Ontario Labour Relations Board
0376-99-R Reitmans (Canada) Limited, Applicant v. The Carpenters’ District Council of Ontario, United Brotherhood of Carpenters and Joiners of America and United Brotherhood of Carpenters and Joiners of America, Local 2486, Responding Parties.
BEFORE: Mary Ellen Cummings, Alternate Chair.
APPEARANCES: Richard J. Charney, Bruno Eller and Scott Goodman for the applicant; Harold Caley and Charles Calligan for the responding party.
DECISION OF THE BOARD; October 31, 2000
This is an application pursuant to section 127.2 of the Labour Relations Act, 1995 (the “Act”). Reitmans (Canada) Ltd. (Reitmans) seeks a declaration that it is a “non-construction employer”.
The facts are not in dispute. I heard from a single witness, Reitmans’ long-time Vice President of Store Planning, Bruno Eller. Both counsel economically and co-operatively put before me all the information they thought relevant to my decision.
Reitmans is a 75 year old Montreal based retailer of clothing for men, women and children. It operates through three divisions, Penningtons, Reitmans and Smart Set, and 640 stores with those names are found in shopping centres and downtown areas across Canada.
Mr. Eller and the 14 people in his department are responsible for planning the construction and renovation of Reitmans stores across Canada. Construction and renovation are a constant activity at Reitmans. For example, on May 5, 1999, the date this application was made, there were 5 projects ongoing in Ontario.
Reitmans performs none of the actual construction and renovation work directly; it has consistently employed general contractors to carry out all the work at the sites. Reitmans at one time employed carpenters directly to assist in the installation of store fixtures. It was the employment of those carpenters that enabled the United Brotherhood of Carpenters and Joiners of America (the Carpenters) to acquire bargaining rights. Reitmans signed a voluntary recognition agreement in 1971 with Local 2486 in Sudbury and was certified by the Board in 1973 for Board Area 8. With the advent of province-wide bargaining in the ICI sector in 1978, these bargaining rights resulted in the Carpenters acquiring bargaining rights for the whole province. Reitmans has not directly employed any carpenters since 1981 or 1982. Increasingly, Reitmans left it to the general contractor to arrange the installation of all store fixtures, and did not replace its carpentry employees as they retired.
Mr. Eller testified that he was unaware that the Carpenters held bargaining rights for Reitmans until he received a complaint in April 1999 from Local 2486. Reitmans was building a new store in Sudbury, and retained a general contractor not in contractual relations with the Carpenters. Once Local 2486 satisfied Reitmans that it held bargaining rights, the grievance was settled. Shortly after, this application was brought.
Although Reitmans has engaged general contractors on numerous occasions over the years it has tended to choose “unionized’ contractors; in fact its preferred contractor in Ontario is bound to the Carpenters’ ICI agreement, so it is not at all surprising that the existence of the Carpenters’ bargaining rights was not an issue for Reitmans or for the Carpenters. Mr. Eller testified that it is the intention of Reitmans to continue to use “unionized” general contractors. However, Reitmans wants to be relieved of the obligation to engage only unionized contractors.
Mr. Eller described the work of the Store Planning Department. Reitmans retained outside design consultants to design a look and concept for each of the distinct chains it operates. Once the leasing area of Reitmans advises Store Planning that a new store is to be opened or an existing store is to be renovated, the draftspersons in Store Planning take the design concept and transfer it to the particular configuration of the store, starting with the plans provided by the landlord. Reitmans stores are typically tenants, located in malls and plazas. The initial plans will set out the location of change rooms and the cash desk; wall treatments; flooring; racking and product display. Those initial plans are then reviewed and changed or approved by the Operations area of the particular chain, then returned to Store Planning for execution.
Mr. Eller sets the scope of work and details the budget for each project. Store Planning prepares all the tender documents, which are extensive. Store Planning also draws all the detailed plans. These include those needed for heating, ventilation, air conditioning and sprinklers; electrical and light fixture specifications; plans for elevations and storefront; plans for the millwork contractor to build and install the cash desk; and all finishes, including carpet and tile specifications and configurations. Essentially, Store Planning provides all the drawings and specifications that the general contractor and any subcontractor would need to both price and execute the project. Store Planning then tenders the job, using a list of preferred general contractors. As I set out earlier, Mr. Eller indicated that he has a preferred general contractor in Ontario, but depending on work-load, it may not be able to meet all of Reitmans construction needs.
