- The Ontario Court of Appeal overturned two Divisional Court decisions, finding the lower court failed to apply the required Vavilov standard of review to the Ontario Labour Relations Board's determination that various companies were "related employers" under the Labour Relations Act, 1995.
- Vavilov requires judicial restraint and respect for the distinct role and specialized expertise of the administrative decision-maker and permits courts to intervene only if it is truly necessary to safeguard the legality, rationality, and fairness of the administrative process.
- These OCA decisions indicate that courts are expected to follow the Vavilov principles when conducting reasonableness reviews of administrative decisions, including decisions of the OLRB.
The Ontario Court of Appeal (OCA) released two decisions on November 16 that considered whether the Divisional Court applied the correct standard of review required by Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65, in assessing whether companies should be declared "related employers" within the meaning of s. 1(4) of the Labour Relations Act, 1995 (OLRA).1 In both decisions, the OCA set aside the Divisional Court's decisions after determining that it did not apply the required Vavilov standard of review2 because it did not demonstrate an appropriate degree of restraint and respect for the Ontario Labor Relations Board's (OLRB's) highly specialized expertise, jurisprudence and considerable experience in deciding s. 1(4) applications, which put the OLRB in a better position to interpret its home statute.
Tomasz Turkiewicz (Turkiewicz) was a principal and director of Brickpol Masonry (Brickpol). Brickpol was bound by collective agreements with various masonry/construction unions (Unions). When Turkiewicz was injured in an accident and became unable to work, he declared personal bankruptcy and Brickpol was dissolved. Years later, Turkiewicz became the sole proprietor of Tomasz Turkiewicz Custom Masonry Homes (TTCMH), which also did bricklaying and masonry work, but on a non-union basis.
The Unions filed three applications with the OLRB regarding work being done by TTCMH: (i) a declaration that pursuant to ss. 1(4) of the OLRA Brickpol and TTCMH were "related employers"; (ii) pursuant to s. 69 of the OLRA there had been a transfer of business; (iii) a grievance referral under s. 133 of the OLRA. The OLRB delivered three decisions in response to the applications.
First OLRB Decision
The OLRB declared Brickpol and TTCMH a single employer as the two businesses were carried out under the common control and direction of Turkiewicz. The OLRB found that because Brickpol and TTCMH were related businesses that served the same markets and performed work for the same type of clients, the Unions' collective bargaining rights were being eroded and this was precisely the type of mischief s. 1(4) of the OLRA is meant to address.
Second OLRB Decision
The OLRB decided the TTCMH performed work that fell within the Unions' jurisdiction but failed to engage union members. Because Brickpol and TTCMH were found to be related employers, TTCMH was also bound by the then-current collective agreement.
Third OLRB Decision
The OLRB decided that TTCMH violated the then-current collective agreement and awarded the Unions damages of $32,466, which it considered a reasonable calculation of the value of the bargaining unit work.
Divisional Court's Decision
Turkiewicz brought judicial review applications to the Divisional Court for each of the three OLRB decisions. The applications were granted and each OLRB decision was quashed.
The Divisional Court quashed the first decision on the basis that it was unreasonable. The court found that although the OLRB reasonably found that Brickpol and TTCMH were a single employer, it failed to find a valid labour relations purpose before making the related employer declaration, as required. The Divisional Court found that this case did not involve an employer repositioning its business to avoid labour relations obligations. Instead, it involved "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."
Because the second and third decisions were based on the quashed first decision, they too were quashed. The court did not remit the first decision to the OLRB on the basis that it would inevitably conclude that the declaration did not serve the purpose of s.1(4) of the OLRA. The court stated that had it not quashed the third decision due to the first decision being quashed, it would have quashed and remitted the third decision for reconsideration because the quantum of damages was harsh and unreasonable.
The Unions appealed the Divisional Court's decision to the OCA. The OCA allowed the appeal and restored the OLRB's decisions.
The OCA found that the Divisional Court erred by failing to follow the Vavilov directives when it applied the reasonableness standard to the OLRB's decisions: it did not show the requisite restraint and respect for the OLRB's specialized expertise or grant appropriate deference to its decisions.
The OCA stressed that Vavilov requires a court conducting a reasonableness review to focus on the decision actually made by the decision maker. When the decision maker gives reasons, the court must examine them with respectful attention, and attempt to understand the reasoning process used to arrive at the conclusion.
The OCA noted that Vavilov provides that two fundamental flaws can render a decision unreasonable: (1) a failure of rationality internal to the reasoning process; and (2) the decision is untenable in light of the relevant factual and legal constraints that bear on it. The OCA found the OLRB's decisions rational and logical because each one was based on rational and logical reasoning. The OCA also found the OLRB's decisions tenable in light of the relevant factual and legal constraints. The OCA concluded that there was no basis for judicial intervention.
