[1993] OLRB REP. MAY 421
3150-91-R; 3151-91-R Millwright District Council of Ontario on its own behalf and on behalf of Local 1244, Applicant v. Inplant Contractors Inc. and 911846 Ontario Limited c.o.b. as Flint Industrial Services and Flint Riggers and Erectors Inc., Responding Parties
BEFORE: S. Liang, Vice-Chair, and Board Members F. B. Reaume and J. Kurchak.
APPEARANCES: Marisa Pollock and Henry Martinak for the applicant; W. Thornton, A. Markham and Russ Derseweh for the responding parties.
DECISION OF THE BOARD; May 3, 1993
1These are applications made pursuant to the provisions of sections 1(4) and 64 of the Labour Relations Act. The Millwright District Council of Ontario on its own behalf and on behalf of its Local 1244 ("the Millwrights" or "the union") alleges that there has been a sale of a business or part of a business from Inplant Contractors Inc. ("Inplant") to 911846 Ontario Limited c.o.b. as Flint Industrial Services ("Flint Canada") and Flint Riggers and Erectors Inc. ("Flint USA"), or that the responding parties are related employers within the meaning of the Act.
2On the second day of hearing, the responding parties informed the Board that they do not dispute that Flint Canada and Flint USA are companies carrying on related activities under common control and direction. Counsel indicated, however, that the companies oppose the issuance of a declaration under section 1(4) of the Act with respect to these two companies, on the basis of the Board's discretion.
I - The Evidence
3Ann Markham and Russ Derseweh gave evidence on behalf of the responding parties. The applicant called no evidence. The Board also received a considerable amount of documentary evidence in the way of invoices, accounts receivables summaries, T4 forms, corporate documents and other material, which we have reviewed in depth.
4This case essentially revolves around the involvement of Ann Markham and Tim Hay in Inplant and subsequently in Flint Canada. There is no dispute that Inplant is bound to the provincial Millwright collective agreement. Inplant conducted business in Southern Ontario from about July 1986 to December 1990, when it went into receivership. Flint Canada was incorporated in January of 1991, essentially to conduct business in Canada for Flint USA, which is located in Flint, Michigan. Ann Markham is an officer and director of Inplant, which is no longer in business, and is also an officer and director of Flint Canada. The applicant alleges that the events of January 1991 constitute a sale of a business or part of a business from Inplant to Flint Canada and Flint USA. In the alternative, the applicant alleges that the companies carry on related activities under common control or direction.
Inplant - 1984 to April 1987
5Inplant was formed in Chatham in 1984 by Ann Markham and her ex-husband, Glenn Markham. The company was formed as a result of Glenn Markham's interest in business opportunities in the area of supply of labour to industrial plants. Mr. Markham had worked briefly for a company in the area pursuing these types of contracts for the company. He then decided to go into business on his own. The Markhams colloquially referred to this type of business as "rentabody". Essentially, it consists of supplying labour for such purposes as maintenance during plant shutdowns.
6Inplant was formed with ownership split equally between the Markhams. Glenn Markham was the president, Ann Markham the secretary. Both were directors. Both guaranteed the debts of Inplant. These began as a $5,000 loan and fluctuated with the company's line of credit. The day to day business of the company was managed by Glenn Markham. He took requests for labour and arranged for workers to fill the requests. A constant part of his responsibilities was the active pursuit of new contracts. Ann Markham did record-keeping for the company, prepared the payroll and typed invoices on Glenn Markham's instructions. The company operated out of the Markham home. During this period, Ms. Markham also worked full-time at an accounting firm. She has had training in accounting and bookkeeping although she is not a certified accountant.
7From 1984 to 1987, when Glenn Markham sold his interest in Inplant to Tim Hay, most of the company's work was in the business of supply of skilled labour. The company also did some machinery moving. The largest customer of Inplant during this period was Navistar International Corporation Canada ("Navistar"), to which Inplant supplied labour for the purpose of plant maintenance. Apparently, early in the company's history, Inplant used workers from the Millwrights, the Ironworkers and the Operating Engineers unions. However, it stopped using Millwrights in or around November 1984, as a result of the refusal by the Millwrights to agree to a separate collective agreement covering maintenance work, at lower wage rates.
