• Inability to Pay? Prove it.
  • December 6, 2010 | Author: Stephen J. Carpenter
  • Law Firm: Stewart McKelvey - Charlottetown Office
  • In difficult financial times, it is sometimes necessary to take a new approach to the operation of a business.  When this happens an employer may wish to negotiate changes to the collective agreement, particularly where financial losses are occurring.  A recent British Columbia Labour Relations Board decision, United Food and Commercial Workers International Union, Local 1518 v. Westfair Foods, addresses this issue. 

    The Facts

    Management at an “Extra Foods” store decided to convert into a “No Frills” store.  By converting it to a No Frills store, the employer was also seeking the corresponding collective agreement.  The employer did not provide the union with information about the financial state of affairs.  The union argued that the employer had committed unfair labour practices by not discharging its duty to bargain in good faith. 

    The Decision

    During the negotiation process the management brought forth an inability to pay argument.  Later, the union sought disclosure of the financial situation of the store, particularly in regard to its financial viability.  However, at the proceedings the employer argued that the decision to convert the store to a new business model was being made regardless of their financial situation.

    The board found that when the employer made an inability to pay argument, required to allow the union to review the financial situation, so that members could be informed.  However, although the financial information should have been disclosed, the franchising agreement was not relevant to the process.

    Specifically the board found that the failure to provide financial information in the situation breached the duty to bargain in good faith; and also meant that the last offer vote was not valid, because the appropriate information had not been provided to the employees.

    What This Means to You

    If you are seeking concessions at the bargaining table based on an argument that the company is not in a financial position to satisfy its current obligations, it will be necessary to share financial information with the union representatives.  In satisfying this requirement, it is not necessary to provide everything that the union may seek.  However, you must provide sufficient information so the union can review the financial situation, and inform the membership.  If there is concern about the financial information being shared with those not entitled to review the information, the employer can satisfy its duty by allowing an opportunity for the bargaining committee to review the documents, but not allow the bargaining committee to make copies or disclose information beyond the committee.  The documents shared should include financial statements, and information relating to projected revenues and expenditures.  Failure to meet this requirement may result in a finding of an unfair labour practice, or invalidating the employees’ vote on a contract offer.