The Supreme Court of Canada has ruled that Wal-Mart Canada Corp. violated Quebec’s labour laws when it shut a store in Jonquière almost a decade ago, just after its employees organized a union.
Facts of the case and lower court decisions
Wal-Mart opened a store in Jonquière, Quebec, in 2001, and three years later the workers formed a local of the United Food and Commercial Workers (UFCW) union. In August 2004, the Commission des relations du travail certified UFCW Local 503 as the bargaining agent for the 190 employees.
Wal-Mart and the union met several times to negotiate the terms of a first collective agreement. However, these meetings were unsuccessful and on February 2, 2005, the union applied to the Minister of Labour to appoint an arbitrator to settle the dispute that remained between the parties. One week later, Wal-Mart informed the Minister of Employment and Social Solidarity that it intended to close the store “for business reasons.” On April 29, 2005, the store was closed and 200 employees were terminated and out of work.
The union and the employees believed that the decision to close was based on anti-union considerations, and they brought a series of proceedings against Wal-Mart.
The union launched a grievance alleging that the dismissal of the employees constituted a change in their conditions of employment that violated section 59 of the Labour Code. Under that provision, employers are not allowed to change their employees’ conditions of employment without the written consent of the certified union while a collective agreement is being negotiated. This obligation begins as soon as there is a petition for certification.
The arbitrator decided that Wal-Mart had not proved its decision to dismiss was made in the ordinary course of its business, and therefore the termination of the employees’ contracts constituted a unilateral change that was prohibited by section 59 of the Code.
This decision was upheld by the Superior Court, but. However, it was overturned by the Court of Appeal. In fact, the Court of Appeal found that section 59 did not apply in this case. Moreover, Wal-Mart won most of the additional court challenges, including a 2009 decision that said the employees had used the wrong labour law provisions to fight the company’s actions.
And then the case made it to the Supreme Court of Canada.
Supreme Court of Canada decision
The Supreme Court had to determine whether section 59 of the Code applies in situations involving the complete and permanent closure of a business. Only if so, would it be necessary to determine whether the closure of Wal-Mart’s Jonquière store constituted a change in conditions of employment contrary to section 59 of the Code.
Wal-Mart had argued that the closing was for business reasons, not because it was trying to break the union. But the Supreme Court agreed with the arbitrator that a reasonable employer would not close this establishment, which was performing well and was even promising to pay bonuses to employees.
The Court concluded:
- It is clear that section 59 of the Code exists not only to maintain the status quo during the negotiation of a collective agreement, but also to facilitate certification and ensure that the parties bargain in good faith.
- Under the provision, the union was required to show there was a unilateral change in working conditions. This goal could be accomplished by showing:
- A condition of employment existed on the day the petition for certification was filed or a previous collective agreement expired
- The condition was changed without its consent and
- The change was made during the prohibition period
- It is important to understand what a “condition of employment” is. The phrase is a flexible one that encompasses anything having to do with the employment relationship on either an individual or a collective level.
- The union had to show sufficient evidence to prove that the alleged change was inconsistent with the employer’s normal management practices. However, nothing prevented the arbitrator from drawing presumptions of fact from the whole of the evidence presented. For example, if the union submitted evidence from which the arbitrator could infer that a specific change did not seem to be consistent with the employer’s normal management practices, a failure by the employer to adduce evidence to the contrary was likely to have an adverse effect on its case.
- Changes are consistent with the employer’s “normal management policy” if they are consistent with the employer’s past management practices or, alternatively, consistent with the decision that a reasonable employer would have made in the same circumstances (the arbitrator had to be satisfied that those circumstances existed and were genuine).
- Arbitrators deciding a case like this have broad remedial powers. These powers range from reparation in kind to reparation by equivalence. Reparation by equivalence is appropriate where the employer goes out of business either in part or completely (making it impossible for employees to be reinstated).
- Arbitrators have significant discretion when making the decision. Other decision makers have to show deference to the arbitrator. In fact, a court can only change the award if it is unreasonable.
The Supreme Court found that, in this case, the arbitrator’s award was one of the possible, acceptable outcomes which were defensible in respect of the facts and law. It confirmed that the arbitrator was right to decide that Wal-Mart was not able to show that the closure was made in the ordinary course of the company’s business. It was reasonable to find that a reasonable employer would not close an establishment in this case. The Jonquière Wal-Mart store was experiencing no financial hardship whatsoever. It was reasonable to find that closing the store and thereby terminating the employees’ contracts was a change in the conditions of employment that violated section 59 of the Code.
Interestingly, justices Rothstein and Wagner JJ dissented, arguing that section 59 of the Code does not apply in situations involving the complete and permanent closure of a business:
- There was a genuine closure of the store: section 59 requires the employer to justify reasons for closure, and this is inconsistent with the employer’s right to close its business for any reason.
- Section 59 could not possibly apply to businesses that are closing because it presupposes the existence of an ongoing business: the provision was designed to facilitate the conclusion of a collective agreement within an existing employment relationship, but it is not designed to maintain the employment relationship.
- There was no appropriate remedy for the arbitrator because there was a business closure. Appropriate remedies involve restoring the status quo but this was not available (an arbitrator could not order an employer to reopen a store). The employer already compensated the employees by paying severance.
This case was a long time coming—almost 10 years after the closure. Legal counsel for the union stated the following about the message that was sent to employers who are tempted to close their business to avoid dealing with unions:
Therefore, the appeal was allowed and sent back to the arbitrator to determine the appropriate remedy.
The main lesson in this case is that it is never a good idea for employers to try and avoid dealing with a union by closing their business. It will be very obvious if the announcement of a business closure takes place right after a union comes into a workplace and the employer must negotiate with the union (as in this case). Freedom of association is a fundamental right!
There are provisions in labour relations legislation that require employers to keep the status quo regarding working conditions during the negotiation of a collective agreement. These provisions exist in order to limit any influence the employer might have on the process, ease employees’ concerns and facilitate the development of the future labour relations framework for the business.
Unions can prove an employer violated this provision by showing that there was a unilateral change made to the conditions of employment. Unless the changes are consistent with the employer’s normal management policy (consistent with past management practices or something a reasonable employer would genuinely have done in the same circumstances), the employer could be on the hook.
It will be interesting to see what kind of remedy the arbitrator awards. As can be seen from this case, labour arbitrators have broad remedial powers and significant discretion.
In the Globe and Mail, David Doorey, a professor of labour and employment law at York University in Toronto, said the Supreme Court made it very clear that that Wal-Mart’s mass termination of employees and closing of the store was not “normal” business operations, and this could have broader implications across the country.
Still, Prof Doorey said, the decision won’t likely have a substantial impact on labour organizing, because “our laws have long prohibited an employer from closing and firing its work force to avoid a union.” At the end of the day, “the Quebec employees have still lost their jobs for exercising their legal rights to join a union. [The Supreme Court decision] is a victory for those workers, but a small one,” he said.