Canada: Supreme Court Of Canada Rules On Statutory Freeze Provisions In Labour Legislation

Today, the Supreme Court of Canada provided guidance on the proper interpretation and application of damages for breaches of statutory freeze provisions in labour legislation. These provisions prevent employers from changing terms and conditions of employment after a certification application is made by a union in respect of its employees or during the bargaining process. This case is significant to employers—the Court held that any change to the terms or conditions of employment during a statutory freeze can only be made if the change is consistent with the employer's past management practices or it is a change a reasonable employer would have made in the same circumstances. The change cannot be made because of the arrival of the union.

In the case before the Court, United Food and Commercial Workers, Local 503 v. Wal-Mart Canada Corp., Wal-Mart had opened a store in Jonquiere, Quebec, in 2001. The UFCW certified a unit of employees at the location in August 2004. The parties attempted to negotiate a collective agreement but failed. In February 2005, the Union applied to the applicable government ministry to appoint an arbitrator to settle the dispute. One week later, Wal-Mart told the ministry that it would be laying off all of the employees at the location for "business reasons" on May 6, 2005, although it actually did so one week earlier.

Years of litigation and recriminations followed. Wal-Mart was, among other things, accused of anti-union animus in its decision. The Union made applications under numerous sections of the Quebec Labour Code for a remedy, many of which were dismissed.

The Union also applied for a remedy based on the following section of the Code:

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 appointed to hear the application found in favour of the Union, stating that the dismissal of the employees was a breach of this section. The majority of the Supreme Court of Canada agreed.

In arriving at its decision, the court expounded on the rationale for the legislation and how it should be interpreted. It noted that similar legislation is found in each provincial jurisdiction, as well as in the federal jurisdiction, and that its interpretation of the Quebec legislation would be applicable throughout Canada.

The court gave the following guidance about this type of legislation:

  • "[T]he purpose of [the statutory provision] in circumscribing the employer's powers 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".
  • "The 'freeze' on conditions of employment codified by this statutory provision limits the use of the primary means otherwise available to an employer to influence its employees' choices: its power to manage during a critical period".
  • "By circumscribing the employer's unilateral decision-making power in this way, the 'freeze' limits any influence the employer might have on the association-forming process, eases the concerns of employees who actively exercise their rights, and facilitates the development of what will eventually become the labour relations framework for the business."
  • "[T]he true function of [the provision] is to foster the exercise of the right of association".
  • The provision... "gives employees a substantive right to the maintenance of their conditions of employment during the statutory period".
  • "[T]he prohibition for which [the provision] provides will apply regardless of whether it is proven that the employer's decision was motivated by anti-union animus".
  • "The essential question in applying s. 59 is whether the employer unilaterally changed its employees' conditions of employment during the period of the prohibition." The onus is on the union to prove that a unilateral change has been made.
  • A change in a "condition of employment" should be broadly interpreted. The "condition of employment" concept encompasses "anything having to do with the employment relationship on either an individual or a collective level" and includes the right to continued employment.
  • The right for an employee to be free from any change during the freeze is not absolute as the employer always has the power to manage its business. An employer may, therefore, terminate an employee's employment "if it does so for legitimate reasons within the meaning of the law." However, in the context of a statutory freeze, any legitimate reason must also "be consistent with the employer's normal management practices."
  • A change can be found to be consistent with the employer's "normal management policy" if:

(1) it is consistent with the employer's past management practices or, failing that,

(2) it is consistent with the decision that a reasonable employer would have made in the same circumstances. In other words, a change that would have been made but for the union organization or collective bargaining.

  • "In all the general labour relations schemes in Canada, therefore, although the employer does not lose its right to manage its business simply because of the arrival of a union, it must, from that point on, exercise that right as it did or would have done before then."

The Court concluded by finding that Wal-Mart's termination of all the location's employees was not consistent with its past management practices, restoring the arbitrator's decision, and remitting the matter back to the arbitrator to assess damages flowing from the breach.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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