Welcome to the summer edition of the International Employment Law Committee newsletter. Thanks as always to our contributors, and please let me know if you are interested in submitting an article on recent developments in your jurisdiction.
Helen Colquhoun
Withers, Hong Kong
Friday, September 15, 2017
Canada - Clash of Principles Leads to Sea Change in Union Rights During Insolvency Proceedings
By Theodore Goloff, Robinson Sheppard Shapiro, and Brian Sherman (law student)
Introduction
In law as in life, where one begins determines where one ends, particularly where one’s starting point for legal analysis depends upon one’s choice between competing principles to champion. In a federal system such as Canada, where insolvency law lies within federal jurisdiction but where provincial competence in labour relations law is presumptive (indeed less than 10% of Canada’s working population falls under the jurisdiction of federal labour and employment law), conflict arises where the two intersect, as they represent divergent objectives.
Labour relations law provides employees the mechanism to advance their interests and redress the imbalance of economic power in their favour. Insolvency law is predicated upon the competing principle of maintaining the rights of all creditors within a predictable scheme and order, so that their claims are treated pari passu, and is designed to prohibit one group of aggressive creditors from gaining at the expense of others.
Unless varied by the Supreme Court of Canada, the recent decision of the Court of Appeal for Ontario in Romspen Investment Corporation v. Courtice Auto Wreckers Limited, 2017 ONCA 301, may well represent a sea change in the relationship between labour relations law and insolvency. Romspen appears to be the first instance where a Canadian appellate court was asked to consider whether, on principle and/or on the facts of the case, a union should or should not be allowed to pursue a certification application during receivership/bankruptcy, by lifting a stay of proceedings resulting from a receiving order issued in accordance with the Bankruptcy and Insolvency Act [BIA]. Considering the different vantage points of the majority and the dissent, it is not surprising that their analysis and their disposition of the case are diametrically opposed.
Background
As Justice Lauwers, in dissent, wrote:
[60] The insolvency regime in Canada is intricate and the way it addresses the interests of debtors, creditors and others is carefully calibrated.
In the event of insolvency, legal structures are available in Canada for both restructuring and reorganization, i.e. the Companies’ Creditors Arrangement Act [CCAA], allowing companies to retain value as “going concerns”, while protecting against intangible losses, such as evaporation of the companies’ goodwill that, inter alia, result from liquidation. Reorganization serves the public interest by facilitating the survival of companies supplying goods or services crucial to the health of the economy while, hopefully, saving large numbers of jobs. As the CCAA does not specify what happens if reorganization fails, the BIA, supplies the backdrop for that unfortunate situation, i.e. the firms’ demise. The two statutes work in tandem, grouping all possible actions for recovery against the debtor into a single proceeding controlled in a single forum overseen by a single judicial officer, avoiding the chaos that would attend insolvency if each creditor initiated recovery proceedings individually in different forums, all the while placing all creditors on an equal footing, diminishing the risk that the most aggressive creditors would realize their claims against the debtor’s limited assets to the detriment of all the others.
The insolvency regime proceeds from the premise of a statutory freeze and standstill to allow for judicially supervised reorganization and rebirth, if possible, with the pain of the “haircut” required being shared amongst creditors and stakeholders, and the orderly and schematic disposition of assets if bankruptcy ultimately ensues.
The essential premise of labour relations law, in Canada, at least since the last Supreme Court pronouncements on Section 2(d) of the Canadian Charter of Rights and Freedoms [Charter], known as the “trilogy” of 2015, proceeds from a constitutionally recognized and protected right of the “working class” to better its economic position and redress the inequity of uneven bargaining power through (i) associational rights, i.e. certification; (ii) collective bargaining; and (iii) the use of the strike weapon. Clearly because its purpose is to redress imbalance through dynamic collective change, labour relations law challenges rather than preserves the status quo.
The issue raised in Romspen is different from the more classic case of a simple employee unfair labour practice charge, e.g. termination, given that the outcome of such proceedings might involve liquidating the amount of back pay (lost wages and interest), if any, owed, providing, in that sense, the data required to allow the receiver or trustee in bankruptcy to determine whether there even is a “claim provable in bankruptcy”. There seems therefore, in that circumstance, to be a more cogent argument for allowing such proceedings to go forward, because the interests of both the complainant and the receiver or trustee are, in that sense, advanced in tandem. Such was, in fact, the view of the Quebec Superior Court in Re, Engrenage P.Y.G. (Faillite de), 2003 CanLII 27983 and Société de gestion ltée (Syndic de), J.E. 98-155.
Salient Facts
In the Rompsen case, certification proceedings were filed almost two months after Courtice Auto Wreckers was put into receivership by Rompsen, one of Courtice’s secured creditors. A general stay of certification proceedings was imposed, pursuant to the provisions of the BIA by the receiver.
The issue of whether or not the general order to stay proceedings applied so as to block the certification was canvassed by the Ontario Labour Relations Board, which held that, indeed, the general stay applied. The Board proceeded to stay the union’s certification application pending before it. The union sought an order to quash the Receiver’s stay, and by ricochet the Board’s order, from a judge of the Ontario Superior Court of Justice, without success. That decision was appealed by the union allegedly “de plano”, i.e. as of right, without leave being sought. Both the majority and dissenting judges agreed that leave was required but, because the central issue raised in the appeal, as the majority put it, was “the relationship between, and intersection of, federal bankruptcy law and general provincial labour relations law” [para 26], leave to appeal was exceptionally granted on public interest grounds.
In the end, the majority allowed the appeal, set aside the order of the motion judge, and granted the union leave to proceed with its certification application.
A Clash of Principles – Dissent vs. Majority Decision: To Stay or not to Stay Certification Proceedings
As noted by the dissent, “[w]hatever the applicable test, ‘lifting the automatic stay is far from a routine matter’” and that “lifting of a stay is exceptional in view of the expectation that most creditors’ claims will be resolved through the summary procedure, and not through ongoing court or administrative law proceedings” [para 78].
Indeed, the lifting of a stay order is a matter that lies within the bankruptcy judge’s discretion. It has long been a tenet of higher courts that discretion given to trial court judges ought not to be disturbed or appeal, save on grounds of palpable error of law, or less than reasonable appreciation of the facts.
Certainly a bankruptcy court judge, in any of Canada’s provinces, would per force have a specialized expertise akin to that of any administrative tribunal created by statute whose decisions, in Canada, even when not protected by a privative or preclusive clause, are reviewable only under extremely narrow parameters.
In this regard, Justice Lauwers, in dissent, noted:
[84] As a commercial list judge with long experience in insolvency, the bankruptcy judge would be fully alive to the relevant and to the business realities faced by the debtor, the creditors and the receiver. Moreover, he would be intimately familiar with the particular facts of the case. That is why it is important for this court, from the viewpoint of the standard of review, to defer to the bankruptcy judge in the exercise of his discretion under s. 215 of the BIA or the terms of the receivership order: see e.g. Royal Crest Lifecare Group Inc. (Re) (2004) […] 181 O.A.C. 115 (C.A.), leave to appeal refused, [2004] S.C.C.A. No. 104, at para. 23; Grant Forest, at paras. 97–99.
To be sure, the majority decision took issue with a number of findings of fact of the receiver, and/or of the bankruptcy judge, terming them inter alia “speculative” [paras 34 and 41] or adding: “The Receiver’s statement in its first report that it has ‘serious concerns’ that certification could negatively impact a sale amounts to little more than self-serving speculation”. In this respect, the dissent countered:
[116] In my view, the bankruptcy judge’s statement that certification could negatively impact the sale of the Harmony Road depot is self-evidently true and falls well within the margin of appreciation that is his due, given his knowledge of the commercial realities. I would be most reluctant to disparage the advice of the court-appointed receiver as mere “self-serving speculation”. Such an officer has no self-interest and owes duties to all the parties and to the court. In my view, it was open to the bankruptcy judge to accept the receiver’s advice.
[117] If the union achieves certification and the Harmony Road depot is sold in such a way as to attract successor labour rights, then any prospective purchaser of the depot will be faced with the obligation to immediately embark on first collective agreement negotiations. This is not a small additional burden on what would otherwise be the terms and conditions of the depot’s sale. It will plainly discourage some potential bidders and therefore negatively affect the depot’s market price by reducing the number of buyers who would be willing to engage. Any cooling of the interests of potential purchasers in the debtor’s assets would reduce the proceeds of sale to the prejudice of all the creditors. With respect, this is more than a mere “inconvenience to the receivership process.”
[118] If the court were to permit the post-receivership certification process to continue, it would effectively hand one interested group of creditors, the newly unionized employees, a tool with which to increase their leverage over the other creditors.” (emphasis added)
At para 114, the dissent in Romspen referenced the “significant professional costs to the Receiver’s administration”, stating that “[t]he cost of a labour negotiation will, in effect, be a super-priority expense that will ultimately be absorbed by and materially prejudice other creditors through reduced realizations and distributions.”
Most respectfully, it certainly lies within the role of any court to draw factual inferences from statutory language. Apparently, that is what the dissent understood the bankruptcy trial court judge to have done. While before the bankruptcy judge, the receiver is and was a party ad-litem, in law at least, the latter is and was rightly to be viewed as a court-appointed judicial officer who has no separate personal and self-serving interests but those of the collectivity of creditors and the proper administration of the BIA.
In that respect, if the receiver’s “serious concerns” were speculative, in the absence of proof to the contrary aren’t they to be taken as having been raised in the best interests of the mass of creditors? Isn’t that the true role of the receiver?
Was Federal Paramountcy Triggered?
The next, more substantive, issue between the majority and dissent centered on how to reconcile federal insolvency and bankruptcy legislation with the provincial statutory labour relations scheme, itself a regime that is constitutionally grounded in human rights.
As insolvency is within the exclusive competence of the Parliament of Canada, the paramountcy of federal legislation, while engaged, is tempered by Section 72(1) of the BIA providing:
72(1) The provisions of this Act shall not be deemed to abrogate or supersede the substantive provisions of any other law or statute relating to property and civil rights that are not in conflict with this Act, and the trustee is entitled to avail himself of all rights and remedies provided by that law or statute as supplementary to and in addition to the rights and remedies provided by this Act. [Court’s emphasis]
In Rompsen, there is between majority and dissent a fundamental disagreement as to when federal paramountcy is or is not triggered.
The majority, on the basis of GMAC Commercial Credit Corporation – Canada v. T.C.T. Logistics Inc., [2006] 2 SCR 123 [GMAC], determined that for paramountcy to be triggered there must be an “operative conflict”, between one or more provisions of the statutes, defined in 407 ETR Concession Co. v. Canada (Superintendent of Bankruptcy), [2015] 3 SCR 397, as being an impossibility to comply with both the provincial law and the federal bankruptcy regime. For the dissent, this latter and more recent case suggested a second flexible more context- and fact-specific paramountcy trigger.
Apparently, the majority did not consider the second portion of the “conflicts” test suggested by ETR Concession, which, in the dissent’s view, is “the latest word from the Supreme Court on paramountcy” [para 98]. This second test posits that federal insolvency paramountcy is triggered where, although it is possible to comply with both laws, the operation of the provincial law “frustrates” the purpose of the federal regime. In such an event, pursuant to ETR Concession, “the provincial law remains valid, but will be read down so as to not conflict with the federal law, though only for as long as the conflict exists” [para 101].
The difference between the majority and dissent, in their approach, is telling. As the dissent put it:
[103] The court’s task here is not to reconcile statutory language, but to reconcile different policies. This is a nuanced, difficult and delicate task informed by the bankruptcy judge’s knowledge both of the law and the operation of the marketplace in the context of the specific matter before him, drawing also on his experience and wisdom, and his sense of what is commercially reasonable. The bankruptcy judge brought just that perspective to this case.
The dissent continued:
[107] In my view, the policy contest presented in this case is precisely the kind of conflict between provincial regulatory regime for labour relations and the federal insolvency regime that the paramountcy doctrine is intended to recognize and accommodate.
[108] My colleague relies on the Supreme Court’s decision in GMAC. In that case the issue was whether leave should be granted to the union under s. 215 of the BIA so that the Labour Relations Board could determine “successor employer” status.
[109] However, there is a crucial distinction between this case and GMAC. The union had long been certified in GMAC. By contrast, in this case, the certification effort followed the appointment of the receiver by several months. This distinction is important because it engages one of the fundamental policy principles in insolvency law, which is to preserve the status quo among the creditors as of the date the receiver was appointed. The bankruptcy judge accurately identified that this principle would be violated if the debtor could be forced to accept union certification post-bankruptcy. In my view, my colleague does not give due weight to this critical principle.
To Stay or Not To Stay – The Central Question
The majority took issue with the suggestion that the certification “would in effect increase the rights of the members of the proposed bargaining unit relative to other creditors” [para 31], adding:
[32] […] A successful certification application does not guarantee employees better wages; it simply allows employees to combine their bargaining power and rely on the union’s assistance in negotiating their terms and conditions of employment. While it is true that upon certification certain rights and obligations crystallize that would not otherwise (e.g. the employer’s duty to recognize the union and bargain with it in good faith), certification does not have the effect of automatically increasing the rights employees have as creditors, thereby prejudicing other creditors. It is simply conjecture at this point to assume that the union will be successful in negotiating a more financially favourable contract for bargaining unit employees. Moreover, at this juncture, allowing the union’s certification application to proceed merely entitles the union to a representation vote, not to certification.
