2097-95-R Labourers’ International Union of North America, Local 183, Applicant v. Oxville Homes Ltd., Zancor Homes Ltd., Fernbrook Homes Limited, Zancor (W.B.) Homes Ltd., Zancor Development Inc., Zancor Homes (Meadow) Ltd. and Zancor Homes (W.G.) Ltd., Responding Parties.
2098-95-G Labourers’ International Union of North America, Local 183, Applicant v. Oxville Homes Ltd., Zancor Homes Ltd., Fernbrook Homes Limited, Responding Parties.
BEFORE: Gail Misra, Vice-Chair.
APPEARANCES: Carolyn Hart and Jorge Vala for the applicant; Lisa S. Goodfellow, Dennis Zanardo and Nick Cortellucci for the Zancor companies; Erin Kuzz and Mike Riccardi for Oxville and Fernbrook.
DECISION OF THE BOARD; May 11, 2000
1Board File No. 2097-99-R is an application under sections 64 and 1(4) of the Labour Relations Act, as it was in August 1995 when these applications were first made. Board File No. 2098-95-G is a referral of a grievance in the construction industry to arbitration pursuant to section 126 of the Labour Relations Act, as it was in August 1995. Although amendments were made to the legislation which have changed the relevant section numbers, there have been no substantive changes to the sections themselves. For the purposes of this decision all references will therefore be to the amended act, sections 69, 1(4) and 133 of the Labour Relations Act, 1995 (the “Act”).
2Board File No. 2097-99-R proceeded first and will be dealt with in this decision. The Board reiterates that the applicant (the “union”) has withdrawn the application as it relates to section 69 of the Act. The issue before the Board is therefore whether the responding parties are related businesses for the purposes of the Act. The union is seeking a declaration regarding the relatedness of the companies, but is not seeking damages for the entire period of time since the filing of the applications. The grievance is dependent on the Board’s findings regarding the related employer application.
THE FACTS
3Oxville Homes Ltd. (“Oxville”), and later Fernbrook Homes Limited (“Fernbrook”), are owned in equal proportions by Nick Cortellucci, Danny Salvatore and Gino DiGenova. Oxville was the original company of which Mr. Salvatore is the President, Mr. DiGenova is the Vice-President, and Mr. Cortellucci is the Secretary of the corporation. At some point in the past it was decided that “Fernbrook” was a more saleable name, so the newer company was incorporated under that name. When referring to Fernbrook in this decision it is to be taken to include Oxville as that is the name that is commonly used by these two companies. The name “Oxville” will be used when historic context is required. There is no dispute about the relatedness of these two companies.
4As a member of the Toronto Housing Labour Bureau, Oxville was bound to a collective agreement with the union for all construction employees engaged in the on-site construction of all types of low-rise housing in the County of Simcoe and in what is commonly referred to as Board Area 8. There is no dispute that Oxville and Fernbrook are now both bound to the collective agreement, and have honoured their collective bargaining relationship with the applicant.
5Fernbrook maintains that it is not related in any manner nor is there common control and direction between it and the Zancor companies. The various Zancor companies take the same position. Further, even if the Board finds that the companies are related, the Board is urged to find that no labour relations purpose would be served by making a related employer declaration in this case.
6Mr. Nick Cortellucci is the person common to Fernbrook and to some of the Zancor companies. The union argues that he exercises common control and direction between the various responding parties. However, the evidence is that while Mr. Cortellucci was one of the original investors in Oxville, he has had no day-to-day involvement in the running of either Oxville or Fernbrook. The day-to-day operations of Fernbrook are undertaken by Mr. Salvatore, who had originally approached Mr. Cortellucci to invest in a new company he was starting 18 or 20 years ago. Since that time, if Fernbrook needs some investment in a particular project, Mr. Cortellucci invests, and then gets his money (and profit if any) out when the project is complete. All financial matters are dealt with through his lawyers, and he signs the requisite documentation. Mr. Cortellucci’s lawyers are not the same counsel utilized by Fernbrook. He has no other role in Fernbrook, and in particular, has no role in Fernbrook’s land acquisitions, design work, estimating, choice of sub-contractors, or labour relations. No one at Fernbrook has a reporting relationship to Mr. Cortellucci.