8In June of 1986, the Markhams separated. Ann Markham continued to do some bookkeeping work for the company from her home. In July of 1986, Glenn Markham located Inplant in an office in Chatham, after which the work of preparing invoices was no longer part of the work that Ann Markham did for the company.
Inplant - April 1987 to January 1991
9In April of 1987, Glenn Markham sold his half-share of the company to Tim Hay, an acquaintance who is an ironworker by trade. Hay had worked for Inplant before and for a time also had his own welding business. Upon this sale, Ann Markham became the president and Tim Hay the secretary-treasurer. After the sale, the company continued to do work for Navistar and other companies requiring labour for maintenance purposes. As well, it continued to do some machinery moving. However, it started doing a significant amount of work in structural steel erection and installation.
10In 1988, Ann Markham quit her full-time job in the chartered accountant's office. This was the result of increased bookkeeping demands from Inplant as a consequence of some major structural steel contracts as well as her increasing freelance accounting work for various clients. The work which Ann Markham performed for Inplant after Tim Hay bought into the company was not substantially different from before. She continued to do bookkeeping and payroll and preparation of invoices. Tim Hay was responsible for the day-to-day management of the firm. On one occasion, as a result of a grievance filed by the Millwrights, Ann Markham and Tim Hay together attended a meeting with a Labour Relations Officer at the Board's offices. She states that she attended at Hay's request. She has also gone for drinks with Inplant customers with Hay, but is generally not involved in soliciting work.
11In 1988, Inplant entered into a lease for office space at 21 Arnold Street in Wallaceberg. Ann Markham personally guaranteed this lease. The company operated out of these premises until its demise.
12In the first few days of January, 1991, Inplant went out of business. The bank that held its operating line of credit called the loan and froze Inplant's account. At this time, Inplant had debts of about $200,000. It also had substantial accounts receivables. Inplant owned equipment of about $150,000 in value, some of which was seized by the bank. Eventually, as a result of Ann Markham's ability to pay off some of the debt and collect on some of the accounts receivables, the bank allowed her to discharge her personal guarantee on Inplant's debts. Some of the equipment was sold off to various buyers. Some of it is still in Hay's possession.
Flint USA and Flint Canada
13Between March 1987 and December 1990, one of Inplant's customers was Flint USA. Flint USA is a company based in Flint, Michigan, owned by Deforest Rinz. The business of Flint USA is rigging and erecting, machinery moving, and dismantling and relocating plants. Flint USA is also engaged in the supply of skilled trades in the United States. Most of its customers are located within a 300 mile radius of greater Detroit, although in relocating plants for customers, the work may take Flint beyond the Detroit area. Flint USA does about $3 million in business each year.
14Between March 1987 and December 1990, Inplant supplied labour to Flint USA on 5 jobs, with a total value of about $30,000.00. The value of this work represents less than 1% of the total sales of Inplant during this period. These jobs involved Flint USA contracts for the dismantling of plants located in Canada and the relocation of the machinery in the plants to the United States. Inplant supplied labour to Flint USA for the work in Canada on these jobs.
15In early January, after Inplant ceased business, Rinz phoned Ann Markham. The purpose of the call was to inquire about a truck belonging to Flint USA that was in possession of Inplant, and had been used on a job. During the course of this conversation, Markham explained to Rinz Inplant's circumstances. Among other things, she asked whether he was interested in purchasing some equipment.
16A few days later, Rinz phoned Inplant and asked Markham to go to Flint for a meeting. Other than saying that he had something he thought she might be interested in, he did not elaborate on the purpose of the meeting. Markham went to Flint the same day to meet with him. At this meeting, Rinz showed her a purchase order that he had for a job to remove some equipment for Lignotoc in Cambridge. He stated that he wanted to set up a Canadian company and asked Ann if she was interested in handling the accounting and being the Canadian resident director for the company. He also mentioned other work Flint USA was hoping to line up in Canada.