[…]
[34] In my view, this line of reasoning is speculative. While some purchasers may be dissuaded by recognition of the proposed bargaining unit, it may also be that a set collective agreement, with its clarity of terms, would be attractive to a prospective purchaser. The union, on behalf of its members, has an interest in the business being sold as a going concern and therefore has an incentive to act in a manner that would promote such an outcome.
[35] More fundamentally, however, there is simply no concrete evidence that recognition of the proposed bargaining unit would negatively impact a sale.
From this writer’s perspective, is the opinion regarding the supposed incentive to act “in a manner that would promote such an outcome” any less speculative than the conclusion reached by the receiver, which the bankruptcy judge saw no reason to vary?
From this writer’s perspective, and with respect, the issue lies at the core of both (i) how one views the latitude of an appellate court to review the exercise of trial courts’ discretionary remedies and, more fundamentally, (ii) the validity of assumptions as to the harmony of the goals of labour and the mass of the creditors. Even if both see value in the sale of the business rather than its dismantling, it is certainly a more than reasonable and plausible, if not a more compelling assumption, that all things being equal, a prospective buyer would have to negatively factor the possibility, if not probability, of the cost of bargaining of first collective agreement into the mix. This would be doubly true in Quebec where first contract negotiation can lead to an agreement imposed by arbitrator, even without proving bad-faith bargaining.
In any case, with the greatest respect for the majority opinion, with more than 45 years as a management side labour relations lawyer in Quebec behind me, I would suggest that first collective agreements that do not alter the employer’s economic landscape through improvements in wages, benefits or other non-monetary conditions of employment, are as rare as hen’s teeth. I would doubt that my colleagues at the Bar of Ontario on either side would see matters differently.
In determining whether lifting a stay order is or is not appropriate, the bankruptcy court was required to weigh the relative “prejudices” that may result.
With respect, fairly predictable and logical results of certification, even if they cannot be calculated with precision, nonetheless constitute far more than speculative prejudice.
The Charter’s Place in All of This
While no direct mention is made of the Charter, this author clearly believes that the majority’s decision has as its leitmotif the constitutionalization of the right to certification. Clearly, the majority would have been influenced by the Union’s reference thereto writing:
[37] […] The right to form and join a union of one’s choosing is a fundamental right under the Labour Relations Act, 1995, S.O. 1995, c. 1, Sched. A (the “LRA”). While flexibility is required to address the challenges in any particular insolvency proceedings against the legitimate exercise of labour rights simply because the assertion of those rights represents an inconvenience to the receivership process: GMAC, at paras. 50-51.
[…]
[44] […] I am simply not persuaded that allowing the union’s certification application to proceed would cause any more than de minimis prejudice to Ambrose Group creditors.
[45] On the other hand, a lot is at stake for the union and the employees. Maintaining the stay prejudices the important objectives “quick votes” are designed to serve, unduly interferes with employees’ ability to exercise their statutory labour rights, and, particularly where employees have allegedly been dismissed for exercising those rights, undermines employee confidence in the efficacy of core labour rights and protections.
[46] Labour rights do not end when insolvency proceedings begin.
To be sure, as the majority points out, obliquely referring, I believe, the above-mentioned Supreme Court trilogy, “the right to form and join a union of one’s choice is a fundamental right” [para 37], it is the dissent that deals with this issue more directly.
Justice Lauwers writes:
[88] The appellant’s factum simply asserts that: “Given the constitutional protection afforded to this process, the court should be wary of allowing the existence of a receivership to frustrate the certification application.” Fair enough, but the union had the entire life of the business before insolvency within which to pursue certification.
[89] In oral argument, counsel for the union expanded on this brief allusion. He asserted that the MPAO decision constitutionalized bargaining rights, and argued that the right of employees to unionize should “supersede” any concern in relation to the sale of the business. He added that there is no empirical evidence that unionization will reduce the sale value of the asset, but even if that were to be the outcome of the employees’ exercise of their rights under the labour legislation: “So be it”.
[90] However, counsel for the union did not take the position that the constitutionalization of labour rights takes away entirely the bankruptcy court’s discretion under s. 215 of the BIA or the order appointing the receiver to refuse to lift the stay where labour rights are in issue.
Conclusion
Romspen represents a clash of principles and a significant shift in the law on many different levels, the fallout of which is as yet not fully known. And if my point of view differs from those of my betters, I differ with deference.
In the end, given that there is an application for leave to appeal to the Supreme Court of Canada, pending it remains to be seen whether the dissent’s apocalyptic vision to the effect that:
[93] In my view, giving unions carte blanche to begin certification efforts for insolvent enterprises after the date of the appointment of a trustee or receiver or the date of an order under the CCAA would effect a sea change in insolvency law; it would profoundly alter the economic dynamics of insolvency, and whether the CCAA route is preferable to outright bankruptcy.
will be stillborn as a result of judicial scrutiny at a higher level and further clarification of the law on this issue by Canada’s highest court. Certainly, though, folks doing business in Canada on either side of the labour-management divide should be keenly interested in this case.
Introduction
In law as in life, where one begins determines where one ends, particularly where one’s starting point for legal analysis depends upon one’s choice between competing principles to champion. In a federal system such as Canada, where insolvency law lies within federal jurisdiction but where provincial competence in labour relations law is presumptive (indeed less than 10% of Canada’s working population falls under the jurisdiction of federal labour and employment law), conflict arises where the two intersect, as they represent divergent objectives.
Labour relations law provides employees the mechanism to advance their interests and redress the imbalance of economic power in their favour. Insolvency law is predicated upon the competing principle of maintaining the rights of all creditors within a predictable scheme and order, so that their claims are treated pari passu, and is designed to prohibit one group of aggressive creditors from gaining at the expense of others.
Unless varied by the Supreme Court of Canada, the recent decision of the Court of Appeal for Ontario in Romspen Investment Corporation v. Courtice Auto Wreckers Limited, 2017 ONCA 301, may well represent a sea change in the relationship between labour relations law and insolvency. Romspen appears to be the first instance where a Canadian appellate court was asked to consider whether, on principle and/or on the facts of the case, a union should or should not be allowed to pursue a certification application during receivership/bankruptcy, by lifting a stay of proceedings resulting from a receiving order issued in accordance with the Bankruptcy and Insolvency Act [BIA]. Considering the different vantage points of the majority and the dissent, it is not surprising that their analysis and their disposition of the case are diametrically opposed.
Background
As Justice Lauwers, in dissent, wrote:
[60] The insolvency regime in Canada is intricate and the way it addresses the interests of debtors, creditors and others is carefully calibrated.
In the event of insolvency, legal structures are available in Canada for both restructuring and reorganization, i.e. the Companies’ Creditors Arrangement Act [CCAA], allowing companies to retain value as “going concerns”, while protecting against intangible losses, such as evaporation of the companies’ goodwill that, inter alia, result from liquidation. Reorganization serves the public interest by facilitating the survival of companies supplying goods or services crucial to the health of the economy while, hopefully, saving large numbers of jobs. As the CCAA does not specify what happens if reorganization fails, the BIA, supplies the backdrop for that unfortunate situation, i.e. the firms’ demise. The two statutes work in tandem, grouping all possible actions for recovery against the debtor into a single proceeding controlled in a single forum overseen by a single judicial officer, avoiding the chaos that would attend insolvency if each creditor initiated recovery proceedings individually in different forums, all the while placing all creditors on an equal footing, diminishing the risk that the most aggressive creditors would realize their claims against the debtor’s limited assets to the detriment of all the others.
The insolvency regime proceeds from the premise of a statutory freeze and standstill to allow for judicially supervised reorganization and rebirth, if possible, with the pain of the “haircut” required being shared amongst creditors and stakeholders, and the orderly and schematic disposition of assets if bankruptcy ultimately ensues.
The essential premise of labour relations law, in Canada, at least since the last Supreme Court pronouncements on Section 2(d) of the Canadian Charter of Rights and Freedoms [Charter], known as the “trilogy” of 2015, proceeds from a constitutionally recognized and protected right of the “working class” to better its economic position and redress the inequity of uneven bargaining power through (i) associational rights, i.e. certification; (ii) collective bargaining; and (iii) the use of the strike weapon. Clearly because its purpose is to redress imbalance through dynamic collective change, labour relations law challenges rather than preserves the status quo.
The issue raised in Romspen is different from the more classic case of a simple employee unfair labour practice charge, e.g. termination, given that the outcome of such proceedings might involve liquidating the amount of back pay (lost wages and interest), if any, owed, providing, in that sense, the data required to allow the receiver or trustee in bankruptcy to determine whether there even is a “claim provable in bankruptcy”. There seems therefore, in that circumstance, to be a more cogent argument for allowing such proceedings to go forward, because the interests of both the complainant and the receiver or trustee are, in that sense, advanced in tandem. Such was, in fact, the view of the Quebec Superior Court in Re, Engrenage P.Y.G. (Faillite de), 2003 CanLII 27983 and Société de gestion ltée (Syndic de), J.E. 98-155.
Salient Facts
In the Rompsen case, certification proceedings were filed almost two months after Courtice Auto Wreckers was put into receivership by Rompsen, one of Courtice’s secured creditors. A general stay of certification proceedings was imposed, pursuant to the provisions of the BIA by the receiver.
The issue of whether or not the general order to stay proceedings applied so as to block the certification was canvassed by the Ontario Labour Relations Board, which held that, indeed, the general stay applied. The Board proceeded to stay the union’s certification application pending before it. The union sought an order to quash the Receiver’s stay, and by ricochet the Board’s order, from a judge of the Ontario Superior Court of Justice, without success. That decision was appealed by the union allegedly “de plano”, i.e. as of right, without leave being sought. Both the majority and dissenting judges agreed that leave was required but, because the central issue raised in the appeal, as the majority put it, was “the relationship between, and intersection of, federal bankruptcy law and general provincial labour relations law” [para 26], leave to appeal was exceptionally granted on public interest grounds.
In the end, the majority allowed the appeal, set aside the order of the motion judge, and granted the union leave to proceed with its certification application.
A Clash of Principles – Dissent vs. Majority Decision: To Stay or not to Stay Certification Proceedings
As noted by the dissent, “[w]hatever the applicable test, ‘lifting the automatic stay is far from a routine matter’” and that “lifting of a stay is exceptional in view of the expectation that most creditors’ claims will be resolved through the summary procedure, and not through ongoing court or administrative law proceedings” [para 78].
Indeed, the lifting of a stay order is a matter that lies within the bankruptcy judge’s discretion. It has long been a tenet of higher courts that discretion given to trial court judges ought not to be disturbed or appeal, save on grounds of palpable error of law, or less than reasonable appreciation of the facts.
Certainly a bankruptcy court judge, in any of Canada’s provinces, would per force have a specialized expertise akin to that of any administrative tribunal created by statute whose decisions, in Canada, even when not protected by a privative or preclusive clause, are reviewable only under extremely narrow parameters.
In this regard, Justice Lauwers, in dissent, noted:
[84] As a commercial list judge with long experience in insolvency, the bankruptcy judge would be fully alive to the relevant and to the business realities faced by the debtor, the creditors and the receiver. Moreover, he would be intimately familiar with the particular facts of the case. That is why it is important for this court, from the viewpoint of the standard of review, to defer to the bankruptcy judge in the exercise of his discretion under s. 215 of the BIA or the terms of the receivership order: see e.g. Royal Crest Lifecare Group Inc. (Re) (2004) […] 181 O.A.C. 115 (C.A.), leave to appeal refused, [2004] S.C.C.A. No. 104, at para. 23; Grant Forest, at paras. 97–99.
To be sure, the majority decision took issue with a number of findings of fact of the receiver, and/or of the bankruptcy judge, terming them inter alia “speculative” [paras 34 and 41] or adding: “The Receiver’s statement in its first report that it has ‘serious concerns’ that certification could negatively impact a sale amounts to little more than self-serving speculation”. In this respect, the dissent countered:
[116] In my view, the bankruptcy judge’s statement that certification could negatively impact the sale of the Harmony Road depot is self-evidently true and falls well within the margin of appreciation that is his due, given his knowledge of the commercial realities. I would be most reluctant to disparage the advice of the court-appointed receiver as mere “self-serving speculation”. Such an officer has no self-interest and owes duties to all the parties and to the court. In my view, it was open to the bankruptcy judge to accept the receiver’s advice.
[117] If the union achieves certification and the Harmony Road depot is sold in such a way as to attract successor labour rights, then any prospective purchaser of the depot will be faced with the obligation to immediately embark on first collective agreement negotiations. This is not a small additional burden on what would otherwise be the terms and conditions of the depot’s sale. It will plainly discourage some potential bidders and therefore negatively affect the depot’s market price by reducing the number of buyers who would be willing to engage. Any cooling of the interests of potential purchasers in the debtor’s assets would reduce the proceeds of sale to the prejudice of all the creditors. With respect, this is more than a mere “inconvenience to the receivership process.”
