[1997] OLRB Rep. September/October 849
2660-94-R Labourers' International Union of North America Local 1089 (the "Labourers"), Applicant v. 533670 Ontario Limited c.o.b. as Best Personnel Services ("Best") and Esso Imperial Oil Limited ("Esso"), Responding Parties
BEFORE: G. T Surdykowski, Vice-Chair.
APPEARANCES: John Moszynski and Robert Leone for the applicant; Peter Chauvin, Don Callum and Carol Kameka for 533670 Ontario Limited c.o.b. as Best Personnel Services; James B. Noonan, WJ. Dalziel, N.C. Draper, A.J. Wiggins and Karen M. Sargeant for Esso Imperial Oil Limited.
DECISION OF THE BOARD; October 7, 1997
This is an application for certification. It was made on October 21, 1994, under the construction industry provisions of the then (Bill 40) Labour Relations Act. More than a year later, on November 10, 1995 the current (Bill 7)Act was given Royal Assent.
The current Act is Schedule "A" to Bill 7. Section 3 of Bill 7 (as opposed to Schedule "A" of the current Act) is part of the transitional provisions which apply to the Act. It provides that:
(1) This section applies with respect to proceedings commenced under the old Act in which a final decision has not been issued on the day on which this section comes into force.
(2) A proceeding continuing after the new Act comes into force shall be decided as if the new Act had been in force at all material times. The presiding person or body shall apply the substantive provisions of the new Act as the procedural rules established under it.
(4) Despite subsection (2), in a proceeding relating to an application for certification of a trade union as a bargaining agent, the presiding person or body shall apply sections 5, 8. 9 and 9.1 of the old Act and not sections 7. 8 and 10 of the new Act. This subsection applies only with respect to applications for certification made before October 4, 1995.
The transitional provisions did not directly address applications for certification made under the construction industry provisions of the Act. However, it is apparent that the Legislature intended that the appropriate Bill 40 Act provisions apply to applications for certification made before October 4, 1995. It has never been suggested otherwise by any party in this case.
The first issue to be determined in this application, and the issue with which this decision is concerned, is: who was the employer of the employees who are the subject of this application? Esso says that Best was. Best and the Labourers both say that Esso was.
I note that notwithstanding that the application was filed on October 21, 1994, and that representation proceedings generally proceed expeditiously, the hearings did not begin until late May 1997 (and ended on October 1, 1997). The delay was a result of attempts by the parties to arrive at a mutually satisfactory resolution of the matters in issue between them, both with and without the assistance of the Board. Although these efforts bore no fruit in the result, all indications are that the efforts were bona fide. The fact that the evidence, although somewhat stale, seems quite well preserved, indicates the amount of attention the parties paid to the matter during the intervening period. The fact of the delay is, in the circumstances, irrelevant to the question of "who was the employer".
In argument, Esso asserted that prior to this application, there was no dispute between it and Best that Best was the employer of the employees in question, and that Best has taken a different position in this application because it wishes to avoid a trade union. Best's rejoinder was that it is Esso which is trying to avoid a trade union.
It is not particularly surprising that an employer entity, which both Esso and Best are, would prefer to operate without a trade union. That is true of most employers. Further, notwithstanding Esso's assertion that it deals with trade unions properly in those of its operations where its employees have opted to be represented by a trade union (which are relatively few in number), I consider Esso's suggestion that its position on the "who was the employer" issue has nothing to do with a desire to avoid (or a preference not to deal with) a trade union to be somewhat disingenuous).
But so what? It is not surprising that an employer, particularly a large and successful enterprise like Esso which has operated for many years without much of a trade union's presence (and none in Sarnia), would prefer to continue to operate without any, or any additional, trade union presence. There is nothing in the Labour Relations Act which requires an employer to desire a trade union collective bargaining partner, or that it be happy about the prospect of dealing with a trade union. On the contrary, an employer is free to be unhappy about it, to express its views in that respect (within the limits of section 70), and to oppose a trade union's attempts to organize its employees, either in proceedings at the Board or otherwise, so long as it does nothing which improperly interferes with employees' or trade unions' rights under the Act.
Another theme developed by Esso was that the Labourers is trying to capture the "big fish" (i.e. Esso), and that it is attempting to do so by coming through "a back door which Esso unfortunately left unlocked", something which the Labourers candidly acknowledges. So what? In the circumstances of this case, there is nothing which suggest that the "back door" is any less a legitimate entry way to bargaining rights than the "front door", wherever that is. Nor is it the least bit surprising that the Labourers would prefer to have bargaining rights with "big fish" Esso rather than, with great respect to it, "small fish" Best. There was no suggestion that the Labourers has done anything unlawful. (And Esso's characterization of the "back door" as having been "unfortunately" left unlocked belies its assertion that it does not seek to avoid a trade union.)
