1161-98-R International Brotherhood of Electrical Workers Local 353, Applicant v. CSE Corporation c.o.b. as Concept Systems Electric, Beldin Electrical Limited, Alverio Inc., Responding Parties.
BEFORE: Harry Freedman, Vice-Chair.
APPEARANCES: Elizabeth M. Mitchell and Michael Oram for the applicant; Steven Muzzo for CSE Corporation c.o.b. as Concept Systems Electric; Joseph Liberman and Rocco Grieco for Beldin Electrical Limited; Jay Rider and Mario Codispoti for Alverio Inc.
DECISION OF THE BOARD; January 26, 2000
This is an application under sections 69 and 1(4) of the Labour Relations Act, 1995, S.O. 1995, c. 1 (the "Act") for declaratory and other relief. The applicant seeks to have the Board declare that the responding parties Beldin Electrical Limited (“Beldin”) and Alverio Inc. (“Alverio”) are bound by the collective agreements to which the applicant and the responding party CSE Corporation c.o.b. Concept Systems Electric (“Concept”) are bound either by reason of a sale of a business between Concept as vendor and Beldin and Alverio as purchasers or because Beldin and Alverio carried on related businesses under common control and direction with Concept and the circumstances of their relationship were such that the Board should exercise its discretion under section 1(4) of the Act to declare that Concept, Beldin and Alverio are a single employer for purposes of the Act. The Chair of the Board authorized me to sit alone to hear and determine this matter pursuant to section 110(14)(a) of the Act.
Concept was created in March 1991 when Steven Muzzo and Mario Codispoti decided that they would go into the residential electrical contracting business together with Rocco Grieco. Concept began operating in April 1991. Each of Messrs. Muzzo, Codispoti and Grieco invested $20,000 in Concept and were equal shareholders, as well as being the officers and directors of Concept until Mr. Grieco resigned in November 1993 and Mr. Codispoti resigned in July, 1995. Since Mr. Codispoti’s resignation, Mr. Muzzo has been the sole shareholder, officer and director of Concept.
Mr. Grieco is the sole officer, director and shareholder of Beldin. Mr. Codispoti is the sole shareholder and principal of Alverio. Beldin was incorporated in April 1995; some 18 months after Mr. Grieco left Concept in November 1993. Alverio was incorporated in July 1995; at about the time Mr. Codispoti resigned from Concept. Sometime in 1997, Alverio secured electrical work on a condominium project at 90 Sumach Street in Toronto. Alverio did the work on the model suites for that project and later, near the end of 1997, arranged for Beldin to enter into a contract to perform the electrical work at that project. Beldin and Alverio are equal partners in respect of the work done at the 90 Sumach St. project and in the other work that each of them may obtain from time to time.
Mr. Muzzo had been employed as a project manager by Tridel (a large developer and builder of residential high rise buildings) for about four years prior to March 1991. Both Mr. Codispoti and Mr. Grieco were electricians (working foremen) who had worked for Mapleton Electric Inc. (“Mapleton”), an electrical contractor for whom the applicant held bargaining rights and were principals of that company (each of them held a one third interest in Mapleton with the other third held by Marino Zavarella). Mapleton had performed electrical work for Tridel. Mr. Muzzo knew Messrs. Codispoti and Grieco from them having worked for Mapleton on Tridel projects Mr. Muzzo managed.
Messrs. Codispoti and Grieco had each acquired a one third interest in Mapleton with Mr. Zavarella in August 1988 and continued with Mapleton until they resigned in August of 1990. (Mr. Zavarella had owned and operated Mapleton Electric Limited for several years prior to Messrs. Codispoti and Grieco joining him. Mapleton Electric Limited had also been a contractor for whom the applicant held bargaining rights. Mr. Codispoti and Mr. Zavarella had wanted a new company created. Thus, Mapleton was incorporated on August 5, 1988.) Mapleton had entered into a voluntary recognition agreement with the applicant in September, 1988 because, according to Mr. Codispoti, Mapleton Electric Limited had been a union contractor and they (the three principals of Mapleton) did not want to try to operate non-union. The Mapleton voluntary recognition agreement was signed on behalf of Mapleton by Messrs. Zavarella, Codispoti and Grieco (exhibit no. 7).
Both Mr. Codispoti and Mr. Grieco had been engaged in the electrical trade for several years prior to their association with Mr. Zavarella and Mapleton. Mr. Grieco was a journeyman electrician and later a working foreman employed by Mayfair Electric, a non-union electrical contractor. He had worked for Mayfair Electric from about 1980 until 1988 when he joined Mr. Codispoti in Abitat Electric Limited (“Abitat”). Mr. Codispoti started working in Canada in the electrical trade in January 1966 with Jack Guido, a residential electrical contractor. He left Mr. Guido when Mr. Guido’s business closed down in late 1969 or 1970 and went to work for Jay Electric Limited (“Jay”), first as a journeyman electrician and then later as a working foreman and ultimately as a supervisor until he left Jay in 1988 to work with Mr. Grieco through Abitat. Jay was also an electrical contractor for whom the applicant held bargaining rights.
