[1996] OLRB Rep. May/June 355
2717-95-R National Automobile, Aerospace, Transportation and General Workers Union of Canada (CAW-Canada) and its Local 636, Applicant v. Canada Stampings & Dies Ltd., Stamptech Ltd., Responding Parties
BEFORE: Christopher Albertyn, Vice-Chair, and Board Members R. W Pirrie and C. McDonald.
APPEARANCES: Craig Grant, Arlen Renwick and Mark Arnett for the applicant; Robin B. Cumine and R. A. Hewitt for Canada Stampings & Dies Ltd.; Paul Brooks and Dave Hewitt for Stamptech Ltd.
DECISION OF THE BOARD; June 10, 1996
This is an application for a declaration under subsection 1(4) of the Labour Relations Act, 1995 that the responding parties are one employer for the purposes of the Act. The relevant provisions of section 1 of the Act are as follows:
(4) Where, in the opinion of the Board, associated or related activities or businesses are carried on, whether or not simultaneously, by or through more than one corporation, individual, firm, syndicate or association or any combination thereof, under common control or direction, the Board may, upon the application of any person, trade union or council of trade unions concerned, treat the corporations, individuals, firms, syndicates or associations or any combination thereof as constituting one employer for the purposes of this Act and grant such relief, by way of declaration or otherwise, as it may deem appropriate.
(5) Where, in an application made pursuant to subsection (4), it is alleged that more than one corporation, individual, firm, syndicate or association or any combination thereof are or were under common control or direction, the respondents to the application shall adduce at the hearing all facts within their knowledge that are material to the allegation.
For the purposes of convenience, the parties are referred to as follows. The applicant may be referred to as "the union" or the "CAW". The respondent, Canada Stampings & Dies Ltd., is referred to as the first respondent, as "Canada Stampings & Dies Ltd.", as "CS&D" or as "the Dundas Street" company or operation. Stamptech Ltd. is referred to as the second respondent, as "Stamptech" or as "the Main Street" company or operation.
The respondents are located in Woodstock. CS&D has its business and manufacturing operation at 344 Dundas Street. Stamptech operates from premises at 124 Main Street.
The applicant also seeks orders that:
Stamptech recognize it as the bargaining agent of Stamptech's employees;
employees of CS&D on lay-off be employed to fill positions at Stamp-tech;
employees of CS&D on lay-off while junior employees performed bargaining unit work at Stamptech be compensated for lost earnings and benefits, plus interest.
The responding parties presented their evidence first. Two witnesses testified, Mr. Robert Arthur Hewitt, the effective owner of CS&D, and his son, Mr. David Ronald Hewitt, who is the general manager and principal shareholder of Stamptech. Thereafter, the union closed its case without calling evidence. What follows is drawn from the evidence of Mr. R.A. Hewitt (sometimes referred to just as "Mr. Hewitt") and Mr. David Hewitt.
CS&D commenced business in 1898. In 1926 it moved to the Dundas Street premises in Woodstock where it is located at present. Also in 1926 it was incorporated, though under the name, Canada Casters Ltd.
In 1951 the union was certified by the Board in respect of CS&D's employees. The certificate was not produced, but the Board's decision which issued the certificate was. It reads as follows:
Decision: "The Board finds that all employees of the respondent, save and except foremen, persons above the rank of foreman and office staff, constitute a unit of employees of the respondent appropriate for collective bargaining.
The Board is satisfied, on an examination of the records of the applicant and the records of the respondent, that more than fifty-five per centum of the employees in the bargaining unit are members of the applicant.
A certificate will issue.
- The certificate is relevant to these proceedings because the collective agreement between the union and CS&D defines the union's bargaining rights by reference to the certificate. Article 1, Recognition, reads:
The Company recognizes the union as the bargaining agents for such employees as are named in the certification awarded by the Ontario Labour Relations Board, excluding such employees as are named in the said certification. Exception to be foremen, those above the rank of foremen, and office staff.
Despite the absence of any limitation upon the location of the union's bargaining rights in respect CS&D's employees, in practice (subject to what follows concerning Ingersoll) those rights were exercised in Woodstock, at the Dundas Street premises and at premises in Canterbury Street, of which there is more below.