In the absence of an unfair labour practice complaint (and there is none in this case), the motivation of any of the parties is irrelevant to the matters in issue in an application for certification. This is particularly true of a "who is the employer" issue. Equally irrelevant (as Esso submitted in its opening statement) is whether the employees in question are unionized when the question is asked. That is, the answer to the question should not be different because the employees are not represented by a trade union.
Counsel referred to the following cases in argument: Templet Services, [1974] OLRB Rep. Sept. 606; York Condominium Corporation, [1977] OLRB Rep. Oct. 645; The Tower Company (196]) Ltd., [1979] OLRB Rep. June 583; Sutton Place Hotel, [1980] OLRB Rep. Oct. 1538; Re Ford Motor Co. and Plant Guard Workers, (1981) 1981 CanLII 4460 (ON LA), 1 L.A.C. (3d) 141 (MacDowell); K-Mart Canada Limited, [1983] OLRB Rep. May 649; Re Royal Ontario Museum and Service Employees, (1984) 16 L.A.C. (3d) I (Adams); Sylvania Lighting Services, [1985] OLRB Rep. June 1173; Travelers Motor Inn, [1988] OLRB Rep. Feb. 206; Nichirin Inc., [1991] OLRB Rep. Jan. 78; Provincial Store Fixtures, [unreported OLRB decision dated March 30, 1993, File No. 1306-92-R]; Dare Personnel Inc., [1995] OLRB Rep. July 935. There are many more decisions in the Board's jurisprudence which deal with "who is the employer" issues, but the selection referred to by the parties is representative of the evolution of the approach which the Board and arbitrators have taken to the question, both generally and specifically in "personnel agency" cases.
Although the Board is always prepared to consider any factor which is relevant, as a general matter, the factors which the Board has considered when faced with a "who is the employer" issue are the ones first compiled in the York Condominium, supra, decision:
(1) who exercises direction and control over the employees when they are performing the work;
(2) who bears the burden of remuneration;
(3) who has the power to impose discipline;
(4) who does the hiring;
(5) who has the authority to discharge;
(6) who do the employees perceive to be their employer;
(7) the intention to create an employment relationship.
None of these factors is necessarily determinative, and the relative significance of any individual factor will depend on the circumstances of the particular case. Having said that, it is apparent that the object of the exercise is to assess the various factors, both individually and in the context of all the other factors, in order to ascertain who has fundamental control over the employment relationship, particularly where the factors point in different directions. In making the assessment and determination, the Board is more concerned with substance than with form; that is, the Board will not permit commercial form to obscure labour relations reality.
A natural consequence of this is that the first five factors listed in York Condominium, supra, which are indicators of control, have become more important than the last two, which are both more subjective and difficult to gauge. This is consistent with the Board's preference (and the underlying theme of the Act as demonstrated by provisions like subsection 1(4) and section 69) for substance over form, and with the principle that perception and impression cannot be determinative of a question of law (see, International Union of Canada and Kent Line Ltd., (1972) 1972 CanLII 1085 (FCA), 27 D.L.R. (3d) 105 (Federal Court of Appeal).
When it comes to a question of fundamental control, there is little which is more important than beginning the relationship (hiring), regulating it (direction, control and supervision) and ending it (termination). Accordingly, York Condominium, supra, factors 1, 4 and 5 have gained primacy. Indeed, even though the Board (and arbitrators) have been careful to say that it will not necessarily be determinative, decisions like Dare Personnel, supra, Sylvania Lighting, supra, and Royal Ontario Museum, supra, demonstrate that direction and control is a very significant factor. At the same time, these decisions also demonstrate that the perception of the employees, and commercial contracts as indicators of intention often carry little weight.
The cases involving personnel agencies suggest that persons who are referred to work for a company will generally be considered to be employees of that company, and not of the personnel agency. The decision in Templet Services, supra, indicates that this will not always be the case, but standing virtually alone as it does, it also demonstrates that the contrary result (i.e. that the personnel agency is the employer) is an uncommon exception.
Is there anything to distinguish this case from the cases in which the "customer" company and not the personnel agency has been found to be the employer? In my view, there is not. Indeed, the facts in this case are rather reminiscent of Ralston Purina Canada Inc., [1979] OLRB Rep. June 552.
There appeared to be some disagreement between the parties regarding the evidence which the Board should give weight to in considering the question in issue. I prefer the broader approach suggested by Best and the Labourers. The fact that the issue is who was the employer at the time the application was made does not mean that evidence of what occurred at other times is not relevant, to the extent that such evidence sheds light on what the situation was at the material times.
