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The case law relating to labour and employment is constantly evolving; in this issue, we would like to draw your attention to the following topics:

1. Separate Pay Equity Plans: Their validity is subject to the existence of a predominantly female job class.
2. Alienation of an Enterprise: The application of Article 2097 C.C.Q. makes it impossible to allege termination of the employment relationship.
3. Moral Damages: The Court of Appeal Takes a Restrictive Approach.

I. VALIDITY OF SEPARATE PAY EQUITY PLANS THROWN INTO QUESTION

In a recent decision, the Commission de l'équité salariale (C.É.S.) questioned the validity of a request for a separate pay equity plan by a certified employee association when the association does not represent any employees in a predominantly female job class. The decision with respect to a dispute between Ville de La Prairie and the union representing white-collar employees formed the subject of a C.É.S. resolution at its 124th sitting on February 15 and 16, 2005.[1]

Facts Underlying the Dispute

Ville de La Prairie was to create a pay equity plan and had decided to appoint a pay equity committee, pursuant to the provisions of the Pay Equity Act.[2]

The municipality originally created a single pay equity plan for all its employees, including non-unionized employees and two separate groups of unionized employees, white-collars and blue-collars. After the first two steps of the pay equity plan had been completed, the blue-collar representatives asked the municipality to exclude it from the general plan and to set up a separate pay equity plan in accordance with section 32 of the Act.

The municipality agreed to the request made by the blue-collar union, which represented only predominantly male job classes. The white-collar union then contested the decision before the C.É.S., which concluded that the blue-collar union's request had to be accepted by the municipality, given that it had been made within a reasonable time limit, as the general plan was still in the early stages.[3]

The white-collar union contested the decision before the Commission des relations du travail (C.R.T.). At the same time, it raised a new issue. The union asked the C.R.T. if the employer's general pay equity plan had to take into account the job classes covered by the blue-collar bargaining unit, even if the blue-collar union had asked for a separate plan. During a pre-hearing conference, the C.R.T. stated that the C.É.S. should decide on this issue first; with the consent of all the parties involved, the C.R.T. then returned the case to the C.É.S. for a decision.

The C.É.S.'s Decision

In response to the issue raised before the C.R.T., the C.É.S. unanimously concluded that the Act clearly stipulates that pay equity plans, "[Translation] whether general or separate, are unrelated to one another.# The predominantly male job classes covered by a separate plan could thus not be considered under the employer's general plan.

Section 52 of the Act is the only exception to this rule and applies only if no predominantly male job classes have been identified in any of the pay equity plans established in an enterprise; in that case, the predominantly female job classes covered by the plan must be compared with all predominantly male job classes in the enterprise. However, in this particular case, the general plan did include predominantly male job classes, and the predominantly male job classes covered by the separate plan for blue-collar employees could thus not be taken into consideration.

In light of a new argument submitted by the white-collar union, the C.É.S. decided to examine another issue that had never been raised before it or before the C.R.T., namely whether the Act can be interpreted as allowing a separate pay equity plan to be created for a group of employees represented by a certified association when the group in question comprises only predominantly male job classes.

The C.É.S. decided by a majority, with Commissioner Louise Marchand dissenting, that the right to request the creation of a separate pay equity plan necessarily required predominantly female job classes to be compared with predominantly male job classes. Since there was no predominantly female job class among the blue-collar employees, the request for a separate plan for this group of employees would "[Translation] exclude the predominantly male blue-collar job classes from any pay equity plan to be implemented" by the employer in question.

Allowing such an exclusion was unacceptable, given that, according to the majority, it compromised the main objective of the Act, i.e., correcting discriminatory differences in compensation. Consequently, a request to implement a separate plan that does not cover any predominantly female job classes cannot be granted. The C.É.S. thus considered the request made by the blue-collar union invalid, and all of the job classes represented by the union continued to be covered by Ville de La Prairie's general pay equity plan.

