July 9, 2014 By: Karine Dion
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The recent Supreme Court of Canada case, United Food and Commercial Workers, Local 503 v. Wal-Mart Canada Corp., on appeal from the Court of Appeal for Quebec, deals with the limit of an employer’s rights during the certification process. This decision may give employers cause to think twice before deciding to close their doors in order to avoid unionization in Canada.

In 2001, Wal-Mart opened its Jonquière location. In August of 2004, the Commission des relations du travail certified United Food and Commercial Workers, Local 503 (the ‘Union’), as the bargaining agent for the Wal-Mart employees working at that establishment.

As the Union and Wal-Mart could not agree on a first collective agreement, the Union applied to the Minister of Labour to have an arbitrator settle the dispute. Wal-Mart then decided to terminate the employment contracts of its nearly 200 employees who worked at the Jonquière location, and subsequently closed its doors on April 29, 2005, claiming this decision was ‘for business reasons’. Believing that the decision was instead based on anti-union considerations, proceedings were commenced against Wal-Mart.

The Union filed a grievance alleging that the dismissal of the employees constituted a change in their conditions of employment, in violation of section 59 of the Quebec Labour Code (‘Code’). Paragraph 1 of this section reads as follows:

From the filing of a petition for certification and until the right to lock out or to strike is exercised or an arbitration award is handed down, no employer may change the conditions of employment of his employees without the written consent of each petitioning association and, where such is the case, certified association.

The arbitrator, Jean-Guy Ménard, concluded that the termination of all of the employees’ contracts constituted a prohibited unilateral change in the conditions of their employment. This award was affirmed by the Superior Court, but overturned on Appeal, where the judges, relying on Plourde v. Wal-Mart Canada Corp., 2009 SCC 54 (CanLII), agreed that the section did not apply in the circumstances. The majority of the Supreme Court of Canada allowed the appeal and declared the arbitral award to be valid.

The Supreme Court was tasked with resolving the following issues:

  1. Can section 59 of the Code be used to challenge the termination of the contracts of employment of all the employees of an establishment?
  2. If so, did the arbitrator render an unreasonable award in concluding that, in this case, the terminations constituted an unlawful change in conditions of employment?

The ‘freeze’ on conditions of employment, which results from the application of s. 59, has three effects:

  1. It limits an employer’s influence on the association-forming process;
  2. It eases the concerns of employees who actively exercise their rights; and
  3. It facilitates the development of the labour relations framework for the business (at para. 35).

The union bears the onus of proving an employer’s anti-union conduct. Their burden will be discharged by showing the following:

  1. That a condition of employment existed on the day the petition for certification was filed or a previous collective agreement expired;
  2. That the condition was changed without its consent; and
  3. That the change was made between the start of the prohibition period and either the first day the right to strike or to lock out was exercised or the day an arbitration award was handed down, as the case may be (para. 39).

The Court reaffirmed that the phrase ‘condition of employment’ is given a large and liberal interpretation. It is a flexible concept that encompasses ‘anything having to do with the employment relationship on either an individual or a collective level’ [TRANSLATION].

Implicitly incorporated into the employment contract is the condition of continued employment. However, the condition is not absolute as an employer retains the power to manage its business, for example by terminating one or more employment contracts for ‘legitimate reasons’ or upon ‘sufficient’ notice of termination.

The Court accepted the words of Deschamps J.A., as she then was, in Automobiles Canbec inc.:

although dismissal is not, strictly speaking, a condition of employment, the condition of continued employment, and thus the protection against dismissal without a good and sufficient reason, can be included in the conditions of employment covered by section 59 L.C.’ [TRANSLATION]

To prove that the termination of the employees’ contracts was in fact a ‘change in conditions of employment’, the Union had to establish not only that Walmart modified how it ran its business, but also that this modification was inconsistent with its ‘normal management practices. This is because an employer maintains the right to exercise its management power, even with the arrival of a union, so long as is does so pursuant to its ‘normal management practices’. The employer must continue acting the way it acted, or would have acted, before the petition for certification was filed.

As a result, if the union submits evidence from which the arbitrator can infer that a specific change does not seem to be consistent with the employer’s normal management practices, a failure by the employer to adduce evidence to the contrary is likely to have an adverse effect on its case.

There are two ways for an arbitrator to find an employer to have acted in accordance with its ‘normal management practices’, and therefore within the parameters of section 59 of the Code:

  1. Its decision is consistent with its past management practices; or, failing that
  2. Its decision is consistent with the decision that a reasonable employer would have made in the same circumstances. 

The Supreme Court also discussed the scope of the arbitrator’s powers. The Quebec legislature decided that complaints of unlawful changes to conditions of employment should be dealt with as if they were grievances. Thus, arbitrators ruling on alleged violations of section 59 have the power to order reparation in kind, such as the reinstatement of a condition of employment (i.e., reinstatement), or reparation by equivalence, such as damages. The latter remedy is appropriate where the employer goes out of business either in part or completely, making it impossible to otherwise reinstate the dismissed employees. Unlike s. 15 of the Code, which was the section at issue in Plourde, the case relied on by the Court of Appeal for Quebec and the dissenting judges at the Supreme Court, section 59 contains nothing that would support a conclusion that its applicability depends on the existence of an active business or the possibility of reinstatement to be applicable. As such, Plourde, cannot lead to the conclusion that the closure of a business rules out the possibility of applying section 59 of the Code.

An arbitrator, dealing with a complaint based on section 59 of the Code, must be given considerable discretion that calls for deference on the part of the ordinary courts. In the instant case, Arbitrator Ménard held that, in the circumstances, the termination of all the contracts of employment constituted a change in the employees’ conditions of employment within the meaning of section 59. He noted the following:

It was in fact reasonable to find that a reasonable employer would not close an establishment that ‘was performing very well’ and whose ‘objectives were being met’ to such an extent that bonuses were being promised.

As such, the Supreme Court considered the arbitrator’s award reasonable, and thus, unreviewable.

The Supreme Court opined that the purpose of section 59 is ‘not merely to strike a balance or maintain the status quo, but is more precisely to facilitate certification and ensure that in negotiating the collective agreement the parties bargain in good faith’. Overall, the function of section 59 is to foster the exercise of the right of association by maintaining employees’ conditions of employment during the ‘freeze’, without depriving the employer of all of its management power.

The mechanism codified in section 59 is not specific to Quebec, as it exists in all provinces of Canada and at the federal level (see, for example, section 43(16) of Ontario’s Labour Relations Act and section 24(4) of the Canada Labour Code). In all the labour relations schemes in Canada, an employer does not lose its right to manage its business simply because of the arrival of a union, but must, after such arrival, exercise that right as it did or would have done before then. Employers will now need to think twice before deciding to close the doors of a Canadian location in order to avoid unionization.

This content is not intended to provide legal advice or opinion as neither can be given without reference to specific events and situations. © 2017 Nelligan O’Brien Payne LLP.

Service: Labour Law