a party receiving notice of an application does not file a response in the way required by these Rules, he or she may be deemed to have accepted all of the facts stated in the application, and the Board may decide the case upon the material before it without further notice.

20. No person will be allowed to present evidence or make any representations at any hearing about any material fact relied upon which the Board considers was not set out in the application or response and filed promptly in the way required by these Rules, except with the permission of the Board. If the Board gives such permission, it may do so on such terms as it considers advisable.

7. As of the day hereof (i.e. about five weeks after the terminal date for filing a Reply), there has been no Reply from any of the responding parties, nor any other indication that any of them wish to participate in or contest this application or any of the facts set out in it.

8. On May 4, 1993 the applicants requested that the Board deal with the matter on the basis of the material before it, without a formal hearing. Counsel submits that the responding par­ties have failed to file any response and that the uncontradicted facts pleaded in the application must be deemed to be accepted and make out a prima facie case for the relief requested (see: Lakeridge Acoustics, [1993] OLRB Rep. Feb. 137). In the applicants' submission, no formal hear­ing is necessary. The Board need only apply its own Rules which have been specifically brought to the responding parties' attention.

III

9. The Board sees no reason why it should not grant the applicants' request. The respond­ing parties have chosen not to reply to the application or otherwise indicate any interest in partici­pating in the proceeding. Despite the Rules and the specific warning on Notice Form B-23, the responding parties have not contested the facts upon which the applicants rely, nor opposed the relief to which the applicants claim they are entitled. In the circumstances, the Board sees no rea­son why it should magnify the costs to the parties and the public by scheduling a formal hearing to adjudicate matters which have not been put in issue - not least because it is not at all clear what facts (if any) the responding parties would be permitted to raise so belatedly and there was no response to 3001-92-G either.

10. The Board finds that the facts stated by the applicants make out a case for the relief requested and that those facts are uncontradicted and are deemed to be accepted by the respond­ing parties. We reiterate: the responding parties have filed no response nor raised any reason why the Board should not draw the inferences and make the findings which flow from those facts, namely that:

(a) the responding parties are engaged in related activities or businesses under common control or direction; and/or

(b) a business or a part of the "business" of G.B. Metals Limited has been transferred to the other responding parties.

11. The Board declares that the responding parties are one employer for the purposes of the Act.

12. In view of the declaration in the preceding paragraph, it is unnecessary to decide whether the circumstances also warrant a declaration of successorship under section 64 of the Act.

13. It follows that the responding parties continue to be bound by the collective bargaining obligations and collective agreements of G. B. Metals Limited, including any liability payable under that collective agreement.