Service Employees International Union, Local 204 v. Durham Access to Care, 2000 CanLII 12981

Service Employees International Union, Local 204 v. Durham Access to Care

File No.: 3227-99-R Date: November 30, 2000 Ontario Labour Relations Board

Between: Service Employees International Union, Local 204 (Applicant) and Durham Access to Care, Canadian Red Cross Society (Ontario Zone), Comcare Independent Living Inc., Kawartha Quality Care Inc., ParaMed Health Services, and Bayshore Health Care (Responding Parties) and Ontario Nurses Association (Intervenor)

Before: Gail Misra, Vice-Chair

Appearances: Elizabeth J. McIntyre and Tim Gleason for the applicant and the intervenor Glenn Christie and John MacKenzie for Comcare Amanda Hunter and Sean Leighland for Red Cross Daina Groskaufmanis for Bayshore Sandi Tanner for ParaMed Maureen Houston and Tom Oleson for Durham Access to Care Lee Shouldice, Lyn Linton and Deborah Warren for Kawartha

DECISION OF THE BOARD

1. The responding parties have requested as a preliminary matter that the Board dismiss this application without hearing its merits on the basis that the application fails to establish a prima facie case for sections 69 and 1(4) findings and remedies. In its decision of October 25, 2000 the Board dismissed the section 69 application. In that decision the Board also indicated that it was satisfied that the application disclosed a prima facie case that the responding parties are associated or related activities or businesses, carried on through more than one corporation, under common control or direction, pursuant to section 1(4) of the Labour Relations Act, 1995 (the "Act"). However, the Board directed the parties to make oral arguments on the subject of whether or not it would or should exercise its discretion to make a section 1(4) declaration even if all of the prerequisites of that section had been satisfied.

2. On November 1 and 2, 2000 a hearing was held to receive the parties' submissions regarding the latter issue. As in earlier arguments made to the Board, the responding parties made a joint submission, and then some responding parties added their particular submissions as an addendum. Ms. McIntyre argued on behalf of the applicant (the "SEIU"), and when necessary, on behalf of the intervenor ("ONA").

3. In the October 25, 2000 decision the Board outlined the context in which this application arises. In order for the reader to better comprehend the nature of the application, paragraphs 5 to 13 of that decision are reproduced below:

5. In Board File No. 3227-99-R the Service Employees International Union, Local 204 ("SEIU") has bargaining rights for "all employees" of the Red Cross Homemaker Services of the Canadian Red Cross (Ontario Zone) in the Regional Municipality of Durham ("Red Cross"). The employees represented are homemakers, household support workers or attendants, and are collectively referred to as "homemakers". The Red Cross has for some time received contracts for the provision of homemaking services to clients of the Durham Access to Care.

6. There appears to be no dispute that SEIU has never had bargaining rights for any employees of Durham Access to Care ("DATC"), and neither the DATC nor its predecessor have ever employed homemakers. Similarly, it appears that the SEIU has never had bargaining rights for the employees of Comcare Independent Living Inc. ("Comcare"), Bayshore Health Care ("Bayshore"), Kawartha Quality Care Inc. ("Kawartha"), or Paramed Health Services ("Paramed"), all of which are responding parties to this application and are also service providers providing homemaking services under contract to the DATC. There also appears to be no dispute that each of these responding parties is a separate corporate entity with no common ownership as between them.

7. The SEIU is claiming that the DATC conducted a competition for homemaking services the result of which was that part of the business that the Red Cross used to provide has been transferred to the other service providers, Comcare, Bayshore, Kawartha and Paramed. The SEIU further claims that this transfer of part of the business of the Red Cross constitutes a sale of a business under section 69 of the Act, and that all or some of the responding parties together constitute a related employer within the meaning of section 1(4) of the Act. As a consequence, the SEIU claims as a remedy that all of the responding parties should be bound by the existing collective agreement between the SEIU and the Red Cross.

8. The SEIU asserts in its application that the Red Cross and the DATC are not-for-profit corporations without share capital. Comcare, Kawartha, Paramed and Bayshore are private, for-profit corporations. The DATC purchases long-term care services from outside service providers, who in turn actually deliver to or perform the services for individual clients. In order to purchase services the DATC enters into contracts for services with both the for-profit and not-for-profit service providers through a managed competition process.

9. According to the SEIU application the DATC exercises management and control over the delivery of long-term care services through the service providers in a number of ways which the application describes in some detail. Suffice it to say that the SEIU is generally claiming that the DATC screens potential participants in the Request for Proposal ("RFP") process, conducts the RFP process, and awards contracts. It enters into detailed service agreements with the service providers, and those agreements regulate virtually all aspects of their service delivery. The DATC then determines what services will be provided to individual clients and assigns the client to be served to particular service providers. Finally, the DATC funds the service providers and supervises their budgets.

10. The SEIU goes on in its application to give extensive detail about the type of information the DATC seeks about the service providers, and what it expects the service providers to do in order to comply with the DATC's service expectations. Essentially the SEIU is alleging that the DATC exercises very detailed control over the way in which service providers and their employees deliver services on behalf of the DATC.

11. In support of its contention that there has been a sale of a business, the SEIU claims that for many years the Red Cross was the primary service provider for homemaking services in Durham region. After the introduction of the RFP process in 1997 the Red Cross received an ever-diminishing percentage of the available homemaking work, until in April 1999 it had no protected volume of work at all. Even though the Red Cross participated in the RFP process, and was successful in getting a percentage of the available homemaker services work, the SEIU alleges that work previously performed by the Red Cross homemakers was transferred to Comcare, Kawartha, Paramed, and Bayshore, who were other successful bidders for the same work. It therefore claims that all or part of the homemaking business of the Red Cross was transferred to one or more of the responding parties.