7Mr. Cortellucci has worked in and been involved with the construction industry since 1962. He owns Four Valleys Grading and Excavating (“Four Valleys”), which he has both owned and operated himself since 1971. It is located at 137 Bowes Road, Concord, Ontario. His business performs site excavation and grading. In addition, Mr. Cortellucci is often approached by other construction companies, or nascent construction enterprises, to invest in their respective businesses. While he does not invest in every opportunity offered to him, Mr. Cortellucci appears to have investments in a number of companies. It appears that each company he is a partner in does not necessarily know what other companies Mr. Cortellucci is involved with.
8Four Valleys has done work for Oxville, Fernbrook, and for the Zancor building companies. It appears to be a major excavating and grading company in the construction industry which has also done work for numerous other builders in the Greater Toronto Area in both the residential and industrial and commercial sectors of the construction industry. There is no evidence before the Board that any of the named responding parties received preferential treatment from Four Valleys as a result of Mr. Cortellucci’s involvement in their respective companies. There is also no evidence that Mr. Cortellucci required or directed that excavating and grading work from any of the responding party builders with whom he was involved be sent to Four Valleys.
9To the extent that Mr. Dennis Zanardo has had any relationship to Fernbrook, it is that he was an employee there on two occasions for less than one year each in the past 11 years. He was employed as a site superintendent and as such had none of the authority normally associated with managerial employees. As a site superintendent Mr. Zanardo had no role in the selection of land for a project, or in the development of the land. He had no role in the setting of the house prices, negotiating with the trades, or marketing of a project. Mr. Zanardo has also been a site superintendent for many other builders in the past 20 or 25 years that he has been in the construction business. In addition, he has been a contracts manager and a construction manager for some other companies.
10Sometime in 1989 Mr. Zanardo and his father, Leo Zanardo, saw 25 acres of land in Wasaga Beach which they determined to purchase for development. Mr. Leo Zanardo looked for investors to help in the project when he was contemplating purchasing the Wasaga Beach land. He had known Mr. Cortellucci for some time. Dennis Zanardo had himself known Mr. Cortellucci for 25 or 30 years as a result of his father’s connection and his own work in the construction industry. Leo Zanardo approached Mr. Cortellucci with a view to getting him to invest in the financing of the property when the deal closed. Mr. Cortellucci agreed to invest in the purchase and servicing of the land. The bank that financed the deal apparently requested that Mr. Cortellucci be the President of the newly incorporated company as it was Mr. Cortellucci who was securing the financing.
11Thus Zancor Development Inc. (“Zancor Development”) was incorporated in April 1989. Its directors are Mr. Dennis Zanardo, Mr. Cortellucci and Stuart Bollefer. Mr. Cortellucci is the President and Mr. Zanardo is the Vice-President and Secretary. Prior to the deal for the Wasaga Beach land closing, Mr. Zanardo’s father passed away so it appears he was not actually involved in the incorporation.
12Zancor Development’s plan was to buy unserviced land at a reasonable price, to go through the processes necessary to get the land subdivided and serviced, and to then sell the serviced lots to builders. Mr. Zanardo deals with all of the aspects of the planning, applying to the municipalities to get approvals, and overseeing the work necessary to service the lots. Mr. Cortellucci either puts up the money himself or arranges for the financing. He also signs some cheques from time to time. There has been and is no transfer of assets, employees, or work between Fernbrook and Zancor Development, except to the limited extent outlined below.
13The Wasaga Beach 25-acre parcel was subdivided into 106 lots. However, by that time the real estate market had collapsed and Zancor Development was unable to do anything with the lots for about one year. It had a local real estate agent trying to sell the lots, but did not find a buyer who wanted to buy all of the lots. It received a total of four offers, with the largest parcel offer being for 15 lots.