Mr. Hewitt is the current beneficial owner, general manager and president of CS&D. He first became associated with the company in 1968 when he and a partner acquired ownership of it. The partnership ended in 1972 and Mr. Hewitt took over the Dundas Street company. Some time thereafter Mr. Hewitt changed the name of the company from Canada Casters Limited to its present name. Mr. Hewitt and his wife owned the shares in that company until November 1, 1993. As from that date the ownership of CS&D was acquired by R.A. Hewitt & Sons Limited. That company is wholly owned by Mr. Hewitt and his wife. The building and land on which the Dundas Street operation is situated is now also in the name of RA. Hewitt & Sons Limited, which leases the site to CS&D. The alteration of corporate ownership was occasioned by estate planning advice given to Mr. Hewitt. Throughout these corporate adjustments, Mr. Hewitt remained in overall control and charge of the Dundas Street operation.
II. CS&D has had a continuing collective bargaining relationship with the union. During the long period of Mr. Hewitt's tenure of the company he negotiated each collective agreement on behalf of CS&D until the most recent collective agreement, concluded in March 1994. That agreement was negotiated by CS&D's then general manager, who has since left the company.
Mr. Hewitt claims that, despite the "all employee" bargaining unit description in the original certificate issued to the union in 1951 and the terms of the recognition article of the collective agreement, since he has been associated with CS&D the bargaining unit has applied only to full-time employees. He contends that part-time employees who perform work referred to in the collective agreement have been excluded from the bargaining unit. The union appeared to challenge that claim, though it presented no contrary evidence at the hearing.
CS&D is primarily a custom metal stamping business. It also does most of its own die work. The company produces components for equipment manufacturers to use in their products, e.g. the company makes stampings for automobile, appliance, gas valve and bus manufacturing businesses. The company also has a product line of its own. It produces baby crib hardware, which the company markets itself. It also does other small stampings which it markets itself: orchard box brackets and exhaust tab locators. The company's own product line constitutes about 10% of its total output.
CS&D employs between S and 9 employees, depending upon demand and the rate of production, who are within the union's bargaining unit.
CS&D has certain zoning limitations upon its Dundas Street operation. It cannot use machines greater than a certain maximum size. The largest press used in the Dundas Street operation is a 110 ton press.
There has been little change in CS&D's business over the past decade, other than that it now has greater demand for larger stampings than it can perform at the Dundas Street plant. The company must sub-contract the larger stampings. Stamptech is the principal, if not the only, beneficiary of such sub-contracting. In large measure Stamptech does CS&D's larger stampings which cannot be done at the Dundas Street factory.
We shall return to Stamptech when we describe its origins. Suffice at this point to say that it takes on CS&D's heavier work which cannot be performed at the Dundas Street factory.
Prior to 1990, CS&D operated from one other outlet in Woodstock. For about 8 or 9 years before 1990 CS&D had a repair facility at Canterbury Street in Woodstock. There it refurbished and repaired punching presses. CS&D's surplus punching presses were sent there for repair and refurbishment, with a view to their re-use or sale. Baby crib frames were also manufactured at Canterbury Street, although that operation later returned to Dundas Street before being moved to Ingersoll, of which there is more below.
The collective agreement between CS&D and the union covered the Canterbury Street facility and the 3 to 5 employees there. The union asserted bargaining rights over all of CS&D's outlets in Woodstock.
In 1990 Mr. Hewitt initiated a new venture through a company associated with CS&D, which he named Canada Stampings Presses & Equipment Limited. The venture was intended to purchase defective punch presses, refurbish them and sell them, and to repair punch presses and to combine those activities with CS&D's Canterbury Street operation. The new venture was not primarily a manufacturing operation, but rather more a repair and maintenance business. There was, however, some subsidiary manufacturing included in the project. Some of the operation of CS&D at Dundas Street - crib spring manufacturing, under-crib frame bending and perforating, and crib spring assembly - was to be included in the new venture.
The profit margins in the new venture were anticipated to be small, and Mr. Hewitt sought some accommodation from the CAW to introduce certain new classifications at a lower hourly rate than was provided in the collective agreement (for crib spring manufacturing, under-crib frame bending and perforating, and for crib spring assembly). The CAW was not willing to make that accommodation, so Mr. Hewitt decided to establish the new business in Ingersoll where suitable premises could be obtained, rather than in Woodstock. Mr. Hewitt took an initial lease of 3 years over the Ingersoll premises. So the Canterbury Street operation of CS&D in Woodstock was closed in 1990.
The new venture was to carry on business in Ingersoll. Baby crib frame manufacture was moved there. That manufacture was originally at Canterbury Street, but some time prior to the establishment of the Ingersoll plant, it had been moved to the Dundas Street operation. Crib spraying too was done in Dundas Street, and that too was moved to Ingersoll. The refurbishment of presses had been done at Canterbury Street. That too was moved to Ingersoll.
Hence, to summarize, all of CS&D's Canterbury Street operation moved to the new Ingersoll plant, and so did some of the company's Dundas Street operation.
