Says grievance arbitrable as unlawful 'contracting in' can arise even without express prohibition in collective agreement
When a utility company staffed its newly built control room through a chain of related entities and a freshly incorporated contractor, it set the stage for a dispute over who truly employs those workers.
In a preliminary award dated April 1, 2026, Arbitrator Deanna Webb ruled the Power Workers' Union's grievance against Milton Hydro Distribution (MHDI) arbitrable, finding that unlawful "contracting in" can arise even absent an express prohibition in a collective agreement.
Milton Hydro Distribution owns an Electrical Distribution Control Room in Milton, Ontario, the daytime management of which had long been subcontracted to offsite third parties. A 2021 strategic review produced a business case recommending an in-house 24/7/365 control room staffed with six staff and a supervisor.
After the union grieved a 2022 job posting for in-house control room operators and withdrew that grievance in June 2024, MHDI launched a request for proposals. The contract went to MEGS, a related entity, which subcontracted the work to Concentric Ltd., incorporated on July 31, 2024, by Daniel Kavanaugh, who had allegedly worked as a Systems Operator Specialist for Oakville Hydro while it was contracted by MHDI.
The union filed its grievance on February 13, 2025, alleging MHDI hired "contract employees" who ought to be recognized as MHDI employees under the collective agreement.
‘True employer’ framework
Daytime management was allegedly overseen by Kavanaugh, President and CEO of Concentric, alongside two Concentric employees. Unlike past subcontractors, all three worked onsite using MHDI equipment and alongside MHDI employees.
The MHDI directory showed all three under the "Control Room Operations Department" with @miltonhydro email addresses, and listed Kavanaugh as reporting to MHDI's Vice-President of Distribution Services.
MHDI argued Webb should apply the "true employer" framework from West Fair Foods Limited v. United Food and Commercial Workers Canada, Local 401, under which contracting in is permissible absent an express prohibition, so long as it is genuine and done in good faith. Webb found that even under that framework, the union had made out a prima facie case: if MHDI is found to be the true employer, the contracting in would not be genuine and would therefore violate the collective agreement.
Webb further noted that applying the union's proposed "implied restriction" framework, under which the absence of language in a collective agreement does not give an employer the right to contract in work because there is an implicit prohibition on doing so, leads to the same conclusion.
Scope clauses and limits of past practice
The collective agreement's all-employee scope clause at Article 1.01 recognizes the union as sole bargaining agent for all MHDI employees, subject to specific exclusions for supervisors and those above that rank, an executive assistant, students, and individuals on a government-sponsored program. Webb found this clause may support alleged violations of Articles 1 (Recognition), 2 (Management's Rights), 5 (Employee Categories) and 15 (Job Posting), and separately established a prima facie case that the control room work may constitute bargaining unit work.
On laches, Webb found the clock would only have begun running when the union became aware of Concentric's presence in the workplace. The Control Room Services Agreement between MEGS and Concentric became effective November 18, 2024, making the Union's February 13, 2025 grievance a delay of less than three months at most — not excessive, and not prejudicial to the Employer, particularly given the 2022 grievance that had already put MHDI on notice.
On estoppel, Webb found the union had consistently opposed contracting in since 2022, when it grieved the employer's attempt to bring in operators through Services Inc. There was no evidence, Webb held, that the employer could have reasonably believed the union agreed to contracting in and relied on it to its detriment. Webb concluded: "I find that the Union is not barred from proceeding with the Grievance based on the Doctrines of Laches or Estoppel, and that the Employer's motion in this regard is hereby denied."
