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Labour (Ont) - Successor Employers. Red N' Black Drywall Inc. v. Carpenters' District Council of Ontario
In Red N' Black Drywall Inc. v. Carpenters' District Council of Ontario (Div Court, 2024) the Divisional Court considered a 'successor employer' issue [LRA s.69], here in what may be fairly characterized as attempted 'union busting':[1] The applicants seek judicial review of the decision of the Ontario Labour Relations Board dated March 6, 2023 finding that pursuant to s. 69 of the Labour Relations Act, 1995, SO 1995, c.1, the applicants are bound by the applicable collective agreements with the respondent unions for carpenters and carpenters’ apprentices in the Province of Ontario in both the Industrial, Commercial, and Institutional sector and the residential sector of the construction industry.
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[3] The board found that there was a sale of the business of Blackfield to one of its principals, Mr. Oztabak in early 2008. The board found that this sale was part of a plan by Mr. Oztabak and the other principal of Blackfield, Mr. Karaaslan, “to ensure that a non-union company was established to be able to operate free and clear from Blackfield's union obligations.” The board also found that in 2010, Mr. Oztabak transferred the business to the applicant companies that he owns.
[4] The board held that both transactions were sales within the meaning of s.69 of the statute and, as a result, the successor businesses were bound by the collective agreements pursuant to s. 69 (2). . Mulmer Services Ltd. v. LIUNA, Local 183
In Mulmer Services Ltd. v. LIUNA, Local 183 (Div Court, 2023) the Divisional Court considered the labour issue of 'successor employers', here in a employer's judicial review of an OLRB finding that the applicant was just such:[4] In short, the Board determined that Mulmer was a “successor employer” for the purposes of ss. 69 and 69.1 of the LRA. Subsection 69(2) of the Act provides that:Successor employer
(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. ....
[15] Further to the Minister’s referral under section 115 of the Act, the Board heard the matter and ultimately issued the Decision in question.
[16] As reflected in the Decision, the Board framed its analysis by stating that the primary issue in the case was “whether or not the shuttle bus service operated by SP+ (and, subsequently, by Mulmer)” is a service to which s. 69.1 of the LRA applies.[4] The Board noted that, assuming s. 69.1 does apply to the shuttle bus service,[5] the Board must then determine if the requirements of s. 69.1(3) were met and, by extension, whether the sale of the business from SP+ to Mulmer that occurred on March 1, 2021, is deemed to be a “sale of a business” for the purposes of s. 69. The Board set out the relevant provisions of the LRA, including the provisions of s. 69(1) and s. 69.1(3) of the Act, as follows:Successor rights, building services
69.1(1) This section applies with respect to services provided directly or indirectly by or to a building owner or manager that are related to servicing the premises, including building cleaning services, food services and security services.
. . . .
Services under contract
(3) For the purposes of section 69, the sale of a business is deemed to have occurred,
(a) if employees perform services at premises that are their principal place of work;
(b) if their employer ceases, in whole or in part, to provide the services at those premises; and
(c) if substantially similar services are subsequently provided at the premises under the direction of another employer. [17] The Board then began its analysis with a review of the well-established principles of statutory interpretation endorsed by the Supreme Court of Canada.[6] It went on to note, inter alia, the language of s. 64(1) of the Legislation Act, 2006[7] and the OLRB’s previous jurisprudence confirming that the successor employer provisions of the LRA are to be regarded as remedial and “should, of course, be given a large and liberal interpretation,”[8] that is, “such fair, large and liberal interpretation as best ensures the attainment of its objects.”[9]
[18] The Board held that in order to fall within s. 69.1(1) of the Act, the services in question must meet two requirements: they must be provided directly or indirectly by or to a building owner or manager, and they must be related to servicing the premises.[10]
[19] The Board expressed no difficulty in finding that the first requirement of s. 69.1(1) was met in this case. The Board rejected Mulmer’s proposition that the shuttle bus service is not provided “to a building owner or manager” but is instead provided to UHN staff and patients, as follows:Patients and staff of UHN are undoubtedly the “beneficiaries” of the service. However, the service only exists because UHN contracts for it. It may be regarded in either of two ways. It is either provided to UHN (indirectly, through its “agent”, Plexxus) or it is provided by UHN (indirectly, by SP+ or another provider) for the use and convenience of its patients and staff. Whichever way it is regarded, the shuttle bus service is a service “provided by or to a building owner or manager”.[11] [20] The Board went on to address what it expressed to be “the more difficult (and consequential) question at issue here,” being whether the shuttle bus serves is “related to servicing the premises” so as to satisfy the second requirement of s. 69.1(1).[12]
