0901-99-U United Steelworkers of America, Applicant v. Saan Stores Ltd. and Gendis Inc., Responding Party.

0902-99-R United Steelworkers of America, Applicant v. Saan Stores Ltd. and Gendis Inc., Responding Party v. Group of Employees, Intervenors.

BEFORE: Patrick Kelly, Vice-Chair.

APPEARANCES: Jeff Andrew and Robert McKay appeared on behalf of the applicant; Don Houston and Jennifer Roberts-Logan appeared on behalf of the responding party. No one appeared on behalf of the Group of Employees, Intervenors.

DECISION OF THE BOARD; July 16, 2001

1. Board File No. 0902-99-R is an application under section 69 and 1(4) of the Labour Relations Act, 1995, S.O. 1995, c.1 as amended (“the Act”). The applicant alleges a sale of a business by Greenberg Stores Ltd. to Saan Stores Ltd. and Gendis Inc., and in the alternative, seeks a declaration that Gendis Inc., Greenberg Stores Ltd. and Saan Stores Ltd. are related businesses. Board File No. 0901-99-U is an application filed pursuant to section 96 of the Act, alleging violations of sections 56, 70, 72, and 87(1) of the Act.

2. The intervenors in Board File No. 0902-99-R did not appear at the hearing.

3. The parties who participated in the hearing agreed that the Board should deal first with Board File No. 0902-99-R, and following a decision in that matter, remain seized to deal, if necessary, with the section 96 application. Accordingly, this decision concerns only Board File No. 0902-99-R.

4. The parties in this matter reached agreement on the material facts, set out below:

AGREED STATEMENT OF MATERIAL FACTS

Introduction

1. The Applicant United Steelworkers of America (“USWA”) was the bargaining agent for certain employees of Greenberg Stores Ltd. (“Greenberg”) in the town of Marathon, Ontario.

2. The Respondent, Gendis Inc. (“Gendis”), owned 100% of Metropolitan Stores of Canada Limited (“Metropolitan Stores”), a property holding company which in turn owned 100% of Greenberg and Saan Stores Ltd. (“Saan”).

3. Greenberg operated “The Met” in a mall in the small town of Marathon.

4. As part of a restructuring of its retail operations in 1997, Gendis withdrew its financial support for Greenberg. Greenberg then made an assignment into bankruptcy on February 11, 1997. The Met store in Marathon was liquidated by the Trustee in bankruptcy by June of 1997.

5. Until April of 1999, Saan did not have a commercial presence in Marathon. In April of 1999, Saan opened a store in a different location in the same mall in Marathon.

Certification and Bargaining History

6. USWA was certified on an interim basis in December 1994 as the exclusive bargaining agent for all employees of Greenberg Stores in the town of Marathon, Ontario save and except certain managerial employees. A final certificate was issued in October 1995.

Applicant's Appendix 1: Certificate dated October 5,1995

7. From the time of certification until its bankruptcy in February 1997, Greenberg operated one department store in Marathon under the name ^“The Met”. The store was located in Marathon Centre Mall.

8. The Met was a retail store which sold a wide range of merchandise including clothing, furniture, stationery, house wares, general household items and confectionaries. It also operated a restaurant.

9. Approximately 38 full and part-time bargaining unit employees worked at The Met. It was approximately 25,000 square feet.

10. The USWA served Greenberg with notice to bargain a first collective agreement on or about January 31,1995.

11. The USWA applied for first contract arbitration on December 4, 1995. A Board of Arbitration purported to settle a first collective agreement in an award dated November 12, 1996.

Applicant's Appendix 5: First Contract Arbitration Award, November 12, 1996

12. Greenberg refused to implement the collective agreement, alleging, inter alia, that the Board of Arbitration exceeded its jurisdiction by including a “union shop” clause in the collective agreement. Greenberg filed an application for judicial review of the Board's award on December 16, 1996. Greenberg had not perfected the application at the time it was assigned into bankruptcy on February 11, 1997.

13. On November 26, 1996, the USWA made a complaint to the Ontario Labour Relations Board under section 96 of the Labour Relations Act (the “Act”), alleging that Greenberg had violated section 17, 56 and 70 of the Act, because Greenberg had not executed and implemented the alleged first collective agreement included in the award by the Board of Arbitration.

Respondents’ Appendix 7: Greenberg Stores Ltd., [1997]

O.L.R.D. No. 293

14. On February 3,1997, the Labour Board issued its decision on the USWA's complaint. The Labour Board declined to enforce the alleged first collective agreement against Greenberg, or to inquire into the USWA’s complaint.

