Canada: The Wal-Mart Saga: An Employer Cannot Just Close Up Shop; He Will Have To Justify It Too

In the Supreme Court of Canada's June 27 decision relating to the closing in 2005 of Wal-Mart's unionized store in Jonquière, the Court clarifies the concept of the freeze on conditions of employment provided in s 59 of the Quebec Labour Code and sides with the union.

Background

In 2004, the employees of Wal-Mart's Jonquière store, which had opened in 2001, joined the UFCW, Local 503. Following unsuccessful bargaining, the union applied in February 2005 for the appointment of a grievance arbitrator to determine a first collective agreement. Three months later, Wal-Mart closed down the store "for business reasons."

Multiple proceedings were filed by the union and certain employees, most of which were resolved in favour of Wal Mart. One case involving a complaint for dismissal on account of union activity was unsuccessfully appealed to the Supreme Court in 2009 (Plourde v. Wal-Mart Canada Corp., 2009 SCC 54). Now, however, a complaint alleging that the store closure was in violation of the freeze on conditions of employment under s 59 of the Labour Code has been allowed.

Section 59 provides that between the filing of the petition for certification and the exercise of the right to strike or lock out or the determination of a collective agreement, an employer may not unilaterally change the conditions of employment. Following many procedural ups and downs, arbitrator Jean-Guy Ménard ruled in 2009 that the closure of a business and the dismissal of all the employees may be a violation of s 59 and that if the employer were unable to explain its actions, it would be in violation of s 59. On judicial review, the Quebec Superior Court upheld the arbitrator's finding, but subsequently, the Quebec Court of Appeal, in a unanimous ruling based on two different sets of reasons, overturned that decision on grounds that the closure of an enterprise does not constitute a change in the conditions of employment.

The decision

The Supreme Court, in a 5:2 majority ruling, granted the appeal, restored the arbitrator's decision and remitted the case to him to determine the appropriate remedies for the 200 employees concerned. The reasons of the majority were written by LeBel J, while the dissenting opinion was written jointly by Wagner and Rothstein JJ.

In his reasons, LeBel J points out that the freeze on the conditions of employment is intended to foster the right of association by limiting the employer's powers during the critical period when collective labour relations are nascent within the business. Section 59 is not concerned with an employer's anti-union conduct but provides for maintenance of the conditions of employment in effect when the petition for certification is filed. "Conditions of employment" is a flexible concept that encompasses both individual and collective conditions of employment, including the right to maintenance of the employment relationship. A union may rely on presumptions of fact to show that changes in the conditions of employment are not consistent with the employer's "normal management practices." The employer must then prove that the impugned changes are consistent with its past management practices or with practices that a reasonable employer would have adopted in similar circumstances.

By applying these principles and the test of reasonableness to the arbitration award, the majority distinguished this case from the 2009 decision in Plourde, in which the Court appeared to say that only the remedies provided under ss 12 to 14 of the Labour Code were applicable in the case of closure of a business, on the basis that the wording of s 59 of the Labour Code does not depend on the existence of an active business or a possibility of reinstatement of the employees. According to the majority, the arbitrator was correct in finding that the union had adduced sufficient evidence to conclude that the closure of the store was not consistent with the employer's past management practices or those of a reasonable employer in similar circumstances. In this connection, the majority noted the store's good financial position. The Court ordered that the case be remitted to the arbitrator to determine the appropriate remedy.

In their dissenting opinion, Wagner and Rothstein JJ said that s 59 cannot be applied to a closure of a business and that the employer's sole burden is to show that the closure is genuine and definitive. To compel the employer to justify its decision in any other respect would be inconsistent with Quebec law.

Conclusion

This decision of the Supreme Court, clarifying the employer's obligations during the freeze period imposed by s 59 of the Labour Code, has important consequences for non-unionized employers. Although the decision is based on Quebec law, its findings are likely to apply across Canada, since, as the majority of the Court indicates, the same mechanism exists in all the Canadian provinces as well as federally. In future, employers who are subject to petitions for certification will bear a greater burden and will have to justify their decision to close up shop. It will be interesting to see how "normal management practices" will be determined, especially in cases that do not involve chain stores, or what a "reasonable" employer would do in similar circumstances. Finally, it will also be interesting to see how the arbitrator Ménard deals with the remedies, since it will not be possible to re-open the store (even the union did not seek this) and all the employees who lost their jobs have already received two weeks' severance per year of service.

This decision seems to have breathed new life into the union movement. Lawyers for the UFCW described the decision as a "total victory" and union confederations such as the CSN have promised to "launch a union offensive in the private sector" declaring "... this judgment has put the wind in our sails."

Norton Rose Fulbright Canada LLP

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