[1992] OLRB Rep. October 1118
0675-92-U Retail, Wholesale and Department Store Union, AFL:CIO:CLC, Complainant v. The Brick Warehouse Corporation, Respondent
BEFORE: Brain Herlich, Vice-Chair, and Board Members W. A. Correll and H. Peacock.
APPEARANCES: Mary Hart, Robert McKay, Paul Kessig, Mike Weber and Frank Rendell for the complainant; E. L. Stringer and Robert Gloweski for the respondent.
DECISION OF THE BOARD; October 6, 1992
This is a complaint filed under section 91 of the Labour Relations Act alleging that the respondent has violated section 81 of the Act.
The respondent (also referred to as the "company" or the "employer") operates a national chain of 40 retail stores offering furniture, electronic and other appliances for sale to the public. Seventeen of its stores are located within the province of Ontario. This complaint was filed in respect of four stores (one each in Burlington and St. Catharines and two in Toronto) where the complainant (also referred to as the "union") has been certified by the Board to represent bargaining unit employees. The union alleges that the implementation of a revised policy regarding sales commissions on returns and account corrections is in violation of section 81, commonly referred to as the "freeze" provisions of the Act.
Subsection (1) of section 81 provides as follows:
81.-(1) Where notice has been given under section 14 or section 54 and no collective agreement is in operation, no employer shall, except with the consent of the trade union, alter the rates of wages or any other term or condition of employment or any right, privilege or duty, of the employer, the trade union or the employees, and no trade union shall, except with the consent of the employer, alter any term or condition of employment or any right, privilege or duty of the employer, the trade union or the employees,
(a) until the Minister has appointed a conciliation officer or a mediator under this Act, and,
(i) seven days have elapsed after the Minister has released to the parties the report of a conciliation board or mediator, or
(ii) fourteen days have elapsed after the Minister has released to the parties a notice that he or she does not consider it advisable to
appoint a conciliation board,
as the case may be; or
(b) until the right of the trade union to represent the employees has been terminated,
whichever occurs first.
In its reply the company asserted that the events complained of did not fall within the freeze period in respect of the Toronto store located at 1165 Kennedy Road. At the commencement of the hearing the union acceded to that view and withdrew its complaint in respect of that store.
The union was certified to represent employees at the remaining three stores on various dates in December, 1991 and January, 1992. In respect of each of these stores, notice to bargain was given February 7, 1992 and a "no-board" report issued on July 6, 1992. There was no dispute that the events complained of took place during the currency of the freeze period contemplated under section 81(1) of the Act.
The remuneration of company employees represented by the union and engaged in the sales departments is provided exclusively on the basis of a commission salary and other sales incentives based on the sale of products. The quantum of commissions varies in accordance with the particular products sold.
On or about February 11, 1992 the company implemented changes to the commission levels associated with various products. Those changes resulted in the union filing three unfair labour practice complaints (one for each of the stores involved in the present complaint) alleging violation of the freeze provisions. In response to these complaints, company counsel wrote directly to the union asserting, inter alia, that "[a]s a normal part of the process of running its business the Company has historically changed commission rates on an "as needed" basis depending on a variety of factors including pricing and margins, competition, need to encourage sales of certain merchandise, etc...". Shortly after this intervention the union's complaints were withdrawn. The company' s assertion regarding the history of changes to commission rates was not disputed by the union at the hearing into the instant complaint. Indeed, the veracity of the company assertion was well established through certain exhibits entered into evidence. These documents provided numerous examples of changes to commission rates and other sales incentives both prior and subsequent to the commencement of the freeze period.
The present complaint, however, does not involve changes to commission rates or related sales incentives. For at least five years prior to the events giving rise to this complaint the company's policy regarding the impact of returns and other adjustments on employees' commission was constant. Generally speaking returns made within 60 days of delivery would result in a loss of the commission associated with the sale; returns made after the 60 day period would not affect the commission already received in respect of that sale. Furthermore, even certain returns or adjustments (i.e. those related to damaged settlements, account corrections and certain cases of customer inconvenience) which took place less than 60 days post delivery would not result in the loss of commission already paid on the sale. On or about March 16, 1992 a revised policy regarding sales commissions on returns and account corrections was implemented. The result of this change was that henceforward all returns and account corrections, regardless of when they occurred, were to result in the loss of the commission associated with the sale. It is this change which the union asserts is in violation of the freeze provisions.