Respondents' Appendix 7: Greenberg Stores Ltd., [1997]

O.L.R.D. No. 293

15. The USWA did not seek judicial review of the Labour Board’s decision to refuse to inquire into the complaint.

Corporate Structure and Governance

16. Gendis is incorporated federally. It has interests in a number of fields including retail merchandising, the pipeline industry, and real estate management. Its activities and those of its subsidiaries have changed over time but are accurately described at the time they are described in the various company reports filed by the parties.

17. Greenberg had four directors and Saan had three directors. Two of the directors on the Saan and Greenberg board were the same, being Messrs. Albert D. Cohen and G. Allan MacKenzie.

18. Albert D. Cohen was Chairman and Chief Executive Officer for Gendis, MMG Management Group (which collectively refers to stores operated by Greenberg), Saan and Metropolitan; and G. Allan MacKenzie, President and Chief Operating Officer of Gendis and Metropolitan and Chairman of the Executive Committee of both MMG Management Group and Saan.

Applicant’s Appendix 6: Excerpt from Gendis lnc. Annual Report 1995

19. Mr. Cohen and Mr. MacKenzie continued to hold these positions with Gendis and Saan until Mr. Cohen's retirement in April 1999. Mr. MacKenzie is now President of Gendis and Chief Executive Officer of both Gendis and Saan. MacKenzie is also Chairman of Saan.

Applicant's Appendix 7: Gendis Inc. Annual Report 1999

Saan and Greenberg

20. Saan and Greenberg were retail chains, each with its own management group. Saan and Greenberg also used different logos and trademarks.

21. Greenberg operated under the names “Greenberg,” “Met Mart" or “Met” (collectively referred to as “MMG Management Group”). Met stores were located across Canada while “Greenberg” stores were located principally in French speaking communities in Quebec and Atlantic Canada.

22. Greenberg’s head office and distribution centre were located in Point Claire, Quebec. Greenberg supplied inventory to its store locations from its distribution centre. The administration, marketing, purchasing, management, merchandising, store operation and human resources functions for the Greenberg chain were concentrated at its head office and distribution centre in Point Claire. Greenberg employees were entitled to participate in a Gendis pension and benefits program.

Respondents’ Appendix 2: Annual Information Form for Gendis Inc. dated March 25, 1996 at 4, 6-7

Respondents’ Appendix 3: Organization Chart for Greenberg dated June 1996

23. Prior to 1997, Saan operated predominantly in the Western Provinces, Ontario, the Yukon and Northwest Territories.

24. Saan's head office and distribution centre are located in Winnipeg, Manitoba. Saan supplied inventory to its store locations from its distribution centre. The administration, marketing, purchasing, management, merchandising, store operation and human resource functions for the Saan chain are and were performed at its head office and distribution centre in Winnipeg. Saan employees were entitled to participate in a Gendis pension and benefits program.

Respondents’ Appendix 2: Annual Information Form for Gendis Inc. dated March 25, 1996 at 4, 6

Respondents’ Appendix 4: Organization Chart for Saan dated August-September 1995

25. Saan operates retail stores across Canada, catering to small town communities in particular. It sells family clothing, footwear, accessories, linens and other household products.

Bankruptcy of Greenberg

26. Gendis initiated a restructuring of its retail operations in or around the first few months of 1997. On February 10, 1997, the company's Board of Directors decided to withdraw financial support from Greenberg after it experienced operating losses in the previous three years of approximately $80,000,000.00.

Respondents’ Supplementary Record, Director's Resolution dated February 10, 1997

27. On February 11, 1997, Greenberg then assigned itself into bankruptcy,

Respondents’ Appendix 5: Gendis Inc. Annual Report 1997

at 2

28. The firm of Caron, Belanger, Ernst and Young was appointed Trustee in Bankruptcy of Greenberg and immediately took control of the assets, including the Met store in Marathon.

Respondents’ Appendix 5: Gendis Inc. Annual Report 1997

at 2

29. Saan then entered into an agreement with the Trustee to purchase certain of Greenberg's assets, including 89 of Greenberg's 169 stores. The purchase was approved by the Quebec Superior Court (In Bankruptcy) on February 11, 1997.

Applicant’s Appendix 9: Gendis Inc. Annual Report 1997 at p. 6 ff.

