Ajax (Town) v. CAW, Local 222, 2000 SCC 23, [2000] 1 SCR 538

Ajax (Town) v. CAW, Local 222, [2000] 1 S.C.R. 538

The Corporation of the Town of Ajax                                               Appellant

v.

National Automobile, Aerospace and Agricultural

Implement Workers Union of Canada (CAW-Canada)

and its Local 222, Charterways Transportation Limited                 Respondent

and

Ontario Labour Relations Board                                                      Respondent

Indexed as:  Ajax (Town) v. CAW, Local 222

Neutral citation:  2000 SCC 23.

File No.:  26994.

2000:  February 16; 2000:  April 27.

Present:  McLachlin C.J. and L’Heureux‑Dubé, Gonthier, Iacobucci, Major, Bastarache, Binnie, Arbour and LeBel JJ.

on appeal from the court of appeal for ontario

Labour relations -- Trade unions -- Successor rights -- Sale of a business -- Town terminating contract with transportation company for operation of town’s municipal transit system and commencing operation of system on its own -- Company laying off workers involved in transit operations -- Town hiring significant number of laid off workers -- Ontario Labour Relations Board finding that sale of a business within meaning of successorship provision of Labour Relations Act had taken place -- Whether Board’s interpretation of successorship provision patently unreasonable -- Labour Relations Act, R.S.O. 1990, c. L.2, s. 64.

The appellant town entered into a contract with a transportation company regarding the operation of the town’s municipal transit system.  The town owned and supplied the buses and virtually all other tangible assets used to operate the system.  It also controlled routes, schedules, rates and fare collection.  The company provided and coordinated the drivers, mechanics and cleaners who operated the system.  The respondent union was the certified bargaining agent for the bus drivers, mechanics and cleaners employed by the company in these transit operations.  The town council voted to terminate its contract with the company as of the end of 1992, and to commence the operation of the system on its own as of 1993.  The company laid off all of the drivers, mechanics and cleaners involved in the transit operations.  The town hired a number of the company’s former employees, who formed a substantial proportion of the town’s new transit staff.  The Ontario Labour Relations Board concluded that the sale of a business within the meaning of s. 64 of the Ontario Labour Relations Act, concerning successor employers, had occurred.  The Divisional Court quashed the Board’s decision on the ground that it was patently unreasonable.  The Court of Appeal allowed the union’s appeal.

Held (L’Heureux‑Dubé, Bastarache and Binnie JJ. dissenting):  The appeal should be dismissed.

Per McLachlin C.J. and Gonthier, Iacobucci, Major, Arbour and LeBel JJ.:  The Court of Appeal’s reasons were substantially agreed with.  The function of the reviewing court in this case is not to test the correctness of the Board’s decision, but rather to decide whether the decision was patently unreasonable.  It was not patently unreasonable for the Board to find a nexus between the transportation company and the town, as required for successorship.  Since the historical and functional connection between the company and the town constitutes evidence upon which the Board would rationally have based its conclusion of successorship, that conclusion was not “clearly irrational”.

Per L’Heureux‑Dubé, Bastarache and Binnie JJ. (dissenting):  While the patently unreasonable test sets a high standard of review, a decision is patently unreasonable if it gives to a section of an Act a meaning which the words of the statute cannot reasonably bear.  It was patently unreasonable for the Board to decide that the termination of the contractual relationship amounted to the sale of a business or part thereof pursuant to s. 64 of the Labour Relations Act only because the town had terminated the service contract, decided to perform the work itself and hired some of the company’s former employees.  There is no indication of a sufficient nexus between the company and the town in the circumstances of this case to support the Board’s conclusion that something passed from one to the other after the termination of the service contract.  Moreover, the Board’s decision is patently unreasonable because it dispenses with the need for a disposition in s. 64.  However broadly the terms “sale”, “transfer” and “disposition” may be interpreted, something must be relinquished by the predecessor business on the one hand and obtained by the successor on the other to bring a case within the section.  The town’s unilateral decision to hire some of the company’s former employees cannot reasonably be interpreted as a deemed disposition by the company of part of its business.  The Board’s interpretation is also patently unreasonable in light of s. 64.2 of the Act, which provides for the protection of specific bargaining rights by deeming that the sale of a business has occurred where “substantially similar services are subsequently provided at the premises under the direction of another employer” with respect to certain building services.  The interpretation given by the Board to s. 64 makes s. 64.2 redundant.

Cases Cited

By McLachlin C.J.

Referred to:  United Food and Commercial Workers International Union v. Parnell Foods Ltd., [1992] O.L.R.B. Rep. 1164; Canada (Attorney General) v. Public Service Alliance of Canada, [1993] 1 S.C.R. 941; Canada (Director of Investigation and Research) v. Southam Inc., [1997] 1 S.C.R. 748.

