Labourers' International Union of North America, Local 183 v. The Georgian Construction Company Limited, 1995 CanLII 9962

[1995] OLRB Rep. March 354

1826-93-R; 3087-93-R; 3985-93-G Labourers' International Union of North Amer­ica, Local 183, Applicant v. The Georgian Construction Company Limited, Responding Party; Labourers' International Union of North America, Local 183, Applicant v. The Georgian Construction Company Limited, The Georgian Group Inc., Cresmark Construction Limited and Krestmark Development Corporation, Responding Parties; Labourers' International Union of North America, Local 183, Applicant v. The Georgian Group, Responding Party

BEFORE: D. L. Gee, Vice-Chair, and Board Members F. B. Reaume and H. Kobryn.

APPEARANCES: John Moszynski, Rocco Lotito, Antonio Pinto and Keith Cooper for the appli­cant; James G. Knight and Gene Maida for The Georgian Construction Company Limited; William Clunie for The Georgian Group Inc.; G. Dimitriou and Nick Maida for Cresmark Construction Limited; Gene Maida for Krestmark Development Corporation.

DECISION OF THE BOARD; March 1, 1995

1. The name of the responding parties in Board File No. 3087-93-R is amended to read: "The Georgian Construction Company Limited, The Georgian Group Inc., Cresmark Construc­tion Limited and Krestmark Development Corporation".

2. Board File No. 1826-93-R is an application for certification pursuant to the construction industry provisions of the Labour Relations Act (the "Act") in response to which The Georgian Construction Company Limited asserts that it did not employ any labourers on the date of applica­tion as the labourers working on its job sites were employees of The Georgian Group Inc. Board File No. 3985-93-G is a referral of a grievance to arbitration under section 126 of the Act. Board File No. 3087-93-R is an application pursuant to section 1(4) of the Act. The application for certifi­cation and the grievance were adjourned pending the outcome of the section 1(4) application.

3. There is little dispute as to the facts and accordingly we have briefly summarized only those facts relevant to our determination.

4. The Maida family is extensively involved in the construction industry. Members of the Maida family have interests~ individually and in combination with one another or arms-length enti­ties~ in numerous commercial entities which are involved in various aspects of the construction industry.

5. The Georgian Group Inc. ("Georgian Group") acts as a project management company in connection with the building of single family homes. Georgian Group initially operated as a trade name and was eventually incorporated on June 10, 1981. The applicant, Labourers' Interna­tional Union of North America, Local 183 ("Local 183") was certified to represent the construc­tion labourers in the employ of Georgian Group on residential construction, subject to specified exemptions, on December 28, 1977. Georgian Group has never been involved in the construction of ICI projects or non-profit housing.

6. Two Maida brothers, Frank and Anthony, are the directors of Georgian Group. The third Maida brother, Gene, has been a signing officer and the treasurer of Georgian Group since 1989. Gene is a signing officer solely for the purpose of signing cheques and all such cheques must be counter-signed by the Vice-President of Georgian Group, Mr. William Clunie. Gene owns no shares of Georgian Group and derives no income from Georgian Group. There is no evidence of Gene having any direction or control over Georgian Group.

7. The Georgian Construction Company Limited ("Georgian Construction") has carried on business since 1985. Georgian Construction acts as a construction manager or a design build contractor. The sole director and officer of Georgian Construction is Gene Maida. Anthony Maida and William Clunie are authorized signing officers.

8. Georgian Construction is wholly owned by Georgian Development Corporation which is owned in equal shares by Gen Drain Holdings Inc., Gen Drain Properties Inc., and Glenbrooke Holdings. Gen Drain Holdings Inc. and Gen Drain Properties Inc. are trusts which have been set up for the children of Frank and Anthony Maida. Frank and Anthony have the power to vote the shares of Gen Drain Holdings Inc. and Gen Drain Properties Inc. The shares have been voted on

no more than one occasion. Glenbrooke Holdings is Gene Maida's holding company. Glenbrooke Holdings has been hired by the three shareholders of Georgian Development Corporation to man­age Georgian Construction. Glenbrooke Holdings is paid a fee for managing Georgian Construc­tion and each year Glenbrooke Holdings pays Gene Maida a salary.

9. From 1985 to 1990 Georgian Construction operated only in the ICI sector of the con­struction industry. Although Georgian Construction obtained approximately 25 percent of its ICI construction work from companies which were controlled by Maida family members or in which Maida family members had an interest, the evidence establishes that Georgian Construction's abil­ity to attract and obtain ICI construction work was largely due to the initiative and hard work of Gene Maida. The evidence further establishes that the employees and sub-trades of Georgian Con­struction were hired or retained by Gene Maida without any assistance or involvement of other Maida family members.