Respondents’ Supplementary Record: Order of Quebec Superior Court dated February 10,1997, including Offer to Purchase

30. Saan did not purchase any of the following assets relating to the former Met store in Marathon: inventory, equipment, fixtures, or accounts receivable, or take an assignment of the lease relating to the former Met store in Marathon.

Respondents’ Supplementary Record: Order of Quebec Superior Court dated February 10,1997

31. By letter dated February 11, 1997, Messrs. Cohen and Mackenzie advised employees of The Met in Marathon that Gendis "as banker to MMG decided to terminate its support for MMG and restructure its retail operations." Mr. Cohen and Mr. MacKenzie further informed employees that some MMG stores would be consolidated with the Saan chain. They stated that The Met in Marathon was not one of the stores selected to be acquired by Saan.

Applicant's Appendix 10: Letter from Gendis Inc. dated February 11, 1997

32. In June 1997, after liquidating the Met’s inventory_, the Trustee closed the Met store in Marathon.

Saan in Marathon

33. In or around the Fall of 1998, “OK Economy”, a food store, moved from its locale in the Marathon Centre Mall to the space formerly occupied by The Met. The store now operates under the name “Extra Foods”.

34. Saan opened a retail operation in the Marathon Centre Mall in April 1999. The new store opened in the space vacated by the OK Economy food store on April 7, 1999. The size of the leased premises is now approximately 14,219 square feet.

Applicant’s Appendix 11: Press release from Saan web site dated April 7, 1999

35. Saan conducted substantial renovations to convert the leased premises from a food store to a clothing store.

36. The new store relies on a similar customer base as the former Met store.

37. The retail sales work performed by employees of Saan is similar to that performed by the retail sales staff of the Met store in Marathon. Employees of the Saan store in Marathon are, however, required to perform sales work, stock work, administration and paper work and housekeeping. ln addition, the Saan store in Marathon does not have a restaurant and has no need for servers, cooks or other restaurant workers.

Date: January 22, 2001

“R. McKay”

for the Applicant

“D. Houston”

for the Respondents

5. The parties also were content to rely upon the documents filed by the applicant (“USWA”) and the responding parties (“Gendis” and “Saan” respectively) in support of the application and response. Their arguments were based upon these documents and the agreed facts.

6. The documentary evidence showed that there were marketing strategies developed and implemented by Gendis that were common to Greenberg Stores Ltd. (“Greenberg”) and Saan, and that the employees of both Greenberg and Saan participated in a group benefit plan of which Gendis was the insured.

The Argument of the Applicant

7. The applicant acknowledged that Saan did not acquire any of the tangible assets associated with Greenberg’s Met store in Marathon. However, it argued that Saan did acquire, through its purchase of Greenberg’s estate following the assignment in bankruptcy, intangible assets in the form of Greenberg’s trademarks and trade names (including all the goodwill in connection with which such trademarks and trade names had been used), thus enabling Saan, which prior to April 1999 had no retail presence in Marathon, to open a store similar in product line and operation to, and in the same mall that had previously housed, Greenberg’s Met store.

8. The applicant asked the Board to draw the following conclusions. Retail is a key component of the business of Gendis. Saan and, at one time, Greenberg were the two arms of that business component, operating through different parts of Canada. Gendis initiated the bankruptcy of Greenberg, and, as a result of that action, the control of Greenberg’s trademarks passed to Saan (via the purchase of portions of the Greenberg estate), which in 1999 opened for business in Marathon, serving the same clientele in the same mall as did Greenberg via its Met store. The applicant contended that, but for the non-arm’s length manipulation by Gendis in forcing Greenberg’s financial collapse, Saan would not be operating in Marathon, and thus the Board should find a sale of business. In the alternative, the applicant argued that the Board should declare that Gendis, Saan and Greenberg are related businesses because both Saan and Greenberg operated in substantially the same retail businesses under Gendis, and shared common control and direction through the corporate governance structure which included certain key executive officers common to all applicable governing boards.