17Russ Derseweh testified that it was his idea to have Flint USA set up a Canadian branch company. Derseweh is the general manager of Flint USA. He stated that the idea for the Canadian company originated when he received a request to quote on the re-location of the Lignotoc plant from Cambridge, Ontario to New Jersey. In addition to the Lignotoc job, there were at least four other long-time clients of Flint USA who indicated that they had future work in Canada relocating their Canadian plants to the United States. As a result of this, Derseweh felt that there was going to be a lot of future work in Canada from plant closings and relocations because of the Canadian economy, and that Flint USA should form a Canadian company in order to be more competitive in Canada. Previously, when Flint USA did work in Canada, it used subcontractors to supply labour (such as Inplant). By forming a Canadian subsidiary, Flint USA could cut out the middleman mark-up by hiring their own labour directly.
18Derseweh spoke to Rinz about the idea of forming a Canadian company. Rinz phoned his lawyer and accountant, and determined, among other things, that a Canadian director was required. The result of this was the telephone call to Ann Markham.
19Before this telephone call, Ann Markham had met Rinz on only one occasion. In the fall of 1986, she and Glenn Markham spent an evening with Rinz and his son. Although this was after their separation, the Markhams were making an attempt to reconcile. Rinz and Glenn Markham discussed the possibility of combining their efforts to do business together. Ann Markham spent some time chatting socially to Rinz and, among other things, talked to him about the nature of her work and background in accounting and bookkeeping.
20Apparently, the discussions between Rinz and Glenn Markham did result in something. In 1987, Canam Riggers Ltd. was incorporated with Deforest Rinz as president and Glenn Markham as Vice-President. We have no evidence as to what this company does, nor any evidence as to its functional relation, if any, to the companies in these proceedings.
21In any event, when Ann Markham met with Deforest Rinz in early January of 1991, the proposal that Rinz made was that she become the Canadian resident director and a officer of a new company, and that she handle accounting and payroll work for the company. She would be paid $500 each week for her work. In a few days, Ann Markham called Rinz and told him that she would accept the offer. Rinz and Derseweh came to Canada, met with Markham and they arranged for the incorporation of the new company, as of January 30, 1991. Markham became the president of the company, and Rinz the secretary-treasurer. Rinz is the sole shareholder.
22In evidence, Markham stated that she did not know why she was the named the president and Rinz the secretary-treasurer. She does not recall any discussion with Rinz or the lawyer who incorporated the company as to the meaning of being the president, or the obligations and powers of being a director and officer. She stated that she is unaware of the powers, if any, given to her as a director and officer by the by-laws. She does not see herself as having any power of independent decision-making within the company. She stated that she does not have the authority to buy anything, even a calculator, without authorization.
23The new company decided to rent premises on a sub-lease from Markham, at 21 Arnold. As set out earlier, she had personally guaranteed the lease for Inplant at this location. Markham stated that she mentioned the availability of this space to Rinz, who agreed to take some of it for Flint Canada. In addition to Flint Canada, there is an accountant that also sub-lets space at 21 Arnold. Both Flint Canada and the accountant pay their rent directly to the landlord for their portion of the rent. The Flint Canada office is used by Markham for her bookkeeping work for the company. As well, she continues to do freelance accounting for various firms and individuals. The office equipment belongs to Markham and is part of the equipment of Inplant that was released to her. Russ Derseweh also uses the office at 21 Arnold Street when necessary as a base for Flint Canada and Flint USA's work in Canada.
24As set out above, there were a number of job leads in Canada that led Rinz and Derseweh to incorporate Flint Canada. Most of these possibilities did in fact eventually result in work. It appears that about four-fifths of the work that Flint USA did in Canada in the first year-and-half of the operation of Flint Canada was done for Flint USA clients. Where work is obtained through Flint USA clients located in the United States, Flint USA holds the contract. Flint USA in turn "sub-contracts" the labour portion of the contract to Flint Canada.
