[1993] OLRB Rep. June 516
2714-92-G; 2715-92-R Labourers' International Union of North America, Local 837, Applicant V. Kepic Wrecking Inc. and 963590 Ontario Inc. c.o.b. as Kepic Wrecking, Responding Parties
BEFORE: G. T. Surdykowski, Vice-Chair, and Board Members F. B. Reaume and D. A. Patterson.
APPEARANCES: John Moszynski, Caroline Hart, and Manuel Baston for the applicant; Ronald Kepic for 963590 Ontario Inc.; no one appeared on behalf of Kepic Wrecking Inc.
DECISION OF THE BOARD; June 7, 1993
Board File No. 2714-92-G is a referral to the Board of a grievance in the construction industry pursuant to section 126 of the Labour Relations Act. Board File No. 2715-92-R is an application, under sections 1(4) and 64 of the Act, in which the applicant (the "Labourers") asserts that there has been a sale of business from Kepic Wrecking Inc. to 963590 Ontario Inc. c.o.b. as Kepic Wrecking, or that those two entities constitute one employer for purposes of the Labour Relations Act.
The applications were heard together on April 22, 1993. No one appeared at the hearing on behalf of Kepic Wrecking Inc.
On the evidence, Kepic Wrecking Inc. is bound by the collective agreement between the Metropolitan Toronto Demolition Contractors Inc., and the Labourers International Union of North America, and the Labourers International Union of North America, Ontario Provincial District Council, on behalf of its affiliated Local Unions, 247, 491, 493, 506, 527, 597, 607, 625, 749, 837, 1036, 1059, 1081 and 1089 (see also, Kepic Wrecking Inc., Board File No. 0088-92-G, July 7, 1992, unreported).
Although Kepic Wrecking Inc. filed nothing with the Board and did not appear at the hearing, and could therefore be taken as having admitted what is alleged by the Labourers herein (see Lakeridge Acoustics, [1993] OLRB Rep. Feb. 137), 963590 Ontario Inc. c.o.b. as Kepic Wrecking did appear and contested the applications. Default by one responding party does not necessarily bind another and we do not find it appropriate to dispose of these matters without considering the evidence presented.
Ronald Kepic is the principal and sole proprietor of 963590 Ontario Inc. c.o.b. as Kepic Wrecking. His father, Steve Kepic, is the principal and sole proprietor of Kepic Wrecking Inc. For many years prior to January, 1992, Ronald Kepic worked on and off for Kepic Wrecking Inc., and for various other demolition contractors, some of which appear to be owned and operated by other relatives. On or about January 22, 1992, Ronald Kepic incorporated 963590 Ontario Inc. He registered "Kepic Wrecking" as the name 963590 Ontario Inc. was to operate under on or about March 16, 1992. Ronald Kepic testified that he decided to start his own company because his father is considering retirement and "I need an income." He chose Kepic Wrecking as an operating name in order to take advantage of the goodwill associated with that name in the wrecking industry, particularly in the Hamilton area. He testified that he chose this name despite his father telling him not to (although it is evident that Steve Kepic did not feel sufficiently strongly about this to try to prevent Ronald Kepic from using Kepic Wrecking as a business name). Ronald Kepic testified that he had planned to buy certain equipment from Kepic Wrecking Inc. for use by 963590 Ontario Inc. c.o.b. as Kepic Wrecking but decided not to, largely because he thought that "it would help the union's case." Indeed, he conceded that he would have purchased the equipment but for that concern. Ronald Kepic made it quite clear that he wanted nothing to do with the Labourers.
When employed by Kepic Wrecking Inc., Ronald Kepic often acted as a working foreman with managerial responsibilities. Although he performed manual labour and operated machines, he also has had overall responsibility for job sites when his father was not there. He has supervised employees of both Kepic Wrecking Inc. and any of its sub-contractors on job sites. He has had authority to hire new employees and has made lay-off recommendations, some of which were followed and some not, to his father. On occasion (on a Sarnia job done under an Electrical Power Systems Construction Association agreement in 1993 for example) Ronald Kepic was engaged by Kepic Wrecking Inc. in a purely managerial capacity. On occasion, Ronald Kepic helped Steve Kepic prepare bids Kepic Wrecking Inc. submitted for jobs. Ronald Kepic also has a Kepic Wrecking Inc. business card with his name and home telephone number on it.