CS&D and the CAW provided for the possible extension of their collective agreement to Ingersoll. The collective agreement between them for the period October 20, 1990 to October 19, 1993 and the subsequent agreement from 1993 to 1996 have a memorandum of agreement as their last page. The wording of the last page is the same in both agreements. It reads as follows:
MEMORANDUM OF AGREEMENT
between
CANADA STAMPING PRESSES AND EQUIPMENT
and
CAW-CANADA
The Company recognizes the Union (CAW-Canada) as the bargaining agent for the former Canada Stampings and Dies Limited employees (Woodstock) who are now employed in the bargaining unit at Ingersoll.
The Company and the Union agree that the collective agreement applicable to the employees in this bargaining unit will be the Canada Stampings and Dies Limited agreement.
It is recognized by both parties that the Ingersoll Unit of Canada Stamping Presses and Equipment employees will have to ratify the terms and conditions of this agreement by a vote separate from the Woodstock Canada Stampings and Dies Limited employees.
Neither party took any action under the agreement in relation to the Ingersoll workers. No vote was held among the former CS&D workers to ratify the agreement and make it applicable to them and, as a result, it was not made applicable.
Given the lull in the economy at the time, the Ingersoll endeavour was not a thriving success. When the lease on the Ingersoll premises was due to expire in November 1993, Mr. Hewitt decided to close down that operation. When Canada Stampings & Presses Equipment Limited was wound up, CS&D assumed all of its assets and liabilities. There was a lot of machinery and equipment at Ingersoll, which Mr. Hewitt decided to move back to Woodstock. He acquired premises at Main Street from February 1, 1994 and the heavy presses and the equipment needed for crib frame manufacture were moved there. (Although the Ingersoll lease expired in November 1993, the new tenant of those premises allowed Mr. Hewitt to store the machinery and equipment there until the Main Street lease commenced). Those assets were to form the basis of what, a year later, was to become Stamptech Ltd. when it was incorporated in February 1995.
Mr. Hewitt put the Main Street lease in the name of R.A. Hewitt & Sons Ltd. That has not changed. The lease has expired and now continues from month to month, but no other lessee has been substituted. The Main Street operation was part of CS&D, which sub-leased the premises from R.A. Hewitt & Sons Ltd., just as Stamptech now does. Stamptech assumed responsibility for the payment of the rent in about the fall of 1995.
Mr. Hewitt took the Main Street premises primarily to store the heavy presses and the other machinery and equipment which had been at Ingersoll, and to continue the manufacture of the baby crib frames, and the spraying of cribs sold by CS&D. Some repair and refurbishment of presses was to be, and was, done at the Main Street operation. The business being conducted at Main Street was under the control and direction of Mr. Hewitt, and it was an extension of CS&D's business.
A bending operation had been performed at Dundas Street. The task involves bending tubing into a rectangular shape and punching holes into it. There is some confusion as to whether this operation went via Ingersoll to Main Street or directly there - Stamptech's response to the application suggests that it moved from Dundas Street to Main Street in February 1994; Mr. Hewitt's evidence at the hearing suggests that it went there via Ingersoll - but what is clear is that, one way or another, it moved from Dundas Street to Main Street. The bender and perforator for that operation was moved from Dundas Street to Ingersoll, and from there to Main Street. It involves between 4 to 8 hours of work a week at Main Street.
The machinery moved from Ingersoll to the Main Street operation included big tonnage stamping presses and dies. Those machines could not be moved to the Dundas Street operation because the zoning restrictions in force there prevent the use of such heavy equipment. CS&D could not expand its operation into heavy press usage at Dundas Street because of the restrictions, but the Main Street operation was suitable for such expansion. Heavy metal stamping at the Main Street operation amounts to about 20 hours work per week. This work is the same as that done by CS&D at Dundas Street, except that the stamping tonnage and the dies at Main Street are larger.
Leaving aside the work that went from Dundas Street via Canterbury Street to Ingersoll and then to Main Street, and the work that went from Dundas Street to Ingersoll and then to Main Street, and the bending - perforating operation which went from Dundas Street either directly to Main Street or via Ingersoll, there has been some direct, though tiny (about 2 hours a month), loss of work at Dundas Street as a result of the opening of the Main Street operation. The stamping of a metal flange was moved to Main Street when a modification to the die required a press with heavier tonnage than could be accommodated at Dundas Street. The press is now located in the Main Street factory.
Mr. David Hewitt claimed that there has also been some enhancement of work at Dundas Street as a result of the establishment of the Main Street operation. He referred to the production of cross slats. That work was previously done in Ingersoll, and it was moved to Dundas Street from there. It was never at Main Street. It amounts to about 2 to 3 hours of work a week.