12. The SEIU claims that prior to the transfer of work by the DATC from the Red Cross to the other service providers, the Red Cross had 201 full and part-time bargaining unit employees. By August 1999, after the transfer of work, the Red Cross had 161 full and part-time employees in the SEIU bargaining unit, and the hours worked by those employees had been reduced. The SEIU further claims that after the other service providers were successful in getting contracts from the DATC, many former Red Cross employees went to work for the other service providers for lower hourly rates of pay. The SEIU concedes that some of the work transferred to Comcare has since returned to the Red Cross.

13. The SEIU alleges that all of the responding parties are providing substantially the same services that had been provided by the Red Cross, to the same clients, in the same geographic region. Therefore, the SEIU claims that there has been a transfer or sale of all or part of the business of the Red Cross to the DATC, Comcare, Kawartha, Paramed, and Bayshore within the meaning of section 69 of the Act. It further claims in the alternative that one or more of the responding parties are related employers within the meaning of section 1(4) of the Act.

4. Section 1(4) states:

1. ............... (4).......... Where, in the opinion of the Board, associated or related activities or businesses are carried on, whether or not simultaneously, by or through more than one corporation, individual, firm, syndicate or association or any combination thereof, under common control or direction, the Board may, upon the application of any person, trade union or council of trade unions concerned, treat the corporations, individuals, firms, syndicates or associations or any combination thereof as constituting one employer for the purposes of this Act and grant such relief, by way of declaration or otherwise, as it may deem appropriate.

5. For the purpose of the argument made and dealt with in this decision the responding parties accept that the applicant has established, on a prima facie case basis, that all of the prerequisites of section 1(4) can be found. However, they take the position that the Board should not and would not exercise its discretion in this case even if it heard all of the evidence and was satisfied that the elements of section 1(4) of the Act had been established. They therefore ask that the Board decline to hear the application.

6. The responding parties argue that section 1(4) was never meant to remedy the type of situation being addressed in this application since the problem here is an economic rather than a labour relations one. The gist of the argument made is that the SEIU is seeking to expand and enhance its bargaining rights, and to inoculate itself against the vagaries of the competitive marketplace. The responding parties argue that there is no labour relations mischief in the situation here that would require the remedy of a section 1(4) declaration. To the extent that the applicant can claim there is any erosion of its bargaining rights, the responding parties argue that that erosion is artificial and is due to the competitive process.

7. The SEIU argues that the Durham Access to Care's ("DATC") level of supervision of the service providers would be sufficient for the Board to find that it is a related employer to the Canadian Red Cross Society (Ontario Zone) ("Red Cross") within the meaning of section 1(4) of the Act. It further argues that the competitive bidding process for work has so substantially changed the pre-existing conditions under which the Red Cross used to get work that there are now serious labour relations concerns which warrant a Board declaration. The SEIU argues that a declaration would facilitate meaningful collective bargaining between the employees of the Red Cross and their real employer, the DATC. Further, it would stop the erosion of bargaining rights by ensuring that even if the Red Cross lost work to other service providers, the union's bargaining rights would not be eroded because all of the service providers would be treated as being part of one employer.

8. Rather than outlining the details of the parties' arguments, they are dealt with in the remainder of the decision.

9. The union argues that the section 1(4) declaration is necessary in order that it may know who is the real employer or employers. It asserts that the DATC holds all of the economic power as all funding to the service providers flows through it. Further, the DATC is alleged to be involved in every aspect of the homemaker services. The union therefor believes that the DATC should be at the bargaining table and it states that it is not sure who the real employer is. It asserts that each of the responding party service providers is not an independent employer in its own right.

10. The union referred the Board to the decision in Brantwood Manor Nursing Homes Limited, [1986] OLRB Rep. Jan. 9, in support of its argument. In that case a nursing home contracted with other agencies for housekeeping, laundry, maintenance, health care and nursing aide functions that had been done by its own unionized employees. It laid off its bargaining unit employees. The Board granted the union's application for a related employer declaration. In reaching its decision the Board considered the extent to which the union's representation rights and rights won through collective bargaining had been deliberately or consequentially eroded when the employer changed the way it did business (see para. 79). The Board considered the jurisprudence regarding subcontracting and reiterated that some subcontracting relationships may fall within the ambit of section 1(4). However, the situation in each case where a single employer declaration has been made is of a unionized employer who has contracted out work, but has maintained such a level of control as to lead to the conclusion that it is still the true employer. Thus, if the unionized employer seeks to use a separate non-union vehicle to continue to perform the type of work its own organized workforce used to do, the Board is more likely to find that the employers are related within the meaning of section 1(4). (See for example Complete Car Care Centre, [1983] OLRB Rep. Aug. 1293; J. H. Normick Inc., [1979] OLRB Rep. Dec. 1176; Donald A. Foley Limited, [1980] OLRB Rep. Apr. 436; and, Kennedy Lodge Inc., [1985] OLRB Rep. Nov. 1585.)