[118] If the court were to permit the post-receivership certification process to continue, it would effectively hand one interested group of creditors, the newly unionized employees, a tool with which to increase their leverage over the other creditors.” (emphasis added)
At para 114, the dissent in Romspen referenced the “significant professional costs to the Receiver’s administration”, stating that “[t]he cost of a labour negotiation will, in effect, be a super-priority expense that will ultimately be absorbed by and materially prejudice other creditors through reduced realizations and distributions.”
Most respectfully, it certainly lies within the role of any court to draw factual inferences from statutory language. Apparently, that is what the dissent understood the bankruptcy trial court judge to have done. While before the bankruptcy judge, the receiver is and was a party ad-litem, in law at least, the latter is and was rightly to be viewed as a court-appointed judicial officer who has no separate personal and self-serving interests but those of the collectivity of creditors and the proper administration of the BIA.
In that respect, if the receiver’s “serious concerns” were speculative, in the absence of proof to the contrary aren’t they to be taken as having been raised in the best interests of the mass of creditors? Isn’t that the true role of the receiver?
Was Federal Paramountcy Triggered?
The next, more substantive, issue between the majority and dissent centered on how to reconcile federal insolvency and bankruptcy legislation with the provincial statutory labour relations scheme, itself a regime that is constitutionally grounded in human rights.
As insolvency is within the exclusive competence of the Parliament of Canada, the paramountcy of federal legislation, while engaged, is tempered by Section 72(1) of the BIA providing:
72(1) The provisions of this Act shall not be deemed to abrogate or supersede the substantive provisions of any other law or statute relating to property and civil rights that are not in conflict with this Act, and the trustee is entitled to avail himself of all rights and remedies provided by that law or statute as supplementary to and in addition to the rights and remedies provided by this Act. [Court’s emphasis]
In Rompsen, there is between majority and dissent a fundamental disagreement as to when federal paramountcy is or is not triggered.
The majority, on the basis of GMAC Commercial Credit Corporation – Canada v. T.C.T. Logistics Inc., [2006] 2 SCR 123 [GMAC], determined that for paramountcy to be triggered there must be an “operative conflict”, between one or more provisions of the statutes, defined in 407 ETR Concession Co. v. Canada (Superintendent of Bankruptcy), [2015] 3 SCR 397, as being an impossibility to comply with both the provincial law and the federal bankruptcy regime. For the dissent, this latter and more recent case suggested a second flexible more context- and fact-specific paramountcy trigger.
Apparently, the majority did not consider the second portion of the “conflicts” test suggested by ETR Concession, which, in the dissent’s view, is “the latest word from the Supreme Court on paramountcy” [para 98]. This second test posits that federal insolvency paramountcy is triggered where, although it is possible to comply with both laws, the operation of the provincial law “frustrates” the purpose of the federal regime. In such an event, pursuant to ETR Concession, “the provincial law remains valid, but will be read down so as to not conflict with the federal law, though only for as long as the conflict exists” [para 101].
The difference between the majority and dissent, in their approach, is telling. As the dissent put it:
[103] The court’s task here is not to reconcile statutory language, but to reconcile different policies. This is a nuanced, difficult and delicate task informed by the bankruptcy judge’s knowledge both of the law and the operation of the marketplace in the context of the specific matter before him, drawing also on his experience and wisdom, and his sense of what is commercially reasonable. The bankruptcy judge brought just that perspective to this case.
The dissent continued:
[107] In my view, the policy contest presented in this case is precisely the kind of conflict between provincial regulatory regime for labour relations and the federal insolvency regime that the paramountcy doctrine is intended to recognize and accommodate.
[108] My colleague relies on the Supreme Court’s decision in GMAC. In that case the issue was whether leave should be granted to the union under s. 215 of the BIA so that the Labour Relations Board could determine “successor employer” status.
[109] However, there is a crucial distinction between this case and GMAC. The union had long been certified in GMAC. By contrast, in this case, the certification effort followed the appointment of the receiver by several months. This distinction is important because it engages one of the fundamental policy principles in insolvency law, which is to preserve the status quo among the creditors as of the date the receiver was appointed. The bankruptcy judge accurately identified that this principle would be violated if the debtor could be forced to accept union certification post-bankruptcy. In my view, my colleague does not give due weight to this critical principle.
To Stay or Not To Stay – The Central Question
The majority took issue with the suggestion that the certification “would in effect increase the rights of the members of the proposed bargaining unit relative to other creditors” [para 31], adding:
[32] […] A successful certification application does not guarantee employees better wages; it simply allows employees to combine their bargaining power and rely on the union’s assistance in negotiating their terms and conditions of employment. While it is true that upon certification certain rights and obligations crystallize that would not otherwise (e.g. the employer’s duty to recognize the union and bargain with it in good faith), certification does not have the effect of automatically increasing the rights employees have as creditors, thereby prejudicing other creditors. It is simply conjecture at this point to assume that the union will be successful in negotiating a more financially favourable contract for bargaining unit employees. Moreover, at this juncture, allowing the union’s certification application to proceed merely entitles the union to a representation vote, not to certification.
[…]
[34] In my view, this line of reasoning is speculative. While some purchasers may be dissuaded by recognition of the proposed bargaining unit, it may also be that a set collective agreement, with its clarity of terms, would be attractive to a prospective purchaser. The union, on behalf of its members, has an interest in the business being sold as a going concern and therefore has an incentive to act in a manner that would promote such an outcome.
[35] More fundamentally, however, there is simply no concrete evidence that recognition of the proposed bargaining unit would negatively impact a sale.
From this writer’s perspective, is the opinion regarding the supposed incentive to act “in a manner that would promote such an outcome” any less speculative than the conclusion reached by the receiver, which the bankruptcy judge saw no reason to vary?
From this writer’s perspective, and with respect, the issue lies at the core of both (i) how one views the latitude of an appellate court to review the exercise of trial courts’ discretionary remedies and, more fundamentally, (ii) the validity of assumptions as to the harmony of the goals of labour and the mass of the creditors. Even if both see value in the sale of the business rather than its dismantling, it is certainly a more than reasonable and plausible, if not a more compelling assumption, that all things being equal, a prospective buyer would have to negatively factor the possibility, if not probability, of the cost of bargaining of first collective agreement into the mix. This would be doubly true in Quebec where first contract negotiation can lead to an agreement imposed by arbitrator, even without proving bad-faith bargaining.
In any case, with the greatest respect for the majority opinion, with more than 45 years as a management side labour relations lawyer in Quebec behind me, I would suggest that first collective agreements that do not alter the employer’s economic landscape through improvements in wages, benefits or other non-monetary conditions of employment, are as rare as hen’s teeth. I would doubt that my colleagues at the Bar of Ontario on either side would see matters differently.
In determining whether lifting a stay order is or is not appropriate, the bankruptcy court was required to weigh the relative “prejudices” that may result.
With respect, fairly predictable and logical results of certification, even if they cannot be calculated with precision, nonetheless constitute far more than speculative prejudice.
The Charter’s Place in All of This
While no direct mention is made of the Charter, this author clearly believes that the majority’s decision has as its leitmotif the constitutionalization of the right to certification. Clearly, the majority would have been influenced by the Union’s reference thereto writing:
[37] […] The right to form and join a union of one’s choosing is a fundamental right under the Labour Relations Act, 1995, S.O. 1995, c. 1, Sched. A (the “LRA”). While flexibility is required to address the challenges in any particular insolvency proceedings against the legitimate exercise of labour rights simply because the assertion of those rights represents an inconvenience to the receivership process: GMAC, at paras. 50-51.
[…]
[44] […] I am simply not persuaded that allowing the union’s certification application to proceed would cause any more than de minimis prejudice to Ambrose Group creditors.
[45] On the other hand, a lot is at stake for the union and the employees. Maintaining the stay prejudices the important objectives “quick votes” are designed to serve, unduly interferes with employees’ ability to exercise their statutory labour rights, and, particularly where employees have allegedly been dismissed for exercising those rights, undermines employee confidence in the efficacy of core labour rights and protections.
[46] Labour rights do not end when insolvency proceedings begin.
To be sure, as the majority points out, obliquely referring, I believe, the above-mentioned Supreme Court trilogy, “the right to form and join a union of one’s choice is a fundamental right” [para 37], it is the dissent that deals with this issue more directly.
Justice Lauwers writes:
[88] The appellant’s factum simply asserts that: “Given the constitutional protection afforded to this process, the court should be wary of allowing the existence of a receivership to frustrate the certification application.” Fair enough, but the union had the entire life of the business before insolvency within which to pursue certification.
[89] In oral argument, counsel for the union expanded on this brief allusion. He asserted that the MPAO decision constitutionalized bargaining rights, and argued that the right of employees to unionize should “supersede” any concern in relation to the sale of the business. He added that there is no empirical evidence that unionization will reduce the sale value of the asset, but even if that were to be the outcome of the employees’ exercise of their rights under the labour legislation: “So be it”.
[90] However, counsel for the union did not take the position that the constitutionalization of labour rights takes away entirely the bankruptcy court’s discretion under s. 215 of the BIA or the order appointing the receiver to refuse to lift the stay where labour rights are in issue.
Conclusion
Romspen represents a clash of principles and a significant shift in the law on many different levels, the fallout of which is as yet not fully known. And if my point of view differs from those of my betters, I differ with deference.
In the end, given that there is an application for leave to appeal to the Supreme Court of Canada, pending it remains to be seen whether the dissent’s apocalyptic vision to the effect that:
[93] In my view, giving unions carte blanche to begin certification efforts for insolvent enterprises after the date of the appointment of a trustee or receiver or the date of an order under the CCAA would effect a sea change in insolvency law; it would profoundly alter the economic dynamics of insolvency, and whether the CCAA route is preferable to outright bankruptcy.
will be stillborn as a result of judicial scrutiny at a higher level and further clarification of the law on this issue by Canada’s highest court. Certainly, though, folks doing business in Canada on either side of the labour-management divide should be keenly interested in this case.
France - The Macron Labor Reform for France
By Roselyn Sands, EY Societe d'Avocats
President Emmanuel Macron of France won the May 2017 election promising to significantly reform the French labor & employment laws as a priority by September 2017. As we stated in our article in May 2017, the purpose of this Reform is to increase flexibility and reduce unemployment. While the new legislation will not have the force of law until later in the Fall, below we summarize the key features of the Macron labor law reform.
Use of Special Procedures to Achieve Speed
In order to achieve such accelerated timing, the French Government will enact the contemplated reform by way of ordinance (“ordonnance”). In French law, this statutory instrument allows the Council of Ministers (“Conseil des Ministres”) to enact laws in areas of law that are usually reserved for legislative enactment. In order to allow such abbreviated process, the Parliament adopted a law (“loi d ’habilitation”) on August 2, 2017 allowing this procedure. Draft ordinances were made public on August 31, 2017 and should be adopted by the Council of Ministers September 22, 2017. The legislative process, is targeted to end in October/November 2017, with the ratification of the ordinances by the Parliament which will give force of law to the Macron Labor Law Reform.
A part of the French opposition to this reform is gaining some momentum and they are trying to slow this process down. Indeed, a demonstration on September 12 was the first and another one is planned in late September. However, it is not believed that the demonstrations or strikes will weigh heavily enough to change the current state of affairs.
General philosophy of the Macron labor law reform
There are 3 main general themes of paramount importance:
• Ability to customize applicable labor rules within a company through negotiation
• Streamlining of employee representatives
• Predictability of damages and further simplification of the termination process
1) Ability to customize applicable labor rules within a company through negotiation
The traditional architecture of French labor law is a pyramidal structure starting at the top with the French Labor Code, then the industry-wide collective bargaining agreements, and then the company-wide collective bargaining agreements. Each additional layer traditionally could only enhance employee protections, never taking any rights away.
This new Macron Labor Law Reform reverses this hierarchy of norms and allows collective bargaining at the company-wide level to achieve greater flexibility even if employee protections are reduced.
There are exceptions and many details on how to collectively bargain, but overall the important message of the reform is that companies are now more able to negotiate at the company level in order to create custom-made rules.
2) Streamlining of employee representatives
One of the most important measures of the Reform is the merger of all employee representative bodies. As of January 1, 2019, all companies will only have one representative body replacing the existing Works council, “délégués du personnel”, and health & safety committees. The new Social and Economic Committee (“Comité Social et Economique”) will exist in all companies with 11 or more employees. The scope of the CSE will increase depending on the number of employees within a company.
In certain circumstances, the new CSE will have the power to negotiate and collectively bargain with the employer, traditionally reserved to unions in the past. Under certain conditions, employee referendum will be required to confirm the agreement.