The subject of the grievance herein is what was referred to by the parties as a "Dare Foods" job which involved the demolition and removal of a four-storey L-shaped building on Jackson Street in Hamilton. This demolition work was actually performed for Hamilton Car Parks Ltd. which had acquired a lease for the property which included the right to demolish the building and construct a parking lot.
Hamilton Car Parks Ltd. gave the contract for the demolition work to Kepic Wrecking
Inc. There is a long history of Kepic Wrecking Inc. performing demolition work for Hamilton Car
Parks Ltd. This helps to explain why the demolition arrangement, pursuant to which Kepic Wrecking Inc. received $50,000 plus salvage rights, was made on a handshake between Richard Leibtag, General Manager of Hamilton Car Parks Ltd. and Steve Kepic.
The demolition work on the Dare Foods job began on or about October 15, 1992. Although the estimates varied, it seems that there were six to eight persons engaged in demolition work at the site between mid-October, 1992 and the end of December, 1992. During that period, Ronald Kepic was on the site as a representative of Kepic Wrecking Inc. It seems that the remainder of the persons on the site were employees of either Gerry's Wrecking (?) to which Kepic Wrecking Inc. had "sold" or sub-contracted the demolition work and salvage rights with respect to lumber, or Smith's Reclaimed Bricks, to which Kepic Wrecking Inc. had "sold" or sub-contracted the demolition work and salvage rights with respect to bricks. After January 1, 1993, the work proceeded less quickly and Ronald Kepic was only occasionally on the job site. The work was virtually completed by early April, 1993.
The Labourers claimed that there were 130 eight-hour days of work for eight workers on this job (i.e. 1040 eight-hour worker days). On the basis of the evidence before the Board, we find that there were an average of seven men on the job between October 15 and December 31, 1992. Not counting statutory holidays, this amounts to 371 eight-hour worker days (53 days x 7 men). Between January 1, 1993 and April .9, 1993, which we find is the date the job was completed, we find, on the basis of the evidence, that there were an average of five men on the job. This amounts to 345 eight-hour worker days. (69 days x 5 workers). The total then is 716 eight-hour worker days.
It is clear that the demolition work on the "Dare Foods" job was covered by the collective agreement referred to in paragraph 3, above. It is also clear that the Labourers had many unemployed members who were ready, willing and able to perform the work. Kepic Wrecking Inc. employed no members of the Labourers to perform any of the work it did on the job site. Further, neither of the companies to which it sold or sub-contracted work on the site was bound to a collective agreement with the Labourers. Nor did they use members of the Labourers to do the work. Kepic Wrecking Inc. clearly breached its obligations under the collective agreement as aforesaid; namely, to employ members of the Labourers to do the work, or to sub-contract the work to contractors with respect to which the Labourers or another affiliate of the Labourers International Union of North America and the Labourers International Union of North America, Ontario Provincial District Council had collective bargaining rights.
The further question is whether 963590 Ontario Inc. c.o.b. as Kepic Wrecking bears any responsibility in that respect because it and Kepic Wrecking Inc. constitute one employer for purposes of the Labour Relations Act, or because there has been a sale of business between Kepic Wrecking Inc. and 963590 Ontario Inc. c.o.b. as Kepic Wrecking.
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 carned 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.
