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Edition 2 - Volume 1 February 15, 1991
Employers use a variety of strategies in pursuit of their perceived interest to minimize the cost of labour and maximize their power to manage their enterprise.
One strategy is appearing in workplaces across Ontario with increasing frequency. That is the use of temporary manpower agencies. Employers use temporary manpower agencies to "contract in" labour. The workers who are "contracted in" are paid at a lower rate than regular workers, although generally, for all intents and purposes, temporary manpower agency workers do the same work as their brothers and sisters at the next machine or desk.
The use of temporary manpower agency workers is part of management's strategy in both organized and unorganized workplaces. In unorganized workplaces, employers use temporary manpower agency workers to shield themselves from the cost of paying a complete compensation package to the workers in question. Management also attempts to shield themselves from the obligation to pay severance and termination pay when the temporary workers are let go.
Employers try to create a fiction that the temporary manpower agency workers are not their employees. Employers try to create a fiction that the workers are employees of the manpower agencies which referred them to the workplace.
In organized workplaces, employers will "contract in" workers in an attempt to avoid all of their lawful obligations pursuant to a collective agreement, including compensation, seniority, union recognition, and union representation rights etc.
The CAW-Canada Legal Department has recently been involved in two cases in which favourable decisions have been obtained with respect to this problem of "contracted in" labour.
One case was decided in the context of an organizing drive. The second case was decided in the context of an organized workplace. In the latter case, the CAW-Canada obtained an arbitration award with respect to a grievance which was filed to protest the "contracting in" of temporary manpower agency workers.
In this case, a company called Nichirin Inc. signed a contract with two different manpower agencies, namely Kelly Manpower and Manpower Services. Each agency supplied Nichirin with so-called temporary manpower agency workers. Nichirin decided how many temporary workers were needed, when they would work, what work they would do, which work stations would be used, when the temporary workers would take their break and lunch. Nichirin even applied their own disciplinary rules regarding lateness and attendance to the temporary manpower agency workers. Nichirin paid the temporary manpower agencies a set fee for every hour worked by each of the temporary workers.
The status of these temporary workers was called into question because the CAW-Canada filed an application for certification regarding a bargaining unit at Nichirin. The determination of the employee status of these temporary workers became quite significant and relevant to the disposition of our application for certification.
The decision of the Ontario Labour Relations Board regarding the employee status is twelve pages long. In the result, the Ontario Labour Relations Board found that these temporary agency workers were, as a matter of law, and for the purposes of the Ontario Labour Relations Act, employees of Nichirin Inc.
The Ontario Labour Relations Board relied on the leading cases of KMart Canada Limited (1983) O.L.R.B. Rept May 649 and York Condominium Corporation (1977) O.L.R.B. Rept Oct 645, to find in favour of the CAW's position that the so-called temporary manpower agency workers were, in law, employees of Nichirin. The Board outlined the criteria by which it determines which of two or more entities is the employer of a worker for the purposes of the Labour Relations Act. These criteria are:
In the result, the temporary manpower agency workers were found to be employees of Nichirin and were included in the bargaining unit. This was an important decision because it affected the level of membership support enjoyed by the union. Organizers of new units should pay careful attention to the existence and number of temporary manpower agency workers.
In another case involving a company called Bristol Myers Canada Inc., a grievance was filed after the employer brought in temporary manpower agency workers to perform miscellaneous packaging work. As was the case in the Nichirin Inc. matter, Bristol Myers paid a flat hourly fee for each hour of work performed by the agency workers. The manpower agency in question kept all personnel records regarding the workers and looked after WCB, CPP and UI matters. Further, they issued T-4 slips for the workers.
The temporary manpower agency workers worked on the line with Bristol Myers employees, under the supervision and direction of the lead hand, who in turn reported to a foreman. The temporary manpower agency workers took the same breaks and lunch times as the regular employees. They wore the same work uniforms and safety shoes and were subject to verbal warnings at the hands of Bristol Myers supervision.
The relevant provision of the collective agreement stated as follows:
Supervisory personnel or other non bargaining unit employees shall not undertake any work regularly performed by an employee in the bargaining unit except under the following circumstances:
The arbitrator stated as follows:
"It is apparent that the weight of authority in this province indicates that where there is day to day control and utilization of personnel performing work that would otherwise be handled by employees in the bargaining unit, an employment relationship exists under a collective agreement and the intervention of an outside agency does not detract from the relationship. In addition, Boards of Arbitration have recognized that the substance of the relationship symbolized by the control of the personnel should take precedents over the form".
The arbitrator also stated:
"I am of the view that a contracting in situation such as the one before us differs from the usual contracting out situation. When a company and union negotiate a collective agreement they negotiate about work. Usually, as in this case, there are different job classifications receiving different rates of pay. The substratum upon which those classifications are formed is the work of the enterprise. To bring persons into a plant or work location to perform the same work as bargaining unit employees destroys or erodes the foundation upon which the collective agreement is negotiated. In my view, where persons are brought into a work situation to work along side regular employees and where they perform the same work as those employees, the mere fact that those persons are recruited through the auspices of an independent agency is not sufficient to create a "true" contracting out situation as that term is generally understood."
The union's grievance was allowed.
Finally, this issue may come up in the context of the Ontario Employment Standards Act, or other Employment Standards Acts in jurisdictions across the country. The issue may be phrased as follows: Are temporary manpower agency workers entitled to notice of termination of employment or termination pay in lieu thereof and severance pay. If so, who is responsible for payment of these moneys?