The OCA also found that the Divisional Court erred in its application of the reasonableness standard of review when it concluded that the OLRB "failed to analyze whether a related employer declaration would serve a labour relations purpose as it was required to do." The OCA noted that in the first decision, the OLRB found that the Unions' bargaining rights were being eroded because TTCMH was performing bargaining unit work on a non-union basis. The OCA acknowledged that the OLRB did not use the phrase "labour relations purpose"; however, it found that it was clear that the OLRB exercised its discretion to grant the related employer declaration for that labour relations purpose, the preservation or protection from artificial erosion of a union's bargaining rights.
The OCA also found the Divisional Court was not entitled to substitute its own view of what constitutes a labour relations purpose. Section 1(4) gives the OLRB the discretion to make a related employer declaration when the statutory preconditions are met. The Divisional Court should have shown appropriate deference to the OLRB's specialized expertise and jurisprudence on the relevant issues. By finding the first decision unreasonable, the Divisional Court failed to adhere to the foundational principle that underlies a reasonableness review: intervene in administrative matters only if it is truly necessary to safeguard the legality, rationality, and fairness of the administrative process.
The OCA found as well that the Divisional Court erred when it criticized the OLRB's approach to s. 126(3) of the OLRA. The OCA found that s. 126(3) required the OLRB to consider only the length of the hiatus caused by Turkiewicz's accident, which the OLRB considered, and not its reasons. The OCA noted that OLRB jurisprudence confirmed that anti-union motivations need not exist for a s. 1(4) declaration to be issued. The OCA decided, therefore, that the Divisional Court erred when it imposed an additional factor on the OLRB that is not present in the statute or the jurisprudence.
Furthermore, the OCA found the Divisional Court erred when it improperly made factual findings not made by the OLRB in the first decision relating to Turkiewicz's injury, ability to work, and the impact of his circumstances, and relied on them to conclude that the OLRB's decisions were unreasonable. The OCA noted that Vavilov provides that a reviewing court must not interfere with the findings of a tribunal in the absence of exceptional circumstances (which did not exist here), and that the reviewing court should refrain from reweighing and reassessing the evidence considered by the decision maker.
The OCA found also that the Divisional Court erred in its determination that the OLRB's damages award was unreasonable. The Divisional Court did not refer to Blouin Drywall Contractors Ltd. and United Brotherhood of Carpenters and Joiners of America, Local 2486 (1975), 8 O.R. (2d) 103 (C.A.), leave to appeal to S.C.C. refused (November 17, 1975), which the OCA described as "the leading Canadian authority, consistently followed for nearly fifty years, on calculating damages in these matters." The OCA emphasized that the OLRB's calculation of damages in the third decision was consistent with its guidance in Blouin Drywall, and that the Divisional Court did not explain why it concluded that the damages award was "harsh and unreasonable."
Finally, the OCA decided that the Divisional Court erred in refusing to remit the matters to the OLRB because the high threshold for such a refusal (exceptional circumstances) was not met. The OCA noted that Vavilov provides that when a decision is unreasonable it is most often appropriate for the reviewing court to remit the matter to the decision maker.
Enercare Home & Commercial Services (Enercare) sells, rents, installs, and services residential HVAC systems. Unifor Local 975 (Unifor) is the exclusive bargaining agent for all Enercare employees. Enercare provides services through unionized employees and independent contractors. Its use of independent contractors is expressly permitted in its collective agreement.
Ganeh Energy Services Ltd. (Ganeh) and Beaver Energy Services Ltd. (Beaver) are two of the 90 independent contractors used by Enercare. Ganeh performs HVAC servicing and maintenance and Beaver performs HVAC installation.
Unifor brought applications to the OLRB for declarations that Enercare and its contractors Ganeh, Beaver, and a third independent contractor, Perras Mechanical Services Ltd. (Perras), were "related employers" within the meaning of s. 1(4) of the OLRA and, alternatively, that there had been a transfer of business within the meaning of s. 69.
The OLRB stated that four criteria must be met for a related employer declaration to be made: there must be more than one entity involved; the business activities of the entities must be associated or related; the entities must be under common control or direction; and there must be a labour relations reason for granting the declaration.