While there was no real dispute between the parties as to either the facts giving rise to the present complaint or the state of the law and the Board's jurisprudence regarding the statutory freeze, they each urged us to come to opposite conclusions in dealing with this particular case.
The parties referred us to a number of cases including Spar Aerospace Products Limited, [1978] OLRB Rep. Sept. 859; Corporation of the Town of Petrolia, [1981] OLRB Rep. Mar. 261; Simpsons Limited, [1985] OLRB Rep. Apr. 594; Arrow Games Inc., [1991] OLRB Rep. Feb. 157; and George St. L. McCall Chronic Care Wing of the Queensway General Hospital, [1991] OLRB Rep. May 619.
The union argues that the company has unlawfully altered a policy which had been in effect for at least five years. The impugned change not only affects employees' levels of compensation, it also forces employees to readjust their expectations and eliminates at least the long standing certainty which previously assured employees that once the sixty day period had elapsed, their commissions were irrevocably theirs. Given the duration and the importance of the previously established policy, the change implemented is not one which was within the reasonable expectations of the employees. This change in policy can, if need be, be distinguished from changes to commission rates per se. Changes to commission rates demonstrate a historical pattern distinguished by the constancy of change and fluctuation in the various rates. But while that pattern of change may bring changes to commission rates within the reasonable expectations of the parties, it is the very unchanging nature of the company's policy on returns and corrections which precludes any such similar conclusion.
The company argues that the mere fact that the change in question is the fist to be made to the policy in at least five years does not in and of itself lead to the conclusion that a freeze violation has occurred. The freeze provisions not only do not necessarily preclude "first time" events, they also serve to freeze employers' rights which include the right to manage the enterprise. In this respect the company also relies on certain terms of the "standard" employment contracts governing the terms and conditions of its salespeople. The employer also relies on the fact that it is a national enterprise which is managed as such. The present complaint relates to only 3 of the company's 40 stores across the country. The impugned change was part of a national policy change and, so long as there is no evidence of any improper motive, the employer should be permitted to continue its way of doing business.
By way of reply, the union acknowledges that "first time changes" are not in and of themselves in violation of the freeze and that managerial rights survive the freeze. The issue is whether the impugned change was within the reasonable expectations of the employees. The fact that the employer acted on a national basis is no defence; the employer may continue to act on a national basis but that is not a license to ignore the freeze provisions. The issue of improper motive is not relevant with respect to the strict liability freeze provisions.
Perhaps the most recent and comprehensive articulation of the Board's approach to the freeze provisions can be found in Simpsons Limited, supra, which merits quoting at length:
The Board could have interpreted section 79 [now section 81] so as to freeze the precise conditions extant at the time the statutory provisions was triggered. The Board, though, has consistently rejected that approach as an unreasonable interpretation of the legislation. In the Board's view, such an interpretation would effectively paralyze an employer's operations for the duration of the statutory freeze, a period which could be quite lengthy. In effect, the business as before formulation in Spar Aerospace, supra, was the Board's response to too expansive a view of employee privileges. To paraphrase Spar Aerospace, the employer's right to manage its operation was maintained subject to the condition that the operation conform to the pattern established when the freeze was triggered.
Business as before is a slippery concept to apply to specific fact situations. The focus of the test is the pattern of operations, the employer's practice. Certainly, where the practice is accurately embodied in an employer's policy manual, the application of business as before has been relatively straightforward: J. M. Schneider Inc., [1984] OLRB Rep. Apr. 609. There have been other instances where a practice has been so well entrenched as to be beyond dispute: Spar Aerospace, supra, with respect to annual merit and annual cost of living increases. On the other hand, the increased parking fee cases illustrate the difficulty in looking for a pattern: see Oshawa General Hospital, [1985] OLRB Rep. Jan. 98, and the cases cited therein, including Humber Memorial Hospital, [1979] OLRB Rep. Aug. 764 and Ottawa General Hospital, September 1984, unreported, File No. 0965-84-U(B). Does business as before require annual adjustments to parking fees, equal increases in fees, regular adjustments, any charge to employees for parking, or, is what is frozen the actual rate in place at the time of the freeze? The cases generally reject the actual rate at the time of the freeze and uphold adjustments to rates. However, the cases reveal the difficulty of looking at a pattern or business as before to measure employees' privileges.