11. It was in the very particular context in Brantwood Manor that the Board went on to speak to the question of the importance of knowing who the real employer is. The Board stated:

101. When the application of subsection 1(4) is in issue, the Board is concerned with the definition or potential redefinition of a continuing collective bargaining relationship, not with the assignment of vicarious liability for an occasion of negligence, nor solely with the interpretation and application of the language of a collective agreement. If there is a serious debate over which of two entities is the employer of persons who are conceded to be someone's employees, that will be because some of the important attributes of an employer can be seen in each of them. When each of the entities appear to have a real stake in and influence on matters of relevance to the labour relations of employees in a bargaining unit, then even from their perspective it may make sense to treat them both as the employer for labour relations purposes than to choose between them and designate one as employer for labour relations purposes to the exclusion of the other, who might for other purposes be treated as employer. The possibility that a choice is unnecessary or inappropriate should be considered before the choice is made.

(Emphasis added)

12. In addressing the matter of whether there is any real question about who the employer is, the Board will also consider one of the responding parties' arguments. They argue that the SEIU is seeking to expand its bargaining rights because when the union was voluntarily recognized as the bargaining agent for the Red Cross homemakers in early 1999, the other responding parties were already in existence and the competitive bidding process had been utilized by the DATC since 1997. Yet, at that juncture of getting its bargaining rights the applicant did not seek to have the DATC, or any of the other service providers at the time, joined as related employers. It is suggested that there was already extant the competitive bidding environment with a number of players in addition to the Red Cross. Therefore, the responding parties ask what has changed that would cause the Board to extend the applicant's bargaining rights to parties who existed at the time of the voluntary recognition, who were service providers at that time, and who the applicant did not seek to have unionized at the time by claiming that they all constituted one employer.

13. In Federated Building Maintenance Company Ltd., [1985] OLRB Rep. Nov. 1585, the Board reviewed the applicability of section 1(4) to subcontracting arrangements where a union had organized the workers of a building-cleaning contractor at a specific building. In that instance at the time of certification the cleaning contractor had an established contract with its customer, the owner of the building. The Board noted that the union did not suggest during the certification process that the customer was a related employer within the meaning of section 1(4) of the Act. The Board went on to state "nor could there have been [any relatedness alleged] without automatically creating a requirement to establish support among a much broader employee constituency encompassing employees of both employers" (see para. 28). The Board noted it was a novel case at the time. It is worth quoting at some length from the decision as it has considerable relevance to the matter before the Board in the present case:

31. Despite the able submissions of counsel for the applicant union and the many authorities referred to, we do not think that the circumstances of this case raise any new principles, nor is it necessary to undertake any substantial review of the Board's developing jurisprudence. … The only novelty lies in the identity of the applicant: a union representing the employees of a subcontractor claiming (somewhat belatedly) that the subcontractor and its customer should be treated as one employer for labour relations purposes. Such claims are more commonly made when a unionized employer retains a subcontractor to perform work ordinarily done by its own employees and their union invokes section 1(4) to prevent an erosion of work opportunities.

32. We accept the union's proposition that section 1(4) may be broad enough to cover some of subcontracting arrangements – especially those which do not involve "contracting out" but which might more appropriately be described as "contracting in" or "labour only" subcontracting. Where "A" enters into a relationship with "B", whereby "B" comes into "A's" premises to perform functions to "A's" detailed specifications which were or might be undertaken by "A's" own employees, there will inevitably be something of a "symbiotic relationship" between the two business entities. Their activities will be complementary. They will necessarily be "related" in a general sense, and efficiency will usually require that there be some degree of co-ordination. Moreover, the more closely the purchaser of employee services controls when, where, how, by whom, and at what price the employees services are provided, the more the activities will appear to be under joint control and direction. If at the same time, the subcontractor is effectively dominated by the purchaser or it appears that the notion of a subcontract was introduced to provide a separate non-union corporate vehicle which permits the purchaser to have the same work performed in much the same way as before, but beyond the ambit of its collective agreement, the Board may well find that a section 1(4) declaration is warranted.

33. Section 1(4) permits the institutional rights of a trade union and the contractual rights of its members to attach to a definable commercial activity regardless of the particular legal vehicles through which that activity is carried on. Legal form or changes in form will not necessarily dictate, fragment, or undermine a collective bargaining structure. Two firms – quite separate in law – can be treated as one employer for collective bargaining purposes, and the union need not pursue the often-difficult question of who would be the "real employer" applying common law tests. Moreover, if a particular commercial relationship falls within the ambit of the language of section 1(4) and the facts establish the mischief which section 1(4) was designed to avoid, it does not avail respondents to claim that they are separate companies with merely a "subcontracting" relationship. There is no magic in terminology. On the other hand, while many subcontracting arrangements might arguably fall within a literal reading of the language of section 1(4), we do not think the statute was ever intended to collapse the vast majority of bona fide contracting relationships. Section 1(4) is clearly discretionary, and should be applied only where there is clear evidence of the mischief it was intended to avoid.

34. From an analytical point of view, the circumstances of this case are really quite similar to those before the Board in The Charming Hostess Inc., supra, Ethyl Canada Inc., supra, and, more recently, Caressant Care Nursing Home of Canada Limited, supra. In each of those cases, the Board found that the particular subcontracting arrangements under review did not trigger the application of section 1(4), even though the parties had a close commercial relationship. Indeed, if anything, the facts here present an even weaker case for a section 1(4) declaration.