When the Main Street operation commenced, after the closure of the Ingersoll plant, Mr. Hewitt played a very active role in nurturing the new endeavour. He ran the operation for its first 15 to 18 months (from February 1994 until about mid-year 1995), as he did, and does, the Dundas Street factory. For a variety of economic reasons, not explored in evidence, Mr. Hewitt decided early in 1995 to separate the corporate structure of the Main Street business from his Dundas Street business. He set up Stamptech Ltd. in February 1995, although Stamptech did not do business under its own name until the summer of 1995. Mr. Hewitt was a founding director. Since then he has sought to transfer control of the company from himself to his second son, David Hewitt. Mr. David Hewitt was to assume control and responsibility for the business. Once Stamptech Ltd. was established Mr. Hewitt increasingly shed his control and influence over the Main Street operation and its direction passed from him to his son, David. By September 1995, Mr. Hewitt had effectively ceased to have any supervision or control of the operation at Main Street, which has now passed to Mr. David Hewitt, save that Mr. Hewitt remains the Secretary-Treasurer of Stamptech. He could not recall if he is still a director of Stamptech and he thought he owned only 1 share of 10,300 shares. (That was the number of shares mentioned by Mr. Hewitt in evidence; the responses of both responding parties gives a figure of 10,004 shares. Nothing turns on this difference, or on the difference between these figures and that given by Mr. David Hewitt in evidence). Mr. Hewitt now has no day-to-day involvement in the business. His son, David, testified that there were 15,000 shares, of which he owns about two thirds, and his younger brother, John, owns about one third. How the two young men were able to raise the capital necessary to acquire the shares was not explored in evidence, and we assume, in the absence of evidence to the contrary, that they were not assisted by Mr. Hewitt, R.A. Hewitt & Sons Ltd. or CS&D in making that acquisition. Only 2 shares are not held by them: one is owned by Mr. Hewitt and one by his eldest son (David's and John's eldest brother).
Mr. David Hewitt testified that, in his view, Stamptech did not become a completely separate business operation from CS&D until September 1995. Until then, though to a declining extent, it was ostensibly and practically a division of CS&D. Since September 1995, and to an increasing extent in the immediately preceding period, David Hewitt directs and manages Stamptech, even although his involvement occupies only about half of his working time. He makes the company decisions on behalf of Stamptech, consulting his younger brother and co-shareholder, John, when he considers that necessary. David Hewitt decides what work is to be done by Stamptech, and how it is to be done.
To situate this application (dated October 13, 1995) in the chronology of the establishment and development of Stamptech, the union filed its grievance with CS&D, which gave rise to this application, on March 28, 1995, i.e. approximately a year after the Main Street operation began and approximately a month after Stamptech was established, although it was not to trade under its own name for many months to come. The group grievance includes the following,
The union protests on its behalf and on behalf of the affected group of workers, the actions of the company in failing to apply the collective agreement at its facility on (124 Main St. Woodstock, Ontario).
The company has therefore violated article 1 and other related sections of the collective agreement including wages, seniority, layoff and union dues.
We therefore request that the collective agreement be applied to this facility (124 Main St. Woodstock, Ont.) and that all damages payable to the affected workers and the union be paid by the company with interest.
The grievance was not resolved by the parties and it was referred to arbitration under what is now section 49 of the Labour Relations Act. The arbitration was scheduled for hearing on September 29, 1995. At the hearing, CS&D challenged the jurisdiction of the arbitrator, arguing that the Board should determine first whether Stamptech was related or associated with CS&D. The arbitration did not proceed and the union then brought these proceedings.
Stamptech now has its own lawyer, bank account, pay roll, minute books and auditor, distinct from those of CS&D. This separation has obtained at least since October 1995. Stamptech submits a separate tax return from CS&D. It has no loans from CS&D, and nor has CS&D provided any security or guarantee on behalf of Stamptech. Stamptech does not share logos or letterheads with CS&D. Stamptech has only one employee who works part time as a punch-press operator. He worked at Dundas Street for about 2 weeks, about 2 years ago. Other than that, there has been no inter-mingling of employees between the two companies.
Despite the factors suggesting separation and independence of Stamptech from CS&D, the Bell telephone directory for Brant, Oxford, Regional Municipality of Haldimand-Norfolk, including among other towns Woodstock, for the period 1995-1996 has the following entries:
Canada Stampings & Dies Ltd. 344 Duadas ... 537-6245 Plant 2 124 Main ... 537-0102
Thus, Stamptech is referred to as "Plant 2" under CS&D. Mr. David Hewitt explains this apparent anomaly as originating from the time when the Main Street telephone was first installed in the Main Street factory. At that time Bell put the telephone number under CS&D and, despite requests to have the Main Street operation line appear beside a Stamptech entry in the directory, Bell has not yet made the alteration.