The freeze provisions catch two categories of events. There are those changes which can be measured against a pattern (however difficult to define) and the specific history of that employer s operation is relevant to assess the impact of the freeze. There are also first time events and it is with respect to that category that the business as before formulation is not always helpful in measuring the scope of employees' privileges. Some first time events have been readily rejected by the Board, where, for example, the employer has instituted parking fees for the first time during the freeze: see Scarborough Centenary Hospital, [1978] OLRB Rep. July 679; St. Joseph's Hospital, September 1984, unreported, File No. 0965-84-U(A). On the other hand, the Board has upheld an employer's right to lay-off employees during the freeze (assuming there is no anti-union animus in the decision): Simpsons, supra; Burlington Carpet Mills, [[1980] OLRB Rep. Oct. 13611 supra; The Winchester Press, [[1982] OLRB Rep. Feb. 284] supra; Grey Owen Sound, [[1983] OLRB Rep. Apr. 522] supra; Deacon Brothers, [[1979] OLRB Rep. Oct. 9311 supra; Airline (Malton) Credit Union, [[1981] OLRB Rep. Aug. 1055] supra. This right has been confirmed even where the first instance of layoff occurred during the freeze (see Grey Owen Sound, supra; The Winchester Press, supra; and where the layoff had occurred elsewhere in the employer's operation but not at the specific location in question (see Simpsons, supra). The respondent in the instant case cited Corporation of the Town of Petrolia, supra, for the proposition that the employer may also contract out work for the first time during the freeze.
Instead of concentrating on business as before, the Board considers it appropriate to assess the privileges of employees which are frozen under the statute and thereby, delimit the otherwise unrestricted rights of the employer, by focussing [sic] on the reasonable expectations of employees. The reasonable expectations approach, in the Board's opinion, responds to both categories of events caught by the freeze, integrates the Board's jurisprudence and provides the appropriate balance between employer's rights and employees' privileges in the context of the legislative provisions.
Reasonable expectations language has appeared in a number of decisions dealing with the freeze section. See, for example, Corporation of the Town of Petrolia, supra; Scarborough Centenary Hospital, supra; Oshawa General Hospital, [supra], York-Finch Hospital, supra; St. Mary's Hospital, [1979] OLRB Rep. Aug. 795 (Decision omitted from [1979] OLRB Rep. March); AES Data Limited [1979] OLRB Rep. May 368. In the latter case, for example, the Board found that the employer was entitled to re-assign job functions since the employees could not reasonably expect to continue performing their jobs in exactly the same way despite changes in the mode of production and market conditions. Thus, in the Board's view, the reasonable expectations of employees as the appropriate measure of the employees' privileges which are protected by the freeze is a common thread running through the earlier decisions. In the instant case, the Board is expressly articulating the test.
The reasonable expectations approach clearly incorporates the practice of the employer in managing the operation. The standard is an objective one: what would a reasonable employee expect to constitute his or her privileges (or, benefits, to use a term often found in the jurisprudence) in the specific circumstances of that employer. The reasonable expectations test, though, must not be unduly narrow or mechanical given that some types of management decision (e.g., contracting out, workforce reorganization) would not be expected to occur everyday. Thus, where a pattern of contracting out is found, it is sensible to infer that an employee would reasonable expect such an occurrence during the freeze. The Board in Simpsons [Limited, [1985] OLRB Rep. Mar. 469], supra, although the cleaning was contracted out before the company itself took over that operation, did not conclude there was such a pattern.
The reasonable expectations approach also integrates those cases which affirm the right of the employer to implement programmes during the freeze where such programs have been adopted prior to the freeze and communicated (expressly or implicitly) to the employees prior to the onset of the freeze; Le Patro d'Ottawa, [1983] OLRB Rep. Feb. 244. The Board considers that the upholding of the right to contract out during the freeze period in Corporation of the Town of Petrolia, supra, does not establish an unrestricted right of the employer to contract out work during the freeze but, rather, recognizes that the employer in that case had embarked on a programme leading to the contracting out well in advance of the freeze and that the employees would reasonably have been aware of his programme in the circumstances (see par. 20, in particular).
