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Labour (Ont) - Related Employers. Canadian Union of Skilled Workers v. Four Seasons Site Development Ltd.
In Canadian Union of Skilled Workers v. Four Seasons Site Development Ltd. (Div Court, 2024) the Ontario Divisional Court dismissed a union JR, here against an OLRB exercise of discretion that "dismissed the Union’s application for a declaration that the respondents Four Seasons Site Development Ltd. (“Four Seasons”) and Westport Paving Inc. (“Westport”) are related entities and constitute one employer for labour relations purposes" [LRA s.1.4]:III. The Union’s related employer application
[12] On April 21, 2017, the Union filed a related employer application with the Board under s. 1(4) of the LRA, as contemplated by the MOS.
[13] Section 1(4) provides:(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. [Emphasis added.] [14] In the application, the Union sought a declaration that Four Seasons and Westport were under common control and direction and therefore constituted one employer bound by the bargaining rights held by the Union for Electricians in Toronto. The application came before Vice-Chair Adam Beatty for determination.
[15] As set out in the Decision, at para. 15, the parties agreed that the Union was required to establish the following three elements before the Board would consider whether to make a declaration under s. 1(4):1. There must be more than one corporation, individual, firm, syndicate or association involved;
2. Related or associated activities or business must be carried on by the entities concerned; and
3. The activities or businesses must be under common control or direction. [16] The parties also agreed that even if these three prerequisites were satisfied, the Board maintained the discretion over whether to declare two entities as related employers under section 1(4): Decision, at para. 16.
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[21] Having found that the three prerequisite conditions for a common employer declaration were met, the Board then exercised its discretion to dismiss the application. ....
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[24] At paras. 11-12, the Board also declined to consider two Court of Appeal decisions that were released on November 16, 2022, two weeks before the Board issued its Decision: Turkiewicz (c.o.b. Tomasz Turkiewicz Custom Masonry Homes) v. Bricklayers, Masons Independent Union of Canada, Local 1, 2022 ONCA 780, 476 D.L.R. (4th) 421, and Enercare Home & Commercial Services Limited Partnership v. UNIFOR, Local 975, 2022 ONCA 779, 476 D.L.R. (4th) 342. The Board reasoned that the Union “had ample opportunity to bring these decisions to the Board’s attention prior to the release of the November 30, 2022 decision.”
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[32] With respect to the Board’s discretion under s. 1(4), the court stated that provision “gives the OLRB the discretion to make a related employer declaration when the statutory preconditions are met. The exercise of that discretion warrants deference”: Turkiewicz, at para. 91.
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VI. Analysis
The Board acted reasonably with respect to the exercise of its discretion to decline to grant the related employer declaration
[37] The Union submits that the Board erred in exercising its discretion to decline to grant the related party declaration. The Union says that Board unreasonably failed to engage with the Union’s central argument relating to economic dominance.
[38] The Union submits that its central argument was that Westport was functionally and economically dependent on Four Seasons. Therefore, the Union’s bargaining rights should also attach to Four Seasons so that the Union can negotiate a collective agreement for the employees with the entity that holds economic control over the business. The Union says that without a common employer declaration, the existing bargaining rights that the Union has for Westport employees are rendered meaningless.
[39] When assessing whether Four Seasons and Westport fulfilled the threefold criteria for a related employer under s. 1(4), the Board detailed its factual determinations and found that Westport was functionally integrated with and economically reliant on Four Seasons.
[40] The Union submits that despite the Board’s full acceptance of the Union’s main argument relating to economic dominance when finding that the three related employer criteria were met, the Board erred in failing to address that argument at all in its analysis regarding the exercise of remedial discretion under s. 1(4). The Union says that the Board instead focused solely on Four Season’s argument that there was no erosion of bargaining rights: Decision, at paras. 144-149. The Union submits that the Decision does not address any of the Union’s fundamental arguments that are derived from established Board jurisprudence regarding related employer declarations: there are no references to Four Seasons’ dominance over Westport; no references to the effects of this dominance on the Union’s ability to bargain effectively; no references to the jurisprudence cited by the Union in support of this position and why it does not apply; and no references to the all-sectors certificate the Board issued to the Union.
[41] The Union also submits, among other things, that the Board did not explain why Four Seasons’ erosion and expansion arguments overwhelmed the Union’s functional dependence argument and the labour relations concern of ensuring direct dealings between the union/employees and the entity possessing real economic control.
