This is a short summary of the Supreme Court of Canada’s June 27, 2014 ruling in United Food and Commercial Workers, Local 503 v. Wal-Mart Canada Corporation.  A further analysis, in both English and French, is forthcoming in a future edition of this newsletter. Another analysis of this decision in French follows in this newsletter.

On June 27, 2014 the Supreme Court of Canada, in a 5-2 decision, reversed historic precedent and ruled that Quebec’s labour relations law can prohibit a company from closing a business, where the closure constitutes a change of employment conditions designed to defeat a union.

The issue arose at a Quebec Wal-Mart store where, in 2004, the United Food and Commercial Workers (“UFCW”) organized a union among store employees.  After unsuccessful negotiations towards a collective agreement, Wal-Mart’s ultimate response was to close the store, as it has done elsewhere when unions surfaced.

Section 59 Quebec’s Labour Code contains a classic “statutory freeze” rule, restricting an employer from altering working conditions when a union is trying to be certified or is negotiating a collective agreement:

59. From the filing of a petition for certification and until the right to lock out or to strike is exercised or an arbitration award is handed down, no employer may change the conditions of employment of his employees without the written consent of each petitioning association and, where such is the case, certified association.

As the dissenting Justices (both from Quebec) note in their reasons, section 59 has never before been interpreted to mean that a company cannot close a business, but rather that the rule is meant to “freeze” working conditions where the business continues to operate.  This did not deter the majority of the Court from finding that “continued employment” was a “condition of employment” which could not unilaterally be changed without “legitimate reasons”

Whether it is based on the Civil Code, on labour legislation or on the implicit content of a contract of employment, this right to continued employment is therefore always the basis for a condition of employment for employees (art. 1434 C.C.Q.).  However, this condition is not absolute.  The employer retains at all times the 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. 

The Court acknowledges that a business closure could be tenable during the freeze:

In this context, the employer cannot simply argue that its decision is consistent with the powers conferred on it in the individual contract of employment and by the general law before the petition for certification was filed.  It must continue acting the way it acted, or would have acted, before that date...

But that if a closure has been effected in response to a new union or negotiations, it may not be legal, because to permit such a closure would deprive s.59 of the Code of any meaning in the context.

This is a departure from traditional interpretations of the statutory freeze.  Subject to further analysis (to be presented in an upcoming issue of Employment & Labour) it appears that the Supreme Court has placed a burden on employers to show that their reasons for business closure are not tainted, otherwise the closure may be viewed as a breach of the law and of a union’s right to organize and represent employees.

Gowlings’ preliminary advice to employers is to seriously re-consider whether a business closure decision (in the context of union organizing or bargaining) could survive the kind of scrutiny now suggested by the Supreme Court of Canada.