Ontario Labour Relations Board

[1996] OLRB REP. FEBRUARY 57

3372-94-R; 3373-94-G; 1164-95-G; 1165-95-R Carpenters and Allied Workers Local 27, United Brotherhood of Carpenters and Joiners of America, and United Brotherhood of Carpenters and Joiners of America, Locals 785 and 2050, Applicants v. Dobben Group Inc., Dobben Construction Inc. and Marcon Contractors, Responding Parties; Carpenters and Allied Workers Local 27, United Brotherhood of Carpenters and Joiners of America, and United Brotherhood of Carpenters and Joiners of America, Locals 785 and 2050, Applicants v. The Dobben Group Inc., Responding Party; Carpenters and Allied Workers Local 27, United Brotherhood of Carpenters and Joiners of America, and United Brotherhood of Carpenters and Joiners of America, Locals 785 and 2050, Applicants v. Con-Ex Inc., Responding Party; Carpenters and Allied Workers Local 27, United Brotherhood of Carpenters and Joiners of America, and United Brotherhood of Carpenters and Joiners of America, Locals 785 and 2050, Applicants v. Dobben Group Inc., Dobben Construction Inc., Marcon Contractors Inc., and Con-Ex Inc., Responding Parties

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

APPEARANCES: Mike McCreary, Carlos Pimental and Wensel Woeschka on behalf of the applicants; Bill Sinclair and Lucus Dobben on behalf of the responding parties.

DECISION OF THE BOARD; February 13, 1996

1. The style of cause is hereby amended to name the applicants in each of these Board Files as follows: "Carpenters and Allied Workers Local 27, United Brotherhood of Carpenters and Joiners of America, and United Brotherhood of Carpenters and Joiners of America, Locals 785 and 2050".

2. Board File No. 3372-94-R is an application under what are now sections 69 and 1(4) of the Labour Relations Act, 1995 (the "Act"). By decision dated May 30, 1995 the Board declared Dobben Group Inc. ("Group"), Dobben Construction Inc. ("Dobben") and Marcon Contractors ("Marcon") (collectively referred to herein as the "Dobben group of companies") to constitute one employer for the purposes of the Act. The Board further declared that Group, Dobben and Marcon were all bound to the Provincial Collective Agreement between the Carpenters Employer Bargaining Agency and the Ontario Provincial Council, United Brotherhood of Carpenters and Joiners of America (the "Carpenters' Provincial Agreement"). A request made by the applicants, that the Board declare Dobben and Marcon jointly liable for outstanding debts of Group owing to the United Brotherhood of Carpenters and Joiners of America, Local 2050 ("Local 2050") as a result of a Board order in Board File No. 2509-94-G and to the Carpenters and Allied Workers Local 27, United Brotherhood of Carpenters and Joiners of America ("Local 27") as a result of a Board order in Board File No. 3543-94-G, remains outstanding.

3. Board File No. 1165-95-R is a further application under sections 69 and 1(4) of the Act. The applicants seek a declaration under section 1(4) of the Act that Con-Ex Inc. ("Con-Ex") and the Dobben group of companies constitute one employer for the purposes of the Act and that Con-Ex is jointly liable for the outstanding debts of Group as identified in the previous paragraph. At the hearing, the applicants advised the Board that they were not pursuing their application under section 69.

4. Board File Nos. 1164-95-G and 3373-94-G are referrals of grievances to arbitration under what is now section 133 of the Act which have not yet been heard by the Board. These matters have been held in abeyance pending the outcome of Board File Nos. 3372-94-R and 1165-95-R. The applicants seek a declaration in the instant proceedings that Con-Ex and the Dobben group of companies are jointly liable for any order which the Board may make in Board File Nos. 1164-95-G and 3373-94-G.

Board File No. 1165-95-R - Related Employer Issue

5. It is not disputed that all four of the responding parties are under the common control and direction of Lucus Dobben. Mr. Dobben is the sole officer and director as well as the individual responsible for the day-to-day operations of all of the responding parties. The issues to be determined are whether Con-Ex and the Dobben group of companies carry on associated or related activities or businesses and whether the Board should exercise its discretion to declare Con-Ex and the Dobben group of companies to constitute one employer for the purposes of the Act.

