Northern Exposure

Wal-Mart Layoffs Declared Illegal by Quebec Arbitrator

As we have reported before (January 6, 2009, December 2, 2008, and August 26, 2008), Wal-Mart has repeatedly been dealt blows by Canadian courts and other decision-makers. Most recently, an arbitrator in Quebec has weighed in – and it’s more bad news for Wal-Mart in Canada.

Wal-Mart’s store in Jonquiere, Quebec, was certified by the UFCW, Local 503 in 2004. In February 2005, after unsuccessful attempts to negotiate a collective agreement, Wal-Mart publicly indicated its intention to close the store for business reasons – it couldn’t afford to meet the union’s demands. It then gave employees notice of termination effective May 2005, the date on which the store would cease operations.

In response, the union and employees launched several lawsuits against Wal-Mart.

Labour board complaint
One avenue of complaint was to the Quebec Labour Board.

Employees filed complaints alleging that their employment was terminated because of their union activities. In response, Wal-Mart argued that an employer has a right to permanently cease its operations. This matter has been debated before the Supreme Court of Canada and we are expecting a decision shortly.

Grievances filed
The union also filed grievances against Wal-Mart arguing that the layoffs resulting from the store closure were illegal because they were in breach of the “freeze” provision contained in the Quebec Labour Code. Section 59 of the Labour Code states that:

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

In a recent decision (Travailleurs et travailleuses unis de l’alimentation et du commerce, section locale 503 et La Compagnie Wal-Mart du Canada – Établissement de Jonquière, tribunal d’arbitrage, Me Jean-Guy Ménard, le 18 Septembre 2009. The decision is available only in French.), the arbitrator agreed with the union.

Freeze provision historically
It’s well established that the freeze provision doesn’t impose an absolute freeze on all terms and conditions of employment. Rather, it imposes a regime of “business as usual” – an employer may change terms and conditions of employment without union consent if the change is one that is customary or established practice. The purpose of this provision is to stop employers from changing the working conditions in order to punish employees who have chosen to unionize.

Arguments at arbitration
The union argued that Wal-Mart had modified the conditions of employment by closing the store and laying off employees. As such, Wal-Mart had to explain the “business reasons” in support of its closure.

The union also had a former employee of the store testify that the store management was convinced in 2004 that the store would be making profits in 2004 and that employees would receive a bonus at the end of that year. This evidence seems to have made an impact on the arbitrator as he quoted from the employee in his decision (paragraph 2 of the decision).

Wal-Mart argued that the freeze provision didn’t apply. The decision to cease all store operations is a prerogative that belongs to an employer – it doesn’t come within the meaning of the freeze provision. As such, there was no need for Wal-Mart to demonstrate whether the changes made were within the concept of “business as usual.”

Arbitrator’s decision
The arbitrator ruled that the freeze provision did apply in this case.

In his view, it didn’t suffice for Wal-Mart to invoke unspecified “business reasons” for the store closing and the resulting layoffs without explaining satisfactorily what those reasons were. The freeze provision protects the rights and working conditions of employees following a request for union certification and limits the employer’s discretion to modify the working conditions. The layoffs constituted a change in the conditions of employment. Therefore, the employer had the burden of proving that its decision fell within the concept of “business as usual”:

the layoffs were not unrelated to [Wal-Mart’s] decision to close its books. There is in effect reason to believe that what explains the cessation of operations also explains the layoffs. The fact that the reasons for one may be related to those which support the other does not appear to me to block the recourse set out in section 59. And even if these reasons were identical, I do not see what could relieve [Wal-Mart] from providing them with regard to the layoffs which are the focus of the present case.

Having ruled that Wal-Mart’s layoffs were illegal, the arbitrator deferred the issue of remedy to the parties to solve. It remains to be seen what will actually come of this case. As well, Wal-Mart has announced that it will apply for judicial review of the arbitrator’s decision. We will keep you informed of future developments.

Contact the author, Dominique Launay