On February 18, 2011, the Ontario Divisional Court (the "Court") released its decision in Independent Electricity System Operator v. Canadian Union of Skilled Workers and Labourers' International Union of North America et. al.1 In this important decision,2 the Court held that legislation permitting the termination of collective bargaining rights at an employer's request and against a union's objections is constitutionally valid.
Construction Industry Collective Bargaining
Ontario's Labour Relations Act, 1995 ("LRA") has special rules applicable only to companies and trade unions operating within Ontario's construction industry. This specialized system was first created in the 1960's to address the unique circumstances of employment in construction and to regulate the labour relations of companies carrying on business in the construction industry for profit.
The Ontario Labour Relations Board slowly broadened what many considered to be the traditional parameters of the construction industry to include businesses that did not perform construction work for profit. The practical effect of the Board's approach was to essentially eliminate any distinction between construction companies operating for profit and organizations that merely purchase construction services. Banks, school boards and retailers all came to be included in the same collective bargaining structure as construction companies. In short, the specialized system had evolved to become one of near general application.
Construction Industry "Employer" Redefined
After several decades of the expansion of bargaining rights, Ontario's legislature amended the LRA to introduce the concept of a "non-construction employer." The LRA now defines the term as follows:
"non-construction employer" means an employer who does no work in the construction industry for which the employer expects compensation from an unrelated person.
The purpose of the "non-construction employer" amendment was to reaffirm the original distinction between companies that operate in the construction industry for profit and companies that only purchase construction services and otherwise carry on a wholly unrelated business endeavour.
The change to the LRA was not retroactive and a number of non-construction companies already bound to construction industry collective agreements continued to be bound to bargaining rights. To account for this circumstance, the new legislation created an application process by which companies claiming "non-construction employer" status could apply to the Board to end existing construction industry bargaining rights.
"Non-Construction Employer" Application
Following the restructuring of Ontario Hydro, one of the successor organizations, the Independent Electricity System Operator ("IESO"), refused to recognize the bargaining rights of two construction trade unions: the Canadian Union of Skilled Workers and the Labourers' International Union of North America (together, the "Unions"). The basis of the IESO's refusal was its claim to be a "non-construction employer" and thus not operating a business in the construction industry. The IESO also objected to the Unions' claim to bargaining rights on the basis that it had never directly employed any member of the Unions and there had never been any person in the bargaining units. Despite the IESO's objections, the Board directed the IESO to recognize the Unions' bargaining rights and commence collective bargaining.
In response, the IESO filed an application with the Board to be declared a non-construction employer and have the Unions' construction industry bargaining rights terminated. While the Board agreed the IESO was a non-construction employer, and the construction industry provisions of the LRA should not apply to it, the Board refused to make a declaration terminating the Unions' bargaining rights on the basis that such a declaration would result in a breach of the right to freedom of association under section 2(d) of the Canadian Charter of Rights of Freedoms. The Board therefore declared the non-construction employer provisions to be unconstitutional, reaching this conclusion based on the Supreme Court of Canada's decision in B.C. Health Services.3
The Court's Decision
The IESO sought judicial review of the Board's decision to refuse to terminate the Unions' construction industry bargaining rights. On February 18, 2011, a unanimous Court overturned the Board's decision.
The Court distinguished between the right of an individual to associate with others to pursue workplace goals through collective bargaining and the rights of unions as institutions. The Court concluded that the Board erred in extending constitutional protection to the institutional interests of a construction trade union, noting that even though the Unions' bargaining rights would terminate, their members' individual rights would remain protected through access to the ordinary (non-construction) collective bargaining regime in the LRA.
The Court also considered the complex public policy issues engaged by the "non-construction employer" concept. In doing so, the Court observed that while the Unions lost their right to collectively bargain with the IESO, they maintained the right to organize and engage in collective bargaining with companies performing construction work created by the construction needs of the IESO and other similar consumers of construction work. As such, the Court found that there was no substantial interference with any right protected by the Charter. And in so doing, the Court affirmed the legislature's intended distinction between consumers and purveyors of construction services as constitutionally valid.
Ontario's construction industry collective bargaining regime is complex. Since its inception in 1962, various amendments have been made that, at different times, have been viewed as favourable to both construction industry trade unions and construction industry employers. The "non-construction employer" provisions represented an effort by the legislature to affirm and refocus the original purpose of the specialized statutory system that had drifted from its original intent.
The legislature's direction, and now the Court's decision, affirm that the LRA's construction industry provisions were intended to regulate only the relationship between construction workers and the contractors that employ them. Construction industry trade unions have no constitutionally protected right to bargain with both companies that purchase construction services and the companies that provide those services.
1 2011 ONSC 81, released February 18, 2011.
2 The Canadian Union of Skilled Workers and Labourers International Union of North America et. al. have applied for leave to appeal the decision to the Ontario Court of Appeal.
3 Health Services and Support - Facilities Subsector Bargaining Assn. v. British Columbia, 2007 SCC 27,  2 S.C.R. 391. The Supreme Court found that the guarantee of freedom of association in the Charter includes a constitutional right to a process of collective bargaining. The government is prohibited from "substantially interfering" with the collective bargaining process, whether by reversing the results of past collective negotiations or by prohibiting future collective bargaining on significant workplace issues.
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