Labour (Ont) - Related Employers. 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:
 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. This provision was added to the Act in a 1970 amendment and has remained substantively unchanged ever since. 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. 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.
 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. 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”.
(b) Jurisprudential History
 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”. 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.”
 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. 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.
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.
 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); 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:
(b) these entities are engaged in associated or related activities; and
(c) the entities are under common direction or under common control.
(a) common ownership or financial control; 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.” Favouring substance over form does not, however, go so far as to ignore the essential requirement that the entities be in a control relationship:
(b) common management;
(c) interrelationship of operations;
(d) representation to the public as a single integrated enterprise; and
(e) centralized control of labour relations.
… 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. 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”. 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.Labour Relations Purpose
 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. Nor is it a “catch all” to address other labour relations issues such as contracting out.
 A labour relations purpose is found where a related employer declaration may:
• preserve or protect from artificial erosion the bargaining rights of the union; Where no such labour relations purpose can be found, the OLRB usually declines to grant a related or successor employer application.
• create or preserve viable bargaining structures; and
• ensure direct deadlines between a bargaining agent and the entity with real economic power over the employees.
 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. 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).
 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
 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.” 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.
 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: In all contracting out cases a “degree of functional interdependence is inevitable.” 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.
(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.
 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.
 On the other hand, the Board has been reluctant to issue a related employer declaration in respect to a longstanding contracting out arrangement. 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”.
 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.