Section 64 of the Act is commonly known as a "successor employer" or "sale of business" provision. In Pinecrest-Queensway Health and Community Services, [1992] OLRB Rep. Nov. 1211, the Board described, at paragraphs 6-9, the purpose and effect of sections 1(4) and 64 of the Act as follows:
Section 1(4) applies to situations in which activities which generate employment relations governed by the Labour Relations Act are carried on through more than one legal entity, whether or not at the same time. This provision gives the Board the power to pierce the corporate veil and declare two or more entities to constitute one employer for purposes of the Act where the Board is satisfied that they are engaged in associated or related activities under common direction or control. In that respect, section 1(4) modifies traditional common-law notions which are based upon the separation between legal entities and the pnivity of contract. It is a remedial provision intended to prevent the intentional or incidental frustration or erosion of established bargaining rights consequent upon changes in the structure or form of what is, for labour relations purposes, a single business or activity. To put it another way, whatever separation may exist between two or more entities for corporate, tax or other purposes, the Board is entitled to treat them as being one employer for labour relations purposes if they carry on associated or related activities under common control or direction. The purpose of section 1(4) is to protect the bargaining rights of a trade union and the rights of employees to bargain collectively with their employer through that trade union from being undermined by the form, or an alteration of the form, of a business or activity. In applications under section 1(4), the Board is concerned with the functional relationship between entities. Businesses or activities are "related" or "associated" because they are of the same character, serve the same general market, employ the same mode or the means of production, utilize similar employee skills, or are carried on for the benefit of related principals (see, for example, Brant Erecting and Hoisting, [1980] OLRB Rep. July 945 and October 1353). Where the Board is satisfied that two or more entities carry on associated or related activities or businesses under common control or direction, which may but does not necessarily include control over employees, the Board may declare that those entities constitute one employer for purposes of the Labour Relations Act. The effect of such a declaration is that the affected entities share the rights and obligations of an employer under the Act and any applicable collective agreement.
Section 64 has the same purpose and a similar effect. Like section 1(4), it recognizes that a "business" is a concept which does not lend itself to precise definition. Rather, a business is an economic activity (whether for profit or not) which can be conducted through a variety of legal vehicles or arrangements. It is the activity, not its form, which gives rise to employee-employer relationships which are regulated by the Act and to which bargaining rights attach. Consequently, under the Labour Relations Act, bargaining rights attach to an activity as an employer rather than to a particular employer name or form of employer, and so long as that activity continues bargaining rights continue to exist. As in section 1(4), common-law or commercial law concepts have limited application to section 64 applications. Indeed it is those very concepts which led to the problems which the two provisions are intended to remedy.
The term "business" is not limited to a commercial or profit making activity. Sections 1(4) and 64 apply equally to traditional commercial activity and to municipalities, school boards, hospitals and other non-profit undertakings which have employees. It is the labour relations aspect of a "business" which is the focus of sections 1(4) and 64. In that respect, it is the continuity of the "activity" which is significant. "Business" is not necessarily synonymous with a particular group or kind of employees or the "work" they perform. Concomitantly, bargaining rights do not necessarily attach to particular work or employees. Although a continuity of work may be significant, it is not always sufficient to justify a finding that that two or more entities constitute one employer, or that there has been a sale of a business. The focus of the inquiry under both section 1(4) and section 64 is the total economic organization, not just the employees or the work performed (see Metropolitan Parking Inc., [1979] OLRB Rep. Dec. 1193; British American Bank Note Co., [1979] OLRB Rep. Feb. 72; Kitchener-Waterloo Hospital, [1991] OLRB Rep. Oct. 1130).
The purpose of sections 1(4) and 64 of the Labour Relations Act is to preserve established bargaining rights, not to extend them or to create bargaining rights where there were none....
In this case, the Labourers brought to the Board's attention a decision of the Board (differently constituted) dated July 7, 1992 in Board File No. 0088-92-G, the previous section 126 proceeding involving the Labourers and Kepic Wrecking Inc., which contains the following paragraph;
In his evidence Mr. Stephen Kepic did not deny that the equipment identified by the applicant's witnesses had been on site. He did deny that the work that was being performed was being performed by Kepic Wrecking Inc. Mr. Kepic was out of the country during the period that this work was being done and he had no knowledge of the project. However he did testify that he has sold certain of his equipment to his son Ronald Kepic who has incorporated a numbered company in order to carry on the same work as his father. Mr. S. Kepic indicated that his son has incorporated a numbered company and is carrying on business as "Kepic Wrecking". Upon making inquiries Mr. S. Kepic learned that the work in question was performed under contract to a Mr. Mike McGale. None of the persons on site were employed by Kepic Wrecking Inc.
