International Brotherhood of Electrical Workers, Local 586 v. Bellefeuille Electric Limited, 2001 CanLII 4701

International Brotherhood of Electrical Workers, Local 586 v. Bellefeuille Electric Limited and Portt Electric Ltd.

3240-98-R International Brotherhood of Electrical Workers, Local 586, Applicant v. Bellefeuille Electric Limited and Portt Electric Ltd., Responding Parties.

3258-98-G International Brotherhood of Electrical Workers Local 586, Applicant v. Bellefeuille Electric Limited and Portt Electric Ltd., Responding Parties.

BEFORE: John Morgan Lewis, Vice-Chair.

APPEARANCES: Michael Gottheil, Robert Monti, Ken Scott and James Barry on behalf of International Brotherhood of Electrical Workers, Local 586; Michael S. Ruddy and Dave Bellefeuille on behalf of Bellefeuille Electric Limited; George Rontiris and Dennis Portt on behalf of Portt Electric Limited

DECISION OF THE BOARD; May 30, 2001

1Board File No. 3240-98-R is an application under subsection 1(4) and section 69 of the Labour Relations Act, 1995 (the “Act”) in which the applicant, International Brotherhood of Electrical Workers, Local 586 (the “union”) asserts that there has been a sale of business from Bellefeuille Electric Limited (“B.E.”) to Portt Electric Ltd. (“P.E.”). The union also alleges that B.E. and P.E. are under common control and direction constituting a single employer for the purposes of labour relations. Board File No. 3258-98-G is a referral of a grievance to arbitration under section 133 of the Act and was adjourned pending the Board’s disposition of the sale of business/related employer application.

2Upon the agreement of the parties, David Bellefeuille was removed as a responding party to these applications. The style of cause is amended accordingly.

3At the commencement of the hearing counsel for B.E raised a preliminary motion contesting the union’s allegation that it was bound to the Principal Agreement between the Electrical Trade Bargaining Agency of the Electrical Contractors Association of Ontario and the International Brotherhood of Electrical Workers and the International Brotherhood of Electrical Workers Construction Council of Ontario (the “principal agreement”). B.E. also maintained that it was not bound to the residential collective agreement between the Electrical Contractors Association of Ottawa and the union (the “residential agreement”). The union and B.E. filed extensive submissions in accordance with the Board’s direction and proceeded to call evidence with respect to the status of B.E. Prior to the second day of hearing in relation to the preliminary motion, counsel for B.E. advised the Board that it was withdrawing its motion and that it was now in agreement with the union that it was bound to both the principal agreement and the residential agreement at all material times with respect to these applications.

Facts

4The Board heard from two witnesses: Dave Bellefeuille and Dennis Portt. The union did not call any evidence. Not surprisingly, the material facts were not in dispute, although the parties asked the Board to draw different, sometimes conflicting inferences in relation to those facts. The facts are set out as follows.

5David Bellefeuille started working as an apprentice electrician in 1966. He worked for a number of companies until obtaining his status of licensed electrician in 1971 while working for Continental Electric in the City of Ottawa. Mr. Bellefeuille later obtained his Master’s License (the importance of which will be discussed in some detail later in the decision) and in 1975 went into business for himself in the electrical trade. He operated as a sole proprietorship until incorporating B.E. on February 22, 1979. Mr. Bellefeuille indicated that B.E. ceased operating as electrical contractor in the construction industry as of August 31, 1998. B.E. continues to exist as a holding company for the purpose of investments on behalf of Mr. Bellefeuille and his wife.

6Mr. Bellefeuille has been the President and sole director and shareholder of B.E. since its incorporation. The only other officer has been Mrs. Bellefeuille who is listed as the Secretary. Mrs. Bellefeuille worked for the company on a full-time basis throughout its history. Mr. Bellefeuille testified that his wife handled all the paperwork of the company and that her duties included invoicing customers, paying bills, and completion of all required government documents. Mr. Bellefeuille and his wife were the only individuals at B.E. who had signing authority. On occasion B.E. was required to obtain bonding when performing certain contracts in and in those instances the company used Guardian Insurance as the surety. Mr. Bellefeuille and his wife were required to provide a personal guarantee for the value of the bonding which was as high as $500,000. No other individual ever provided a personal guarantee on behalf of the company.

7Mr. Bellefeuille was the driving force behind the company. He was responsible for almost every single key element in running the company: working on the tools, supervising work of other employees, tendering of all bids, negotiating all contracts, arranging for materials, and, along with his wife, ensuring that all of the company’s paperwork was current.

8B.E. was largely active in the industrial, commercial and institutional sector of the construction industry. Mr. Bellefeuille estimated that ninety per cent of his work was in the ICI sector and less than ten per cent was in the residential sector. Most of the work obtained by B.E. was by virtue of public tender through a general contractor or directly with an institution. Ninety per cent of work was by public tender and ten per cent would be small jobs of less then $1,000.

9Mr. Bellefeuille identified a number of clients for whom B.E. regularly performed work. Included in this list was Ottawa R&R Construction Limited (“R&R”) which is a general contractor that worked on a number of banks and subcontracted the electrical work to B.E. Mr. Bellefeuille’s contact at R&R was Bill Raymaker. B.E. also performed a large amount of work at the Ottawa Civic Hospital. While Mr. Bellefeuille dealt with a number of project managers at the Ottawa Civic Hospital, he identified Frank Medwenitsch as a project manager with whom he had worked with on a regular basis. Other substantial clients included Enterprise Properties, which is a property management firm. Angela Brown was Mr. Bellefeuille’s contact at Enterprise Properties. Mr. Bellefeuille also referred to Polycon Inc. and Garbo Construction Ltd. as regular clients of B.E.