Certain suppliers and customers have confused CS&D and Stamptech by referring to Stamptech as CS&D in their invoices. Mr. David Hewitt has endeavoured to correct such errors by advising of the separation between the two entities.
All of the work performed by Stamptech is done under contract for CS&D. Stamptech has no work other than the work it receives from CS&D. When Mr. David Hewitt was asked whether any endeavour had been made to secure other customers besides CS&D, he replied that no such endeavour had been made, pending the outcome of these proceedings and the dispute with the union as to whether the collective agreement between CS&D and the CAW is binding upon Stamptech and the Main Street operation. In a sense, any expansion of Stamptech's business is being delayed pending the resolution of this application.
The materials used by Stamptech to produce goods for CS&D are owned and supplied by CS&D. Some of the machinery used by Stamptech is its property, e.g. the decoiler; other equipment, e.g. the coil feeder, is the property of R.A. Hewitt & Sons Ltd., on lease to Stamptech. The end product produced by Stamptech is the property of CS&D. Stamptech gets paid only for the value it adds to the raw material supplied by CS&D.
CS&D passes all of its heavy press work to Stamptech, unless the task is too large even for Stamptech's large presses.
David Hewitt works part-time at Stamptech. He also claims to work full-time for CS&D, working as a member of its management. He therefore works in Dundas Street and at the Main Street factory. Although his working time is divided roughly equally between his responsibilities as a member of the management team in Dundas Street and his duties as the managing director of Stamptech, his earnings are not in the same proportion. He earns about 75% of his income from CS&D and about 25% from Stamptech. His Stamptech income is effectively subsidized by CS&D. He sees this as a transitional phenomenon, expecting that as Stamptech's business grows it will be able to provide its fair contribution to his income.
In order to determine "relatedness" or "association" as between CS&D and Stamptech, we have regard to some of the standards established in previous Board decisions. In Brant Erecting and Hoisting, [19801 OLRB Rep. July 945, at 949, paragraph 15, the following indications of relatedness or association are suggested:
It is not necessary to have shared participation in a common business endeavour or even contemporaneous economic activity. The relationship between the business entities is a functional rather than a temporal one. Businesses or activities are "related" or "associated" because they are of the same character, serve the same general market, employ the same mode and means of production, utilize similar employee skills, and are carried on for the benefit of related principals. If these criteria are met, two businesses may be "related" within the meaning of section 1(4) even though their activities are carried on through different 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".
There are some features of distinction between CS&D and Stamptech, referred to above. But, overwhelmingly, the two businesses are related or associated. CS&D and Stamptech have the same general character; they serve the same general market (Stamptech reaching that market purely through the vehicle of CS&D); they employ the same mode and means of production; they utilize similar employee skills, if not (other than in management) the same employees; the businesses have common management, in the persons of Mr. David Hewitt (a member of CS&D's management team and the managing director of Stamptech) and Mr. Hewitt (the managing director of CS&D and the SecretaryTreasurer of Stamptech); the companies are publicly perceived, albeit erroneously, as being one and the same; and the businesses are carried on for the benefit of related principals. At the time of this application and in the preceding period the two sites, Dundas Street and Main Street, were ultimately under the common control and direction of Mr. Hewitt. Furthermore, besides the direct transfers of work from Dundas Street to Main Street, and the transfers from Canterbury Street and Dundas Street via Ingersoll to Main Street, Main Street's operation is substantially concerned to perform work for CS&D which CS&D cannot do at Dundas Street because of the by-laws that restrict the size of the stamping machines which can be located there. The Main Street operation exists principally because part of CS&D's manufacturing cannot be performed from its own premises. Mr. Hewitt started the Main Street operation to continue work he had previously had done in Dundas Street, Canterbury Street and Ingersoll. The work done in Main Street is directly related to the needs of CS&D. R.A. Hewitt & Sons Ltd. holds the leases of both premises, and sub-lets to CS&D and Stamptech respectively. Thus control of the premises vests in what is essentially Mr. Hewitt's holding company. CS&D subsidizes Mr. David Hewitt's income from Stamptech by paying a disproportionate share. Stamptech has no work other than that which it receives from CS&D, and it has not to date sought to obtain other work. The raw materials used by Stamptech, some of its machinery and equipment, and its final products are owed by CS&D or by R.A. Hewitt & Sons Ltd. Stamptech functions effectively as a department of CS&D, although located separately. It is true that since about September 1995 Mr. Hewitt has substantially ceased to manage Stamptech, and that that task has now been assumed by David Hewitt, with some assistance from his younger brother, John, but Mr. Hewitt, who controls CS&D, remains the Secretary-Treasurer of Stamptech.