Store Planning chooses the successful bidder, then oversees the construction project. A Store Planning Supervisor will be responsible for a project, but will visit the site only intermittently. The Store Planning Supervisor is responsible for taking initial measurements for the draftspersons, for supervising the renovation, and acting as the contact between the general contractor and Reitmans. No one from Reitmans directs work at the site; that is the responsibility of the general contractor. The general contractor engages the subtrades, and manages all aspects of their work including quality and scheduling.
Outside of the general contract, Reitmans supplies a number of items. It provides all lighting; carpet; tiles; signage; wall brackets, hanging systems and hardware for merchandise display; security grill for the storefront; vinyl wallcoverings and the central vacuuming system. Reitmans also contracts directly with the millwork company that builds the cash desk. All these components are shipped to the job site, either directly, or through Reitmans’ traffic department, for installation by the general contractor or one of the subcontractors the general has engaged.
Store Planning receives and pays invoices, makes progress payments, and monitors “actual” to “budgeted” costs. Both renovations of an existing store and opening a new store are major construction projects, ranging in value from $100,000 to more than $300,000, with most in the range of $250,000. In 1999, an unusually busy construction year, Reitmans opened 24 stores and renovated 29 in Ontario. Mr. Eller explained that the schedule of construction is cyclical, and affected by the number of leases to be renewed (stores are typically renovated on lease renewal), the pace of new store growth, and Reitmans’ willingness to spend money on renovation. Mr. Eller anticipates considerably less construction in 2000, but there is no question that the renovation of existing stores and the construction of new stores is a regular, ongoing activity of Reitmans. The early 1990s saw an average of 3 to 5 new stores and the same number of renovations each year, with steady growth to 10 new stores and 10 or so renovations annually through the late 1990s, rising to the 24 new and 29 renovated in 1999.
It is noteworthy that Reitmans’ Annual Reports consistently report how many stores have been renovated, opened and closed as part of the President's "Report to our Shareholders". Mr. Eller agreed that the appearance of stores is an important factor in the success of a retailer like Reitmans and all stores need to be renovated every 7 to 10 years.
It is also worth noting that Reitmans does not design or plan stores for anyone else, that is, it is not “in the business” of designing retail space for the open market. Reitmans is a seller of fashion and as Mr. Eller put it, all of the company’s and employees’ work is devoted to some aspect of retailing clothing.
Argument and Decision
- It is useful to start with relevant excerpts from the Act.
1(1) “construction industry” means the businesses that are engaged in constructing, altering, decorating, repairing or demolishing buildings, structures, roads sewers, water or gas mains, pipe lines, tunnels, bridges, canals or other works at the site.
- “employer” means a person other than a non-construction employer who operates a business in the construction industry, and for the purposes of an application for accreditation means an employer other than a non-construction employer for whose employees a trade union or council of trade unions affected by the application has bargaining rights in a particular geographic area and sector or areas or sectors or parts thereof
“non-construction employer” means a person who is not engaged in a business in the construction industry or whose only engagement in such a business is incidental to the person’s primary business.
127.2(1) This section applies with respect to a trade union that represents employees of a non-construction employer employed, or who may be employed, in the construction industry.
(2) On the application of a non-construction employer, the Board shall declare that a trade union no longer represents the employees of the non-construction employer employed in the construction industry if, on the date the application is made, the non-construction employer does not employ any such employees represented by the trade union.
(3) Upon the Board making a declaration under subsection (2), and collective agreement binding the non-construction employer and the trade union ceases to apply with respect to the non-construction employer in so far as the collective agreement applies to the construction industry.