(Emphasis in original)

14. The Board went on in paragraphs 35 and 36 of the decision to review the facts of the case before it and noted particularly that Federated (the cleaning business) was an independent business with its own established employee complement. It operated for the benefit of its own principals to provide specialized services to a variety of customers, of which O & Y was one. The Board reviewed the two companies and noted that they had none of the normal indicia in related employer cases. The Board noted that Federated was not a "mere shell or device to avoid collective bargaining obligations" nor was it an instrument of O & Y. It recognized that because the cleaning business is extremely competitive, O & Y had considerable leverage as a customer. It also noted that there was great specificity in the cleaning contract, but found nothing turned on that fact, as there are detailed contracts in other sectors of the economy, like the construction industry. The Board stated that "a degree of functional interdependence is inevitable, and implicit in many subcontracting arrangements" (see para. 36).

15. In summing up its decision in Federated Building Maintenance the Board went on to state:

37. This is not a case in which an employer has shifted workers from one corporate vehicle to another, or where the union's bargaining rights have been undermined. There is no erosion in the sense of a transfer of work to the allegedly related employer. O & Y has never done its own cleaning. If Federated is no longer competitive, the work will go to another subcontractor, not employees of O & Y. If that happens, the union's bargaining rights will disappear, and the employees may have only limited rights to work opportunities in other parts of Federated's organization; but that is the entirely foreseeable consequence of the union's decision to root its bargaining rights in a single work site, and a commercial relationship which is subject to the competitive pressure of market forces. Finally, there has been no fragmentation of an established bargaining structure of the kind which attracted comment in Penmarkay Foods Limited, [1984] OLRB Rep. Sept. 1214. No new corporate vehicles have come into existence nor have O & Y and Federated changed the essential nature of their relationship. O & Y has merely pointed out that, in a period of restraint, it would not pay more than the "going rate" for services which could easily be provided by Federated's competitors – a message (undoubtedly true) which Federated passed on to its own employees.

38. If the Board were in any doubt as to the applicability of section 1(4) and the desirability of making a "related employer" declaration, such doubts disappear when one considers the effect which such declaration would have. Prima facie, O & Y and Federated would each become bound by the collective bargaining obligations of the other, including such obligations as there may be with unions other than the applicant. Prima facie, the unorganized workers of O & Y would be swept into the applicant's bargaining unit, and there would be an immediate conflict with the collective agreements of other unions. O & Y would find itself dealing with the applicant, and Federated would notionally become a party to O & Y's collective agreements. It may be that under section 1(4) the Board has the authority to "fine tune" its order so as to avoid such problems, however, in the circumstances of this case, we see little need to make any order at all. The facts simply do not disclose the circumstances or the mischief for which section 1(4) was the intended remedy.

16. In the case before me the situation is somewhat analogous to that in Federated Building Maintenance. The SEIU successfully sought voluntary recognition from the Red Cross in early 1999 when the competitive bidding process had been in place for the homemaker work for about two years. The application notes that the Red Cross had been receiving less and less protected volume, and that a growing percentage of what had been the Red Cross' homemaker work was being put to tender. The applicant represents people working across the province in the health care sector. It knew or ought to have known that as of April 1999 the Red Cross would have no protected volume but would be bidding in the same way as any other service provider seeking work. That was the environment in which the SEIU got its bargaining rights.

17. At that juncture the applicant did not claim that the DATC or any other service provider was a related employer. It apparently had no trouble identifying who the real employer was. It did not seek voluntary recognition from any of the responding parties other than the Red Cross but in any event, it would be difficult to imagine what the basis for the union seeking bargaining rights from those responding parties would have been. The Board is therefore of the view that there is no need in this case to clarify who the real employer is and a section 1(4) declaration for that purpose is unnecessary.

18. SEIU argues that the Board should exercise its discretion to make a section 1(4) declaration in this case because the Board could then, by way of remedy, create a viable bargaining structure for all of these parties and for any newcomers to the industry. It suggests that even if it organized each of the service providers that would not be the end of the matter. New service providers may be successful in bidding for work, thus leaving the union with a moving target. The union asserts that if the Board does not intervene to declare all of the service providers and the DATC to be one employer, there will not be a viable bargaining structure in place in this industry. The SEIU claims that multi-entity bargaining is consistent with the rest of the health care field, especially with hospitals and some private nursing homes.

19. The Board has no trouble stating that this is not an argument that the Board finds compelling. It is one thing for organized employers to decide among themselves to engage in joint bargaining with a trade union, it is quite another for the Board to impose such a structure on heretofore unorganized entities in the context of a section 1(4) declaration. The hospitals that participate in central bargaining with the SEIU and ONA are all organized by these unions and have long-established relationships. They have voluntarily decided to participate in central bargaining and have not had the Board impose a bargaining structure upon them. While the SEIU claims that some nursing homes also bargain centrally, it is noteworthy that many do not. Again, it is a voluntary association of unionized nursing homes that participates in a form of central bargaining, and they do not do so as a result of a Board order.

20. The Board was referred to Diamond Taxicab Association (Toronto) Limited, [1995] OLRB Rep. June 753, as an example of a situation in which the Board imposed a bargaining structure on parties in the context of a section 1(4) application. That decision is of no assistance as in that case all of the parties upon whom the Board imposed the bargaining structure were already certified. The parties had been having great difficulty in bargaining for a collective agreement because all of the certified employers were not at the bargaining table. The Board looked at the economic and functional integration among the employer responding parties, and the fact that the employers already had the union as the bargaining agent, and decided that a bargaining infrastructure would be appropriate. That is not the case before me, and the Board would therefore not be likely to impose a bargaining regime. There is no caselaw to support the type of remedy the applicant is seeking in the situation where there is one organized employer and numerous other non-union employers who have never had to bargain with a union at all, let alone being forced to bargain collectively.