3) Predictability of damages and further simplification of the termination process
As promised by Macron during the French election campaign, a minimum floor and maximum ceiling will be applicable in the award of damages for wrongful termination by the French Labor Courts. To illustrate, the maximum ceiling for damages for an employee with 10 years of service is 10 months; and for 30 years of service, 20 months of salary. (This is in addition to the legal termination indemnities, which do not change.) This will apply to unlawful terminations with the exception of matters involving the violation of fundamental rights like harassment or discrimination cases, for example.
Moreover, to minimize the risk of form over substance, a “template” for termination letters will be available for employers, and the termination letter itself will no longer be the only proof possible to demonstrate the legal grounds for the termination. Both the employer and the employee will have the availability to give or ask for complementary information on the termination grounds, after formal notification of the termination letter.
As to the substance itself of legal grounds, in economic redundancies, a significant effort has been made to simplify the legal economic grounds: only economic difficulties in France will be taken into account, not the economic situation of the group in the world. The redeployment offer process will be also be significantly simplified in the context of economic termination.
*
The key take-away is that we have a new ballgame in France on labor law with a fundamentally different philosophy!
President Emmanuel Macron of France won the May 2017 election promising to significantly reform the French labor & employment laws as a priority by September 2017. As we stated in our article in May 2017, the purpose of this Reform is to increase flexibility and reduce unemployment. While the new legislation will not have the force of law until later in the Fall, below we summarize the key features of the Macron labor law reform.
Use of Special Procedures to Achieve Speed
In order to achieve such accelerated timing, the French Government will enact the contemplated reform by way of ordinance (“ordonnance”). In French law, this statutory instrument allows the Council of Ministers (“Conseil des Ministres”) to enact laws in areas of law that are usually reserved for legislative enactment. In order to allow such abbreviated process, the Parliament adopted a law (“loi d ’habilitation”) on August 2, 2017 allowing this procedure. Draft ordinances were made public on August 31, 2017 and should be adopted by the Council of Ministers September 22, 2017. The legislative process, is targeted to end in October/November 2017, with the ratification of the ordinances by the Parliament which will give force of law to the Macron Labor Law Reform.
A part of the French opposition to this reform is gaining some momentum and they are trying to slow this process down. Indeed, a demonstration on September 12 was the first and another one is planned in late September. However, it is not believed that the demonstrations or strikes will weigh heavily enough to change the current state of affairs.
General philosophy of the Macron labor law reform
There are 3 main general themes of paramount importance:
• Ability to customize applicable labor rules within a company through negotiation
• Streamlining of employee representatives
• Predictability of damages and further simplification of the termination process
1) Ability to customize applicable labor rules within a company through negotiation
The traditional architecture of French labor law is a pyramidal structure starting at the top with the French Labor Code, then the industry-wide collective bargaining agreements, and then the company-wide collective bargaining agreements. Each additional layer traditionally could only enhance employee protections, never taking any rights away.
This new Macron Labor Law Reform reverses this hierarchy of norms and allows collective bargaining at the company-wide level to achieve greater flexibility even if employee protections are reduced.
There are exceptions and many details on how to collectively bargain, but overall the important message of the reform is that companies are now more able to negotiate at the company level in order to create custom-made rules.
2) Streamlining of employee representatives
One of the most important measures of the Reform is the merger of all employee representative bodies. As of January 1, 2019, all companies will only have one representative body replacing the existing Works council, “délégués du personnel”, and health & safety committees. The new Social and Economic Committee (“Comité Social et Economique”) will exist in all companies with 11 or more employees. The scope of the CSE will increase depending on the number of employees within a company.
In certain circumstances, the new CSE will have the power to negotiate and collectively bargain with the employer, traditionally reserved to unions in the past. Under certain conditions, employee referendum will be required to confirm the agreement.
3) Predictability of damages and further simplification of the termination process
As promised by Macron during the French election campaign, a minimum floor and maximum ceiling will be applicable in the award of damages for wrongful termination by the French Labor Courts. To illustrate, the maximum ceiling for damages for an employee with 10 years of service is 10 months; and for 30 years of service, 20 months of salary. (This is in addition to the legal termination indemnities, which do not change.) This will apply to unlawful terminations with the exception of matters involving the violation of fundamental rights like harassment or discrimination cases, for example.
Moreover, to minimize the risk of form over substance, a “template” for termination letters will be available for employers, and the termination letter itself will no longer be the only proof possible to demonstrate the legal grounds for the termination. Both the employer and the employee will have the availability to give or ask for complementary information on the termination grounds, after formal notification of the termination letter.
As to the substance itself of legal grounds, in economic redundancies, a significant effort has been made to simplify the legal economic grounds: only economic difficulties in France will be taken into account, not the economic situation of the group in the world. The redeployment offer process will be also be significantly simplified in the context of economic termination.
*
The key take-away is that we have a new ballgame in France on labor law with a fundamentally different philosophy!
Germany - The 2018 Works Council Election is Approaching: Conducting the Election and Contesting an Election
By Bernd Weller and Dr Johan-Michel Menke, Heuking Kühn Lüer Wojtek PartGmbB
The upcoming works council election is approaching. In the first article (AuA 2017, 338), we made observations on preparations before the actual election. In this article, we want to discuss the conducting of the actual election, typical stumbling blocks, and possible contestation scenarios. In particular, due to the complexity of the regulations of the Works Constitution Act and the election rules adopted, the conducting of the election is prone to errors. Without optimal preparation (and monitoring during the election), the risk is therefore great that errors will occur during the election. But even in the event that errors should occur during the election, not every error leads to legal consequences.
1. TIME OF THE ELECTIONS
The regular election of the works council is held every four years in accordance with Section 13(1) Works Constitution Act. Since works council elections have not occurred for the first time in every company in the same calendar year, the question arises why the vast majority of companies nevertheless conduct works council elections in 2018. This is due to the statutory provision in the Works Constitution Act (Section 13(3)), which transfers all works council elections as rapidly as possible into the four-year regular cycle. Only when the last works council election is held less than one year from the beginning of the regular date for elections within the meaning of Section 13(1) Works Constitution Act is the term of office of the works council extended so that it is moved to the usual 4-year cycle only in the next immediately following period for regular elections. By focusing the elections on individual years, it is supposed to make it easier for among others trade unions and courts to be prepared administratively for the elections and possible contestation proceedings. For soccer fans, this at least has the advantage that the regular date for elections can easily be determined – it always occurs in the year of the Soccer World Cup.
Elections may be held outside of the 4-year time period only under the strict requirements of Section 13(2) Works Constitution Act.
2. Election preparation in the strict sense
In principle, the works council can decide for itself with what lead time it initiates the election of the new works council. It is legally determined that the works council is obligated to undertake the initiation of the election by appointing the electoral board no later than ten weeks before the expiry of its term of office, Section 16(1) Works Constitution Act. In view of the fact that both the electoral board and the candidates enjoy the special protection against dismissal of Section 15 Protection Against Dismissal Act until the announcement of the election results, the possibility exists that works councils – in the case of imminent staff cutbacks – provide protection against dismissal for a large part of the work-force by initiating the election an as early as possible, since then suddenly everyone will stand as candidate for election. This special protection against dismissal is only excluded when the early appointment of the electoral board can be qualified as an abuse of legal rights. Abuse of legal rights is only accepted in absolutely exceptional cases. Thus, for example, the appointment of the electoral board 36 weeks before the start of the statutory election period was not deemed to be an abuse of legal rights (cf. Lower Saxony State Labor Court, October 13, 2010 – 17 Sa 569/10).
Practical tip: Companies should initiate personnel restructuring measures regardless of the particularities of Section 15(4) Protection Against Dismissal Act in the case of a plant closure significantly before the regular works council election, in order to avoid the special protection against dismissal of the electoral board and the electoral candidates.
3. THE RIGHT TO VOTE
The active right to vote is accorded to all employees of the establishment, who have reached the age of 18. All employees who have been a member of the relevant establishment for six months are eligible to be candidates (passive voting right). The determination of the active and passive voting right is of decisive importance for the specific implementation of the election – and for avoiding later contestability.
Misunderstandings can frequently easily arise in respect to the right to vote particularly in the case of the following groups of persons:
• Executive staff have neither active nor passive voting rights.
• Temporary workers already have active voting rights if they have been employed for longer than three months in the establishment. They only have passive voting rights if they gain employment with the hiring company subsequent to their temporary employment. In this case, the time spent working as part of the temporary employment counts towards the required minimum time working at the establishment of six months.
• Parental leave: Employees on parental leave are entitled to the active and the passive right to vote during the entire parental leave period.
• Laid-off employees: Until the expiry of the period of notice, they have active and passive voting rights. A properly laid-off employee is entitled to the active right to vote after expiry of the period of notice only when filing a protection against dismissal action and continuing to be employed during the protection against dismissal proceedings. An employee laid off without notice is entitled to the passive right to vote, if filing a protection against dismissal action (in due time). The reason for this is that the employer could otherwise effectively prevent the election of electoral candidates that the employer disagrees of by issuing (ineffective) extraordinary dismissals (cf. Federal Labor Court, November 10, 2004 – 7 ABR 12/04).
• Employees who are ill or on leave and inactive work contracts: Employees who are ill, on leave or those whose work contract is temporarily inactive have active and passive voting rights.
• Partial retirement: Employees who are in partial retirement have no voting rights, as soon as the release phase has begun.
• Employees abroad / another establishment: Due to the ever-closer interconnection of work flows, more and more situations arise in which the assignment of employees is questionable, for example, if
o an employee is temporarily sent abroad,
o an employee (of another group company), who belongs to an establishment abroad, has authority to give orders to employees in the German establishment or
o an employee, who – whether regularly working in several establishments on-site or whether entitled to issue instructions to employees in several establishments – could be assigned to several German establishments.
In all of the aforementioned cases, the election participation depends on whether and in which establishment(s) the employee is "integrated." Integration in this sense means factual circumstances, according to which an employee is part of an operational organization and also chain of command. Thus, a supervisor is, for example, already integrated into an establishment (in which he is never physically present), when exercising leadership and management functions in respect to employees in this establishment and the leadership function serves the operational purpose of this establishment (cf. Baden-Württemberg State Labor Court, May 28, 2014 – 4 TaBV 7/13). Conversely, sales representatives in the field are also integrated into an establishment in that they are subject to the instructions of the organization there (in other words: supervisors):
o In the case of posted workers, the integration into the "home establishment" is as a rule maintained if they are not integrated into an operational organization abroad (e.g., in the case of assembly workers). But even an integration into a foreign establishment is not contrary to the continued integration and thus eligibility to vote in the home establishment when the posting is only of a limited temporal nature.
o According to recent case law, the supervisor of employees of a German establishment who is based abroad – frequently in the matrix structure – is also to be regarded as an employee of the German establishment. The question as to whether such supervisor is "executive staff," is thereby not to be assessed ac-cording to the supervisor’s role in the overall group, but rather only in respect to the respective company. It may therefore well be that a "big shot" from abroad is considered a normal employee in the German establishment – with full active and passive voting rights.
o Finally, it is also conceivable that an employee belongs to several German establishments and thus has the right to vote in several German establishments. For this purpose, it must only be checked, according to the aforementioned criteria for each individual establishment, whether an "integration" into the respective establishment exists.
4. SPECIAL CASE: EXECUTIVE STAFF
According to Section 5(3) Works Constitution Act, executive staff are employees who under their contract of employment and the status in the company/establishment
• are entitled on their own responsibility to engage and dismiss employees employed in the establishment / operation department (Section 5(3)(1) Works Constitution Act)
• have general authority or power of procuration and the power of procuration is also not unimportant in relation to the employer (Section 5(3)(2) Works Constitution Act) or
• regularly carry out other duties, which are important for the existence and development of the company or an establishment and fulfilment of which requires particular experience and knowledge, if, in doing so, they either essentially make decisions on their own responsibility or substantially influence these decisions; this may also be the case with stipulated procedures, particularly those based on legal provisions, plans or guidelines and when cooperating with other executive staff (Section 5(3)(3) Works Constitution Act).
Specifically, the first-mentioned criterion, the entitlement to engage and dismiss employees on one's own responsibility, is satisfied for employees in Germany only in the rarest cases. In contrast to Section 14(2) sentence 1 Protection Against Dismissal Act, both entitlements, therefore the right to engage and dismiss employees, must be met cumulatively (cf. Munich State Labor Court, June 06/2012 – 5 TaBV 51/10). Through the introduction of the dual control principle, an employee is only rarely authorized to engage and to dismiss employees on his own responsibility – without having to obtain the consent of a third party. Since a company will not be able to assert that the second signature is provided only "formally" without any decision-making power, this case group is almost never used.
Also, the "formal" granting of general authority or power of procuration in relation to third parties does not automatically qualify an employee as executive staff within the meaning of Section 5(3)(2) Works Constitution Act. Rather, the general authority/power of procuration must also be designed in the internal relationship such that not only unessential du-ties to be executed on one's own authority are allocated to chief representatives/authorized representatives. The chief representative/authorized representative must – at least in his (not unimportant) area of responsibility – perform entrepreneurial duties. An employee furnished with power of attorney does not fall under this second group of the executive staff. He may meet the requirements of the third case group, however.