10. In or about 1990, with the onset of the recession, ICI construction industry work became sparse. Accordingly, Georgian Construction~ through the efforts of Gene Maida, began to seek out alternative sources of income. Once again, the evidence establishes that it was by virtue of the hard work and initiative of Gene Maida that Georgian Construction was able to break into the area of non-profit housing. It is in the area of non-profit housing that Georgian Construction has been engaged for the past several years.

11. The first non-profit housing contract which Georgian Construction was successful in obtaining is known as the Amesbury Residences project. Georgian Construction was engaged on the Amesbury Residences project from June, 1991 to September, 1992.

12. Subsequent to the Amesbury Residences project Georgian Construction was successful in obtaining a contract for a non-profit housing project known as the Hope Villa project. Georgian Construction was engaged on the Hope Villa project from May, 1993 to September, 1993.

13. No other Maida family company had any involvement with any aspect of either the Amesbury Residences or Hope Villa projects and we accept that Georgian Construction was suc­cessful in obtaining these contracts based purely on its own abilities.

14. In May, 1993 Georgian Construction also commenced work on its third non-profit hous­ing project known as the Scarlett Road project. The land on which this project was built was origi­nally acquired and owned by a company owned by Maida family members. The mortgage on the land was in default and accordingly Gene Maida recommended that the land be sold to the Minis­try of Housing. It was not a condition of the sale of the land to the Ministry of Housing that Geor­gian Construction would be awarded the contract to build the non-profit housing on that site. Georgian Construction was, however, successful in obtaining the contract in question. Georgian Construction was engaged on the Scarlett Road project from May, 1993 to May, 1994.

15. Georgian Construction does not employ construction labourers. Accordingly, on the Amesbury Residences, Hope Villa and Scarlett Road projects, Georgian Construction borrowed labourers from Georgian Group. Georgian Construction obtained quotes from three companies for the provision of labour before accepting the quote submitted by Georgian Group. Georgian Group agreed to loan labour to Georgian Construction at its cost (wages plus benefits and remittances) plus one dollar per hour. In early 1993, the labourers loaned to Georgian Construction by Geor­gian Group were paid on Georgian Construction cheques. The evidence establishes that, earlier in 1993, Georgian Group ran out of blank pay cheques. Georgian Construction had a stock of pay cheques bearing its name which it no longer required as Georgian Construction no longer had an active payroll. Mr. Clunie decided to use up Georgian Construction's stock of pay cheques while

awaiting new Georgian Group cheques. Although the individuals were paid on cheques bearing the name Georgian Construction, the funds in the account in question were those of Georgian Group such that Georgian Group was in fact paying the employees. Georgian Group would then invoice Georgian Construction for the amount agreed upon and Georgian Construction paid Geor­gian Group.

16. In September, 1993 Gene Maida negotiated a building contract for a non-profit housing project, known as the Upper Middle Road project, on behalf of Cresmark Construction Limited ("Cresmark"). Gene Maida's nephew, Nick Maida, is the sole officer and director of Cresmark. The Upper Middle Road project came about as a result of contacts made by Gene Maida in the non-profit housing area. Although Gene Maida was capable of building the project with Georgian Construction, he saw the project as an opportunity to give his nephew experience as a general con­tractor. Cresmark, similar to Georgian Construction on the previous non-profit housing projects, borrowed construction labourers from Georgian Group.

17. Georgian Group and Georgian Construction have the same address. Their offices are located in adjoining suites. Georgian Construction rents its office space and certain office services from Georgian Group. The office services provided by Georgian Group include use of a shared receptionist, telephone system and financial management services including a single payroll, although not the day-to-day bookkeeping and accounting. Georgian Construction employees have access to cafeteria and washroom facilities that are shared with Georgian Group employees. Geor­gian Construction has the services of William Clunie available to it. Georgian Construction is charged a service fee by Georgian Group for the services provided including the use of Mr. Clu­nie's time.

18. In the fall of 1983, Mr. Clunie assisted Gene Maida in obtaining a $750,000 bond. Gene was able to secure the bond based on his own net worth which was derived from his interest in a family company. Mr. Clunie did not charge Gene Maida for his assistance but rather did it as a per­sonal favour.

19. In March, 1986 Georgian Development Corporation (and hence the shareholders thereof) injected $150,000 into Georgian Construction. In November, 1991, in order to permit Georgian Construction to obtain a 12 million dollar bond, Georgian Development Corporation injected a further $850,000 into Georgian Construction. Gene Maida served as a personal guaran­tor in order to secure the 12 million dollar bond. Given the timing of the cash infusion, it is reason­able to infer that the bond in question was required by Georgian Construction with respect to one of its non-profit housing projects.

