Abdoulrab et al. v. Ontario Labour Relations Board et al.

[Indexed as: Abdoulrab v. Ontario (Labour Relations Board)]

95 O.R. (3d) 641

Court of Appeal for Ontario,

Simmons, Blair and Juriansz JJ.A.

June 18, 2009

Administrative law -- Judicial review -- Standard of review -- Employees applying for judicial review of decision of Labour Relations Board that certain companies were not related employers under s. 4 of Employment Standards Act -- Divisional Court finding that Board's decision was reasonable -- Court not erring in failing to first determine correct interpretation of s. 4 of Act and then determine whether Board's decision fell within reasonable margin of error -- Judicial review on standard of reasonableness recognizing that no single outcome is correct -- Function of judicial review on standard of reasonableness being to determine whether decision falls within range of acceptable outcomes -- Employment Standards Act, 2000, S.O. 2000, c. 41, s. 4.

Employment -- Employment standards -- Related employers -- Purchaser of A Co. already owning B Co. at time of purchase and incorporating Holdco to hold shares of both companies at request of his banker -- A Co. terminating large number of employees because of downturn in business and making proposal in bankruptcy -- Employees rejecting proposal and A Co. going into bankruptcy -- Owner incorporating C Co. after bankruptcy and acquiring assets of A Co. from trustee -- Labour Relations Board reasonably finding that B Co., C Co. and Holdco were not jointly and severally liable for severance and termination pay under s. 4 of Employment Standards Act as related employers -- Insolvency of A Co. not caused or affected by its relationship with B Co. and Holdco -- Incorporation of C Co. and acquisition of A Co.'s assets not having any effect on A Co.'s ability to meet its obligations to terminated employees under Act -- Employment Standards Act, 2000, S.O. 2000, c. 41, s. 4.

When the owner of Cat-Dip purchased that company, he already owned N Inc. At the request of his banker, he incorporated a holding company ("406") to hold all the shares of both companies. Cat-Dip began experiencing business problems and ultimately terminated a large number of employees, triggering their entitlement to severance and termination pay under the Employment Standards Act, 2000. When the employees rejected Cat-Dip's proposal in bankruptcy, Cat-Dip went into bankruptcy. The owner then incorporated C Inc. and purchased Cat-Dip's assets at their appraised value. Several of the terminated employees filed claims with the Employment Standards Branch of the Ministry of Labour for their termination and severance pay. An employment standards officer determined that N Inc., 406 and C Inc. were jointly and severally liable for severance and termination pay as related employers to Cat-Dip under s. 4 of the Act and issued orders to pay. The three companies sought review of the orders to pay by the Ontario Labour Relations Board. The Board found that N Inc., 406, C Inc. and Cat-Dip were related businesses for the purpose of s. 4(1)(a) of the Act because of their common management, ownership and financial control but that the criteria set out in s. 4(1)(b) of the Act were not met as there was neither an intent to defeat, nor an effect of defeating, the intent and purposes of the Act. The Divisional Court dismissed the employees' application for judicial review of the Board's decision. The employees appealed. [page642]

Held, the appeal should be dismissed.

The Divisional Court did not err in failing to first determine the correct interpretation of s. 4 of the Act and then determining whether the Board's decision fell within a reasonable margin of error. Judicial review on a reasonableness standard recognizes that there is no single outcome that must be regarded as the correct one. Rather, there is a range of outcomes that are acceptable, and the function of judicial review on a standard of reasonableness is merely to determine whether the decision falls within that range. The Board's decision was not unreasonable. While the Act sets out minimum employee entitlements, it does not guarantee that they will be paid in the event of the employer's bankruptcy. The Board found as a fact that N Inc. and 406 propped up Cat-Dip financially, rather than consuming assets that might otherwise have been available to meet Cat-Dip's employment standards obligations. That factual finding provided a justifiable and intelligible basis supporting the Board's conclusion that the companies' relatedness did not have the effect of defeating the intent and purposes of the Act. As for the relationship between Cat-Dip and C Inc., the Board found that there was no evidence of any collusion or inappropriate activity in the making of Cat-Dip's proposal in bankruptcy to the unsecured creditors and no basis to conclude that any action taken by C Inc. affected the likelihood that the terminated employees would receive their severance and termination pay. Again, that finding provided a justifiable, intelligible and transparent basis for the Board's conclusion that C Inc. and Cat-Dip were not related employers.

APPEAL from the decision of the Divisional Court(Lane, Swinton and Bryant JJ.), [2007] O.J. No. 3155, 228 O.A.C. 88 (Div. Ct.) dismissing an application for judicial review of a decision of the Ontario Labour Relations Board.

