3625-99-U United Dairy and Bakery Workers CAW Local 462 of National Automobile, Aerospace, Transportation and General Workers’ Union of Canada (CAW-Canada), Applicant v. Natrel Inc., Responding Party.

BEFORE: Stephen Raymond, Vice-Chair.

APPEARANCES: Robert Gibson, Robert McKay and Tom Muldoon for the applicant; Richard J. Charney, Sebastian Calvo, Krista Borthwick and Karen Tobin for the responding party;

DECISION OF THE BOARD; June 27, 2001

1. This is an application brought by the United Dairy and Bakery Workers CAW Local 462 of National Automobile, Aerospace, Transportation and General Workers’ Union of Canada (CAW-Canada) (“the CAW”) pursuant to section 96 of the Labour Relations Act, 1995, as amended (“the Act”) that Natrel Inc. (“Natrel”) has violated sections 15, 70, 72 and 76 of the Act.

2. The allegation is, at its simplest, that Natrel has failed to bargain in good faith because it has:

(a) bargained the scope clause of the collective agreement to impasse, and/or

(b) proposed the removal of the substantive terms and conditions of the collective agreement to be replaced by a cash payment that is not enforceable through the collective agreement. By doing this, the CAW argues that Natrel is seeking to strip the collective agreement of its basic provisions.

Background

3. The bargaining unit in question is comprised of eight dependent contractor delivery drivers working out of Natrel’s distribution centre. Natrel is a company that produces and sells dairy products. A predecessor union to the CAW was certified for this group of dependent contractors in 1986. At that time, the company was Royal Oak Dairies. Since 1986, both the identity of the trade union and the employer have changed and this round of bargaining is the first between this trade union and this employer.

4. A dependent contractor’s terms and conditions of “employment” are governed by both the collective agreement and a commercial agreement. The commercial agreement is negotiated by each dependent contractor individually with Natrel. The dependent contractors have had their relationship with Natrel and its predecessors governed by successive commercial agreements and the collective agreements since 1986.

5. The prior collective agreement expired on September 15, 1999. Notice to bargain was given on August 11, 1999 and bargaining sessions were held on December 15, 1999, January 25, 2000, February 16, 2000 and March 1, 2000. A conciliation officer was appointed on February 9, 2000. The CAW has not held a strike vote. Natrel understood, until just prior to the commencement of this hearing on December 18, 2000, that a strike vote had been held and that there was unanimous support for a strike mandate.

6. The recognition and scope clause of the last collective agreement reads as follows:

1.01 The Company recognizes the Union as the representative for all Dependent Contractors of the Company working in or out of Hamilton, Ontario save and except supervisors and persons above the rank of supervisor. Dependent Contractors are defined as Agent Distributors owning and operating one (1) truck and does not include Distributors who regularly employ other persons to operate a truck or trucks.

7. In addition, the collective agreement provided a management rights clause, a no strike or lockout clause, a union representation clause, a grievance and arbitration procedure, notice board and access, discharge protection and for its duration. Appendix ‘A’ to the collective agreement provided for benefit coverage for life insurance, weekly indemnity, long term disability, accidental death and dismemberment, dental care, supplementary health, optical and workers’ compensation. It also provided that the dependent contractor is responsible for Canada Pension Plan premiums, Unemployment Insurance premiums and income tax. It further provided that payments made to the dependent contractor under the commercial agreement satisfy any statutory requirements for vacation pay, overtime or holiday pay. In addition, Appendix ‘A’ provided for the supply to the dependent contractor of caps, gloves and a reimbursement for uniforms and safety footwear. As well, there are provisions for jury duty or being subpoenaed as a crown witness, bereavement leave, a group RRSP, the payment of licenses and a payment for “special deliveries”. Furthermore, there are four provisions that have the effect of amending provisions of the commercial agreement. Additionally, there is the provision of Article 1.08 of Appendix “A” which states:

1.08 The rates of commission or compensation for the services of each Dependent Contractor and his equipment shall be contained in each Dependent Contractor’s Commercial Agreement. The Company will maintain confidentiality of information it receives or possesses concerning the Dependent Contractor’s business and financial affairs.

8. Appendix ‘B’ to the collective agreement provided for an entitlement to three weeks of vacation and the system by which a vacation replacement driver will be assigned. There are, in addition, Letters of Understanding and Letters of Intent that provided for parking, fuel credits for working on a statutory holiday and severance.

9. As well, each dependent contractor has a commercial agreement. It is a fairly standard commercial agreement between two businesses. It provides for the obligations of the dependent contractor (referred to in the agreement as the “distributor”) in relation to the services to be provided and the payment to the distributor. It has provisions relating to non-competition and confidentiality. It provides for the termination of the agreement.