Finally, the lay-off cases are consonant with the reasonable expectations approach. Very few, if any, work forces are entirely static; fluctuations in the size of the staff complement and its composition are the norm. Employers are generally expected to respond to changing economic conditions through the hiring, termination and attrition of employees. It is in this sense that it is reasonable for employees to expect an employer to respond to a significant downturn in the business with layoffs (or terminations) even where such layoffs are resorted to for the first time during the freeze. The magnitude of the layoffs, of course, must be proportional or relative to the severity of the economic circumstances. Economic justification must be proven where relied on and there must be an absence of anti-union animus. It must also be stressed that, while the expectation of layoffs does not initially depend on the specific history of the employer's operation, there might well be specific evidence with respect to that employer which would negate the otherwise usual reasonable expectation of layoffs in response to an economic downturn.
The reasonable expectations approach also distinguishes between layoffs and contracting out. Where there was a pattern of contracting out, of course, there would be no violation of section 79 where work was contracted out during the freeze. However, in the Board's opinion, while an employee would reasonabl[y] expect a layoff where there was no demand, i.e., where there was an economic downturn, an employee would not reasonably expect that the work would continue to be performed for the benefit of the employer's operation but through contracting out. This is not to say that the employer does not have the right to contract out work during non-freeze periods, except as limited by a collective agreement. During the freeze, however, and unless there is a practice of contracting out, the employer's right to contract out is limited by the employees' privilege of performing the work if the work is to be performed for the benefit of the employer's operation. Contracting out is merely one of the ways an employer might otherwise increase productivity or efficiency which is caught by the freeze; reducing wages, instituting parking fees, ignoring its policy manual are other means of achieving such goals which are proscribed by the statutory provision.
While there may be little controversy regarding the Board's approach to freeze cases it is often not a simple matter to apply the law to particular cases. It is, however, of paramount importance to bear in mind the purpose of the freeze provisions which the Board has recently in George St. L. McCall Chronic Care Wing of the Queensway General Hospital, supra, described as follows (at paragraph 12):
…..The purpose of these provisions is to provide a fixed and stable point of departure for collective bargaining, and to thereby facilitate the collective bargaining process, by maintaining the terms and conditions of employment for bargaining unit employees in the pattern which existed at the time the freeze provisions came into effect. This ensures a fixed basis for negotiations and precludes any unilateral alteration to the status quo which might give one party an unfair advantage in bargaining or for propaganda purposes.
Having considered the evidence, the submissions of the parties and the jurisprudence, we are satisfied that the employer's policy change in this case is contrary to the freeze provisions of the Act.
In arriving at this conclusion we are essentially persuaded that the change in question to a policy in place for at least five years, a change which has impact on the remuneration of employees and which entirely eliminates any possibility of commissions in the relevant circumstances is not one within the reasonable expectations of the employees. We have considered, as the employer urged us to do, various provisions of the "standard" employment contracts entered into evidence but have found the relevant provisions too vague and general in nature to support the company's claim that the policy change is one contemplated by those provisions or is otherwise one within the reasonable expectations of the employees. In this respect it is useful to compare the provisions relied on by the employer with those that specifically deal with levels of commission rates. While the former do contemplate the deduction of monies from commissions in certain circumstances, they do not contemplate the same pattern of change associated with commission rates which are explicitly described as "commissions... at such rates as may be established by the Brick from time to time". Consistent with this is the fact that the exhibit titled Sales Policies and Procedures explicitly states that "commission rates vary from one to ten percent". Neither do we find those portions of the standard contracts dealing with observance of policies regarding the conduct of sales representatives to be of assistance. Our conclusion in this regard is fortified by the fact that although numerous examples of changes to commission rates were filed in evidences we were not pointed to a single example (either prior to or during the freeze) where the payment of commissions was entirely eliminated in any particular circumstances.
In short, we are persuaded that the change in question is not one which was within the reasonable expectations of the employees. While the employer may have been within its rights to have made the change in question prior to the onset of the freeze (for a somewhat analogous case involving the withdrawal of parking privileges see Scarborough Centenary Hospital Association, [1978] OLRB Rep. July 679), we are satisfied and hereby declare that the implementation of the revised policy on sales commissions on returns and account corrections was in violation of section 81(1) of the Act.
While we have found that the respondent has violated the Act we also find it appropriate to observe that no improper motive or anti-union animus has been alleged or found in this case.
With respect to remedy, in view of the circumstances, including the fact that it would appear that the freeze period had expired even prior to the hearing in this matter, we find it appropriate to limit relief to a direction, which we hereby make, that the respondent fully compensate all bargaining unit members for any and all losses they may have suffered as a result of the respondent's violation of the Act.
The Board will remain seized in the event the parties encounter any difficulties in implementing our decision.