14At some point in 1991 Mr. Salvatore, of Fernbrook, approached Mr. Cortellucci to ask him if Zancor Development still had the land in Wasaga Beach. Mr. Cortellucci told him he wasn’t sure as there had been a few offers received, but told him that he should contact Mr. Zanardo. Mr. Zanardo and Fernbrook had discussions and agreed that Fernbrook should place a sales trailer on the property to see if it could sell any houses before agreeing to purchase the property. As a number of houses did sell, Fernbrook agreed to buy the entire property. Mr. Zanardo, with Mr. Cortellucci’s approval, agreed to sell the 106 lots to Fernbrook for the costs incurred to that time. Mr. Cortellucci advised him to get the best deal he could. Mr. Cortellucci did not have any discussions with Mr. Salvatore of Fernbrook about how much the land should be bought for. Zancor Developments had had no other offers to purchase the land that year. It made no profit on this deal, but it did not lose either, and was able to ostensibly rid itself of all of the lots to one buyer. In fact the sale was not made directly to Fernbrook, but rather to each purchaser of the houses built on the 106 lots.
15Zancor Homes Ltd. (“Zancor Homes”) was incorporated on March 13, 1990. Messrs. Zanardo and Cortellucci are equal shareholders, and are the officers and directors of this company. Mr. Zanardo is the Secretary, and Mr. Cortellucci is the President/Chairperson. Mr. Cortellucci is a financial partner but has no role in the day to day operation of this company. Zancor Homes’ head office is located at 137 Bowes Road, Concord, Ontario, where it rents office space from one of Mr. Cortellucci’s other companies.
16Zancor Homes built about four houses in Brampton before 1991-92. Mr. Zanardo found six serviced lots of land, put the packages together to get permits, prepared the budget for the building of the houses, arranged for the trades to build the houses, was the site superintendent, and hired a real estate agent to sell the houses. Mr. Cortellucci secured the bank financing for the project, but both he and Mr. Zanardo invested an equal amount of money each. Mr. Zanardo asked Mr. Cortellucci’s advice on the selling price for the houses. The two men split the profits on the sale of the houses on a 50-50 basis. Fernbrook had no role at all in this company, and there was no transfer of assets, common office, shared employees, transfer of work or anything else between Fernbrook and Zancor Homes. Four Valleys did the excavation and grading for the houses as Mr. Zanardo testified that it was prepared to do the work at a good price.
17Zancor (W.B.) Homes Ltd. (“Zancor Homes WB”) was incorporated on March 6, 1995. Dennis Zanardo is the sole officer and director of this company which also has its head office at 137 Bowes Road, Concord, Ontario. While Zancor Homes WB shares an office with Zancor Homes at Bowes Road, it is unclear whether it shares phone or facsimile numbers or anything else with the other Zancor companies.
18Zancor Homes WB bought 46 serviced lots in Wasaga Beach in 1995 from Zancor Development. Zancor Development had purchased the lots and serviced them in 1993 or 1994. Mr. Cortellucci had arranged the financing for that purchase. Zancor Homes WB purchased the serviced lots at cost from Zancor Development. Mr. Zanardo and Mr. Cortellucci agreed that the lots should be sold at cost to Zancor Homes WB because that would ensure that the houses built on the lots could be sold at a more affordable price as the housing market at the time was still somewhat flat.
19Mr. Zanardo arranged for an architect to draw up plans and Zancor Homes WB built six model homes. He worked on all aspects of the project himself and sold most of the project. He testified that he did not need any financing to buy the land, as the sale of the land was contingent on homes being sold. Fernbrook had no role in the operation of this company. There is no evidence that Mr. Cortellucci had input into the pricing of the houses sold, any role in the day-to-day operations of this business, or in any matters related to labour relations.
20The evidence is unclear with respect to Mr. Cortellucci’s role in the financing of Zancor Homes WB. He testified that he invested in the project by arranging financing through a bank. However, Mr. Zanardo indicated the project did not require any financing as the houses sold and the building was financed as sales were made. It may be that Mr. Cortellucci was confused about which aspect of the project he had financed. It is most likely that he was recalling that he had financed the Zancor Development purchase and servicing of the 46 lots.