The above conclusion of association or relatedness as between CS&D and Stamptech is drawn from the evidence presented at the hearing. That evidence was partly chronological, but substantially descriptive of the present circumstances as between CS&D and Stamptech, i.e. as they appear in late April 1996. The evidence showed that there has been a conscious endeavour by Mr. Hewitt to extricate himself from the Main Street operation and to transfer control to David Hewitt. That process commenced in earnest only once Stamptech was formed in February 1995. The union's grievance on this matter was filed in March 1995. At that time Stamptech had been registered, but it was not to make its public appearance until about October 1995. At the date of application, October 13, 1995, Stamptech had barely shown its existence. The Main Street operation was only then emerging as even apparently distinct from CS&D. Up to that date, the two operations appeared to be one and the same. Hence, we have found that CS&D and Stamptech, while appearing to be two distinct businesses, are essentially the same business. In October 1995 they did not even appear to be distinct businesses.
While opposing the conclusion we have reached that the responding parties are related or associated businesses, counsel for Stamptech directed much of his argument to contending that, were we to make a finding of relatedness or association, we should nonetheless exercise our discretion not to make a declaration under subsection 1(4) of the Act. Counsel emphasized that the conclusion of association between two businesses does not necessarily lead the Board to make a declaration under subsection 1(4) of the Act. That declaration, on counsel's submission, should be made only if there has been an erosion of CS&D's bargaining unit work. Counsel suggested that, although there was some minor transfer of work from CS&D to Stamptech, when evaluated overall, CS&D has had a net gain in bargaining unit work time as a result of the establishment of Stamptech.
We accept Stamptech's counsel's submission that there are two separate inquiries in applications of this sort: one to determine if the two businesses are related or associated, as we have found that they are here; the other to decide whether or not the declaration should be issued.
The scope of subsection 1(4) of the Act is well described in KNK Limited, [1991] OLRB Rep. Feb. 209, at 215:
Section 1(4) of the Act was enacted in 1971. It deals with situations where the commercial activities which generate employment relationships regulated by the Act, may be carried on through more than one legal entity. Where those legal entities are engaged in related economic activities under common control or direction, the Board is empowered to "pierce the corporate veil" and declare them to be one employer for the purposes of the Act.
Section 1(4) clearly and specifically modifies both the common-law notion of "privity of contract" and commercial law assumptions based upon the separate legal identity of the corporate shell. As a result of section 1(4), collective agreement rights need not be co-extensive with the legal framework of the business. To this extent, labour law insulates collective bargaining from disruption should the exigencies of the market prompt an employer to change the number or form of the legal vehicles through which it carries on business. As a result of a 1975 amendment, section 1(4) no longer requires that related business activities be carried on simultaneously. The Legislature has recognized that the identity of the business (as opposed to its legal envelope) may be preserved even though the legal vehicles through which it is carried out may change from time to time.
It is important to note that section 1(4) is not an unfair labour practice provision. Although some commercial dealings which trigger section 1(4) may constitute an unfair labour practice. section 1(4) itself does not require a finding of "anti-union animus". It is not limited to commercial "schemes" designed to escape from the union. It can also apply to bona fide business transactions which only incidentally frustrate established statutory rights. Section 1(4) is not a "penalty" provision. It merely allows the Board to consider such business transactions from a labour relations perspective rather than common or commercial law rules.
Stamptech's counsel referred to several Board decisions, including Bramalea Carpentry Associates, [1981] OLRB Rep. July 844, at 847-849; George Hainers Limited, [1981] OLRB Rep. Oct. 1382 at 1385; City of Toronto Non-Profit Housing Corporation, [1982] OLRB Rep. Feb. 280, at 282, paragraph 4; Gerald Davidson Plumbing & Heating Limited, [1984] OLRB Rep. Mar. 462, at 465-6, in support of his argument that the Board should not exercise its discretion under subsection 1(4) in this case. He and counsel for CS&D argued that subsection 1(4) can be used as to preserve bargain rights -to prevent their erosion, but not to extend bargaining rights, as, they suggested, is the case here. To use a metaphor, counsel contended that subsection 1(4) can be used as a shield, but not as a sword.