Mr. Codispoti incorporated Abitat in 1987 but did not start carrying on business through Abitat until he left Jay in 1988. Mr. Grieco and Mr. Codispoti were equal shareholders and the only officers and directors of Abitat. Abitat operated as a business for only about six months, doing service work and some small commercial work. Mr. Codispoti, while at Jay, had worked on a number of Tridel projects. He was contacted by Tridel who suggested that Mr. Zavarella (who operated Mapleton Electric Limited) could use some help in doing Tridel’s work. At the time Tridel was making that suggestion to Mr. Codispoti, Abitat was bidding to do work for Tridel on a commercial strip mall project. Abitat was successful in obtaining that work, but had it performed by Mapleton, since by the time that commercial project was to be done, Abitat ceased carrying on business and Mapleton had been formed.
After Messrs. Codispoti and Grieco left Mapleton in August 1990, they started trying to pick up electrical work through Abitat once again. Mr. Codispoti was also engaging in discussions with Mr. Muzzo about going into business together with him and Mr. Grieco. Mr. Muzzo had initial discussions about starting an electrical contracting business with only Mr. Codispoti. Mr. Codispoti had made it clear to Mr. Muzzo that Mr. Grieco also had to be part of their new business and Mr. Muzzo agreed. Ultimately, Concept was incorporated and began carrying on business in April 1991.
Mr. Codispoti was responsible for the incorporation of Concept and was its president. Mr. Grieco was vice-president and Mr. Muzzo was treasurer. They each had an equal say in the running of Concept’s business, with Mr. Muzzo being principally responsible for finding work, coordinating the purchasing of supplies, obtaining competitive bids from suppliers and negotiating contracts with customers. Messrs. Codispoti and Grieco were foremen on the jobs Concept obtained, ensuring that the work was carried out properly and efficiently. They were also principally responsible for hiring electricians and determining how many electricians were needed on a particular job. They decided whether their employees would move between job sites, and who would be laid off. In effect, Mr. Codispoti and Mr. Grieco were responsible for the construction work that Concept performed.
Mr. Muzzo did not have experience in the electrical contracting business. He did, however, have the contacts both from his work at Tridel and through his family who are active in the construction industry. While Mr. Codispoti and to a lesser extent, Mr. Grieco, were known in the industry and Mr. Muzzo relied on their reputations to assure his customers that Concept would perform the work, he used his own contacts and family connections to secure work. His uncle Marco Muzzo is a developer engaged in both high rise and single family residential work and industrial and commercial projects. In addition, Leo Del Zotto, a principal of Tridel, has been a very close friend of Mr. Muzzo’s father since Mr. Del Zotto and Mr. Muzzo’s father were children. Mr. Muzzo was able to rely on those contacts initially to secure work for Concept. In its first year, Concept worked only for Tridel. In the following two years, about one third of Concept’s business was with Tridel.
Mr. Muzzo, in addition to his important contacts in the construction industry, also had the administrative and managerial expertise necessary to run a business. His work at Tridel exposed Mr. Muzzo to all facets of the construction industry and gave him experience in dealing with a number of trades. At the time he was thinking of going into business for himself, he learned from a friend who was in the mechanical trade that Mapleton was having some problems. He was encouraged by his friend to speak with Mr. Codispoti about going into business together. It was clear that Mr. Muzzo had a very important and significant role in Concept right from its inception, together with Messrs. Codispoti and Grieco.
When Messrs. Codispoti and Grieco carried on business through Abitat, they were responsible for all elements of that business. They were able to price the smaller jobs but would hire an estimator to develop the costing for bigger jobs. That method was also used at Mapleton, although Mr. Grieco was not involved in pricing jobs while at Mapleton. The method that Messrs. Codispoti and Grieco used at Abitat and Mapleton to price jobs continued at Concept. Concept retained an estimator on a fee for service basis for each project on which Concept wanted to bid. The estimator would review the drawings and provide an estimate of hours and quantity of material. Mr. Muzzo, after receiving the estimator’s work, sought out competitive bids from suppliers for the various quantities of materials required, such as fixtures, conduit pipe, switch gear, generator, fire alarm components, wire and fittings. Mr. Muzzo obtained the prices and then prepared spreadsheets showing all of the various components to be certain that the bids received were for the same materials. Mr. Muzzo was responsible to ensure that they were “comparing apples to apples” when reviewing the prices. Once all of that material was assembled, Mr. Muzzo together with Messrs. Codispoti and Grieco would collectively decide what their margins needed to be and the ultimate price that they would submit for the job.