Cases referred to Dunsmuir v. New Brunswick, [2008] 1 S.C.R. 190, [2008] S.C.J. No. 9, 2008 SCC 9, 329 N.B.R. (2d) 1, 64 C.C.E.L. (3d) 1, 164 A.C.W.S. (3d) 727, EYB 2008-130674, J.E. 2008-547, [2008] CLLC Â220-020, 170 L.A.C. (4th) 1, 372 N.R. 1, 69 Imm. L.R. (3d) 1, 291 D.L.R. (4th) 577, 69 Admin. L.R. (4th) 1, 95 L.C.R. 65; Law Society of New Brunswick v. Ryan, [2003] 1 S.C.R. 247, [2003] S.C.J. No. 17, 2003 SCC 20, 223 D.L.R. (4th) 577, 302 N.R. 1, J.E. 2003-713, 257 N.B.R. (2d) 207, 48 Admin. L.R. (3d) 33, 31 C.P.C. (5th) 1, 121 A.C.W.S. (3d) 172, apld Timberland Ford Inc. (Re), [2004] O.E.S.A.D. No. 917 (L.R.B.), consd Other cases referred to Cameron Motorsports Inc. (Re), [2004] O.E.S.A.D. No. 830 (L.R.B.); Carillon Decorative Products Inc. v. Ontario (Employment Standards Officer) (2004), 2004 1535 (ON SCDC), 71 O.R. (3d) 500, [2004] O.J. No. 2880, 188 O.A.C. 312, 2 C.B.R. (5th) 112, 132 A.C.W.S. (3d) 283 (Div. Ct.); Graphite Specialty Products Ltd. (Re), [2009] O.E.S.A.D. No. 153 (L.R.B.); IEP Ltd. (Re), [2005] O.E.S.A.D. No. 1220 (L.R.B.); Machtinger v. HOJ Industries Ltd., 1992 102 (SCC), [1992] 1 S.C.R. 986, [1992] S.C.J. No. 41, 91 D.L.R. (4th) 491, 136 N.R. 40, J.E. 92-783, 53 O.A.C. 200, 40 C.C.E.L. 1, 92 CLLC Â14,022 at 12108, 33 A.C.W.S. (3d) 256; Mark Winter & Associates Inc. (Re), [2005] O.E.S.A.D. No. 1308 (L.R.B.); Northland Superior Supply Co. (Re), [2004] O.E.S.A.D. No. 307, [2004] OLRB Rep. March/April 384 (L.R.B.); Platespin Canada Inc. (Re), [2005] O.E.S.A.D. No. 33, [2005] OLRB Rep. January/February 131 (L.R.B.); Queensway Roadhouse Ltd. (Re), [2004] O.E.S.A.D. No. 761 (L.R.B.); Rizzo v. Rizzo Shoes Ltd. (Re) (1998), 1998 837 (SCC), 36 O.R. (3d) 418, [1998] 1 S.C.R. 27, [1998] S.C.J. No. 2, 154 D.L.R. (4th) 193, 221 N.R. 241, J.E. 98-201, 106 O.A.C. 1, 50 C.B.R. (3d) 163, 33 C.C.E.L. (2d) 173, 98 CLLC Â210-006; Victorian Order of Nurses (Re), [2004] O.E.S.A.D. No. 1403 (L.R.B.) Statutes referred to Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 Employment Standards Act, R.S.O. 1990, c. E.14 [rep.], s. 12 [page643] Employment Standards Act, 2000, S.O. 2000, c. 41, ss. 1(1), 4, (1), (a), (b), (2), (5), 14(1), (2) [as am.], 81(1), (3), 116 [as am.], (7), 119(6), (7), (13), (14)

Ron Franklin and Avvy Go, for appellants. Brian Blumenthal and Judy L. Chan, for respondent Director of Employment Standards (Ministry of Labour). Clifton Prophet and Brent Arnold, for respondents Novaquest Finishing Inc., Catelectric Inc. and 4064186 Ontario Inc. Voy Stelmaszynski, for respondent Ontario Labour Relations Board.

The judgment of the court was delivered by

JURIANSZ J.A.: --

I. Overview

[1] The appellants are former employees of Catelectric-Dip Corporation ("Cat-Dip"). Their employment was terminated on December 19, 2003, shortly before Cat-Dip went into bankruptcy on January 19, 2004. They did not receive the severance and termination pay to which they were entitled under the Employment Standards Act, 2000, S.O. 2000, c. 41 (the "ESA"). They appeal from the decision of the Divisional Court dismissing their application for judicial review of a decision of the Ontario Labour Relations Board [[2006] O.E.S.A.D. No. 440, [2006] OLRB Rep. March/April 248]. [See Note 1 below] The Board had overturned the decision of an employment standards officer which concluded that the three corporate respondents should be jointly and severally liable as related employers to pay the appellants' termination and severance pay pursuant to s. 4 of the ESA.

[2] The appellants do not attack the Board's factual findings or the Divisional Court's treatment of those findings. Further, they recognize that the Board is protected by the privative clause in s. 119(13) of the ESA. They submit, however, that the Divisional Court erred in upholding the decision of the Board as reasonable. Instead, they submit that the Divisional Court should have [page644] found that the Board erred in its interpretation and application of the related employer provisions in s. 4(1) and (2) of the ESA.

II. Facts

The purchase of Cat-Dip and the financing arrangement

[3] Cat-Dip, an electroplating company, was originally owned by a division of Decoma International ("Decoma"), a member of the Magna family of automotive companies. It had about 150 full-time permanent employees. In March 2002, David Lund bought Cat-Dip from Decoma. He was already the owner of another electroplating company, Novaquest Finishing Inc. ("Novaquest").

[4] At the time of the Cat-Dip purchase, Mr. Lund incorporated a holding company, 4064186 Canada Inc. ("406"), to hold all the shares of Cat-Dip and Novaquest. Mr. Lund held all the shares of 406. The Board accepted Mr. Lund's testimony that this arrangement came about largely at the request of his and Novaquest's banker, the Bank of Montreal ("BMO"). BMO established all of its financial arrangements with 406. BMO extended credit facilities to 406, the holding company, secured by all of the assets and receivables of Novaquest and Cat-Dip, the operating companies. Each day, 406 "scooped" all of the money deposited in Novaquest and Cat-Dip and, in turn, provided all of their necessary operating funds. BMO was not concerned with the performance of Cat-Dip in isolation. Instead, BMO was concerned about whether 406 was meeting the covenants established as part of the financing arrangement and whether the operating companies were performing in a manner which ensured that BMO's security was adequately protected.

Cat-Dip's business problems leading up to bankruptcy

[5] In 2003, Cat-Dip began to experience business problems after losing some of its key customers. One of the primary reasons for its difficulties in maintaining profitability was that its employees' wages were approximately 25 per cent -- 30 per cent higher than at Novaquest.

