Preserving Fairness in Ontario's Construction Industry:

The Case for Keeping Section 1(4)

Provincial Building and Construction Trades Council of Ontario, AFL-CIO

October 1999

Preserving Fairness in Ontario's construction industry:
The Case for Keeping Section 1(4)

1. What it's all about:

A well-financed lobby, organized by eight of the largest general contractors is seeking the repeal of section 1(4) of the OLRA. Without section 1(4) construction employers could walk away from a signed collective agreement by setting up a shell company which is nominally a different employer and transferring both their work and their employees to that shell. Without section 1(4), unionization in the construction industry would be effectively voluntary, not on the basis of choice by employees, but on the basis of employer preference.

2. What the General Contractors Claim:

The eight general contractors behind the campaign to repeal section 1(4) make two claims. The first, and most important is that fairness requires that construction employers be allowed to choose whether to operate on a union or a non-union basis. The second claim is that allowing construction employers to make this choice will significantly reduce construction costs in Ontario. Neither of the claims can be support by either argument or evidence.

3. Fairness:

If section 1(4) is repealed, a construction employer could entirely escape its obligation to abide by the terms of a collective agreement or to bargain in good faith simply by changing its corporate guise. Employers would not have to change any of their

managers. Indeed, the construction work would be identical, in all respects.

In no other aspect of business life would a company be allowed to simply walk away form its legal obligations and carry on, without interruption, as if the legal obligations had never existed.

The claim that union members can work non-union for competing contractors is specious. In the first place, no evidence has been marshalled to show that this is a widespread practice. Secondly, a number of collective agreements in the ICI sector explicitly prohibit or restrict the ability of union members to work for non-union employers. There is no history of unionized employers raising complaints under the terms of these contract provisions.

4. A Recipe for Labour Conflict:

If section 1(4) of the OLRA is repealed, labour relations in the construction industry will be drawn rapidly into a vortex of increasing instability. Without section 1(4) construction unions will be unable to turn to the Labour Board to protect legally acquired bargaining rights. To protect those bargaining rights construction unions will be forced to take industrial action. This will be the only way to secure the representation rights that the OLRA confers, but the Board can no longer enforce. Work stoppages, work-to-rule, picket lines and secondary boycotts will become endemic in the construction industry. Given the multi-craft nature of construction projects, this will lead to ongoing disruptions of work.

5. Ratcheting Up the Workplace Accident Rate:

Comparative data supplied by the Construction Safety Association show that nonunion contractors have accident rates 21/2 times higher than unionized contractors. In Alberta, which has de-unionized most of its construction industry, the lost time accident rate in construction was almost 3 times higher than in Ontario. Indeed, the difference in accident rates between union and non-union contractors is so great that there should be separate rate schedules for the unionized sector.

6. WSIB Costs:

There is a direct relationship between WSIB costs and the accident rate. If construction in Ontario is de-unionized, construction industry claims will increase by approximately 2.5 times. This cost increase alone would nullify most of the labour cost savings that de-unionization might entail.

In 2000, WSIB premiums in construction will be approximately 8 % of covered payroll. Applying the expected increased in lost-time claims would drive average premiums to around 20 %. Such rates are not unprecedented. In some high incidence sectors in construction, premiums are currently over 20 % of covered payroll.

7. The Underground Economy

The general contractors claim that removal of section 1(4) will lead to a frictionless transfer of construction employment from unionized contractors to non-union shell companies. This reflects a profound misreading of the dynamics of the construction labour market. De-unionization will trigger a sharp increase in underground practices. The most common of these is to style an employment relationship as a sub-contract arrangement so as to enable the "sub-contractor" to avoid reporting income and the "contractor" to avoid paying El, WSIB and CPP contributions. Not only would legitimate contractors lose market share, they would also be left -with the burden of the WSIB's unfunded liability and the need to pay for the claims of underground workers whose 'employers" conveniently alter their status when an injury occurs.

8. Preserving the Skilled Labour Supply:

Virtually every collective agreement provides for negotiated training trust funds that support apprenticeship training and skills upgrading. Many construction unions operate sophisticated training centres. Without these training centres, for many trades there would be no capacity whatsoever in Ontario. In other trades, taking the union sponsored training out of the picture would dramatically reduce the supply of training.

If the general contractors were to succeed in de-unionizing construction, the long- term supply of skilled labour would be significantly undermined.

9. Construction Costs:

Owners and developers are free to select any general contractor. Competition between union and non-union contractors already keeps construction costs in check. If unionized contractors' costs get out of line, work gravitates to the non-union sector.

A comparison of industrial construction costs in the petrochemical industry shows that Sarnia - after the negotiation of a project agreement - now has lower labour costs than Joffre, Alberta. Over the past ten years, increases in construction costs in Alberta and Ontario were virtually identical.

10. Preserving Quality in Construction:

The belief that "a construction job should be done the right way" is deeply imbedded in the traditions and philosophy of the construction crafts. The condominium construction industry in B.C. is a pointed example of what happens when an industry is de-unionized and craft standards are discarded.

11. Preserving Negotiated Benefits:

In the construction industry, unions typically allocate approximately 23 % of the negotiated hourly rate to benefits. This is the major source of labour cost difference between union and non-union contractors. If the general contractors are successful in their bid to de-unionize the construction industry, benefit coverage in the construction industry will be virtually eliminated. The reliance on tax supported social programmes, especially during periods of unemployment, would increase sharply.