United Association of Journeymen and Apprentices of the Plumbing and Pipefitting Industry of the United States and Canada, Local Union 527 v. D.E. Witmer Plumbing & Heating Limited, 1999 CanLII 19986

United Association of Journeymen and Apprentices of the Plumbing and Pipefitting Industry of the United States and Canada, Local Union 527 v. D.E. Witmer Plumbing & Heating Limited

[1999] OLRB REP. MAY/JUNE 390

2050-97-R; 2051-97-G; 2808-98-G United Association of Journeymen and Apprentices of the Plumbing and Pipefitting Industry of the United States and Canada, Local Union 527, Applicant v. D.E. Witmer Plumbing & Heating Limited; D.E.W. Mechanical Inc.; D.E.W. Mechanical, Responding Parties

Construction Industry - Related Employer - Board rejecting submission that responding parties not under common control and direction because of intervention of personal bankruptcy of individual identified as "key person" - Single employer declaration issuing

BEFORE: Gail Misra, Vice-Chair.

APPEARANCES: A. J. Ahee and T Crystal for the applicant; Clarke Melville, J. Sharkey, D. Witmer and P. Witmer for the responding parties.

DECISION OF THE BOARD; May 6, 1999

1. Board File No. 2050-97-R is an application made under sections 69 and 1(4) of the Labour Relations Act, 1995. Board File Nos. 205 1-97-G and 2808-98-G are construction industry grievances referred to arbitration pursuant to section 133 of the Act.

2. The successor or related employer application was argued before the Board on April 8, 1999, and is the subject of this decision. There is little dispute about the facts of this case. The real issue is whether, when an individual who owned and operated a unionized business is granted personal bankruptcy, that individual sheds any obligations regarding operating a union business should he begin to operate a new business of a similar nature to the one he previously had.

3. D. E. Witmer Plumbing & Heating Limited ("Witmer") operated in Cambridge, Ontario. Douglas Edward Witmer was an officer and director of that corporation and was the controlling mind of the company. Mr. Witmer is a licensed plumber whose company had been doing residential plumbing jobs, new residential construction, as well as renovations and some small industrial and commercial work. Witmer was certified by the applicant (the "union") in 1987 and operated under the provincial I.C.I. collective agreement and under a residential construction agreement. By the late 1980's Witmer was doing 80 to 85% of its work in the repair and service area, 5% remodelling, and 10% commercial and industrial construction.

4. In 1988 a 20% shareholder in Witmer decided to leave the company because of the certification, and Mr. Witmer had to buy out his share of the business. The economy was in decline, the company's competitiveness was reduced as a result of having to work within the terms of the provincial collective agreement, and the business was in trouble. In the spring of 1989 the Royal Bank of Canada, the company's bank, indicated it wanted to see more money infused into Witmer. Mr. Witmer took out a large mortgage on his residence and put the money into the company. However sales kept falling, and in May 1990 the Royal Bank of Canada appointed a receiver and manager to operate Witmer and to oversee its wind-down. Mr. and Mrs. Witmer had personally guaranteed the debts of the company.

5. By May 1990 the company owed money to the Bank, to trade creditors, and to the union. The receiver manager sold the company's assets, and Mr. Witmer went to work for Twin City Mechanical in Kitchener. He worked there doing estimating and project management, the type of work he had done in his own company. In August 1993 Witmer's charter was officially dissolved, although the company had not been operating since 1990.

6. Even after selling their home, the Witmers personally owed the bank money and were being pursued by creditors. The second home they bought was lost through a power of sale. The only things the Witmers were allowed to keep were Mr. Witmer's personal hand tools, their furniture, and their personal effects. They made personal assignments into bankruptcy in September 1991 having lost all of the assets accumulated over their lifetime. Mr. Witmer was 56 years old at the time. In April 1992 the Ontario Court of Justice (General Division) granted Mr. and Mrs. Witmer absolute discharges from their debts. In its decision, Court File Nos. 35-039419 and 35- 039420, April 29, 1992, D.R. McDermid, J., the Court stated as follows:

The Witmers are 56 years old and have lost everything they worked a lifetime to acquire. As was stated elsewhere, the purpose of the Bankruptcy Act is not to punish the bankrupts but to permit honest but unfortunate debtors - which I find the Witmers to be - to obtain a discharge from their debts so that they can reintegrate themselves into the community as useful and productive citizens free from the crushing burden of their debts.

7. The Court's judgment did not however have the effect of discharging the Witmers from civil actions which had been filed against them personally by two of their creditors. Those companies were specifically told in the decision that their court actions against the Witmers could continue.