[42] As a result of these failures to meaningfully engage in the Union’s central argument, the Union submits that the Board’s reasons failed to exhibit the requisite degree of justification, intelligibility and transparency: see Vavilov, at para. 100.
[43] I disagree.
[44] In the Decision at paras. 124-143 under the heading “Exercise of Discretion”, after finding that the threefold prerequisites of making a common employer declaration were met, the Board set out in detail the submissions of both parties with respect to whether the Board should exercise its discretion to grant the declaration. The Board, at paras. 124-131, specifically referenced the Union’s economic dominance argument in this context, as well as the Union’s rejection of Four Seasons’ submissions relating to erosion/expansion of bargaining rights, including as follows:124. CUSW argued that this was an appropriate case for the Board to exercise its discretion and to make the requested declarations. CUSW argued that the requested declarations were necessary in order to ensure that it had bargaining rights with the source of fundamental economic control over the employees. In this case, that is Four Seasons.
125. CUSW argued that this was not a case where the Union sought to expand its bargaining rights. Rather, CUSW was simply seeking access to Four Seasons because it held fundamental economic control over the employees in question.
126. In [Canadian Union of Public Employees v. Meadowcroft (Livingston Lodge), 1998 CanLII 18287 (Ont. LRB), at para. 53], the Board noted that section 1(4) is designed to achieve the following:
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.
127. In that decision, the Board concluded that it was appropriate to issue a common employer declaration “in order to ensure that collective bargaining” had a solid foundation and in order to ensure that the “bargaining agents are able to engage in direct dealings with the entity with real economic power over the employees in the bargaining units.” CUSW argued that the same conclusion should apply here.
[Emphasis added.] [45] I see no merit in the Union’s assertion that the Decision did not address the Union’s central argument in its rationale for declining to exercise the Board’s discretion to grant the common employer declaration. In making that determination, the Board was faced with competing analyses from the parties.
[46] In summary, the Union argued, at para. 124, that a related employer declaration was necessary “in order to ensure that it had bargaining rights with the source of fundamental economic control over the employees”. Four Seasons argued, at para. 140, that there was “no reason to grant relief under section 1(4)” because, among other things, there had been no erosion of bargaining rights.
[47] It is evident from the Decision that the Board preferred Four Seasons’ approach to the “Exercise of Discretion” issue. In reaching that conclusion, the Board was not required to undertake a point-by-point analysis and address every aspect of the Union’s argument: see Newfoundland and Labrador Nurses’ Union v. Newfoundland and Labrador (Treasury Board), 2011 SCC 62, [2011] 3 S.C.R. 708, at para. 16; Vavilov, at para. 128. The Board, at para. 148, specifically concluded that “not only is there no erosion of bargaining rights, there is no possibility of such an erosion” given that the effect of a single employer declaration would be to expand the Union’s bargaining rights to cover “work that Westport has never been involved in.” It follows that the Board did not accept the Union’s assertions that a related employer application was necessary to ensure “direct dealings with the entity with real economic power over the employees in the bargaining units” given, among other things, that Westport did not and never had employed any employees to perform the work that would have been affected by a single employer declaration (electrical work on road construction projects): see Decision, at paras. 147-148.
[48] Reading the Decisions as a whole, the Union has not established that the Decisions were unreasonable. As previously noted, s. 1(4) of the LRA contemplates that the Board has the discretion to choose whether to issue a related employer declaration, even where the three elements that are the prerequisites to the issuance of a declaration are met. The Board’s exercise of that discretion is accorded considerable deference: see Turkiewicz, at para. 91. I would defer to the Board’s exercise of discretion in this case. . Enercare Home & Commercial Services v. UNIFOR, Local 975
In Enercare Home & Commercial Services v. UNIFOR, Local 975 (Div Ct, 2021) the Divisional Court considers the Labour Relations Act test for related employers:[21] Subsection 1(4) of the Act provides as follows: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. [22] This provision was added to the Act in a 1970 amendment and has remained substantively unchanged ever since.[10] Although the legislative record is not clear on this point, it seems that the inspiration for this amendment goes back to recommendations in the Goldenberg Report and subsequent recommendations from a federal Task Force on Industrial Relations following a series of disruptive strikes in the Canadian rail system in the 1960’s.[11] While the Task Force did not specifically recommend related employer provisions, it did adopt and repeat recommendations from the Goldenberg Report related to successor employers.