25When Flint USA performs a job in Canada, Derseweh may be on site 1 or 2 days a week. As well, Flint USA has a number of supervisors (about 4), each of whom is assigned the day to day supervision of a particular job. On jobs in Canada, Flint USA has at least one supervisor on the site for the duration of the job. The employees, however, are Canadian workers, hired primarily from the Ironworkers hiring hall. The American supervisors report the hours worked to the Flint USA office in Flint, Michigan. In turn, this office sends this information to Ann Markham so that she can make up the payroll for the Canadian workers.
26In addition to the work for Flint USA customers, Flint Canada has also done some work for Canadian companies. This work might be machinery removal, equipment rental, rental of equipment plus an operator, or supply of skilled labour. This last represents only a very small portion of the work. Most of these contracts were obtained through Tim Hay, and were reasonably small in value. Near the beginning of Flint Canada's existence, Derseweh decided to hire Tim Hay as a supervisor. Derseweh states that he hired Tim Hay because of his field experience. He also understood that Hay had good contacts with the local Ironworker hiring hall and could obtain good workers. The original suggestion to get in touch with Hay in fact came from the Ironworker local business agent. When he was hired, Hay told Derseweh that he could get some work for Flint Canada through his previous contacts. Hay only stayed with Flint Canada for 4 or 5 months. When he left, Flint Canada ceased to do work for most of the customers that Hay had dealt with. Derseweh stated that he did not consider the work obtained through Hay to be any significant benefit to Flint, and did not seek to pursue any of it after Hay left.
27Flint USA has an extensive collection of equipment. When it has a job in Canada, it brings its own equipment over the border. It did not buy any of the equipment of Inplant. Rinz personally bought one truck from Inplant. This truck has not been used on any Flint jobs in Canada. A number of the workers that started with Flint Canada had been regular Inplant employees. Of 12 employees that have worked with Flint Canada, 7 have also worked for Inplant. By the time of the hearing, only 2 former Inplant employees remained as "regular" employees of Flint Canada. "Regular" in this context means essentially that they are regularly called for work when Flint Canada needs workers. Some of the employees who left Flint Canada are now working with Tim Hay in another company.
Argument
28Counsel for the union submits in argument that Ann Markham was much more involved in the management of Inplant than she tried to suggest in her evidence. She professes ignorance at many turns as to the workings of the business, but this is simply not credible. The evidence shows that she attended meetings with clients, a meeting with a Labour Relations Officer, and that she was in fact both an officer and director of Inplant, with all the responsibilities and powers that those positions entail. Further, counsel states, the evidence shows a history of co-operation between Flint USA and Inplant on various machinery removal jobs. In addition, there was even a discussion between Glenn Markham and Deforest Rinz about joining forces, subsequently manifested in Canam Riggers Ltd.
29When Flint USA decided to form a Canadian company, they were aware of Inplant. Part of the reason for hiring Tim Hay was the hope that Hay could bring to Flint Canada some of the work that Inplant had formerly done. The type of work Hay did bring to the company was a disappointment to Derseweh, but the fact remains that but for Hay's involvement with Flint Canada, this work would not have come into the company.
30Most importantly, in counsel's submission, is the fact that Ann Markham and Tim Hay transferred their services to Flint Canada. Hay was unquestionably the key person at Inplant and in going to work for Flint Canada, he effectively transferred the goodwill of Inplant to the new company. In acquiring the services of Markham and Hay, Flint Canada acquired the basis of an economic organization. Without them, Flint Canada had no presence in Canada and no contacts with customers or a labour force.
31Counsel referred the Board to the following cases: Gallant Painting, [1991] OLRB Rep. Sept. 1051; Clean & Brite Laundry, [1980] OLRB Rep. July 957; Ably Concrete Floor Limited, [1991] OLRB Rep. May 579; and Doran Construction Limited, [1984] OLRB Rep. Aug. 1108.