Stamptech's counsel argued too that the union had delayed unnecessarily in bringing this application, and for that reason alone we should not issue the declaration sought. Counsel suggested that the union had waived its claim to the bulk of the Main Street operation's work because that work had come from the Ingersoll factory, over which, he contended, the union had not bothered to exert its bargaining rights. Then, once the Main Street operation commenced in February 1994, despite the openness and lack of concealment of that operation by management, the union took no action until the filing of its grievance more than a year later, in March 1995. In the circumstances of a delay of that duration, counsel submitted, the Board should not be disposed to grant a declaration under subsection 1(4) of the Act. Counsel referred to the decision in Andreynolds Company Limited, [1990] OLRB Rep. Nov. 1107 at 1113 as authority for the submission.
The difficulty faced by a union in applications of this sort where an employer expands its business to new premises, if we were to follow the erosion test recommended by CS&D's and Stamptech's counsel, is that if the union makes the application before there has been actual erosion of bargaining rights, then it is told that its application is premature, but if it makes the application only once there is evidence of erosion, it is told that it has abandoned its bargaining rights by moving the application too slowly.
The union did not abandon its bargaining rights. The union expressly asserted bargaining rights in the collective agreement concluded in 1990 in respect of the Ingersoll operation just as it was commencing, even although the union did not then act upon the rights it had protected. When the subsequent collective agreement was concluded, for the period 1993-1996, the union again asserted collective bargaining rights over the Ingersoll plant, though again without following up on them. By ensuring reference to the collective bargaining rights over certain workers at the Ingersoll plant the union was expressly not waiving any right it had to bargain on their behalf.
As regards the allegation that the union delayed bringing this application, there was no evidence to suggest that the union was aware of the establishment of the Main Street operation before March 1995. But even if the union were aware of that development from its inception a year earlier, it could not have brought this application until it had knowledge of the separate legal persona of Stamptech. Stamptech was incorporated in February 1995 but its existence was not then apparent. Its existence became apparent only in the fall of 1995 and the union diligently brought this application soon thereafter.
To the extent that there was any delay in the union's bringing of this application, no evidence of any prejudice on account of the delay was presented at the hearing.
The responding parties have argued that the union must show an erosion of their existing bargaining rights, and that they cannot claim bargaining rights in respect of the extension or growth of a business. We have found that there has been an erosion of their extant bargaining rights. Nonetheless, the distinction between erosion and extension of bargaining rights, like the analogy of a shield and a sword, is not entirely sustainable. There are circumstances in which bargaining rights are adversely affected, though not necessarily eroded, by the expansion of a business to a new location. The concept of "erosion" does not adequately address the situation in which the growth that would otherwise fall within the description of the original bargaining unit, passes elsewhere solely on account of the establishment of that separate corporate entity. Erosion of bargaining rights is just one manifestation of the principle upon which the Board founds its discretion in these applications. The preservation of bargaining rights is concerned not only with maintaining the status quo relationship between the union and the employer, but also with ensuring that the growth of the business accrues to that bargaining unit, and not outside of it provided, of course, that the growth falls within the parties' bargaining unit description. This notion was described in The Great Atlantic & Pacific Company of Canada Limited, [1981] OLRB Rep. Mar. 285, at 289 paragraph 15: "The very purpose of section 1(4) is to ensure that the union's bargaining rights and the scope of the collective agreement will not be restricted simply because an employer chooses to expand through a new corporate vehicle rather than its existing one".
The discretion as to whether to issue a subsection 1(4) declaration is exercised by the Board in various circumstances. It is not generally exercised in an "upstream~' application, that is where the union has acquired bargaining rights in a subsidiary or subordinate operation and then seeks to flow "upstream" to secure bargaining rights under subsection 1(4) in the principal operation. That was the case, for example, in Bramalea Carpentry Associates, relied on by Stamptech's counsel and referred to above. In other words, where the union seeks a subsection 1(4) order as a substitute for certification in circumstances in which, but for the existence of two separate legal personae, it would not have had bargaining rights, the Board will decline to exercise its discretion. We understand the decision in B & M Millwork Ltd., [1991] OLRB Rep. Apr. 438, relied upon by Stamptech's counsel, to have been made in that context. The circumstances in which the Board will exercise its discretion under subsection 1(4) are those in which the union would have exercised bargaining rights, but for the intrusion of a different corporate entity. In other words, if a union's existing bargaining rights are adversely affected, or if those rights are potentially adversely affected, by the operation of a related or associated business then the Board should exercise its discretion to make a declaration under subsection 1(4).