9. In support of its position in this matter, counsel for the applicant referred me to the following decisions: Gordons Markets a Division of Zehrmart, [1978] O.L.R.B. Rep. July 630; Ian Somerville Construction Ltd., [1988] O.L.R.B. Rep. Oct. 1022; Ellis Don Limited [1992] O.L.R.D. No. 3322 unreported; Dutch Boy Food Markets, 65 CLLC ¶ 16,051; Etobicoke Public Library Board, [1989] O.L.R.B. Rep. Sept. 935; The Borden Company Limited and Silverwood Dairies Limited, [1970] O.L.R.B. Rep. Jan. 1244; Dominion Sheet Metal & Roofing Works; [1996] O.L.R.D. No. 3222; Long Lake Forest Products Inc., [1994] O.L.R.B. Rep. Oct. 1343; Saan Stores Ltd. (Sept. 16, 1997) 4527 (N.S.L.R.B.); Brant Erecting and Hoisting [1980] O.L.R.B. Rep. July 945; Canac Shock Absorbers Limited, [1973] O.L.R.B. Rep. Oct. 509; Zehrs Markets Limited, [1974] O.L.R.B. Rep. May 331; Metropolitan Parking Inc., [1979] O.L.R.B. Rep. Dec. 1194; Thunder Bay Ambulance Services Inc., [1978] O.L.R.B. Rep. May 467; Vulcan Containers Ltd., [1997] O.L.R.B. Rep. Aug. 765; Penmarkay Foods Limited, [1984] O.L.R.B. Rep. Sept. 1214; STM Specialized Transit Management Corporation, [1991] O.L.R.B. Rep. July 900; Canada Stampings & Dies Ltd., [1996] O.L.R.B. Rep. June 355; Vagden Mills Ltd., [1998] O.L.R.D. No. 4221; Accomodex Franchise Management Inc., [1993] O.L.R.B. Rep. Apr. 281.

The Argument of the Responding Parties

10. Counsel for the responding parties argued that the material facts and documents in this matter did not support a finding of a sale of business, nor a finding of related employers, but in the event that the Board was persuaded that the applicant had substantiated the necessary elements for a finding of related employers, nevertheless the Board should decline to exercise its discretion to make a declaration under section 1(4) of the Act.

11. The first prong of the responding parties’ argument is that Saan and Greenberg were separately managed, discrete businesses operating from geographically distinct head offices and distribution centres. Each had its own management group and reporting structure, and unique logos and trademarks. The only personnel links between the businesses occurred at an extremely high and remote level (directors) in each organization, which, counsel submitted, is not the kind of managerial control contemplated by section 1(4) of the Act.

12. Secondly, counsel for the responding parties contended that there were significant differences in the nature of the Greenberg and Saan businesses in Marathon. Admittedly, both were engaged in retail, but the Met was a much larger and more diverse operation, employing a larger work force than the Saan store whose focus was on family clothing, not furniture or restaurant sales. Moreover, counsel argued, there has been no suggestion that the employees of the Met store viewed themselves as anything but Greenberg employees.

13. Thirdly, it was argued by the responding parties that Saan did not acquire either of the tangible or intangible assets associated with the Marathon store. Counsel requested the Board to look closely at the agreement of purchase and sale (“the sale agreement”) covering the assets of the 89 Greenberg stores (excluding, of course, the Met store in Marathon) sold to Saan. That agreement was not intended to convey any interest in Greenberg’s stores other than those associated with the 89 stores which were the subject of the sale. Thus, equipment, franchise agreements, inventory and leases are all described in the sale agreement with reference to specific leased Greenberg store locations, none of which operated in Marathon. Similarly the term “other intangible assets” in the sale agreement, including goodwill, are referred to “strictly with respect to leased locations”. It so happens, counsel argued, that “trademarks and trade names”, which the applicant seizes upon as indicative of a sale involving the Met store, could not, by their very nature, be described in reference to any particular leased Greenberg store location. When viewed in its entirety, counsel argued, the sale agreement conveys clearly the intention of its signatories to transfer nothing beyond which could properly be associated with the 89 Greenberg stores.

14. Fourthly, counsel for the responding parties noted that there was an approximate two-year hiatus between the closing of the Met store by the trustee in bankruptcy, and the opening by Saan of its store in a different location in the same mall in Marathon.

15. The fifth and final part of the responding parties’ argument concerned the labour relations history of the Met store. Counsel argued that the general history of tempestuous relations between the applicant and the store are irrelevant to this proceeding. Nevertheless, counsel contended that there never was a collective agreement covering the Met employees in Marathon, and therefore there is no collective agreement to impose upon Saan in relation to its Marathon operation. Notwithstanding that an arbitrator ordered the Met and the applicant to enter into a collective agreement settled by the arbitrator, the employer sought judicial review of the arbitrator’s award, and, mainly because of the court proceeding, this Board declined the applicant’s request to enforce the arbitrator’s award. Shortly thereafter, the Met store followed its Greenberg counterparts into bankruptcy, and the employer’s application for judicial review was never perfected. Furthermore, the effect of section 43(19) of the Act is such that, even if there had been a collective agreement settled by arbitration, the term of such agreement would be only two years, expiring in 1998, notwithstanding any renewal provision awarded by the arbitrator.