In this case, Ronald Kepic denies that he or his company, 963590 Ontario Inc. c.o.b. as Kepic Wrecking, ever actually purchased any equipment from Kepic Wrecking Inc. Only one of these versions can be accurate. We do not know what evidence the Board had before in Board File No. 0088-92-G, but on the evidence before the Board in this proceeding, and considering the candor with which Ronald Kepic testified, including his explanation why he did not go through with an intended purchase of equipment from his father's company, we find that there was no such sale of equipment. Nor is there any evidence of any other form of commercial transaction between the two responding employers.
However, in section 1(4) or section 64 applications the Board's review of the relationship between the affairs of two or more employers is not limited to traditional or formal corporate and commercial dealings. Accordingly, the test applied by the Board to determine whether or not a sale of a business has occurred is neither mechanical nor easily stated. On the contrary, as the Board observed in Metropolitan Parking Inc. [1979] OLRB Rep. Dec. 1193 (at paragraph 34):
This distinction is easily stated, but the problem is, and always has been, to draw the line between a transfer of a "business", or "a part of a business" and the transfer of "incidental" assets or items. In case after case the line has been drawn, but no single litmus test has ever emerged. Essentially the decision is a factual one, and it is impossible to abstract from the cases any single factor which is always decisive, or any principle so clear and explicit that it provides an unequivocal guideline for the way in which the issue will be decided. Thus, an apparent continuity of the business may not be significant if the alleged successor has already been engaged in a similar business, or has set up a "new" business which resembles the "old" one in many respects. In Ralph Ford Electrical, [1974] OLRB Rep. June 388, for example, several key employees of the alleged predecessor became dissatisfied and struck out on their own in competition with their former employer. In that case the Board found that there was not a transfer of a business, but rather the creation of a new "parallel" business which only incidentally made use of some of the tangible elements of the predecessor's business organization. Similarly, in Sunnybrook Food Mkt., [1974] OLRB Rep. Jan. 47 the continuation of a grocery business on the same premises, and with some of the same fixtures, was not enough to support a successor-ship finding. The Board was not satisfied that there had been a transfer and continuation of the predecessor's business (i.e., the business that he owns and operates) but simply the continuation of a like business. It is recognizable that so long as there is a market for a product, some entrepreneur is likely to appear who will produce for that market and, in so doing, he may share many of the characteristics of his alleged predecessor.
There is no doubt that Ronald Kepic, who for all practical purposes, is 963590 Ontario Inc. c.o.b. as Kepic Wrecking, has been trying to take advantage of the goodwill his father's company, Kepic Wrecking Inc., has developed in the wrecking industry. While Steve Kepic may have advised him against that course, he has done nothing to prevent Ronald Kepic from using the Kepic Wrecking name to his own advantage to further the business of 963590 Ontario Inc. That goodwill is an important asset in the wrecking industry is both generally known and demonstrated by the evidence in this case. Hamilton Car Parks Ltd. wanted to deal with only Kepic Wrecking Inc. and specifically rejected a lower bid because Mr. Leibtag didn't know and didn't like the look of the lower bidder. Further, Ronald Kepic conceded that 963590 Ontario Inc. c.o.b. as Kepic Wrecking has been taken to be Kepic Wrecking Inc. by persons with whom he has had dealings. On his own evidence, it is apparent that Ronald Kepic incorporated and began to operate this numbered company in anticipation of his father Steve's pending retirement, essentially so that he could pick up the Kepic Wrecking Inc. business where his father left off, but without the Labourers. Ronald Kepic has not and will not simply take over Kepic Wrecking Inc. because, as he candidly admitted, he wants nothing to do with the Labourers. In the Board's view, there has in effect been a transfer of goodwill from Kepic Wrecking Inc. to 963590 Ontario Inc. The Board is satisfied that there has therefore been a sale of business, within the meaning of section 64 of the Labour Relations Act, from Kepic Wrecking Inc. to 963590 Ontario Inc., which sale took place at or about the time that the numbered company was incorporated; that is, on January 22, 1992.
