McGavin Toastmaster Ltd. v. Ainscough, [1976] 1 SCR 718

SUPREME COURT OF CANADA

McGavin Toastmaster Ltd. v. Ainscough, [1976] 1 S.C.R. 718

Date: 1975-04-22

McGavin Toastmaster Limited (Defendant) Appellant;

and

Bernice Letitia Ainscough et al. (Plaintiffs) Respondents,

1974: November 26; 1975: April 22.

Present: Laskin C.J. and Martland, Judson, Ritchie, Spence, Pigeon, Dickson, Beetz and de Grandpré JJ.

ON APPEAL FROM THE COURT OF APPEAL FOR BRITISH COLUMBIA

Labour relations—Collective agreement—Illegal strike—Plant closed by management—Whether employer—employee relationship terminated—Whether employer bound by severance pay provisions of collec­tive agreement.

Employees of the appellant company, including the respondents, went on strike. on March 1, 1971, and were still on strike on March 5, 1971, when the company closed its plant pursuant to a decision of its board of directors taken the previous day that the plant, which was shut down by reason of the strike, would not be re-opened. The strike was illegal because, inter alia, it occurred during the subsistence of a collective agreement (Mediation Services Act, 1968 (B.C.), c. 26, s. 23). The union, party to the collective agreement, and the employees who were members thereof, were deeply concerned about loss of jobs owing to layoffs over the previous two years and owing to a decision by the company to move a certain operation to another plant in another province.

The respondents claimed severance pay as provided for under the terms of the collective agreement and, following the appellant's refusal to recognize their enti­tlement thereto (on the ground that they were not discharged but themselves left the employment of the company), took action to recover such pay. The trial judge gave judgment in favour of the respondents and this judgment was upheld by the Court of Appeal for British Columbia, Robertson J. A. dissenting. With leave, the company appealed to this Court.

Held (Ritchie, Spence, Pigeon and de Grandpré JJ. dissenting): The appeal should be dismissed.

[Page 719]

Per Laskin C.J. and Martland, Judson, Dickson and Beetz JJ.: In the face of labour relations legislation such as existed at the material time in British Columbia, in the face of the certification of the union, of which the respondents were members, as bargaining agent of a specified unit of employees of the company and in the face of the collective agreement in force between the union and the appellant company, it was not possible to speak of individual contracts of employment and to treat the collective agreement as a mere appendage of individual relationships. Accordingly, questions such as repudiation of contract and fundamental breach were inapplicable. Common law concepts like repudiation and fundamental breach could not be invoked in relation to collective agreements which have not expired and where the duty to bargain collectively subsists.

The unlawful strike did not terminate the employer-employee relationship. It was open to the company to act in relation to the unlawful strike by positive action against the strikers but it failed to do so; and, whether or not it saw in the strike an opportunity to accelerate its longer term plan to close out the operations in question, its failure to act against the employees save by closure of the plant brought it within the severance pay obligations of the collective agreement.

Per Ritchie, Spence, Pigeon and de Grandpré JJ., dissenting: The contract of employment of each of the respondents contains clauses derived from two sources: (a) the collective agreement; (b) the general law in all matters not covered by the agreement. The obligation of the employee to serve his employer is not spelled out in the collective agreement and may be considered as flowing from the general law. It is also imposed by the collective agreement, the basis of which is that the union will take active steps to ensure that the members of the unit will respect the law, including the obligation not to withdraw their services to the employer through an illegal strike.

It follows that when the employees in concert refuse illegally, as was the case here, to offer their services, they are in breach of the most fundamental obligation of their contracts. When, as was also the case here, this breach acquires a definitive character by effectively destroying the goodwill of the operation, the employer is justified in considering the employees as having definite­ly broken their contracts of employment. From that moment on, the employer is no longer bound by any of the terms of those contracts, including in the present case the benefits stipulated in the collective agreement.

[Page 720]

[Syndicat catholique des employés de magasins de Québec Inc. v, Cie Paquet Ltée, [1959] S.C.R. 206, followed; Re Polymer Corp. and Oil, Chemical and Atomic Workers International Union, [1961] O.R, 176, aff'd. [1961] O.R. 438, aff'd. [1962] S.C.R. 338 (sub nom. Imbleau et al. v. Laskin et al.; C.P.R. Co. v. Zambri, [1962] S.C.R. 609, referred to.]