21. The Canada Labour Code contains a unique provision that legislatively grants what the SEIU is seeking in this application. Section 34 of the Code refers to employees employed in the long-shoring industry. Pursuant to this section, the Canada Industrial Relations Board may determine that the employees of two or more employers actively engaged in the long-shoring industry in a geographic area constitute a unit appropriate for collective bargaining. The employer group, as there would be more than one employer involved, must choose one of the employers as the employer representative and that representative then has the obligation to bargain on behalf of all of the employers. Thus, the Code provides for consolidated employer bargaining and aims to minimize the potential for instability in that industry. It in essence creates a type of monolopy as any new employer getting work in the designated dock area is caught by the certification order and becomes bound by the collective agreement (see Halifax Grain Elevator Ltd. (1989), 76 di 157 (CLRB #725)).

22. As is obvious from the above-noted discussion of section 34 of the Canada Labour Code, it takes special legislature provisions to force unrelated parties into monopolistic, sector-based bargaining relationships. There is nothing in the Act to suggest that Ontario legislators ever contemplated such a drastic measure for any industry. Even the special construction industry provisions in the Act only apply to employers who are unionized.

23. For all of the reasons outlined above there is no basis upon which the Board would exercise its discretion under section 1(4) of the Act to grant the union the remedy of multi-entity bargaining in the circumstances of this application.

24. The responding parties are particularly concerned that what the applicant is seeking to do in this application is to expand its bargaining rights up from the only organized service provider, the Red Cross, to the actual body that gives out the contracts, the DATC, and then back down again to all other service providers who are also receiving homemaking services work from the DATC. They argue that this is not a case of an organized employer changing its form in such a manner that it, wittingly or otherwise, circumvented the union's bargaining rights.

25. In Canada Stampings & Dies Ltd., [1996] OLRB Rep. May/June 355, the Board addressed "upstream" section 1(4) applications as follows:

57. The discretion as to whether to issue a subsection 1(4) declaration is exercised by the Board in various circumstances. It is not generally exercised in an "upstream" application, that is where the union has acquired bargaining rights in a subsidiary or subordinate operation and then seeks to flow "upstream" to secure bargaining rights under subsection 1(4) in the principal operation. That was the case, for example, in Bramalea Carpentry Associates, relied on by Stamptech's counsel and referred to above. In other words, where the union seeks a subsection 1(4) order as a substitute for certification in circumstances in which, but for the existence of two separate legal personae, it would not have had bargaining rights, the Board will decline to exercise its discretion. We understand the decision in B & M Millwork Ltd., [1991] OLRB Rep. Apr. 438, relied upon by Stamptech's counsel, to have been made in that context. The circumstances in which the Board will exercise its discretion under subsection 1(4) are those in which the union would have exercised bargaining rights, but for the intrusion of a different corporate entity. In other words, if a union's existing bargaining rights are adversely affected, or if those rights are potentially adversely affected, by the operation of a related or associated business then the Board should exercise its discretion to make a declaration under subsection 1(4).

26. As in the Canada Stampings case, this is an application in which the union is seeking a section 1(4) declaration 'upstream' to the DATC. However, it is also seeking such a declaration laterally to all of the other service providers who are in a similar position to the Red Cross. As the Board noted in Canada Stamping, it does not generally exercise its discretion in an "upstream" application. However, the Board would assess each case on its own merits and look at whether there was some labour relations mischief to remedy.

27. Hence, even if all of the prerequisites of section 1(4) have been established, in order for the Board to make a section 1(4) declaration it must also be convinced that there is some labour relations mischief that must be remedied through the declaration. In Industrial Mine Installations Ltd., [1972] OLRB Rep. 1029 at page 1031, the Board described the mischief that section 1(4) is designed to remedy:

Section 1(4) is obviously contemplated to cure the mischief that results from being unable to properly define and tie down the employment relationship. In many situations where companies have a close relationship an employee may be shifted from one company to another so that his employment relationship, at any given period, is difficult to define in terms of one employer. So too, the number of employees employed by one of those companies at any given time may be impossible to ascertain.

Also, in some situations where a union had been granted bargaining rights for the employees of one employer, the employees could be shifted to another associated or related employer with the result that the bargaining rights which had been earned by the trade union for employees was lost.

So too, in the case where associated or related employers joined in a common enterprise and used one work force, which was shifted and transferred from time to time, the certification with respect to one employer only was, in effect, a certification of a segment of the total enterprise, and could seriously impair the totality of the business operations by inhibiting the shifting of employees between union and non-union segments of the enterprise. …

28. As described above, section 1(4) is designed in part to cure the mischief that may result from not being able to adequately define the employment relationship. As has been addressed earlier, that is not the case here. The SEIU had no trouble in defining the bargaining unit it was seeking to represent in 1999, and it apparently knew who should be in that bargaining unit. It was also satisfied with who the employer was. On that basis, it got the Red Cross to voluntarily recognize it as the bargaining agent for those employees.