Executive staff of the third group according to Section 5(3)(3) Works Constitution Act fulfil duties according to their contract of employment, which
• have particular meaning for the company / the establishment,
• require special knowledge and experience and
• which the employee can essentially carry out himself without instructions.
This covers therefore employees, who due to their position are particularly close to company management and are able to handle entrepreneurial duties at least in some areas. The employee must thereby not make the decisions on his own responsibility and alone. Rather, it suffices if he at least decisively influences decisions of company management (cf. Federal Labor Court, March 25, 2009 – 7 ABR 2/08). Thus, in particular "staff employees" for the third group are considered for these case groups.
Section 5(4) Works Constitution Act also has some interpretative rules, the fulfillment of which is very relevant for the characterization of an employee as executive staff within the meaning of Section 5(3)(3) Works Constitution Act.
5. THE IMPLEMENTATION AND CONDUCT OF THE "NORMAL" WORKS COUNCIL ELECTION
The normal election procedure can be divided into five main sections:
• appointment of the electoral board,
• drawing up the electoral list,
• publication of the election notice,
• submission, review and publication of the proposed lists, and
• holding the actual election process as well as counting the votes and publication of the election result.
When appointing the electoral board, as the central constitutional electoral body, it de-pends on whether a works council already exists or not. The works council has the statutory duty to appoint the electoral board, Section 16 Works Constitution Act. If the works council does not fulfil this duty or does not do so within the ten-week period, the electoral board may be appointed either by the general works council or the group works council or by the labor court. In establishments, in which a works council does not exist, the electoral board may be directly elected by the general works council or the group works council, alternatively in an establishment meeting, or may be appointed by the labor court, Section 17 Works Constitution Act. Once the electoral board has been elected or appointed, it has the duty to initiate the election immediately, to carry it out and to determine the election result.
At the beginning of the works council election, the electoral board has to create a list of the eligible voters, the electoral list, Section 2 Election Regulations. The electoral list must be kept separately by gender and must contain last names, first names, and dates of birth in alphabetical order. Furthermore, it is necessary to identify who has only active voting rights, therefore, who lacks the passive right to vote (e.g., temporary workers). In the later election, only those employees are – actively as well as passively – eligible to vote, who are listed on the electoral list. Consequently, the accuracy of the list is of particular importance for the further progress of the election. After the electoral list has been drawn up, the electoral board has to display the electoral list from the day of the initiation of the election until the completion of the voting at a suitable place for inspection in the establishment. Alternatively or cumulatively, making it available for public display in the Intranet or by email is also considered. Opposition to the electoral list may be submitted in writing to the electoral board within two weeks after issuing the election notice. Every employee of the establishment is entitled to do so – not, however, the employer or a trade union represented in the establishment, Section 4 Election Regulations.
Practical tip: Election contestations are frequently successfully based on the inaccuracy of the electoral list. In case of doubt, the employer should therefore fully support the electoral board in drawing up the list.
The electoral board then releases the election notice, which with a view to the extent of the minimum details in practice is very prone to error and therefore in practice frequently provides grounds for contesting the election. In particular, the information on the mini-mum seats for the minority gender in the establishment can frequently lead to errors. Section 15(2) Works Constitution Act requires that the gender, which is in the minority in the staff, must at least be represented in the works council according to its relative numerical strength, if the works council consists of three or more members. Therefore, the electoral board must determine how many employees belong to the respective gender at the time of issuing the election notice.
The election notice must also contain the number of the supporting signatures necessary for the individual proposed lists. Each employee may only run as a candidate for a pro-posed list and also only support one proposed list.
Practical tip: In practice, it can make sense to offer the electoral board a final (legal) re-view of the electoral list and the election notice, in order to avoid contestable errors.
As soon as the election notice is posted, proposed lists may be submitted, Section 6 Election Regulations.
The mandatory contents of a proposed list are:
• list of the individual candidates giving last names, first names, dates of birth and type of employment in the establishment,
• designation of the candidates in a recognizable sequence with a consecutive number,
• written consent of each individual candidate for inclusion in the proposed list,
• designation of a list representative, who is entitled and obligated to submit and receive declarations to and from the electoral board, and
• adding the necessary supporting signatures as specified in the election notice.
If only one proposed list is submitted, a majority vote, therefore, a personal vote between the candidates of this list occurs. In the case of several competing proposed lists, however, a proportional voting takes place.
In the subsequent (actual) casting of votes, it must be guaranteed that the voting rights principles are complied with. Each eligible voter must be able to decide freely whether and how he votes. Furthermore, the election must be secret. This can be guaranteed in particular by a privacy screen during the election (e.g., by polling booths) and a sealed ballot box. There must also be a guarantee that each eligible voter votes only once and that both the ballot as well as the election locality and voting time do not influence the election.
The counting of the votes takes place in public. The seats in the works council must be determined, where the minimum quorum for the minority gender must be taken into consideration. The result of the election must then be recorded in an election register and be signed by the chairman of the electoral board and one further member of the board. Following this, those elected must be informed of their election, the election results must be announced, and the works council is to be invited to the inaugural meeting.
6. SIMPLIFIED ELECTORAL PROCEDURE
The simplified electoral procedure may be carried out in one or two stages. Which procedure is used, depends decisively on how the works council election was initiated, Section 14a Works Constitution Act:
• The electoral procedure is a one-stage procedure if the electoral board was appointed by the group, general or works council or the labor court.
• The electoral procedure is a two-stage procedure if the election was initiated either by a trade union represented in the establishment or else by three employees of the establishment who are eligible to vote.
The initiation of the two-stage election procedure takes place by invitation of the listed initiators. The invitation letter must be made public and contain information on who is invited to the election meeting, when and where the meeting will be held, that proposals must be submitted by the end of the election meeting and what number of supporting sig-natures is required. The election meeting may occur at the earliest seven days after the first day of the publication of the invitation. In the election meeting, the electoral board must then be elected, which must draw up the electoral list and has to issue the election notice. The actual casting of votes occurs only in the second election meeting. In the simplified procedure, only the majority, therefore personal vote, takes place. Vote counting occurs publicly immediately following the casting of votes. Subsequent voting must be requested by no later than three days before the election meeting. Otherwise, the principles of secrecy and freedom of choice already set out as part of the normal election procedure apply.
In the one-stage election procedure, the electoral board has to draw up the electoral list after its appointment and to issue the election notice as well as to make both known. The law does not provide a minimum period for the time span between the appointment of the electoral board and conducting the election meeting. It is recommended, however, to observe the minimum period according to Section 28(1) sentence 2 Election Regulations, i.e., seven days, because otherwise hardly any time remains for the employees to submit the proposed lists.
7. CONTESTING AN ELECTION
The representation of the implementation and course of the works council election shows that the procedure is prone to error in many areas. A distinction must thereby be drawn between errors, which are "only" contestable and those, which can lead to the nullification of the election.
The contesting of an election is governed by Section 19 Works Constitution Act.
(1) An election may be contested before the labor court, if any of the essential rules respecting the right to vote, eligibility or electoral procedure have been infringed and no subsequent correction has been made, unless the infringement could not have altered or influenced the election results.
(2) Such contestation may be made by any three or more persons with voting rights, a trade union represented in the establishment or the employer. To be receivable the action must be brought within two weeks of the announcement of the election results.
But what are the essential provisions with regard to the right to vote, eligibility or election procedures? And what violation can at least potentially influence the election result? Does any hypothetical possibility of an interference in an election suffice or must the election result actually have been influenced?
An election provision, which is considered a "must" in contrast to a purely regulatory standard ("target") is essential. Violations of target provisions do not in principle justify the contestability of the election due to their clearly less binding nature than must provisions. An exception exists only if the target provision contains elementary basic principles of the works council election or supporting principles of the Works Constitution Act (cf. Federal Labor Court, October13/2004 – 7 ABR 5/04).
The following violations have already led to the contestation of a works council election:
• misjudgment of the concept of an establishment (cf. Bielefeld Labor Court, January 24, 2017 – 2 BV 128/16),
• authorization of persons not eligible to vote or non-authorization of persons eligible to vote (cf. Federal Labor Court, June 25, 1974 – 1 ABR 68/73; Federal Labor Court, March 20, 1996 – 7 ABR 34/95).
• incorrect determination of the number of members of the work council (cf. Federal Labor Court, March 13, 2013 – 7 ABR 69/11),
• appointment of the electoral board by a works council no longer in office (cf. Federal Labor Court, March 01, 1976 – 1 ABR 19/54),
• authorization of improper election proposals and non-authorization of proper election proposals (for example, due to lack of supporting signatures),
• incorrect allocation of seats for the minority gender,
• violations of the secrecy of the election (cf. Düsseldorf State Labor Court, December 13.12.2016 – 9 TaBV 85/16),
• use of the simplified election procedure without the existence of the statutory requirements,
• violation of the principle of free choice and equality of opportunity for the candidates (cf. Federal Labor Court, December 06, 2000 – 7 ABR 34/99),
• non-public counting of the votes.
8. PITFALLS
The successful contestation of a works council election requires an at least hypothetical impact of the error in the election procedure on the election result; consequently, the greatest pitfalls exist where the right to vote itself, the candidacy, and the casting of the vote/counting of the vote are affected. In this connection, attention should be paid in particular to the following aspects:
• Foreign-language employees: According to Section 2(5) Election Regulations, the electoral board is obligated to inform foreign-language employees, who do not have (sufficient) command of the German language, in their foreign language (or at least a language sufficiently well understood by them) before the initiation of the works council election about the election procedure, drawing up of the electoral and proposed lists, election process and casting of votes in a suitable manner (Federal Labor Court, October 13, 2004 7 ABR 5/04). Here, for example, the trade unions are helping, which offer relevant explanations in a large number of languages for download on their websites free of charge.
• Numbers, dates, addresses: The electoral board has to pay attention to a large number of deadlines, numbers, and calculations and must communicate dates and addresses (for example, for the election) unmistakably. All of this is error-prone – all the more so if the members of the electoral board do not have any-thing to do with such formalities in their professional everyday life.
• Electoral list, candidates, supporting signatures: The precise review of the electoral list (active and passive eligibility to vote) as well as proposed lists is urgently advised. Here, employees are too easily forgotten, double-counted, or taken into consideration even though they no longer have the right to vote at all.
• No incompatibility of offices: It is inconceivable that the leading candidates for the federal parliament are at the same time their election official. In an establishment, this is different – not least due to the scarce resources in small establishments: Here, members of the works council who are active and running as candidates can also be a member of the electoral board and thus make decisions about the eligibility to vote / proposed list of the "opposition." Not everyone can resist the associated temptation. In larger establishments, it has therefore proven to be a good idea, if one or two employees (also from the Human Resources Department) exercise the function of the electoral board – and only the latter – over several election periods.
• Ballot box: The security of and the exclusion of opportunities for manipulation at the ballot box are a core area of election protection. Therefore, not only in elections in remote countries is there a focus on monitoring ballot boxes. In establishments, the elections are carried out too trustingly sometimes. An electoral board member may take the ballot box (alone) home, before the election is continued on the next day in another establishment site (branch of the establishment) or the ballot box is brought at night, before the count, into a room, to which many employees have unchecked access. It is necessary to consider not only these issues in advance, but rather also their monitoring afterwards.
• Vote casting, postal voting and -counting: Finally, the vote casting itself is also subject to many errors. This pertains not only to the issue of how it is ensured that an employee only casts his vote once (not in an Excel list, Federal Labor Court, June 12, 2013 – 7 ABR 77/11). An electoral interference or violation of the election procedure provisions may also already exist when the electoral board – with the intention of increasing the voter participation in this way – is too generous in inviting postal voting (Frankfurt State Labor Court, April 17, 2009 – 9 TaBV 163/07). Finally, vote counting is also error-prone. Both the evaluation of the individual ballots (is a ballot filled with "dashes" still valid?) as well as place and time of the vote count (how freely accessible is the room for the vote counting?, cf. Federal Labor Court, February 15, 2006 – 7 ABN 75/05) involve risks.
9. ELECTION NULLIFICATION
The nullification of the election must be strictly distinguished from the contestability of the election. Errors in the election, which lead to the nullification of the election, may still be challenged long after publication of the election result and by everyone. A works council election is nullified, if there is gross and obvious violation of essential principles of the statutory right to vote such that there is not even the appearance of an election corresponding to the law. The nullification of the election must be accepted in extremely exceptional situations and was accepted to date, for example, in the following cases:
• works council election without electoral board (cf. Munich State Labor Court, June 16, 2002 – 11 TaBV 50/08),
• falsification of postal vote documents,
• terrorizing the workforce during voting (cf. State Labor Court, March 08, 1957 – 1 ABR 5/55),
• holding a works council election in an establishment, which is obviously not subject to the Works Constitution Act (ct. State Labor Court, February 09, 1982 – 1 ABR 36/80).
If there is a case of nullification of the works council election, this has far-reaching con-sequences. Decisions must then be made in all issues as if a works council had never existed.