Mr. Muzzo, from the inception of Concept, was responsible for marketing and the negotiation of the contracts with the developers. His expertise lay in formulating the pricing for jobs and marketing the business, whereas the expertise in electrical work and supervision of employees was with Mr. Codispoti and Mr. Grieco. The division of labour among the principals of Concept was not firm, but generally, Mr. Muzzo did almost all of the “paperwork” and carried out the administrative functions of the business while Messrs. Codispoti and Grieco were on the job sites for about eighty per cent of their time. The balance of their work time was in the office, generally at the end of the day and on the weekends, to review the estimates, discuss pricing and sign documents.
The role of Messrs. Codispoti and Grieco while they were employed (and had an interest in Concept) was quite similar to their roles and responsibilities when they worked together at Mapleton. Mr. Codispoti had increasingly more responsibilities while he was employed at Jay, but he never had the authority to set prices for jobs prior to operating Abitat with Mr. Grieco. Similarly, Mr. Grieco was, as a foreman with Mayfair, responsible for the quality of the work and the satisfactory completion of the jobs done by the crews under his supervision. Messrs. Codispoti and Grieco were both integral to the business of Concept, as was Mr. Muzzo.
Mr. Grieco left Concept in November 1993 as a result of some differences that had developed between him and the other two principals of Concept. Mr. Grieco testified that at the time he left Concept, Messrs. Muzzo and Codispoti were mad at him because they thought, mistakenly according to Mr. Grieco, that he had done a job privately behind their backs. When he left, Mr. Grieco said that although he was paid back the shareholder loan he had made to Concept, he lost his initial equity investment of $20,000 in Concept because there was no money in the company. Mr. Muzzo explained that he thought Mr. Grieco received his shareholder equity in Concept when he left and that the money paid to Mr. Grieco was a repayment of the balance of his shareholder loan to Concept. Mr. Grieco transferred his 1/3 interest in Concept to Mr. Muzzo and Mr. Codispoti equally.
Mr. Grieco started Beldin in April 1995. Between November 1993 and April 1995 he did not work in electrical contracting; rather, between November 1993 and October 1994 he was helping out his brother who owned a health club. In October 1994, Mr. Grieco went to Australia for a couple of months. On his return, he did not get back into the electrical contracting business until he started Beldin. Mr. Grieco explained that Beldin started out trying to get small jobs. He obtained work for Beldin through his friends and contacts at his social club. As he did work, he obtained more small jobs through word of mouth. Mr. Grieco also explained that he did not do any work for Tridel through Beldin and that Beldin had neither solicited any customers of Concept nor had it hired any employees who had been at Concept.
Mr. Codispoti decided to leave his employment with Concept in June 1995 and entered into an agreement with Concept and Mr. Muzzo dated June 22, 1995 by which the terms of his resignation were fixed. (See exhibit 1.) He explained that he did not feel he was getting anywhere so he decided to leave. Mr. Codispoti told Mr. Muzzo that he would stay with Concept as long as Mr. Muzzo needed him, and when he was not needed, he would leave. Mr. Muzzo explained in his cross-examination that he and Mr. Codispoti had two different visions for the business. Mr. Muzzo wanted to take some risks to expand the business while he felt that Mr. Codispoti, quite understandably, was much more risk averse. Concept was moving to becoming a high volume electrical contractor with slim margins on each job that needed to maintain those high volumes of work (available in large scale high rise apartment construction) to sustain its overhead. Mr. Codispoti did not share Mr. Muzzo’s view of the how the business should develop and therefore they decided to end their partnership with Mr. Codispoti resigning from Concept.
Under the June 1995 agreement, Mr. Codispoti was to be paid for up to one year for “management and technical services”, but that the agreement could be terminated by Mr. Codispoti at any time. In fact, Mr. Codispoti ended his management services arrangement with Concept in January 1996, about one half way through the term of that agreement.
Shortly after the June 22, 1995 agreement was executed, Mr. Codispoti incorporated Alverio Inc. as the corporation through which those management fees would be paid. Mr. Codispoti also testified that at the time Alverio Inc. was formed, he did not expect that it would be in the electrical contracting business.
Mr. Codispoti acknowledged that things would have been more difficult for Mr. Muzzo after Mr. Codispoti’s resignation. Mr. Codispoti continued to perform his supervisory responsibilities in relation to the work performed by Concept, but no longer had any signing authority or authority to purchase goods or materials. Mr. Codispoti also explained that Mr. Muzzo was the one person in Concept who developed the business and got the work for the company. Mr. Codispoti explained that his principal role in Concept was to ensure that the work was done properly.