APPEAL from a judgment of the Court of Appeal for British Columbia[1], affirming a judg­ment of Kirke Smith J. Appeal dismissed, Ritchie, Spence, Pigeon and de Grandpré JJ. dissenting.

D. McK. Brown, Q.C., and D. L. Page, for the defendant, appellant.

G. L. Murray, Q.C., for the plaintiffs, respondents.

The judgment of Laskin C.J. and Martland, Judson, Dickson and Beetz JJ. was delivered by

THE CHIEF JUSTICE—This appeal, which is here by leave of this Court, concerns entitlement to severance pay as provided for under the terms of a collective agreement between the appellant com­pany and a trade union representing bakery employees in the appellant's bakery plant in Vancouver. The claim to severance pay was made by 93 persons who were the plaintiffs in an action to recover such pay following the appellant's refusal to recognize their entitlement thereto when it closed its Vancouver plant on or about March 5, 1971. The monetary calculations are not in issue, but the appellant defended the action on the ground that from and after March 1 and 2, 1971, the plaintiffs were no longer employees of the appellant, that they wrongfully and in breach of individual contracts of employment left the plant and did not report for work, and were therefore disentitled to enforce the severance pay provisions of the collective agreement which were alleged to be part of their respective contracts of employment. The appellant company asserted in its

[Page 721]

defence that the plaintiffs were not discharged but themselves left the employment of the company.

This Court raised, suo motu, the question whether the matter in issue here ought properly to have been submitted to arbitration under the grievance and arbitration provisions of the collec­tive agreement between the appellant and the plaintiffs' trade union. In correspondence exchanged between solicitors the question of arbi­tration was raised and then dropped, and Court proceedings were instituted on May 12, 1971. There was no contention in defence that the appro­priate proceedings should have been by way of arbitration under the collective agreement, and it does not appear that any such position was taken either before the trial judge or in the British Columbia Court of Appeal. This Court refrained therefore in this case from taking any position on this question and is content to deal with the legal issue or issues as having been properly submitted to the Courts for adjudication.

The bare facts of this case are that employees of the company, including the plaintiffs in this action, went on strike on March 1, 1971, and were still on strike on March 5, 1971, when the company closed its plant pursuant to a decision of its board of directors taken the previous day that the plant, which was shut down by reason of the strike, would not be re-opened. The strike was illegal because, inter alla, it occurred during the subsist­ence of a collective agreement: see Mediation Services Act, 1968 (B.C.), c. 26 (as entitled by 1972 (B.C. 2nd sess.), c. 8), s. 23(1) (Act repealed by 1973 (B.C. 2nd sess.), c. 122, enacting new Labour Code, effective as to various provisions on procla­mation). There is no doubt that the union, party to the collective agreement, and the employees who were members thereof, were deeply concerned about loss of jobs owing to layoffs over the previ­ous two years and owing to a decision by the company to move a certain operation to another plant in another province. Though this was the explanation for the strike, it could not be a legal justification for it. Extensive submissions were made by counsel for the company as to the eco­nomic reasons which compelled it to assess the future of the Vancouver plant but it is of no

[Page 722]

relevance to this case whether the situation justi­fied its course of action or not. There was no suggestion that it was not legally entitled to make such assessment and come to a decision to phase out its Vancouver operation or bring it to an immediate end subject, of course, to any obliga­tions that it had under the collective agreement.

There was some dispute as to the extent to which the company had or had not had meetings with the union at or following February 22, 1971, when it decided to discontinue the so-called "bun" operation in Vancouver and to have its Calgary plant serve the Kelowna area with buns as of March 1, 1971. Certainly, no meetings were held after March 1, 1971. Between February 22 and March 1, 1971, there was communication between company and union, and the record, for what it is worth, is clear that the company's decision was an irrevocable one, leading to union alarm that fur­ther attrition of the work force was likely. The work force had been informed by a union official of the "bun" decision and when the communica­tions and discussions up to March 1, 1971, proved unsuccessful to secure a reversal of suspension of the decision, the employees in late mid-morning on March I, 1971, began an orderly shut down of the plant preparatory to a general membership meet­ing in the afternoon. The minutes of the meetings disclose that it was unanimously agreed "to stay out until the situation is rectified". These words were said by company counsel to mean that the employees had decided to quit their jobs but it is the fact, as Robertson J.A. said in his reasons, that the minutes were not communicated to the com­pany which made its decision to close the plant independently of any knowledge of or reliance on the minutes. The union, as both the trial judge and Seaton J.A. noted in their reasons, attempted after

[Page 723]

March 1, 1971, to meet with the company but a meeting was refused. However, a union official was told by telephone to be available on Friday, March 5, 1971, and at that time he was handed a letter announcing the company's decision, taken on March 4, 1971, to close the plant.