The fact that there has been a sale of business does not necessarily mean that the entities involved do or do not also constitute one employer under section 1(4) of the Act. As the Board observed in Economy Store Fixtures Limited, [1992] OLRB Rep. May 575 (at paragraph 18), sections 1(4) and 64 are not necessarily mutually exclusive in their operation or effect and in appropriate circumstances both may apply. Accordingly, and because the effects of a successful section 64 application will not always be identical to a successful section 1(4) application, we find it necessary to deal with the latter in this case as well.
Ronald Kepic's managerial role with Kepic Wrecking Inc. is clearly a significant one. (Indeed, the evidence suggests that he is a "key man" within the meaning of that term in the Board's section 64 jurisprudence.) Whatever the respective individual roles and responsibilities of Steve and Ronald Kepic, it is clear that the two responding employers are engaged in the same business, under the same "Kepic Wrecking" name and overall umbrella, under their joint direction or control. The fact that Steve and Ronald Kepic may individually exercise different degrees of direction or control over one than the other does not detract from the fact that they share in the direction or control of the two responding employers. In essence, Kepic Wrecking Inc. and 963590 Ontario Inc. c.o.b. as Kepic Wrecking are one business. Establishing 963590 Ontario Inc. and having it carry on business under the Kepic Wrecking name is merely a step in the process of passing the business from Steve to Ronald Kepic and, at the same time, an attempt to remove the business from an unwanted collective bargaining relationship with the Labourers. Accordingly, the Labourers' bargaining rights are at risk and this is an appropriate case for the Board to exercise its discretion to issue a declaration under section 1(4) of the Act as requested by the Labourers.
In the result, just as Kepic Wrecking Inc. is bound by the collective agreement referred to in paragraph 3, above, so is 963590 Ontario Inc. c.o.b. a Kepic Wrecking. Further, Kepic Wrecking Inc. and 963590 Ontario Inc. c.o.b. as Kepic Wrecking are jointly and severally liable for the breaches of the said collective agreement as aforesaid (see paragraphs 7-11 above) and for the damages arising from those breaches.
Having regard to the evidence and representations before the Board and the Board's findings as aforesaid, the Board therefore:
(a) declares that there has been a sale of business, within the meaning of section 64 of the Labour Relations Act, from Kepic Wrecking Inc. to 963590 Ontario Inc. c.o.b. as Kepic Wrecking;
(b) declares that Kepic Wrecking Inc. and 963590 Ontario Inc. c.o.b. as Kepic Wrecking constitute one employer for purposes of the Labour Relations Act;
(c) declares that Kepic Wrecking Inc. and 963590 Ontario Inc. c.o.b. as Kepic Wrecking are both bound by the collective agreement between the Metropolitan Toronto Demolition Contractors Inc., and the Labourers' International Union of North America, and the Labourers' International Union of North America, Ontario Provincial District Council, on behalf of its affiliated Local Unions, 247, 491, 493, 506, 527, 597, 607, 625, 837, 1036, 1059, 1081 and 1089;
(d) declares that Kepic Wrecking Inc. and 963590 Ontario Inc. c.o.b. as Kepic Wrecking have breached the said collective agreement by failing to perform the work at a job known as "Dare Foods" in Hamilton in accordance with the terms and conditions thereof;
(e) directs Kepic Wrecking Inc. and 963590 Ontario Inc. c.o.b. as Kepic Wrecking to comply with the full terms and conditions of the said collective agreement;
- With respect to the measure of the damages arising out of the breaches of the collective agreement herein (for which the two responding employers are jointly and severally liable), the Board finds it appropriate to remit the matter to the parties to give them an opportunity to settle the issue between themselves. The Board will remain seized with the issue of damages for a period of 90 days from the date hereof. If they are able to settle this issue, the parties should so advise the Board. If they are unable to settle it, the Board will, upon request of any party within that 90 day period, issue a decision with respect to the issue of damages on the basis of the evidence now before it. If the Board hears nothing from the parties within 90 days, the Board will assume that the matter has been settled and this proceeding will be terminated.