[23] The Goldenberg Report had, itself, addressed one aspect of the problem of related employers:Consideration should be given to measures for the protection of acquired bargaining rights in situations arising from certain types of business practices which may affect such rights, for example, where a contractor, engaged on a number of projects in each of which he has a different partner, is in a position to shift employees from a project with respect to which certification has been granted to another.[12] [24] The concerns identified by Commissioner Goldenberg are largely reflected in the wording of s.1(4), and are bolstered by s.1(5), which places a disclosure obligation on respondents to an application to “adduce at the hearing all facts within their knowledge that are material to the application” so that the OLRB may “focus on the true operational integration of the alleged related employers”.[13]
(b) Jurisprudential History
[25] Initial OLRB cases viewed related employers as a different aspect of the mischief addressed by the successor employer provisions. For example, in Industrial-Mine Installations Ltd., the OLRB considered the intention of s.1(4), noting that the provision “is obviously contemplated to cure the mischief that results from being unable to properly define and tie down the employment relationship”.[14] This mischief may arise, for instance, “where companies have a close relationship [and] an employee may be shifted from one company to another”, or “where a union had been granted bargaining rights for the employees of one employer, the employees could be shifted to another associated or related employer with the result that the bargaining rights which had been earned by the trade union for the employees was lost.”[15]
[26] In Brant Erecting & Hoisting, the OLRB further elaborated on the rationale for the provision:Section 1(4) ensures that the institutional rights of a trade union, and the contractual rights of its members, will attach to a definable commercial activity, rather than the legal vehicle(s) through which that activity is carried on. Legal form is not permitted to dictate or fragment a collective bargaining structure; nor will alterations in legal form undermine established bargaining rights.
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Businesses or activities are “related” or “associated” because they are of the same character, serve the same general market, employ the same mode and means of production, utilize similar employee skills, and are carried on for the benefit of related principals. If these criteria are met, two businesses may be “related” within the meaning of s.1(4) even though their activities are carried on through different or corporate vehicles and are not carried on simultaneously.[16] [27] In summary, the concerns of Commissioner Goldenberg and the Task Force, and those articulated in early OLRB decisions, show that s.1(4) is intended to respond to similar broad concerns as the successor employer provisions. However, s.1(4) is intended to address somewhat different forms of corporate reorganization: as the Supreme Court found in Lester, successor rights provisions will rarely be applicable in situations where businesses operate simultaneously, without any disposition of at least a part of the first business to the second. In such a situation, where an employer is carrying on business through multiple legal entities under common control, s.1(4) may be engaged to protect a union’s bargaining rights.[17]
[28] In Century Store Fixtures, the OLRB set out three basic criteria to assess whether it should make a declaration that employers are “related”:(a) there is more than one entity (i.e. corporation, individual, firm, syndicate, association, or any combination of these things);
(b) these entities are engaged in associated or related activities; and
(c) the entities are under common direction or under common control.[18] [29] In the case at bar, as in many cases under s.1(4), the contested issues arise under the third branch of the statutory test summarized in Century Store Fixtures. The test for whether entities are engaged in associated or related activities involves analysis of five indicia:(a) common ownership or financial control;
(b) common management;
(c) interrelationship of operations;
(d) representation to the public as a single integrated enterprise; and
(e) centralized control of labour relations.[19] [30] The test is applied purposively, to disregard formalities in favour of the real substance of the parties’ relationships, so as not to “preclude the fulfillment of legislative objectives.”[20] Favouring substance over form does not, however, go so far as to ignore the essential requirement that the entities be in a control relationship:… the test for “control” under s.1(4) of this Act envisions the ultimate power to “call the shots” where necessary… with respect to the labour relations of the two enterprises, and not simply the authority and responsibility to direct the activities of employees in the field. Were it otherwise, a totally independent and established company hiring the manager of field services from another company would inevitably find itself in the position of being a “related employer” for the purposes of the… Act. Rather… the section contemplates a point of central decision-making control with the ultimate power to, for example, say “yes” or “no” to a wage proposal from the union for both entities. Such power, as the Board cases show, may come simply from the legal relationship between the two entities.[21] [31] In Ontario Legal Aid Plan, the nature of the relationship between the allegedly related entities was central to the case. Two community legal aid clinics argued that the Ontario Legal Aid Plan was “related” to the clinics as an employer, because the Plan funded the clinics, constraining clinic management’s decisions during collective bargaining. The Court of Appeal found that s.1(4) of the Act permitted taking a “look behind the corporate veil” to assess whether “there are sufficient indicia of the managerial control normally exercised by an employer over its employees”.[22] The court went on to find that control over funding could be considered, but it was not, by itself, determinative:…. [Control over funding] may well be a factor in holding that a prima facie case has been made out for the common control and direction required by s.1(4)…. [I]t is necessary to look at the legal relationship which created this dependency before arriving at the conclusion that the common control and direction was of a managerial character.[23] Labour Relations Purpose
[32] There must be a valid “labour relations purpose” to grant successor or related employer declarations. The Board’s discretion is not to be exercised to enable a union to extend its bargaining rights to bypass the normal certification process.[24] Nor is it a “catch all” to address other labour relations issues such as contracting out.