By Bastarache J. (dissenting)

Canada (Attorney General) v. Public Service Alliance of Canada, [1993] 1 S.C.R. 941; Canadian Broadcasting Corp. v. Canada (Labour Relations Board), [1995] 1 S.C.R. 157; United Food and Commercial Workers International Union v. Parnell Foods Ltd., [1992] O.L.R.B. Rep. 1164; Canadian Union of Public Employees v. Metropolitan Parking Inc., [1979] O.L.R.B. Rep. 1193; Lester (W.W.) (1978) Ltd. v. United Association of Journeymen and Apprentices of the Plumbing and Pipefitting Industry, Local 740, [1990] 3 S.C.R. 644; U.E.S., Local 298 v. Bibeault, [1988] 2 S.C.R. 1048.

Statutes and Regulations Cited

Labour Relations Act, R.S.O. 1990, c. L.2, ss. 1(4), 64 [am. 1992, c. 21, s. 29], 64.2 [ad. idem, s. 31].

APPEAL from a judgment of the Ontario Court of Appeal (1998), 41 O.R. (3d) 426, 166 D.L.R. (4th) 516, 113 O.A.C. 188, [1998] O.J. No. 3915 (QL), reversing a decision of the Divisional Court (1995), 84 O.A.C. 281, 21 B.L.R. (2d) 196, 95 C.L.L.C. ¶210-040, [1995] O.J. No. 1907 (QL), quashing a decision of the Ontario Labour Relations Board, [1994] O.L.R.B. Rep. 1296, 24 C.L.R.B.R. (2d) 280, declaring that the sale of a business had taken place.  Appeal dismissed, L’Heureux‑Dubé, Bastarache and Binnie JJ. dissenting.

Richard J. Charney and Damhnait Monaghan, for the appellant.

Barrie Chercover, Julia McNally and L. N. Gottheil, for the respondent National Automobile, Aerospace and Agricultural Implement Workers Union of Canada (CAW - Canada).

Ronald N. Lebi, for the respondent Ontario Labour Relations Board (CAW-Canada).

The judgment of McLachlin C.J. and Gonthier, Iacobucci, Major, Arbour and LeBel JJ. was delivered by

1                                   The Chief Justice –  I would dismiss the appeal with costs to the respondent National Automobile, Aerospace and Agricultural Implement Workers Union of Canada (CAW-Canada), substantially for the reasons of Goudge J.A. in the Ontario Court of Appeal (1998), 41 O.R. (3d) 426.

2                                   I have had an opportunity to read the reasons of Bastarache J.   Our disagreement is over whether it was patently unreasonable for the Board to find a nexus between Charterways and Ajax, as required for successorship per United Food and Commercial Workers International Union v. Parnell Foods Ltd., [1992] O.L.R.B. Rep. 1164.    As stated by Cory J.  in Canada (Attorney General) v. Public Service Alliance of Canada, [1993] 1 S.C.R. 941, at p. 964, the function of the reviewing court in this case is not to test the correctness of the Board’s decision, but rather to decide whether the decision was patently unreasonable.  See also Canada (Director of Investigation and Research) v. Southam Inc., [1997] 1 S.C.R. 748,  per Iacobucci J.  In my view, the historical and functional connection between Charterways and the Town of Ajax constitutes evidence upon which the Board would rationally have based its conclusion of successorship. I  would agree with Goudge J.A. that the conclusion of the Board was not “clearly irrational”. 

The reasons of L’Heureux-Dubé, Bastarache and Binnie JJ. were delivered by

3                                   Bastarache J. (dissenting)  — This appeal concerns the application of the sale of business provision, s. 64, of the Ontario Labour Relations Act, R.S.O. 1990, c. L.2.  The issue raised is whether the interpretation of this successorship provision by the Ontario Labour Relations Board ([1994] O.L.R.B. Rep. 1296) was patently unreasonable in the circumstances of this case.  A unanimous bench of the Divisional Court ((1995), 84 O.A.C. 281) found that the interpretation of the Board was patently unreasonable, while a unanimous bench of the Court of Appeal ((1998), 41 O.R. (3d) 426) found that it was not.  For the reasons hereafter, I find that the Board’s decision was patently unreasonable.