8. In July 1993 Twin City Mechanical closed and terminated Mr. Witmer's employment. Since Mr. Witmer was now 58 years old he did not believe his chances of getting another job were very good. He therefore determined to return to doing plumbing himself. He got a new business loan, bought tools, equipment, and some inventory from Twin City which was going out of business, and looked for work. From September 1993 on Mr. Witmer did plumbing contracts, operating under the name D.E.W. Mechanical, which in July 1996 was incorporated as D.E.W. Mechanical Inc. ("DEW"). As he had been for Witmer, Mr. Witmer is the officer and director of DEW. He operates the business out of his home in Kitchener, and advertised the company through flyers which were delivered door to door, or through the mail. DEW did not advertise in newspapers, but was listed in the Yellow Pages of the telephone book.

9. Soon after he began to get work, Mr. Witmer realized that he needed some help after being away from the tools for almost 20 years. He therefore hired another plumber. In 1996 and 1997 the business began to get busier, so Mr. Witmer hired a second plumber. Neither of these two plumbers had worked for Witmer.

10. DEW had a different logo than did Witmer. While the trucks operated by Witmer had been white with black lettering, the truck colours for DEW were dark green with gold lettering. The company phone numbers were different. While the volume of work performed by DEW is much smaller than Witmer, the type of work performed is the same. DEW has an active customer list of about 10 or 12, out of which one customer was also a Witmer customer. That client, Schiedel Construction ("Schiedel"), accounts for about 50% of DEW's total sales. Most of DEW's work is now done in commercial and industrial settings.

11. DEW gets 99% of its work through a bidding process. Mr. Witmer claimed he was not aware that DEW had ever bid against any union contractors. However, he conceded the company had not bid through the bid depository so its bids would not have come to the union's attention because they would not get published in the Daily Commercial News or other newspapers. The major suppliers for DEW are different than Witmer's suppliers. Some minor suppliers may have been utilized by both companies. Mr. Witmer claims that the DEW company was visible in the Waterloo Region.

12. It was not until the late summer of 1997 that an anonymous caller telephoned the union and informed it that Mr. Witmer was back in business. Mr. Tom Crystal, the Business Manager for the union local called the Ontario Pipe Trades Council and asked for a corporate search to be done on DEW. When he found out that Mr. Witmer was the principal of the company the union filed a grievance and this application in September 1997. A further grievance was filed in November 1998.

DECISION

13. The union conceded that there are no indicia for a section 69 finding of a sale of a business, so the Board will not address the section 69 aspect of this application.

14. Section 1(4) of the Act states:

15. (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.

16. The responding parties concede that Witmer and DEW are associated or related companies, but claim they are not under common control and direction because of the intervention of Mr. Witmer's personal bankruptcy. It is suggested that while Mr. Witmer was a key person (as generally described in the Board jurisprudence) at Witmer, he is a different man than he was before the bankruptcy, and that as a result of the absolute discharge by the Court, he has shed all legal and financial obligations which may have attached to him when he was with Witmer. Counsel for the responding parties argues that as a result of the personal bankruptcy there is a legal intermption of the elements of common control and direction, and that the obligation to hire unionized labour is shed. It is also argued that there has been no erosion of bargaining rights in the circumstances of this case, and that there is no loss of work to the members of the union because DEW does not compete in the unionized sector of the construction industry.

17. In the event that the Board finds there is common control and direction, the responding parties argue that the Board should exercise its discretion not to make a declaration because there has been no erosion of the union's bargaining rights, DEW does not and has no plan to compete with union contractors, and in any event, DEW cannot compete with those contractors because of its size.

18. The union argues that Mr. Witmer by his own admission was and is the key person in both Witmer and in DEW. Witmer was bound by collective agreements with the union, and Mr. Witmer has simply resurrected his company after the recession. The union argues there has been an erosion of bargaining rights and loss of work for its members as DEW is still doing work for Schiedel, and indeed, 50% of DEW's work comes from that general contractor. Further, DEW has two employees, so work has been lost to members of the union. The union claims it did not know of DEW's work as the company was not bidding publicly, but once it heard about Mr. Witmer's new company, the union acted with dispatch and did not sit on its rights.

19. There is no case law to support the novel argument being made by the responding parties with respect to a breach in common control and direction. The Board has considered a number of factors when looking at whether there is common control and direction between two or more companies. It looks at whether there are common shareholders, directors or officers; whether the person who has the ultimate power to "call the shots" is the same in the companies; and whether that person controls labour relations decision making. (See Jen-Ry Utility Contracting Company Limited, [1984] OLRB Rep. Dec. 1724). In considering the "key person" issue, in Tn- Corps Industrial Contractors, [1994] OLRB Rep. Oct. 1446, at para. 86 the Board stated:

20. Some of the Board's decisions (See for example Ian Somerville Construction Ltd., supra, Kent Acoustics Limited, supra, and Steeles Electric, supra) have concluded that there was common control and direction where a key person left one entity and established a new entity later notwithstanding a hiatus of many years. Those cases however are readily distinguishable from the present as in each of those cases the entity which the key person left behind ceased to exist or operate after his departure. It is difficult to envision more compelling evidence of an individual's status as a "key person" with a company than the fact that the company ceases to operate when the key person is no longer associated with it. In those circumstances, when the key person returns at some later point in time to revive a business which has been dormant or non-operating during his absence, it is much more apparent that the key person is the "link" which establishes, for labour relations purposes, the common control and direction between associated or related activities of the separate entities (which are not at that point operating simultaneously).