10B.E. hired its employees from the union’s hiring hall. Mr. Bellefeuille was solely responsible for the company’s employees. This included authority to discipline, discharge and lay off. B.E. employed foremen who would be responsible for overseeing work on a particular site. Any major issues, however, were dealt with personally by Mr. Bellefeuille.

11B.E. had a steady complement of employees who worked for the company for a number of years. The following list indicates B.E.’s regular employees and the period of time they worked for the company:

Name Years of Employment

Laurier Houle 15 years

Henry Pace 12 years

Andrew Bellefeuille 11 years

Wayne Paul 6 years

Dennis Portt 10 years

Darryl Mayer 3 years

12Dennis Portt commenced his employment career in the high-tech industry in 1976 after graduating from high school. After working for a number of firms, he left the hi-tech industry and worked in the drywall trade for two years. In November 1987, Mr. Portt joined the union as an apprentice. B.E. hired Dennis Portt as an apprentice on November 25, 1987. Mr. Portt was referred to B.E. from the union hiring hall. Mr. Portt worked exclusively for B.E. for the next ten years. He completed his apprenticeship in July of 1992. Mr. Portt continued to work for B.E. as a journeyman and was the last employee to be laid off when the company ceased to operate as an electrical contractor. At no time was Mr. Portt employed as a foreman for B.E. Mr. Portt carried out his duties as an electrician in a similar manner as the other electricians employed by B.E. Mr. Portt was on friendly terms with Mr. Bellefeuille as were all of the employees of the company. Mr. Bellefeuille testified that he played hockey with all of his employees on Friday afternoons for a period of sixteen months. Similarly, all employees were invited to the company’s Christmas party as well as a summer barbecue. Although it was implied by counsel for the union that Mr. Portt had a particularly friendly relationship with Mr. Bellefeuille, there was nothing in the evidence which would support such a finding.

13Mr. Bellefeuille testified that he decided to close down due to failing health. Mr. Bellefeuille had back surgery in which a disk was removed. In addition, Mr. Bellefeuille had undergone eight operations on his hands to address nerve deterioration caused by carpal tunnel syndrome. Mr. Bellefeuille testified that he commenced to lay-off his employees beginning in June of 1998. Mr. Portt was his last employee and worked to the end of July 1998. Mr. Bellefeuille did not think that Mr. Portt worked for B.E. during the month of August. Mr. Bellefeuille indicated that he completed the last warranty work for B.E. in August when he installed a fire alarm, which was the last work performed by B.E.

14Mr. Bellefeuille testified that he had previously tried to sell his company in December 1994 to Messrs. Portt, Houle, Pace and Paul. He had invited the four employees to his home when he proposed that they form a partnership and purchase the company from him for a price of $250,000. Mr. Bellefeuille had publicly announced his intention to sell the company earlier but received no offers from interested parties. It was then that he decided to approach his employees. Mr. Bellefeuille arrived at the figure of $250,000 without making a formal evaluation of the company’s assets. Mr. Bellefeuille considered the value of the company to be well in excess of this amount but he was willing to accept less in order to facilitate the sale. Mr. Bellefeuille proposed that each of the employees pay him $12,500 each up front and the remaining $200,000 be paid over a period of time without interest. Mr. Portt testified that what they were being offered in buying the company was the following:

• Three service trucks

• All tools and materials

• All equipment

• Client List

• Good Will

• Use of Mr. Bellefeuille’s Master’s License

• The services of Mr. and Mrs. Bellefeuille for a period of six months

Mr. Bellefeuille even proposed that he would assist in securing financing for the transaction.

15Mr. Portt testified that the employees were surprised by the offer. It was the first time that Mr. Bellefeuille had indicated that he wanted to retire and get out of the business. Mr. Bellefeuille mentioned that he was approaching 50 and wanted to slow down. The employees met the next day to discuss the offer. The meeting lasted one hour and at the end of which it was agreed that they would not accept the offer to purchase the company. The consensus amongst the employees was that a partnership amongst all four of them would not work out. Mr. Portt testified that he did not take the offer that seriously because the four of them did not get along that well, which would have prevented the company from running profitably. Mr. Houle later met with Mr. Bellefeuille and advised him that the employees were not prepared to accept his offer.

16From December 1994 to the eventual windup of the company on August 31, 1996, everyone associated with B.E. knew it was only a matter of time before Mr. Bellefeuille retired. Although Mr. Bellefeuille made no formal announcement to this effect, clients, suppliers and employees knew that Mr. Bellefeuille was slowly winding down the business. Mr. Bellefeuille indicated that he had intended to close the business earlier than August 31, 1996, but that two large projects on which B.E. was working had been delayed for a significant period of time. Mr. Bellefeuille had decided that once those two large projects were completed, the company would cease operating. The employees were aware of this because Mr. Bellefeuille was pricing less and less work. For example, B.E. stopped pricing work for R & R, one of its biggest clients, six months prior to closing down. In June of 1996, the first two regular employees were laid off. The remaining employees were let go during the month of July 1996. As previously noted, Mr. Portt was the last employee to be laid off. Mr. Portt asserts that he was laid off on Friday, July 26, 1996 while working at the Ontario Civic Hospital. He had received no prior notice of the lay-off but testified that it did not surprise him as there was not much work left to complete and all the other employees had already been laid off.

17Mr. Portt testified that it was his intention to seek employment with another union contractor. To that effect, Mr. Portt contacted the union on July 29, 1996 and was told that he would be waiting approximately 18 months on the union’s unemployed list. Mr. Portt never registered on the union’s unemployed list nor did he contact any electrical contractors. He did file a claim for employment insurance benefits and received said benefits for the months of August and September. Mr. Portt ultimately decided to start an electrical contracting business and registered a business name on August 13, 1996. Quite a number of things happened between July 29, 1996 and August 13, 1996, which helped persuade Mr. Portt and his wife to make such a decision.

