Canada: SCC Decision Regarding Wal-Mart In Québec A Cautionary Case For All Canadian Unionized Employers

Our colleagues in Québec have produced a helpful summary of the recent Supreme Court of Canada decision involving a Wal-Mart in Jonquière, Québec, found to have breached its statutory duties during the freeze period following certification of a bargaining unit.

After negotiations for a collective agreement reached a standstill, the Wal-Mart in question decided to close its doors, for what it alleged to be legitimate business reasons. The arbitrator appointed to decide the Union's grievance of the closure concluded that Wal-Mart's decision to close the store was not in the course of the company's ordinary business and therefore breached section 59 of Quebec's Labour Code (the "Code"), which prohibits any changes to "conditions of employment" during the statutory freeze period.

The arbitrator's decision was upheld by the Quebec Superior Court, but reversed in the decision of the Québec Court of Appeal on the basis that the arbitrator did not properly have jurisdiction over the closure grievance, which involved termination of employment and, as such, did not involve "conditions of employment". In effect, the Court of Appeal held that the closure of a business rules out the possibility that an employer can be found to have breached its statutory duties. The Court of Appeal relied in part on an earlier decision by the Supreme Court of Canada in the labour relations saga regarding the Jonquière Wal-Mart, concluding that, because the arbitrator did not have jurisdiction to compel Wal-Mart to continue its operations, no remedy was available for any alleged breach and therefore the grievance was not appropriate for arbitration under the Code.

The Supreme Court of Canada disagreed and reversed the Court of Appeal's decision. In doing so, the Court held, firstly, that termination of employment in connection with the closure of a business does not fall outside of the Code's prohibition on altering "conditions of employment":

[44] ... Like any other condition of employment, maintenance of the employment relationship remains a condition but is nevertheless subject to the employer's exercise of its management power. Therefore, in the words of Deschamps J.A., as she then was, [translation] "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.": Automobiles Canbec Inc., per Deschamps J.A., at p. 13.

Secondly, regarding remedial authority, the Court held that even though an arbitrator cannot compel an employer to stay in business:

[63]...In appropriate arbitrator can order reparation in kind, such as the reinstatement of a condition of employment. Where the circumstances do not lend themselves to such a remedy, however, the arbitrator can order reparation by equivalence. The latter remedy will be appropriate where the employer goes out of business either in part or completely, at least insofar as it is impossible to reinstate the employees dismissed in contravention of s. 59.

Finding that the closure of a store may properly engage s. 59 of the Code and that an arbitrator has remedial authority to decide a grievance under that section, the Court concluded as follows regarding the essential question to be analyzed:

[78]...An arbitrator hearing a case in such a context must, as in any other case concerning a decision that results in a change in conditions of employment, determine whether the employer's decision — to resiliate all the contracts of employment in this instance — is consistent with its past management practices or with those of a reasonable employer in the same circumstances.

To resolve this question, the Court makes it clear that an employer must be able to show that the decision to close a store was an authentic decision, not a "simulation" and consistent with its ordinary practice. The Court put it this way:

[82] If the employer wishes to avoid having the arbitrator accept the complaint filed under s. 59, therefore, it must show that the change in conditions of employment is not one prohibited by that section. To do so, it must prove that its decision was consistent with its normal management practices or, in other words, that it would have proceeded as it did even if there had been no petition for certification. Given that going out of business either in part or completely is not something that occurs frequently in any company, the arbitrator often has to ask whether a reasonable employer would, in the same circumstances, have closed its establishment: see Syndicat des travailleuses et travailleurs du Centre d'approbation de Nordia — CSN. Without suddenly becoming an expert in this regard, the arbitrator must also, therefore, above all else, be satisfied of the truthfulness of the circumstances relied on by the employer and of their significance.

Of particular importance in this decision was Wal-Mart's failure to adduce evidence to counter the Union's evidence that the decision to close the Jonquière store "was not consistent with the employer's past management practices or with those of a reasonable employer in the same circumstances."

The Jonquière decision is an important case for employers in all provinces of Canada. Indeed the Court specifically notes that there is an equivalent to s.59 of the Code in every province in Canada as well as at the federal level. Most significantly, the Court emphasizes that in the context of labour relations during the statutory freeze period, employers should tread carefully if considering the closure of a business. Strong objective evidence will be required to show the closure was a decision made in the ordinary course of business. If there is evidence that the employer has departed from past or reasonable management practices, and the employer does not or cannot explain the departure, arbitrators have the remedial authority to make potentially significant orders for "reparation by equivalence" to reinstatement.

The case has been remitted to the arbitrator for a decision on the remedy. We will keep you posted.

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