29. The second mischief that the section is designed to address is the erosion of bargaining rights. From the Board's review of the application and the union's submissions it is clear that what the union calls an erosion of bargaining rights is the loss of work to the Red Cross as a result of the competitive bidding process. The union further considers it an erosion of its bargaining rights that the number of employees now employed by the Red Cross is lower than it used to be. While the Board accepts the union's pleadings regarding the loss of work and members, that is not to say that the Board would necessarily characterize the situation as an erosion of bargaining rights. In a prima facie review the Board accepts as true and provable all of the applicant's pleadings of fact. It does not accept all of the applicant's positions on the legal implications of those pleadings of fact. That is precisely what the Board must ultimately decide.

30. In this case there may be erosion of bargaining rights simply because the Red Cross may not always be successful in the competitive bidding process. However, the union knew at the time that it organized the Red Cross bargaining unit that the Red Cross had to bid for work from the DATC. It therefore knew the milieu in which it was gaining bargaining rights, and as in Federated Building Maintenance, knew that its rights were subject to certain market forces.

31. Is that the type of erosion of bargaining rights that section 1(4) is aimed at? The Board has consistently held that the section was not intended to collapse legitimate subcontracting relationships, and that there must be clear evidence of mischief before the Board will exercise its discretion under the section. Thus, in subcontracting cases the Board looks at whether the subcontractor is an independent business or is a vehicle through which collective bargaining obligations are being or can be avoided.

32. The Board is of the view that the situation in Durham region regarding the contracting for homemaker services is not a scheme to defeat the SEIU's bargaining rights. Further, it is not a "double breasting" situation as is found in the cases in which the Board has made a declaration under section 1(4) of the Act. It is a situation in which a government initiative and policy is having an impact on the volume of work being awarded to the Red Cross. The government, which provides most if not all of the funding in the long-term care sector, decided in 1996 that it wished to move to a managed competition model for the delivery of home care services. Prior to 1996, the Red Cross had received homemaking work in the previous delivery of health care model. It was given two or three years to become competitive in the new tendering for work model. It appears that in the competitive model the Red Cross has lost some of the work it previously used to get, but it is to be remembered that it was already losing that work even before the union got its bargaining rights for the homemakers in 1999.

33. In the last two years the Board has on a number of occasions made findings of fact with respect to the formation of Community Care Access Centres and the Request for Proposal process. Based on the Board's experience in this sector, it accepts that the competitive bidding process was not designed to circumvent the SEIU's bargaining rights. Rather, the Board is of the view that the competitive bidding process is a practical aspect of a health services public policy initiative instituted by the provincial government in 1996. That was before the SEIU had any bargaining rights with the Red Cross. Thus, it cannot be said that the Red Cross or the DATC were acting in a manner designed to undermine the union's bargaining rights. The impact of the move to a competitive bidding model may have the consequence of the Red Cross losing some or all of the homemaking service work that it presently has from the DATC, but that does not automatically mean that there is some labour relations mischief that the Board should rectify. In the particular circumstances of this case the Board cannot characterize the loss of work to the Red Cross as an erosion of the union's bargaining rights that would require the remedy of a section 1(4) declaration.

34. It is noteworthy that in section 1(4) cases the Board is normally considering situations where the employer, or the ostensible employer, of persons in a bargaining unit is seeking through a separate corporate entity to carry on a business or activity that may or does have the effect of eroding a union's bargaining rights. As is obvious from a reading of the Canada Stampings & Dies Ltd. decision, cited above, it is the relationship between a bargaining agent and an employer that is usually of concern. Hence, the Board looks for the actions of the organized employer, or its surrogate, when considering whether to exercise its discretion, and it seeks to preserve a union's bargaining rights, not to permit the expansion or extension of those bargaining rights. In the present case it appears to the Board that what the union is seeking is an expansion of its bargaining rights "upstream" to the DATC and laterally to the unorganized service providers.

35. In STM Specialized Transit Management Corporation, [1991] OLRB Rep. July 900, the Board addressed a request for both an "upstream" and lateral section 1(4) declaration. In that case the Toronto Transit Commission ("TTC") had initially contracted for transit services for disabled persons with one company, All-Way. However, it subsequently gave the contract to STM. STM and All-Way were conceded to be carrying on related activities under common control or direction because both companies were wholly owned subsidiaries of Vitran Corporation Inc. The Board made a section 1(4) declaration with respect to STM and All-Way.

36. The union had also asked the Board to find that the TTC and STM were related, but the Board dismissed that application. The union claimed that while the TTC had subcontracted the services, it had retained effective control of it. The TTC conceded that it had a level of control over the service, but suggested that was simply because it had prudent terms in its commercial contract with the subcontractor. In considering the relationship between the TTC and STM the Board noted that while the TTC had provided a service for the ambulatory disabled for about 15 years, it had never provided that service through its own employees but rather the service had been provided by subcontractors (see para. 26). The Board went on to state:

27. The authorities relied on by both counsel demonstrate that the Board has accepted the proposition that the terms of a commercial contract between two or more nominally dependent entities can be brought within the reach of subsection 1(4) of the Act. Whether such entities are under common direction or control within the meaning of that subsection depends on whether control over the work which is the subject of the contract has passed to the subcontractor, or whether the employer with the collective agreement obligation simply has substituted the subcontractor's employees for its own without giving up control and direction of the employees. See Charming Hostess, supra, at paragraphs 42-44.