Dissenting Opinion

Essentially, Commissioner Louise Marchand was of the opinion that the wording of the Act was clear: Pursuant to sections 11 or 32 of the Act, any certified union can request the creation of a separate plan, whether or not it represents predominantly female job classes at the time the request is made. Obviously, if there are no predominantly female job classes, it will not be necessary to assess the differences in compensation between predominantly female job classes and predominantly male job classes. However, it may be necessary to do so in the future if a new predominantly female job class is created within a group of employees that did not include any before. It was thus incorrect to conclude that creating such a separate plan was contrary to the objective of the Act.

Conclusion

Following the adoption of the Act, several unions that did not represent any predominantly female job classes considered that their members had no direct financial interest in participating in the creation of a general pay equity plan within an enterprise; in fact, only employees who are members of a predominantly female job class may be entitled to compensation adjustments under the Act. Under the circumstances, several unions preferred to request the creation of a separate plan for their members, as they were well aware that the procedural requirements under the Act would be relatively easy to satisfy, given that there would be no predominantly female job class in the separate plan. This right, which certified unions can exercise unilaterally pursuant to sections 11 or 32 of the Act, has now been called into question by the C.É.S. decision in the Ville de La Prairie case.

This issue is also very significant for all the employers concerned, who, in the event of a dispute, will have to assess the impact of such a decision on their specific circumstances. In fact, the inclusion in a general pay equity plan of predominantly male job classes that would have been excluded had there been a separate plan is likely to lead to a reevaluation of the differences in compensation between predominantly female job classes and predominantly male job classes. Consequently, the compensation adjustments necessary to achieve and maintain pay equity could be quite different.

At the time of writing, no appeal had been lodged against the decision rendered in the Ville de La Prairie case. The time limit to apply to the C.R.T. to contest a C.É.S. decision is 90 days (section 104 of the Act). Several issues are still pending, one of them being whether the decision will be appealed. Another issue is whether the C.R.T. will confirm the C.É.S.'s conclusion, either in this or another case. If it does, the question arises whether the C.É.S. will decide to intervene in separate plans that have already been completed and whether it would decide to intervene when verifying whether pay equity has been maintained. It is thus too early to assess the true impact of the decision rendered by the C.É.S.

II. IMPACT OF ARTICLE 2097 C.C.Q.: EMPLOYEES CANNOT ALLEGE THAT THEIR EMPLOYMENT HAS BEEN TERMINATED

In a 2003 judgment in Manoir Sully,[4] the Court of Appeal concluded that the employment relationship of a unionized employee is terminated even if the employment continues with a new employer on the same terms and conditions, in accordance with section 45 of the Labour Code. Based on this conclusion, certain employees recently alleged that they were entitled to enforce claims resulting from such termination of employment against their former employer even if their employment was continued with a new employer on the same terms and conditions. The Superior Court and a grievance arbitrator concluded that such claims were unfounded.

Société du Parc des Îles

In Beaudry c. Société du Parc des Îles,[5] non-unionized Société du Parc des Îles employees were entitled to an indemnity pursuant to their contract of employment if the employer ceased its operations; however, the indemnity was payable only if they lost their jobs permanently and were not offered equivalent positions with the City of Montréal or any of its corporations.

When the City of Montréal sold its La Ronde facilities to Six Flags, all of the employees in question were transferred to the purchaser, which agreed to maintain the employees' positions, with all of their rights and privileges. Even though the purchaser fulfilled its undertakings to all of the employees, the employees alleged that they had lost their jobs with the Société du Parc des Îles, which had obviously ceased its operations, and that they had not been offered another position with the City of Montréal or any of its corporations; they thus claimed payment of the indemnity provided for in their contract of employment.

Madam Justice Diane Marcelin dismissed the claims, stating that the employees could not allege that they had lost their jobs; in order to accept their claim, one would have to ignore Article 2097 C.C.Q., which reads as follows:

2097. A contract of employment is not terminated by alienation of the enterprise or any change in its legal structure by way of amalgamation or otherwise.

The contract is binding on the successor of the employer.

Since the employees in question had been transferred to Six Flags on the same conditions and with the same benefits as they enjoyed before they were transferred, they could not allege constructive dismissal or loss of employment within the meaning of the relevant clause in their contract of employment. The Court concluded that the application of Article 2097 C.C.Q. prevented the application of the contractual clause raised by the employees.