- In Greater Essex District School Board [2000] O.L.R.D. No. 642, at paragraph 32, the Board succinctly set out the “two part” test that every applicant must meet before it can be declared a “non-construction employer”:
In enacting section 127.2, the legislature intended, in our view, to provide for two types of employers; those who formerly carried on business in the construction industry, and no longer do so, and those who did so only to the extent of falling within the previous definition of a construction industry employer. Such employers are entitled to come to the Board to assert that their businesses or activities have, since becoming bound to the collective agreement, ceased to be involved in the construction industry at all, or to demonstrate that they meet the new definition of a non-construction employer and to answer the question of whether there were any employees employed in the construction industry on the application date. If the answer to both questions is affirmative, then the Board is directed to terminate the collective agreement that is no longer applicable to the employer’s business or activities.
In this case, there is no dispute that on the application date, May 5, 1999, Reitmans employed no employees in the construction industry, and had not done so for at least 17 years, so Reitmans has met the first part of the test. The remaining question, then, is whether Reitmans’ engagement in a business in the construction industry is incidental?
As the Board signaled in Greater Essex District School Board, an understanding of the Board’s jurisprudence and how it has historically defined who is an “employer” in the construction industry is key to comprehending the “non-construction employer” amendments. Although the Board’s ultimately expansive definition of “employer” in the construction industry evolved over time it was consolidated in The Municipality of Metropolitan Toronto, [1989] OLRB Rep. Mar. 279. At the risk of oversimplifying the facts, the IBEW held ICI construction industry bargaining rights for electricians and electricians’ apprentices employed by Metro. As a result, Metro became bound to the IBEW provincial collective agreement. That agreement prohibited Metro (and every other employer bound to that agreement) from directly or indirectly subletting work to an employer who was not a party to the IBEW provincial collective agreement. Metro engaged in a public tender process for modifications to its firing range. The successful contractor was not a party to the IBEW provincial collective agreement. The IBEW grieved, and Metro argued that it was not an “employer” in the construction industry, but merely an owner, and purchaser of construction services, and consequently, not bound to the IBEW provincial collective agreement except when it directly hired electricians. The Board disagreed. The statutory definition at issue then was:
117(c) “employer” means a person who operates a business in the construction industry
- After setting out jurisprudence that had found a municipality and a school board to be employers in the construction industry even when they did not directly employ tradespeople, the Board in Metro Toronto said at paragraphs 31 and 32:
- If it is at all relevant to ask whether a person bound by a construction industry collective agreement is a “person who operates a business in the construction industry” we do not accept that the question is to be answered in the negative if the person in question is a “mere purchaser” of construction services. In a broad sense, and except for individuals engaged only in the sale of their own labour, all those who operate businesses in the construction industry purchase construction services either from their employees or from independent contractors or both. Some do so in order to discharge obligations they have undertaken in a contract to supply construction services. Others do not. When interpreting the phrase “person who operates a business in the construction industry” in relation to certification applications, the Board has made no distinction between vendors of construction services and those who “operate a business in the construction industry” only with a view to enjoying the results themselves. We see no reason why such a distinction should be imported into the same phrase if the interpretation and application of that phrase is of some relevance to the disposition of a grievance arising under a collective agreement.
[emphasis added]
- As we have already observed, if being an operator of a business in the construction industry is a statutory prerequisite to being an “employer” who can be bound by a construction industry collective agreement, then it must be possible to be a “person who operates a business in the construction industry” in the sense intended by clause 117(c) without directly employing any construction workers. The only way one can in any sense “operate a business in the construction industry” without directly employing construction worker is by engaging an independent contractor or contractors to bring construction about. It necessarily follows that the mere purchasing of construction services from independent contractors must amount to operating a business in the construction industry in the sense intended by clause 117 (c) in at least some circumstances. Having regard to the purpose of the statutory provisions in question, we cannot see why the Legislature would have intended the phrase “operates a business in the construction industry” to apply to mere purchasers of construction services from independent contractors in some circumstances and not in others. It seems to us that if the phrase was intended to have continuing significance once a collective bargaining relationship is established, it must have been intended to describe anyone who effects construction, whether by hiring construction workers or by engaging contractors.