Other than receiving payment for his shareholder equity ($60.00) and repayment of his shareholder loans, Mr. Codispoti was also entitled to obtain Concept’s four year old van at the end of the lease. No other goods, materials or equipment were transferred to Mr. Codispoti or Alverio. Mr. Codispoti did not hire any employees who had been employed by Concept, nor did Alverio do work for any customers of Concept for six months after he terminated his management arrangement with Concept. Mr. Codispoti thought he was required by section 8 of the June 22, 1995 agreement not to compete with Concept. Section 8 of that agreement stated:
“Mario [Codispoti] hereby covenants and agrees with CSE [Concept] and Steven [Mr. Muzzo] that during the term of his Management Agreement and for a period of six (6) months after its termination he will not directly or indirectly solicit any business from CSE.”
Mr. Codispoti thought that he could not solicit work from any customers of Concept for six months after terminating his arrangement with Concept by reason of that provision. Alverio did not bid on any work that Concept was seeking. It obtained work from people who Mr. Codispoti knew from his experience in the industry and who he first met when he worked for Jack Guido after arriving in Canada.
Mr. Codispoti and Mr. Grieco got together to do work on a project that Mr. Grieco obtained in connection with an automobile body shop. When Mr. Codispoti started doing electrical work through Alverio, he did small jobs, such as installing light fixtures or connecting refrigeration equipment for small business owners. Most of his jobs when he started working as a contractor through Alverio were valued at between $200 and $1000.
Mr. Muzzo testified that after Mr. Grieco left in November 1993, he was not replaced. His work continued as before and Mr. Codispoti was responsible for the supervision of the projects as before. Mr. Muzzo also explained that he has never lost any work or customers to either Mr. Grieco or Mr. Codispoti (or their companies) and that they have never bid any work he was bidding. When Mr. Codispoti left Concept, Mr. Muzzo was able to replace him with employees who were leaving Falco Electric (“Falco”), a unionized electrical contractor which was closing down. Concept hired four foremen, one sub-foreman, an office manager and secretary from Falco and was, in the absence of Mr. Codispoti, able to carry on business without any interruption. Mr. Muzzo also testified that his business has expanded significantly over the last several years.
Counsel for the applicant asserted that what was transferred from Concept to Beldin and Alverio were the skills, expertise, business acumen and industry contacts of Messrs. Grieco and Codispoti. In addition, counsel relies on the transfer of the right to acquire a four-year van at the end of its lease. She also claims that the repayment of the shareholder loans was a transfer of assets that were a component of the business, that is, capital used to operate the business.
The applicant places particular emphasis on Mr. Codispoti’s experience prior to his joining Mr. Muzzo in creating Concept and his role at Concept to argue that Mr. Codispoti’s departure from Concept and his subsequent creation of Alverio and carrying on business as an electrical contractor was a disposition of a part of a business from Concept to Alverio. Counsel for the applicant contends that a union’s bargaining rights are important institutional interests of a union that attach to the business and all of its elements, no matter what form the business takes. She persuasively argues that there are two fundamental components of a business, particularly in the construction industry; the expertise, managing and procuring of the work (which would include pricing and negotiating with suppliers, sub contractors and customers and bidding for work) and the ability to perform (including the ability to supervise) the work. She says Mr. Codispoti brought those elements with him to Concept from Mapleton, and then when he left Concept, he took his talents or, according to counsel, part of Concept’s business with him to his new business. She points to the non-competition agreement as reinforcing the notion that Mr. Codispoti was able to (and did) take elements of Concept’s business with him, to which the applicant’s bargaining rights attached.
Mr. Codispoti was, according to the applicant, a “key man” at Concept. When he started up again through Alverio, he began small but expanded the business by virtue of his contacts and experience. In effect, Mr. Codispoti was a part of Concept’s business. That view is reinforced, the applicant submits, when one considers the beginnings of Concept. Mr. Muzzo needed Mr. Codispoti’s experience, expertise and reputation to get that business going. Mr. Muzzo could not before and could not after Mr. Codispoti left Concept carry on as an electrical contractor without Mr. Codispoti unless he replaced him. That is, Mr. Codispoti was an integral element of the business of Concept. When Mr. Codispoti left, Mr. Muzzo obtained that missing element of the business from the remnants of Falco. As an example, Mr. Codispoti held the Master Electrician licence (the M Licence) issued by the Metropolitan Toronto Licencing Commission to electrical contractors. When Mr. Codispoti left, Mr. Muzzo could not hold the M Licence for Concept as he was not an electrician. One of the foremen who had left Falco and was hired by Concept obtained the M Licence for Concept after Mr. Codispoti left.
