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Ontario, Canada: Appellate Court Set Aside Decisions That Quashed OLRB Determinations On “Related Employers” Declarations For Failure To Apply Proper Standard – Employee Rights/ Labour Relations

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  • 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.

Turkiewicz (Tomasz Turkiewicz Custom Masonry
Homes) v. Bricklayers, Masons Independent Union of Canada, Local
1
, 2022 ONCA 780

Background

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.

OLRB Decisions

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.

OCA Decision

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
Limited Partnership v. UNIFOR Local 975
, 2022 ONCA
779

Background

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.

OLRB Decision

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.

OCA Decision

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.

Footnotes

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:

[55] 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).

[56] 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).

[57] 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).

[58] 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).

[59] 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).

[60] 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).

[61] 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.

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.

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