[6] In September 2003, BMO advised 406 that it was $1.6 million "out of margin" and was borrowing in excess of the ratio of receivables it had covenanted to maintain. BMO refused to provide any more money and expected 406 to return quickly to margin. Further, BMO moved the 406/Novaquest/Cat-Dip financial situation to its "special accounts department" and counselled Mr. Lund to hire more sophisticated financial advice.

[7] Mr. Lund hired Mr. Reid, a chartered accountant, as the chief financial officer for 406 in September 2003. At the time he [page645] was hired, 406 did not have enough funds available to meet the next payroll for the employees of Novaquest and Cat-Dip. Mr. Reid testified that the financial problems were serious. That same month, Cat-Dip lost one of its larger key customers and temporarily laid off 28 employees. In November 2003, BMO retained Richter and Partners ("Richter") to monitor the group of companies.

[8] As BMO refused to advance any further funds, Mr. Lund borrowed approximately $2.5 million from family members in September and October 2003 in exchange for promissory notes. Although the loans were intended to allow Cat-Dip to continue operating, they were made to Novaquest and secured by Novaquest's assets. The funds were then moved into the accounts of 406 and used to defray Cat-Dip's operating costs.

[9] In the fall of 2003, Mr. Lund and Mr. Reid made concerted efforts to locate new customers for Cat-Dip and to streamline the company's operations. However, despite those efforts, Cat- Dip continued to lose money. Mr. Lund and Mr. Reid held discussions with Richter about the options available for Cat- Dip. They ultimately retained Richter as the trustee in bankruptcy to advise them on the possibility of making a proposal to creditors under the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (the "BIA"). Richter recommended offering $195,000 to unsecured creditors, which amounted to approximately 10 cents on the dollar.

[10] On December 19, 2003, Cat-Dip sent notices to all its employees advising them that their employment had either been terminated or that their employment could continue at a lower wage-rate. In total, approximately 100 employees lost their employment that day. Many of these employees had worked for Cat-Dip for a long time, some as long as 20 years.

[11] The termination triggered the termination and severance pay provisions of the ESA. Terminated employees were entitled to termination pay of one week's wages for each year of service to a maximum of eight weeks and to severance pay of one week's wages for every year of service.

Cat-Dip's bankruptcy and the launch of Catelectric Inc.

[12] On December 29, 2003, Cat-Dip filed a proposal under the BIA. The primary unsecured liability of Cat-Dip was its debt to terminated employees. On January 19, 2004, a meeting of creditors was held. The unsecured creditors were offered approximately 12 cents on the dollar. Richter advised that if the proposal was rejected, the unsecured creditors would receive nothing because BMO's secured claims against Cat-Dip far exceeded the value of Cat-Dip's assets. Despite Richter's advice, the majority of the creditors, made up of the employees, voted against the [page646] proposal. As a consequence of the rejection of the proposal, Cat-Dip went into bankruptcy.

[13] Richter, the receiver and trustee in bankruptcy, intended either to shut down Cat-Dip temporarily or to liquidate it immediately. A few hours after Cat-Dip went into bankruptcy, Mr. Lund incorporated a new company, Catelectric Inc. ("Catelectric"), and obtained $1,775,000 in financing; the funds were drawn in part from his own assets and loans from his family. He then purchased the assets of Cat-Dip at their appraised value, which was considerably less than the amount of BMO's outstanding secured debt.

[14] Catelectric began to operate immediately. In fact, the Cat-Dip employees who remained with Catelectric did not even cease working. They continued to work at the same location, on the same machines and on the same projects, for Catelectric.

Cat-Dip employees' claims and the decision of the Employment Standards Officer

[15] Several of the employees terminated by Cat-Dip filed claims with the Employment Standards Branch of the Ministry of Labour for their termination and severance pay, alleging that Novaquest, 406 and Catelectric were related employers within the meaning of s. 4 of the ESA. An employment standards officer determined that $983,942.68 was owed to these employees and that Novaquest, 406 and Catelectric were jointly and severally liable as related employers to Cat-Dip under s. 4 of the ESA. Orders to pay were therefore made against the three companies. The three companies then filed applications with the OLRB for review of the orders to pay.

Review of the employment standards officer's decision by the Board

[16] On the applications to review the order of the employment standards officer, the Board's task was to determine whether Novaquest, 406 and Catelectric were related employers within s. 4 of the ESA. Section 4(1) of the ESA provides:

4(1) Subsection (2) applies if, (a) associated or related activities or businesses are or were carried on by or through an employer and one or more other persons; and (b) the intent or effect of their doing so is or has been to directly or indirectly defeat the intent and purpose of this Act.

[17] Section 4(2) of the ESA provides that the employer and the other person or persons described in subsection (1) shall be treated as one employer for the purposes of the ESA. [page647]

[18] Section 4(5) of the ESA states:

4(5) Persons who are treated as one employer under this section are jointly and severally liable for any contravention of this Act and the regulations under it and for any wages owing to an employee of any of them.

[19] In its decision dated October 26, 2005, the Board found that Novaquest, 406, Catelectric and Cat-Dip were related businesses for the purpose of s. 4(1)(a) of the ESA because of their common management, ownership and financial control. In its second decision dated April 27, 2006, the Board found that the criteria set out in s. 4(1)(b) had not been met. According to the Board, there was neither an "intent" to defeat nor an "effect" of defeating the intent and purpose of the ESA.