32Counsel for the company, on the other hand, submits that Ann Markham cannot be considered the driving force of Inplant. Although there is no question that she shared in the profit and loss of the company, she cannot be considered the "key person" in the sense of embodying the business. Further, although there is some minor overlap between the type of work performed by Flint Canada/Flint USA and that done by Inplant, these businesses are quite different in nature. At the time Inplant went into receivership, its main business was welding and structural steel, contrasted to Flint USA which specializes in plant liquidation and relocation.
33With respect to those elements of Inplant's business which can now be found at Flint Canada, counsel submits they are not significant. The arrangement to lease the former premises of Inplant was a convenience only. The decision to form Flint Canada was made even before the company considered hiring Tim Hay, and Hay was not recruited by the company. The continuity of some of the labour force is not significant, it is suggested, in the context of a hiring hall. In any case, Flint Canada now uses a number of employees dispatched from the Ironworkers local union, who have not worked for Inplant, in addition to Flint USA's pre-existing supervisory staff.
34Counsel disputes that without Markham and Hay, Flint Canada had no basis on which to start business in Canada. Although it had no company in Canada, Flint USA had a number of clients based in the United States, which resulted in the vast majority of the work performed by Flint Canada. Flint USA has always done work in Canada - what it did not have the vehicle to do before was to employ its Canadian labour directly.
35The responding parties also question the motives of the union in bringing this application. During the hearing of this case, it became apparent that Glenn Markham was cooperating with the union and providing the union with information in respect to this case. However, it also came out in the evidence that Markham has formed a non-union company which is doing "rentabody" work under contract with Navistar. Counsel for the companies asks rhetorically why the union has not sought bargaining rights with respect to Glenn Markham's company (which, it is submitted, is doing exactly the type of work that Inplant was doing at the time that the union and Inplant signed the voluntary recognition agreement), and is instead seeking to expand its rights to cover the operations of Flint USA.
36Counsel relies on the following cases: Widcor Limited, [1989] OLRB Rep. Jan. 66; Stebill Limited, [1989] OLRB Rep. Apr. 384; Hard rock Forming Company, [1987] OLRB Rep. July 1003; Jen-Ry Utility Contracting Company Limited, [1984] OLRB Rep. Dec. 1724; Yola Construction Ltd., [1990] OLRB Rep. Mar. 358; Chandelle Fashions, [1982] OLRB Rep. June 828; and Arbis Construction Ltd., [1983] OLRB Rep. Dec. 1959.
Sale of Business
37Sections 64(1) and (2) stated prior to January 1, 1993: 64. (1) In this section, "business" includes a part or parts thereof;
"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 or is a party to a collective agreement with a trade union or council of trade unions sells his, her or its 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, her or its 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.
38Amendments to the Labour Relations Act, including amendments to section 64, came into force on January 1, 1993. Sections 64 (1) to (2) now state:
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 precedent")
"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 succ~de")
(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.
39This case was argued before us after January 1, 1993. No argument was directed to whether the changes have any effect on the outcome of this case, there was no reliance on any of the new provisions in section 64, and we do not consider the changes relevant to our determinations.
40As discussed in the cases to which we were referred, section 64, as it existed prior to January 1 and now, is remedial legislation designed to preserve bargaining rights and prevent their erosion or frustration as a result of changes to the structure of a business. In Tatham Company, for instance, the Board stated:
- Section 55 [now section 63] prevents the destruction of bargaining rights or a dislocation of the collective bargaining status quo, by transforming the institutional rights of the union and the collectively bargained rights of the employees into a form of "vested interest" which becomes rooted in the business entity, and like a charge on property, "runs with the business." To accomplish this objective, the statute gives a very special meaning to the word "sale", envisages that bargaining rights can be continued in a severable "part" of a business, abrogates the notion of privity of contract, and eliminates the significance of the separate legal identity of the new employer.