16. In support of the position of the responding parties, counsel referred me to the following decisions: Walters Lithographic Company Limited, [1971] O.L.R.B. Rep. July 406; Diversey (Canada) Ltd., [1978] O.L.R.B. Rep. Sept. 814; Radio Shack, [1979] O.L.R.B. Rep. July 689; Donald A. Foley, [1980] O.L.R.B. Rep. April 486; Brant Erecting and Hoisting, [1980] O.L.R.B. Rep. July 945; Ethyl Canada Inc., [1982] O.L.R.B. Rep. July 998; John Hayman & Sons Co., [1984] O.L.R.B. Rep. June 822; Eighty-Five Electric, [1987] O.L.R.B. Rep. June 833; Ontario Legal Aid Plan v. Ontario Public Service Employees Union, (1991), 6. O.R. (3d) 481 (C.A.); Inplant Contractors Inc., [1993] O.L.R.B. Rep. May 421; W.W. Lester v. U.A. Local 740 (1978) Ltd., 1990 CanLII 22 (SCC), 76 D.L.R. (4th) 389 (S.C.C.); Ottawa Truck Centre, [1982] O.L.R.B. Rep. Nov. 1704; Zellers Inc., [1995] O.L.R.B. Rep. Aug. 1141; McIntosh v. Parent, [1924] O.L.R. 552 at 555 (C.A.).

Decision

Was there a sale of business?

17. The relevant portions of section 69 in this matter are set out below:

18. (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 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.

(8) Before disposing of any application under this section, the Board may make such inquiry, may require the production of such evidence and the doing of such things, or may hold such representation votes, as it considers appropriate.

(9) Where an application is made under this section, an employer is not required, despite the fact that a notice has been given by a trade union or council of trade unions, to bargain with that trade union or council of trade unions concerning the employees to whom the application relates until the Board has disposed of the application and has declared which trade union or council of trade unions, if any, has the right to bargain with the employer on behalf of the employees concerned in the application.

(12) Where, on any application under this section or in any other proceeding before the Board, a question arises as to whether a business has been sold by one employer to another, the Board shall determine the question and its decision is final and conclusive for the purposes of this Act.

18. 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.

19. Thus, the Board has traditionally been far less concerned with the form, and more interested in the substance of the transaction or transactions in question, when making determinations under the sale of business provisions of the Act. The transfer need not be directly from the employer named in the collective agreement; it can be effected by a third party intermediary, and still constitute a sale. Nor does the intervention of a bankruptcy of the predecessor, and the subsequent sale of the bankrupt’s assets impinge on the Board’s jurisdiction to find a sale of business or part thereof: see Vulcan Containers Ltd., [1997] OLRB Rep. July/August 765.

20. Accomodex Franchise Management, supra, provides insight into the meaning of the terms “business” and “part of a business” as they are referred to in section 69. There the Board articulated what has become commonly known as the instrumental approach to successorship. What follows are extracts from the decision which explain this approach, and the factors to be weighed in applying it:

A ‘business’ is a commercial vehicle which has been rationally constructed to produce certain goods or services for a defined market; and over the years, the Board has come to what might be described as an “operational” or “instrumental” interpretation of that term…. [paragraph 54]

The instrumental approach to successorship suggests that bargaining rights are attached to an economic vehicle – the mechanism, resources or facilities by which the undertaking serves its purpose – rather than the purpose itself, the employees, or their work. The Board then tries to determine, from a labour relations perspective, whether the transfer and continuation of some facet or facets of that undertaking, warrants a continuation of bargaining rights – for, of course, when interpreting section 64 [now section 69], the Board has to keep in mind its purpose and effect. The Board tries to reach a result which is fair to both the statute and the context under review – that is, a result that appears to be called for to remedy the mischief for which section 64 was passed. That mischief is not the loss of work or work opportunities, but rather the disruption of bargaining rights which would flow from a change in the ownership but continuation of all or part of the elements that make up the business. [paragraph 55]

… The more the transferee’s ability to carry on his business is derived from or dependent upon things acquired from the proprietor of the predecessor business, the stronger the inference [of a sale of business] will be – particularly if the predecessor has ceased to carry on its business or has withdrawn from the relevant market… [paragraph 58]