10. CONCLUSION
The statutory requirements for the conducting and course of the works council election are highly complex. Whether a standard or simplified election procedure: A "no brainer" will not suffice. Particularly due to the many small pitfalls and the risks resulting therefrom of an election contestation and expensive repetition of the works council election, often an active support of the electoral board – also by legal expertise – must be recommended to the employer. In any case, the employer has to bear the cost of the election, Section 20(3 Works Constitution Act. This does, of course, not include all "desired expenses" of the electoral board (such as certain office equipment, cf. Berlin Labor Court March 16, 2017 – 63 BV 11412/16), but all required cost. This includes, in addition to the actual election papers (ballots, ballot box, etc.,), also the cost of training of the electoral board, if necessary, its legal support during the election, and the expenditures associated with the election (for example, travel expenses to the branches of the establishment). Such cooperation of the employer and the electoral board during the election can save not only cost for the employer, but rather at the same time can build trust capital for the collaboration with the works council.
The upcoming works council election is approaching. In the first article (AuA 2017, 338), we made observations on preparations before the actual election. In this article, we want to discuss the conducting of the actual election, typical stumbling blocks, and possible contestation scenarios. In particular, due to the complexity of the regulations of the Works Constitution Act and the election rules adopted, the conducting of the election is prone to errors. Without optimal preparation (and monitoring during the election), the risk is therefore great that errors will occur during the election. But even in the event that errors should occur during the election, not every error leads to legal consequences.
1. TIME OF THE ELECTIONS
The regular election of the works council is held every four years in accordance with Section 13(1) Works Constitution Act. Since works council elections have not occurred for the first time in every company in the same calendar year, the question arises why the vast majority of companies nevertheless conduct works council elections in 2018. This is due to the statutory provision in the Works Constitution Act (Section 13(3)), which transfers all works council elections as rapidly as possible into the four-year regular cycle. Only when the last works council election is held less than one year from the beginning of the regular date for elections within the meaning of Section 13(1) Works Constitution Act is the term of office of the works council extended so that it is moved to the usual 4-year cycle only in the next immediately following period for regular elections. By focusing the elections on individual years, it is supposed to make it easier for among others trade unions and courts to be prepared administratively for the elections and possible contestation proceedings. For soccer fans, this at least has the advantage that the regular date for elections can easily be determined – it always occurs in the year of the Soccer World Cup.
Elections may be held outside of the 4-year time period only under the strict requirements of Section 13(2) Works Constitution Act.
2. Election preparation in the strict sense
In principle, the works council can decide for itself with what lead time it initiates the election of the new works council. It is legally determined that the works council is obligated to undertake the initiation of the election by appointing the electoral board no later than ten weeks before the expiry of its term of office, Section 16(1) Works Constitution Act. In view of the fact that both the electoral board and the candidates enjoy the special protection against dismissal of Section 15 Protection Against Dismissal Act until the announcement of the election results, the possibility exists that works councils – in the case of imminent staff cutbacks – provide protection against dismissal for a large part of the work-force by initiating the election an as early as possible, since then suddenly everyone will stand as candidate for election. This special protection against dismissal is only excluded when the early appointment of the electoral board can be qualified as an abuse of legal rights. Abuse of legal rights is only accepted in absolutely exceptional cases. Thus, for example, the appointment of the electoral board 36 weeks before the start of the statutory election period was not deemed to be an abuse of legal rights (cf. Lower Saxony State Labor Court, October 13, 2010 – 17 Sa 569/10).
Practical tip: Companies should initiate personnel restructuring measures regardless of the particularities of Section 15(4) Protection Against Dismissal Act in the case of a plant closure significantly before the regular works council election, in order to avoid the special protection against dismissal of the electoral board and the electoral candidates.
3. THE RIGHT TO VOTE
The active right to vote is accorded to all employees of the establishment, who have reached the age of 18. All employees who have been a member of the relevant establishment for six months are eligible to be candidates (passive voting right). The determination of the active and passive voting right is of decisive importance for the specific implementation of the election – and for avoiding later contestability.
Misunderstandings can frequently easily arise in respect to the right to vote particularly in the case of the following groups of persons:
• Executive staff have neither active nor passive voting rights.
• Temporary workers already have active voting rights if they have been employed for longer than three months in the establishment. They only have passive voting rights if they gain employment with the hiring company subsequent to their temporary employment. In this case, the time spent working as part of the temporary employment counts towards the required minimum time working at the establishment of six months.
• Parental leave: Employees on parental leave are entitled to the active and the passive right to vote during the entire parental leave period.
• Laid-off employees: Until the expiry of the period of notice, they have active and passive voting rights. A properly laid-off employee is entitled to the active right to vote after expiry of the period of notice only when filing a protection against dismissal action and continuing to be employed during the protection against dismissal proceedings. An employee laid off without notice is entitled to the passive right to vote, if filing a protection against dismissal action (in due time). The reason for this is that the employer could otherwise effectively prevent the election of electoral candidates that the employer disagrees of by issuing (ineffective) extraordinary dismissals (cf. Federal Labor Court, November 10, 2004 – 7 ABR 12/04).
• Employees who are ill or on leave and inactive work contracts: Employees who are ill, on leave or those whose work contract is temporarily inactive have active and passive voting rights.
• Partial retirement: Employees who are in partial retirement have no voting rights, as soon as the release phase has begun.
• Employees abroad / another establishment: Due to the ever-closer interconnection of work flows, more and more situations arise in which the assignment of employees is questionable, for example, if
o an employee is temporarily sent abroad,
o an employee (of another group company), who belongs to an establishment abroad, has authority to give orders to employees in the German establishment or
o an employee, who – whether regularly working in several establishments on-site or whether entitled to issue instructions to employees in several establishments – could be assigned to several German establishments.
In all of the aforementioned cases, the election participation depends on whether and in which establishment(s) the employee is "integrated." Integration in this sense means factual circumstances, according to which an employee is part of an operational organization and also chain of command. Thus, a supervisor is, for example, already integrated into an establishment (in which he is never physically present), when exercising leadership and management functions in respect to employees in this establishment and the leadership function serves the operational purpose of this establishment (cf. Baden-Württemberg State Labor Court, May 28, 2014 – 4 TaBV 7/13). Conversely, sales representatives in the field are also integrated into an establishment in that they are subject to the instructions of the organization there (in other words: supervisors):
o In the case of posted workers, the integration into the "home establishment" is as a rule maintained if they are not integrated into an operational organization abroad (e.g., in the case of assembly workers). But even an integration into a foreign establishment is not contrary to the continued integration and thus eligibility to vote in the home establishment when the posting is only of a limited temporal nature.
o According to recent case law, the supervisor of employees of a German establishment who is based abroad – frequently in the matrix structure – is also to be regarded as an employee of the German establishment. The question as to whether such supervisor is "executive staff," is thereby not to be assessed ac-cording to the supervisor’s role in the overall group, but rather only in respect to the respective company. It may therefore well be that a "big shot" from abroad is considered a normal employee in the German establishment – with full active and passive voting rights.
o Finally, it is also conceivable that an employee belongs to several German establishments and thus has the right to vote in several German establishments. For this purpose, it must only be checked, according to the aforementioned criteria for each individual establishment, whether an "integration" into the respective establishment exists.
4. SPECIAL CASE: EXECUTIVE STAFF
According to Section 5(3) Works Constitution Act, executive staff are employees who under their contract of employment and the status in the company/establishment
• are entitled on their own responsibility to engage and dismiss employees employed in the establishment / operation department (Section 5(3)(1) Works Constitution Act)
• have general authority or power of procuration and the power of procuration is also not unimportant in relation to the employer (Section 5(3)(2) Works Constitution Act) or
• regularly carry out other duties, which are important for the existence and development of the company or an establishment and fulfilment of which requires particular experience and knowledge, if, in doing so, they either essentially make decisions on their own responsibility or substantially influence these decisions; this may also be the case with stipulated procedures, particularly those based on legal provisions, plans or guidelines and when cooperating with other executive staff (Section 5(3)(3) Works Constitution Act).
Specifically, the first-mentioned criterion, the entitlement to engage and dismiss employees on one's own responsibility, is satisfied for employees in Germany only in the rarest cases. In contrast to Section 14(2) sentence 1 Protection Against Dismissal Act, both entitlements, therefore the right to engage and dismiss employees, must be met cumulatively (cf. Munich State Labor Court, June 06/2012 – 5 TaBV 51/10). Through the introduction of the dual control principle, an employee is only rarely authorized to engage and to dismiss employees on his own responsibility – without having to obtain the consent of a third party. Since a company will not be able to assert that the second signature is provided only "formally" without any decision-making power, this case group is almost never used.
Also, the "formal" granting of general authority or power of procuration in relation to third parties does not automatically qualify an employee as executive staff within the meaning of Section 5(3)(2) Works Constitution Act. Rather, the general authority/power of procuration must also be designed in the internal relationship such that not only unessential du-ties to be executed on one's own authority are allocated to chief representatives/authorized representatives. The chief representative/authorized representative must – at least in his (not unimportant) area of responsibility – perform entrepreneurial duties. An employee furnished with power of attorney does not fall under this second group of the executive staff. He may meet the requirements of the third case group, however.
Executive staff of the third group according to Section 5(3)(3) Works Constitution Act fulfil duties according to their contract of employment, which
• have particular meaning for the company / the establishment,
• require special knowledge and experience and
• which the employee can essentially carry out himself without instructions.
This covers therefore employees, who due to their position are particularly close to company management and are able to handle entrepreneurial duties at least in some areas. The employee must thereby not make the decisions on his own responsibility and alone. Rather, it suffices if he at least decisively influences decisions of company management (cf. Federal Labor Court, March 25, 2009 – 7 ABR 2/08). Thus, in particular "staff employees" for the third group are considered for these case groups.
Section 5(4) Works Constitution Act also has some interpretative rules, the fulfillment of which is very relevant for the characterization of an employee as executive staff within the meaning of Section 5(3)(3) Works Constitution Act.
5. THE IMPLEMENTATION AND CONDUCT OF THE "NORMAL" WORKS COUNCIL ELECTION
The normal election procedure can be divided into five main sections:
• appointment of the electoral board,
• drawing up the electoral list,
• publication of the election notice,
• submission, review and publication of the proposed lists, and
• holding the actual election process as well as counting the votes and publication of the election result.
When appointing the electoral board, as the central constitutional electoral body, it de-pends on whether a works council already exists or not. The works council has the statutory duty to appoint the electoral board, Section 16 Works Constitution Act. If the works council does not fulfil this duty or does not do so within the ten-week period, the electoral board may be appointed either by the general works council or the group works council or by the labor court. In establishments, in which a works council does not exist, the electoral board may be directly elected by the general works council or the group works council, alternatively in an establishment meeting, or may be appointed by the labor court, Section 17 Works Constitution Act. Once the electoral board has been elected or appointed, it has the duty to initiate the election immediately, to carry it out and to determine the election result.
At the beginning of the works council election, the electoral board has to create a list of the eligible voters, the electoral list, Section 2 Election Regulations. The electoral list must be kept separately by gender and must contain last names, first names, and dates of birth in alphabetical order. Furthermore, it is necessary to identify who has only active voting rights, therefore, who lacks the passive right to vote (e.g., temporary workers). In the later election, only those employees are – actively as well as passively – eligible to vote, who are listed on the electoral list. Consequently, the accuracy of the list is of particular importance for the further progress of the election. After the electoral list has been drawn up, the electoral board has to display the electoral list from the day of the initiation of the election until the completion of the voting at a suitable place for inspection in the establishment. Alternatively or cumulatively, making it available for public display in the Intranet or by email is also considered. Opposition to the electoral list may be submitted in writing to the electoral board within two weeks after issuing the election notice. Every employee of the establishment is entitled to do so – not, however, the employer or a trade union represented in the establishment, Section 4 Election Regulations.
Practical tip: Election contestations are frequently successfully based on the inaccuracy of the electoral list. In case of doubt, the employer should therefore fully support the electoral board in drawing up the list.
The electoral board then releases the election notice, which with a view to the extent of the minimum details in practice is very prone to error and therefore in practice frequently provides grounds for contesting the election. In particular, the information on the mini-mum seats for the minority gender in the establishment can frequently lead to errors. Section 15(2) Works Constitution Act requires that the gender, which is in the minority in the staff, must at least be represented in the works council according to its relative numerical strength, if the works council consists of three or more members. Therefore, the electoral board must determine how many employees belong to the respective gender at the time of issuing the election notice.
The election notice must also contain the number of the supporting signatures necessary for the individual proposed lists. Each employee may only run as a candidate for a pro-posed list and also only support one proposed list.
Practical tip: In practice, it can make sense to offer the electoral board a final (legal) re-view of the electoral list and the election notice, in order to avoid contestable errors.
As soon as the election notice is posted, proposed lists may be submitted, Section 6 Election Regulations.
The mandatory contents of a proposed list are:
• list of the individual candidates giving last names, first names, dates of birth and type of employment in the establishment,
• designation of the candidates in a recognizable sequence with a consecutive number,
• written consent of each individual candidate for inclusion in the proposed list,
• designation of a list representative, who is entitled and obligated to submit and receive declarations to and from the electoral board, and
• adding the necessary supporting signatures as specified in the election notice.