41As to the application of section 64 to specific fact situations, the Board stated in Gallant Painting, supra:
- Given the remedial purpose of section 63, the primary focus of the Board in applications under section 63 is what is the "business" of the predecessor to which the bargaining rights have become attached or "vested". Rather than focusing upon the legal forms and commercial transactions which surround the circumstances which gave rise to the section 63 application, the Board looks to the predecessor's "business" and determines if this has been "disposed" of in some manner to the successor or if there has been a continuum of that business by the successor. Have the essential elements of the predecessor's "business" been transferred to the successor thereby enabling the successor to continue the business? (See for example Grand Valley Ready-Mixed Concrete Supply Limited, [1981] OLRB Rep. June 663)
42On what constitutes "the business" or "part of a business" of a company, the Board also stated in Tatham Company, at paragraph 26:
… 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, a particular figuration 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 must be applied in a manner which is sensitive to both the business context and the purpose which the section is intended to accomplish.
43In Gallant Painting, the Board found that in the maintenance painting business, the essence of the business, its "total economic organization", resides in the experience and expertise of its management personnel. This is because in a bid-oriented industry, the crucial elements to the success of a business are the expertise to price and bid on jobs and the skill and ability of personnel who can ensure that the job is completed within the limits of the bid (see para. 47). The Board found that by acquiring the skills and expertise, built-up experience, reputation and contacts of John Gallant, Lindsay Maintenance acquired the essential elements of Gallant Painting, which enabled it to embark into the painting business.
44Gallant Painting is but one recent example of a "key man" case. In these cases, the Board has recognized that in certain types of businesses, the essence of the economic activity is found in one or more key persons. Where a key person transfers his or services to another entity, taking with him or her the essential elements of the business upon which its economic activity is based, this constitutes a sale of a business. Most of these cases have arisen in the construction industry.
45In the case before us, the applicant submits that Ann Markham and Tim Hay constitute "key persons" in the sense applied by the Board in these cases. We are prepared to accept that to a large degree, the basis of Inplant's economic activity lay in its people. Although Inplant clearly had physical assets (equipment and tools) which were essential to the jobs it undertook, these were not the essence of its business. When Glenn Markham was with Inplant, it was primarily his skills, contacts and bidding ability which formed the basis of the company. When Tim Hay bought Markham's share, he brought to Inplant his own skills, contacts and bidding ability.
46To the extent that Inplant was successful during the time it was in business, it was due to the efforts of Glenn Markham and then Tim Hay. The primary role that these individuals played in the business of Inplant is demonstrated by the significant change in the company's business when Hay took over. Since Hay is an ironworker by trade and has contacts and experience in that area, he moved the business of Inplant into structural steel erection. Structural steel jobs, which had not been performed by Inplant under Markham, began to constitute about half of the company's business.
47If Tim Hay can therefore be considered a "key man" in whom the business of Inplant resided, was there a transfer of the business when he joined Flint Canada? On balance, we do not think so. The evidence establishes that Flint Canada came into existence as essentially a Canadian subsidiary of a well-established company, Flint USA. Together, these two companies intended to take advantage of expanding business opportunities in Canada by having in place the corporate vehicle to hire a work force directly instead of subcontracting for labour as Flint USA had done in the past. The type of work that Flint USA/Flint Canada undertook in Canada after January of 1991 was the same type of work that Flint USA had done in Canada before. Flint USA has always specialized in machinery moving, primarily related to plant relocations. It had the management, the supervisory staff, the equipment, the name and the contacts to move this business into Canada. It did not need to acquire the business or part of the business of Inplant in order to do this type of work. The genesis of Flint Canada was Flint USA, not Inplant.
48Indeed, the evidence shows that the decision to start doing work in Canada through Flint Canada was made before any thought of hiring Tim Hay. Tim Hay was hired because he was a field supervisor, and because he knew the local labour force. Undoubtedly, his experience as an estimator and his contacts with Canadian clients made him an attractive employee. However, the evidence does not point to his hiring as being an element of Flint Canada's ability to start doing business.