18Mr. Portt was not willing to wait 18 months before securing work. He spoke with his brother-in-law who worked in the hi-tech industry about job opportunities. He was advised that he would have to upgrade his education and that a course would cost approximately $10,000. Mr. Portt and his wife rejected the idea of returning to the hi-tech field as they felt it would be a waste to not take advantage of Mr. Portt’s expertise as an electrician with 10 years’ experience.

19Mr. Portt and his wife made the decision to start an electrical contracting company sometime prior to August 13, 1996. Mr. Portt testified that when he filled out the registration forms, he had previously spoken to a lawyer on how to register a company. Mr. Portt asserted that he did not speak to Mr. Bellefeuille regarding his decision to start a company. Prior to registering the business name, Mr. Portt had received two calls for work. One call was a reference from his brother and the other call was from a neighbour. Both jobs were small in scope.

20Shortly after registering Portt Electric, Mr. Portt received a phone call from Frank Medwenitsch from the Ottawa Civic Hospital. Mr. Medwenitsch was calling to find out if Mr. Portt was interested in pricing some work. Mr. Portt agreed to meet with him the next day. Mr. Portt ended up pricing two small jobs and one larger job. Mr. Portt obtained the two smaller jobs but not the larger job. Mr. Portt testified that he had never priced work or even assisted Mr. Bellefeuille in pricing work. Mr. Portt received some assistance from some material suppliers in putting together prices for the three jobs at the Ottawa Civic Hospital.

21Mr. Portt testified that he was not sure how Mr. Medwenitsch obtained his telephone number. Mr. Portt had spoken with Mr. Medwenitsch during his last week of work for Mr. Bellefeuille at the Ottawa Civic Hospital and had indicated that he was presently uncertain about his future plans, but that one of his options was to start an electrical contracting business. Presumably, Mr. Medwenitsch remembered this conversation when he invited Mr. Portt to submit a tender for the three jobs at the Ottawa Civic Hospital.

22Mr. Bellefeuille wrote to the union on August 19, 1996 seeking to obtain an honourary withdrawal from the union. When he did not receive a response from the union, Mr. Bellefeuille spoke with Darryl Lecuyer, a representative of the union who has since passed away. According to Mr. Bellefeuille, Mr. Lecuyer indicated that the union would not provide an honourary withdrawal for Mr. Bellefeuille as he was permitting Mr. Portt to use his Master’s License, thereby permitting him to work on a non-union basis. Mr. Bellefeuille spoke to Dennis Scott, the union’s Business Manager, the next day and was again told that the union was denying Mr. Bellefeuille an honourary withdrawal. Mr. Bellefeuille testified that he requested the honourary withdrawal because he was retiring from the trade. In cross-examination, Mr. Bellefeuille conceded that he could retire without seeking an honourary withdrawal but that he wanted to stop paying union dues now that he was no longer going to work.

23At the same time that Mr. Bellefeuille was seeking his honourary withdrawal, Mr. Portt was similarly seeking to withdraw from the union. Mr. Bellefeuille testified that he was unaware of Mr. Portt’s request. Mr. Bellefeuille indicated that he assumed that Mr. Portt was going to operate a union company but that he never spoke to Mr. Portt on this topic. On August 21, 1996 Mr. Portt requested an honourary withdrawal from the union. Mr. Portt indicated to the union that he was seeking the withdrawal because he did not want to pay union dues. Not surprisingly, Mr. Portt did not make reference to his starting an electrical business as it was clearly his intention that he did not want to be unionized.

24On August 27, 1996 Mr. Portt initiated discussions with Mr. Bellefeuille regarding the possible sale of some of Bellefeuille’s equipment, tools and material. Following this discussion a list was prepared reflecting what Mr. Portt was seeking to purchase from B.E. The Board heard many versions of who produced the list and when it was produced. Mr. Portt was far from clear on these matters and created much confusion as his testimony changed a number of times. For the purpose of this decision, however, the Board draws no adverse inference with respect to the testimony of Mr. Portt other than he was confused on this point. Nothing turns on who produced the list or when it was produced.

25An extensive list was produced which formed the basis of the discussions between Mr. Bellefeuille and Mr. Portt. Mr. Bellefeuille costed each of the items and proposed a figure of $100,000. The contents of the list and Mr. Bellefeuille’s costing figures are reproduced below:

2- extension ladders - $400 2 job boxes-$700

Conduit Fittings - $300 1-16’ step ladder - $650

2 Wire stands - $300 Plugs and covers - $300

2-12’ step ladders - $900 Wire rack - $150

Fire alarm equip. - $1000 1-10’ step ladder - $200

Holo saw kits - $400 15 KVA transformer - $600

2-8’ step ladders - $200 15 hand benders - $400

Furnace relays, elements - $200 8-6’ step ladders - $1,000

Meters - $700 Scaffold - $500

1-3’ step ladder - $100 Megger - $350

1 – Chicago Bender - $2,000 Amprobes - $500

1 – Chev. Cargo Van - $20,000 Assorted fuses - $500

1 – Core drill complete with bits - $12,000 Misc. wire cuts - $2,000

Hand drills - $3,000 Pipe at warehouse - $1,500

Hydraulic punch sets - $800 Heating cables - $300

Manual punch sets - $300 Lighting fixtures at warehouse - $2,500

Misc.120/240 Volt Breakers - $2000 Heat guns - $600

Misc. 600 Volt Breakers - $3,500 PVC bender - $250

Misc. lighting fixtures - $5,000 Lamp assortments - $500

Filing Cabinet - $250 Corflex conn. - $200

Misc. Inventory - $2,000 Misc. disconnects - $1,500

Shelving - $300 Misc. panels - $3,500

Baker scaffold - $400 Used panels - $1,000

Kango - $1,000 Assorted heaters - $2,000

3 service truck contents - $3,000 Fish tapes - $200

Misc. inventory at warehouse - $2,500 Relays and timers - $300

Scaffold wheels - $100 Bx in stock - $1,500

As is readily evident, the listed items are quite extensive and as indicated by Mr. Portt, were more than enough to start an electrical contracting business. The listed items did not include all of the equipment, tools and materials in the possession of B.E. Mr. Bellefeuille estimated that B.E. had another $150,000 worth of inventory on hand as of August 1996. It is interesting to note that the full amount of equipment, tools and equipment owned by B.E. amounts to $250,000 – the proposed purchase price put forward by Mr. Bellefeuille in December 1994.

26Mr. Portt rejected Mr. Bellefeuille’s proposal of $100,00 and indicated that he was prepared to buy the listed items for $20,000. Mr. Bellefeuille took a few days before replying and suggested an amount of $50,000. Mr. Portt indicated to Mr. Bellefeuille that $50,000 was more than he was able to spend. Mr. Bellefeuille then proposed that he would be willing to accept $20,000 up front with the remaining $30,000 payable over a period of time. This was acceptable to Mr. Portt and the following document was signed by the parties to reflect the terms of their arrangement.

September 10th, 1996

We, Diane and Dennis Portt agree to pay Dave and/or Carol Bellefeuille the sum of $50,000.00 (Fifty Thousand Dollars).

Of this amount $20,000.00 (Twenty Thousand Dollars) will be paid in advance for material, tools and office supplies as agreed upon by the undersigned.

The balance of $30,000.00 (Thirty Thousand Dollars) will be paid, interest free, over a period of 5 (five) years at the rate of $6,000.00 (Six Thousand Dollars) per year at the end of the fiscal year.

(Dennis Portt) (September 10, 1996)

Dennis Portt Date

(Diane Portt) (September 10, 1996)

Diane Portt Date

(Dave Bellefeuille) (September 10, 1996)

Dave Bellefeuille Date

(Carol Bellefeuille) (September 10, 1996)

Carol Bellefeuille Date

27Mr. Portt obtained the equipment, tools and material around August 29, 1996. Mr. Bellefeuille never sought legal advice on any aspect of the transaction. He testified that Mr. Portt had gotten a very good deal as the value of the items sold was in excess of $100,000. Mr. Bellefeuille referred to the sale of the items as his retirement fund. He also acknowledged that by structuring the payments in such a fashion that he was assisting in the financing of P.E. Mr. Bellefeuille did not seek security from Mr. Portt with respect to the outstanding $30,000 which was to be paid over a period of five years. According to Mr. Bellefeuille, the thought of obtaining security never occurred to him as he trusted Mr. Portt. Although there was some delay in paying the initial $20,000, Mr. Portt has made timely annual payments to Mr. Bellefeuille in the amount of $6,000 for 1997, 1998 1999 and 2000. One final payment of $6000 is due in September 2001.

28It was sometime in September (and after the purchase of the equipment, materials and tools) when Mr. Portt approached Mr. Bellefeuille regarding the use of his Master’s License. When pricing the large job at the Ottawa Civic Hospital, Mr. Portt was made aware that if awarded the job, P.E. would be required to employ an electrician who possessed a Master’s License. Although P.E. was not awarded the large job, Mr. Portt knew that in order to work in the City of Ottawa he would have to obtain a Master’s License. To that end, Mr. Portt approached Mr. Bellefeuille and asked if he could “use” his Master’s License. By “use” I am referring to the practice whereby Portt Electric would show Mr. Bellefeuille as an employee possessing a Master’s License thereby satisfying the By-Law requirements for the City of Ottawa. Despite this representation, Mr. Bellefeuille never was an employee for P.E.

29Mr. Bellefeuille agreed that P.E. could use his Master’s License for one year but that Mr. Portt would have to get his own Master’s License as soon as possible. The importance of obtaining a Master’s License was made clear by Mr. Bellefeuille in response to a question in cross-examination. Mr. Bellefeuille was asked why he did not simply refuse to allow Mr. Portt to use his Master’s License. In response Mr. Bellefeuille stated that P.E. could not be in business without employing someone who possessed a Master’s License.

30Mr. Bellefeuille did not seek any form of compensation for allowing P.E. to use his Master’s License. P.E. did pay for the annual registration fee for the Master’s License. Despite the intention of the parties, Mr. Portt did not obtain his Master’s License until July 8, 1999, after the filing of these applications. Mr. Portt testified that his wife became ill which prevented him from fulfilling the necessary requirements to obtain a Master’s License until he had been in business for almost three years.

31Another critical element to the successful launch of P.E. was to secure credit from the various trade suppliers and with a lending institution. In order to facilitate the establishment of credit, Mr. Portt did not accurately disclose the company’s indebtedness to Mr. Bellefeuille with respect to the sale of the equipment, tools and material. For example, the company was required to verify its financial status when it sought to establish credit with Wesco, an electrical supplier. The financial statement completed by P.E. discloses assets in the form of inventory and equipment and vehicles totaling $50,000. This would appear to refer to those items acquired by P.E. from B.E. The financial statement does not disclose, however, any liabilities flowing from the same transaction, and in particular the $50,000 owing to Mr. Bellefeuille. When applying for a line of credit with the Bank of Montreal in December 1996, P.E. again did not disclose its indebtedness to Mr. Bellefeuille.