[20] In reaching this conclusion, the Board focused on the following: the circumstances surrounding the acquisition of Cat-Dip; how it related to the other companies owned by Mr. Lund; how Mr. Lund reacted to its financial problems; and, how, after its bankruptcy, Mr. Lund came into possession of the Cat- Dip assets, enabling him to establish the "phoenix company", Catelectric. The Board rejected the argument that s. 4 is "simply a deep pockets provision that requires only a finding of relatedness between a company that can meet its employment standards obligations and a company that cannot". It went on to observe that the fact that one related company is solvent and the other insolvent is not, on its own, an "effect" that defeats the intent or purpose of the ESA; there must be a connection between the "relatedness" and the insolvency. The Board concluded that there was no evidence in this case that the insolvency of Cat-Dip was caused or affected by its relationship with 406 and Novaquest. To the contrary, the Board concluded [at para. 39]:

Cat-Dip was propped up by the revenues and financial strength of Novaquest, which, in turn, allowed 406 to maintain the lending relationship with the Bank that supported Cat-Dip's mounting losses. Without Novaquest and 406, Cat-Dip would have failed earlier and without the ability to meet its employment standards obligations.

[21] Therefore, the Board held that Novaquest, 406 and Cat- Dip should not be treated as one employer under s. 4(2) of the ESA.

[22] Turning to Cat-Dip and Catelectric, the Board concluded that there was no evidence that any action taken in respect to Catelectric had an effect on the ESA entitlements of the Cat- Dip employees. It found that the rejection of the proposal in bankruptcy created the opportunity for Mr. Lund to acquire Cat-Dip's assets from BMO. The launch of Catelectric, a "phoenix" company, did not have any "effect" on Cat-Dip's ability to meet its ESA obligations to [page648] the terminated employees. Cat-Dip had gone bankrupt and the employees' entitlements to termination and severance pay were not going to be made in any event. Mr. Lund's choice to purchase the assets of Cat-Dip and use them to start Catelectric Inc. did not have an "effect" on Cat-Dip's abilities to pay the employees. The Board therefore held that Cat-Dip and Catelectric should not be treated as one employer under s. 4(2) of the ESA.

[23] The Board set aside the order of the employment standards officer.

Judicial review of the Board's decision by the Divisional Court

[24] The employees brought an application before the Divisional Court for judicial review of the Board's decision setting aside the decision of the employment standards officer. Swinton J., writing for the Divisional Court, concluded that "the decision of the Board was a reasonable one on the facts before it". According to the Divisional Court, the Board neither misinterpreted the test under s. 4(1)(b) of the ESA nor made unreasonable findings of fact; it did not ignore relevant and material evidence, and there was an evidentiary basis for its decision. The Divisional Court therefore dismissed the application for judicial review.

[25] The appellants appeal to this court from the decision of the Divisional Court.

III. Issues

[26] The appellants raise the following four issues on appeal: (1) Under what circumstances should this court overturn a decision of the Divisional Court? (2) Did the Divisional Court err in failing to interpret s. 4 of the ESA before finding that the Board's application of the section was reasonable? (3) Did the Divisional Court fail to interpret correctly s. 4 of the ESA? (4) What other relevant factors should this court consider in deciding this case?

IV. Positions of the Parties

The appellants' position

[27] It is worth reiterating that the appellants do not attack the Board's findings of fact. Instead, they advance a strictly legal argument. They accept that the Divisional Court could not have [page649] interfered with the Board's decision unless it found that decision to be unreasonable. They submit that this court should overturn the decision of the Divisional Court only if it determines that the Divisional Court applied the wrong law, misinterpreted the law or was otherwise incorrect in its assessment and/or conclusion. The appellants advance a two-pronged argument in submitting that the Divisional Court erred in upholding the decision of the Board as reasonable.

[28] First, they assert that the Divisional Court failed to articulate the "correct" interpretation of s. 4 of the ESA before conducting its review of the Board's decision to determine whether it was reasonable. According to the appellants, the Divisional Court's approach is contrary to the very purpose of judicial review.

[29] Second, the appellants submit that, generally, in order for a decision to be reasonable, it must accord with the purpose and intent of the governing statute. According to the appellants, the Supreme Court of Canada has established specific principles to guide the interpretation of employment standards legislation; these principles require that the Board reach decisions that fulfill the underlying remedial purpose of the ESA, namely, to protect employees' entitlements.

[30] The appellants submit that the purpose of s. 4 of the ESA is to ensure that employees receive the severance and termination pay to which they are entitled even when their employer is unable to meet its obligations. While the appellants do not contest the Board's finding of fact there was no intent to defeat the ESA, they submit that the question of whether there was such an "effect" is a matter of legal construction. They submit that the Board failed to interpret the word "effect" in a manner consistent with the clear and overarching legislative purpose of the ESA, generally, and s. 4, specifically. According to the appellants, the "effect" component of s. 4 is satisfied whenever the result or "effect" of not treating related employers as one employer is that employees lose their entitlements to severance and termination pay.

Position of the Director of Employment Standards

[31] The Director of Employment Standards (the "Director") asserts that there are two divergent and conflicting lines of decisions of the OLRB in relation to the interpretation of s. 4 of the ESA -- a narrow line and a broad line. The Director submits that the narrow line of decisions, which it asserts the Board applied in this case, is unreasonable. [page650]

[32] The Director's argument that the "broad" line of authority is correct parallels the second prong of the appellants' argument. Like the appellants, the Director stresses that the ESA is remedial public welfare legislation designed to ensure minimum employment standards for a vulnerable class of non-unionized workers in Ontario. In particular, the "related employer" provisions of s. 4 are intended to expand who is liable as the "employer" for employees' entitlements to wages under the ESA without regard to corporate form. According to the Director, the narrow line of authority is unreasonable because it is wholly inconsistent with the approach to the interpretation of employment standards legislation mandated by the Supreme Court of Canada. The Director argues that the Board applied an unreasonable line of authority and made an unreasonable decision. A decision that applies an unreasonable line of authority cannot be reasonable.