In this case, Esso concedes (and the evidence clearly establishes) that Esso directed and controlled the employees in question. To the extent that there is distinction between direction and supervision, Esso also supervised them. York Condominium, supra, factor I therefore points to Esso as the employer.
Although I have no evidence before me which suggests that the manner in which the employees in question were paid is typical of how employees referred to work by an employment agency are paid, the jurisprudence suggests that it is at least not uncommon. In this case, the employees tracked their own hours on forms supplied and verified by Esso, dropped off these forms at Best weekly, and received a weekly paycheque from Best. Best made all of the usual employment deductions and employer payments for income tax, unemployment insurance, Canada Pension Plan, and workers' compensation purposes, and it was Best which issued income tax T-4 slips and records of employment to the employees. However, all of this was done pursuant to the agreement between Esso and Best in that respect, and all of it was charged back to Esso, along with a commission for "overhead" (which included Best's profit) of 13 or 15 percent (depending on whether Best performed a recruitment function for the particular employee). In the circumstances of this case, I am satisfied that when it came to paying the employees, Best performed a payroll function, and that the "burden or remuneration" was on Esso.
The evidence suggests that if all that Esso had wanted was someone to perform a payroll function, it could have had a chartered bank provide one at a much lower rate. Perhaps, but it didn't. Further, although Best performed a payroll function, that is not all it did. First, as the two different "commission" rates indicate, Best also performed a recruitment function as required. Banks do not do this. Second, Esso used Best as an administrative layer to supplement its "valley staffing" strategy. That is, Esso used employees referred to it by Best to supplement its regular work force, on a regular and predictable basis, as required. The employees referred by Best were paid at lower wage rates, and had no access to the seniority or other benefits which direct Esso employees received. Accordingly, it is far from obvious that Esso could have obtained what it received from Best from some other "payroll service" more cheaply or at all. Third, although the wage rates paid to employees provided by Best were established in Esso's contract with Best, it is apparent that Esso dictated those rates. Best charged back the wages to Esso in their entirety, and had little interest in what they were. This is in contrast with contractors which may be engaged by Esso to perform work. Whether these contractors operate on a cost plus or fixed price contract, and whether they provide labour and materials or labour only. Esso has no say in what wages or benefits the contractors' employees will be paid, whether or not the contractors are bound by a collective agreement. Finally, the fact that it was Best which made the various employment "source deductions" and employer contributions and may be the "employer" for income tax or other purposes, is neither determinative, nor particularly enlightening when one is trying to separate form from substance. (Indeed, it is far from clear that Esso would not be considered to be the accident employer of employees referred to it by Best for workers' compensation purposes.)
1 am satisfied that York Condominium, supra, factor 2 points to Esso as being the employer.
I am also satisfied that Esso had an exercised power to discipline employees referred to it by Best. This is apparent from Brian Aitken's testimony concerning his relationship and interaction with his Esso supervisors, and from the evidence concerning the counselling, direct warnings and termination of Pat MacMillan, Best referral, by Esso. There is no evidence which suggests that Best had or ever attempted to exercise any disciplinary power, or that it was asked by Esso to do so. Indeed, Best had no supervisory staff either at Esso, or assigned to the employees it referred to Esso, and Best had no knowledge of what the employees were doing at Esso, other than as revealed by the Esso time sheets it used to produce a payroll.
Similarly, it is apparent that Esso determined when the employment relationship would begin and end, either temporarily or permanently.
Sometimes, Best did perform a recruitment function for Esso. Upon being asked by Esso to do so, Best would refer persons it considered to be qualified to perform the work required to Esso. However, it is clear that Esso was free to accept or reject anyone who Best referred, and that no one was actually "hired" until Esso expressly or implicitly accepted them as employees.
However, Esso often played a much more directory role regarding the referral of employees by Best. For example, in early 1994, Best lost its contract with Esso to another personnel agency ("S.O.S."). When that happened, the employees who Best had referred to Esso and who were still working there were "transferred" from Best's payroll to S.O.S's payroll. Several months later, in early April, 1994, Best re-acquired the contract it had lost to S.O.S. and was directed by Esso to put people on its payroll, including six employees who had been "transferred" to S.O.S. earlier, and three who had been direct Esso (temporary) employees. It is apparent that Best had no say in any of this. It is also apparent that none of this had any affect of any substance on the six employees who were transferred for payroll purposes from Best to S.O.S. and back to Best again. They continued to work at Esso under the same terms and conditions throughout. On another occasion, in May, 1994, Esso supervisors directed Best to "hire" several people, who it turned out were relatives of direct Esso employees.
Apparently, this is contrary to an internal Esso policy, and when it was discovered Esso directed Best to remove these persons from the payroll. That is, they were terminated.