32Mr. Portt listed Mr. Bellefeuille as a reference on the first three credit applications. The applications were with respect to Westburne, Wesco and Guillevin International Inc. and all listed Mr. Bellefeuille as a reference. It would appear that once P.E. obtained credit from these three institutions, he no longer listed Mr. Bellefeuille as a reference on any further applications as the company’s credit was now established. Both Mr. Portt and Mr. Bellefeuille indicated that Mr. Portt did not seek Mr. Bellefeuille’s permission to use his name as a reference.

33On October 21, 1996, Mr. Portt wrote to three contractors seeking their permission to be listed as a reference. Those contractors are as follows:

Ottawa Civic Hospital – Frank Medwenitsch

R & R Construction – Bill Raymaker

Enterprise Property Group – Angela Brown

34All three contractors were former clients of B.E. for whom Mr. Portt had worked while with B.E., and also while with P.E. in the short time that it had been operating. Mr. Portt then sent out an introductory letter to a number of general contractors working in the Ottawa region in which these three contractors, along with Angelo Serpelinni of Durabuilt Construction, were listed as references. Many of these general contractors were former clients of B.E., but some were not. Perhaps surprisingly, Mr. Portt did not list Mr. Bellefeuille as a reference despite having worked for him for ten years and the excellent reputation enjoyed by B.E. as a quality electrical contractor.

35Mr. Bellefeuille and Mr. Portt testified that Mr. Bellefeuille did not assist P.E. in securing work. The transaction of equipment, tools and materials did not include Bellefeuille’s client list nor did Mr. Bellefeuille recommend P.E. to anyone. Mr. Bellefeuille had little contact with Mr. Portt once P.E. was established. Mr. Bellefeuille experienced a tragic personal loss in the Fall of 1998 which kept him out of the Ottawa region for a number of months. Mr. Bellefeuille and his wife then spent a few months travelling. In total Mr. Bellefeuille spent little time in the Ottawa region from September 1996 to April 1998.

36Almost immediately P.E. was successful in securing work. From September 1996 to December 1996 the company realized sales of $80,670.24. In 1997 P.E. generated revenues of $212,758.49. Revenue figures in 1998 and 1999 were $460,522.78 and $449,446.55, respectively. Corresponding to this growth in revenue, P.E. hired a number of electricians to work alongside Mr. Portt. In 1999, P.E. employed six electricians on a regular basis. None of the electricians who have worked for P.E. have ever worked for B.E. Mrs. Portt works on a full time basis for the company. She handles the clerical and administrative work functions for the company.

37Eighty per cent of P.E.’s work came from public tenders and twenty per cent came from service calls. Many of P.E.’s clients were also former clients of B.E. In particular, P.E. has worked extensively for R&R and at the Ottawa Civic Hospital.

38In early 1997 P.E. was incorporated. Dianne Portt was initially listed as the company’s President and Mr. Portt was a shareholder. At some point that arrangement was amended so that Mr. Portt became the President with two shares and Mrs. Portt had one share. Neither Mr. Bellefeuille or Mrs. Bellefeuille have ever been an officer, director or shareholder of P.E.

The Parties’ Submissions

39The union asserts that Mr. Bellefeuille was involved in the creation of P.E. despite the denials of Mr. Bellefeuille and Mr. Portt. The union asks the Board to draw inferences from the evidence that there was much more going on between Mr. Bellefeuille and Mr. Portt at the time B.E. was winding down and P.E. was being established. The union argues that there is common control and direction between B.E. and P.E., which triggers the protections afforded by subsection 1(4) of the Act.

40The union’s main argument is that there has been a sale of a business from B.E. to P.E. The union asserts that B.E. was more than just Mr. Bellefeuille and the essence of B.E. was transferred to P.E. during the Fall of 1996. The union argues that but/for the assistance of Mr. Bellefeuille, as evidenced by the generous terms on the sale of equipment, tools and material, the use of his Master’s License for almost three years, and the use of his good name in securing credit, P.E. would never have been established. The union points to the overlap in customers from B.E and P.E. and asserts that this is the type of situation which speaks to the purpose of section 69 of the Act.

41Counsel for P.E. refers to the union’s argument in relation subsection 1(4) as a fiction not supported by the evidence which was not challenged by any union witness. P.E asserts that there is no basis on which the Board can make a declaration pursuant to subsection 1(4) of the Act.

42P.E. argues that the union’s position with respect to section 69 is flawed as the transfer of the business of B.E. must incorporate more than just the sale of a few items and the use of a Master’s License. It was argued that in the construction industry the key element of a business resides in the ability to bid and obtain work. At B.E. the only evidence before the Board was that Mr. Bellefeuille carried out the bidding process while at P.E the only evidence before the Board was that Mr. Portt carried out this function. There can be no transfer of a business as contemplated in section 69 of the Act, it was argued, absent a transfer of such a core element to the business.

Analysis and Decision

i) Application under Subsection (1)(4)

43Section 1(4) of the Act reads as follows:

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.

44The Board finds that the union has failed to establish the statutory preconditions for the exercise of the Board’s discretion to declare that P.E. and B.E. are related and constitute a single employer for the purposes of the Act. Simply put, the union asks the Board to draw a number of inferences from the testimony of Messrs. Portt and Bellefeuille which would support the proposition that Mr. Bellefeuille continued to be an active participant in the electrical industry after August 31, 1996 by carrying out various essential functions, such as procuring work, for P.E.

