Municipal Government Construction Employer Certification and Proposed Amendments to the Labour Relations Act, 1995 {2015-F-42) (Our File: A01-162)

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1 r June 4, 2015 The Regional Munlcfpallty of Ourtlam Corporate Services Department Legislative SeMces 605 ROSSLANO RO. E. POBOX623 WHITBY ON L 1 N 6A3 CANADA nn Fax: Matthew L Gasket! Commissioner or Corporate Services The Honourable Kathleen Wynne, Premier Main Legislative Building Queen's Park Toronto ON M7A 1A1 RE: Municipal Government Construction Employer Certification and Proposed Amendments to the Labour Relations Act, 1995 {2015-F-42) (Our File: A01-162) Premier Wynne, please be advised the Finance & Administration Committee of Regional Council considered the above matter and at a meeting held on June 3, 2015, Council adopted the following recommendations of the Committee: "A) That the Province of Ontario be requested to make amendments to the Labour Relations Act, 1995 ("LRA"), as necessary, to ensure that municipal public procurement processes are open to all qualified bidders and are conducted in a fair, open and competitive manner, by excluding municipalities and other public sector entities from being considered construction employers as described under the LRA; B) That the Region endorse the position of the Association of Municipalities Ontario (AMO) as indicated in its March 17, 2015 correspondence to the Minister of Labour (Attachment 1) as it relates to exclusion of municipal governments from the construction employer provisions of the Act, which provides that: 'AMO believes it is in the public interest to exclude municipal governments from the "construction employer" provisions in the Labour Relations Act. Municipal governments provide a broad range ofservices to their communities and cannot be said to operate a construction business or to primarily engage in construction-related business. They should have the autonomy to choose the most fiscally efficient firms to undertake critical infrastructure and construction projects in their communities. '; C) That Report #2015-F-42 of the Commissioner of Finance be forwarded to the Premier of Ontario, the Minister of Labour, local MPP's, AMO and Durham's area Municipalities; and Ifthis information is required in an accessible format, please contact the Accessibility Co-ordinator at ext

2 0) That Durham's MPPs be asked for their support and comments back within 6 months.n As directed, please find enclosed a copy of Report #2015-F-42 of the Commissioner of Finance. Deb Bowen, AMCT Regional Clerk/ Director of Legislative Services DB/mj t Attach. c: Honourable Kevin Daniel Flynn, Minister of Labour C. Elliott, MPP, Whitby/Oshawa G. Anderson, MPP, Durham Honourable T. MacCharles, MPP (Pickering/Scarborough East) J. Dickson, MPP, Ajax/Pickering J. French, MPP, Oshawa L. Scott, MPP, Haliburton/Kawartha Lakes/Brock G. McNamara, President, Association of Municipalities of Ontario A. Greentree, Clerk, Municipality of Clarington C. Harris, Clerk, Township of Scugog D. Leroux, Clerk, Township of Uxbridge D. Shields, Clerk, City of Pickering D. Wilcox, Clerk, Town ofwhitby M. de Rond, Clerk, Town of Ajax S. Krane, Clerk, City of Oshawa T. Gettinby, CAO/Clerk, Township of Brock R.J. Clapp, Commissioner of Finance Page 2 of 2

3 If this information is required In an accessible format, please contact oo ext The Regional Municipality of Durham Report to: The Finance and Administration Committee From: R.J. Clapp, Commissioner of Finance M.L. Gaskell, Commissioner of Corporate Services Report#: 2015-F-42 Date: May 26, 2015 SUBJECT: Municipal Government Construction Employer Certification and Proposed Amendments to the Labour Relations Act, 1995 RECOMMENDATIONS: THAT the Finance and Administration Committee recommend to Regional Council that: 1. The Province of Ontario be requested to make amendments to the Labour Relations Act, 1995 (ulra"), as necessary, to ensure that municipal public procurement t processes are open to all qualified bidders and are conducted in a fair, open and competitive manner, by excluding municipalities and other public sector entjtfes from being considered construction employers as described under the LRA. 2. The Region endorse the position of the Association of Municipalities Ontario (AMO) as indicated in its March 17, 2015 correspondence to the Minister of Labour (Attachment 1) as it relates to exclusion of municipal governments from the construction empk>yer provisions of the Act, which provides that AMO believes it is in the public interest to exclude municipal governments from the "construction employer" provisions In the Labour Relations Act. Municipal governments provide a broad range ofservices to their communities and cannot be said to operate a construction business or to primarily engage In constructionrelated business. They should have the autonomy to choose the most fiscally efficient firms to undertake critical Infrastructure and construction projects in their communities." 3. This report be forwarded to the Premier of Ontario, the Minister of Labour, local MPP's, AMO and Durham's area municipalities. 55