49It is also true that the hiring of Tim Hay allowed Flint Canada to take advantage of some work from local customers, with whom Flint USA did not have a prior relationship. Thus, it is fair to say that Tim Hay contributed to the economic activity of Flint Canada and Flint USA. However, his contribution was only a matter of the amount of work undertaken. His contribution consisted, in addition to his supervisory duties, of obtaining some local contracts. Hay's tenure with Flint Canada did not add significantly to the company's ability to do business in Canada, nor did his departure five months later detract from the company's continuing economic activity. It seems to us that it would be unrealistic to characterize his brief tenure as the contribution of the business or part of the business of Inplant to Flint Canada.
50The facts of this case are distinguishable from those in Gallant Painting, supra, where the hiring of John Gallant (who was the "key person" of Gallant Painting) was the essential factor that allowed Lindsay Maintenance to start up a maintenance painting business.
51And what of Ann Markham's continued presence at Flint Canada? We disagree that she could be considered a "key person" of Inplant, in the way this Board has applied that concept. Without in any way wishing to minimize her contribution to the business of Inplant, her role in the company was essentially in the areas of bookkeeping, accounting and payroll services. If Ann Markham had not been available, Inplant could have contracted for these services elsewhere. We also do not mean to suggest that Ms. Markham did not have a hand in the management of Inplant. It is quite likely that she did. However, we make a distinction between persons who have some authority to guide an enterprise, and persons who can be considered as "key persons" in the way that concept has been applied by the Board. The fact that Ms. Markham shared in the ownership and probably had some say in the direction of Inplant is not sufficient to make her a "key person" since we are unable to find that her contributions to Inplant were either uniquely hers to give, or constituted the essential bases of the economic activity of the company. Thus, we are unable to find that in contracting for her services or appointing her an officer and director of Flint Canada Flint Canada acquired the business or part of the business of Inplant.
52Having determined that neither the hiring of Ann Markham nor of Tim Hay should in itself lead to a finding of a sale of a business or part of a business, we are not convinced that there are any other factors which might lead to this result. There are elements of continuity between the work of Flint Canada and the work of Inplant. These elements consist of: the office space, some of the customers, and some of the workers. In the context of this case, we do not find that these elements, taken together with the presence of Markham and Hay, constitute the sale of a business or part of a business. At best, they are discrete assets that supplement the pre-existing business of Flint USA. Although in another situation, these types of factors may form a coherent economic vehicle, here they merely constitute elements of a business that for various reasons attached themselves to Flint Canada. Other assets of Inplant, such as the equipment and tools, did not become part of Flint Canada.
Related Employers
53Section 1(4) of the Act states:
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.
54In Brant Erecting and Hoisting, the Board set out the purposes of section 1(4) and in particular, the effect of the phrase "whether or not simultaneously":
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 [63] which preserves the established bargaining rights and collective agreement when a "business" is transferred from one employer to another. Section [63] 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.
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 [63]. 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 businesses 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 [63] 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. However, it should be noted that section 1(4) is discretionary. The Board need not make a 1(4) declaration even when the conditions precedent are present; and has not done so, for example, where a trade union is seeking to extend rather than preserve its bargaining rights.
A more difficult question is whether Brant Erecting and Hoisting and Provincial Steel can be said to have engaged in "associated or related activities or businesses" since, for practical purposes, Brant Erecting ceased to exist as a going concern prior to the establishment and subsequent incorporation of Provincial Steel. The respondent contends that the two businesses cannot be "related" within the meaning of section 1(4) because they were never engaged in any joint ventures or business endeavours, nor were they carrying on business at the same time. The respondent argues that such overlap as there may have been between the activities of Provincial Steel and Brant Erecting, was solely for the purpose of winding up the latter company, and cannot be regarded as the kind of related activity to which section 1(4) is directed. But for the 1975 amendment to the Act, this argument would have considerable force; but it is now clear that the "associated or related activities or businesses" need not be carried on simultaneously. The amendment extends the ambit of section 1(4) to situations in which one business entity is actively carrying on business and the other is not. It is not necessary to have shared participation in a common business or endeavour or even contemporaneously 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 significantly modifies the common law notions of "privity of contract" or "the corporate veil".