The OLRB concluded the first and second criteria were easily satisfied; Enercare, Ganeh, Beaver, and Perras were separate entities that serviced Enercare's customers. It also determined that there was common control or direction. Citing its own jurisprudence, the OLRB stated that the greater the functional coherence and interdependence among related activities and businesses, the more probable it is that it would conclude the entities carrying on the activities should be treated as one employer. The OLRB listed the following elements as relevant to common control and direction, noting that not all of them must be engaged for a finding that the third criterion is met:
- Common ownership or financial control: The OLRB concluded that Ganeh and Beaver's "functional economic dependency" on Enercare lead to Enercare having "effective indirect control" over them.
- Common management: The OLRB observed that Enercare retained a significant role in managing the work sent to Ganeh, Beaver, and Perras.
- Interrelationship of operations: The OLRB found that Ganeh, Beaver, and Perras technicians were part of, and integrated into, Enercare's daily resources and dispatch system.
- Representation to the public as a single, integrated enterprise: The OLRB noted that Enercare exercised considerable control to ensure the contractors' technicians were seen as an extended but integrated aspect of Enercare's business.
- Centralized control of labour relations: The OLRB found that although Enercare had no formal role in the labour relations of Beaver, Ganeh, or Perras, the practical reality was different.
Based on these findings, the OLRB concluded that Enercare had fundamental control and direction over the work performed for it by Ganeh, Beaver, and Perras, and that Enercare and those entities shared common control and direction over the activities they carried on as part of Enercare's core business activities.
The OLRB then considered whether there was a labour relations reason for issuing a related employer declaration. Relying on its own jurisprudence, the OLRB explained that s. 1(4) is intended to address "mischief" that includes the erosion of bargaining rights. It found that Unifor's bargaining rights were eroded or undermined "by the diversion of what would normally be work performed by Unifor members to one of the responding parties."
The OLRB made the related employer declaration in respect of Ganeh and Beaver because, among other things, they "essentially comprise a parallel Enercare workforce, performing the same core work performed by Unifor's bargaining unit but unencumbered by the accompanying bargaining unit entitlements," and Enercare can avoid its bargaining unit obligations and "artificially erode" Unifor's bargaining unit.
The OLRB declined, however, to make a related employer declaration in respect of Perras because, among other things, Enercare had no input or involvement in 70% of Perras' business, it did not effectively dominate or control Perras, economically or otherwise, and there was no clear evidence of the erosion of Unifor's bargaining rights.
Divisional Court Decision
The Divisional Court quashed the OLRB's decision and remitted the matter to the OLRB for a fresh determination. It found the OLRB's analysis unreasonable because it failed to consider the parties' bargaining history, the collective agreement, and the Letters of Understanding addressing Enercare's longstanding contracting-out practices. The court found this unreasonable analysis led to a "decontextualized analysis" of other issues and made the OLRB analysis unreasonable throughout. The court emphasized that assessing whether an employer is "related" requires full consideration of the labour relations context, which the OLRB did not consider. Enercare's history of contracting out was necessary context to appreciate the reasons Ganeh and Beaver came into existence and why they operated as they did, and to assess Enercare's "control" over Ganeh and Beaver. The court noted many factors that cast doubt on the reasonableness of the OLRB finding that Ganeh and Beaver were related employers to Enercare and questioned the validity of the OLRB's distinction between Ganeh/Beaver and Perras on the basis that it did not affect the bargaining relationship between Enercare and Unifor. The court also found that nothing prevented Ganeh/Beaver from performing other work and that it was solely their management decision to work almost exclusively for Enercare.
The OCA found that, as was the case in Turkiewicz, the Divisional Court decision in Enercare did not follow the Vavilov framework for conducting a reasonableness review of an administrative decision. The OCA allowed the appeal, set aside the Divisional Court's decision, and restored the OLRB's decision.
The OCA determined that the OLRB's decision was not unreasonable. The OLRB's reasoning was "internally coherent, rational, and logical" and bore "the hallmarks of reasonableness – justification, transparency, and intelligibility"; the OLRB clearly identified the evidence before it and the facts it relied on in making the related employer declarations and set out the parties' submissions; the governing statutory scheme was the most salient aspect of the relevant legal context and, "The OLRB is a highly specialized tribunal with considerable expertise, placing it in an elevated position to interpret its home statute"; s. 1(4) applications are within the OLRB's exclusive mandate and they confer a broad discretion on the OLRB; and the OLRB was informed by a significant body of its own jurisprudence how to interpret and apply s. 1(4).
The OCA found that the Divisional Court's decision failed to follow the Vavilov framework for conducting a reasonableness review of an administrative decision. Among other things:
- It did not start from the principle of restraint and respect for the distinct and specialized role of the OLRB and its "demonstrated expertise and lengthy experience" or give the OLRB's decision appropriate deference.