20. "Georgian" was deliberately used by Gene Maida in the name of Georgian Construc­tion. Gene Maida wanted to capitalize on any goodwill which may have been associated with the name. The evidence establishes that there is an element of confusion in the eye of some of the sub-trades which deal with Georgian Construction as to its identity separate and apart from Georgian Group.

21. The evidence with respect to Krestmark Development Corporation ("Krestmark") was extremely limited. The evidence establishes that Krestmark is not a construction company and has never had any employees working as construction labourers nor does there appear to be any poten­tial for it to do so in the future. The sole purpose of Krestmark is to hold a majority interest in a plaza in Markham, Ontario. The Board is satisfied that Krestmark is not associated or related to Georgian Group and accordingly, on such basis, dismisses the section 1(4) application as against Krestmark Development Corporation.

22. The evidence with respect to Cresmark establishes that it is a general contractor in the construction industry. Its sole activities to date have been to act as the general contractor on the Upper Middle Road project and to bid on other projects without success. As indicated above, Cresmark secured the contract for the Upper Middle Road project as a result of the efforts and benevolence of Gene Maida. The performance bond for the Upper Middle Road project was issued by Cresmark directly through the existing bond facility of Georgian Construction. Cresmark does not deny that it is related to Georgian Construction. It takes the position, however, that it cannot be related to Georgian Group unless Georgian Construction is so found, and supports Georgian Construction in its position that it is not related to Georgian Group.

23. Section 1(4) of the Act provides as follows:

24. ……

(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.

24. In order for the Board to declare Georgian Group and Georgian Construction to consti­tute one employer for the purposes of the Act, section 1(4) requires that they constitute two or more entities which carry on associated or related activities or businesses under common control or direction. Upon finding such preconditions to have been met, the Board has a discretion to refuse to grant such a declaration as it may deem appropriate.

25. Counsel for Georgian Construction denies that Georgian Construction and Georgian Group are carrying on associated or related activities or businesses or are under common direction or control. In the altemative, it is submitted that the Board should exercise its discretion and refuse to declare Georgian Construction and Georgian Group to be one employer for the purposes of the Act.

26. It is submitted on behalf of Georgian Construction that Georgian Construction and Georgian Group serve two distinct markets and that there is no overlap in their activities. Geor­gian Construction presently acts as a general contractor in the area of non-profit housing. Georgian Construction has obtained access to this market as a result of the efforts of Gene Maida. It has no plans of becoming active in the area of single family homes. In contrast, Georgian Group is solely engaged as a project manager with respect to the building of single family homes. Georgian Group has no experience in the area of non-profit housing and lacks the expertise and contacts necessary to break into this area. Thus, it is submitted that Georgian Group and Georgian Construction do not carry on associated or related activities or businesses.

27. The Board has interpreted the words "associated or related activities or businesses" in a manner consistent with the broad remedial purpose of subsection 1(4). In B rant Erecting and Hoisting, [1980] OLRB Rep. July 945 the Board stated as follows:

28. . . . 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".

29. Later, in Frank Plastina Investments Ltd., [1986] OLRB Rep. June 720 the Board com­mented on the scope of the terms "associated" and "related" as follows:

30. Given the remedial thrust of section 1(4) and the broad language chosen by the Legislature ("associated" or "related", "activities" or "businesses"), it is apparent that the section was intended to apply to a wide variety of commercial activities, even when an employer's main or principal business concern may be something else. That was the opinion of the Board in Elmont Construction Limited, [1974] OLRB Rep. June 342 (application for judicial review dismissed, sub nomine, Elmont Construct Limited and Bruce Huntley Contracting Limited v. Toronto Building and Construction Trades Council et al., 75 CLLC ¶14,270), and it is one with which we respectfully agree. The fact is, that a firm engaged in the construction business can, with relative ease, become involved, from time to time, in various sectors, subdivisions, phases, or special­ized kinds of construction work, depending largely upon the business opportunities which present themselves, and we do not think we should readily hold that those activities are "unre­lated" - particularly if they are being undertaken at the same time and involve common manage­rial or employee skills. .