[21] In the course of its analysis, the Board considered the proper interpretation of the operative word “premises,” reviewed the interpretation given to the term in its prevision decision in Medieval Times, and addressed (but ultimately rejected) Mulmer’s argument that the definitions of “building services” and “building services provider” under the Employment Standards Act, 2000[13] and the regulations made thereunder[14] should dictate the Board’s interpretation of the successor employer provisions of s. 69.1 of the LRA. . 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 successor employers:[19] The legislative and jurisprudential history of the successor employer provisions of the LRA are set out in Deloitte. As concluded in Deloitte, the test for successorship:… is assessed through an “instrumental approach” to determine whether a “functional economic vehicle” or a “going concern” has been transferred. This inquiry is to be undertaken through the lens of a large and liberal interpretation of the provision, to protect against the loss of bargaining rights through re-arrangement of business structures, while at the same time enabling businesses to sell their assets and arrange their affairs.[9] [20] The essential balance – between “protecting against the loss of bargaining rights” and “enabling businesses to… arrange their affairs” – runs through the jurisprudence on both successor and related employer applications. The successor employer provisions were added to the LRA in 1962 and enacted in roughly their current form in 1970. The related employer provisions were added in 1970, and their genesis relates closely to the reasons for enacting the successor employer provisions: to protect against loss of bargaining rights through re-arrangement of business structures, while still enabling businesses to arrange their affairs. . Turkiewicz v. Ontario Labour Relations Board
In Turkiewicz v. Ontario Labour Relations Board (Div Ct, 2021) the Divisional Court commented extensively on the issue of successor employers under the LRA:Related Employer Jurisprudence
[32] The history of successor employer provisions of the LRA is set out in Deloitte[27], and the history of related employer provisions of the LRA is set out in Enercare[28]. The provisions arose from similar problems: the use of different legal structures for operating a business to avoid or escape collective bargaining rights. To quote from Enercare:The essential balance – between “protecting against the loss of bargaining rights” and “enabling businesses to… arrange their affairs” – runs through the jurisprudence on both successor and related employer applications. The successor employer provisions were added to the LRA in 1962 and enacted in roughly their current form in 1970. The related employer provisions were added in 1970, and their genesis relates closely to the reasons for enacting the successor employer provisions: to protect against loss of bargaining rights through re-arrangement of business structures, while still enabling businesses to arrange their affairs.[29] [33] LRA, s.1(4) provides: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. [34] In most circumstances, “related” employers carry on business simultaneously. However, this is not required for a declaration of related employer status. In Ian Somerville Construction, the OLRB made a related employer declaration where there had been a gap of five years between the operations of one related employer, and the commencement of operations of the other.[30] The OLRB held that “the Board is concerned with the nature of the business” and “the gap in and of itself is not determinative of the relatedness issues.”[31] Similar dicta may be found in other Board decisions.[32]
[35] The development of the test for “related employers” is set out in Enercare,[33] and there can be no doubt that Turkiewicz and Brickpol meet the statutory test for the exercise of discretion to make a s.1(4) declaration. They had common ownership, common management, and they were engaged in the same activities, in the same markets. The Board’s conclusion to this effect is reasonable.[34]
[36] However, that does not end the matter. The Board must then ask itself if there is a “labour relations purpose” to granting a related employer declaration.[35] This is the crucial question the Board must ask itself to decide whether it should exercise its discretion to make a s.1(4) declaration. To answer this question, the Board must assess the entire context of the case. This the Board failed to do.
Labour Relations Purpose for a Related or Successor Employer Declaration
[37] 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.[36] Nor is it a “catch all” to address other labour relations issues such as contracting-out or an individual union member accepting non-union work.[37]
[38] A labour relations purpose is found where a related employer declaration may:(a) preserve or protect from artificial erosion the bargaining rights of the union;
(b) create or preserve viable bargaining structures; and
(c) ensure direct dealings between a bargaining agent and the entity with real economic power over the employees.[38] Where no such labour relations purpose can be found, the OLRB usually declines to grant a related or successor employer application.[39] This principle has not been applied consistently in construction industry cases, and it should be.
[39] This is not a case of an employer repositioning its business to avoid its labour relations obligations. This case is about a man whose life and business were largely destroyed because of injuries he suffered in a collision, who, many years later, tried to start again. Nothing has been transferred or redeployed from the original business, other than the man himself. The Board failed to assess Turkiewicz’s perspective, to consider all the circumstances, to decide if a legitimate labour relations purpose was served by making the requested declaration. I return to the balancing that ought to have been done after considering the special context of construction industry collective agreements.
[40] It is not necessary to review the Board jurisprudence in construction industry cases on this point at length. It starts from the undeniable premise that in cases arising in the construction industry, a hiatus, even a long hiatus, may not preclude a s.1(4) declaration. However the thrust of Board decisions on this issue is that a hiatus does not matter at all, and even when the hiatus is long and the only common aspect of the two businesses is one key individual, the declaration should be granted if the relatedness test is met. This logic, by itself, is unreasonable. It defeats the requirement to consider the hiatus and subsumes the requirement that there be a “labour relations purpose” for a s.1(4) declaration into the test for relatedness.
