On January 27, 2006, the Supreme Court of Canada rendered two much-anticipated decisions confirming that unionized employees who are permanently dismissed for economic reasons are not entitled to receive reasonable notice prior to termination, or payment in lieu thereof, pursuant to the Civil Code of Québec ("Civil Code").
Following a decision to close their businesses for financial reasons, in 1999 and 1998 respectively, two Québec-based companies dismissed their unionized employees. In the first case, Isidore Garon Ltée. v. Syndicat du bois ouvré de la région de Québec Inc. (C.S.D.), the collective agreement provided that in the event of a layoff for six consecutive months or more, the employer’s obligation was to provide the employees with the notice of termination requirements contained in the Québec’s Act Respecting Labour Standards ("LSA"). The LSA requires employers to give employees notice of termination, or pay in lieu thereof, which varies between one to eight weeks, depending on an employee’s continuous years of service, when terminating or laying off employees for six or more months. In this case, the employer provided nine weeks of notice to all employees, without regard for their years of service. In the second case, Fillion et Frères (1976) Inc. v. Syndicat national des employés de garage du Québec Inc. (C.S.D.), the employer complied with the notice requirements of the LSA but did not provide notice over and above the LSA’s minimum requirements, arguing that no provision existed in the collective agreement which required the giving of any other notice prior to termination.
Both unions filed grievances on behalf of the affected employees, alleging that the employees were entitled to reasonable notice of termination of employment, or pay in lieu thereof, as required by Articles 2091 and 2092 of the Civil Code.
Prior to hearing the case on the merits, a preliminary objection as to the jurisdiction of the arbitrator was raised to the effect that the reasonable notice requirements of the Civil Code apply only to non-unionized employees since Article 2091 is found in a chapter of the Civil Code that pertains exclusively to individual contracts of employment.
Decisions From Which The Appeal to The Supreme Court Emanates
In both cases, the arbitrators dismissed the objections, agreeing with the unions’ position that Article 2091 is a public order provision that must co-exist with a collective agreement and as such, they assumed jurisdiction to hear the grievances on the merits. Many legal analysts agreed that this conclusion was surprising as it has long been recognized in Canadian labour law that an individual contract of employment could not apply where a collective agreement is in force between the parties.
Both cases were heard under judicial review before the Superior Court of Québec where opposite conclusions were reached. In Isidore, the Superior Court dismissed the employer’s motion, holding that the arbitrator did have jurisdiction to hear the grievance while in Fillion, the Superior Court quashed the arbitrator’s decision, holding that the grievance could not be decided by the arbitrator.
Both cases were appealed before the Québec Court of Appeal. The Court of Appeal concluded that both arbitrators had correctly asserted jurisdiction over the grievances.
The Court of Appeal held that a grievance arbitrator necessarily has an obligation to recognize that the protection afforded by the public order provisions of the Civil Code apply to a unionized employee who is permanently terminated. According to the Court of Appeal, Article 2091 applies without regard to the unionized or non-unionized status of an employee.
Decision of the Supreme Court
On January 27, 2006, by a 4-3 majority decision, the Supreme Court overturned the decisions of the Court of Appeal, holding that unionized workers whose employment is terminated following a plant closure are not entitled to reasonable notice of termination pursuant to the Civil Code. Deschamps J., writing for the majority, held that the rules governing collective labour relations constitute a body of law whose governing principles are distinct from the rules that serve as foundations for the individual contract of employment under the Civil Code. The majority concluded that a rule which is incompatible with the collective labour relations scheme (such as that contained at Article 2091 of the Civil Code) cannot be incorporated within the collective agreement and must be disregarded. Three reasons were advanced for this conclusion:
First, as a condition of employment, notice of termination for unionized employees is necessarily bargained for collectively, in advance, by the union and the employer. On the other hand, the notice provided for under Article 2091 of the Civil Code is agreed upon as an individual matter between the employer and employee at the time employment is terminated. Apart from the minimum notice standards provided in the LSA, the length of notice to be given to unionized employees is a matter to be determined solely within the bargaining process between the union and the employer.
Second, the right of an employee to claim reasonable notice pursuant to Article 2091 of the Civil Code is the counterpart of an employer’s right to terminate the employment relationship by providing notice, or pay in lieu thereof, without being required to show good and sufficient cause. Conversely, in the collective labour relations context, since the employer’s right to dismiss is limited, with re-instatement being the most common remedy, the reasonable notice provided by Article 2091 is simply not applicable.
Finally, the Supreme Court stated that the legislative history of Article 2091 of the Civil Code militates in favour of the view that the Québec legislature did not intend to incorporate the notice requirement of Article 2091 into the collective labour relations context. More specifically, Article 2091 was enacted solely for the purpose of protecting employees who are in an inferior bargaining position. As Deschamps J. stated: "[t]o say that an employee is isolated or vulnerable when he or she is represented by a union would be an affront to organized labour." The Court added that a proposal to use the Civil Code as the general framework for all labour relations had, ultimately, been rejected by the Québec legislature.
In light of the above, the Supreme Court held that the arbitrators in the Isidore and Fillion cases were without jurisdiction to hear the grievances filed by the union.
The Supreme Court’s decision has finally brought some clarity to the issue of the applicability of Article 2091 within the unionized context and is sure to have important consequences on the financial assessment of the costs associated with closing a business which employs unionized employees.
With a strong dissent by three of the Court’s seven judges, it remains to be seen whether this issue is closed for good.
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