37. In STM, cited above, the Board had before it a situation of two companies that were wholly owned subsidiaries of a larger entity. The organized company had had a contract for work with the TTC. The TTC took the work back, and then gave it to the unorganized company. As a result, the union effectively lost its bargaining rights as all of what its members had been doing in the organized company had now gone to the unorganized arm. It is not difficult to see why the Board had no trouble making a section 1(4) declaration in that case as it was a classic case showing the mischief that the section is designed to address. An organized employer was related to an unorganized company that became the recipient of a contract for work, thus eroding the trade union's bargaining rights. However, it is noteworthy that the Board denied the union's request to declare the TTC and STM were related employers within the meaning of the Act despite the level of control that the TTC exercised through the terms of its contract with STM.

38. The Board has considered other fact situations in which one or more of the responding parties to a section 1(4) application have not themselves had employees who did bargaining unit work. In Rino Zanette (1981) Ltd., [1988] OLRB Rep. Sept. 923, the Board stated:

70. The applicant argued that the Board should declare Sault Holdings and Zanette Investments, along with certain other named respondents, to be a single employer for the purposes of the Act. However, as indicated above, Zanette Investments was a "one-shot deal" and never employed any construction employees, let alone construction labourers. For at least the last ten years, Sault Holdings has operated as a land holding company which has not employed anyone to perform construction industry work. Even when it acted as an owner/developer, there is no evidence to suggest that Sault Holdings employed any construction employees. In these circumstances, even if all of the other elements necessary for a subsection 1(4) declaration were found to be present, the Board would not exercise its discretion to give subsection 1(4) relief regarding Sault Holdings and Zanette Investments. As noted in the cases referred to above, subsection 1(4) and section 63 [now 69] are designed to protect a trade union's bargaining rights when the business to which those bargaining rights attach is sold or is carried out by or through more than one legal entity. However, bargaining rights do not arise in an employment vacuum and the operation of these provisions has generally been limited to protecting bargaining rights that attach to enterprises giving rise to employment. In exercising its discretion under subsection 1(4), one of the factors which the Board examines is whether the business carried on by a respondent employs anyone. If a respondent does not have any employees and does not have a history of employing anyone, it will generally be very difficult for an applicant to demonstrate that a subsection 1(4) declaration is warranted.

39. The Board's extensive jurisprudence regarding section 1(4) has recognized that the section is designed to preserve bargaining rights which are threatened by non-arm's length transactions. In making a declaration under this section of the Act the Board seeks to prevent the erosion of bargaining rights by the decision of an employer to conduct all or a part of its business through a separate non-union entity. The matter before me is not a case in which an employer is trying to conduct any of its business through a non-union entity. The Red Cross is not alleged to have created any new businesses to funnel work through to avoid its collective agreement obligations. It is conceded that the DATC and the other responding party service providers are separate corporate entities, and on the basis of the application it cannot be said that they are anything other than at arms' length from the Red Cross. While it may be that the DATC exercises a significant amount of control over all of the service providers in the way in which it wants services delivered, quality control, reporting and so on, the Board has recognized that in a subcontracting relationship that may be the case without causing the Board to find that a section 1(4) declaration is in order.

40. The union does not dispute that the DATC has not had homemakers in its employ. The DATC has therefore not been an employer of the type of employees that the SEIU represents at the Red Cross. There is what the Board called in Rino Zanette, cited above, "an employment vacuum" as regards homemakers both now and historically. It is therefore difficult to see why the Board would declare the DATC and the Red Cross to be one employer.

41. In Inducon Construction (Northern) Inc., [1982] OLRB Rep. March 390, the Board dealt with a similar situation to the one in Rino Zanette, and before the Board here. In declining to make a section 1(4) declaration the Board stated:

37. In Crown Cork and Seal Company Limited, [1978] OLRB Rep. Sept. 809, the Board reasoned that there ought to be a labour relations purpose in the exercise of the Board's jurisdiction under section 1(4). In the case of Desbil, the Board notes that it never had any employees, is a holding company which holds its share of the partnership and has no other assets. In the view of the Board, there is no labour relations purpose to be served at this time in applying the provisions of section 1(4) to Desbil. Accordingly, the Board, in the exercise of its discretion, is not prepared to treat Desbil as constituting one employer with IDC, IDBA and ICNI for the purposes of the Act. The applicant did not request any relief with respect to Inducon Consultants of Canada Limited and there is no evidence before the Board that this company every employed carpenters or labourers on any construction project. While the aspects of common management, common ownership or financial control, interrelationship of operation and representation to the public as a single integrated enterprise apply to the relationship between this company and IDC, IDBA and ICNI, in the opinion of the Board, no labour relations purpose would be served at this time in applying the provisions of section 1(4) to Inducon Consultants of Canada Limited. Accordingly, the Board, in the exercise of its discretion, is not prepared to treat Inducon Consultants of Canada Limited as constituting one employer with IDC, IDBA and ICNI.

42. The Board in Ainsworth Electric Co. Limited, [1993] OLRB Rep. Sept. 817, considered the relationship between Ainsworth Electric, which had a collective agreement with a union, and the Stadium Corporation of Ontario ("Stadco"), in the context of a section 1(4) application. Stadco had never been in the business of providing electrical and mechanical services or staging systems to other building owners or managers, although it had from time to time staffed its own events. Ainsworth had been in the business of doing just that work for a long time, and had been contracted by Stadco to provide those services to the Skydome Stadium in Toronto. The union wanted Ainsworth and Stadco to be declared to be one employer so that Stadco would be bound by the collective agreement it had with Ainsworth. The Board found that the relationship between the two companies was one of owner and subcontractor, rather than common principles involved in a joint venture. The Board found that the situation did not reveal the mischief that section 1(4) was designed to cure as there were no common principals trying to manipulate corporate shells in order to erode established bargaining rights. To the contrary, the Board was of the view that the union was seeking to extend its bargaining rights to the employees of a separate employer who it had not previously sought to represent. (See para. 36.)