There has been a direct loss of work, or erosion of bargaining rights from Dundas Street to Main Street, in that the stamping of a metal flange was moved from the former to the latter. Also a tube bending and hole punching process was moved from Dundas Street (perhaps via Ingersoll) to Main Street. That too was work performed by bargaining unit employees. The transfer of that work would entail a diminution of the union's bargaining rights if our discretion under subsection 1(4) of the Act were not exercised in the applicant's favour.
There was also an indirect loss of work to bargaining unit employees in that work formerly done by bargaining unit employees at Canterbury Street went via Ingersoll to Main Street. But for the establishment of the separate legal entity of Stamptech that work would have been performed by CS&D and covered by the CS&D collective agreement with the union. If we were not to exercise our discretion in the union's favour, the union's bargaining rights in that respect would be diminished.
In our view, the proper test, as applied in KNK Limited, above, and Great Atlantic and Pacific, above, is to determine whether the existing bargaining rights of a union, as defined by the bargaining unit description, are adversely affected, or potentially adversely affected, by the establishment of the new operation. This principle was referred to as follows in Great Atlantic and Pacific Company of Canada Limited, above 285, at 289:
... But for the creation of a separate vehicle, the work opportunities associated with the related business activity, and the conditions of employment of the employees engaged in that activity, would be regulated by the collective agreement. The very purpose of section 1(4) is to ensure that the union's bargaining rights and the scope of the collective agreement will not be restricted simply because an employer chooses to expand through a new corporate vehicle rather than its existing one.
In the facts of this case, there has been a directly adverse affect upon the CS&D bargaining unit by the establishment of a manufacturing operation in Main Street in that work that was originally done at Dundas Street is now done at the Main Street plant (whether via Canterbury Street and/or Ingersoll or transferred directly). There was in fact a diminution of the existing bargaining rights of the union occasioned by the passing of business to the Main Street operation. There is also a potentially adverse effect on the union's bargaining rights in CS&D by the establishment of Stamptech in that the natural growth of CS&D's enterprise at Dundas Street has been transferred to Stamptech at Main Street. Dundas Street's expansion is limited by zoning restrictions and considerations of size. CS&D's business expansion into larger pressing is happening at the Main Street plant. As Mr. David Hewitt suggested in testimony, there is room for expansion of Stamptech's business, but that expansion has been delayed pending the outcome of this application. If the zoning restrictions in Dundas Street were not as they are, in all likelihood the expansion of CS&D's business would have occurred there, and not in Main Street. In those circumstances there would have been no doubt that the union's bargaining rights extended to cover that expansion. The difference of location does not change that result. As stated in KNK Limited, above, at page 219, paragraph 45: "... section 1(4) prevents the extinction of bargaining rights from unilateral employer action and/or commercial law considerations unrelated to labour relations". The bargaining rights of the union in this case would be potentially adversely affected if a subsection 1(4) declaration were not made.
In light of all of the above considerations, we are disposed to make the subsection 1(4) declaration sought by the union in respect of the responding parties.
We now address the question of the date from which the subsection 1(4) declaration should be effective. The Board's usual course is to make the declaration with retrospective effect to the date upon which the separate entity was established. The Board will depart from that approach if the appropriate balance of labour relations interests requires it (Jarrett Construction Limited, [1992] OLRB Rep. May 586). The union acted with reasonable diligence to assert its claim to include Stamptech within the bargaining unit upon learning of its existence. It did so first by filing a grievance on March 28, 1995, approximately a month after the incorporation of Stamptech. In our view, the declaration of CS&D and Stamptech as constituting one employer for the purposes of the Act should be made retrospective to the date of the union's grievance on March 28, 1995, from when the employer became aware that the issue in this case was alive.
The union has asked for certain additional relief besides a subsection 1(4) declaration. In particular, it seeks orders that employees of CS&D on lay-off be employed to fill positions at the Main Street operation and compensation for CS&D employees on lay-off who have greater seniority than employees at Stamptech. As a purely collateral matter there was some evidence and suggestion, notwithstanding the express terms of the bargaining unit description in the recognition article of the parties' collective agreement, that the parties' collective agreement is restricted to full-time employees. We express no opinion on this matter, nor have we made any finding in that regard. Should any of the parties need to pursue this issue, like the ancillary relief sought by the union, those are matters which, in our view, should better be determined by arbitration under the collective agreement, and not by the Board. The question of the rights of employees of CS&D on lay-off to work at Stamptech is also a matter for decision by an arbitrator.
Accordingly, we declare that Canada Stampings & Dies Ltd. and Stamptech Ltd. are one employer for the purposes of the Act, with effect from March 28, 1995.
We retain jurisdiction to address any dispute arising from this decision.