31. As submitted by counsel for Georgian Construction, the evidence establishes that Geor­gian Construction has created a niche for itself in the area of non-profit housing, whereas Georgian Group is active only in the area of single family homes. We do not, however, view such activities, when viewed in the context of the construction industry, as being unrelated. Both companies are active in the residential sector of the construction industry. As the definition of sector (set out in section 119 of the Act) indicates, residential projects share similar work characteristics. As a result, it would be relatively simple for a contractor engaged in one aspect of residential construction to refocus its efforts, and by utilizing the same employees and suppliers, become active in another aspect of residential construction. Counsel submits that Georgian Group lacks the necessary exper­tise to break into the non-profit housing industry. That, however, is not the Union's concern. The Union's concern is Georgian Construction's entry into residential construction, which has already occurred and could easily spread to the area of single family homes. In our view, Georgian Con­struction and Georgian Group carry on associated or related activities or businesses in that they are both active in the residential sector of the construction industry.

32. With respect to issue of common direction or control, counsel for Georgian Construc­tion submits that the evidence establishes that Anthony and Frank Maida direct and control Geor­gian Group and that Gene Maida directs and controls Georgian Construction such that the two are not under common direction or control. Counsel submits that the fact that Frank and Anthony have the ability to vote two-thirds of the shares of Georgian Development Corporation does not mean that they are in control of Georgian Construction as the evidence establishes that the shares have been voted, at most, on one occasion.

33. The Board is satisfied that Frank and Anthony Maida direct and control Georgian Group and that Gene Maida has no involvement in the affairs of Georgian Group. The Board is further satisfied that Gene Maida directs the day-to-day operations of Georgian Construction. The Board is not satisfied, however, that Georgian Construction is not also under the control of Frank and Anthony Maida.

34. The evidence establishes that Georgian Construction is wholly owned by Georgian Development Corporation. Georgian Development Corporation is in turn owned by three equal shareholders, two trust companies set up for the children of Frank and Anthony Maida and Gene Maida's holding company. Frank and Anthony Maida vote the shares held by the trust companies set up for their respective children. Frank and Anthony Maida thus have the legal authority and power to vote the majority of the shares of Georgian Development Corporation.

35. The evidence further establishes that Gene Maida's company, Glenbrooke Holdings, was appointed by the shareholders of Georgian Development Corporation to manage Georgian Construction. Thus, Gene Maida presently manages Georgian Construction as a result of the appointment of his company by the majority of the shareholders. Frank and Anthony, through their ability to vote the majority of the shares in Georgian Development Corporation, have the ability to terminate Glenbrooke Holding's management contract and hence Gene Maida's day-to­day control over Georgian Construction.

36. The evidence further establishes that the capital required to start up Georgian Con­struction was invested by the shareholders of Georgian Development Corporation. The sum of $150,000 was invested in Georgian Development Corporation in 1986. Then, in 1991, when Geor­gian Construction was endeavouring to enter the area of non-profit housing, a further $850,000 was injected into Georgian Development Corporation. The funds were required in order for Georgian Construction to acquire a bond necessary to bid on a non-profit housing project. Thus, the capital utilized by Georgian Construction to start up its operations, and the capital necessary in order to acquire a bond which assisted Georgian Construction's entry into the area of non-profit housing, was contributed in large part by the trust companies set up for the children of Frank and Anthony Maida. The sum of money contributed by each shareholder in Georgian Development Corpora­tion, namely $333,333.00, is not insignificant, and it is reasonable to assume that, absent such cash injections, Georgian Construction would not have obtained the bond in question or been as suc­cessful as it has been in the area of non-profit housing.

37. Counsel for Georgian Construction submits that the Board should look beyond the fact that Frank and Anthony Maida, as the individuals who have the power to vote the majority of the shares of Georgian Development Corporation, have the legal ability to control Georgian Construc­tion, and consider who in fact is controlling Georgian Construction. As indicated above, the evi­dence establishes that the shares have been voted, if at all, on one occasion. Counsel thus submits that, whatever may be the legal construct~ it is evident that Gene Maida is controlling Georgian Construction without accountability to the shareholders. We do not agree.

38. The Board discussed the meaning of "control" or "direction" of a company for the pur­poses of section 1(4) in Jen-Ry Utility Construction Company Limited, [1984] OLRB Rep. Dec. 1724 as follows:

39. 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. I. 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.)

40. As the above quote indicates, the Board looks to determine where the ultimate power to make decisions concerning labour relations resides and not simply the authority to direct the employees' activities. In our view, the ultimate power to make decisions with respect to Georgian Construction resides with the shareholders of Georgian Development Corporation and not with Gene Maida. The shareholders of Georgian Development Corporation exercised such power when they appointed Glenbrooke Holdings to manage Georgian Construction. The fact that the share­holders have not since interfered with the management of Georgian Construction by Glenbrooke Holdings may simply indicate that they have thus far approved of the company's management and does not lead to the conclusion that they are not in control of Georgian Construction. The fact is, if circumstances changed, and Frank and Anthony Maida felt a need to appoint officers, directors or a new management company to operate Georgian Construction, they have the power to do so. In light of their considerable investment in Georgian Development Corporation, such a development is not beyond the realm of possibility. Thus, notwithstanding Gene Maida's day-to-day manage­ment of Georgian Construction, ultimate power resides with the shareholders of Georgian Devel­opment Corporation.