… in determining whether there has been a “sale” within the meaning of the Act, the Board attaches particular significance to the nature of the work performed in , and by, the business, before and after the alleged transfer. If the nature of the work performed subsequent to the transfer is substantially similar to the work performed prior to that transaction (and if the employees, or types of employees, are the same) this would normally support an inference that there has been a transfer of a business or part of a business with in the meaning of section 64 [now section 69]. [paragraph 59]

In considering whether a part of a business has been transferred, the Board must find that what has been transferred is “a coherent and severable ‘part’ of [the predecessor’s] economic organization – managerial, or employee skills, plant, equipment, know-how, or goodwill – thereby allowing the successor to perform a definable part of the economic function formerly performed by the predecessor. [paragraph 66]

21. Even though what passes between predecessor and alleged successor must be “coherent and severable”, it need not consist of traditional manifestations of business enterprise, such as assets, customer lists or accounts receivable. It is enough, for purposes of a section 69 finding, that the subject matter of the transfer be a coherent business, or part thereof, of the predecessor and utilized by the alleged successor to carry on its affairs. Thus, in Thunder Bay Ambulance Services Inc., supra, the Board concluded that a sale had taken place where the successor acquired an “exclusive entitlement” to use assets previously used by the predecessor hospitals, even though title in those assets remained in the Ministry of Health.

22. In the assessment of the facts from which a sale or transfer of a business is alleged to have occurred, the Board has been particularly careful where the relationship between the predecessor and alleged successor is less than arm’s length. For, as the Board in Metropolitan Parking Inc., supra, observed at paragraph 35,

…The presence of a pre-existing relationship may suggests [sic] an artificial transaction designed to avoid bargaining obligations; or (more commonly) there may be a transaction in the nature of a business re-organization which does not alter the essential attributes of the employer-employee relationship, and which should not, having regard to the purpose of section 55 [now section 69], disturb the collectively bargained framework for that relationship…In such circumstances it may be important to carefully examine the pre-existing links or lines of common control to which the alleged predecessor and successor are both subject. Such examination is precisely what is undertaken by the Board on an application under section 1(4); but it is also relevant on section 55 applications, and it if for this reason that applicants commonly plead section 1(4) in the alternative. It would be incorrect to make this consideration a decisive “test” for successorship, but where there is a pre-existing corporate connection between the predecessor and the successor the Board has been disposed to infer a “transfer” if there is the slightest evidence of such transaction. (See: Zehrs Markets, [1975] OLRB Rep. Jan. 48) …

23. In the case before me there is no question that there were pre-existing links between Gendis, Saan and Greenberg at the time of the Greenberg bankruptcy. And there was no dispute that it was the actions of Gendis which resulted in Greenberg’s insolvency, giving rise to the sale of a number of Greenberg’s assets to Saan, Gendis’ other retail arm. Had the Met store in Marathon been expressly included in that transaction involving the sale of certain assets from a large number of Greenberg stores to Saan, I would have been more favourably inclined to the applicant’s sale of business argument. The only factor linking the Met store to the sale of the Greenberg assets is found in the acquisition by Saan of the Greenberg trademarks and trade names. That acquisition, the applicant contends, allowed Saan to open and operate a similar store in Marathon.

24. The problem with this argument is that there was no evidence before me concerning the extent, if any, to which the new Saan store in Marathon used the Greenberg trademarks and trade names in its business. In the complete absence of any evidence, it is not possible to say whether the Saan store actually relied upon the Greenberg trademarks and trade names, and even if it did, whether that played any significant role in Saan’s ability to carry on business in Marathon. It is simply not possible to find that what Saan acquired through the bankruptcy of Greenberg, enabled it to carry on business in Marathon.

Are or were Gendis, Greenberg and Saan related companies pursuant to section 1(4) of the Act?

Section 1(4) of the Act provides as follows:

1. (1) In this Act,

(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.

25. Although there is much jurisprudence on the test for the application of section 1(4), for the purposes of this decision it is sufficient to refer to the decision in Etobicoke Public Library Board, supra, where the Board succinctly set out the test for a common employer declaration. At paragraph 81, the Board observed:

There are three conditions which must exist before a common employer declaration can be made pursuant to the Board’s authority under section 1(4) of the Act. These are:

(a) there must be more than one corporation, firm, individual, association or syndicate involved

(b) these entities must be engaged in associated or related businesses or activities, whether or not simultaneously; and

(c) these entities must be under common control or direction….