21. In Elgin Street Mechanical & Plumbing Inc., [1999] OLRD No. 360, Feb. 5, 1999, the Board addressed the "key person" concept as follows:

22. The concept of the "key person" is often tied to business operations which are "bid oriented". That is, the Board has, in many cases, commented upon the significance of estimating, bidding, and project management skills in those situations where the success or failure of the business depends upon the ability to carefully bid on work opportunities (see, for example, Gallant Painting, [1991] OLRB Rep. Sept. 1051; Construction PH. Grager Inc., [1985] OLRB Rep. Feb. 233; Merit Contractors of Niagara, cited above, and Inplant Contractors Inc., [1993] OLRB Rep. May 421).

23. In this case Mr. Witmer was the directing mind of Witmer and there is no question that he is the directing mind of DEW. He was a licensed plumber at Witmer, and he continues to be a licensed plumber at the new company. He estimated and bid jobs and managed the projects at Witmer, and that is also what he does at DEW. Both of his companies do the same type of work, in the same general area. A most telling aspect of Mr. Witmer's importance to the two companies is that because of his reputation with Witmer he was able to get DEW 50% of its work from a former client of Witmer's. Witmer was no longer viable because of its financial state, and because the bank took over its management, and removed Mr. Witmer. Thus that business went dormant. However, when Mr. Witmer wanted to start up a new business, he was able to do so because he utilized the same skill set, expertise and experience he had utilized to operate the former company. This is a classic key person case, and it is also a classic case of common control and direction.

24. Does the fact of Mr. Witmer's personal bankruptcy change his position as a "key person" or as the individual who had and has common control and direction of the two businesses? I think not. Even the Court found that Mr. and Mrs. Witmer could continue to be pursued in their personal capacities by the two creditors who were suing them. All that the bankruptcy achieved was to rid the Witmers of their burden of debts. The fact of Witmer having been an organized company was not a personal financial burden or a debt carried by Mr. Witmer. The bargaining rights held by the union attached to the Witmer company. However, Mr. Witmer was the controlling and directing mind of that company, and he was the "key person" in that company until that company went out of business. However, when Mr. Witmer decided to go back into the same business he had been in before, and he again became the controlling mind of the new business, and its key person, then the union had the right to seek to establish that its bargaining rights should flow to the new company. The fact of the personal bankruptcy did not mean that Mr. Witmer lost his licence as a plumber, or that he shed his skills and ability to run a plumbing contracting business. Contrary to the argument made, the Board cannot find that as a result of the personal bankruptcy Mr. Witmer became a "new person", and therefore cannot be found to be either a key person or the same controlling mind that he was before.

25. Section 1(4) of the Act is designed to address just such a situation where a person or company is organized, runs into trouble or for other reasons goes defunct, and then is resurrected as a new company doing essentially the same business as it had formerly done. The Act seeks to protect the bargaining rights which had attached to the original business by mandating the Board to consider whether in each case the elements of section 1(4) are present. In such cases the Board can find the companies are associated or related businesses, and can direct that bargaining rights flow to the associated or related company. On the facts before me, I find that Witmer and DEW are associated or related businesses under common control or direction.

26. Having found that all of the elements of section 1(4) of the Act have been met, the Board must consider whether to exercise its discretion to make a declaration of relatedness. DEW is operating in the same business and in the same Board area as Witmer was, and the only difference at present is that DEW is a smaller company with fewer clients. The Board does not accept that DEW is not competing against union contractors or for unionized work as there is simply no evidence to prove that to be the case. The fact that DEW is doing work for Schiedel, which also had work done for it by Witmer when it was organized, suggests that DEW may well be bidding against other union contractors. In any event, DEW is working in the ICI sector of the construction industry, and as such is engaged in work in a heavily unionized sector.

27. The Board is satisfied that on the facts of this case a declaration should issue. Therefore, the Board declares that Witmer and DEW are one employer for the purposes of the Act, and that DEW is bound by and must recognize any collective agreements or bargaining rights held by the union in respect of Witmer.

28. The two grievances remain outstanding. Should the union wish to pursue these matters it should so advise the Registrar of the Board so that dates may be set for those two matters. I am not seized.