[33] A labour relations purpose is found where a related employer declaration may:• preserve or protect from artificial erosion the bargaining rights of the union;
• create or preserve viable bargaining structures; and
• ensure direct deadlines between a bargaining agent and the entity with real economic power over the employees.[25] [34] Where no such labour relations purpose can be found, the OLRB usually declines to grant a related or successor employer application.[26]
[35] As found by the Board the work contracted out to Ganeh and Beaver erodes the bargaining rights of the union: it is all work that could be performed by unionized employees and is instead performed by independent contractors.[27] However, the Board’s findings, as framed, have not been placed within the context of Enercare’s longstanding contracting out practices or the history of this issue in collective bargaining (including the terms of the Collective Agreement and the LOUs).
[36] The requirement for a “labour relations purpose” informs the Board’s exercise of discretion where an applicant meets the statutory test for a related employer declaration. This requirement does not, however, supplant the statutory test. A “labour relations purpose” will not justify a related employer declaration where, though there is erosion of bargaining rights, the employers are not, in fact, related. Otherwise virtually every manner of contracting out can be characterized as eroding bargaining rights, possibly leading to a related employer declaration. Assessing whether an employer is “related” requires full consideration of the labour relations context, something that did not happen in this case.
Contracting Out and Related Employer Applications
(i) Contractors as Related Employers
[37] Generally, the OLRB has not found that contracting out is a basis for a related employer declaration. As stated in learned commentary, “labour-only contracting” does not usually ground a related employer declaration because “[t]he related employer provision does not seek to prevent employers from externalizing employment responsibility, but to preserve the integrity of union representation rights and collective agreements where the legal form of the business has been altered.”[28] However, the OLRB has distinguished between “bona fide contracting out”, where a s.1(4) declaration is not likely to be made, and other situations where a s.1(4) declaration may be granted.
[38] In Metro Waste Paper Recovery Inc., the OLRB set out factors to be considered to decide whether the contracting out is bona fide:A legitimate subcontract in labour relations is one where the fundamental control over the employees rests with the subcontractor. Some of the considerations which bear on an assessment of the sub-contracting’s “legitimacy” are:
(a) the extent to which the contracting business is in a genuine arms-length relationship with the contractor;
(b) the extent to which the contractor devolves control over the subcontracted: the more the contractor retains control the less like a true subcontracting appears;
(c) whether the subcontracted work represents a core business of the contractor or is just a periphery matter;
(d) in labour subcontracting, the extent to which it is a permanent or a temporary subcontract.[29] [39] In all contracting out cases a “degree of functional interdependence is inevitable.”[30] That inevitable interdependence, by itself, is not sufficient to meet the test for “common direction and control”. Otherwise, most contracting out relationships would meet the test for “related employers” and it cannot be the case that the legislature intended to cast the net so wide.[31]
[40] This said, the line between permissible contracting out and contracting out that will lead to a related employer declaration depends on context, and whether the contracting out is being used to undermine collective bargaining. In Kennedy Lodge, for example, a related employer declaration was made after the employer laid off 92 union members and then engaged another company to hire workers to carry out the same work that had been done by the laid off employees.[32]
[41] On the other hand, the Board has been reluctant to issue a related employer declaration in respect to a longstanding contracting out arrangement.[33] Where the union has known of the situation and exercised its bargaining rights in the face of the situation, it may be an issue the union should be required to raise during collective bargaining, and not a “scheme to defeat bargaining rights”.[34]
[42] What is clear from the cases is that a careful analysis of the context of the contracting out is essential to the analysis, in order to assess the effect of the contracting out on bargaining rights and to assess the employer’s good faith in contracting out.
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