45The Board finds that while Mr. Bellefeuille was integral to the creation of P.E., he did not take an active role in its operation. Mr. Bellefeuille was in the middle of a deeply troubling personal crises during the Fall of 1996. He was not present during the Fall of 1996 nor for the following 18 months to be in a position to assist Mr. Portt with his new enterprise. The Board does not find that the role of Mr. Bellefeuille with P.E. is sufficient to establish that B.E and P.E. are under common control or direction. Accordingly, the application under subsection 1(4) is dismissed.

ii) Application under Section 69

46The relevant provisions of Section 69 of the Act are as follows:

69. (1) In this section,

"business" includes a part or parts thereof; ("entreprise")

"sells" includes leases, transfers and any other manner of disposition, and "sold" and "sale" have corresponding meanings. ("vend", "vendu", "vente")

(2) Where an employer who is bound by or is a party to a collective agreement with a trade union or council of trade unions sells his, her or its business, the person to whom the business has been sold is, until the Board otherwise declares, bound by the collective agreement as if the person had been a party thereto and, where an employer sells his, her or its business while an application for certification or termination of bargaining rights to which the employer is a party is before the Board, the person to whom the business has been sold is, until the Board otherwise declares, the employer for the purposes of the application as if the person were named as the employer in the application.

(5) The Board may, upon the application of any person, trade union or council of trade unions concerned, made within 60 days after the successor employer referred to in subsection (2) becomes bound by the collective agreement, or within 60 days after the trade union or council of trade unions has given a notice under subsection (3), terminate the bargaining rights of the trade union or council of trade unions bound by the collective agreement or that has given notice, as the case may be, if, in the opinion of the Board, the person to whom the business was sold has changed its character so that it is substantially different from the business of the predecessor employer.

The jurisprudence with respect to the statute’s sale of business provisions is substantial. The Ontario Court of Appeal in Charterways Transportation Limited, [1998] OLRB Rep. Sept./Oct 897 offers a recent observation concerning the nature and purpose of section 64 (now section 69) in a decision whose reasons were adopted in substance by the majority of the Supreme Court of Canada ([2000] OLRB Rep. Mar./Apr. 413). At paragraph 24, the Court of Appeal noted:

… The statutory definition is inclusive: “‘sells’ includes leases, transfers and any other manner of disposition”. Because of the remedial purpose of s.64 [now s.69], namely the preservation of bargaining rights, this definition is to be given a broad and liberal interpretation. Moreover, it is not required that the transfer take any particular legal form nor take place by way of a legal transaction. In W.W. Lester, supra, at 674-75, McLachlin J. put it this way:

Ten of the labour acts have provisions similarly worded to s.89 of the Newfoundland Act, referring to transactions such as sale, lease, transfer or disposition. (The Quebec Act also contains a successorship provision but the section uses the phrase “alienation or operation”.) Although the terms “sale” and “lease” may have restricted meanings, the words “transfer” and other “disposition” have been broadly interpreted to include several types of transactions, including exchange, gift, trust, take overs, mergers, and amalgamation.

In keeping with the purpose of successorship provision – to protect the permanence of bargaining rights – labour boards have interpreted “disposition” broadly to include almost any mode of transfer and have not relied on technical legal forms of business transactions. As explained by the Ontario Board in United Steelworkers of America v. Thorco Manufacturing Ltd. (1965), 65 CLLC ¶16,052, an expansive definition accords with the purpose of the section – to preserve bargaining rights regardless of the legal form of the transaction which puts bargaining rights in jeopardy.

47Thus, the Board has traditionally been far less concerned with the form, and much more interested in the substance of the transaction or transactions in question, when making determinations under the sale of business provisions of the Act.

48Vaunclair Meats Limited [1981] OLRB Rep. May 581 establishes at paragraph 28 that “part of a business”, as those words now appear in section 69(1), need not be interpreted to refer to the core of the business, but rather encompass in their meaning:

… a coherent and severable part of … [the] economic organization managerial or employee skills, plant, equipment, ‘know-how’ or goodwill, thereby allowing the successor to perform a definable part of the economic functions formerly performed by the predecessor.

49In Elgin Street Mechanical & Plumbing Inc., [1999] OLRB Rep. the Board discussed the purpose of section 69 in the construction industry where the focus has traditionally been on the movement of a “key person” who is identified as encompassing the very essence of the business. Beginning at paragraph 33 the Board writes as follows:

33. The sale of a business application is brought pursuant to section 69 of the Act, which provision reads, in part, as follows:

34. (1) In this section, "business" includes a part or parts thereof; ("entreprise")

"sells" includes leases, transfers and any other manner of disposition, and "sold" and "sale" have corresponding meanings. ("vend", "vendu", "vente")

(2) Where an employer who is bound by or is a party to a collective agreement with a trade union or council of trade unions sells his, her or its business, the person to whom the business has been sold is, until the Board otherwise declares, bound by the collective agreement as if the person had been a party thereto and, where an employer sells his, her or its business while an application for certification or termination of bargaining rights to which the employer is a party is before the Board, the person to whom the business has been sold is, until the Board otherwise declares, the employer for the purposes of the application as if the person were named as the employer in the application.

(3) Where an employer on behalf of whose employees a trade union or council of trade unions, as the case may be, has been certified as bargaining agent or has given or is entitled to give a notice under section 16 or 59, sells his, her or its business, the trade union, or council of trade unions continues, until the Board otherwise declares, to be the bargaining agent for the employees of the person to whom the business was sold in the like bargaining unit in that business, and the trade union or council of trade unions is entitled to give to the person to whom the business was sold a written notice of its desire to bargain with a view to making a collective agreement or the renewal, with or without modifications, of the agreement then in operation and such notice has the same effect as a notice under section 16 or 59, as the case requires.

