By closing its first unionized outlet in North America in 2005 and throwing some 190 employees out of work less than a year after union certification was granted and before a first contract could be achieved, U.S.-based retail giant Wal-Mart violated a prohibition in the Quebec Labour Code against changing "the conditions of employment" of employees after an application for certification had been filed, a Quebec arbitrator has found. The arbitrator held that it did not 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 complex and ongoing legal saga began in August 2004 when the Quebec Labour Relations Board certified Local 503 of the United Food and Commercial Workers Union as the bargaining agent for employees at the Wal-Mart store in Jonquière, about 470 kilometres north of Montreal. After trying unsuccessfully to negotiate a first contract with Wal-Mart, the union applied to Quebec's Minister of Labour in February 2005 for appointment of an arbitrator. On February 9, 2005, the same day that the Minister announced acceptance of the union's request, Wal-Mart declared that it was closing the store effective May 6, 2005. The company informed the Quebec government that the closing was "for business reasons." Wal-Mart subsequently closed the store ahead of schedule, on April 29, 2005, allegedly to head off anticipated labour protests.

Among other legal measures that it took in response, the union filed a grievance, claiming that closing the store and putting the employees out of work in the circumstances contravened s.59 of the Quebec Labour Code, which provides that "[f]rom 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 the petitioning association and, where such is the case, certified association."

In an August 30, 2006 decision, Arbitrator Jean-Guy Ménard found that he did not have jurisdiction to hear the case because the real subject matter of the grievance was an allegation of reprisals for union activity contrary to sections 12, 13, and 14 of the Code, and this fell squarely within the jurisdiction of the Quebec Labour Relations Board. However, this decision was overturned on judicial review in November 2007 by a Quebec Superior Court judge who ruled that Ménard could not determine without a hearing on the merits that closing the store and terminating the jobs of the affected employees did not in fact change their conditions of employment contrary to s.59.

In a September 18, 2009 decision on the merits, Arbitrator Ménard noted that "in practical terms, it is first incumbent on the union to show that there was a change in the conditions of employment by proving in principle the pre-existing conditions and the change that occurred following the filing of the request for certification. Once this step is completed, the employer has the burden of establishing on a preponderance of the evidence that it did not contravene s.59 of the Code [because] the decision was made in the normal course of business." Ménard added that "it is now established in jurisprudence and in doctrine that a layoff or a dismissal can give rise to a change in the conditions of employment."

Consequently, the arbitrator held, "the employer must justify its decision by proving that it was made in the normal course of its operations and in the absence of any inequitable, abusive or discriminatory consideration."

Ménard found that, to the contrary, "the union has duly established that there was a change in the conditions of employment of the employees by means of the mass layoffs that were announced to them on February 9, 2005 and implemented effective April 29, 2005.... [Wal-Mart] believes that it has viably invoked [the defence of "business as usual"] by suggesting that the layoffs are explained simply by the closing of its establishment. With all respect, I am not of this view."

The arbitrator reasoned that "s.59 of the Labour Code creates a particular period in the life of a business. From the time an application for certification was filed, the employer did not have full discretion.... It still had the power to manage the activities of its store, but it was required to explain decisions such as layoffs that constituted changes in the conditions of employment of the employees…. It did not suffice to say that it was a 'business decision' over which [Wal-Mart] had exclusive power."

In the arbitrator's view, "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. But the fact that the reasons for the one may be related to those which support the other does not appear to me to block the recourse set out in s.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."

Arbitrator Ménard determined that, "in the absence of [Wal-Mart] having done this, I am obliged to conclude that there was an illegal change in the conditions of employment of the employees by means of the layoffs that they suffered as of April 29, 2005." Declaring the layoffs illegal, Ménard retained jurisdiction to impose remedies if the parties were unable to reach an agreement.

Wal-Mart has already announced that it will apply for judicial review of the arbitrator's decision. Andrew Pelletier, Vice-President of Corporate Affairs, said that "[i]f Wal-Mart had just wanted to close the store … that store would have closed from the moment that it became certified by the union – but that's not what happened." Pelletier maintained that the closing decision was made only after multiple bargaining sessions, because there was "no way" the store could afford to meet the union's demands.

Meanwhile, the Supreme Court of Canada is considering whether Wal-Mart's closing of the Jonquière store was an unfair labour practice and a violation of the employees' Charter rights to freedom of association. In January, the Court heard appeals from two Quebec Court of Appeal decisions favourable to Wal-Mart on these issues, and reserved judgment. No date for a decision has been announced.

Travailleurs et travailleuses unis de l'alimentation et du commerce, section locale 503 v. La Compagnie Wal-Mart du Canada
Jean-Guy Ménard, Arbitrator
September 18, 2009

Read the full text of the decision.

[Editors' Note: The decision is in French. Translations from the text are provided by Lancaster House.]