On November 27, 2009, the Supreme Court of Canada rendered its much awaited decision on an employer’s right to cease operations for alleged anti-union reasons. In two related decisions, the country’s highest court ruled in favour of Wal-Mart Canada Corp. that it was not required to re-open a store in Jonquière, Quebec, it had closed following the unionization of employees of that store.

Background

In August 2004, the United Food and Commercial Workers Union, Local 503 (the “Union”), was certified to represent employees of the Wal-Mart store in Jonquière, the first Wal-Mart store to be unionized in North America. After several fruitless bargaining sessions, the Union filed an application under the Quebec Labour Code (the “Code“) to establish the provisions of a first collective agreement. On February 9, 2005, the Minister of Labour referred the dispute to arbitration and notified the parties of the referral. On the same day, Wal-Mart informed the employees of its decision to close the Jonquière store. The store eventually closed on April 29, 2005 leaving approximately 190 employees jobless.

In Plourde v. Wal-Mart Canada Corp. [2009] S.C.J. No. 54 (the “Plourde Decision“), Mr. Plourde filed a complaint under Sections 15 to 17 of the Code claiming that he lost his employment because of his union activities. He sought an order that he be reinstated in his job. Reinstatement of Mr. Plourde would require Wal-Mart to re-open the store. Under Section 17 of the Code, when an employer imposes a sanction (for example, a termination of employment) on an employee concurrent with the employee’s participation in union activities, there is a presumption that the sanction was imposed because of the employee’s union activities. The employer may rebut the presumption if it can prove that the sanction was imposed for good and sufficient reasons. The Commission des relations du travail (the “CRT”) found that Wal-Mart had shown the store’s closure to be genuine and permanent, which in itself is good and sufficient reason within the meaning of Section 17. The Quebec Superior Court and the Quebec Court of Appeal dismissed Mr. Pourde’s appeals.

Similarly, in Desbiens v. Wal-Mart Canada Corp. [2009] S.C.J. No. 55 (the “Desbiens Decision”), three former employees of Wal-Mart filed a complaint claiming that they lost their employment because of the unionization of the establishment. In that case, however, the CRT ordered the reinstatement of the employees and held that Wal-Mart had not shown good and sufficient reason to close the store. The Quebec Court of Appeal quashed the CRT decision.

At the Supreme Court of Canada

In a 6-3 split decision, the Supreme Court of Canada confirmed the principles stated in its recent decision in (I.A.T.S.E.), Stage Local 56 v. Société de la Place des Arts de Montréal, [2004] 1 S.C.R. 43 (“Place des Arts“) that: 1. there is no legislation to oblige an employer to remain in business; 2. if an employer decides to close up a shop, the dismissals which follow are the result of ceasing operations; and 3. ceasing operations is a valid economic reason not to hire personnel, even if the decision to cease operations is based on socially reprehensible considerations.

The Court recognized that Wal-Mart could permanently close one of its stores, regardless of the reason, and Wal-Mart could overturn the presumption established by Section 17 of the Code by showing that the decision to close is real and definitive and the closing is genuine and permanent.

However, the Supreme Court of Canada did limit the application of the principle in Place des Arts by stating that the principle “did not suggest that the closure immunized the employer from any consequences or that there was no remedy anywhere under the Code to provide for compensation to the terminated employees, or other relief or remedy, on proof that the termination was for anti-union reasons.” The Court recognized that the employees maintained their right under other sections of the Code (e.g. Sections 12 to 14) to seek damages arising from the closure of the store and their claim that the closure of their employer’s business was a result of anti-union motives.

It is important to note that Mr. Plourde and the Union raised a constitutional argument relying on Heath Services and Support – Facilities Subsector Bargaining Assn. v. British Columbia, [2007] 2 S.C.R. 391, in which case, the Supreme Court of Canada recognized that the freedom of association protected by Subsection 2(d) of the Charter includes the right to collective bargaining. The Court dismissed the constitutional argument by stating that this argument “extends the reasoning in Health Services well beyond its natural limits” and “it cannot be correct that the Constitution requires that every provision, (including s. 17), must be interpreted to favour the union and the employees.”

In the dissenting judgement, Abella J., held that proof of permanent closure was not enough to discharge the employer’s burden to rebut the presumption in Section 17. Instead, an employer must demonstrate that a decision to cease operations was not motivated by anti-union animus. If the decision was made for anti-union reasons, it would be unlawful. The dissenting judges were of the opinion that it was counter-intuitive to conclude that a business closing is a good enough reason for closing a business because “the effect is to suggest that under the Labour Code, an employer’s conduct can be scrutinized for anti-union motives if a single employee is dismissed, but not if all employees are dismissed. Closing a business can in fact be the most severe form of reprisal for union activity.”

Conclusion

As a result of the Plourde Decision and the Desbiens Decision, the presumption offered by Section 17 of the Code will be practically unavailable to employees if the employer has genuinely and permanently ceased operations. The decisions confirmed that unions and employees may file claims for damages and other remedies under on Sections 12 to 14 of the Code when the employer shuts down its operations concurrently with the employees’ union activities. However, absence of the reversed burden of proof offered by Section 17, the burden of proof that the business is closed for anti-union reasons will rest upon the unions and employees. It will be interesting to see how such burden of proof can be discharged in future cases and what types of remedy the Labour Relations Commissions will be ordering if and when such burden of proof has been successfully discharged.