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SCC Rules Statutory Freeze Period Applies to Closure of Business
July 3, 2014
Author(s): Erin S. White

In its much anticipated decision in United Food and Commercial Workers, Local 503 v. Wal-Mart Canada Corp., the Supreme Court of Canada has ruled that the statutory freeze period provided under section 59 of the Québec Labour Code applies in the context of a business closure.

In 2001, Wal-Mart opened a store in Jonquière, Québec. Three years later, the union was certified as the bargaining agent for employees working at the Jonquière store. Following certification, the union and Wal-Mart met over the course of several months in order to negotiate the first collective agreement. When talks proved unsuccessful, the union applied under the Québec Labour Code for first agreement arbitration. The following week, Wal-Mart announced that it would be closing the Jonquière store. The union believed Wal-Mart’s decision was based on anti-union animus and, in response, brought a series of proceedings against the company.

The union argued that Wal-Mart’s decision was contrary to s. 59 of the Code, which imposes a freeze on conditions of employment while a collective agreement is being negotiated following the filing of a petition for certification. At the grievance arbitration, the arbitrator determined that the dismissal of the employees constituted an unlawful change to their conditions of employment because the decision to close the store was not made in the ordinary course of business. The arbitrator’s award was upheld by the Québec Superior Court but was overturned by the Québec Court of Appeal. The Court of Appeal found that s. 59 is not applicable to the closure of a business.

In a 5:2 decision, a majority of the Supreme Court of Canada found that the arbitrator’s decision was reasonable. The majority determined that the true purpose of s. 59 is to facilitate certification and to ensure good faith bargaining. In order to establish a breach of s. 59, a union must show that the employer had, without the consent of the union, made a unilateral change to a condition of employment during the freeze period and that the change was inconsistent with the employer’s normal management practices. The Court observed that a change will be inconsistent with normal practices if it is (1) inconsistent with the employer’s past practices, or (2) inconsistent with the decision a reasonable employer would have made in the circumstances. Further, the majority noted that the prohibition provided by s. 59 may apply regardless of whether anti-union motivation is present.

The Court rejected the argument that s. 59 does not apply in the context of the closure of a business. Although an employer cannot be ordered to reopen an establishment, an arbitrator does have the power to order compensation for employees whose rights were violated. Accordingly, the majority remitted the case back to the arbitrator for a determination of the appropriate remedy.

Although the Supreme Court of Canada’s decision is an interpretation of a specific provision of the Québec Labour Code, it is of great interest to employers in BC as the BC Labour Relations Code contains a similar freeze period mechanism.

United Food and Commercial Workers, Local 503 v. Wal-Mart Canada Corp., 2014 SCC 45

Question relating to the content in this article should be directed to Joseph Shaw, Partner.