4 REPORT #2015-F-42 Page OVERVIEW The LAA establishes the legislative framework for the Province's labour relations system. It includes provisions relating to the certification and decertification of trade unions, elements of collective agreements, the transfer of bargaining rights, as well as the procedures which govern the collective bargaining process. For the purposes of acknowledging certain unique attributes of the construction industry, special provisions addressing the construction Industry are contained in the LAA. To-date, several large municipalities, including City of Toronto, City of Sault Ste. Marie, City of Hamilton and more recently, Region of Waterloo, have been deemed 'construction employers' by the Ontario Labour Relations Board ("OLRB") as a result of employees signing membership cards with an external construction union. The effect of this is to cause these municipalities to be bound to various Province-wide and local collective agreements for construction trades. Most recently, in December 2012 the Region of Waterloo was the subject of a successful certification application by an external construction union (the carpenter's Union"). This action took place as a result of two municipal employees signing membership cards with the / Carpenter's union during an open period. These employees were worklng on the weekend engaged In what the Carpenter's Union argued was "carpentry work" [putting together a prefabricated garden shed]. The effect of this simple act ultimately resulted in the certification of the Region of Waterloo as a 'construction employer' while certifying the union local as bargaining agent for the employees. An employer can be certified and bound to a local and/or provincial collective agreement in the construction Industry if the construction work in question is being performed on the day that the Union applied to the OLRB for certification. Only those employees performing the construction work on the day of the application are permitted to decide whether the employer is certified or not. As seen in the Region of Waterloo situation, this decision can be made by as few as two employees regardless of the number of employees who overall perform that work. The current definition of construction employer has been expansively interpreted by the OLRB. It can apply to an employer even if their primary business is not construction and their primary reason for engaging In construction activity was not for profit. An employer can be deemed to be a "construction employer" if: a) they engaged In construction work, (without regard for the size of the project), on the day that the Union applies for certification and were certified; orb) they are deemed a successor or related employer to an organization that is bound or becomes bound to a construction collective agreement. 56

5 REPORT #2015-F-42 Page 3. It is possible to challenge this status as a construction employer at the OLRB, by asking the OLRB for a declaration that they are a "non-construction employer" pursuant to section 126 and 127.2(2) of the LAA. If successful, this has the effect of terminating ties to the construction union and the applicable. local or provincial collective agreement. However, the test for determining whether an employer is a "non-construction employer" is limited, narrow and specific. To date, there has been limited success in decertifying and no municipal government has been successful in obtaining exemption from the OLRB through application for "non-construction employer" status. For those municipalities which are caught by these provisions, they are deemed 'construction employers' and are bound to the terms of the applicable local and/or province-wide collective agreement(s). This means they have no discretion in the setting or negotiation of wages, language or other terms of the agreement. The affected municipalities are also subject to the contract-out clauses of the collective agreement which may only permit them to use contractors affiliated with that trade union. Further, many collective agreements contain a "cross-over" clause which binds employers to different collective agreements in different sectors, trades and sometimes different unions. These provisions effectively create a closed tendering process through the disqualification of non-signatory firms which may effectively include both non-unionized and non-afflllate unionized firms. This would apply for all applicable sector work performed by and for the municipality. Previous attempts had been made to close this legislative loophole at the individual municipal level and later with the tabled Bill 73: Fair andopen Tendering Actwhich was designed to exempt municipa.lities and school boards from the rules governing the construction sector as outlined within the LAA. Despite a number of municipal resolutions indicating support for the bill in addition to support by the Large Urban Mayor's Caucus of Ontario (LUMCO), the Ontario Chamber of Commerce (OCC), the Mayors and Regional Chairs of Ontario (MARCO), AMO and other labour organizations, the bill was defeated in the legislature on September 19, However, the relatively recent developments at Region of Waterloo have again focused attention on the construction provisions of the LAA and how they may impact procurement by municipal governments and other public sector entities. RecentJy, the Association of Municipalities Ontario (AMO) sent a letter dated March 17, 2015 to the Ontario Minister of Labour (Attachment 1), indicating its support for excluding municipal governments from the 'construction employer' provisions of the LRA. Following a review of available information and consultation with neighboring municipalities, Regional staff are recommending that the position of AMO be endorsed by Regional Council and that the Province be requested to amend the LRA, to exclude municipalities and other public sector entities from being considered construction employers. 57