The essence of the applicant’s argument is that both Mr. Grieco and more importantly, Mr. Codispoti were elements of the business of Concept. When they left Concept and then once again came together in the venture they undertook beginning in 1996, they, in effect, continued a part of the business of Concept. The applicant’s bargaining rights, the applicant says, attached to the business of Concept, including its parts, and when a part of that business, that is Messrs. Codispoti and Grieco, surfaced in the electrical contracting business, the bargaining rights of the applicant should continue to attach to them.
The are a number of Board decisions which try to articulate the factors and elements that comprise a business, which, in my view, may differ depending upon the nature of the industry in which the business is engaged. The elements of a business in manufacturing may be very different than the elements that constitute a business in the retail grocery industry. Businesses in the construction industry are also very different than other businesses in a wide variety of ways. The Board in The Tatham Company Limited, [1980] OLRB Rep. Mar 366 commented upon the variety of elements that might constitute a business when it wrote at 376-77:
“The issue of employer successorship arises out of a seemingly endless variety of factual settings, with each new case presenting some of the factors considered relevant to the resolution of prior cases while raising other materially altered, entirely omitted, or newly-added facts which arguably should affect the decision on the merits. Much of the confusion which attends successorship results from the facility with which each case can be distinguished on its facts from all former cases; but to dismiss the confusions so lightly would be to disregard the fundamental differences inherent in the various business contexts in which the successorship issue arises. Factors which may be sufficient to support a ‘sale of business’ finding in once sector of the economy may be insufficient in another. In some industries, particular configuration of assets—physical plant machinery and equipment—may be of paramount importance; while in others it may be patents, ‘know-how’, technological expertise or managerial skills which will be significant. Some businesses will rely heavily on the goodwill associated with a particular location, company name, product name or logo; while for other businesses, these factors will be insignificant. The Labour Relations Act applies equally to primary resource industries, manufacturing, the retail and service sector, the construction industry and certain public services provided by municipalities and local authorities. In each of these sectors the nature of the business organization is different, yet in each case section 55 [now 69] must be applied in a manner which is sensitive to both the business context and the purpose which the section is intended to accomplish.”
- In Gallant Painting, [1991] OLRB Rep. September 1051 the Board discussed the concept of the term “business” at page 1060 and in that decision relied on the following description of a transaction which would constitute a sale of a business found in the Canada Labour Relations Board decision in Radio CJYC Ltd. et al, [1978] 1 Can. L.R.B.R. 565 at paragraph 44:
“For a transaction to be considered a ‘sale of a business’ there must be more than the performance of a like function by another business entity. There must be a transfer from the predecessor of the essential elements of the business as a block or as a “going concern”. A business is not synonymous with its customers or the work it performs or its employees. Rather, it is the economic organization which is used to attract customers or perform the work. The Legislature could have provided for the continuation of bargaining rights whenever there is a continuity of the work performed, but it did not do so. Bargaining rights are only continued when the employer transfers his business. The use of the active verb and possessive pronoun is not insignificant.”
The Board, at page 1060 of Gallant Painting, supra, described the “essential elements” or “economic organization” of the maintenance painting business in that case in the following terms:
“…the maintenance painting business is a bid oriented business. In this type of business the essence of the business resides in the experience and expertise of its management personnel. To be financially successful the essential elements of the maintenance painting business are the expertise to price and bid upon jobs, and the skill and ability of personnel who can perform the job within the limits of a successful bid…. It is not the tools or physical assets which are the ‘essence’ of the painting maintenance business. It is the skill, experience and expertise of its key management personnel.”
There are a number of decisions relied on by the applicant relating to transactions in the construction industry that constituted a “sale of business” within the meaning of the Act in which the “key management people” cease working for one employer and begin working for another. See Deluxe Electrical Contractor Ltd., [1990] OLRB Rep. November 1335; Aquicon Construction Co. Ltd., [1994] OLRB Rep. December 1611; Steeles Electric, [1994] OLRB Rep. 603 at paragraph 40; Ably Concrete Floor Limited, [1991] OLRB Rep. May 579; Stucor Construction Ltd., [1987] OLRB Rep. 614; Base Electric Co. Ltd., [1978] OLRB Rep. Feb. 140.
Gallant Painting, supra, is another example where the Board found that there had been a sale of a business when the successor employer hired the key man, but there was also much more that led to that result. In Gallant Painting, supra, the Board wrote at page 1062:
“In our view this is not simply an acquisition of a ‘key man’ case for the facts taken in their totality disclose much more. Lindsay Maintenance acquired Gallant Painting’s ‘goodwill’ for any goodwill of that company came by reason of its owner John Gallant and the Gallant name. It acquired some of Gallant Painting’s employees….It occasionally borrowed equipment from John Gallant. It acquired one of Gallant Painting’s two major customers.”
