UPDATE 3-Canada court rules against Wal-Mart over Quebec store closure

Fri Jun 27, 2014 3:49pm EDT

(Adds comment from Wal-Mart)

By Randall Palmer and Allison Martell

OTTAWA/TORONTO, June 27 (Reuters) - Wal-Mart Stores Inc violated Quebec's labor code when it closed a store in the province that had become one of the first in Canada to successfully unionize, the Supreme Court of Canada ruled on Friday.

The ruling was a rebuke to the world's largest retailer, though its impact on unionization efforts at other Quebec and Canadian stores may be limited. The decision took issue with the timing of the 2005 closure, but it did not address the company's right to shut operations.

The court sent the case to an arbitrator to determine appropriate remedies, which will likely include compensation for the 190 workers who lost their jobs when the store, in Jonquiere, Quebec, closed. The closure came shortly after the United Food and Commercial Workers (UFCW) union was certified to represent the store's workers in 2004.

Wal-Mart had said it did not close the store because it was being unionized, pointing to the fact that it had reached a collective agreement with the same union at a store in St-Hyacinthe, Quebec.

"We are disappointed by the decision," Wal-Mart said in an emailed statement. "This was an appeal of a unanimous decision by the Quebec Court of Appeal to reject the UFCW's claim, which in our view was a legally correct decision."

The company said it was reviewing the decision to determine its next steps.

In 2009, the Supreme Court backed Wal-Mart's right to close the store, but Friday's win came after the union brought a fresh challenge under a different article in the Quebec Labor Code.

Quebec, a largely French-speaking province, has traditionally been one of the most labor-friendly jurisdictions in North America.

Friday's ruling found that Wal-Mart erred in closing the store during a "freeze" period, which starts when workers file to unionize and ends when they get a contract, go on strike or are locked out. Quebec law limits employers' ability to change working conditions during the freeze period.

"Once a union has been certified, you have to negotiate," said Gilles LeVasseur, a professor and labor expert at the University of Ottawa.

LeVasseur said the ruling does not prevent Wal-Mart from closing unionized stores outside of the freeze period. Financial penalties would not be material to the retail giant, he said, but public relations will be an issue.

"A lot of people in Quebec will say, are they respecting our actual distinct-society way of seeing labor relations? We have a way of doing things in Quebec," he said.

Wal-Mart is a formidable competitor in Quebec and the rest of Canada and has said it will invest about C$500 million ($467 million) this year to expand in the country.

The United Food and Commercial Workers called the ruling a "historic and positive milestone in protecting workers' rights."

But David Doorey, a labor law professor at York University in Toronto, said the decision does not fundamentally alter the dynamic between the retailer and its Canadian workers, given that the unionized workers still lost their jobs.

"That message leaves a chill over all other Wal-Mart employees who would dare to exercise their legal rights to choose collective bargaining," he said.

The Supreme Court decision was split 5-2.

In the dissent, Judges Marshall Rothstein and Richard Wagner argued that applying the relevant law to a store closure would have "absurd results", blocking a closure during the freeze period but allowing it, for any reason, immediately after that period ends.

The case is United Food and Commercial Workers, Local 503 v. Wal-Mart Canada Corp, 2014 SCC 45.

($1=$1.07 Canadian) (Editing by Jeffrey Benkoe, Bernadette Baum, Jeffrey Hodgson and Peter Galloway)