From that point on, the Board did not distinguish between vendors of construction services and owners who purchased construction services when the Board determined the obligations of “employers” in the construction industry. The non-construction employer amendments to the Act were intended to affect this line of law.
The Legislature accomplished this in two ways; it changed the definition of “employer” in the construction industry and created the “non-construction employer”:
“employer” means a person other than a non-construction employer who operates a business in the construction industry
“non-construction employer” means a person who is not engaged in a business in the construction industry or whose only engagement in such a business is incidental to the person’s primary business.
The legislation asks first, whether an employer remains in business in the construction industry and if the answer is yes, whether that involvement is only “incidental to the person’s primary business”. Employers who were once, but are no longer, engaged in businesses in the construction industry can be declared “non-construction employers”. Similarly, employers who were considered employers in the construction industry but whose involvement is only “incidental”, can be declared non-construction employers.
But it is significant to note that the Legislature did not change the definition of “construction industry”. The Board’s jurisprudence interpreting that definition is still relevant. As set out in Metro Toronto, that jurisprudence has consistently held that the words, “operates a business in the construction industry” describes anyone who effects construction, whether by hiring employees directly, or by engaging contractors.
Counsel for the responding party submitted that the Board should narrowly construe “non-construction employer”, and apply the provision only to entities whose involvement in the construction industry is not of a lasting or long-term nature. Counsel argued that Reitmans did not meet this test because it is regularly, indeed, constantly “engaged” in the planning, renovation and building of stores. The Store Planning Department is, counsel argued, exclusively “engaged” in the designing, drafting and procurement for construction.
Counsel for the applicant proposed a variety of tests that the Board could apply to determine whether or not a person is a “non-construction employer”. Although counsel’s proposals are interesting and thought-provoking, I conclude that the Board will be in a better position to enunciate tests once it has seen a range of fact situations and heard a broad number of submissions.
In this case, there is no doubt that Reitmans is a sophisticated and regular purchaser of construction services. There is also no doubt that Reitmans spends a lot of money on construction. In 1999, for example, construction and renovation of stores cost more than $13 million. It is also true that even in a year like 1999, where lots was spent, the figure amounted to only about 6% of sales revenue. I conclude that Reitmans’ engagement in the construction is “incidental” to its primary business as a clothing retailer. Reitmans regularly requires the renovation and building of stores but that involvement does not alter the characterization if its primary business as a retailer.
In my view, Reitmans represents a classic example of the type of situation for which the non-construction employer provisions were intended. Reitmans has not employed persons in the construction industry for nearly two decades and its entrepreneurial focus is on selling clothes to families, not on building structures.
Counsel for the responding party submitted that the applicant should be prevented from succeeding in this application because of the events that led up to it. As Mr. Eller admitted, until April 1999, Reitmans did not realize that it had collective agreement obligations to the Carpenters. Once it found out, Reitmans settled the Sudbury grievance, and then brought this application.
Counsel for the responding party submitted that Reitmans is now either estopped from bringing this application, or the Board should view its conduct as an unfair labour practice. Counsel relies on Reitmans’ settlement of the grievances, in which it acknowledged that it was bound to the Carpenters’ Provincial ICI collective agreement. To so quickly seek to get out of that agreement should be viewed by the Board as inappropriate.
Every construction employer who brings an application to be declared a non-construction employer is bound to a collective agreement in the construction industry. Otherwise, there would be no reason to bring the application. There is nothing in Reitmans’ conduct that could arguably give rise to an estoppel or found an unfair labour practice.
The Board concludes that Reitmans has met the statutory pre-conditions for a declaration that it is a non-construction employer.
However, the responding party has delivered and filed a Notice of Constitutional Question in this matter. The responding party submits that section 127.1 and 127.2 violate the Canadian Charter of Rights and Freedoms, in particular, sections 2(d), 7 and 15. The parties agreed that this argument would only need to be addressed in the event that the Board found in favour of the applicant on the substantive issues under the Labour Relations Act. In view of the Board’s findings that Reitmans is a “non-construction employer”, the parties are directed to contact the Registrar to arrange for hearing the Charter issues.
This panel of the Board is seized.
“Mary Ellen Cummings”
for the Board