There was agreement by the trial judge and by all members of the Court of Appeal that the company had closed the plant within the meaning of art. XX of the collective agreement, reading as follows:

In the event of amalgamation, closure of the plant or a department thereof, or reduction in work force due to automation or technological advances causing a regular full-time employee to lose his or her employment, the Company hereby agrees to pay such an employee severance pay at his or her regular rate of pay according to the following schedule:.. .

From that basis, which appears to me to be incon­testible, the issues taken both at trial and on appeal were (1) whether there was a repudiation by each employee of his contract of employment, by reason of the unlawful strike, entitling the company to terminate it and whether the company did so; (2) whether the concerted refusal to work terminated the employer-employee relationship; and (3) whether the unlawful strike constituted a breach of a fundamental term of the contracts of employment of the respective striking employees so as to disentitle them to call upon the company to perform its obligations, in this case the obligation to give severance pay. The trial judge, Kirke Smith J. found for the plaintiffs on all issues, concluding his reasons as follows:

It may well be that in the circumstances here the defendant would have been justified in giving each of the plaintiffs notice of discharge, and that such discharge would be regarded as having been made "... for sufficient cause" within Article VII S. 1(a) of the collective agreement. The defendant not having done so, the plaintiffs' contracts of employment, in my opinion, continued in force—and the so-called decision of the defendant not to "re-open" the plant constituted the effective "closure" of that plant, as that term is used in

[Page 724]

Article XX. This term, like all others in that Article, involves management action.

It follows, therefore, that there having been no notice of discharge given to the plaintiffs, no allegation that there was in each case sufficient cause for discharge, and a closure of the plant by the defendant effected by termination of the plaintiffs' employment, the plaintiffs are entitled to the relief sought in the action, with the following exceptions.

The plaintiff William H. Lilly, a jobber, and the plaintiffs Sara Bourne, Arlene Comber, Betty Klassen and Worthy Margaret Nicol, regular part-time employees, are not entitled to benefits under the clauses of the collective agreement invoked. No evidence was led by or on behalf of these plaintiffs, and the dismissal of their claims will be without costs.

The British Columbia Court of Appeal was unani­mous in affirming the trial judge on issues (1) and (2), but Robertson J.A. took a different view on the question of the alleged fundamental breach and would have allowed the appeal on that ground. The majority of the Court, McFarlane and Seaton B.A. were of the opinion that the holding at trial on this issue in plaintiffs' favour was correct.

I am of the same opinion as the majority of the British Columbia Court of Appeal, affirming the decision of the trial judge, that the plaintiffs should succeed, but I come to this conclusion on different grounds. I do not think that in the face of labour relations legislation such as existed at the material time in British Columbia, in the face of the certification of the union, of which the plain-tiffs were members, as bargaining agent of a speci­fied unit of employees of the company and in the face of the collective agreement in force between the union and the appellant company, it is possible to speak of individual contracts of employment and to treat the collective agreement as a mere appendage of individual relationships. The majori­ty of this Court, speaking through Judson J. in Syndicat catholique des employés de magasins de Québec Inc. v. Compagnie Paquet Ltée[2],

[Page 725]

at p. 212, said this in a situation where a union was certified for collective bargaining under Quebec labour relations legislation:

There is no room left for private negotiation between employer and employee. Certainly to the extent of the matters covered by the collective agreement, freedom of contract between master and individual servant is abro­gated. The collective agreement tells the employer on what terms he must in the future conduct his master and servant relations,

The situation is the same in British Columbia where the legislation in force at the material time stated explicitly that a collective agreement entered into between a union and an employer is binding on the union, the employer and the employees covered thereby: see Mediation Services Act, 1968 (B.C.), c. 26, s. 6.