Position of the OLRB

[33] The OLRB quite properly did not take a position on the merits of the appeal. It restricted itself to making submissions on the standard of review and related issues. The OLRB has a statutory duty under s. 116 of the ESA to hear and determine applications for review of decisions of employment standards officers. When reviewing the decisions of employment standards officers, the OLRB essentially conducts a hearing de novo. As set out in s. 119(6) of the ESA:

119(6) The Board may, with necessary modifications, exercise the powers conferred on an employment standards officer under this Act and may substitute its findings for those of the officer who issued the order or refused to issue the order.

[34] Under s. 119(7), the OLRB may amend, rescind, or affirm any order made, issue a new order, or affirm the refusal to make an order.

[35] Moreover, a decision of the OLRB is shielded from unrestrained judicial review by the privative clause in s. 119(13):

119(13) A decision of the Board is final and binding upon the parties to the review and any other parties that the Board may specify. The OLRB asserts that the protection of this privative clause strongly suggests that reasonableness is the appropriate standard for review of a decision of the OLRB. The OLRB places special emphasis on s. 119(14), which states:

119(14) Nothing in subsection (13) prevents the court from reviewing the decision of the Board under this section, but a decision of the Board concerning the interpretation of this Act shall not be overturned unless the decision is unreasonable. [page651] This subsection expressly precludes the review on a standard of correctness of a decision of the OLRB concerning the interpretation of the ESA.

[36] The OLRB submits that the Divisional Court quite properly declined to articulate a "correct" interpretation of s. 4 of the ESA prior to conducting its reasonableness review. On judicial review, the court's role is simply to determine whether the OLRB's interpretation was reasonable. If so, then the court should not interfere with its decision, even if other reasonable interpretations exist. The OLRB says that the Divisional Court was not required to resolve any conflict between two allegedly conflicting lines of decisions interpreting s. 4 of the ESA. According to the OLRB, "the existence of conflicting lines of cases is a natural and acceptable consequence of the deference that courts properly afford expert tribunals".

Position of the respondent companies

[37] The respondent companies submit that given the plain words of s. 119(14) of the ESA, a reviewing court cannot overturn a decision of the OLRB unless it is unreasonable. The respondent companies go so far as to argue that even if the Divisional Court regarded the Board's decision as wrong, it was obliged to uphold it if the decision was reasonable. They submit that a Board decision cannot be found to be unreasonable unless there is no line of analysis in its reasons that could reasonably lead the tribunal from the evidence to its conclusion. According to the respondent companies, the Board applied a clear and reasoned approach, consistent with prior jurisprudence of the OLRB and Divisional Court, and arrived at a reasonable conclusion.

[38] The respondent companies criticize the appellants' suggested approach to the interpretation of s. 4 as an attempt to impose a scheme of absolute liability on related employers. More importantly, they say that the appellants' liability approach to the related employer provision would deprive s. 4(1)(b) of all meaning and render it superfluous. By contrast, they submit that the Board's application of s. 4(1) was a reasoned balancing of interests that gave meaning to all the words of the provision.

V. Analysis

1. It was not the role of the Divisional Court to provide its own interpretation of s. 4

[39] As summarized above, the appellants argue that the Divisional Court erred in concluding that the Board's interpretation [page652] and application of s. 4 of the ESA was reasonable without first determining the correct interpretation of the section.

[40] The premise of the appellants' argument is that judicial review on the standard of reasonableness allows the Board a margin of error. The Divisional Court's function on judicial review, as conceived by the appellants, is to measure the extent to which the Board's decision departs from the correct one. If the Board's departure from the correct decision is within a reasonable margin of error, the standard of review prevents the court from overturning it. According to the appellants, in this case, the Divisional Court was not in a position to measure the extent to which the Board's decision deviated from the correct one because the court never considered first what the correct decision would be.

[41] The respondent companies' argument that a Board decision that is "wrong" might still be upheld is also premised on the view that judicial review on the standard of reasonableness allows the tribunal a margin of error to deviate from the correct decision.

[42] Regarding judicial review on a standard of reasonableness as the determination of whether a tribunal's decision deviates from the correct decision by more than a reasonable margin of error is a grave misconception. Judicial review on a standard of reasonableness recognizes there is no single outcome that must be regarded as the correct one. Rather, there is a range of outcomes that are acceptable and the function of judicial review on a standard of reasonableness is merely to determine whether the decision falls within that range. The Supreme Court of Canada has explained this repeatedly.

[43] In Law Society of New Brunswick v. Ryan, 2003 SCC 20, [2003] 1 S.C.R. 247, [2003] S.C.J. No. 17, which was relied upon by the Divisional Court, the Supreme Court made clear, at para. 50, that a reviewing court should not ask itself what the correct decision would be:

At the outset it is helpful to contrast judicial review according to the standard of reasonableness with the fundamentally different process of reviewing a decision for correctness. When undertaking a correctness review, the court may undertake its own reasoning process to arrive at the result it judges correct. In contrast, when deciding whether an administrative action was unreasonable, a court should not at any point ask itself what the correct decision would have been. Applying the standard of reasonableness gives effect to the legislative intention that a specialized body will have the primary responsibility of deciding the issue according to its own process and for its own reasons. The standard of reasonableness does not imply that a decision-maker is merely afforded a "margin of error" around what the court believes is the correct result. (Emphasis added) [page653]

[44] In Dunsmuir v. New Brunswick, 2008 SCC 9, [2008] 1 S.C.R. 190, [2008] S.C.J. No. 9, which was rendered after the Divisional Court's decision in this case, the court stated, at para. 47:

[C]ertain questions that come before administrative tribunals do not lend themselves to one specific, particular result. Instead, they may give rise to a number of possible, reasonable conclusions. Tribunals have a margin of appreciation within the range of acceptable and rational solutions. A court conducting a review for reasonableness inquires into the qualities that make a decision reasonable, referring both to the process of articulating the reasons and to outcomes. In judicial review, reasonableness is concerned mostly with the existence of justification, transparency and intelligibility within the decision-making process. But it is also concerned with whether the decision falls within a range of possible, acceptable outcomes which are defensible in respect of the facts and law.