Section 69 of the Act is a remedial provision. It has a number of purposes. On one level, it is intended to preclude the effect of certain business reorganizations which are intended to avoid bargaining rights. On an entirely different level, section 69 of the Act is intended to preserve and maintain bargaining rights held by a trade union as a result of legitimate business reorganizations which have the effect of dislodging those bargaining rights. The Legislature has determined that it is appropriate, in certain circumstances, that the bargaining rights which are "vested" in one business be continued in another, where the business is "sold". In that regard, the bargaining rights in question can be viewed as a kind of charge which "runs with the business" (see the discussion in The Tatham Company Limited, [1980] OLRB Rep. Mar. 366, at paragraphs 19 and 20).

34. Having regard to the broad definitions contained in the Act, a sale of a business for the purposes of the Act can occur in many different ways, and in many different contexts. One way that a sale of a business can occur for the purposes of the Act is through the vehicle of one or more "key persons". As was observed by the Board in Merit Contractors Of Niagara, [1994] OLRB Rep. Feb. 152, at para. 8:

... the Board has recognized that there are individuals who are so important to a business that they are in effect the personification of the business or some significant aspect of it. In other words, they are the "key" to the business or some part of it such that they, in effect, take it with them if they move elsewhere.

In that decision, the Board went on to note, at para. 14, that however important a person may be to the operation of a business, he or she will not be a "key person" for the purposes of the Act unless the business is substantially different without him or her.

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

36. It is important to step back and identify what section 69 does not do. In Metropolitan Parking Inc., [1979] OLRB Rep. Dec. 1193, the Board noted, at paragraphs 36 and 44, that the sale provisions do not attach bargaining rights to the work being performed by a business, or to the customers or the employees of the alleged predecessor business. Instead, the Act focuses upon the business entity as a whole - what was described by the Board in Metropolitan Parking Inc. as "the employer's total economic organization". In Tri-Corps Industrial Contractors, [1994] OLRB Rep. Oct. 1446, the Board made this same point in the context of an application asserting a sale of a business through the vehicle of a "key person" (at para. 63):

Thus it can be seen that not every movement of managerial personnel from one business to another will constitute a sale of a business within the meaning of section [69]. In addition, the cases indicate that 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 [69] will be made.

37. The rationale for the principle identified immediately above is elaborated upon by the Board in Tri-Corps Industrial Contractors. Quite simply, and most particularly in the construction industry, it is experienced estimators, bidders, supervisors and managers that ultimately have the skills to strike out on their own and develop businesses in the industry. Novices do not open their own businesses, at least not for very long. 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 individuals, work, employees or customers, focuses on the business. If, however, the business is, for all intents and purposes, the individual, then the sale provisions of the Act can apply to that individual's departure and commencement of operations elsewhere.

50Counsel for P.E. referred to a number of cases in which the Board addressed the uniqueness of the construction industry and the vital role played by those individuals engaged in the bid tendering process. In Gallant Painting, [1991] OLRB Rep. 1051 the Board, after reviewing general legal principles developed by the Board under section 69, described the key elements of a painting business, which obtained its work by the bid tendering process, in the following manner:

47. What then are the essential elements of the business? What is its “total economic organization?” The evidence confirms that 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 the 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 (see for example, P.H. Granger, supra, and Stuccor Construction, supra). 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.

51Does it flow from such comments that there must be a transfer of key management personnel for the Board to declare that there has been a sale of a business when such a business is engaged in the construction industry? In short, the answer is no. The transfer of key management personnel is one element, albeit of some importance, which the Board will consider in determining whether the essence of a business has been transferred. The inquiry under section 69 is very much one which is primarily determined by the particular facts underlying a transaction. In Shin Ho Canada Ltd., Solid Wood Research Inc., [1995] O.L.R.D. No. 3610, the Board writes as follows:

16. As the decisions the parties have referred to demonstrate, the determination of what is a business or part of a business under section 64 [now section 69] is dependent on the unique combination of facts in each case. That is, there is no set formula or combination of assets, employees, good will, customers etc. which will be determinative. In some cases, all of these factors and others are present, in others only a few. In each case the Board must assess what the factors are that define the particular business in question as well as the relative importance of those factors.

52The Board recognizes that the majority of such cases in the construction industry deal with the alleged transfer of a key person from a unionized business to a non-union business and where there has been very little in the way of assets transferred between the two entities. In such circumstances the Board has, quite appropriately, focused on the essence of what has been transferred which would typically be the skills and expertise of the key person. Where the Board has found those skills and expertise to comprise the essence of the predecessor’s business, a sale of business declaration has been issued. The Board has also placed limitations on this form of analysis, however, by cautioning that not every transfer of experienced management personnel in the construction industry will necessarily result in a sale of business declaration. For example, in Christman & Associates Contractors Ltd., [1999] OLRB Rep. July/August 586 the Board writes as follows:

46. In the construction industry, and particularly in bid oriented sectors of the construction industry, the Board has frequently commented that the human factors of experience and expertise in estimating, together with recognition in the industry, are crucial. The expertise to price and bid on jobs and the skill and ability of personnel who can ensure that the job is completed within the limits of the bid are viewed as the core of a bid oriented business (see: Jen‑Ry Utility Contracting Company Limited, [1984] OLRB Rep. Dec. 1724 at para. 23). The Board has, however, limited its identification of a person as being an essential element of a business to individuals with whom all or a significant part of the business is identified and, without whom, the business would be substantially different (see: Merit Contractors of Niagara, [1994] OLRB Rep. Feb. 152 at para. 14). The Board has recognized that individuals can leave a business and rely on exposure and contacts that they made while at their former employer without resulting in a finding that a part of their employer's prior business has been transferred to them (see: Rivard Mechanical, [1981] OLRB Rep. May 550 at para. 13). Likewise, the Board has commented that the mere fact that an individual, on forming his own company, has advantages due to his experience with a previous employer, does not by itself result in the two companies being under common direction or control (see: Metro Century Construction Ltd., [1983] OLRB Rep. July 1122 at para. 21). While the Board has found the transfer of personnel to constitute a sale of a business (see: Charterways Transportation Limited, supra) it did so in circumstances where a stable employee complement was an operational requirement and the workforce in question was found to be the predecessor employer's most valuable asset in the context of a municipality's decision to take back the transit service it had contracted out.