Similar additional elements existed in some of the other cases cited by the applicant. In Deluxe Electrical Contractor Ltd., supra, the Board noted at paragraph 20 that the predecessor’s “…tangible assets and Capretta, everything with which Deluxe [predecessor business] had carried on the business of an electrical contractor, were transferred to Duplex and were used in its electrical contracting business, a business in which Capretta was an equal partner from the start.” In Stucor Construction Ltd., supra, the Board noted at paragraph 19 that the successor employer had benefited from the predecessor’s business name and “…acquired some of Contractors fixed assets useful to a general contracting business, office furniture and fixtures, the use of its telephone system, and it operated its business out of part of the premises form which Contractors had operated its business.” In Base Electric Co. Ltd., supra, the successor carried on the same sort of work carried on by the predecessor, purchased some of the assets, and, in addition was contracted by the predecessor to finish its work in progress and carry out whatever warranty work might arise.
In both Steeles Electric, supra and Ably Concrete Floor Limited, supra, when the key management people moved to the successor, the predecessor ceased carrying on business. In Ably Concrete Floor Limited, supra, the Board commented at paragraph 16 that although the physical assets of the business were minimal, the successor acquired the assets of the predecessor, which were “…the skills, contacts and reputation of …” the four principals of the predecessor. The Board stated later in that same paragraph: “Turner added to its customer base and eliminated a substantial competitor. This was done against a background of Ably’s newly acquired relationship and obligations with the applicants over bargaining rights. The four partners may be thought of a key personnel and, in the context of this application, by acquiring the exclusive services [of] these four key personnel there was a sale of a business from Ably to Turner within the meaning of the Act”. Similarly, in Steeles Electric, supra, the Board noted at paragraph 37: “Each time he left a company, that company ceased to exist in the form of an electrical contracting firm in the construction industry.”
The applicant has characterized the movement of Messrs. Grieco and Codispoti as a method by which the bargaining rights it holds for Concept are defeated by the splitting up of Concept’s business. As counsel for Mr. Grieco pointed out, this is not a case where the alleged predecessor ceased to exist after two of the principals left and ultimately got back together to work as an electrical contractor once again. He pointed out that although they together brought important elements of the business to Concept, that is their experience as electricians, they were journeymen electricians who came together with Mr. Muzzo. It was Mr. Muzzo, counsel argued, who was able to create the necessary dynamics for the business of Concept to develop and flourish. He, not Messrs. Grieco and Codispoti, had the business acumen, contacts, managerial skills and initiative to develop the business. Mr. Codispoti, although well known in the industry as a foreman or superintendent who could have a project done on time, within the budget fixed for it and ensure its quality, was not the person who analyzed bids, developed pricing, negotiated with suppliers and customers and established the direction of the business as a high volume, low margin electrical contractor.
The Board has emphasized that in the construction industry, the economic entity that creates employment includes both the managerial expertise to develop competitive pricing in order to bid successfully for work with adequate margins to ensure the ongoing viability of the business and the skills and abilities of the persons to perform (or supervise the performance of) the work within the budget established for the project. In Deluxe Electrical Contractor Ltd., supra, the Board at paragraph 18 wrote:
“The Board has commented before on the significance of management expertise in bid-oriented divisions of the construction industry. The Board put it this way in Construction P.H. Grager Inc., [1985] OLRB Rep. Feb. 233 at paragraph 10:
“…the essence of a ‘business’ in a bid-oriented sector of the construction industry frequently resides in the experience and expertise of its management personnel, rather than, for example, in the physical assets such as tools or a specific location.”
Furthermore, as the Board noted in Stucor, supra, that expertise is essential not just for bidding and pricing jobs, but also for executing the acquired jobs with the cost constraints of the bid.”
The Board has adopted that understanding of what constitutes a business in the construction industry in Gallant Painting, supra; Ably Concrete Floor Limited, supra; Stucor Construction Ltd., supra; Merit Contractors of Niagara, [1994] OLRB Rep. Feb. 152; and Inplant Contractors Inc., [1993] OLRB Rep. 421.
- The Board has accepted that the movement of an individual or group of individuals, because their managerial expertise may be key elements of a construction industry business, can constitute a sale of a business. But determining whether there has been a sale of a business also requires an assessment of what actually departed from the predecessor business and more importantly, what, if anything, remains with the predecessor business. As the Board noted in Stucor Construction Ltd., supra, at paragraph 17: “…the Board disagrees with applicant counsel that the reason why the prior business ceased is irrelevant to whether there has been a section 63 [now 69] sale.” The effect on the predecessor business of the departure of the person or persons said to constitute a “part of the business” can provide a good indication of whether there was, in fact, a disposition of part of the business. In Merit Contractors of Niagara, supra, the Board made the following observation at paragraph 14:
“It is conceivable that an individual could be a ‘key person’ and that a business could survive his/her departure. But however important a person may be to the operation of a business, s/he will not be a ‘key person’ with the meaning of the Board’s sale of business jurisprudence unless the business is substantially different without him/her. That is, for an individual to be a ‘key person’ s/he must be identified with a business or some significant part of it.”