43. The Board in Ainsworth concluded as follows:

38. What IATSE is seeking to do in this case is not protect bargaining rights which it has established with Ainsworth, but rather expand those bargaining rights to a customer of Ainsworth which decides to use the services of Ainsworth in varying proportions. To put the matter another way: the union acquired the right to represent employees of Ainsworth by voluntary recognition and agreement with Ainsworth, but it neither acquired the right to represent employees of someone else, nor acquired any rights in respect of work opportunities which do not happen to come to Ainsworth because Ainsworth has not been engaged to supply the electrical systems in question.

39. In our opinion, this is not an appropriate case for the application of section 1(4), even if the subcontracting arrangements here under review might meet a literal reading of section 1(4).

44. Similarly to the situations outlined above, the SEIU is seeking to expand its bargaining rights from the Red Cross to the body that has contracted for the Red Cross' homemaking services. The SEIU goes even further and wants others who are similarly situated to the Red Cross in their relations to the DATC to also be bound by its bargaining rights. Even if all of the prerequisites of section 1(4) were established, the Board would not find any labour relations rationale for making a declaration in this type of case. As the Board has already outlined, the union is seeking to go "upstream" with its bargaining rights to one or more entities that already existed at the time that the union got its bargaining rights and which it did not seek to organize or allege to be related to the Red Cross at that time. It is through the umbrella of the DATC that the SEIU is claiming that the other service provider responding parties should also be declared to be one employer. However, if the Board cannot make the declaration with respect to the DATC, there is no link to the other service providers. There are no allegations that the Red Cross on its own has been siphoning off bargaining unit work to the other service providers. Indeed, on the SEIU's theory of the case the Red Cross would not be able to do so as the DATC is the body giving out the work and controlling the vast majority of the aspects of how the work gets done. Therefore, without a declaration regarding the DATC, the remaining spokes in the wheel could not be found to be one employer for the purposes of the Act.

45. In any event, the applicant has not pled any aspects of relatedness as between the various responding party service providers, but rather through the common control and direction aspect of the DATC's relations to the service providers. The union got its bargaining rights in an industry in which there was an established competitive bidding process that did not guarantee that any bidder would be successful in getting or keeping work that it may have had previously. The union has conceded that none of the responding parties are legally related in any way. Yet, the union is seeking a remedy that would see all of the service providers bound to its collective agreement. The Board cannot see any compelling labour relations reasons why it would grant a declaration in the circumstances.

46. It is not for the Board to interfere in a scheme that has been put in place as a result of a government public policy initiative. In this instance the government of Ontario has decided on how health services will be delivered to the citizens of the province. As the application states, and the Board has noted in previous decisions, the government has mandated the creation of community care access centres ("CCAC") in all regions of the province as central clearing houses, and has mandated that the CCACs must not provide any services directly. The CCACs are required to hold competitions for the services that must be provided, and any service provider who has met the pre-qualification requirements may bid for work. The CCACs therefore contract out all services that are funded by the Ministry of Health. This is the context in which the SEIU has made this application. The Board cannot, in the circumstances of this case, see where a labour relations purpose can be served by a section 1(4) declaration.

47. In City of Toronto and Toronto Parking Authority (Unreported, Board File Nos. 3078-99-R and 2646-99-G, June 15, 2000) the Board dismissed a section 1(4) application without hearing evidence because it decided it would not, in any event, exercise its discretion to make a declaration. The Board stated as follows:

19. In this case the Board finds that even if the legal and factual foundation for a section 1(4) declaration was made out, it would not exercise its discretion and declare the TPA and Toronto to be a single employer for the purposes of the Act. The reasons are quite simple; this case does not disclose any of the "mischief" which section 1(4) was intended to remedy. At its most basic, section 1(4) is in place to ensure there will be no erosion of bargaining rights caused by a unionized entity spinning off a new company, moving work or opportunities for growth from the old company, and operating the new company without regard to the collective agreement obligations of the old. The mischief in such an arrangement is obvious and this labour relations "sleight of hand" is remedied by the Board's discretion to make both companies a single employer for the purposes of the Act.

20. Having determined that the Board would not issue the "single employer" declaration, there is no value in engaging in a factual enquiry with respect to the relationship between the TPA and Toronto. Consequently, that part of the application is dismissed.

48. The Board is satisfied that even if the SEIU application is taken at its best, there is simply no mischief in the circumstances. Section 1(4) is designed to preserve the relationship between an employer and the union representing that employer's workers, and to ensure that a union's bargaining rights are not diluted for improper purposes. In this case, there is no problem in the relationship between the Red Cross and the SEIU, and the Red Cross is not alleged to have done anything to dilute the applicant's bargaining rights.

49. Since the Board, for all of the reasons already outlined above, would not exercise its discretion to make a section 1(4) declaration in this case, it is unnecessary to hold a hearing in order to undertake a factual inquiry regarding the relationships between the various responding parties to this application. Therefore, this application is hereby dismissed.

50. In light of the Board's dismissal of the application, the applicant is directed to return to the responding parties all documents it has received as a result of the Board's production order. The Board reiterates its order that nothing that was produced to the applicant in this proceeding is to be used for any purpose that is unrelated to this application.

"Gail Misra"

for the Board