The Evidence

6. Mr. Dobben testified on behalf of the responding parties. The applicants did not call any evidence.

7. The response filed on behalf of the responding parties in Board File No. 3372-94-R asserted that Group was a general contractor, Dobben was engaged in concrete forming work and that Marcon performed sewer and watermain and related earth work. Mr. Dobben testified, however, that the response is wrong and that Dobben, Group and Marcon were all engaged exclusively in concrete forming work. Mr. Dobben testified that he had a great deal of difficulty getting paid by general contractors for concrete forming work and thus he had decided that the concrete forming business was not for him. He ceased carrying on business through Dobben, Group and Marcon. Mr. Dobben has no intention of ever engaging in concrete forming work again.

8. Mr. Dobben incorporated Con-Ex on March 31, 1995 in order to engage in earth work including excavation, grading and sewer and watermain work. Con-Ex's largest job to date has been the performance of earth work in connection with the Price/Costco Distribution Centre (the "Price/Costco job"). Mr. Dobben testified the Price/Costco job involved dirt removal and bringing fill onto the site. Con-Ex was also responsible for some pipe installation and granular replacement for slab on grade. Since completing the Price/Costco job, Con-Ex has been engaged in topsoil removal, grading and supplying dump sites to other contractors. Board File No. 1164-95-G is a referral of a grievance to arbitration under section 133 of the Act in which it is alleged that Con-Ex has violated the terms of the Carpenters' Provincial Agreement in connection with work performed on the Price/Costco job.

9. Con-Ex works for completely different clients than Dobben, Group and Marcon previously worked for. Con-Ex does not use equipment previously used by Dobben, Group or Marcon and has its own distinct premises and phone and fax numbers. Con-Ex does not employ any employees.

10. Mr. Dobben is a 38 year old journeyman carpenter. He served his apprenticeship under his father over a period of 15 years from the age of 18 to 33. Mr. Dobben has also been to school for earth work and has received a diploma as a quantity surveyor. Prior to going into the concrete forming business with Marcon, it was Mr. Dobben's intention to become a general contractor. Although Mr. Dobben indicated that he would like to work as a general contractor, he has no intention of doing so at this time.

Associated or Related Activities or Businesses

11. The Board has considered the meaning of "associated or related activities or businesses in connection with entities engaged in the construction industry on a number of occasions. As the Board indicated in Frank Plastina Investments Ltd., [1986] OLRB Rep. June 720, firms in the construction industry can, with relative ease, become involved in various sectors, subdivisions, phases, or specialized kinds of construction work. The following quote from Brant Erecting and Hoisting, [1980] OLRB Rep. July 945 explains why this is so:

13. Section 1(4) does not require that related business activities under common control or direction be carried on simultaneously or contemporaneously. This issue was clarified in 1975 by the addition to section 1(4) of the phrase "whether or not simultaneously". The amendment reflects a legislative recognition that the essential unity and identity of an economic activity (which gives rise to employment) may be preserved even though the legal vehicles through which the activity is carried on will not operate simultaneously; and, business may be effectively transferred from one corporate entity to another, without any of the indicia of a "transfer of a business" which might trigger the application of section 55 [now section 69]. This is especially the case in the construction industry where many of the employers will not have the permanence or investment in fixed plant and equipment characteristic of a manufacturing concern. A small construction company can move from jobsite to jobsite or place to place, assembling tools, equipment and a labour force as required after it has made a successful bid. There may be no established economic organization, labour force or configuration of assets. A single principal may have several companies which are used, more or less interchangeably, so that bidding is done and work performed through whichever company is convenient. In such circumstances there may be an effective transfer of business between related businesses without any apparent disposition of assets, inventory, trade names, goodwill, employees, etc. Similarly, where capital requirements are minimal and business relationships transitory, it is relatively easy to wind up one business, and create another one which carries on essentially the same business as before. Indeed there will often be good commercial reasons for doing so unrelated to any express desire to undermine the union s bargaining rights. The earlier company may have run into financial difficulties, or lost its reputation, or there may be legal, accounting or tax advantages in establishing a new vehicle through which the business, or related business activities can be conducted. Again, it is quite possible to do this without a clear and concrete disposition between the two firms so as to call section 55 [now section 69] 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.

12. It is as a result of the relative ease with which a small construction company can engage in a variety of different types of construction work that the Board has determined that entities may not be found to be "unrelated" simply because they are engaged in different types of construction work (see also: Warren Steeplejacks Limited, [19891 OLRB Rep. March 309 and Stebill Limited, [1989] OLRB Rep. April 384).

13. Con-Ex and the Dobben group of companies are all small construction companies. As the above summary of the evidence indicates, Con-Ex has no assets or employees. It rents its equipment. Thus, even assuming that the Dobben group of companies was engaged exclusively in concrete forming work, and that Con-Ex is engaged solely in excavation work (the most favourable version of the facts from the perspective of the responding parties), it is our view that the Dobben Group of companies and Con-Ex carry on associated or related activities or businesses.