26. There was no dispute that the first of the three tests for a finding of a common employer declaration had been met i.e. that there were multiple entities.

27. With respect to whether Saan and Greenberg were engaged in associated or related businesses or activities, counsel for the responding parties suggested that there was no economic unity between the two entities, given the differences between them in location, size, staff complement, and so forth. There were some distinctions between Saan and Greenberg in terms of product line and services, but they were both retail stores, they both sold clothing and household products, and the markets they served did not appear to be measurably distinct. Aside from the fact that Greenberg also provided a restaurant service, there is very little distinction in the essential nature of its business compared to that of Saan.

28. Counsel for the responding parties conceded that it is not necessary to a determination as to associated or related businesses that the businesses be carried out simultaneously, but suggested that section 1(4) does not go so far as to sanction a hiatus of the kind we find here. A significant hiatus militates against a finding of associated or related businesses, particularly where those entities are not engaged in similar pursuits. Be that as it may, I have found that there is little to distinguish Saan from Greenberg in terms of its essential character, and consequently the hiatus, although lengthy, is not such as to eliminate the second component of the test to determine if there are common employers. In addition, the documentary evidence suggested a fair degree of common operating methodology and pricing between the two companies. They were also linked by the same group benefit plan under the auspices of Gendis. I find that Gendis, Greenberg and Saan were engaged in associated or related businesses.

29. I turn now to the question of whether the three companies were under common control and direction, the third component of the test for a section 1(4) declaration. Counsel for the responding parties argued that Saan and Greenberg were managed separately on a day-to-day basis. That is quite accurate, but it is not determinative of the issue. In Walters Lithographic Company Limited, supra, the Board considered a number of factors relevant to the issue of common control and direction, stating at paragraph 21:

The indicia or criteria which the Board considers relevant in making a determination as to whether the activities or businesses of one or more corporations, individuals, firms, syndicates or association, or any combination thereof are carried on under common direction and control and therefore may be treated as one employer are – (1) common ownership or financial control, (2) common management, (3) interrelationship of operations, (4) representation to the public as a single integrated enterprise, and (5) centralized control of labour relations. No single criterion is likely to decide the issue. Rather, as has been stated, the Board’s determination undoubtedly will be based on an appraisal of all of them in the light of the particular facts before it. It hardly need be said that in applying the above criteria, the greater the degree of functional coherence and interdependence which the Board finds among the associated or related activities and businesses the more probable it is that the Board will conclude that the entities carrying on theses activities should be treated as one employer. We would mention here also that the indicia or criteria themselves obviously overlap. For that reason, in applying them to the facts of the instant case we have not attempted to deal with each criterion on an individual basis.

30. In the case before me, while there was no evidence of common management or of centralized control of labour relations, and little evidence suggesting representation to the public (other than potential investors) of an integrated enterprise, there are factors that suggest common control and direction of Saan and Greenberg by Gendis. These include the presence of two top executive officers in common on the governing boards of Gendis, the owner of the retail operation, and Greenberg and Saan, the two functioning components of that retail operation. These individuals, in their capacity as executive officers on the various boards of the three related companies, exercised a degree of financial control over them. On March 21, 1997 they were present at a meeting of the board of directors of Gendis Inc., and they voted, together with the eight other directors present at that meeting to withdraw Gendis’ financial support to Greenberg, and to authorize Saan to enter into the offer to purchase with the trustee of the estate of Greenberg to acquire certain of its assets (discussed above).

31. There was also evidence of some interrelationship of operations between Greenberg, Saan and Gendis. The employees of Greenberg and Saan were entitled to participate in the Gendis pension and benefits program. The retail sales work performed by employees of Saan is similar to the work once performed by the retail sales staff of the Met store in Marathon. There appears to have been some effort by Gendis to coordinate the retail operations of both subsidiary companies so that they were not competing with one another in the same marketplace. Greenberg’s operations were principally concentrated in Quebec and the maritime provinces, while Saan covered Ontario, the western provinces, the Yukon and Northwest Territories. All of this suggests that Saan and Greenberg were two interrelated sides of the Gendis retail arm.

Should the Board declare that Gendis, Greenberg and Saan were related companies?

