Employers Cannot Be Forced to Resume Business, Rules Canada’s Top Court

Wal-Mart began operating in Jonquiere, Quebec in 2001. The United Food and Commercial Workers, Local 503 (“the Union”) became the certified bargaining agent for its employees in 2004. After several months of unsuccessful negotiations, an arbitrator was appointed to establish the first collective agreement between the parties. Just one week later, Wal-Mart announced its intention to close the new store, which it ultimately did on April 29, 2005.

The Union responded with a slew of legal proceedings against Wal-Mart, most of which were resolved in Wal-Mart’s favour. However, on June 27, 2014, the Supreme Court of Canada released a decision overturning the Quebec Court of Appeal, and agreeing with the Union’s allegation that the store’s closure constituted a change in terms and conditions of employment in violation of section 59 of the Quebec Labour Code (“the Code”). Section 59 provides that from the filing of an application for certification until the execution of a collective agreement, an employer may not change its employees’ conditions of employment without the written consent of the Union, unless such change is in the ordinary course of business. This is also known as the “statutory freeze” provision.

Justice LeBel, writing for the majority, began by characterizing the statutory freeze provision as unintended to be punitive of anti-union animus but rather, intended to protect freedom of association and facilitate the development of a labour relations framework for the workplace. He stated that the Union’s grievance succeeded because it was able to demonstrate that being employed constitutes a condition of employment, that there was a condition of employment which existed on the day the certification application was made, that this condition was unilaterally changed by the employer, and that the change was made during the prohibited period. At the time of the certification application, there were approximately 200 employees at the workplace. By closing the store, the employer had rescinded each employment contract, and the store was closed before a collective agreement was executed.

Justice LeBel further described the statutory freeze provision as one that does not reverse the burden of proof, but requires the Union to go further in demonstrating that the change in conditions of employment was not consistent with the employer’s ordinary course of business. In this case, the Union successfully proved that the change was not consistent with the employer’s past management practices, and was not consistent with the decision a reasonable manager would have made in the same circumstances, given that the establishment was performing very well and meeting its business objectives at that time.

Rendering the Court’s controversial decision regarding the appropriate remedy, Justice LeBel posited that since the case began as a labour arbitration grievance pursuant to sections 59 and 100.12 of the Code and article 1590 of the Civil Code of Quebec, the Court should defer to the arbitrator, who is empowered with broad remedial discretion. Under these provisions, the arbitrator may award reparation in kind (reinstatement) or reparation by equivalence (damages). The Court recognized that there is no possibility of reinstatement, since the employer had gone out of business. Nevertheless, the Court recognized the possibility of an alternate remedy in the form of damages. Accordingly, the issue of quantum of damages will be determined by the arbitrator.

For employers in Canada, this decision provides reassurance that neither arbitrators nor courts will order an employer to resume business operations terminated during the statutory freeze period. However, employers in Canada may nevertheless find the decision troubling in its definitive statement that closing a workplace during the statutory freeze period may constitute a violation of the law, and could be a costly endeavour. For Wal-Mart, the cost of the violation is yet to be seen.

We will keep readers informed of developments regarding the damages award.