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Labour II

. 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.
. Thomas v. United Food

In Thomas v. United Food (Div Ct, 2021) the Divisional Court considered what is essentially a laches issue at the OLRB below, dealing with a s.74 duty of fair representation case:
[15] There is no time deadline set out in the LRA for bringing a complaint respecting a Union’s duty of fair representation. The timelines for bringing such a complaint are left to the OLRB's discretion. Where a person brings a complaint that the Union has violated its duty of fair representation, s. 96 of the LRA gives the OLRB wide-ranging discretion whether to inquire into the complaint. Section 99(3) of the LRA provides that the OLRB is not required to hold a hearing to determine a DFR complaint.

[16] Advisory Bulletin 12 posted, on the OLRB's website, provides in regard to a s.74 complaint, in part, that: "While there is no statutory time limit for filing an application, excessive delay without a good explanation may cause an application to be dismissed."

[17] Rule 5 of the OLRB's Rules of Procedure, posted on its website, provides:
Rule 5 Obligation to Make Allegations Promptly

5.1 Where a party in a case intends to allege improper conduct by any person, he or she must do so promptly after finding out about the alleged improper conduct and provide a detailed statement of all material facts relied upon, including the circumstances, what happened, when and where it happened, and the names of any persons said to have acted improperly.
Jurisprudence

[18] The OLRB has developed a body of jurisprudence on how to assess delay in the context of s.74 complaints. In its initial March 15, 2019 decision in this matter, it referenced at paragraph 6, its decision in The Corporation of the City of Mississauga[7] as follows:
A perusal of the Board cases reveals that there has not been a mechanical response to the problems arising from delay. In each case, the Board has considered such factors as: the length of the delay and the reasons for it; when the complainant first became aware of the alleged statutory violation; the nature of the remedy claimed and whether it involves retrospective financial liability or could impact upon the pattern of relationships which has developed since the alleged contravention; and whether the claim is of such nature that fading recollection, the unavailability of witnesses, the deterioration of evidence, or the disposal of records, would hamper a fair hearing of the issues in dispute. Moreover, the Board has recognized that some latitude must be given to parties who are unaware of their statutory rights or, who through inexperience take some time to properly focus their concerns and file a complaint. But there must be some limit, and in my view unless the circumstances are exceptional or there are overriding public policy considerations, that limit should be measured in months rather than years. (emphasis added in paragraph 6 of the OLRB's decision in this matter quoting this decision).
[19] The Applicant relies upon the OLRB's decisions in Chrysler Canada Ltd.[8] and June Jacobs v. Canadian Union of Public Employees and its Local 1385[9] in support of the proposition that where delay is less than one year, the onus is on the responding party to demonstrate actual prejudice sufficient to justify dismissing a complaint without a hearing on its merits.

[20] However, in Nicola Gradojevic[10] the OLRB explained that there is no bright line when the delay in filing an application under section 74 of the LRA results in prejudice to another party:
The Board has attempted to offer some guidance by identifying the one-year mark when it will presume that there is prejudice as a result of the delay. But that does not mean that a delay of 11 months has no prejudice or that it is not reasonable to presume that there will be prejudice to the parties.
[21] The Board's own jurisprudence makes it clear that dismissal for delay is an exercise of discretion, reflecting factually based determinations on a case by case basis.
. 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.
. 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.

….

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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