[45] The court then summarized judicial deference in the context of the reasonableness standard, at para. 49:

In short, deference requires respect for the legislative choices to leave some matters in the hands of administrative decision makers, for the processes and determinations that draw on particular expertise and experiences, and for the different roles of the courts and administrative bodies within the Canadian constitutional system.

[46] In the present case, s. 119(14) of the ESA is a statutory instruction of the legislature to the courts to leave the primary responsibility for the interpretation of the ESA to the OLRB, a specialized expert tribunal. The legislature has mandated that the courts not overturn a decision of the OLRB concerning the interpretation of the ESA unless it is unreasonable.

[47] This legislative scheme, which stipulates judicial review on the standard of reasonableness, precluded the Divisional Court from determining what, in its view, would be the correct interpretation of s. 4 of the ESA in its review of the Board's decision. I therefore do not accept the appellants' argument that the Divisional Court erred in failing to articulate first what in its view would be the correct interpretation of s. 4 before conducting its reasonableness analysis.

2. There are no conflicting lines of authority in the OLRB's jurisprudence

[48] The Director's submission that a special approach to judicial review on the reasonableness standard is required where the administrative tribunal has developed two conflicting lines of authority concerning the interpretation of its governing statute is, at first blush, appealing. From a common sense perspective, it is difficult to accept that two truly contradictory interpretations of the same statutory provision can both be upheld as reasonable. If two interpretations of the same statutory provision are truly [page654] contradictory, it is difficult to envisage that they both would fall within the range of acceptable outcomes. More importantly, it seems incompatible with the rule of law that two contradictory interpretations of the same provision of a public statute, by which citizens order their lives, could both be accepted as reasonable. In such circumstances, the Director suggests, the reviewing court must consider both competing lines of authority and decide which one is reasonable. The Director's position, though perhaps unorthodox, is worthy of consideration.

[49] Before considering the Director's argument, however, it is worth commenting on the Director's posture before the court. Section 116(7) of the ESA gives the Director party status before the OLRB. The role the Director should play as a party was not an issue before the Board, the Divisional Court or this court. The Director explained in its factum that it appears at proceedings of the OLRB and in court to ensure both that the ESA is interpreted in a manner that furthers its broad purpose and that it is consistently applied and enforced. In other words, the Director appears as an advocate of its view of the proper interpretation of the ESA.

[50] The Director submits that this case, as well as several other decisions of the OLRB and of employment standards referees applying s. 4 of the ESA where the employer had become insolvent, were wrongly decided. They were wrongly decided, according to the Director, because they required evidence of some connection between the corporate relationship and the insolvency, and a finding that the employees' rights were defeated by something other than the insolvency. This, the Director submits, is an overly restrictive approach to the interpretation of the "effect" component of s. 4(1)(b) of the ESA. The Director cites cases dating back to 1990 in support of its submission.

[51] In my view, the Director cannot include cases dating back to 1990 in the analysis. Significant changes have been made in employment standards legislation and procedure since then. First, the power to review orders of employment standards officers was transferred from referees of the Office of Adjudication of the Employment Standards Branch to the OLRB by a legislative amendment in 1998. Second, the ESA was substantially rewritten in 2000. Specifically, s. 119(14) was added to the ESA as part of the 2000 amendments and the OLRB's mandate to interpret the ESA was established legislatively. Third, the related employer provision of the ESA was amended in 2000.

[52] I appreciate that the decisions of employment standards referees, although not protected by a privative clause, were reviewed on the pre-Dunsmuir standard of reasonableness. I also [page655] note the Director's submission that s. 4 of the present ESA is intended simply to be a more readable and comprehensible restatement of s. 12 of the now repealed Employment Standards Act, R.S.O. 1990, c. E.14 (although whether that is so is a question to be entertained by the body primarily responsible for the interpretation of the legislation). What I consider important is that only since the addition to the ESA of s. 119(14) can it be said that the legislature specifically assigned the primary role of interpreting the statute to the OLRB. The decisions of referees interpreting earlier versions of the related employer provision in the predecessor statute simply cannot be used to support the contention that the OLRB has failed to interpret the current version of the statute in a consistent manner.

[53] A review of the OLRB's decisions regarding the interpretation of s. 4 of the current ESA does not support the Director's submission that there are two divergent and conflicting lines of authority. Some of the OLRB's decisions made a related employer liable for employee wages, and others did not. The result in each case, it seems to me, was primarily fact-driven. The different decisions can be understood by the presence of a particular fact or facts in one case and the absence of such a fact or facts in other cases.

[54] In only one or two cases has the OLRB taken an extremely broad approach to the interpretation of s. 4 by, in effect, treating it as a "deep pockets provision". For example, in Timberland Ford Inc. (Re), [2004] O.E.S.A.D. No. 917 (L.R.B.), at para. 35, in finding that the test for related employers under s. 4 had been met, Tanya Wacyk, vice-chair of the OLRB, based her decision on the reason that "[i]f the companies are treated as non-related entities, then [the employee] would be deprived of his statutory entitlement to severance as a long- term employee". This approach, however, is vulnerable to the justified criticism that it attaches liability from the simple fact of relatedness under s. 4(1)(a) and thereby fails to give any meaning to and renders superfluous s. 4(1)(b). The earlier decisions of employment standards referees upon which the Director seeks to rely are vulnerable to the same criticism.