Successor and Related Employers in the Construction Industry
[41] Labour boards have developed special considerations for successor and related employer applications in the construction industry because of that industry’s distinct characteristics. Construction employers often have few tangible or permanent assets and few permanent employees. Construction employment is often based on short-term engagements at particular work sites, with the employment ending on completion of a particular employee’s work on the particular work site.[40] As stated in Arlington Crane Service:… it is uneconomical for large firms to develop a permanent work force organized into departments of specialists each with its own supervision. From the point of view of the entrepreneur, while he might retain a small number of key employees, it makes more business sense to hire the bulk of his employees as and when he wins a new contract, keep them on his payroll while they do that specific work, but when that job is finished, terminate their employment.[41] [42] Trade unions in the construction industry have developed a special role because of the transient and episodic nature of construction employment, a role that benefits both union members and employers. As the OLRB describes in Bell Air Conditioning:The long-term stability which one finds elsewhere in the employment relationship is found in the construction industry in the relationship between the skilled tradesman and his craft trade union. Among its varied activities, the craft trade union fulfills a personnel function for the contractors in any particular sector of the industry, by referring to them for employment, through the hiring hall, sufficient skilled tradesmen to meet their particular manpower requirements.[42] [43] The court in Arlington Crane Service put it as follows;Since the relationship between the employer and employee in construction is typically episodic rather than enduring in character, a special form of union organization has emerged to fill this vacuum. The major craft specialties have all developed their own trade unions; the union is the body with which the individual tradesman tends to have the most salient relationship in the industry. The union has often taken the lead in the development and operation of apprenticeship programs which are necessary to train newcomers in the skills of the trade. As well, the union collects and administers funds for the workers’ vacation pay, health and welfare benefits, and retirement pensions.[43] [44] In Ontario Hydro Services, the OLRB held that:The purpose of section 1(4) is to preserve the meaningful nature of bargaining rights. It serves to protect them from being deliberately subverted, or from being eroded by commercial decisions entirely divorced from labour relations considerations. It is therefore necessary for an applicant to demonstrate that there is either actual or potential erosion of those bargaining rights. In the context of a construction collective agreement, that means looking at the work claimed in or covered by the collective agreement. The erosion need only be minor or be only reasonably likely to happen. The claim to the work in the collective agreement need not be conclusive or obvious on its face. But there must be some actual or potential activity on the part of the related employer which could reasonably be said to fall within the scope of the applicant’s collective agreement.[44] [45] Erosion may be found where a related employer is carrying out work that could be considered work covered by the collective agreement – “bargaining unit work”. This may arise, for example, where there is “direct diversion of work that would have been performed by the union company to an associated non-union company.”[45] This analysis does not require diminution of a union’s rights or membership: as stated in Kustom Installation, where an employer has expanded through a related non-union business, this may be “erosion of bargaining rights”:In general, bargaining rights obtained by a union attach to the employer’s business and not to a particular segment of its work. If an employer expands its business the union’s bargaining rights automatically encompass the employees doing new work coming within the scope of the collective agreement.[46] This reasoning hearkens back to the finding in Brant Erecting that s.1(4) ensures that “the institutional rights of the union” attach to a “definable commercial activity”.[47] Put another way, if the test for a related employer declaration is met, then the union’s rights attach to a definable commercial activity – carried on by the employer and the related employer – and the union is entitled to share in the growth of the definable commercial activity.
[46] In the context of the construction industry, it is normal for there to be gaps between periods in which the employer engages employees through the union. In periods between engagements of unionized employees, the union’s bargaining rights are not extinguished:… the fact that the employer lays off a group of employees at the end of its job, and might not hire other employees for months or even years, does not cause the certification to lapse. It lies dormant, but ready to be legally activated as and when the contractor reappears in that area.[48] [47] Because of the transient and episodic nature of employment relationships in the construction industry, and the relative ease with which employers can close a business and reconstitute that business in another form, related and successor employer provisions are of special significance in the construction industry. The Supreme Court of Canada has held that conventional indicia of a transfer of a business may not be sufficient for construction employers, which often lack significant tangible assets.[49] In this context, Labour Boards developed a “key individual” concept, to recognize that in some circumstances in the construction industry, sometimes the only material ‘asset’ transferred is the “key individual”, usually the business’ principal.
[48] This focus on a “key individual” led to amendment of LRA, s.169 in 2000, prescribing factors to be considered by the Board when an application is made pursuant to s.1(4) respecting a construction industry employer.[50] Factors to be considered in such an application focus on the “key individual”: (a) the length of the hiatus between the individual’s role in each entity; (b) whether the individual was in a “formal management role” in the prior entity; and (c) whether the first entity “was able to” carry on business “without substantial disruption” after the individual left.
[49] The Board did not expressly address LRA, s.169 or the jurisprudence related to “key individuals” in the construction industry context. It is clear that Turkiewicz would fit the test for a “key individual” under s.169 subject only to the consideration of “the length of the hiatus between the individual’s role in each entity”. The Board noted, correctly, that there may be a lengthy hiatus – as much as five years had been previously found to still permit a related employer declaration, but the Board did not put its mind to considering the nature and reason for the hiatus in this case – an aspect critical to weighing the hiatus itself. Nor does it seem that it placed weight on the length of the hiatus in this case – in practical terms, a decade.
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