Last Friday’s judgment by the Supreme Court in theWal-Mart case (United Food and Commercial Workers, Local 503 v.Wal-Mart Canada Corp., 2014 SCC 45) has triggered lots of discussion in the media that generally does not provide either an accurate or complete picture of how the decision affects employers. In what follows, we hope to fill that gap.

What actually took place  

Wal-Mart’s closure in 2005 of its Jonquière store aft  er the Union was certified and sought first contract arbitration, following unsuccessful negotiations, gave rise to multi  ple legal proceedings, and now the second of two judgments of the Supreme Court of Canada.

In 2009, the Supreme Court had ruled on complaints claiming that by its store closure, Wal-Mart had dismissed its em- ployees because of union acti  viti  es, thereby violati  ng ss. 15 et seq. of the Quebec Labour Code. The Court had dismissed the complaints because such proceedings could only be taken if the enterprise conti  nued to operate. The Court had then reaffirmed the right of an employer to go out of business for “legitimate” reasons that were not per se unlawful.

The Union had another arrow in its quiver

Under Quebec law, when a union alleges that an employer has in any way changed the working conditions that existed the day an application for certificati  on was filed, it can challenge the change and push the matter to arbitration as if it were a grievance under a collective agreement. The Union filed such a claim following the closing, claiming that such terminations violated s. 59 of the Labour Code, which pro-vides:

59. From the filing of a petition for certi  ficati  on and unti  l the right to lock out or to strike is exercised or an arbitrati  on award is handed down, no employer may change the conditi  ons of employment of his employees without the writt  en consent of each peti  ti  oning associati  on and, where such is the case, certi  fied associati  on. […]

This case also ended up before the Su- preme Court which, on June 27, ruled in the Union’s favour.

What was argued and what the Supreme Court decided

As the Supreme Court saw it, Wal-Mart argued that (i) as the arbitrator’s role is limited to restoring the situati  on that existed before the change and given that the arbitrator has no power to compel a business to reopen, there would simply be nothing that an arbitrator could do under s. 59, even if it found that the employer had changed working conditions; (ii) that terminations of employment resulting from the permanent closure of a business do not and could not constitute changes in conditions of employment, since an employer has the prima facie right to close its business, and continued employment could not be considered a condition of employment; (iii) because the purpose of s. 59 is and was to maintain the status quo before certification was applied for, this provision could not have the effect of creating conditions that didn’t exist before the certification application was filed, i.e. the right to continued employment.

The Court first ruled that the prohibition against changing working conditions will apply regardless of whether or not there is evidence of anti-union intent. To succeed, the union must prove that the particular condition of employment in question existed on the day certification was applied for, that the condition was changed or breached without its consent; and that the change was made “between the start of the prohibition period and either the first day the right to strike or to lock out was exercised or the day an arbitration award was handed down, as the case may be” [para. 39 of the judgment].

The Court then ruled that:

  • The right to continued employment need not be expressly stated. Absent termination for valid reasons, the employer is bound by an obligation to continue employing the employee;
  • The right to continued employment is not an absolute condition. “The employer retains at all times power to manage its business, and this includes the power to resiliate the contract of employment of one or more of its employees for ‘legitimate reasons’ (economic, disciplinary, etc.) or upon ‘sufficient’ notice of termination” [para. 43];
  • In order to succeed in a s. 59 challenge, the union must show more than the mere fact that the employer has changed the conditions of employment. It must establish that such change is inconsistent “with the employer’s normal management practices”;
  • The arbitrator must do more than simply determine that the employer had the power to act the way it did before the union’s arrival. The arbitrator must be satisfied that the employer’s decision was consistent with its normal management practices or “in other words that it would have done the same thing had there been no petition for certification”;
  • Failing proof of consistency with the em- ployer’s past practi  ces, a change can be acceptable if it is consistent with the de- cision that a reasonable employer would have made in the same circumstances.  

It is these statements that should make employers sit up and smell the coffee.

The decision’s impact – Lessons for employers

  • Even when a union certification is pending, you have a right to reasonably manage your business in accordance with “past practice” – i.e. “business as before”;
  • No employer can be forced to remain in business against his will;
  • Because the success or failure of any defense to a s. 59 claim will depend on what the employer did, or would have done, in the past, before the certification application, properly documenting why, how and when human resources decisions are made is crucial;
  • Employers have the right to downsize as business conditi  ons require, but be prepared to show that how and when you reduce staff is consistent with what and how you did things in the past. Wal-Mart offered no proof of its own to support the closure with either a “business as before” or a “reasonability” defense, relying instead on purely legal arguments that it had no case to meet;
  • S. 59 applies to conditions of employment, individual or collective, and applies to all employees in the bargaining unit;
  • If a violation of s. 59 is found, an arbitrator can fashion any remedy that is appropriate and reasonably related thereto, including perhaps substantial moral and punitive damages in favour of the employees and/or the union.
  • How s. 59 will fully play out depends upon the effect and interplay of other statutes such as the Labour Standards Act and the Civil Code, all of which will have to be considered;
  • The impact of this decision is very substantial. Wise employers will think ahead and with the help of human resources professionals document their processes, procedures and decisions. In the complex world of labour law, “I did it just because I could” may neither be a wise nor sufficient reason for making employment related decisions;
  • Above all, remember that what you do must always satisfy what a “reasonable” employer could be said to have done in similar circumstances;
  • Learn what rights you have as an employer long before any union presence, and exercise them consistently and reasonably.

As in all substanti  al employment-related decisions, seek competent legal advice before acting.