32. In the Etobicoke Public Library Board case, supra, the Board summarized the cases dealing with the legislative purpose behind section 1(4), and observed that:

33. The principles and legislative objectives or purposes underlying section 1(4) identified by the Board in these and numerous other decisions may be conveniently summarized as follows: section 1(4) is designed

(a) to preserve or protect from artificial erosion the bargaining rights of the union,

(b) to create or preserve viable bargaining structures, and

(c) to ensure direct dealings between a bargaining agent and the entity with real economic power over the employees….

33. With those principles and objectives in mind, I turn now to a consideration of the exercise of discretion under section 1(4). I have found that the evidence discloses that the first two components of the test for a section 1(4) declaration, as articulated above in the Etobicoke Public Library case have been met. That is, there existed three corporate businesses, and they were engaged in associated or related activities. With respect to the third component of the test, common control and direction, there are some indicia present suggesting a finding in favour of the applicant on that point. However, as indicated, a declaration under section 1(4) of the Act involves the exercise of discretion, and if I am to exercise my discretion in favour of the union in this matter, in my view I must be persuaded that the existence of Saan and its emergence in Marathon as a result of the Gendis-initiated demise of Greenberg adversely affected the applicant’s bargaining rights. Counsel for the applicant asked the Board to consider the unlikelihood of Saan, the Western Canada based arm of Gendis’ retail operation, opening a business in Marathon had Greenberg’s Met store continued to exist. Realistically, could the Marathon market have sustained two stores of the likes of Saan and the Met simultaneously? Counsel suggested that such a scenario was improbable, and that Saan’s emergence owed everything to the bankruptcy of Greenberg, a kind of self-inflicted wound willingly suffered by Gendis for the purpose of its longer term fiscal health. Therefore, the Board should issue a related-employer declaration.

34. At first blush, counsel’s argument seems compelling. It is difficult to envision the co-existence of Saan and Greenberg within the same small community. No doubt, as a practical matter, Gendis would not have adopted such a business strategy in the normal course, and indeed the evidence concerning the separate corporate structures, head offices and reporting relationships confirms that conclusion. But for the demise of the Met store in Marathon, Saan had no apparent interest in establishing its presence in the same community and market. And, as I have indicated, the Met store came to its end as a direct result of the decision of Gendis to cease funding the moribund Greenberg operation of which the Met store was a small piece. In these circumstances, given the lack of an arm’s length relationship between Gendis and its two retail arms, the Board must carefully scrutinize the events in terms of the labour relations implications in deciding whether to issue a related-employer declaration under section 1(4) of the Act.

35. What was the cause of the erosion of the union’s bargaining rights at the Met store in Marathon? The evidence suggests a rather simple answer. The Met store in Marathon belonged to a financially moribund or underperforming corporation whose “banker”, in this case the parent company, Gendis, declined to prop it up with any further financial or other support. That is why the Met in Marathon ceased to operate. There was no serious suggestion that the short, albeit stormy labour relations history at the Met store in Marathon had anything to do with the motivation by Gendis to force Greenberg into bankruptcy and effectively close the doors of its vast collection of stores throughout Canada.

36. The union’s bargaining rights in Marathon evaporated because of Greenberg’s economic collapse, and not because of the emergence of Saan. True, Saan acquired a large piece of the Greenberg business. Perhaps that acquisition enabled Saan to carry on the essence of Greenberg’s business outside of Marathon. But, as I have indicated, nothing from that purchase was proven in this case to have been utilized by Saan to commence to carry on business in Marathon, some two years after the closing of the Met store. Moreover, the emergence of Saan in Marathon was not inconsistent with its defined geographic operating scope – Saan had, prior to 1997, operated stores in Ontario.

37. In my view, this is not a case to which the purposes of section 1(4) apply. In particular, there has not been an artificial erosion of the union’s bargaining rights brought about by corporate restructuring or manipulation. The union’s bargaining rights came to an end because Greenberg failed as a business. Saan’s emergence in Marathon, following a hiatus of almost two years, is, from a labour relations perspective, merely incidental to that failure, and therefore is not a contributing factor to the union’s loss of bargaining rights. There was an erosion of bargaining rights, but that erosion was for economic, and not labour relations, reasons.

38. For these reasons, I decline to make a declaration under section 1(4) of the Act.

39. The application in respect of Board File No. 0902-99-R is dismissed. The union is directed to advise the Board in writing, within thirty days of the date of this decision, whether or not it wishes to proceed with the unfair labour practice complaint in Board File No. 0901-99-U. In the absence of written notification by the union within 30 days, that matter will be terminated.

40. I remain seized to deal with Board File No. 0901-99-U.

“Patrick Kelly”

for the Board