In this case, the evidence concerning the effect on Concept by the resignation of Mr. Grieco in November 1993 and Mr. Codispoti’s departure in January 1996 (after resigning from his employment and giving up his interest in Concept in July 1995) is instructive. Nothing changed when Mr. Grieco left. He was not replaced and Messrs. Muzzo and Codispoti carried on as they had before. More importantly, when Mr. Codispoti left, he was replaced by a foreman who had been employed at Falco. Concept carried on with its business and in fact expanded, obtaining more high volume electrical work than it had been able to acquire prior to Mr. Codispoti leaving. It seems therefore, that although both Mr. Grieco and Mr. Codispoti were very important to the business of Concept, they were more akin to being “assets” of the business as distinguished from being a “part of the business”, that is, a discrete economic enterprise.
- The economic organization of an enterprise that comprises a business in the construction industry is more than the managerial expertise described earlier. If it were only managerial expertise, than any movement of managerial employees from one business to another would constitute a sale of a business within the meaning of the Act and that is simply not the case. See for example Ralph Ford Electric, [1974] OLRB Rep. June 388; Merit Contractors of Niagara, supra; Highview Plumbing & Heating Ltd., unreported decision dated May 8, 1997, Board File Nos. 1588-96-R, 1877-95-R,
1878-95-G, [1997] OLRD. No 1791; Inplant Contractors Inc., supra; and Tri-Corps Industrial Contractors, [1994] OLRB Rep. Oct. 1446. The Board articulated the rationale for not simply equating the transfer of key managerial personnel with a sale of a business in Tri-Corps Industrial Contractors, supra, at paragraph 63:
“…the bargaining rights attached to a ‘business’ and not to an individual. It is only where the key person is so identified with the ‘business’ that it is realistic to view his/her movement to be a transfer of all or part of a ‘business’ that a declaration pursuant to section 64 will be made. To hold otherwise would result in a ‘sale’ whenever an expert, experienced manager, estimator, field supervisor or similar managerial personnel left the unionized company to join another. Within the construction industry it is not unusual to find persons who have obtained specific expertise or management knowledge and experience, who have developed entrepreneurial skills, or who have otherwise acquired specialized abilities by reason of their employment history or association within the industry. It is inevitably these types of attributes which enable persons within the industry to either attract offers of employment from other companies or individuals, or which permit them to start up their own business enterprise either alone or in conjunction with others who may have similar or complimentary expertise, knowledge and skills. Certainly, instances where a business has started from scratch (as is the assertion in the case before us) it is difficult to imagine anyone who does not have some experience, skill or expertise. A complete novice to the construction industry is not likely to start up his/her own business in the industry.”
A similar view was expressed by the Board in Highview Plumbing & Heating Ltd., supra, at paragraph 60, where the Board, after referring to Tri-Corps Industrial Contractors, supra, stated:
“If bargaining rights attached to individuals, a sale of a business for the purpose of the Act would ALWAYS be the result of a senior employee’s departure from a successful business. The Act does not permit for such a conclusion. The Act, instead of focusing upon the individuals, work, employees or customers, focuses on THE BUSINESS. If, however, the business is, for all intents and purposes, the individual, the sale provisions of the Act can apply to that individual’s departure and commencement of operations elsewhere.”
I have not been persuaded that the departures of Messrs. Grieco and Codispoti from Concept resulted in a sale of a business from Concept to Alverio or Beldin. While admittedly the skills, expertise and reputation of Mr. Codispoti and to a lesser extent, Mr. Grieco were important elements to the successful beginning of Concept, it evolved into Mr. Muzzo’s business by the time Mr. Codispoti left in January, 1996. Mr. Muzzo applied his considerable managerial expertise, entrepreneurial initiative, business contacts and experience in managing construction projects and negotiating with customers and suppliers to carry on the business of Concept without interruption after Mr. Codispoti left. He replaced Mr. Codispoti by hiring some one else with the necessary skills and qualifications. It is vital to distinguish between the “business” and the people in the business who do the work that allows the business to exist. Under the Act, bargaining rights attach to the business and not to the people in the business. In this case, neither Mr. Grieco nor Mr. Codispoti took the work or customers of Concept with them after they left. In my view, they were not such an integral part of Concept’s business that the Board could properly find that a part of Concept’s business was transferred when either or both Messrs. Codispoti and Grieco left Concept. Thus, the application for a declaration under section 69 of the Act is dismissed.