Exercise of the Board's Discretion

14. Where the Board finds two or more entities to carry on associated or related activities or businesses under common direction or control, the Board has a discretion as to whether it will declare such entities to constitute one employer for the purposes of the Act.

15. The applicants argue that the Board ought to exercise its discretion in favour of granting the application in order to prevent their bargaining rights from being undermined. In the applicants' submission, absent a declaration, their bargaining rights stand to be eroded in two ways. First, the potential exists that Con-Ex may perform work covered by the Carpenters' Provincial Agreement in the future. A declaration is required in order to ensure such work is performed by the applicants' members. Second, it is asserted that a declaration is warranted in order to make Con-Ex jointly liable for outstanding debts owing to the applicants by Group. If Con-Ex is not. made jointly liable for such debts, the applicants assert that their effectiveness on behalf of their members will be undermined.

16. The purpose and effect of section 1(4) of the Act is discussed in the following passage from B rant Erecting and Hoisting, supra:

12. Section 1(4) of The Labour Relations Act provides as follows:

"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".

Section 1(4) was enacted in 1971 and deals with situations where the economic activity giving rise to employment or collective bargaining relationships regulated by the Act, is carried out by, or through more than one legal entity. Where such legal entities carry on related business activities under common control or direction, the Board is empowered to pierce the corporate veil. Section 1(4) ensures that the institutional rights of a trade union, and the contractual rights of its members, will attach to a definable commercial activity, rather than the legal vehicle(s) through which that activity is carried on. Legal form is not permitted to dictate or fragment a collective bargaining structure; nor will alterations in legal form undermine established bargaining rights. In this respect the purpose of section 1(4) is similar to that of section 55 [now section 69] which preserves the established bargaining rights and collective agreement when a "business" is transferred from one employer to another. Section 55 [now section 69] 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.

17. In the course of determining whether to exercise its discretion under section 1(4), one of the factors the Board considers is whether the entity which the union seeks to have declared related (the "related company") is performing work, or there is a real potential that it will perform work, which would, if the declaration was made, be covered by the collective agreement. Where such is the case, a section 1(4) declaration is generally warranted in order to ensure that the union s bargaining rights are preserved and not undermined. Where the Board has found that the related company is not performing work which falls within the scope of the agreement, the Board has declined to exercise its discretion on the basis that such a declaration is of extremely limited utility (see: Farquhar Construction Limited, [1978] OLRB Rep. Oct. 914; Dominion Stores Limited, [1979] OLRB Rep. June 506; and Valdi Inc., [1979] OLRB Rep. Aug. 833).

18. In the present case, the evidence does not establish that Con-Ex is performing work covered by the Carpenters' Provincial Agreement. Although counsel for the applicant objected to Mr. Dobben testifying as to whether Con-Ex performed any work covered by the agreement, he did not challenge, either by way of cross-examination or by way of independent evidence, Mr. Dobben's description of the work Con-Ex has performed. Thus, the sole evidence available to the Board concerning the nature of the work performed by Con-Ex to date is that given by Mr. Dobben. In our view, this evidence does not establish that Con-Ex has performed work covered by the Carpenters' Provincial Agreement.

19. Counsel for the applicant argued that the Board should exercise its discretion on the basIs that Con-Ex may potentially perform work covered by the Carpenters' Provincial Agreement in the future. Counsel asserts that the Board should be suspicious of Mr. Dobben's claims that he does not intend to engage in work covered by the Carpenters' Provincial Agreement and points to the fact that Mr. Dobben is a journeyman carpenter, and has a desire to become a general contractor, as indicators that Con-Ex will likely become involved in work covered by the Carpenters' Provincial Agreement in the future. Counsel also asserted that the Board should infer from the fact that Mr. Dobben is contesting this application that he intends to perform work covered by the agreement. Counsel suggests that, if Mr. Dobben did not intend to do so, he would consent to the Board making the declaration sought by the applicants.

20. We are not persuaded by the evidence before us that there currently exists a real potential that Con-Ex will engage in work covered by the Carpenters' Provincial Agreement in the future. Mr. Dobben explained that he had considerable difficulty getting paid for the concrete forming work he performed via the Dobben group of companies and accordingly decided to get out of carpentry work. After speaking with friends he decided to try excavation work. Since incorporation, Con-Ex has engaged solely in excavation work. Although Mr. Dobben indicated he has a desire to become a general contractor he has taken no steps to make this desire a reality. We find the suggestion that the Board should draw an adverse inference from the fact that Mr. Dobben is contesting this application untenable especially where, as on the facts of this case, the applicants are seeking a section 1(4) declaration, in part, to have Con-Ex declared liable for the outstanding debts of Group.