[55] Moreover, when assessed alongside the OLRB's other decisions concerning the interpretation of s. 4 since the current ESA came into force, it would appear that the decision in Timberland is an outlier. [See Note 2 below] Having regard to the fact-driven [page656] analysis in each case, I am not persuaded that the OLRB's decisions under the current ESA can be characterized as fitting into two competing incompatible lines of authority. Therefore, I find it unnecessary to consider what would be the proper approach to judicial review on a reasonableness standard in a situation where the administrative tribunal below has developed competing and inconsistent lines of decisions.

[56] It remains to consider the argument that the Board's decision was unreasonable considered on its own.

3. The Board's decision in this case was not unreasonable

[57] There can be no controversy as to the proper approach for assessing whether the standard of reasonableness has been met; it was explained clearly by the Supreme Court in Dunsmuir, as I have already noted above. It must be justifiable, transparent and intelligible, and it must fall within a range of possible, acceptable outcomes which are defensible in respect of the facts and law.

[58] The appellants and the Director submit that the Board's interpretation of s. 4 in this case did not meet this standard because the Board adopted its interpretation of the ESA without regard to the principles established by the Supreme Court concerning the interpretation of employment standards legislation. They rely on the Supreme Court's statement in Machtinger v. HOJ Industries Ltd., 1992 102 (SCC), [1992] 1 S.C.R. 986, [1992] S.C.J. No. 41, at p. 1003 S.C.R.:

The objective of the Act is to protect the interests of employees by requiring employers to comply with certain minimum standards, including minimum periods of notice of termination . . . The harm which the Act seeks to remedy is that individual employees, and in particular non-unionized employees, are often in an unequal bargaining position in relation to their employers. . . .

Accordingly, an interpretation of the Act which encourages employers to comply with the minimum requirements of the Act, and so extends its protections to as many employees as possible, is to be favoured over one that does not.

[59] They also cite the Supreme Court's pronouncement in Rizzo v. Rizzo Shoes Ltd. (Re) (1998), 1998 837 (SCC), 36 O.R. (3d) 418, [1998] 1 S.C.R. 27, [1998] S.C.J. No. 2 that any doubt or ambiguity in [page657] the text of employment standards legislation should be resolved in favour of employees; specifically, they point to the statement by Iacobucci J., at para. 36:

[S]ince the ESA is a mechanism for providing minimum benefits and standards to protect the interests of employees, it can be characterized as benefits-conferring legislation. As such, according to several decisions of this Court, it ought to be interpreted in a broad and generous manner. Any doubt arising from difficulties of language should be resolved in the favour of the [employee] claimant.

[60] These overarching general principles, important as they may be, do not efface the basic canons of statutory interpretation. Nor do they dictate that every dispute concerning employment standards legislation automatically be resolved in favour of employees. The questions of what benefits are conferred by the statute and what are the minimum standards with which employers must comply still need to be determined. Specifically, in the present case, the text of s. 4(1)(b) must still be interpreted in the context of the statute as a whole. Doing so requires that some meaning be attached to all the words of s. 4(1)(b) -- "if the intent or effect of their doing so is or has been to directly or indirectly defeat the intent and purpose of the Act".

[61] Contrary to the submissions of both the appellant and the Director, it seems to me that in interpreting these words the Board did have due regard for the legislative purpose of creating statutory minimum entitlements for employees in the context of the statute as a whole. For example, at para. 48 of its decision dated April 27, 2006 [[2006] O.E.S.A.D. No. 440, [2006] OLRB Rep. March/April 248 (L.R.B.)], in its consideration of the meaning of the word "effect", the Board recognized that the ESA sets minimum standards, but considered them in context. The Board stated:

[T]he Act sets minimum standards, but it does not provide any guarantees that the employees will receive them. Those minimum standards exist within a web of laws that grant priority over the assets in an unsuccessful business to secured creditors, in this case, the Bank. Those minimum standards exist within a legal framework that permits a struggling company to go bankrupt, and in the process, shed its liabilities. The legal framework that governs companies also permits struggling companies to make proposals in bankruptcy to creditors, with the possibility of providing creditors with some recovery of the debt owed. Without doubt, the Board was referring to the fact that, although the ESA does set out minimum employee entitlements, it does not provide any special protection to termination and severance pay in the event of a company's bankruptcy. In order to understand the status of such payments in the context of bankruptcy, it is helpful to briefly review the "legal framework" to which the Board implicitly referred. [page658]

[62] I first note that severance and termination pay constitute "wages" under the ESA by virtue of the fact that they are both "any payment required to be made by an employer to an employee under this Act" pursuant to s. 1(1). Although s. 14(1) provides that "[d]espite any other Act, wages shall have priority over and be paid before the claims and rights of all other unsecured creditors of an employer, to the extent of $10,000 per employee", s. 14(2) states that this protection does not apply "with respect to a distribution made under the Bankruptcy and Insolvency Act (Canada) or other legislation enacted by the Parliament of Canada respecting bankruptcy or insolvency".

[63] Section 81(1) imposes joint and several liability on directors of the employer for employees' wages in several circumstances, including where the employer is insolvent and the employee has filed a claim for the unpaid wages with the receiver or trustee in bankruptcy. However, s. 81(3) specifically exempts directors from liability for termination and severance pay provided for by employment contracts or the ESA.

[64] After referring to the effect of these provisions, the Board commented [at para. 49]:

The existence of these legal mechanisms, and the fact that debts to employees for termination and severance pay have not been given priority over debts made to secured creditors means that the Act's minimum standards are not guaranteed to employees or even, to be realistic, likely to be paid to employees in the event of a company's demise. There are typically many people with better-protected interests ahead of the employees. Whatever one might think of the fairness of such a scheme, it is the one that exists. It is clear to me that these comments address the argument of both the appellant and the Director. It confirms that although the ESA does prescribe minimum entitlements to employees, it does not guarantee that they will be paid in the event of the employer's bankruptcy.