The applicant also claimed that Alverio, Beldin and Concept were under common control and direction carrying on related activities or businesses and therefore, in order to protect the erosion of the applicant’s bargaining rights, the Board should issue a single employer declaration under section 1(4) of the Act. Section 1(4) provides:
“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.”
It is clear to me that the conditions precedent for a single employer declaration as between Alverio and Beldin have been established. Mr. Codispoti and Mr. Grieco, through their respective corporations, carry on an electrical contracting business in the residential and the industrial, commercial and institutional sectors of the construction industry. They work closely together, sharing equally in the revenues and any profits or losses they generate. Thus, if the applicant’s bargaining rights attached to either Alverio or Beldin, I would not hesitate to issue a single employer declaration with respect to Alverio and Beldin.
Concept, Alverio and Beldin also clearly carry on related activities or businesses. They are electrical contractors carrying on business in the construction industry performing work in both the residential and the industrial, commercial and institutional sectors of the industry. The more difficult issue is whether the businesses of Concept, on the one hand and Alverio and Beldin on the other, are or were carried on under common control or direction, and if they are or were, whether a single employer declaration should be made. The evidence was clear that Mr. Muzzo has had nothing whatever to do with either Concept or Beldin since their inception. Counsel for the applicant, in her argument, suggested that although she was not abandoning her application for a declaration under section 1(4) of the Act, she submitted that the fact situation in this case was a sale of a business. The common control and direction relied on by the applicant was the role that Messrs. Codispoti and Grieco had at Concept before they left which was carried on at their new businesses. There is no doubt that all three principals of Concept had an important role in the ongoing business of Concept when it started. They made business decisions by trying to reach consensus. However, as Concept evolved, it became Mr. Muzzo’s business. Mr. Grieco left in November 1993 and had nothing more to do with that business after that time. Mr. Codispoti resigned in June 1995 and ceased his involvement with Concept in January 1996.
It is clear that Concept and the business of Messrs. Codispoti and Grieco are not currently carried on under common control and direction. While Messrs. Codispoti and Grieco had a role in Concept and then established their own business over which they both exercise control and direction, Mr. Muzzo has never had anything to do with either Alverio or Beldin, or with the business carried on by Messrs. Codispoti and Grieco through Alverio and Beldin after they left Concept. Concept still exists and is active in the same kind of business in which Messrs. Codispoti and Grieco were engaged while they were with Concept, only now Concept’s business has expanded significantly.
In my opinion, the underlying purpose of section 1(4) is not served by making a single employer declaration in respect of the two active businesses (that is Concept and the business carried on by Alverio and Beldin) before me in this case. Those two businesses have had nothing to do with one another at any time after they all came into existence and which do not carry on business under common control or direction. Simply put, I have not been persuaded that the business of Concept is being carried on in any way by Alverio and Beldin. Although Mr. Codispoti’s and to a lesser extent Mr. Grieco’s role in both businesses would likely cause the Board to conclude that Concept and their new business had been under common control and direction, but not simultaneously, the applicant has not satisfied me that the electrical work done by Beldin and Alverio would have been done by Concept. Concept’s business was not aimed at the sector of market on which the business of Beldin and Alverio is focused. This is not a case where the principals of the two businesses have reached some understanding about the division of the work both business will undertake. If Concept had ceased carrying on business shortly after Mr. Codispoti left its employ and its demise was related to his departure, the result would likely have been different. It would have been much easier to conclude that Mr. Codispoti exercised such control over Concept that it having ceased to exist after his departure was indicative that his control and direction of the business was necessary for its survival, and that he was, as the Board said in Tri-Corps Industrial Contractors, supra, “a key person … so identified with the business” that when he moved, the business moved with him. In those circumstances, his movement to a new business, if not a sale within the meaning of section 69 of the Act, would likely cause the Board to conclude that Concept and Mr. Codispoti’s new business ought to be declared one employer to preserve the applicant’s bargaining rights.
The applicant obtained bargaining rights for Concept’s business and those bargaining rights have not been adversely affected by Messrs. Codispoti and Grieco undertaking their new business. The Board does not issue a single employer declaration to expand bargaining rights, which would be the case if I were to grant the declaration sought by the applicant. The business of Concept, to which the applicant’s bargaining rights attached, has continued with Mr. Muzzo as its principal. In my view, the applicant’s bargaining rights remain intact at Concept. There is therefore no proper basis for granting a single employer declaration to the applicant.
The application for a declaration under section 1(4) of the Act is also dismissed.
Having regard to the Board’s determinations at paragraphs 37 and 44, this application for declaratory and other relief is dismissed.
“Harry Freedman”
for the Board