21. Thus, it is our determination that there is presently no real potential that Con-Ex will become engaged in work covered by the Carpenters' Provincial Agreement in the foreseeable future. Hence, it is our determination that a declaration that the Dobben group of companies and Con-Ex are one employer for the purposes of the Act is not presently required in order to prevent the transfer of bargaining unit work from the Dobben group of companies to a non-union entity.

22. Counsel for the applicants also argued that the Board ought to exercise its discretion and declare the Dobben group of companies and Con-Ex to constitute one employer for the purposes of the Act in order to make all of the responding parties jointly liable for the outstanding debts of one another. In counsel's submission, the only mechanism available to a trade union to enforce its bargaining rights is the ability to force an employer to pay damages to the trade union for its violations of the collective agreement. If an employer can avoid paying damages by simply shutting down and starting up a new company, the union's sole enforcement mechanism would be rendered ineffective. Counsel relies on Golden Arm Flooring inc., [1992] OLRB Rep. June 731 and Lakeridge Acoustics, [1993] OLRB Rep. Feb. 137.

23. The issue of whether a declaration under section 1(4) of the Act will be granted, solely for the purpose of making the entities in question jointly liable for outstanding debts to the applicant union, has been considered by the Board in Total Marketing Incorporated, [1983] OLRB Rep. April 616 and Duron Ottawa Ltd., Board File No. 3374-93-R, dated October 26, 1994, unreported. The following quote from Duron Ottawa Ltd., which in turn quotes from Total Marketing Incorporated, provides an overview of the facts, and the basis for the Board's determination, in each of the cases:

35. In Total Marketing, supra, the Board indicated that section 1(4) is not intended to give a party to a collective agreement "the right to a 'deep pocket' recovery of an unsatisfied debt against a related corporation". However, it is clear that the Board's comments were directed to the circumstances before it wherein, absent any transfer of work or evidence that the union's bargaining rights had been undermined, the union was seeking to have a parent corporation made liable for the debts of its subsidiary:

4. It is clear that Sepcographics Incorporated has ceased operations, and that the work which it performed is no longer being done. There has been no transfer of work, and in that sense no undermining or erosion of the applicant's bargaining rights. If it appeared on the material before us that the respondent had spun off a similar company to do identical work the case might be more compelling for relief, whether by way of declaration of successorship under section 63 [now section 691 of the Act or by the application of section 1(4). In those circumstances the Board could, by the operation of section 1(4) pierce the corporate veil in the interests of protecting the bargaining rights. (See e.g., Devon Studio, [1980] OLRB Rep. July 961). Those facts are not shown in the instant case. The purpose of section 1(4) of the Act is to preserve bargaining rights. It is not intended to give a party to a collective agreement the right to a "deep pocket" recovery of an unsatisfied debt against a related corporation.

The Board clearly distinguished the situation where a new corporate structure has been created to perform the work previously performed by a related entity and accordingly we do not view the Board's comment in Total Marketing to be applicable to the facts before us.

36. In the present case, Duron failed to pay the wages or remittances required by its collective agreement with Local 527 during the period of November 1992 to November 1993. Local 527 sought to enforce the terms of its agreement with Duron by filing a grievance in August 1993 and pursuing that grievance to arbitration in January 1994. Local 527 was successful at arbitration and obtained a Board order pursuant to which Duron is required to pay Local 527 all outstanding union dues, vacation pay, benefits, pension contributions and wages. Duron has not satisfied the Board order, however, as our findings set out above indicate, Duron is essentially continuing to operate, although on a smaller scale, in the form of Conite. In the Board's view, to permit Duron, by way of a change in form, to avoid complying with the terms of its collective agreement or the requirement that it satisfy a Board order compensating the union and its members for violation of the collective agreement, would negate the contractual rights of Local 527's members and undermine Local 527's bargaining rights.

37. Accordingly, the Board declares that Duron Ottawa Ltd. and 694280 Ontario Inc. c.o.b. as Conite are one employer for the purposes of the Act. As a consequence, Conite is liable to pay to the applicant the amount outstanding under the Board order against Duron.