[65] Against this general background, I turn to the Board's analysis of the undisputed evidence in this case. In its first decision dated October 26, 2005 [[2005] O.E.S.A.D. No. 1040 (L.R.B.)], the Board found that the requirements of s. 4(1) (a) were met -- all of the respondent companies were related businesses. The issue was therefore whether their relatedness had the intent or effect of directly or indirectly defeating the intent and purpose of the ESA under s. 4(1)(b).

[66] In approaching this question in its second decision dated April 27, 2006 [[2006] O.E.S.A.D. No. 440 (L.R.B.)], the Board first noted that "it is a different and separate question" than simply whether the respondent companies were related [at para. 37]: [page659]

If the Legislature had intended to impose liability whenever entities were found to have been engaged in related or associated activities, it would have said so. There would be no need then for section 4(1)(b). Consequently, I reject the argument that section 4 is a simple deep pockets provision that requires only a finding of relatedness between a company that can meet its employment standards obligations and a company that cannot . . . All of the Board's decisions to date interpreting section 4 have concluded that after relatedness has been found, it is necessary to make a separate inquiry about the intent or effect of that relatedness.

[67] The Board also cited the decision of the Divisional Court in Carillon Decorative Products Inc. v. Ontario (Employment Standards Officer) (2004), 2004 1535 (ON SCDC), 71 O.R. (3d) 500, [2004] O.J. No. 2880 (Div. Ct.), which set aside as unreasonable a decision of an employment standards officer which determined that two entities were liable for employees' wages because they were related, without considering the intent or effect of that relatedness.

[68] The Board then made a crucial finding of fact which, as I have emphasized, is not attacked on appeal [at para. 39]:

Cat-Dip was propped up by the revenues and financial strength of Novaquest, which, in turn, allowed 406 to maintain the lending relationship with the Bank that supported Cat-Dip's mounting losses. Without Novaquest and 406, Cat-Dip would have failed earlier and without the ability to meet its employment standards obligations.

[69] As the Divisional Court put it [at para. 47]:

The evidence is clear that Cat-Dip was insolvent at least by September 2003. BMO was unwilling to advance further funds, although family members of Mr. Lund advanced funds to keep Cat-Dip going. The evidence shows that Cat-Dip's relationship with the other corporations resulted in a gain to it.

[70] The finding of fact that Cat-Dip's relatedness to Novaquest and to 406 supported the company, rather than consuming assets that might otherwise been available to meet Cat-Dip's employment standards obligations, is a justifiable and intelligible basis supporting the Board's conclusion that the relatedness did not have the effect of defeating the intent and purpose of the ESA. The reasoning of the Board is transparent. As I have already stressed, the intent and purpose of the ESA does not guarantee that employees will be paid their severance and termination pay entitlements in the event of the employer's bankruptcy.

[71] The Board then went on to consider the relationship between Cat-Dip and Catelectric. Again, it found [at para. 41] that there was no evidence that any action taken in respect of Catelectric "had the effect, either indirectly or directly, on the entitlements of the employees of Cat-Dip". According to the Board [at para. 44], there was "not a shred of evidence" of any collusion or inappropriate activity in the making of Cat-Dip's proposal in bankruptcy to the unsecured creditors. It was the [page660] rejection of that proposal that created the opportunity for Mr. Lund to acquire the assets of Cat-Dip from BMO and to create Catelectric. There was simply no basis on which to conclude that any action taken by Catelectric affected the likelihood that the employees of Cat-Dip would receive their severance and termination pay; those payments were not going to be made by Cat-Dip in any event because the company was in dire financial straits. This finding provides a justifiable, intelligible and transparent basis for Board's conclusion that Catelectric and Cat-Dip were not related employers within the meaning of the ESA.

[72] Finally, intent to defeat the ESA was not an issue on this appeal. The Board found as a fact that Cat-Dip's relatedness to the other companies did not have an effect on its capacity to pay the appellants' termination and severance pay. This finding places its conclusion in law that the relatedness did not have the effect of defeating the intent and purpose of the ESA among the range of acceptable outcomes.

[73] The Divisional Court did not err in upholding the Board's decision.

VI. Disposition

[74] For the foregoing reasons, I would dismiss the appeal. The parties may make submissions on costs through the court's senior legal officer, Mr. John Kromkamp, on a schedule directed by him.

Appeal dismissed.

Notes

Note 1: I will refer to the "Board" to denote the decision-maker in this case and "OLRB" otherwise.

Note 2: See, for example, Victorian Order of Nurses (Re), [2004] O.E.S.A.D. No. 1403 (L.R.B.); Queensway Roadhouse Ltd. (Re), [2004] O.E.S.A.D. No. 761 (L.R.B.); Northland Superior Supply Co. (Re), [2004] O.E.S.A.D. No. 307, [2004] OLRB Rep. March/April 384 (L.R.B.); Cameron Motorsports Inc. (Re), [2004] O.E.S.A.D. No. 830 (L.R.B.); IEP Ltd. (Re), [2005] O.E.S.A.D. NO. 1220 (L.R.B.); Platepin Canada Inc. (Re), [2005] O.E.S.A.D. No. 33, [2005] OLRB Rep. January/February 131 (L.R.B.); Mark Winter & Associates Inc. (Re), [2005] O.E.S.A.D. No. 1308 (L.R.B.); Graphite Specialty Products Ltd. (Re), [2009] O.E.S.A.D. No. 153 (L.R.B.).