Labour pains

By Luis Millán April - May 2013

The years ahead could see significant changes to labour law in Canada.

Labour pains Photo of Kevin Banks (Queen’s University, Kingston) by Mike Pinder.

Is organized labour coming under attack in Canada? Members of the labour movement, reeling from a shifting economy and dwindling membership in the private sector, seem to think so. They decry Ottawa and the provinces’ willingness in recent years to use back-to-work legislation to put an end to bargaining disputes. They denounce a controversial private member’s bill that will place onerous financial disclosure requirements on unions that passed third reading in the House of Commons and, as of this writing, is before the Senate. And now they dread the possibility that the Rand Formula, which for more than a half century has required employees represented by unions to pay dues, will come under increasing scrutiny.

“Clearly, it’s all part of a movement from traditional elements of the Conservative government, who borrowed from the U.S. Republican Party, to attack trade unions on all fronts,” says Stéphane Lacoste, general counsel of Teamsters Canada.

Some conservatives, on the other hand, point to the realities of a global economy, a relatively strong Canadian dollar, and tough times in the nation’s manufacturing heartland as reasons to relax labour laws so that we can compete with emerging economies or even U.S. states that now have more flexible labour markets. “There have been fundamental changes to the economy and there is a real concern on how we will be able to maintain good quality jobs going forward, and to do that everything has to be on the table,” says George Vuicic, a labour and employment lawyer with Hicks Morley Hamilton Stewart Storie LLP.

Squaring the circle

Labour laws and regulations have hardly changed over the past decade, according to a yet-to-be published study by Kevin Banks, director of the Centre for Law in the Contemporary Workplace at Queen’s University Faculty of Law. There are exceptions. British Columbia excluded workers covered by a collective agreement from many of the provisions of the labour standards statute. Some reforms have tilted more heavily towards enhancing employee protections: Quebec strengthened its existing prohibition on the use of replacement workers during strikes and Newfoundland and Labrador has introduced stronger remedies for breach of the duty to bargain in good faith.

George Vuicic

Phot of George Vuicic (Hicks Morley, Ottawa) by Mike Pinder.

And yet, says Banks, there are major changes afoot. “There have been less in the way of statutory changes in recent years, but there has been lots of discussion over whether there is a need for statutory reform.” Saskatchewan’s government is leading the way on a number of fronts. It recently unveiled Bill 85, which consolidates into one piece of legislation a large number of long-standing labour laws. Labour is concerned over the loss of an eight-hour work day, the redefinition of “employee” to exclude those who do supervisory work, and new accounting rules that ostensibly will be a costly burden to small locals.

Here is an overview of other developments in the making.

Rand: The wrong formula?

When Caterpillar Inc., the world’s largest manufacturer of construction and mining equipment, made the ruthless decision last year, following a bitter labour dispute, to close and move its railroad locomotive assembly plant from London, Ont., to Indiana, it came as a surprise to some. Caterpillar was a profitable company, and the London plant hardly affected its bottom line. But the timing of the announcement was telling: a mere 36 hours earlier, Republican lawmakers in the traditionally union-heavy Midwest state had signed a new right-to-work law that allows employees to opt out of paying union dues. That Michigan, yet another union bastion, became the 24th state in the U.S. to enact right-to-work bills last December has not escaped the attention of Canada’s labour experts and politicians.

Now Ontario Progressive Conservative Leader Tim Hudak, echoing views of the American right, has promised to “re-examine outdated workplace rules that date back to the 1940s,” including the historic formula named after former Supreme Court of Canada Justice Ivan Rand. The purpose of the Rand formula, introduced in a famous 1946 interest arbitration award, is to ensure that anyone who refuses to become a union member cannot refuse to pay union dues if he or she benefits from the union’s advocacy efforts. The principle has been codified in the Canada Labour Code and in provincial labour relations laws.

“The Rand formula is a fair solution,” says Banks. “If the union has no way of collecting fees for representing everybody, it’s put in a very difficult position.” Weakening the financial power of unions is precisely the intention behind the right-to-work movement, pro-labour groups charge. They also point to reports prepared for the U.S. Senate as well as the Washington-based Economic Policy Institute which concluded that “despite ambitious claims by proponents, the evidence is overwhelming that right-to-work laws have not succeeded in boosting employment growth in the states that have adopted them.”

