Court calls Finning decision ‘patently unreasonable’
Alberta’s Court of Appeal has overturned a contentious reconsideration ruling by the province’s labour board which, the union argued, allowed union busting. The board’s decision had allowed heavy equipment distributor Finning International Inc. to fire many of its workers and replace their union, when it transferred its parts rebuilding work to a new company. The Court ruled that the board erred by not acknowledging a successorship relationship between the two companies.
The story began in mid-2004 when the Vancouver-based company announced it was going to close its Edmonton component rebuild centre and contract out the work to a new company, O.E.M. Remanufacturing Co. (OEM). As a result, close to 160 employees faced layoffs. In addition, their union, the International Association of Machinists and Aerospace Workers (IAMAW), was to be replaced by a local of the Christian Labour Association of Canada. At a subsequent Alberta Labour Relations Board hearing, the IAMAW argued that Finning was a common employer with OEM and that under successorship rules, the workers and their union should remain intact.
Although to outward appearances not much in the way of good will, employees, managers or equipment was transferred to the new company, that was not the whole picture. A closer analysis revealed Finning financed the costs of building the new facility to the tune of $87 million and also paid for the acquisitions that gave OEM its work. As well, an undated report admitted as evidence at the hearing stated that the company wanted a situation where there would be no union.
On April 7, 2005, having found that the two corporations were “just about as closely related as they can be,” the board ruled in favour of the IAMAW and declared OEM to be the successor employer to Finning International. The board found that a joint venture agreement established that the new company lacked true independence from the old. Under this agreement, Finning was not just a “mere financier,” but an equity partner which was entitled to most of the profit from the new venture. As a result, the board ruled that the two companies were in fact a common employer.
At the time, a union representative called the decision courageous and said it was a “great victory.”
However, Finning asked for and received reconsideration of the decision. The new board overturned the decision saying the company was at liberty to contract out the rebuilding services because there was no clause in the collective agreement prohibiting its doing so. The new board found that the transfer of the work related to the rebuilding operation “did not constitute a disposition of part of Finning’s business” as so few of the elements of a business went to the new owner.
The IAMAW appealed this decision to the Court of Queen’s Bench and then the Alberta Court of Appeal. The latter ruled that the second labour board had erred in the application of its reconsideration powers to the extent that it was “so flawed in certain respects as to be patently unreasonable.” In the first place, the reconsideration board did not have much of the evidence that was considered by the original panel and did not receive any new evidence. Given that situation, the Court of Appeal said it "should have been hesitant" to advance its own appreciation of the facts.
The court also damned the reconsideration board’s analysis of the successorship issues as “unduly restrictive.” Referring to the Supreme Court of Canada’s decision in Lester, it said “the focus should be on the realities of the collective bargaining framework and the true effect of the overall transaction.” The court noted that the creation of “myriads of holding companies, corporate divisions and other ownership structures” should not be a factor against a successorship finding. It criticized the second panel for not taking into account Finning’s $87 million capital infusion, which it called “perhaps the most critical aspect” to the establishment of OEM as a viable, ongoing business. In addition, it noted the reason that there had been no transfer of equipment from the old plant to the new was that the company had allowed it to become obsolete; the court determined that the transfer of capital was in lieu of a transfer of equipment. As a result, the court found the original panel’s decision should stand.
A company spokesperson called the court’s decision too complex to comment on before a detailed review.
However, Alberta Federation of Labour president Gil McGowan said the decision showed the court “recognized the reconsideration panel’s rush to judgment for what it was: a “new blueprint for union busting.” McGowan also criticized the Alberta Labour Relations Board for its lack of objectivity.
The IAMAW is now expected to seek a remedy for the laid-off workers and reinstatement as their representative.
The story began in mid-2004 when the Vancouver-based company announced it was going to close its Edmonton component rebuild centre and contract out the work to a new company, O.E.M. Remanufacturing Co. (OEM). As a result, close to 160 employees faced layoffs. In addition, their union, the International Association of Machinists and Aerospace Workers (IAMAW), was to be replaced by a local of the Christian Labour Association of Canada. At a subsequent Alberta Labour Relations Board hearing, the IAMAW argued that Finning was a common employer with OEM and that under successorship rules, the workers and their union should remain intact.
Although to outward appearances not much in the way of good will, employees, managers or equipment was transferred to the new company, that was not the whole picture. A closer analysis revealed Finning financed the costs of building the new facility to the tune of $87 million and also paid for the acquisitions that gave OEM its work. As well, an undated report admitted as evidence at the hearing stated that the company wanted a situation where there would be no union.
On April 7, 2005, having found that the two corporations were “just about as closely related as they can be,” the board ruled in favour of the IAMAW and declared OEM to be the successor employer to Finning International. The board found that a joint venture agreement established that the new company lacked true independence from the old. Under this agreement, Finning was not just a “mere financier,” but an equity partner which was entitled to most of the profit from the new venture. As a result, the board ruled that the two companies were in fact a common employer.
At the time, a union representative called the decision courageous and said it was a “great victory.”
However, Finning asked for and received reconsideration of the decision. The new board overturned the decision saying the company was at liberty to contract out the rebuilding services because there was no clause in the collective agreement prohibiting its doing so. The new board found that the transfer of the work related to the rebuilding operation “did not constitute a disposition of part of Finning’s business” as so few of the elements of a business went to the new owner.
The IAMAW appealed this decision to the Court of Queen’s Bench and then the Alberta Court of Appeal. The latter ruled that the second labour board had erred in the application of its reconsideration powers to the extent that it was “so flawed in certain respects as to be patently unreasonable.” In the first place, the reconsideration board did not have much of the evidence that was considered by the original panel and did not receive any new evidence. Given that situation, the Court of Appeal said it "should have been hesitant" to advance its own appreciation of the facts.
The court also damned the reconsideration board’s analysis of the successorship issues as “unduly restrictive.” Referring to the Supreme Court of Canada’s decision in Lester, it said “the focus should be on the realities of the collective bargaining framework and the true effect of the overall transaction.” The court noted that the creation of “myriads of holding companies, corporate divisions and other ownership structures” should not be a factor against a successorship finding. It criticized the second panel for not taking into account Finning’s $87 million capital infusion, which it called “perhaps the most critical aspect” to the establishment of OEM as a viable, ongoing business. In addition, it noted the reason that there had been no transfer of equipment from the old plant to the new was that the company had allowed it to become obsolete; the court determined that the transfer of capital was in lieu of a transfer of equipment. As a result, the court found the original panel’s decision should stand.
A company spokesperson called the court’s decision too complex to comment on before a detailed review.
However, Alberta Federation of Labour president Gil McGowan said the decision showed the court “recognized the reconsideration panel’s rush to judgment for what it was: a “new blueprint for union busting.” McGowan also criticized the Alberta Labour Relations Board for its lack of objectivity.
The IAMAW is now expected to seek a remedy for the laid-off workers and reinstatement as their representative.