Bombardier

In Association internationale des machinistes et des travailleurs et travailleuses de l'aérospatiale, section locale 712, CTC-FTQ et Bombardier Aéronautique,[6] the union filed a grievance when Bombardier Inc. sold its defence services business at Mirabel to L-3 Communications MAS (Canada) Inc. ("L-3 Com#).

The union was certified to represent Bombardier Inc.'s employees in various plants, including the defence services plant at Mirabel. All of the unionized employees of the division were transferred to L-3 Com in accordance with a provision of the sales agreement. Moreover, L-3 Com acknowledged that it was bound by the collective agreements pursuant to section 45 of the Labour Code and filed a joint application with the union pursuant to section 45 in order to have the partial transfer to L-3 Com of Bombardier Aerospace's rights and obligations acknowledged. The Commission des relations du travail granted the application.

In its grievance, the union alleged that the employment relationship of the employees in question had been terminated, given the change of employer. In this regard, they relied mainly on the Court of Appeal judgment in Manoir Sully.[7]

The union therefore argued that all of the employees in question were entitled to an indemnity, given that the employer had not given them notice of termination as required under the Civil Code. To that effect, the union cited Articles 2091 and 2092 C.C.Q., which read as follows:

2091. Either party to a contract with an indeterminate term may terminate it by giving notice of termination to the other party.

The notice of termination shall be given in reasonable time, taking into account, in particular, the nature of the employment, the special circumstances in which it is carried on and the duration of the period of work.

2092. The employee may not renounce his right to obtain compensation for any injury he suffers where insufficient notice of termination is given or where the manner of resiliation is abusive.

Even though the parties had not reproduced these provisions in the collective agreement, they are presumed to be incorporated in any collective agreement as a matter of public policy in accordance with the findings of the Supreme Court in Parry Sound.[8] Moreover, the Court of Appeal has issued two judgments confirming that grievance arbitrators have the authority to apply Articles 2091 and 2092 C.C.Q., even if they are not mentioned in a collective agreement.[9]

In response to the union's arguments, the employer argued that it continued to be questionable whether Articles 2091 and 2092 C.C.Q. could be applied to unionized employees, given that there was no mention to that effect in the collective agreement. In fact, the Supreme Court has heard an appeal from the judgments of the Court of Appeal and has taken the case under advisement. However, even if the Supreme Court eventually upholds the Court of Appeal's decisions, the grievance arbitrator should still conclude that the employment relationship was not terminated, given the application of Article 2097 C.C.Q., which expressly provides that contracts of employment are not terminated by alienation of an enterprise and that such contracts are binding on the purchaser.

The union argued that Article 2097 C.C.Q. applies only to the alienation of the whole of an undertaking and does not apply to a partial alienation. The union pointed out the difference in wording between section 45 of the Labour Code, which clearly states that it applies to the alienation in whole or in part of an undertaking, and Article 2097 C.C.Q., which applies to "alienation of the enterprise or any change in its legal structure by way of amalgamation or otherwise."

However, arbitrator Claude Foisy was of the opinion that both the authorities and the case law favoured a broader interpretation of Article 2097 C.C.Q. in order to protect employees' rights following the alienation of an enterprise. He concluded that the article applied not only to the alienation of the whole, but also to the partial alienation of an enterprise. He was thus of the opinion that the union's grievance had to be dismissed, observing at paragraph 54 of his decision:

[Translation]

[54] In short, I believe that, even if Article 2091 had been incorporated in the collective agreement, in this particular case, the individual contract of employment between Bombardier Aerospace and the employees covered by the grievance was not interrupted or terminated, given the alienation of the company and the fact that, pursuant to the legal fiction created by Article 2097, the alienation of the enterprise did not terminate the contract of employment. That being the case, the employees cannot claim an indemnity in lieu of notice from their former employer as such an indemnity can only be based on termination of a contract of employment.

