Be Careful How Close You Get: The risks and pitfalls of a non-unionized company having too close a connection to a unionized company


The Labour Relations Act, 1995 (“LRA”) governs labour relations in Ontario including union certification and termination rights.  The Ontario Labour Relations Board (“the Board”) is a tribunal that adjudicates labour relations matters under the LRA.  Under section 1(4) of the LRA, the Board has the authority to find two corporations or operations as one entity for purposes of unionization of the entities’ workforce.  Through a section 1(4) designation, a non-unionized company can, unintentionally through close connections to another company end up with a unionized workforce.  Section 1(4) specifically 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.

Put more plainly, if the Board is convinced that:

  1. there is more than one corporation, firm, etc., including divisions of the same corporation;
  2. that associated or related activities or businesses are carried on; and
  3. that their activities/businesses are under common control or direction;

the Board can find under s.1(4) of the LRA that the union representing an existing workforce and the associated collective agreement applying to that workforce also apply to the other entity.  For a business entity that does not want a union, this can be a significant risk.  As in other areas of risk, knowledge and prevention can assist to reduce or manage risk. 

Often times, the first stage of the test is met.

As for the second stage of the test (ie. associated or related activities or businesses that are carried on), the Board looks at whether the two entities are:

  • of the same character,
  • serve the same general market,
  • employ the same mode and means of production,
  • utilize similar employee skills, and
  • are carried on for the benefit of related purposes. 

For the third stage of the test, in assessing whether there is common control and direction of the two entities, the Board looks for signs of:

  • common ownership or financial control
  • common management
  • inter-relationship of operations
  • representation to the public as a single integrated enterprise
  • centralized control of labour relations

All the facts are looked at collectively.  The Board wants a firm sense of control and direction coming from one source.  Some of the following specific features of the operation of business entities may be taken into account by the Board as suggesting a single source of control and direction:

  • common premises
  • common equipment
  • common sales staff
  • interchange of employees
  • common facilities
  • common telephone
  • common supervision
  • common solicitors
  • common directors and officers
  • common labour relations and personnel policies
  • similar work performed by employees of the different entities
  • common and inter-related sales techniques
  • functional integration and inter-dependance of operations
  • common cheques issued to all employees
  • common office
  • common bookkeeping and accounting facilities
  • presence of signs indicating associated existence

It is never possible to guarantee that a section 1(4) designation would not be made by the Board to an otherwise non-unionized company but businesses can pay close attention to their operations to try to avoid  the above features to reduce the risk of unintentionally having a unionized workforce.

Topics:  Canada, Employer Liability Issues, International Labor Laws, Liability, Non-Union, Ontario Labour Relations Board, Unions

Published In: Business Organization Updates, Labor & Employment Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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