Canada: Is A Subcontractor A Successor Or Related Employer For Labour Relations Purposes?

Last Updated: April 11 2017
Article by Hugh R. Dyer and Zeinab Yousif

Introduction

In a recent decision, Molson Coors Canada, the Ontario Labour Relations Board (the "Board") held that the subcontracting relationship between Molson Coors Canada ("MCC") and Sherway Warehousing Inc. ("Sherway") did not amount to a sale of business nor were MCC and Sherway related employers under the Labour Relations Act ("LRA"). This decision represents a welcome and comprehensive review of the criteria that the Board will consider in assessing whether a subcontractor is a successor or related employer. Significantly, it underscores the fact that a subcontracting arrangement can involve a close "symbiotic" relationship without engaging the successor or single employer provisions of labour relations legislation.

Essential Facts

In 2012, MCC subcontracted the assembly and shipping of partial or mixed pallets of its products to Sherway. This work had previously been done in the warehouse at MCC's Toronto Brewery. The Canadian Union of Brewery and General Workers, Component 325 (the "Union") represents the production, warehousing and maintenance employees at MCC's Toronto Brewery. In an application filed with the Board, the Union alleged that the transfer of the mixed pallet makeup work to Sherway was a sale of a part of MCC's business and that, as a result, Sherway was a successor to MCC pursuant to s.69 of the LRA and bound by the collective agreement negotiated by MCC and the Union. Alternatively, the Union alleged that, after the work was subcontracted, MCC and Sherway constituted a single employer for the purposes of s.1(4) of the LRA and were jointly liable to the Union.

The Board heard extensive evidence. Briefly, the essential facts are as follows:

  1. Sherway is a significant, well-established warehousing enterprise. Sherway does similar work for other clients. There is no common ownership or management between Sherway and MCC.
  2. MCC had subcontracted similar work relating to storing and filling orders for "full pallets" (i.e. pallets of the same brand) to Sherway for many years.
  3. MCC owns the hardware and software that produces the orders assembled by the Sherway employees.
  4. When the work was subcontracted, MCC supervisors and managers provided a modest amount of training to Sherway's employees and some input regarding organizing the facility.
  5. MCC did not transfer any assets to Sherway, although it made recommendations concerning the selection of one piece of equipment.
  6. The employment of approximately 35 MCC employees who were represented by the Union was terminated after the pallet makeup work was subcontracted.
  7. Sherway selected, trained, supervised, managed and disciplined its own employees.

Analysis

1.     Sale of Business/Successor Rights

The Board concluded that MCC did not transfer a "coherent and severable" part of its business to Sherway.

A subcontracting relationship may amount to a transfer of a business where the subcontractor is unable to fulfill the requirements of the contract without a transfer of assets, know how, equipment, managerial skills or employees from the contractor. The Board concluded this did not occur between MCC and Sherway.

Rather, MCC had simply assigned additional work to Sherway that was within Sherway's core business activities. Sherway did not rely on MCC's assets to carry out the work to any greater extent than it had before. It supplied MCC's requirements with its own personnel, on premises it secured from its landlord and by using its own substantial organization, expertise and equipment supplemented, as in the past, by hardware and software supplied by MCC which was used to assemble and ship orders.

As no part of MCC's business was transferred, the sale of business/successor rights application was dismissed.

2.      Related (Single) Employer

The Union must convince the Board that three pre-conditions are satisfied before the Board may grant a single employer declaration:

(a)        There must be two or more employers;

(b)        the employers must be carrying on associated or related activities or businesses; and

(c)        the activities or businesses must be under common control or direction.

The Board found that the first and second pre-conditions were satisfied. However, on the critical issue of "common control or direction", the Board found that the Union had not met the onus placed on it and the application was therefore dismissed. In reaching its decision, the Board considered five criteria derived from earlier cases:

(a)        common ownership or financial control;

(b)        common management;

(c)        interrelationship of operations;

(d)        representation to the public as a single enterprise; and

(e)        centralized control of labour relations.

The Board found that there was little or no evidence to satisfy criteria (a), (b) and (d). While there was some evidence of interrelationship, the Board found that it did not exceed the normal, "symbiotic" relationship in a subcontracting arrangement. Specifically, the hardware and software used to assemble and ship orders was nothing more than a necessary communication device and did not constitute "control or direction" of Sherway's workforce.

Most importantly, there was no evidence of centralized control of labour relations. Sherway was responsible for hiring, determining wages and benefits, training (except for the brief, initial training provided by MCC), scheduling, assigning work and discipline. The Board concluded, "Simply put, MCC did not control the working lives of Sherway's employees, either directly or indirectly" (paragraph 344).

The Board also weighed the legitimacy of the subcontracting relationship, from a labour relations perspective, by considering the following factors:

(a)  the extent to which the relationship was a genuine arms-length relationship;

(b)  the extent to which the contractor devolved control over the subcontracted work;

(c)  whether the subcontracted work represents a core business or peripheral matter; and

(d)  in labour subcontracting, the extent to which it is permanent or temporary.

The only factor which favoured the Union was that the relationship between MCC and Sherway could not be said to be temporary. Ultimately, however, significant weight was attributed to control. As there was no common control or direction, the application was dismissed.

Why is this Decision Significant?

This is one of the few cases to deal with the subcontracting of warehousing work in Canada and, while it is a decision of the Ontario Board, the law in most Canadian jurisdictions is similar.

The Board's decision recognizes that a subcontracting relationship, especially if the subcontractor is a well-established business, can involve a close "symbiotic" relationship without engaging the successor or single employer provisions of labour relations legislation. Furthermore, in regards to the related employer considerations, it applies the law in a modern context and considers the impact of using modern software and hardware which involves a greater degree of communication and coordination between a contractor and subcontractor. The critical factor in determining whether the parties are a single employer, however, remains whether the subcontractor has independent control over the terms and conditions of employment of its workforce.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Hugh R. Dyer
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.