It must also be pointed out that the grievance arbitrator refused to conclude that the employment relationship had been terminated as a result of the change of employer, despite the conclusions of the Court of Appeal in Manoir Sully; Mtre Foisy was of the opinion that the Court of Appeal had come to that conclusion only because of a specific provision that restricted the employer's right to award subcontracts. There was no such clause in the Bombardier case.

Conclusion

In the past, when parties sold the assets relating to a business, it was generally assumed that the contracts of employment were terminated as a result of the sale and that the purchaser had to make an offer of employment to the vendor's employees, which the employees were free to refuse or accept in order to continue in the employ of the new employer. Article 2097 C.C.Q. has obviously changed the rules of the game, as the purchaser is now bound by the vendor's contracts of employment with its employees. There was still some question, however, whether or not Article 2097 would apply to the partial alienation of an enterprise; the two decisions commented on above seem to confirm that Article 2097 C.C.Q. must be interpreted liberally and that it applies not only to the alienation of the whole, but also in the event of the partial alienation of an enterprise.

III. MORAL DAMAGES; THE COURT OF APPEAL TAKES A RESTRICTIVE APPROACH

In two recent decisions, the Quebec Court of Appeal clarified the grant of moral damages in connection with employment litigation. In both cases, it set aside the decisions of the Tribunal des droits de la personne and the Superior Court, which had granted moral damages of $10,000 and $25,000 respectively.

Université Laval

In the Université Laval[10] case, an employer was appealing a decision by the Tribunal des droits de la personne which ruled that the employer had failed to respect pay equity between the Office Group employees and the Trades and Services Group employees. The Tribunal found that Université Laval was guilty of wrongful discrimination, contrary to the Charter of human rights and freedoms and the Pay Equity Act; it therefore ordered the reimbursement of financial losses and ordered Université Laval to pay moral damages in the amount of $10,000 each to four employees for insults, humiliation, demeaning conduct and unlawful infringement of the right to equality. In a unanimous decision (Justices Thérèse Rousseau-Houle, France Thibault and Julie Dutil), the Court of Appeal dismissed most of the employer's grounds for appeal, except for the one relating to moral damages. On this issue, the Tribunal had found that the four complainants had suffered disappointment, exasperation and humiliation due to discrimination. The Court of Appeal noted that it had to exercise caution before intervening in the trial judge's evaluation of moral damages. However, it decided that moral damages could not be awarded for the sole reason that a Charter right had been infringed. Admittedly, section 49 of the Charter provides for the award of moral damages if the right to equality is infringed. However, an injury must be proved to justify the grant of such damages. According to the Court of Appeal, in this case the complainants had simply explained how their integration into the new compensation system had taken place; this testimony only dealt with the material loss suffered by the complainants and did not justify the granting of moral damages. For this reason, the Court found that the Tribunal had committed a palpable error in granting such damages to the four complainants; they had in fact been compensated for all material loss they had suffered.

Bristol-Myers Squibb

In Bristol-Myers Squibb Canada Inc.,[11] the Court of Appeal ruled on the consequences of the dismissal of a non-unionized employee and, in a majority opinion (Justices Louise Mailhot and Yves-Marie Morissette), decided to set aside the finding of the Superior Court which had granted an amount of $20,000 for moral damages. Justice Joseph R. Nuss, dissenting, would have maintained the decision of the trial court. In its judgment, the Court of Appeal referred to the Stewart decision ([1994] R.J.Q. 1751 (C.A.)) in which it had already made a distinction between the grant of pay in lieu of notice and the grant of additional moral damages based on an abuse of right. These two heads of damage have different purposes; pay in lieu of notice compensates for inconveniences related to dismissal, whereas moral damages compensate for abuse of right that only exists if there is negligence, bad faith or an identifiable fault of the employer. Thus, moral damages will only be granted if there is evidence of a particular type of fault separate from the act of dismissal, which would be the case if the employee suffered serious injury to his/her reputation or was dismissed in a humiliating, degrading or hurtful fashion. In matters of dismissal, abuse of right requires a determination that the manner of dismissal exceeded the reasonable exercise of the employer's right. The test for abuse of right is thus similar to that applied in determining bad faith. This restrictive approach with respect to abuse of right prevents damages based on abuse of right from overlapping with pay in lieu of notice, which compensates for "normal" damages resulting from discharge without notice (stress, anxiety, etc.).