53In the instant application, counsel for P.E. asserts that Mr. Bellefeuille represented the essential elements of B.E. Mr. Bellefeuille did not transfer his services to P.E. While there were other assets which were transferred, they do not comprise the essence of B.E. Therefore, it is inappropriate for the Board to declare that there has been a sale of business from B.E. to P.E. This analysis fails, however, to take into consideration the entire contribution of Mr. Bellefeuille in the creation of P.E. When one considers the crucial role of Mr. Bellefeuille along with the other assets which were transferred to P.E., the Board is left with the undeniable conclusion that the business of B.E. was transferred to P.E. in the Fall of 1996 and that a sale of business declaration should be issued.

54What then was transferred to P.E.? First there was the transaction of the extensive list of materials, tools and equipment which were more than sufficient to start an electrical business. To simply refer to this transaction as merely a sale of assets would be disingenuous. Mr. Bellefeuille received 50% of the value of the assets. When Mr. Portt expressed some concerns of being able to afford to pay $50,000, Mr. Bellefeuille agreed to help finance the start-up of P.E. by structuring the terms of payment over a six-year period with no interest accruing. Despite referring to the $50,000 as his retirement fund, Mr. Bellefeuille never sought any form of security either on the assets themselves or by requiring a personal guarantee from Mr. Portt or his wife. The Board finds it more accurate to describe the sale of the assets as a form of investment in P.E. by Mr. Bellefeuille. This view is consistent with the representations made by Mr. Portt to various financial institutions wherein he failed to indicate the amount outstanding in relation to the asset purchase as a liability on P.E.’s financial statements.

55That was not the only contribution made by Mr. Bellefeuille to the start-up of P.E. Mr. Portt used Mr. Bellefeuille (without his knowledge) as a reference in order to secure a line of credit with three trade suppliers. Once P.E. obtained credit from these three suppliers, Mr. Portt no longer used Mr. Bellefeuille as a reference.

56There is also the matter of the use of Mr. Bellefeuille’s Master’s License for a period of almost three years. The Master’s License is required in order to secure work in the City of Ottawa. As such, it is an essential element of the business. The importance of a Master License (in the plumbing trade) was illustrated in the following comments of the Board in Global Mechanics Ltd., [1997] O.L.R.D. No. 345 beginning at paragraph 19:

19. This does not, however, exhaust the Cosic involvement in Global. In order to obtain municipal permits to perform its work, Global must have an employee with a master plumber’s license. In reality, it does not. Instead it places Peter Cosic’s name on the permit applications.

20. During the course of argument, the Board asked counsel for Global to identify the essential elements of Global’s business. Counsel replied that it consisted of its knowledge of plumbing and fire protection and, to a lesser extent, its physical assets, the largest portion of which are its trucks. In general terms, counsel described it has “the ability to perform plumbing work in the residential and ICI sectors of the construction industry”. In the Board’s view, all of this has its origin in the Cosic-run Intercontinental and Dynamic Plumbing businesses.

21. The real knowledge and expertise in the Global business appears to reside with Jack Cosic. It is he that has the contacts in the construction industry and he obtains the work. It is Mr. Cosic that supervises the jobs. Although lacking an equity interest in the business, Mr. Cosic is entitled to 20% of all of its profits. These profits are derived, in part, from labour performed exclusively by former Intercontinental employees driving former Intercontinental trucks. Also critical to the business is the somewhat dubious use of Peter Cosic’s master plumber’s license. Without it, the company simply would not be able to obtain the necessary approvals to perform the work. In short, it is difficult to identify anything of significance in the Global business that was not derived from Intercontinental.

57There was an almost immediate overlap of customers between B.E. and P.E. The Board is prepared to accept the testimony of Messrs. Bellefeuille and Portt indicating that P.E. did not purchase the customer list from B.E. and that Mr. Bellefeuille did not actively refer customers to P.E. Quite frankly there was no need for P.E. to purchase a customer list from B.E. as Mr. Portt already knew most of B.E.’s major clients. This was amply demonstrated when on October 21, 1998 Mr. Portt sought permission from three established clients of B.E. to be listed as a reference. Mr. Portt knew them based on his tenure with B.E. and had worked for them since starting P.E. It is no surprise that the three companies were identified as major clients of B.E. and quickly became significant clients with P.E.

58Having considered all of the aspects of the transfer from B.E. and Mr. Bellefeuille to P.E. in the Fall of 1996, the Board concludes that there was a sale of a business as contemplated by section 69 of the Act. The Board is prepared to accept that Mr. Bellefeuille did not assume a role with the operations of P.E. and while relevant, this is not a consideration which is determinative of this application. The Board finds that Mr. Bellefeuille did play a crucial role in the establishment of P.E. and in so doing effected a transfer of the essential elements of the business of B.E.

Disposition

59The Board finds as follows:

a) the application under subsection 1(4) is dismissed;

b) the Board declares that there was a sale of a business in accordance with section 69 of the Act by B.E to P.E. in or around September 1996;

c) the Board declares that P.E. is bound to the principal agreement and the residential agreement.

60The Registrar is directed to list the grievance referral in Board File No. 3258-98-G for hearing on its merits.

“John Morgan Lewis”

for the Board