The reality is, and has been for many years now, throughout Canada, that individual relationships as between employer and employee have meaning only at the hiring stage and even then there are qualifications which arise by reason of union secu­rity clauses in collective agreements. The common law as it applies to individual employment contracts is no longer relevant to employer-employee relations governed by a collective agreement which, as the one involved here, deals with discharge, termination of employment, severance pay and a host of other matters that have been nego­tiated between union and company as the principal parties thereto. To quote again from the reasons of Judson J. in the Paquet case, at p. 214:

If the relation between employee and union were that ,of mandator and mandatary, the result would be that a collective agreement would be the equivalent of a bundle of individual contracts between employer and employee negotiated by the union as agent for the employees. This seems to me to be a complete misapprehension of the nature of the juridical relation involved in the collective agreement. The union contracts not as agent or manda­tary but as an independent contracting party and the contract it makes with the employer binds the employer to regulate his master and servant relations according to the agreed terms.

[Page 726]

The collective agreement in the present case makes the foregoing abundantly clear. Wages and hours of work are, of course, dealt with, and persons who come into the employ do so on the terms of the collective agreement as to wages and hours. They also come under the terms of the collective agreement as to promotion, layoffs, rehiring and preference of transfers to shifts, all of which are regulated in this case by art. XVI of the collective agreement, headed "Seniority". Article V deals with hiring procedure, and gives the union the prior right to supply staff subject to certain exceptions. Discharge is dealt with both in art. IV and in art. VII. Central to all the benefits and obligations that rest upon the union, the employees and the company under the collective agreement are the grievance and arbitration provisions, about which nothing more need be said here. Standing at the forefront of the substantive terms of the collec­tive agreement is art. I under which the union is recognized by the company as "the sole collective bargaining agency for all employees coming under the jurisdiction of this agreement". There is in this collective agreement ample support for the obser­vations of Judson J. in the Paquet case.

In my view, therefore, questions such as repudiation and fundamental breach must be addressed to the collective agreement if they are to have any subject-matter at all. When so addressed, I find them inapplicable in the face of the legisla­tion which, in British Columbia and elsewhere in Canada, governs labour-management relations, provides for certification of unions, for compulsory collective bargaining, for the negotiation, duration and renewal of collective agreements. The Media­tion Services Act, which was in force at the ma­terial time in this case, provided in s. 8 for a minimum one year term for collective agreements unless the responsible Minister gave consent to earlier termination, and provided also for the making of collective, agreements for longer terms, subject to certain termination options before the full term had run. Neither this Act nor the com­panion Labour Relations Act could operate according to their terms if common law concepts like repudiation and fundamental breach could be

[Page 727]

invoked in relation to collective agreements which have not expired and where the duty to bargain collectively subsists.

In Re Polymer Corp. and Oil, Chemical and Atomic Workers International Union[3], McRuer C.J.H.C. observed at p. 182 that a collective agreement "is not that sort of contract that can be terminated by repudiation by one party merely because the other party has broken one of its terms". In C.P.R. Co. v. Zambri[4], this Court recognized that the common law relations of employer_ and employee had been altered by the labour relations legislation of Ontario that was involved in that case, legislation that was compa­rable to that in British Columbia to which I have referred. Judson J. speaking for four members of this Court said at p. 624 of the Zambri case that "when a collective agreement has expired, it is difficult to see how there can be anything left to govern the employer-employee relationship. Con­versely, when there is a collective agreement in effect, it is difficult to see how there can be anything left outside except possibly the act of hiring

The references I have made to the collective agreement in this case, which was in force during the events that gave rise to this litigation, lends substance to the words of Judson J. What is, in truth, left for consideration on the appellant's submissions is whether, notwithstanding the existence and binding effect of the collective agreement, the plaintiffs had ceased to be employees by reason only of their unlawful strike and hence had by their own act excluded themselves from the ben­efits provided by art. XX of the collective agreement.