21Zancor Homes (W.G.) Ltd. (“Zancor Homes WG”) was incorporated in October 1996. Dennis Zanardo is the sole officer and director of the corporation. Zancor Homes WG bought two phases of serviced lots from George Wimpey of Canada (“Wimpey”) in West Glen in Mississauga in 1996. It required no financing for the purchase of the property or the construction as Zancor Homes WG sold 90 houses in the first weekend of sales for the first phase of 131 houses. The second phase of the project was for 80 houses. The whole project, in both phases, was sold out. The money to build therefore came from purchaser deposits, and the cost for the land was not due to Wimpey until closing on each house.
22Mr. Zanardo oversaw the work on both phases of the development of the West Glen project, but he was not there every day. He hired a site supervisor for each phase, he attended at the first phase building site every other day, and at the second phase building site once a week. Four Valleys did the excavation and grading on the project, and may have also provided some labour for site clean up. This is a service that Four Valleys provides to any builder that asks for it. There is no evidence that Mr. Cortellucci had any involvement in the day-to-day operation of this venture, he provided no financing, and had no role in its particular labour relations. Fernbrook had no role in the operation of Zancor Homes WG.
23Zancor Homes (Meadow) Ltd. (“Zancor Meadow”) was incorporated in March 1997. Mr. Cortellucci is the sole officer and director of that company. Mr. Cortellucci bought 400 serviced lots from Wimpey in Meadowvale through this company, and then sold parcels of lots to a variety of builders, including Fernbrook. Fernbrook did not get any preferential terms when it purchased some of the lots. Mr. Zanardo had no role in this company at all, except to the extent that Mr. Cortellucci asked him if the Zancor name could be used in the corporation’s name as it had an established reputation in the residential housing industry and with banks. Mr. Zanardo gave his consent to the use of the name. None of the other Zancor companies has purchased land from Zancor Meadow.
24The two Zancor companies that have offices at Bowes Road in Concord rent the space from one of Mr. Cortellucci’s family companies. Four Valleys also rents space in the building. The offices are separate, each with its own entrance. The companies do not share employees, equipment files, telephone lines, or anything else. The Zancor companies and Four Valleys do not have the same accountants or lawyers. No Fernbrook business is ever conducted out of either of the Bowes Road offices. Mr. Zanardo does not himself work out of the Zancor Bowes Road office regularly as he lives and works in Wasaga Beach. He attends at the Bowes Road office about twice a month. When the West Glen project was in progress he would go to that office more often on his way to Mississauga.
25There is no evidence that Mr. Cortellucci ever oversaw any of the trades’ work at any of the Zancor building projects. He never reported having seen any deficiencies on a site to Mr. Zanardo. He did not keep track of the budgets on any of the developments, and relied on the fact that Mr. Zanardo was running each of the projects. Prior to investing in any purchase of property Mr. Cortellucci would visit the prospective property in order to decide whether he would assist in financing the purchase. Mr. Zanardo consulted with him on the price at which to sell land or houses, and Mr. Cortellucci was advised when or how sales of houses were going. His main objective in his investments in the projects with either the Zancor companies or with Fernbrook is to receive a return on his investment.
DECISION
26Section 1(4) of the Act states:
- (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.
27It is undisputed that there is more than one corporation involved in this application. However, there is a question about whether all of the companies are in associated or related activities or businesses. Further, there is a dispute about whether the corporations named by the union are under common control and direction because of Mr. Cortellucci’s involvement in some of the companies. If the Board finds that the elements of section 1(4) have been established, it must then decide whether to exercise its discretion to treat the related corporations as constituting one employer for the purposes of the Act and to declare as such.
28Zancor Development and Zancor Meadow are not in exactly the same business as are all of the other companies named in this application. They either buy raw land and service it before selling it to builders or buy serviced land and sell it in parcels to interested builders. Mr. Cortellucci is the common element in both companies, but Mr. Zanardo has no interest in Zancor Meadow. Neither of these companies has ever built any homes. The responding parties therefore argue that there is an issue about whether these two companies are in related businesses to the other companies, which are residential home builders.