Michael Mazzuca

Photo of Michael Mazzuca (Partner, Koskie Minsky, Toronto)
by Alena Gedeonova

Proponents of scrapping the Rand formula nevertheless argue that workers ought to be able to choose or refuse to pay union dues. Richard Charney, global practice leader of employment and labour with Norton Rose, says that he is comfortable with the current regime, but questions whether it should be “legislatively entrenched” as it is.  He also points out that it enables “trade unions to use funds received through mandatory dues for purposes other than collective bargaining.” Banks points out, however, that Canada’s top court did consider whether unions could use due collected from non-members for political purposes in the 1991 case of Lavigne v. Ontario Public Service Employees Union “and concluded that they could without violating freedom of association or freedom of expression.”

Bill C-377

Another controversial measure is the adoption of Bill-377, a rare private member’s bill that looks likely to receive Royal Assent. If enacted, the new law would require unions to disclose financial information to Revenue Canada — far above what is required of any other private entity, say critics. That would include the names of anyone who receives a payment of $5000; information on salaries, stipends, bonuses and gifts; and reports of how much time they devote to lobbying and political activities.

Supporters argue that the bill aims to bring more accountability and transparency to union activities, bringing them under the same public reporting laws as exist already for charities in Canada. “I don’t think this is an issue of a government trying to undermine unions,” says Vuicic. “We have in Canada compulsory union membership, where union is certified as a bargaining agent for a group of employees. All of the employees are required to contribute to the union and so in that sense requiring unions to disclose how it spends the money the bargaining members contribute and what kind of activities it engages in.”

"[T]he new law would require unions to disclose financial information to Revenue Canada — far above what is required of any other private entity, say critics."

The Canadian Bar Association, among others, has expressed reservations about Bill C-377, ranging from privacy and constitutional concerns to the costs and the impact on pension and benefit plans. None of these concerns were adequately addressed before the bill was passed last December, says Michael Mazzuca, the chair of CBA’s pensions and benefits law section. The bill’s justification does not hold up to scrutiny, he adds. If unions are being targeted because they receive preferential tax treatment, “why are the same type of disclosure obligations not being extended to all entities that get some favourable tax treatment? Even tax-paying corporations get all kinds of deductions and yet there is no similar type of disclosure imposed on them.”

The goal behind Bill C-377 is to undermine the labour movement, says employment lawyer Ronald Pink of Pink Larkin. “Clearly this is an attack on trade unions,” says Pink. “It’s the age of conservatism. We are turning back the clock 50 years on things we fought to achieve.” Expect a number of legal proceedings to be launched against Bill C-377, adds Lacoste.

An assist from the courts?

If there is a ray of hope for labour, it may come from court rulings. In the 2007 BC Health Services ruling, the Supreme Court explicitly recognized that there is a constitutional right in Canada to collectively bargain. The ruling was affirmed two years ago in the Fraser decision. However, lower courts are still struggling with what that means and the scope of the rulings are the subject of heated debate, says Banks. It isn’t clear, for example, that there is a corresponding right to strike. “All we know for sure is that if a government comes in and rewrites an existing collective agreement on important issues it is interfering with the right to bargain collectively,” explains Banks. “But we don’t know what are the basic minimums that are required to say that someone has the right to bargain collectively. That is why there is a great deal of uncertainty in the law.”

"“[W]e don’t know what are the basic minimums that are required to say that someone has the right to bargain collectively." Kevin Banks Queen's University, Kingston

Hopefully, the Supreme Court will soon clarify the scope of section 2(d) of the Charter when it decides whether members of the RCMP can form an independent labour association for the purposes of engaging in collective bargaining in Mounted Police Association of Ontario v. Canada. Michael McDermott, former head of the federal mediation and conciliation service, the department responsible for all labour relations for federally regulated businesses, notes that the Ontario Court of Appeal read the Fraser case as providing a very basic and minimum set of rights under collective bargaining, with employers obliged only to fully consider the demands of employees. That’s it. “No strike or lockout rights and no access to interest arbitration processes of the kind currently found in Canadian labour relations statutes — imagine what a Hudak could do with that,” says McDermott.

Regardless of the outcomes of court rulings, Hugh Christie, a partner at Gowlings, believes the time has come to hold tripartite discussions between employers, labour and government. “When change occurs such that the system may need to change, the underpinnings that people have relied on for the past number of decades change — and that ratchets up the potential for tension even more,” he says. “We are in an era of economic change. Discussions take on an added urgency.”

Update: This article has been updated to clarify that Richard Charney, global practice leader of employment and labour with Norton Rose, does not consider himself a proponent of scrapping the Rand formula.

Luis Millán is a legal journalist based in Wakefield, Que.
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