The applicable legislation, the Mediation Services Act, s. 23, prohibits an employee who is bound by a collective agreement from striking

[Page 728]

during the term of the agreement. It was open to the company in this case to take disciplinary action against the plaintiffs for participating in an unlaw­ful strike, and it is arguable (although this is not before this Court) that discharge would have been held to be for sufficient cause in the light of all the circumstances, if this issue had gone to arbitration. The company did not, however, take any action against the striking employees and, indeed, insisted in its statement of defence that the employees were not_ discharged but had, in effect, quit their jobs. No doubt they had quit work, but, far from quitting their jobs, the record shows that they had resorted to strike action as a means of emphasizing their concern for retention of jobs in the plant and as a means of persuading the company to reconsid­er its decision to curtail available jobs, a decision which was part of an overall plan to phase out the Vancouver operation. Even on the basis of common law concepts, the opinion was unanimous below that the unlawful strike did not per se terminate the employer-employee relationship, and l think this is plainly right, and a fortiori in the light of governing labour-management relations legislation. It was open to the company to act in relation to the unlawful strike by positive action against the strikers; and, whether or not it saw in the strike an opportunity to accelerate its longer term plan to close out its Vancouver operations, its failure to act against the employees save by closure of the plant brought it within the severance pay obligations of art. XX of the collective agreement.

I would dismiss the appeal with costs.

The judgment of Ritchie, Spence, Pigeon and de Grandpré JJ. was delivered by

DE GRANDPRÉ J. (dissenting)—Reduced to its bare essentials, the question put to this Court is the following: When all the members of a union engage in an illegal strike and refuse to report to work until management has changed a decision it is admittedly entitled to take, is there such a

[Page 729]

breach of a fundamental term of the various contracts of employment that the employer cannot be called upon to perform its part of the contract, in this case to pay severance pay and one week's pay in lieu of notice?

To that question, the trial judge and the majori­ty in the Court of Appeal have given a negative answer whereas Robertson J. concluded in favour of the employer.

The facts are simple and have been detailed at length in the judgments below which have been reported respectively at [1973] 4 W.W.R. 505 and [1974] 3 W.W.R. 114. It is therefore sufficient to recall the following:

(1) the events with which we are here concerned took place in March 1971;

(2) the respondents are all members of the Bakery and Confectionery Workers' Interna­tional Union of America, Local No. 468, the certified bargaining agent for a group of the appellant's employees;

(3) at the relevant time existed between appellant and the Bakery Workers' Union a collective agreement, the relevant provisions of which will be quoted later;

(4) for 8 of the 10 years preceding that period, the business had suffered a loss;

(5) in an effort to reverse that situation, appellant had taken various steps including the decision to supply the Kelowna market in British Columbia with buns produced in its Calgary plant;

(6) on February 22, 1971, this decision was com­municated to the union;

(7) prior to that date and in the days that followed, numerous communications by tele­phone and by interviews were exchanged be­tween the union and the appellant; on each and every occasion the latter re-affirmed that its economic situation was such that it was impossible to modify its decision;

[Page 730]

(8) on March 1st, in the afternoon, the members of the Bakery Workers' Union met during working hours and took the decision to go on strike and to remain away from work as long as the decision would not have been modified by the employer;

(9) in the days that followed, there was no real communication between the parties;

(10) on March 4th, the directors of the company, in the light of the economic situation and of the fact that in a perishable goods business a clientele is lost rapidly, decided it could do nothing else but close its plant;

(11) this decision was communicated to the strik­ing union and to the other employees on March 5th, the letter to the striking union reading as follows:

Please be advised that by resolution of its Board of Directors, this Company has determined that it will not re-open its plant at 601 West 10th Avenue, Vancouver, B.C., closed on March 1st, 1971.

The plant will be dismantled and sold.

(12) the following day, March 6th, each respond­ent was forwarded a letter couched in the following terms:

As you are no longer an employee of this Company your Unemployment Insurance Bulk Con­tribution Certificate is enclosed herewith.

To complete the picture, a word should be said about the question raised in the Courts below whether or not the decision of the union summa­rized in para. 8 above was communicated to the appellant in some fashion prior to the directors' meeting of March 4th? On this point, the trial judge had this to say (p. 508):

The company was duly advised of this decision; and on the three following days no employee who was a member of this union showed up for work.

[Page 731]

With this finding, Robertson J.A. did not agree. At p. 120, the report of the judgment in appeal reads as follows:

As I have indicated, there is no evidence to show that the decision arrived at at the meeting on 1st March was communicated to the appellant. As far as appears from the evidence, the employees merely stayed away from work.