Issue 1 – Has Natrel bargained the recognition and scope clause to impasse?

10. Natrel proposed to change the language of the scope and recognition clause from “all Dependent Contractors of the Company working in or out of Hamilton” to “all Dependent Contractors of the Company working out of Hamilton”. Natrel’s proposed change is about the scope of the bargaining unit. Either party to a collective agreement may bargain such a change. However, it is a violation of the duty to bargain in good faith to bargain to the point of an impasse a proposal relating to the scope of the bargaining unit. The Board enunciated this proposal clearly in Brantford Expositor, [1988] OLRB Rep. July 653.

11. It has been emphasized in the various cases that the bargaining unit is the critical starting point of collective bargaining and the manner by which one defines the parties to the bargaining relationship. A clearly defined bargaining unit is also necessary to know the grouping of the employer’s employees in respect of which there is duty under section 15 to bargain in good faith and make every reasonable effort to make a collective agreement. The general rule is that the parties are not allowed to insist upon demands which give rise to an illegality or to press to impasse a demand inconsistent with the scheme of the Act, which includes demands to restructure the bargaining unit.

12. Did Natrel bargain the scope clause to impasse? To determine that, it must be decided whether the parties were at an impasse. The issue of whether the bargaining was at an impasse is a factual one which requires a careful consideration of the collective bargaining that has occurred up to that point.

13. The parties met on four occasions after the CAW gave notice to bargain. Natrel and the CAW exchanged initial proposals. Subsequently, only Natrel made offers. It made its “best offer” on February 16, 2000 and its “final offer” on March 3, 2000. A “no board” report was issued on behalf of the Minister of Labour on February 25, 2000. The parties were in a legal strike/lockout position as of March 13, 2000. On that date, Natrel implemented its final offer. The evidence was that the proposal to change the scope clause was in both Natrel’s “best offer” and its “final offer”. Further, there was evidence that a representative of Natrel did ask a representative of the CAW if the “best offer” was acceptable without the change to the scope clause. The response was that it was not acceptable. The CAW never took a strike vote. The CAW never proposed to Natrel its acceptable collective agreement.

14. Clearly, if the change to the scope provision had not been part of the final offer, there would be no violation of the Act. However, it was. The question is whether being at the stage of a “final offer” means the parties are necessarily at an impasse. In my view, impasse had not occurred. At that point, Natrel was actually bargaining with itself. The CAW was not presenting its view of an acceptable collective agreement nor was it meeting with its members to determine if Natrel’s proposed collective agreement was acceptable to them. It had no interest or intent to “flex its economic muscle”. A strike vote had not taken place. Given all these factors, the bargaining had not reached an impasse.

Issue 2 – Was Natrel seeking to strip the collective agreement of its basic provisions and, if so, is that a violation of the Act?

14. Natrel’s stated bargaining objective was to bring this group of unionized dependent contractors terms and conditions of “employment” in line with its much larger group of non-unionized dependent contractors. To achieve that objective, it sought to remove certain provisions of the collective agreement and replace them with a cash payment. The payment would be reflected in the commercial agreement and would not be enforceable through the collective agreement. Natrel’s intent is evidenced by the following proposal which remained unchanged from the initial offer through to the final offer. The proposal was to remove all of Appendix ‘A’ except 1.08 (reproduced above), all of Appendix ‘B’, and all the Letters of Understanding and Intent and to replace that with the following which was attached to the final offer:

NEW LETTER

(To be included in Memorandum of Settlement and not in the Collective Agreement)

March 3, 2000

In consideration of all self-directed Health, Welfare, Pension and WSIB benefits, boot and milk license, and fuel allowance, the Company will endeavour to compensate commercially all contractors to maintain current coverage and contribution levels.

In order to achieve this result, the company will compensate Agent Distributors, party to this agreement at the date of ratification, by a one-time adjustment of $5,200.00 over and above the current commercial kit.

The Company will review commercial contracts prior to discontinuing Health, Welfare Pension and WSIB coverage. The Company will discontinue coverage 30 days after the commercial review has been completed.

In addition, the Company shall cease deductions for vacation replacement, allowing contracting [sic] to make arrangement for replacement coverage and distribute funds for their replacements at their discretion.

Yours truly,

Natrel inc.