4                                   There is no controversy regarding the factual underpinnings of this case.  In brief, the Town of Ajax and Charterways Transportation Limited entered into a contract regarding the operation of the Town’s municipal transit system.  At all relevant times, the Town owned and supplied the buses and virtually all other tangible assets used to operate the system.  The Town also controlled routes, schedules, rates and fare collection.  For its part, Charterways provided and coordinated the drivers, mechanics and cleaners who operated the system.  In addition, Charterways was responsible for licensing Handi-Trans vehicles, providing fuel, maintaining a spare parts inventory, accounting, operating records, training employees, maintaining a lost and found service, providing general information to callers regarding services provided for disabled, and taking reservations.  The respondent Union was the certified bargaining agent for the bus drivers, mechanics and cleaners employed by Charterways in its Ajax Transit operations.

5                                   The Town Council of Ajax voted to terminate its contract with Charterways as of December 31, 1992, and to commence the operation of the system on its own as of January 1, 1993.  Charterways laid off all of the drivers, mechanics and cleaners involved in the transit operations, not having enough work to permit their transfer to other duties.  The Town, in turn, hired a number of Charterways’ former employees in its recruitment process.  As a result, former employees of Charterways formed a substantial proportion of the Town’s new transit staff.  None of Charterways’ managerial and a limited part of its supervisory staff were hired by the Town.  Of Charterways’ former employees hired by the Town, only a small proportion were actually members of the bargaining unit. Some of the former employees of Charterways who applied for positions with the Town were not hired.

6                                   A majority of the Ontario Labour Relations Board found that part of the business of Charterways was to provide a skilled workforce to the Town and that this workforce constituted a distinguishing part of Charterways’ business.  It concluded that the hiring of a significant number of Charterways’ employees by the Town constituted an “acquisition” of part of a business pursuant to s. 64 of the Act.  The Board was of the view that continuity of the business was sufficient to make a finding of deemed disposition under the terms of s. 64.  Carruthers J., for the Divisional Court, disagreed, noting that nothing occurred between the Town and Charterways which could be reasonably said to have caused a sale, transfer or other disposition of Charterways’ business or part thereof.  He found that there was no nexus, legal act or legal relation to support the finding of the Board.  With respect to whether part of a business had been transferred, Carruthers J. was of the view that when the Town determined that it no longer required the services offered by Charterways, that resulted in a loss of work for Charterways, not a loss of part of its business in the sense of being a separate and identifiable part of its operations.

7                                   Goudge J.A., for the Court of Appeal, decided that the terms “sale”, “transfer” and “other disposition” should be interpreted broadly and do not require that the disposition or transfer take any particular legal form or occur by way of a legal transaction.  He found that the commercial history between the Town and Charterways constituted a proper nexus and concluded that the decision of the Board was not patently unreasonable.

8                                   There is no doubt that the patently unreasonable test sets a high standard of review (Canada (Attorney General) v. Public Service Alliance of Canada, [1993] 1 S.C.R. 941, at pp. 963-64).  Nevertheless, a decision is patently unreasonable if it gives to the section of an Act a meaning which the words of the statute cannot reasonably bear (Canadian Broadcasting Corp. v. Canada (Labour Relations Board), [1995] 1 S.C.R. 157, at para. 62).

9                                   Even if one were to accept, for the purposes of argument, that the instrumental approach was correctly applied by the Board and that it was not patently unreasonable for it to have concluded that Charterways’ employees were its most valuable asset and that they could constitute a business entity that could be sold or transferred, I am nevertheless not satisfied with several elements of the Board’s decision.  First, I fail to see how there was any organizational nexus between Charterways and the Town to support the Board’s conclusion that something passed from one to the other after the termination of the service contract.  In United Food and Commercial Workers International Union v. Parnell Foods Ltd., [1992] O.L.R.B. Rep. 1164, the Ontario Labour Relations Board held that, before one employer can be declared the successor of another, there must be some organizational nexus between the two employers, other than the fact that one employed persons to do certain work that the other now does or will do (at para. 205).  The Court of Appeal in this case found that the commercial relationship between the parties constituted the required nexus.  However, I  disagree that commercial history on its own can constitute a sufficient nexus.  While the Board suggested in Canadian Union of Public Employees v. Metropolitan Parking Inc., [1979] O.L.R.B. Rep. 1193, that a previous corporate, commercial or familial relationship between the parties may warrant a more careful consideration under s. 64, it does not follow from this passage that a commercial relationship in itself  creates a nexus.  This becomes clear from the following statement of the Board, at para. 35:

In assessing the facts from which a transfer of a business may be inferred, the Board has always been especially sensitive to any pre-existing corporate, commercial or familial relationship between the predecessor and the alleged successor; or between the predecessor, the alleged successor and a third party.  Transactions in these circumstances require a more careful examination of the business realities than do transfers between two previously unrelated business entities.  The presence of a pre-existing relationship may suggests [sic] an artificial transaction designed to avoid bargaining obligations; or (more commonly) there may be a transaction in the nature of a business re-organization which does not alter the essential attributes of the employer-employee relationship, and which should not, having regard to the purpose of section 55, disturb the collectively bargained framework for that relationship. . . .  In such circumstances it may be important to carefully examine the pre-existing links or lines of common control to which the alleged predecessor and successor are both subject.  Such examination is precisely what is undertaken by the Board on an application under section 1(4); but it is also relevant on section 55 applications, and it is for this reason that applicants commonly plead section 1(4) in the alternative.  It would be incorrect to make this consideration a decisive “test” for successorship; but where there is a pre-existing corporate connection between the predecessor and the successor the Board has been disposed to infer a “transfer” if there is the slightest evidence of such transaction. . . .  As a practical matter, it is much more difficult to sustain the contention that one has not acquired a predecessor’s business but merely founded a new, independent, but similar, business serving the same market.  [Emphasis added.]

This concern with pre-existing commercial relationships is not related to nexus.  Rather it seems to be related to the willingness to “capture” artificial transactions designed to avoid bargaining obligations.  There is no indication of an artificial transaction in the present case.  Thus, in my opinion, the commercial relationship between the Town and Charterways is an insufficient nexus and there is no indication of any other sufficient nexus in the circumstances of this case so as to support the Board’s finding that a sale of business had occurred pursuant to s. 64 of the Act.

10                               Second, the decision of the Board is patently unreasonable because it dispenses with the need for a disposition in s. 64.  However broadly the terms “sale”, “transfer” and “disposition” may be interpreted, “something must be relinquished by the predecessor business on the one hand and obtained by the successor on the other to bring a case within the section” (Lester (W.W.) (1978) Ltd. v. United Association of Journeymen and Apprentices of the Plumbing and Pipefitting Industry, Local 740, [1990] 3 S.C.R. 644, at p. 675). I fail to see how there was any disposition in the present circumstances.  It is clear to me that a sale or a transfer implies a nexus, an agreement or transaction of some sort between the predecessor and successor employers.  After all, it is a sale, transfer or disposition to a successor employer.  There must be, in my view, a mutual intent to transfer part of the business.  As professed by Beetz J. in U.E.S., Local 298 v. Bibeault, [1988] 2 S.C.R. 1048, at p. 1117:

The concepts of alienation and operation by another are based on an intentional transfer of a right:  it is therefore necessary to determine between whom this mutual intent must exist.

I cannot accept that the unilateral decision of the Town to hire some of Charterways’ former employees can reasonably be interpreted as a deemed disposition by Charterways of part of its business.  In this case, Charterways simply terminated employees it no longer needed.  It did not transfer its employees to the Town.  Its employees applied for positions, as did others, and underwent interviews.  Some of Charterways’ employees  were hired and some were not.  The same service continued for the customers of Ajax Transit, but this is only because the same work was performed by a new organization.

11                               In its decision, the Board commented on “control” and “direction” within the context of a s. 64 analysis.  In so doing, the Board conflated the test for common or related employer within the meaning of s. 1(4) of the Act with the analysis required in a sale of business proceeding.  Since Charterways was held to be a federal undertaking, the common employer provision was unavailable to the Union and the Board.  In Lester, supra, at pp. 693-94, this Court held that construing successorship provisions as common employer provisions was patently unreasonable.

12                               I also note that the interpretation of the Board is patently unreasonable in light of s. 64.2 of the Act, which provides for the protection of specific bargaining rights by deeming that the sale of a business has occurred where “substantially similar services are subsequently provided at the premises under the direction of another employer” with respect to certain building services.  Where the Legislature did not require a transfer or disposition, or a nexus as earlier discussed, it explicitly provided that such were not required.  The interpretation given by the Board to s. 64 makes s. 64.2 redundant.

13                               I conclude by saying that it was patently unreasonable for the Board to decide that the termination of the contractual relationship amounted to the sale of a business or part thereof pursuant to s. 64 only because the Town had terminated the service contract, decided to perform the work itself and hired some of Charterways’ former employees.  The concept adopted by the Board according to which the Town could “transfer to itself” an essential element of Charterways’ business, by cancelling its contract, is not one that the words of the Act can reasonably bear.  I would therefore allow the appeal and quash the decision of the Board, with costs throughout.

Appeal dismissed with costs to the respondent Union, L’Heureux‑Dubé, Bastarache and Binnie JJ. dissenting.

Solicitors for the appellant:  Heenan Blaikie, Toronto.

Solicitors for the respondent National Automobile, Aerospace and Agricultural Implement Workers Union of Canada (CAW - Canada):  Green & Chercover, Toronto.

Solicitor for the respondent Ontario Labour Relations Board:  Ronald N. Lebi, Toronto.