On this aspect of the case, there was certainly no reason for Robertson J.A. to set aside the finding of the trial judge, this finding obviously being based on the evidence in general and particularly on that part thereof which indicates that the local press, as well as radio stations, were immediately notified of the decision taken by the meeting of March 1st and that in fact this information was published and broadcasted.

As a result of the foregoing, the respondents, members of the striking union, took an action against appellant claiming one week's pay in lieu of notice as well as severance pay under ss. VII and XX of the collective agreement, the material extracts reading as follows:

ARTICLE VII: NOTICE

Section I (a) The Company will give regular employees one (1) week's notice or one (I) week's pay in lieu thereof before discharging except that no notice or pay will be given if the discharge is for sufficient cause.

Section 1(b) Employees will give the Company one (1) week's notice when desiring to terminate their employment, except where otherwise mutually agreed.

ARTICLE XX: SEVERANCE PAY

In the event of amalgamation, closure of the plant or a department thereof, or reduction in work force due to automation or technological advances causing a regular full-time employee to lose his or her employment, the Company hereby agrees to pay such an employee severance pay at his or her regular rate of pay according to the following schedule:

[Page 732]

Full Time                       Severance Pay

Consecutive service

up to 2 years                one week

over 2 years                             one week's pay for every year of full time service to a maximum of twenty (20) weeks.

The foregoing shall be in addition to the regular week's notice or week's pay in lieu thereof to which such employees may be entitled. This clause does not apply to a temporary lay-off.

On the sole question with which I am dealing, and which is stated in the opening paragraph of these reasons, I can only repeat what was said by McFarlane J.A. (p. 116):

I note that counsel made no distinction in this regard between severance pay and pay in lieu of notice.

Are respondents entitled to claim the benefit of these provisions? In my view, the answer should be in the negative with the result that the action is ill-founded and should have been dismissed.

The contract of employment of each of the respondents with the appellant contains clauses derived from two sources:

(a) the collective agreement;

(b) the general law in all matters not covered by the agreement.

Such was the unanimous view of the judges below and this view is totally in accord with the judg­ments of this Court in Syndicat catholique des employés de magasins de Québec Inc. v. Compa­gnie Paquet Ltée[5] and in C.P.R. Co. v. Zambri[6] when these decisions are read in their entirety.

The obligation of the employee to serve his employer is not spelled out in the collective agreement and may be considered as flowing from the general law. In my view, it is also imposed by the

[Page 733]

collective agreement, the basis of which is that the union will take active steps to ensure that the members of the unit will respect the law, including the obligation not to withdraw their services to the employer through an illegal strike. To me, this is the principle behind Re Polymer Corp. and Oil, Chemical and Atomic Workers International Union[7], as affirmed at [1961] O.R. 438 and even­tually by this Court[8]; the no strike clause in that case does not create a difference in law with our own situation.

It follows, in my opinion, that when the employees in concert refuse illegally, as was the case here, to offer their services, they are in breach _ of the most fundamental obligation of their contracts. When, as was also the case here, this breach acquires a definitive character by effective­ly destroying the goodwill of the operation, the employer is justified in considering the employees as having definitely broken their contracts of employment. From that moment on, the employer is no longer bound by any of the terms of those contracts, including in the present case the benefits stipulated in the collective agreement. This was the attitude of the employer as is apparent from the facts recalled above in paras. 10, 11 and 12 of my summary. This attitude was perfectly justified in law.

This entire subject-matter has been carefully reviewed by Robertson J.A. in his dissenting opin­ion which, on this point, starts in the middle of p. 132 of the report. I cannot do any better than to adopt his reasons as my own. To these, I would like to add, however, one reference: Australian Hardwoods Pty. Ltd. v. Commissioner for Railways[9], a decision of the Privy Council where Lord Radcliffe, at p. 742, writes:

A plaintiff who asks the court to enforce by mandatory order in his favour some stipulation of an agreement which itself consists of interdependent undertakings be­tween the plaintiff and the defendant cannot succeed in obtaining such relief if he is at the time in breach of his own obligations.

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I would allow the appeal and dismiss the action with costs throughout.

Appeal dismissed with costs, RITCHIE, SPENCE, PIGEON and DE GRANDPRÉ M. dissenting.

Solicitors for the defendant, appellant: Davis & Co., Vancouver.

Solicitors for the plaintiffs, respondents: Guild, Yule, Schmidt, Lane & Murray, Vancouver.