15. Replacing all of these benefits contained in the collective agreement with a cash payment (amount not agreeable, as yet) was acceptable to the CAW (although with great reluctance) as long as the payment was part of the collective agreement. Natrel refused to have the payment be part of the collective agreement. That was not acceptable to the CAW. As long as Natrel was insisting on this provision, the CAW was of the view that the negotiations were dead-locked. In essence, the CAW was of the view that Natrel was seeking to treat the dependent contractors as individual business people with little to no collective rights. The question the Board must ask itself is, whether Natrel violates the Act when, with the agreement of the CAW, it substitutes a cash payment for most of the monetary terms of the collective agreement, but refuses to have that payment be part of or enforceable through the collective agreement.

16. In the Board’s view, there is a violation of the Act. Natrel cannot legally seek to strip the collective agreement of most of its substantive provisions and replace it with a one-time cash payment over which the CAW has no power of enforcement. As the Board has found in Fotomat Canada Limited at page 399, “An employer can not use his raw bargaining power for the objective of operating without a trade union.” This situation is different from the situation the Board found itself in Canada Trustco Mortgage Company, [1984] OLRB Rep. October 1356, where the Board stated,

Nor was the duty to bargain in good faith designed to redress an imbalance of bargaining power. A party whose bargaining strength allows it to virtually dictate the terms of the agreement does not thereby bargain in bad faith, and that proposition is applicable whether it is the union or the employer which “has the upper hand”.

Here, Natrel is not dictating the terms of the collective agreement. It is using its bargaining strength to dictate that the collective agreement will have little impact on the economic circumstances of the dependent contractors. This is not the first time that the Board has been faced with the interpretation of the Act as it relates to dependent contractors. The Board, in McIntosh Limousine Service Ltd., [2000] OLRB Rep. March/April 249, described the relationship this way:

The Legislature has provided that dependent contractors may engage in collective bargaining, and the definition of “collective agreement” is elastic enough to encompass the whole panoply of their rights and obligations. The agreement can be tailored to the special circumstances of a “dependent contractor”. But the collective agreement need not be so all-encompassing. The bargaining parties can decide what will or will not be included in the collective agreement (and thus what will or will not be “arbitrable” pursuant to section 48 of the Act).

Here, the “wages” of these dependent contractors are not in the collective agreement and it is questionable whether they are even enforceable through the collective agreement. Although the drivers are unionized, they act to a large extent, and Natrel encourages this, like independent business people. However, as long as they are unionized they are entitled to the protection of the Act and that includes protection from an employer who would seek to strip away most of the involvement of the trade union in the “economic circumstances” of its members. The stated intention of Natrel was to treat these unionized dependent contractors just like their non-unionized contractors. In other words, Natrel sought to deal with them individually rather than collectively.

17. Natrel argues that the Act does not prohibit it from contracting out the entire bargaining unit so the Act cannot prohibit it from bargaining for more independence for its existing workforce. That is not the issue. As long as the CAW is the exclusive bargaining agent, Natrel must recognize that and deal with the CAW for the terms and conditions of employment. If it fails to do so, the Act is violated. If Natrel contracted out the functions of all members of the bargaining unit, that may or may not lead to other allegations of violations of the Act. Those matters are speculative and not before me. Further, Natrel argues that wages are already part of the commercial agreement and that putting the “benefits” in the commercial agreement by way of a one-time cash payment is not a violation of the Act. I disagree. It is not necessarily the action itself which is lawful or unlawful. It may also be the effect of the action which determines its legality. The effect of Natrel’s proposal is to leave the CAW with an enforceable collective agreement with the following terms:

• Management rights clause

• no strike/lockout clause

• grievance and arbitration procedure

• notice board and access for trade union

• discharge protection

• duration

18. The only substantive clauses left in the collective agreement are the grievance and arbitration procedure which is statutorily mandated and discharge protection. Other than that, there is nothing of substance in the agreement. To pursue that as an objective is, even for a group of dependent contractors, evidence of a failure to recognize the CAW as the exclusive bargaining agent.

19. The parties are directed to return to the bargaining table within thirty days of this decision and to bargain for a collective agreement. Whether the parties ultimately agree on a monetary amount to replace certain benefits is up to them. It is not open to Natrel to insist that such amount be unenforceable under the collective agreement. To allow otherwise would be to permit Natrel to use its superior bargaining strength to bargain the CAW “out of the picture” in relation to this group of dependent contractors. The Board will not permit it to do so.

20. Therefore, the Board finds that

1. there has been a violation of the Act;

2. Natrel must cease and desist from pursuing as a bargaining objective the removal of the cash payment from the collective agreement;

3. Natrel and the CAW must return to the bargaining table and bargain in good faith towards a renewal collective agreement.

21. The Board orders that this decision be posted immediately. These copies must remain posted for thirty days following the date of this decision in a location or locations in the workplace where they are most likely to come to the attention of all employees affected by the application.

“Stephen Raymond”

for the Board