41. As a result, it is our conclusion that Georgian Group is controlled by Frank and Anthony Maida and that Georgian Construction is controlled by the shareholders of Georgian Development Construction, two-thirds of whose shares are voted by Frank and Anthony Maida. Georgian Construction and Georgian Group are thus under common direction or control.

42. Having found that Georgian Construction and Georgian Group are engaged in associ­ated or related activities under common direction or control we turn to whether we should exercise our discretion and refuse to declare Georgian Construction and Georgian Group to constitute one employer for the purposes of the Act.

43. Section 1(4) is most often utilized by the Board to ensure that a union's bargaining rights are not eroded. Whether there has been an erosion of bargaining rights generally depends on whether, had the work been performed by the entity with respect to which the union has bargain­ing rights, the union's bargaining rights would have encompassed employees performing such work. In the present case, had the non-profit housing work performed by Georgian Construction been undertaken by Georgian Group, Local 183's bargaining rights would clearly have applied to such work.

44. Counsel for Georgian Construction suggests, however, that the activities of Georgian Construction have not eroded Local 183's bargaining rights as Georgian Group lacks the expertise and contacts necessary to work in the area of non-profit housing and hence lacks the means to do so.

45. We accept that, at the time Georgian Construction commenced work in the area of non­profit housing, that Gene's knowledge of the area exceeded that of Frank and Anthony. We do not accept that that meant that Georgian Group lacked the means to become active in the area of non­profit housing. The principals of Georgian Group, as is evidenced by their significant capital con­tribution into Georgian Development Corporation, saw non-profit housing as an attractive endeav­our. They had the desire and the capital necessary to move into the area of non-profit housing. As is evidenced by Georgian Construction's loan of labour from Georgian Group, they also had a qualified workforce. What they lacked was the contacts and knowledge that Gene Maida had. While such may have been a factor in their deciding to inject sufficient capital into Georgian Con­struction to enable it to undertake the work as opposed to Georgian Group, we do not accept that this means Georgian Group was unable to move into the area of non-profit housing. In our view, it was possible for the principals of Georgian Group to either hire the necessary expertise or obtain it themselves and thereby enable Georgian Group to enter the area of non-profit housing. Rather, they chose to invest in Georgian Construction and have Georgian Construction pursue such work. Their decision to do so meant a loss of potential work to Local 183's members.

46. With respect to counsel's suggestion that Local 183's bargaining rights have not been eroded because Georgian Construction has borrowed union labour from Georgian Group, we would point out that, if we were to decline to declare Georgian Construction and Georgian Group to be one employer for the purposes of the Act, there is nothing to prevent Georgian Construction from ceasing to borrow labour from Construction Group or another unionized contractor. The fact that it has done so thus far is no guarantee that it will continue to do so in the future. Further, the effect of a section 1(4) declaration is to bind Georgian Construction to Local 183's collective agree­ment with Georgian Group as if it were a party thereto. As a result, should we issue a section 1(4) declaration, Local 183 would be able to enforce the subcontracting provisions of its collective agreement as against Georgian Construction, which it is presently unable to do. Thus, we do not accept that the present arrangement, whereby Georgian Construction borrows labour from Geor­gian Group, means that Local 183's bargaining rights have not been eroded, or, at the very least, that there is no potential for Local 183's bargaining rights to be eroded.

47. In our view, the present scenario is one which section 1(4) was intended to apply to and we see no reason to decline to exercise our discretion to issue a section 1(4) declaration.

48. As indicated above, Cresmark acknowledged, and we so find, that it is related to Geor­gian Construction and that the Board's determination of whether it was related to Georgian Group follows the Board's determination with respect to Georgian Construction.

49. Accordingly, we hereby find that Georgian Construction, Georgian Group and Cres­mark carry on associated or related activities under common control or direction and declare that, for the purposes of the Act, they are to be treated as constituting one employer. We further declare that Georgian Construction and Cresmark are bound to the collective agreement between Georgian Group and Local 183 as if they were a party thereto. The section 1(4) application as against Krestmark is dismissed.

50. The applicant is to advise the Registrar within 30 days of the date of this decision as to how it wishes to proceed with respect to Board File Nos. 1826-93-R and 3985-93-G.

51. This panel is seized.