- It did not initially consider the OLRB decision "as a whole" to determine whether it demonstrated "the requisite level of intelligibility, transparency, and justification." Instead, it measured the OLRB's determinations against its own view of the legislation and analysis of the OLRB jurisprudence, effectively deciding issues de novo
- It improperly engaged in "a reweighing of the evidence" that was before the OLRB, which, as a reviewing court, it was to refrain from doing, absent exceptional circumstances, which did not exist in this case.
- It overlooked, disregarded or interfered with factual findings the OLRB made.
The OCA found that if the Divisional Court had followed the Vavilov principles in conducting its reasonableness review of the OLRB decision, it would have found no basis to find it unreasonable.
Bottom Line for Employers
In the companion decisions, Turkiewicz and Enercare, the OCA made it abundantly clear that when conducting reasonableness reviews of administrative decisions, including decisions of the OLRB, courts must follow the Vavilov principles. Vavilov requires judicial restraint and respect for the distinct role and specialized expertise of the administrative decision maker and permits courts to intervene only if it is truly necessary to safeguard the legality, rationality, and fairness of the administrative process. A reviewing court should refrain from deciding the issues itself (i.e., it should not ask what decision it would have made in place of the administrative decision maker, attempt to ascertain the range of possible conclusions, conduct a de novo analysis, or seek to determine the correct solution). A reviewing court should consider only whether the actual decision made by the administrative decision maker, including its rationale and outcome, was unreasonable.
1. Section 1(4) of the OLRA 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.
2. In Turkiewicz, the OCA provided the following summary of the Vavilov principles for how courts should conduct reasonableness reviews of administrative decisions:
 Vavilov states that the reasonableness review approach is based on the following principles. Courts are to intervene in administrative matters only if it is truly necessary to safeguard the legality, rationality, and fairness of the administrative process. Such reviews start from the principle of judicial restraint and respect for the distinct role of decision makers (para. 13). The reviewing court should respect administrative decision makers and their specialized expertise, should not ask how they themselves would have resolved an issue, and should focus on whether the applicant has demonstrated that the decision is unreasonable (para. 75).
 In conducting a reasonableness review, the court must focus on the decision actually made by the decision maker. The court should refrain from deciding the issues itself. It does not ask what decision it would have made in place of the administrative decision maker, attempt to ascertain the range of possible conclusions, conduct a de novo analysis, or seek to determine the correct solution. Instead, the reviewing court considers only whether the actual decision, including both the rationale for the decision and the outcome to which it led, was unreasonable (para. 83).
 Where reasons have been given, the reasonableness review puts those reasons first. The court must examine the reasons with respectful attention, seeking to understand the reasoning process followed by the decision maker to arrive at its conclusion (para. 84).
 A reasonable decision is one that is based on an internally coherent and rational chain of analysis and is justified in relation to the facts and law that bore on the decision (para. 85). It bears the hallmarks of reasonableness – justification, transparency, and intelligibility (para. 99).
 Two types of fundamental flaws can render a decision unreasonable. The first is a failure of rationality internal to the reasoning process (para. 101). To be reasonable, a decision must be based on reasoning that is both rational and logical. The reviewing court must be able to trace the decision maker's reasoning without encountering any fatal flaws in its overarching logic (para. 102).
 The second type of fundamental flaw arises when a decision is untenable, in some respect, in light of the relevant factual and legal constraints that bear on it (para. 101). Elements in this evaluation include: the governing statutory scheme; other relevant statutory or common law; the principles of statutory interpretation; the evidence before the decision maker and facts of which the decision maker may take notice; the parties' submissions; the past practices and decisions of the administrative body; and, the potential impact of the decision on the individual to whom it applies (para. 106). The governing statutory scheme is likely to be the most salient aspect of the relevant legal context (para. 108).
 I would add that the reviewing court must bear in mind the expertise of the administrative decision maker with respect to the questions before it. At para. 31 of Vavilov, the Supreme Court states that "expertise remains a relevant consideration in conducting [a] reasonableness review." Being attentive to a decision maker's demonstrated expertise may reveal to a court why a decision maker reached a particular outcome or provided less detail in its consideration of a given issue (para. 93). Moreover, decision makers' specialized expertise may lead them to rely, when conducting statutory interpretation, on "considerations that a court would not have thought to employ but that actually enrich and elevate the interpretive exercise" (para. 119). As such, relevant expertise of the administrative decision maker must be borne in mind by a court conducting a reasonableness review, both when examining the rationality and logic of the decision maker's reasoning process and the decision itself, in light of the factual and legal constraints bearing on it.
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