• authored by Darryl Gehlen
  • published Sun, May 11, 2003

Fundamental Control - A Fundamental Farce?

Mergers, acquisitions, re-structuring, "focusing on core competency", public private partnerships, contracting out, privatization, etc.- these terms are now commonplace and any number of corporate manipulations can be described by one of them. Many are legitimate, but as we have seen by a number of corporate scandals, many are not. When labour disputes evoke the question, "Who has responsibility for what?" the answer is often arrived at by asking, "Who has fundamental control?" In the era of globalization and the declining fortunes of workers, the issue of just what constitutes "fundamental control" should be held as one of unionism's most pressing concerns. Recently this logic was applied at the BC Labour Relations Board concerning a labour dispute between UFCW 1518 and two other parties. Or was it?

As we go through the issues of fundamental control, bear in mind two aspects pertaining to the union, UFCW Local 1518, that represents the warehouse workers. First, the warehouse workers have an extremely low regard for this union, primarily due to the union's conspicuous lack of support throughout their dispute with Overwaitea Food Group. If you have been following the details of the dispute at this web site, you'll know why. Second, this local seems determined not to pursue this case through the courts although it has promised in writing that it would do exactly that. Ivan Limpright, UFCW 1518 Secretary Treasurer, has informed members that a "legal opinion" has indicated that there is no basis on which to proceed. The warehouse members are not new to this tactic of hiding behind legal advice and regard it as highly suspect. You can decide for yourself.

The question ultimately was this: which of the two parties had fundamental control? Was it Loman Warehousing Ltd. or was it Overwaitea Food Group? The circumstances that led to the dispute and the two BCLRB decisions (BCLRB No. B391/2002 and B392/2002) that answered that question, make a most instructive case study. Also addressed was a similar question: was this a bona fide "sale" of a business or a "contracting out" disguised as a sale? We'll get to why this is important later.

The labour dispute in question occurred at a custom built warehouse in Langley, British Columbia. Prior to its construction in 1980, the retail grocery chain had warehoused out of a number of out-dated and cramped facilities. Brent Louth, Vice President of Operations for Overwaitea Food Group (OFG), described the new warehouse this way: "This warehouse was larger than the warehouses previously operated by Overwaitea and was designed to enable Overwaitea to consolidate its warehouse operations into one building during the expansion of its stores in British Columbia." Yes, the warehouse was larger, much larger - about ten acres under one roof. Once it was in operation, just about anything sold at a Save-On Foods or Overwaitea Foods store came from this warehouse. The facility became respected as one of the most efficient in North America. Everything was roses, both for the workers and the company's bottom line.

Then, in 1989, a single event changed everything - UFCW gave a new competitor to British Columbia huge concessions. Enter the "two tiered" collective agreement that saw new-hires become second-class employees, with part-time hours and radically lower wages than full-timers. Predictably, the immediate response from every other grocery chain was, "Me too, level playing field!!!" UFCW apologists offered the view that the new-hires would eventually work their way up to full-time wages and benefits. This would turn out to be nothing more than rhetoric as employers, quite predictably, did everything they could to prevent part-time employees from achieving full-time status. Quality of work for retail food workers has gone south ever since.

Known as the "777 agreement" after the UFCW Local 777 which signed the radical agreement, it signaled the end of quality work in the industry. Full-time work was transformed almost overnight into a fiscal liability to be eradicated ASAP. This human resource dynamic came knocking on the warehouse doors shortly thereafter.

UFCW prefers not to mention the 777 agreement. For example, when negotiations predictably became difficult after the 777 agreement, UFCW 1518's Ivan Limpright, in a June 26, 1992 letter to the warehouse members, describes the labour environment this way: "At the end of the day, in closing argument, we stressed that the ten (10) year history of this Collective Agreement would serve as a test case scenario as to why an agreement of this type does not promote a harmonious operation or a harmonious industrial relations atmosphere. We pointed out that our membership had suffered greatly at the hands of our employer. We also pointed out that after ten (10) years of labour peace of performing our end of the deal, that Overwaitea had chosen to nit pick to the point that today we are arguing over the pettiest of issues. Overwaitea has chosen now, and in the past, to practice industrial relations that some would say are in reality Industrial Warfare." Not a word about the 777 agreement.

A brief history (taken from union sources and the "will say statement" of Overwaitea Food Group's Brent Louth) of the contracting out that followed the 777 agreement:

  • 1989 - On February 12, the 777 collective agreement is ratified.
  • 1989 - In March, Overwaitea approaches UFCW 1518 president Brooke Sundin and demands immediate rollbacks of $3/hr for all 1518 employees, including the warehouse. Sundin immediately rejects the demand.
  • 1989 - BC Ice and Cold Storage becomes Versacold
  • 1990 - Contracted out to Versacold for "refrigerated food products".
  • 1990 - Contracted out bulk foods to Turner Distribution Systems.
  • 1990 - Contracted out to Associated Grocers in Calgary all products destined for southeastern BC.
  • 1991 - Contracted out produce to Tom Yee Produce Inc.
  • 1991 - According to UFCW 1518 documents, "In 1991, as negotiations for a new Collective Agreement were to get underway, warehouse members were hit hard by the news that of 340 workers, 116 would be laid off, and another 60 would be reduced to 16 hours per week."
  • 1992 - Overwaitea warehouse "sold" to Loman Warehousing Ltd.
  • 1993 - Overwaitea sells Associated Grocers in Calgary to Linkfast.
  • 1993 - Contracts out to Turner Distribution Systems the HABA, GM, and tobacco.
  • 1995 - Contracts with Axis Logistics for produce, formerly done by Tom Yee Ltd.
  • 1999 - Contracts with EV for all perishable products formerly done by Versacold and Axis.
  • 2000 - Contracts with EV for non-perishable products formerly done by Turner Distribution
  • 2001 - Contracts with EV for goods destined for southeastern BC formerly done by Linkfast.
  • 2002 - Contracts all work done by Loman to EV Logistics, a partnership of Excel and Versacold.
  • 2002 - Shortly after closing the Langley warehouse doors, Loman Warehousing files for bankruptcy.

Yes, there have been more than a few name changes. Companies come and companies go. Here we see the OFG version of the pursuit of worker flexibility - the ability to sell them off or change them like yesterday's dirty underwear. B.C.'s Very Own Food People? And Proud Of It?

Once again, distribution was scattered to various warehouses as far away as Calgary. All that remained at the Langley warehouse was the dry grocery - canned goods, pet food, sugar, pop, juice, paper products, seasonal promotions, and the like. Then in September of 1992 the remaining workers are told that they have been "sold" to a new company and that they no longer work for Overwaitea Food Group. Nothing really changes - several warehouse management faces exit and are replaced by far fewer new management faces. Perhaps the most important change, and probably the point of the whole exercise, is that the name on the paycheck no longer said Overwaitea Food Group. But the warehouse workers do the same job in the same building with the same machinery for the same reason - warehousing for Overwaitea Food group.

Here is where the issue of fundamental control gets interesting. Just what was sold? Very little it turns out.

In the May 5, 2002, edition of the Langley Times, reporter Al Irwin states, "Connie Smith, vice president of Loman Warehousing, of 19855 92A Ave. in Walnut Grove, said the affected workers were Overwaitea employees until 1992, when Loman purchased the warehouse." As vice president, you might think that Connie Smith knew what she was talking about. The fact is that Loman never bought much of anything and certainly not the warehouse. What did they buy? According to LRB decision B392/2002, at paragraphs 6 & 7, the sale is described as follows:

In September of 1992, Overwaitea purported to sell its dry goods warehousing business ("Warehousing Business") to Loman. Three documents were critical to the transaction: a purchase and sale agreement (the "Purchase and Sale Agreement"), a warehouse agreement (the "Warehouse Agreement"), and a lease (the "Lease"). The purchase and sale agreement provided for a sale of the assets related to the Warehousing Business from Overwaitea to Loman. These assets included rolling stock, office equipment, video cameras, and other equipment at the Langley Warehouse. In the Warehouse Agreement, Loman agreed to warehouse dry goods for Overwiatea for a specified period. The Warehouse Agreement was later extended until September 2002. The Lease provided for the lease of a portion of the Langley Warehouse to Loman.

Addressing the issue of what was sold, one is better informed by asking, "who owned what?" The warehouse itself and all the storage racking in it remained the property of OFG. Of course, so was all the stock that flowed through the warehouse. A great deal was made of the fact that some stock was warehoused for other "customers", but this represented an incredibly miniscule percentage and strikes me as more about form than function - i.e., it provided the appearance, at least in law, that the Loman Warehousing was a bona fide business separate from OFG, that it did not function solely as a warehouse for OFG.

As for the items listed as "sold" to Loman, again the question is, "who owned them?" If you have an outstanding loan for a car, is that car yours? More to the point, Personal Property Security Agreements (PPSA) listed a great number of items "sold" to Loman as collateral including "rolling stock, office equipment, and other equipment". What did Loman really own? Perhaps the best thing it owned was an agreement that saw a weekly check come across the street from OFG corporate head office to Loman Warehousing LTD. for $345,000. That's right, three hundred and forty-five thousand loonies every week. No doubt the various creditors saw this as sufficient cause to grant credit. I grant you, the arrangement itself is not cause for alarm or suspicion. However, after the events unfold in their entirety, it adds more than just another interesting color to the picture.

What did OFG get for that weekly paycheck? If you think it was efficient warehouse management, you would be very wrong. Very few documents would speak directly to what Loman Warehousing did for that paycheck. But a few would eventually surface. Although the warehouse workers didn't know it on the day Loman Warehousing LTD. took over, they would be caught in the middle of a lengthy and ugly script that combined the Alice in Wonderland confusion of what was real and what was an illusion, with the classic Shakespearean elements of power, politics, rhetoric, greed, and betrayal. Nor would anyone ever ask them for comment or factual statement.

In Part two, we'll look at the elements of control that time has brought to the surface. You can decide for yourself what was real and what was an illusion.

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