In this case, the Superior Court had granted an amount of $20,000 on the grounds that there had been no probation period, written record, formal notice or warning and due to the suddenness of the dismissal. The evidence showed that the dismissal was the result of a personality conflict between the dismissed employee and her superior. According to the Court of Appeal, interpersonal conflicts are a normal part of labour relations and it is quite common to hear an employee complain that his/her boss is too strict or unfair. Personality conflicts are unavoidable in the workplace since we cannot choose our colleagues in the same way as we choose our friends. In this case, the dismissal was not done in a malicious or incorrect way since it was announced civilly and discreetly. Moreover, the Human Resources Director accompanied the employee to her office so that she could discreetly recover her personal belongings and made sure that the employee could leave the premises without attracting attention.

According to the majority judgment of the Court of Appeal, the events did not show any lack of courtesy in the way the dismissal was handled, nor did it show bad faith. The employer did not attempt to tarnish the employee's reputation with her colleagues or third parties. Although the dismissal had a disastrous effect on the employee, who suffered a depression, such an unforeseeable effect does not allow us to describe the discharge as abusive in itself.

Conclusion

In these two decisions, the Court of Appeal confirms that it will refuse to grant arbitrary moral damages without evidence justifying such an award, particularly in the case of dismissals. Thus, an employer who dismisses an employee will not be liable to pay such damages, as long as the dismissal is done in a correct fashion, without unlawful injury to the employee's dignity, honour or reputation.

The purpose of this document is to provide information as to developments in the law. It does not contain a full analysis of the law nor does it constitute an opinion of Ogilvy Renault or any member of the Firm on the points of law discussed.

[1]. Ville de La Prairie, CES-124-3.2-800-00012, 800-00099 and 800-00121, Rosette Côté, President, Louise Marchand, Commissioner, and Carol Robertson, Commissioner.

[2]. R.S.Q., c. E-12.001.

[3]. This decision, which was rendered on August 26, 2003, reflected C.É.S. policy at the time; since then, the C.É.S. has decided that any request made pursuant to section 11 of the Act must be made before any work is undertaken, the whole in accordance with the conclusions drawn in Musée des Beaux-Arts de Montréal c. Syndicat du Musée des Beaux-Arts de Montréal, 2003 QCCRT 0688, December 5, 2003.

[4]. Syndicat des travailleuses et travailleurs du Manoir Sully inc. c. Laflamme, D.T.E. 2003T-11 (C.A.).

[5]. Beaudry c. Société du Parc des Îles, S.C. Montréal no. 500-17-011088-013, January 27, 2005 (Honourable Diane Marcelin, J.S.C.).

[6]. Association internationale des machinistes et des travailleurs et travailleuses de l'aérospatiale, section locale 712 et Bombardier Aéronautique, unreported arbitral award, dated March 21, 2005 (Mtre Claude H. Foisy, Q.C., Grievance Arbitrator).

[7]. Supra, note (4).

[8]. Parry Sound (District) Social Services Administration Board c. O.P.S.E.U., Local 324, [2003] 2 S.C.R. 157.

[9]. Isidore Garon ltée c. Tremblay, C.A.Q. 200-09-003505-010, December 9, 2003 and Syndicat national des employés de garage du Québec inc. C.S.D. c. Fillion et Frères (1976) inc., C.A.Q. 200-09-003550-016, December 9, 2003; both judgments have been appealed to the Supreme Court; the appeals were heard on February 16, 2005 and are currently under advisement.

[10]. Université Laval c. Commission des droits de la personne et des droits de la jeunesse, C.A. Québec, 200-09-003274-005, January 24, 2005 (Justices Thérèse Rousseau-Houle, France Thibault and Julie Dutil), 2005, QCCA 27.

[11]. Bristol-Myers Squibb Canada Inc. c. Nicole Legros, C.A. Montréal, no. 500-09-012657-029, January 31, 2005 (Justices Louise Mailhot, Joseph R. Nuss and Yves-Marie Morrissette), 2005, QCCA 48.

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