24. As the above excerpt indicates, in determining whether it will grant a section 1(4) declaration for the sole purpose of making the responding parties jointly liable for debts owing to the applicant union, the Board has distinguished between the situation where the related company is performing work covered by the collective agreement and the situation where it is not. Where work is continuing to be performed under the collective agreement, the Board has found the issuance of a section 1(4) declaration appropriate in order to make the related entities jointly liable for outstanding debts and prevent the union's bargaining rights from being undermined. Where, however, the related entity is not performing work covered by the agreement, the Board has declined to issue the declaration as the sole purpose for the declaration would be to provide the union with a "deep pocket" from which to recover an outstanding debt.

25. In our view, the distinction which has been drawn by the Board is a valid one. The purpose of section 1(4) is to protect bargaining rights. If a trade union's bargaining rights have been undermined by a change in corporate form and part of that erosion is caused by the union's inability to enforce the collective agreement, a section 1(4) declaration will issue. If, however, the trade union's inability to enforce its collective agreement arises out of circumstances apart from a situation where section 1(4) is warranted, for example a change in commercial activities that does not erode bargaining rights, a section 1(4) declaration will not issue simply to provide the trade union with an entity from which to collect an outstanding debt.

26. Con-Ex has not, and is not presently, performing work covered by the Carpenters' Provincial Agreement. In such circumstances, it is our determination that it would not be appropriate to issue a declaration under section 1(4) for the sole purpose of making Con-Ex jointly liable for the outstanding debts of the Group.

27. For the reasons set out above, it is our determination that a declaration under section 1(4) of the Act declaring Con-Ex and the Dobben group of companies to constitute one employer for the purposes of the Act is not appropriate at this time. Given that our determination is based on the fact that Con-Ex is not performing work covered by the Carpenters' Provincial Agreement, the applicant is not precluded from bringing a further application in the event Con-Ex engages in such work in the future.

Board File No. 3372-94-R - Joint Liability Issue

28. As indicated above, by decision dated May 30, 1995 in Board File 3372-94-R, the Board declared Group, Dobben and Marcon to constitute one employer for the purposes of the Act. The applicants request that the Board declare Dobben and Marcon liable for the outstanding debts of Group. Group, Dobben and Marcon were, prior to their cessation of business, all performing work covered by the Carpenters' Provincial Agreement. In our view, for the reasons expressed by the Board in Duron Ottawa Ltd., it is appropriate that the Dobben Group of companies be made jointly liable for outstanding debts owing to the applicants.

29. The Board therefore declares that Dobben Construction Inc. and Marcon Contractors are jointly liable for the debts of Dobben Group Inc. owing to the United Brotherhood of Carpenters and Joiners of America, Local 2050 as a result of a Board order in Board File No. 2509-94-G and to the Carpenters and Allied Workers, Local 27 United Brotherhood of Carpenters and Joiners of America as a result of a Board order in Board File No. 3543-94-G.

Board File Nos. 3373-94-G and 1 164-95-G - Joint Liability Issue

30. The applicants also seek a declaration that Con-Ex, Dobben, Group and Marcon are jointly liable for any order which the Board may make in Board File Nos. 1164-95-G and 3373-94-G.

31. Board File No. 1164-95-G is a referral of a grievance in which it is alleged that Con-Ex violated the Carpenters' Provincial Agreement in connection with the Price/Costco job. The applicants' assertion that Con-Ex is bound to the Carpenters' Provincial Agreement was premised on their assertion that Con-Ex is a related employer to the Dobben group of companies. In view of our findings herein, the applicants have until February 23, 1996 to write to the Board giving any reason why Board File No. 1164-95-G ought to proceed. If no such submissions are received from the applicants, Board File No. 1164-95-G will be dismissed.

32. Board File No. 3373-94-G has been held in abeyance pending the outcome of Board File 1 165-95-R. The grievance has not proceeded to a hearing and accordingly no Board order has been made. Given our findings herein, and for the reasons expressed herein, we decline to declare Con-Ex jointly liable for any damages which may be found to be owing to the applicants in Board File 3373-94-G. In our view, whether all or some of Dobben, Group and Marcon are to be held liable for damages which may be ordered by the Board is more appropriately dealt with after the grievance has been heard on its merits. Accordingly, we decline to make any declaration concerning which of Dobben, Marcon or Group would be held liable for damages awarded to any of the applicants in Board File No. 3373-94-G.

33. The applicants are to notify the Registrar if they wish Board File No. 3373-94-G to be listed for hearing. If no such request is made within a period of one year, this matter will be terminated.

34. This panel is seized.