If only one proposed list is submitted, a majority vote, therefore, a personal vote between the candidates of this list occurs. In the case of several competing proposed lists, however, a proportional voting takes place.
In the subsequent (actual) casting of votes, it must be guaranteed that the voting rights principles are complied with. Each eligible voter must be able to decide freely whether and how he votes. Furthermore, the election must be secret. This can be guaranteed in particular by a privacy screen during the election (e.g., by polling booths) and a sealed ballot box. There must also be a guarantee that each eligible voter votes only once and that both the ballot as well as the election locality and voting time do not influence the election.
The counting of the votes takes place in public. The seats in the works council must be determined, where the minimum quorum for the minority gender must be taken into consideration. The result of the election must then be recorded in an election register and be signed by the chairman of the electoral board and one further member of the board. Following this, those elected must be informed of their election, the election results must be announced, and the works council is to be invited to the inaugural meeting.
6. SIMPLIFIED ELECTORAL PROCEDURE
The simplified electoral procedure may be carried out in one or two stages. Which procedure is used, depends decisively on how the works council election was initiated, Section 14a Works Constitution Act:
• The electoral procedure is a one-stage procedure if the electoral board was appointed by the group, general or works council or the labor court.
• The electoral procedure is a two-stage procedure if the election was initiated either by a trade union represented in the establishment or else by three employees of the establishment who are eligible to vote.
The initiation of the two-stage election procedure takes place by invitation of the listed initiators. The invitation letter must be made public and contain information on who is invited to the election meeting, when and where the meeting will be held, that proposals must be submitted by the end of the election meeting and what number of supporting sig-natures is required. The election meeting may occur at the earliest seven days after the first day of the publication of the invitation. In the election meeting, the electoral board must then be elected, which must draw up the electoral list and has to issue the election notice. The actual casting of votes occurs only in the second election meeting. In the simplified procedure, only the majority, therefore personal vote, takes place. Vote counting occurs publicly immediately following the casting of votes. Subsequent voting must be requested by no later than three days before the election meeting. Otherwise, the principles of secrecy and freedom of choice already set out as part of the normal election procedure apply.
In the one-stage election procedure, the electoral board has to draw up the electoral list after its appointment and to issue the election notice as well as to make both known. The law does not provide a minimum period for the time span between the appointment of the electoral board and conducting the election meeting. It is recommended, however, to observe the minimum period according to Section 28(1) sentence 2 Election Regulations, i.e., seven days, because otherwise hardly any time remains for the employees to submit the proposed lists.
7. CONTESTING AN ELECTION
The representation of the implementation and course of the works council election shows that the procedure is prone to error in many areas. A distinction must thereby be drawn between errors, which are "only" contestable and those, which can lead to the nullification of the election.
The contesting of an election is governed by Section 19 Works Constitution Act.
(1) An election may be contested before the labor court, if any of the essential rules respecting the right to vote, eligibility or electoral procedure have been infringed and no subsequent correction has been made, unless the infringement could not have altered or influenced the election results.
(2) Such contestation may be made by any three or more persons with voting rights, a trade union represented in the establishment or the employer. To be receivable the action must be brought within two weeks of the announcement of the election results.
But what are the essential provisions with regard to the right to vote, eligibility or election procedures? And what violation can at least potentially influence the election result? Does any hypothetical possibility of an interference in an election suffice or must the election result actually have been influenced?
An election provision, which is considered a "must" in contrast to a purely regulatory standard ("target") is essential. Violations of target provisions do not in principle justify the contestability of the election due to their clearly less binding nature than must provisions. An exception exists only if the target provision contains elementary basic principles of the works council election or supporting principles of the Works Constitution Act (cf. Federal Labor Court, October13/2004 – 7 ABR 5/04).
The following violations have already led to the contestation of a works council election:
• misjudgment of the concept of an establishment (cf. Bielefeld Labor Court, January 24, 2017 – 2 BV 128/16),
• authorization of persons not eligible to vote or non-authorization of persons eligible to vote (cf. Federal Labor Court, June 25, 1974 – 1 ABR 68/73; Federal Labor Court, March 20, 1996 – 7 ABR 34/95).
• incorrect determination of the number of members of the work council (cf. Federal Labor Court, March 13, 2013 – 7 ABR 69/11),
• appointment of the electoral board by a works council no longer in office (cf. Federal Labor Court, March 01, 1976 – 1 ABR 19/54),
• authorization of improper election proposals and non-authorization of proper election proposals (for example, due to lack of supporting signatures),
• incorrect allocation of seats for the minority gender,
• violations of the secrecy of the election (cf. Düsseldorf State Labor Court, December 13.12.2016 – 9 TaBV 85/16),
• use of the simplified election procedure without the existence of the statutory requirements,
• violation of the principle of free choice and equality of opportunity for the candidates (cf. Federal Labor Court, December 06, 2000 – 7 ABR 34/99),
• non-public counting of the votes.
8. PITFALLS
The successful contestation of a works council election requires an at least hypothetical impact of the error in the election procedure on the election result; consequently, the greatest pitfalls exist where the right to vote itself, the candidacy, and the casting of the vote/counting of the vote are affected. In this connection, attention should be paid in particular to the following aspects:
• Foreign-language employees: According to Section 2(5) Election Regulations, the electoral board is obligated to inform foreign-language employees, who do not have (sufficient) command of the German language, in their foreign language (or at least a language sufficiently well understood by them) before the initiation of the works council election about the election procedure, drawing up of the electoral and proposed lists, election process and casting of votes in a suitable manner (Federal Labor Court, October 13, 2004 7 ABR 5/04). Here, for example, the trade unions are helping, which offer relevant explanations in a large number of languages for download on their websites free of charge.
• Numbers, dates, addresses: The electoral board has to pay attention to a large number of deadlines, numbers, and calculations and must communicate dates and addresses (for example, for the election) unmistakably. All of this is error-prone – all the more so if the members of the electoral board do not have any-thing to do with such formalities in their professional everyday life.
• Electoral list, candidates, supporting signatures: The precise review of the electoral list (active and passive eligibility to vote) as well as proposed lists is urgently advised. Here, employees are too easily forgotten, double-counted, or taken into consideration even though they no longer have the right to vote at all.
• No incompatibility of offices: It is inconceivable that the leading candidates for the federal parliament are at the same time their election official. In an establishment, this is different – not least due to the scarce resources in small establishments: Here, members of the works council who are active and running as candidates can also be a member of the electoral board and thus make decisions about the eligibility to vote / proposed list of the "opposition." Not everyone can resist the associated temptation. In larger establishments, it has therefore proven to be a good idea, if one or two employees (also from the Human Resources Department) exercise the function of the electoral board – and only the latter – over several election periods.
• Ballot box: The security of and the exclusion of opportunities for manipulation at the ballot box are a core area of election protection. Therefore, not only in elections in remote countries is there a focus on monitoring ballot boxes. In establishments, the elections are carried out too trustingly sometimes. An electoral board member may take the ballot box (alone) home, before the election is continued on the next day in another establishment site (branch of the establishment) or the ballot box is brought at night, before the count, into a room, to which many employees have unchecked access. It is necessary to consider not only these issues in advance, but rather also their monitoring afterwards.
• Vote casting, postal voting and -counting: Finally, the vote casting itself is also subject to many errors. This pertains not only to the issue of how it is ensured that an employee only casts his vote once (not in an Excel list, Federal Labor Court, June 12, 2013 – 7 ABR 77/11). An electoral interference or violation of the election procedure provisions may also already exist when the electoral board – with the intention of increasing the voter participation in this way – is too generous in inviting postal voting (Frankfurt State Labor Court, April 17, 2009 – 9 TaBV 163/07). Finally, vote counting is also error-prone. Both the evaluation of the individual ballots (is a ballot filled with "dashes" still valid?) as well as place and time of the vote count (how freely accessible is the room for the vote counting?, cf. Federal Labor Court, February 15, 2006 – 7 ABN 75/05) involve risks.
9. ELECTION NULLIFICATION
The nullification of the election must be strictly distinguished from the contestability of the election. Errors in the election, which lead to the nullification of the election, may still be challenged long after publication of the election result and by everyone. A works council election is nullified, if there is gross and obvious violation of essential principles of the statutory right to vote such that there is not even the appearance of an election corresponding to the law. The nullification of the election must be accepted in extremely exceptional situations and was accepted to date, for example, in the following cases:
• works council election without electoral board (cf. Munich State Labor Court, June 16, 2002 – 11 TaBV 50/08),
• falsification of postal vote documents,
• terrorizing the workforce during voting (cf. State Labor Court, March 08, 1957 – 1 ABR 5/55),
• holding a works council election in an establishment, which is obviously not subject to the Works Constitution Act (ct. State Labor Court, February 09, 1982 – 1 ABR 36/80).
If there is a case of nullification of the works council election, this has far-reaching con-sequences. Decisions must then be made in all issues as if a works council had never existed.
10. CONCLUSION
The statutory requirements for the conducting and course of the works council election are highly complex. Whether a standard or simplified election procedure: A "no brainer" will not suffice. Particularly due to the many small pitfalls and the risks resulting therefrom of an election contestation and expensive repetition of the works council election, often an active support of the electoral board – also by legal expertise – must be recommended to the employer. In any case, the employer has to bear the cost of the election, Section 20(3 Works Constitution Act. This does, of course, not include all "desired expenses" of the electoral board (such as certain office equipment, cf. Berlin Labor Court March 16, 2017 – 63 BV 11412/16), but all required cost. This includes, in addition to the actual election papers (ballots, ballot box, etc.,), also the cost of training of the electoral board, if necessary, its legal support during the election, and the expenditures associated with the election (for example, travel expenses to the branches of the establishment). Such cooperation of the employer and the electoral board during the election can save not only cost for the employer, but rather at the same time can build trust capital for the collaboration with the works council.
Monday, June 5, 2017
France - The Anticipated Labor & Employment Reforms of the New French President
By Roselyn Sands, EY Société d’Avocats
Emmanuel Macron was elected President of the French Republic on May 7, 2017.
His first order of business is reforming French labor & employment laws.
He seeks to trim the Labor Code by taking out hurdles that help no one while protecting employee rights. This requires, in part, moving from a one-size-fits-all legislative architecture to a customized approach by strengthening collective bargaining within companies.
Below are some of the key features of Mr. Macron’s reform:
A new manner of achieving flexibility
The new President wants to ensure that decision are taken “on the ground” through company-wide collective agreements which would prevail over industry-wide collective agreements, or by employee referendum. Industry-wide sectors would be reduced from 100 to 50. Yet, fundamental safeguards would remain in the Labor Code.
Simplification of a Staff representative bodies and strengthening of their role
President Macron seeks the implementation of a single body which would replace the personal delegates, the works council and the Health and Safety committee, in all companies and groups regardless of headcount threshold.
By exception, a company could negotiate an agreement with the unions whereby bodies would remain separated.
Staff representatives would have access to training notably on labor law, and specific tasks on company management. The government would also encourage union involvement and employees presence at the Board of companies so that their involvement can be more useful and pragmatic.
Predictability of Labor Court judgements
In case of litigation, President Macron would like the law to cap damages for wrongful termination. This would allow companies to better anticipate costs and risks of employee litigation.
This rule would not be applicable to dismissals based on discrimination or harassment.
All judgements would be immediately enforceable even pending appeal, subject to some exceptions, in order to prevent delaying tactics.
Tax-free incentive in particular tax free overtime compensation
President Macron would like to reinstate tax free treatment for overtime work to encourage employees to work more: a deduction of 0.50€ per hour on employer contribution for company with less than 20 employees; and full tax exemption of employee contribution on overtime.
Increased purchasing power for employees
President Macron would also like to remove employee contributions for health and unemployment insurance. This measure would be financed by an increase of the generalized CSG contribution of 1.7 point (contribution not only paid by employees). Employer contributions to social security would also be reduced.
Unemployment insurance for everyone
In order to encourage persons to take risks, change careers, try new ones, President Macron would like to make unemployment protection available to everyone, even those that resign.
Employees would have the possibility to benefit from unemployment allowance in case of resignation, once every five years.
Training employees and unemployed
Training will be reinforced by the conversion of employer training contributions to individual training rights for all workers.
Unemployed people would have access to additional training measures but could lose unemployment protection if 2 “decent” job offers are refused or insufficient efforts to search for work.
Maternity leave for all women who work
President Macron would like to create a universal maternity leave for all women whatever their status (employee, independent worker, non-employee…) to further create equality between men and women who work.
Improve access to the independent worker status (gig economy)
President Macron wants to improve independent worker status by removing heavy barriers notably by substantial decrease of their social security contributions and tax, in particular for small businesses that are struggling to survive.
Fighting against social dumping
President Macron would like France to influence Europe by the way of harmonization and creation of a European labor law common base notably by creating minimum standards on training, health and safety, unemployment insurance and minimum wage. Posting of workers in France would be limited to 1 year and European posting of workers rules would be redefined.