55It has often been noted that section 1(4) requires the Board to be satisfied as to three conditions before a common employer declaration can be considered: 1) there must be more than one corporation, firm, individual, syndicate or association; 2) these entities must be engaged in associated or related business activities and 3) these entities must be under common control or direction.
56In the present case, we are satisfied that the first two criteria are met. With respect to the third, in Jen-Ry Utility Contracting Company Limited, supra, the Board discussed the meaning of having "control" or "direction" of a company for the purposes of section 1(4):
- All of these cases make it clear that the test for "control" under section 1(4) of this Act envisions the ultimate power to "call the shots" where necessary, as counsel for the respondent put it, with respect to the labour relations of the two enterprises, and not simply the authority and responsibility to direct the activities of employees in the field. Were it otherwise, a totally independent and established company hiring the manager of field services from another company would inevitably find itself in the position of being a "related employer" for the purposes of the Labour Relations Act. Rather, we accept the submission of the respondent that the section contemplates a point of central decision-making control with the ultimate power to, for example, say "yes" or "no" to a wage proposal from the union for both entities. Such power, as the Board cases show, may come simply from the legal relationship between the two entities, (e.g., Great Atlantic & Pacific Company Limited, A & P Drug Mart Limited, [1981] OLRB Rep. March 285) or from a total lack of independence in practical or economic terms, (e.g. J. H. Normick, Foley, supra, and even Brant Erecting & Hoisting, [1980] OLRB Rep. July 945,) or it may come from a combination of the two, (Kennedy Lodge, supra, Penmarkay Foods Limited, [1984] OLRB Rep. Sept. 1214).
57Usually, the existence of common shareholders, directors or officers is an indicia of common control and direction. In a small business, in particular, it is not surprising to find that where one or two persons constitute the ownership, directorship or executive, these persons also hold the authority to "call the shots". On the other hand, it is also not unusual to find persons occupying the positions of directors or officers in a corporation who do not in fact hold the ultimate power to make decisions affecting labour relations. Thus, the Board looks beyond the paper structure of a company to determine where the real power to make labour relations decisions resides. In some cases, the Board has found companies which do not share common shareholders, directors and officers to be under common control and direction: see, for instance, Widcor Limited, supra and Metropolitan Toronto Condominium Corporation #880, [1992] OLRB Rep. Dec. 1145.
58In the case before us, we are not convinced that Inplant and Flint Canada (or Flint USA) are companies which operate under common control and direction. What is most significant to us is the history and purpose of the formation of Flint Canada. There is no doubt that Flint Canada was formed for one purpose: to serve the business of Flint USA. Thus, the locus of control and direction of Flint Canada's operations is the same as that of Flint USA. Ultimately, it is Deforest Rinz, the owner of both companies, who has authority to make the essential decisions affecting the labour relations of the companies, either personally or through Russ Derseweh.
59In order to incorporate a company in Canada, Rinz needed to find a Canadian director. To this end, he approached Ann Markham. No reason is given as to why Markham also became the president of Flint Canada. However, there is also no reason to conclude, based on the evidence, that her position allows her any level of authority over the economic activities of Flint Canada. Not only does she appear to have very limited powers of independent decision-making within Flint Canada, but, as stated above, Flint Canada itself exists essentially to be a Canadian vehicle to supply labour to Flint USA. The work of Flint Canada is dictated by the work of Flint USA. There is no evidence that Flint USA and Inplant operate under common control and direction.
60We are thus satisfied that Ann Markham's position within Inplant and Flint Canada do not lead to a finding that the responding parties in these applications operate under common control or direction, and there is no other basis for such a finding. Although it has been conceded and it is clear on the evidence that Flint Canada and Flint USA meet the conditions for a finding under section 1(4), no purpose would be served by issuing a declaration. In the result, the applications under sections 1(4) and 64 are dismissed.