6 REPORT #2015-F-42 Page 4. In the alternative, AMO's goal could be achieved by the Province amending section 126 of the LRA in order to broaden the definition of a "nonconstruction employe,.n to take into account factors such as the scope and quantity of the construction work being performed for compensation. By broadening this definition, the Province could effectively achieve an exclusion of municipalities and other public sector bodies which are engaged In the ordinary course of their statutory responslblllties. 2.0 IMPACTS TO PROCUREMENT AND COMPETITIVE BIDDING Based on the OLRB's legislative Interpretation, municipalities would be generally treated as business, or private unionized construction employers, under the LAA. However, the purpose and mandate of municipalities is different than that of commercial entitles and should be recognized as such under the LRA. Munlcipa.I construction contracts serve a primary function of building and maintaining public works at the highest standards possible at the best value for the taxpayer. It is the responslblllty of municipalities to ensure that public funds are spent in a manner which maximizes value for money and ensures that the solicitation, bidding and awarding process is done in a fair, open and competitive environment ensuring that all suppliers are treated fairjy and equally. The restriction of competition and the narrowing of the pool of potential bidders and qualified firms for construction tenders, in particular where specialized labour Is required, can be expected to increase project costs. This may also have the effect of potentially restricting local firms not signatory to applicable Province-wide collective agreements from bidding on municipal projects. Given the prevalence of contracting out construction projects by municipal governments to private sector firms, in particular where specialized labour is involved, the potential risks and Implications of a restricted pool of bidders which limits the availability of well-qualified firms for construction projects are significant. Relying on a pool of bidders accessible solely based on union affiliation rather than adhering to an open process accessible by all qualified bidders, including both union and non-union firms, can pose significant risks to public open procurement in a number of areas, Including, but not limited to, reduced competitive pricing and barring non-affiliated firms from municipal construction opportunities. 58

7 REPORT #2015-F-42 Page CONCLUSION Municipalities have an obligation to operate in the public interest in an open and transparent manner. Nowhere is this more evident than In the procurement of goods and services with the responslblllty for ensuring best value for use of public dollars. For the purposes of ensuring that municipal public procurement processes are left open to all qualified bidders and are conducted in the most fair, open and competitive manner. Regional staff are recommending that the position of AMO be endorsed by Regional Council and that the Province be requested to make amendments to the Labour Relations Act, 1995, as necessary, to exclude municipallttes and other public sector entitles from being considered construction employers as described under the Act. The Commissioner of Works concurs with the recommendations. I' R.J. Clapp, CPA, CA Commissioner of Finance M.L. Gaskell, Commissioner of Corporate Services Recommended for Presentation to Committee G.H. Cubltt, M.S.W. Chief Administrative Officer Attach. 59

8 Attachment to Report 2015-F-42 A ~ CD Associalianof Municipa6lies Ontario Office of the President Sent via kevin.flynn@ontario.ca March 17,2015 The Honourable Kevin Flynn Minister of Labour 400 University Avenue 14th Floor Toronto, ON M7A 1T7 Dear Minister Flynn: AMO Is a strong supporter of municipal procurement processes that are fair, open and competitive. The opportunity to openly tender projects keeps costs efficient in a time when municipal fiscal resources are being stretched. A loophole in Ontario's labour RelationsActthat allows municipalities to be treated as "construction employers" runs counter to this objective. Municipal governments currently deemed "construction employersn are prohibited from openly tendering construction projects and we understand that the process to apply for a "nonconstruction employer'' declaration is time consuming and expensive. We understand that to date, no municipal government has been exempted through this process. As a result, many qualified companies and workers are not allowed to.bid or work on projects In their local communities. Restricted tendering increases project costs, harms local economic development and prevents the public from getting the best value for its tax dollars. AMO believes it is in the public interest to exclude municipal governments from the "construction employer" provisions in the labour RelationsAct: Municipal governments provide a broad range of services to their communities and cannot be said to operate a construction business or to primarily engage in construction-related business. They should have the autonomy to choose the most fiscally efficient firms to undertake critical infrastructure and construction projects In their communities. Yours sincerely,.e#la- Gary McNamara AMO President cc: The Honourable Ted McMeekin, Minister ofmunicipal Affairs and Housing The Honourable Michael Harris, MPP, Kitchener-Conestoga 200 University Ave. Suite Tel Toll Frei! In Ontario Toronto ON, MSH 3C6 Fax sn.42g.es21 amopresidsnt@amo.an ca 60