*
It will be interesting to see if these proposed reforms actually become legislation and how that might influence the French economy.
Emmanuel Macron was elected President of the French Republic on May 7, 2017.
His first order of business is reforming French labor & employment laws.
He seeks to trim the Labor Code by taking out hurdles that help no one while protecting employee rights. This requires, in part, moving from a one-size-fits-all legislative architecture to a customized approach by strengthening collective bargaining within companies.
Below are some of the key features of Mr. Macron’s reform:
A new manner of achieving flexibility
The new President wants to ensure that decision are taken “on the ground” through company-wide collective agreements which would prevail over industry-wide collective agreements, or by employee referendum. Industry-wide sectors would be reduced from 100 to 50. Yet, fundamental safeguards would remain in the Labor Code.
Simplification of a Staff representative bodies and strengthening of their role
President Macron seeks the implementation of a single body which would replace the personal delegates, the works council and the Health and Safety committee, in all companies and groups regardless of headcount threshold.
By exception, a company could negotiate an agreement with the unions whereby bodies would remain separated.
Staff representatives would have access to training notably on labor law, and specific tasks on company management. The government would also encourage union involvement and employees presence at the Board of companies so that their involvement can be more useful and pragmatic.
Predictability of Labor Court judgements
In case of litigation, President Macron would like the law to cap damages for wrongful termination. This would allow companies to better anticipate costs and risks of employee litigation.
This rule would not be applicable to dismissals based on discrimination or harassment.
All judgements would be immediately enforceable even pending appeal, subject to some exceptions, in order to prevent delaying tactics.
Tax-free incentive in particular tax free overtime compensation
President Macron would like to reinstate tax free treatment for overtime work to encourage employees to work more: a deduction of 0.50€ per hour on employer contribution for company with less than 20 employees; and full tax exemption of employee contribution on overtime.
Increased purchasing power for employees
President Macron would also like to remove employee contributions for health and unemployment insurance. This measure would be financed by an increase of the generalized CSG contribution of 1.7 point (contribution not only paid by employees). Employer contributions to social security would also be reduced.
Unemployment insurance for everyone
In order to encourage persons to take risks, change careers, try new ones, President Macron would like to make unemployment protection available to everyone, even those that resign.
Employees would have the possibility to benefit from unemployment allowance in case of resignation, once every five years.
Training employees and unemployed
Training will be reinforced by the conversion of employer training contributions to individual training rights for all workers.
Unemployed people would have access to additional training measures but could lose unemployment protection if 2 “decent” job offers are refused or insufficient efforts to search for work.
Maternity leave for all women who work
President Macron would like to create a universal maternity leave for all women whatever their status (employee, independent worker, non-employee…) to further create equality between men and women who work.
Improve access to the independent worker status (gig economy)
President Macron wants to improve independent worker status by removing heavy barriers notably by substantial decrease of their social security contributions and tax, in particular for small businesses that are struggling to survive.
Fighting against social dumping
President Macron would like France to influence Europe by the way of harmonization and creation of a European labor law common base notably by creating minimum standards on training, health and safety, unemployment insurance and minimum wage. Posting of workers in France would be limited to 1 year and European posting of workers rules would be redefined.
*
It will be interesting to see if these proposed reforms actually become legislation and how that might influence the French economy.
Summer edition
Dear all
Welcome to the Summer edition of the International Employment Committee Newsletter. Thanks as always to our contributors, and please let me know if you are interested in submitting an article for consideration for future editions.
Helen Colquhoun
Withers
(qualified in England & Wales, New York, Hong Kong)
Welcome to the Summer edition of the International Employment Committee Newsletter. Thanks as always to our contributors, and please let me know if you are interested in submitting an article for consideration for future editions.
Helen Colquhoun
Withers
(qualified in England & Wales, New York, Hong Kong)
Canada - New Developments in Federal Labour Relations and Labour Standards Legislation: Towards a 'Super' Federal Labour Tribunal
By Theodore Goloff, Robinson Sheppard Shapiro, Montreal
Those who follow legislative developments regarding the Canada Labour Code, will remember that important changes came into effect in June 2015 – notably the “abandonment” of a purely “card counting” based system for federal union certification, and the requirement of a “certification election” to obtain union certification pursuant to that Code. Shortly after the election of the present Liberal government, in October 2015, the new administration tabled Bill C-4 whose purpose is to re-establish the old system without an obligatory certification vote. This Bill has not yet been adopted by the Parliament of Canada because of amendments by the Canadian Senate. This Bill is surely a matter to be closely followed!
INCREASED LEAVE
Recently, following the Budget of March 22, 2017, the Federal Government tabled Bill C-44, very substantially changing the Canada Labour Code. Inter alia, the Bill amends Part III of the Code to increase parental leave from 37 to 63 weeks, allowing employees to take such leave within a period of 78 weeks following the birth or “due date”, instead of within 52 weeks as was the case previously. The changes allow as well for maternity leave to begin 13 weeks prior to the birth or “due date”, instead of 11 weeks as was the case previously. The Bill also provides for a new leave for an employee who is obliged to provide care to a gravely ill adult. Simple but significant changes in what may be their possible effects!
AN ENLARGED JURISDICTION FOR THE CANADA INDUSTRIAL RELATIONS BOARD
However important, the above changes are simply the tip of the iceberg, as other sections of Bill C-44 radically transforms the labour relations landscape for all employers falling within the federal jurisdiction in Canada.
In a nutshell, the Canada Industrial Relations Board [CIRB], now becomes the primary jurisdiction to hear all recourses under the Code whether pursuant to Part I, II and/or III that deal respectively with labour relations, health and safety and labour standards. There are, of course, clear parallels between the recent creation of the Quebec Administrative Labour Tribunal but as seen below, this proposed federal legislation goes further than its provincial counterpart.
The CIRB, which previously had jurisdiction to hear only recourses provided for violation of Part I, would now inherit the responsibilities previously given over to “appeal officers” provided for in Part II, in matters of health and safety.
With respect to Part III, the CIRB would now also have jurisdiction to hear complaints for alleged unjust dismissal filed pursuant to Section 240 – replacing outside arbitrators named by the Minister. It would still be possible for the CIRB to name an outside arbitrator to hear files both under Part II or Part III, depending upon the anticipated volume of complaints and the somewhat limited resources of the CIRB. This latter change could certainly impact on consistency of decisions.
NEW SANCTIONS – GREATER EFFICIENCY?
A new and fundamental change introduced by this Bill is the creation of a regime of administrative fines for infractions of Parts II and III. It would now be the CIRB that would hear appeals from penalties imposed by the Ministerial order. Furthermore, alleged violations of Parts II and III would no longer be treated by the common law courts. While this may be the harbinger of a more efficient system of redress than recourse to penal complaints that have not been frequently used in the past, because decisions of the CIRB are without appeal, unlike decisions of the common law courts. This too represents a significant change.
NO TO REPRISALS
Another substantive modification to the Code is a new Section dealing with claims for “reprisal” – the equivalent of what Quebec practitioners know as complaints for illegal practices pursuant to Section 122 and the following of the Quebec Labour Standards Act. But there is a twist. The Bill, as tabled, prohibits the joinder of a claim of reprisal with a complaint for unjust dismissal pursuant to Section 240 of the Federal Code. This joinder is allowed under the equivalent provisions of the Quebec Labour Standards Act.
GREATER POWERS TO INSPECTORS
Another substantive change to the Code deals with the recovery of sums allegedly due by an employer to an employee pursuant to Part III of the Code.
Firstly, the powers of inspectors are enlarged substantially because they now can decide whether or not a discharge has in fact taken place so as to bring into play Sections 230 and 235, that deal with notice of termination and severance. These same inspectors can order the end to practices that they deem violations of Part III, all this in addition to issuance of Ministerial (administrative) orders for investigation to assure compliance with the law.
In line with these changes, the CIRB (or an outside arbitrator that it assigns a case to) now may hear appeals from payment orders made by inspectors pursuant to Sections 251 et seq. of the Federal Code. The CIRB will as well now have the power to order costs in such cases, as well as extrajudicial costs incurred by the parties.
It is clear that the federal government’s intent is to reduce the number of violations of Part III, and to more effectively prosecute and penalize those who fail to respect the law, bearing in mind that these are minimum labour standards for employees falling under federal jurisdiction. In other words, legislation with teeth!
Will the creation of this “Super Tribunal”, with its attendant new powers, really shorten delays, lighten the load of common law courts and promote faster and better industrial justice? The federal government seems to think so! Effective or not, given this new landscape – employers beware!
Those who follow legislative developments regarding the Canada Labour Code, will remember that important changes came into effect in June 2015 – notably the “abandonment” of a purely “card counting” based system for federal union certification, and the requirement of a “certification election” to obtain union certification pursuant to that Code. Shortly after the election of the present Liberal government, in October 2015, the new administration tabled Bill C-4 whose purpose is to re-establish the old system without an obligatory certification vote. This Bill has not yet been adopted by the Parliament of Canada because of amendments by the Canadian Senate. This Bill is surely a matter to be closely followed!
INCREASED LEAVE
Recently, following the Budget of March 22, 2017, the Federal Government tabled Bill C-44, very substantially changing the Canada Labour Code. Inter alia, the Bill amends Part III of the Code to increase parental leave from 37 to 63 weeks, allowing employees to take such leave within a period of 78 weeks following the birth or “due date”, instead of within 52 weeks as was the case previously. The changes allow as well for maternity leave to begin 13 weeks prior to the birth or “due date”, instead of 11 weeks as was the case previously. The Bill also provides for a new leave for an employee who is obliged to provide care to a gravely ill adult. Simple but significant changes in what may be their possible effects!
AN ENLARGED JURISDICTION FOR THE CANADA INDUSTRIAL RELATIONS BOARD
However important, the above changes are simply the tip of the iceberg, as other sections of Bill C-44 radically transforms the labour relations landscape for all employers falling within the federal jurisdiction in Canada.
In a nutshell, the Canada Industrial Relations Board [CIRB], now becomes the primary jurisdiction to hear all recourses under the Code whether pursuant to Part I, II and/or III that deal respectively with labour relations, health and safety and labour standards. There are, of course, clear parallels between the recent creation of the Quebec Administrative Labour Tribunal but as seen below, this proposed federal legislation goes further than its provincial counterpart.
The CIRB, which previously had jurisdiction to hear only recourses provided for violation of Part I, would now inherit the responsibilities previously given over to “appeal officers” provided for in Part II, in matters of health and safety.
With respect to Part III, the CIRB would now also have jurisdiction to hear complaints for alleged unjust dismissal filed pursuant to Section 240 – replacing outside arbitrators named by the Minister. It would still be possible for the CIRB to name an outside arbitrator to hear files both under Part II or Part III, depending upon the anticipated volume of complaints and the somewhat limited resources of the CIRB. This latter change could certainly impact on consistency of decisions.
NEW SANCTIONS – GREATER EFFICIENCY?
A new and fundamental change introduced by this Bill is the creation of a regime of administrative fines for infractions of Parts II and III. It would now be the CIRB that would hear appeals from penalties imposed by the Ministerial order. Furthermore, alleged violations of Parts II and III would no longer be treated by the common law courts. While this may be the harbinger of a more efficient system of redress than recourse to penal complaints that have not been frequently used in the past, because decisions of the CIRB are without appeal, unlike decisions of the common law courts. This too represents a significant change.
NO TO REPRISALS
Another substantive modification to the Code is a new Section dealing with claims for “reprisal” – the equivalent of what Quebec practitioners know as complaints for illegal practices pursuant to Section 122 and the following of the Quebec Labour Standards Act. But there is a twist. The Bill, as tabled, prohibits the joinder of a claim of reprisal with a complaint for unjust dismissal pursuant to Section 240 of the Federal Code. This joinder is allowed under the equivalent provisions of the Quebec Labour Standards Act.
GREATER POWERS TO INSPECTORS
Another substantive change to the Code deals with the recovery of sums allegedly due by an employer to an employee pursuant to Part III of the Code.
Firstly, the powers of inspectors are enlarged substantially because they now can decide whether or not a discharge has in fact taken place so as to bring into play Sections 230 and 235, that deal with notice of termination and severance. These same inspectors can order the end to practices that they deem violations of Part III, all this in addition to issuance of Ministerial (administrative) orders for investigation to assure compliance with the law.
In line with these changes, the CIRB (or an outside arbitrator that it assigns a case to) now may hear appeals from payment orders made by inspectors pursuant to Sections 251 et seq. of the Federal Code. The CIRB will as well now have the power to order costs in such cases, as well as extrajudicial costs incurred by the parties.
It is clear that the federal government’s intent is to reduce the number of violations of Part III, and to more effectively prosecute and penalize those who fail to respect the law, bearing in mind that these are minimum labour standards for employees falling under federal jurisdiction. In other words, legislation with teeth!
Will the creation of this “Super Tribunal”, with its attendant new powers, really shorten delays, lighten the load of common law courts and promote faster and better industrial justice? The federal government seems to think so! Effective or not, given this new landscape – employers beware!
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