29What the Board considers constitutes “associated or related” activities or businesses in the context of a section 1(4) application is well established. In Frank Plastina Investments Ltd., [1986] OLRB Rep. June 720, wherein one responding party was a builder and the other a sewer and watermain contractor, the Board stated as follows when it found that the businesses were associated or related:
- Given the remedial thrust of section 1(4) and the broad language chosen by the Legislature (“associated” or “related”, “activities” or “businesses”), it is apparent that the section was intended to apply to a wide variety of commercial activities, even when an employer’s main or principal business concern may be something else. … The fact is, that a firm engaged in the construction business can, with relative ease, become involved, from time to time, in various sectors, subdivisions, phases, or specialized kinds of construction work, depending largely upon the business opportunities which present themselves, and we do not think we should readily hold that those activities are “unrelated” – particularly if they are being undertaken at the same time and involve common managerial or employee skills.
30On the facts of the case before me I find that all of the responding parties are carrying on associated or related businesses activities. They are either developers of residential properties, or they are building residential housing on that property. There are apparently some business advantages to procuring land and servicing it under the rubric of one company, and then selling that serviced land to another company which is the actual builder. However, the construction labour work involved in servicing the land is not so far removed from the construction of the homes themselves as to render the activities unrelated. It is also noteworthy that Mr. Dennis Zanardo has the operational skills to both organize the servicing of land and the building of houses, suggesting that the skill sets required are related.
31I now turn to the issue of whether there is common control or direction among the responding parties. The Board’s test for “control” in section 1(4) of the Act was articulated in Jen-Ry Utility Contracting Company Limited, [1984] OLRB Rep. Dec. 1724, as follows:
- All of these cases make it clear that the test for “control” under section 1(4) of this Act envisions the ultimate power to “call the shots” where necessary, as counsel for the respondent put it, with respect to the labour relations of the two enterprises, and not simply the authority and responsibility to direct the activities of employees in the field. Were it otherwise, a totally independent and established company hiring the manager of field services from another company would inevitably find itself in the position of being a “related employer” for the purposes of the Labour Relations Act. Rather, we accept the submission of the respondent that the section contemplates a point of central decision-making control with the ultimate power to, for example, say “yes” or “no” to a wage proposal from the union for both entities. Such power, as the Board cases show, may come simply from the legal relationship between the two entities, [case cites omitted] or from a total lack of independence in practical or economic terms, [case cites omitted] or it may come from a combination of the two, [case cites omitted].
32The union’s contention is that Mr. Cortellucci is an investor and shareholder in each of the responding parties, and as such he holds the power in each company. The Board notes at the outset that Mr. Cortellucci does not have any share or investment interest in two of the named responding parties, Zancor Homes WB and Zancor Homes WG. In each of the companies about which the Board heard evidence of Mr. Cortellucci’s investment (except for Zancor Meadows), it is clear that Mr. Cortellucci played a reactive role.
33In the case of Oxville, and later Fernbrook, Mr. Cortellucci was asked to be an investor at the outset and since has been invited to invest or assist in arranging financing in selected housing projects. He decides whether he wishes to put in money or participate in arranging financing, and when the project is complete, he receives a share of the project’s profits if there are any. There is no evidence that he has any other role. On the contrary, the evidence is that Mr. Salvatore runs Fernbrook and makes all operational decisions regarding the running of that business.
34In Zancor Developments Mr. Leo Zanardo, having found a piece of land, asked Mr. Cortellucci to invest in the purchase of the first Wasaga Beach piece of raw land, and he agreed. Mr. Dennis Zanardo, acting on behalf of Zancor Developments, approached him about the second piece of Wasaga Beach land, and again he agreed to participate in the financing of the purchase. With respect to Zancor Homes, Mr. Zanardo approached Mr. Cortellucci to invest in the building of four homes on lots in Brampton, and Mr. Cortellucci agreed to participate. In each instance Mr. Zanardo was the active partner on the project who made all of the arrangements for the relevant municipal approvals. He arranged for servicing the land and managed the trades involved in that work. He arranged for the sale of the land, dealt with the trades for the building of the houses where that was the project, and the sale of the houses.