When employees who Best had referred were laid off, as they sometimes were, they were laid off directly by Esso. Best played no role in any lay-off decision. Indeed, its only role was to do the requisite payroll work, including issuing a record of employment as required. Similarly, when these employees were recalled to work, as often as not it was done directly by Esso, and Best was advised, generally by the employee concerned, that he had been recalled so that he could be reinstated on the payroll.
In effect, Best operated as a kind of broker or "hiring hall" in which Esso had unlimited "name hire" authority. It is clear that Esso, not Best, determined who would be hired. It is also apparent that Esso applied the internal policies which it applies to its direct employees to the employees referred by Best. Esso also completely controlled when such employees were temporarily or permanent laid off or terminated. Indeed, there is nothing which suggests that Best could have removed an employee which it had referred to Esso. In the construction industry, owners or general contractors have policies which are applied to subcontractors and their employees. However, the policies tend to be general, generally safety oriented policies, and not the kind of policy which dictates the family status of persons who a subcontractor cannot employ. Similarly, although an owner or general contractor can play a role in discipline, or can cause a subcontractor to remove an employee from the job site for cause, that is generally done through the subcontractor and not directly as Esso has done with employees who came from Best. In addition, owners and general contractors generally have nothing to say about when or who subcontractors will lay-off, both of which Esso completely controlled in this case.
In the result, I am satisfied that York Condominium, supra, factors 3, 4 and 5 point to Esso as being the employer.
In this case, the factor of employee perception is neutral. The evidence suggests that some employees referred by Best perceived it to be their employer, while others perceived Esso to be their employer. In either event, I do not consider this to be a significant factor in this case. York Condominium, supra, factor 6 therefore points to neither Best nor Esso.
I am satisfied that Esso did not intend to create an employment relationship with employees referred to it by Best. However, I am also satisfied that Best didn't either. The employees involved didn't particularly care who their employer was. All they cared about was that they were going to ajob at Esso.
The contract between Esso and Best in this case is an example of form being inconsistent with substance. It is structured so as to make it appear that Best is a normal contractor and that Best employs the persons it refers to Esso. However, it is poorly suited to the actual situation and does not reflect the true relationship between Best, Esso and the employees. In that respect, for example, Articles 1 (Definitions), 2 (Contractors' Representations), 3 (Work), 4 (Schedule), 5 (Subcontractors), 7 (Changes), 8 (Compensation, Invoices and Payment), 11 (Non-Lien Claims and Lien Claims), 13 (Liability and Indemnification), 14 (Insurance), 15 (Deficient Work), and 17 (Termination of Work) simply do not fit. It is apparent that these "boiler plate" provisions, which are appropriate in a true subcontractor situation, are not at all reflective of the service provided by Best. The same is true of Exhibit "A" (Compensation - All inclusive rates) to the contract, which appears to be inconsistent with the "Labour/Trades Rates" tables appended to it. Indeed, these "Labour/Trades Rates" tables appear to be the only parts of the contract which were really operative. In the context of the circumstances taken as a whole, the contract can be given no weight as an indicator of who the employer of these employees was for purposes of this application.
The evidence does suggest that the employees referred to Esso by Best were not treated the same as direct Esso employees. For example, the Joint Industrial Council ("JIC") Agreement was not applied to them, they didn't wear the same coveralls, didn't attend the same health and safety and other meetings, and didn't eat lunch in the same place, among other things. As the Board observed in Nichirin Inc., supra, these things are quite peripheral to the question of who exercised fundamental employment control. Further, not all direct Esso employees are treated the same. Regular "fixed term" employees are treated differently than regular employees. For example, the JIC Agreement does not apply to them either.
Finally, Esso suggested that finding it to be the employer in this case would "entirely disrupt the burgeoning temporary personnel industry". It is not clear to me why that should be so, or that Esso is in a position to even make such an assertion. The party best placed to comment on that question is Best, which clearly does not share Esso's concern. In any event, the Board is obliged to interpret and apply the Labour Relations Act. The effect which this might have on either the immediate parties or in an industry can be a relevant consideration in some cases, but not when it comes to questions of law such as "who is the employer".
In the result, Esso controlled all of the fundamental aspects of the employment of the employees referred to it by Best. It controlled who would work, how long they would work, when and where they would work, what they would do, and what they would be paid. I am satisfied, on a balance of probabilities, that the employees affected by this application for certification were employed by Esso at the material times. More specifically, the answer to the question "who was the employer?" is: Esso.
Other issues remain to be dealt with. The hearing will continue on Tuesday, October 14, 1997, as previously scheduled, but beginning at 2:00 p.m. in the "Board Room", 6th Floor, 400 University Avenue, Toronto, Ontario.