I should note at the outset that it will be very rare to find a temporary manpower agency worker who has five years service as a temporary agency worker. However, you may frequently find a worker with nine months service as a temporary manpower agency worker and, for example, four years and nine months as a regular employee. An employer might argue that since the worker only had four years and nine months as a regular employee he/she is not entitled to severance pay. Our argument is that, in law, the worker has a total of five years and six months service with the employer in question. It is the opinion of the CAW-Canada Legal Department that the definition of the terms "employee" and "employer" in the Ontario Employment Standards Act are broad enough to include a worker who is contracted in from a temporary manpower agency, and works along side other regular workers, for the purposes of severance pay coverage.
Workplace closures and layoffs are destroying the fabric of our economy. Regretfully, the focus of this section of our Law Report is on the Employment Standards Act of Ontario and deals with a series of legal considerations to keep in mind when one is confronted with a workplace closure or massive layoff.
A. One matter to always consider is that regular part time workers are entitled to notice of termination and severance pay in the same general circumstances as full time workers. Indeed, section 40a(2) of the Employment Standards Act specifically states that regular part time employees are entitled to severance pay.
B. Section 40 of Ontario's Employment Standards Act and Regulation 286 set out the framework for payments to be made to an employee in lieu of proper notice of termination. Section 12(1) of Regulation 286 requires that an employee, given proper notice of termination, be paid at least his/her normal non-overtime weekly wage for each week of the notice period, whether or not work is performed. (This section is qualified by s.12(2) in the case of an employee who is guilty of wilful misconduct or disobedience during the notice period, in which case, the provisions of s.40 of the Act and Regulation 286 do not apply.) What about an employee who is absent for all or part of the notice period because he/she is receiving Workers' Compensation benefits or S & A?
Section 14 of Regulation 286 reads:
Where the employment of a person is terminated by notice of termination or otherwise under the provisions of this Regulation, any payments to which the person is entitled under,
(a) retirement pension;
(b) sickness or disability insurance; or
(c) workmen's compensation,
shall not be payments for the purpose of subsections 40(6) and (7) of the Act and section 12 of this Regulation.
It is clear from the Regulation that persons terminated, who are in receipt of WC benefits or sickness or disability insurance and who are absent during the notice period, are entitled to termination pay on top of any payments received from WCB or S & A.
C. Frequently, significant layoffs precede a workplace closure. Consider, for example, the following hypothetical situation. On January 2, 1990, 60 workers are given notice of layoff in a manner which is consistent with their collective agreement and section 40 of the Employment Standards Act which deals with notice of termination. These 60 workers maintain their respective right to recall to employment. Indeed, all 60 workers maintain their seniority rights over the course of their layoff. None resign. On January 2, 1991, all of the 60 workers are still on layoff with recall and seniority rights when their entire workplace closes. One hundred active workers along with the 60 laid off workers are affected by the workplace closure. Note that throughout the scenario there is a valid collective agreement. Do the laid off workers have a right to severance pay?
This issue will be dealt with, to a certain extent, in a decision to be published shortly by Referee Don Franks, in a case involving brothers and sisters affected by the closure of Dominion Forge Company Limited in Windsor, Ontario,
In the meantime, it is the opinion of the CAW-Canada Legal Department that there is a very solid argument to support the proposition that the above mentioned 60 workers are entitled to severance pay. The argument is based on an employment standards decision called Abitibi Price (February 7, 1989) E.S.C. 2452 (Springate) upheld by the Divisional Court, November, 1989. The essence of our argument is that while the 60 workers may have received sufficient notice of termination under section 40 of the Employment Standards Act, they were never terminated during the course of their layoff for the purpose of severance pay, and they were never "terminated" as that word is contemplated by section 40(a) of the Employment Standards Act. The above mentioned 60 laid off workers remained employees of the company in question at least until the date of closure of their workplace, and as employees they are entitled to severance pay.
It is to be noted that sections 40 and 40a of the Employment Standards Act deal with separate issues and separate entitlements. Section 40 deals with notice of termination. Section 40a deals with severance pay entitlement. They are two distinct and different sections and care must be taken to insure that all affected workers receive the benefit of both sections.
D. The following problem may also appear in the difficult circumstances of a workplace closure. This problem has to do with calculating the amount of severance pay to which a worker may be entitled. What does one do for a worker who, hypothetically speaking, commences employment with a company in 1970 and is laid off in 1974? As a consequence of his/her layoff, the worker exhausts his/her right of recall and loses his/her seniority and is contractually terminated from employment. No severance pay is paid.
Then, in 1977, the hypothetical worker is re-hired by the same employer either at the old plant or at a new facility. The worker continues his/her employment until 1991 at which time the facility closes. Does the worker obtain 14 weeks severance pay entitlement (ie. 1977-1991) or 18 weeks severance pay entitlement (ie. 1970-1974 and 1977-1991).
According to Referee Fraser in a case called Domtar Inc. (December 17, 1985) E.S.C. 2021, the worker should obtain 18 weeks severance pay entitlement.
Referee Fraser found the phrase "completed years of employment" in section 40a(1c) refers to a workers total period of employment, whether or not it is discontinuous. The phrase "completed years of employment" does not refer to the last period of employment.
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