35The extent of Mr. Cortellucci’s participation in each of these transactions after the initial financing arrangements had been made was that he was consulted by Mr. Zanardo regarding the selling price for either the pieces of land, or for the houses built. In the case of the first Wasaga Beach property, when consulted by Mr. Zanardo, Mr. Cortellucci told him to sell it at the best price he could get given that the real estate market was depressed, thus leaving it to Mr. Zanardo to deal directly with Fernbrook. With the second Wasaga Beach property, since the real estate market was still somewhat depressed, Mr. Cortellucci agreed to sell the property to Zancor Homes WB at the price of costs incurred up to that point. With the Zancor Homes project in Brampton Mr. Zanardo asked Mr. Cortellucci’s advice on the price at which to sell the houses built. Clearly Mr. Cortellucci’s involvement was only about the protection of his investment, and not about the day-to-day operations of these companies.
36Mr. Zanardo was the sole officer and director of both Zancor Homes WB and Zancor Homes WG. There is no cogent evidence of Mr. Cortellucci’s involvement in either of these two businesses, except to the extent already outlined above regarding the sale of the Wasaga Beach property from Zancor Development to Zancor Homes WB.
37On the evidence before it the Board cannot find that Mr. Cortellucci exercises control or direction over Oxville and Fernbrook. In those companies he is only a one third shareholder and does not therefore control the majority of the shares. In any event, there is no evidence that he has any role in the operation of those companies, other than as a passive investor.
38There is evidence before the Board that Mr. Cortellucci had a greater role in Zancor Developments and Zancor Homes, which he co-owns with Mr. Zanardo. However, that role is exclusively as an investor, when invited by Mr. Zanardo, and to the extent that Mr. Cortellucci participates in any decision-making at these two companies, it is in relation to protecting the value of his investment. There is no evidence that he has a controlling interest in either of the companies. As outlined in detail above, there is also no evidence that Mr. Cortellucci has any role in respect of labour relations matters in these companies.
39The Board is of the view that while Mr. Cortellucci has a long history of involvement in the construction industry there is scant evidence to support a finding that he has extensive knowledge of the building of residential housing. His hands-on experience and expertise is in the area of excavation and grading on construction sites of all types, including residential housing. At Fernbrook it is Mr. Salvatore who has the knowledge and background to run what is by all accounts a very successful residential house building business. At Zancor Developments and Zancor Homes, the only two businesses in which both Messrs. Cortellucci and Zanardo are involved, it is Mr. Zanardo who runs the day-to-day operations. He has 25 to 30 years of experience in many aspects of the residential construction business.
40Mr. Cortellucci’s sole hands-on involvement in any of the named companies is in Zancor Meadows. In that company he bought serviced lots and then re-sold them in parcels to various builders. That business transaction appears to be more in the nature of a land flip where no value was added, rather than an actual development of a raw property. Therefore, while there is no doubt that Mr. Cortellucci is a very active businessman and investor in construction businesses, it is difficult to find that he is the one who “calls the shots” in respect of the land development and home building businesses in question in this application.
41For all of the above reasons the Board cannot find that the responding parties are under common control or direction.
42While it is not necessary for the Board to consider the union’s other arguments, one matter bears comment. The union argues that this is a case of “double breasting” to the extent that Mr. Cortellucci is active in a unionized company, Fernbrook, and in a series of non-union companies, i.e. some of the Zancor companies. It is worth noting that the only building of houses in which Mr. Cortellucci participated, even to the limited extent of investing, was the four homes built by Zancor Homes in Brampton. It is difficult to characterize the Zancor Homes operation as an example of “double breasting” when compared to Fernbrook, which is one of the largest unionized homebuilders in the Greater Toronto Area. The other houses built by Zancor companies were through Zancor Homes WB and Zancor Homes WG, both of which Mr. Cortellucci had no financial or other interest in at all. It is therefore difficult to see how the union can assert that this application is intended to address the potential loss of work from a unionized builder to a non-union builder.
43Having considered the parties submissions and considered the evidence before it, for the reasons given above the Board cannot find that the responding parties are under common control or direction. Since one of the essential elements of section 1(4) has not been met, the section 1(4) application must be dismissed. In addition, since the grievance filed is contingent on a finding of relatedness among the responding parties, and since that has not been established, it too must be dismissed.
“Gail Misra”
for the Board