Canada: Supreme Court Denies Leave To Appeal In An Action Opposing Remstar Against Former Employees Of TQS In Relation To Severance Payments

The Supreme Court of Canada released on February 2nd its judgment in the case of Remstar Corporation v. Syndicat des employés-es de TQS Inc. (FNC-CSN) et al. dismissing with costs the application of Remstar Corporation ("Remstar") for leave to appeal from the decision of the Federal Court of Appeal (the "FCA"). The FCA had dismissed Remstar's application for judicial review of a reconsideration decision by the Canada Industrial Relations Board (the "CIRB") in which the CIRB had concluded that Remstar was the true employer of the TQS's employees under the Canada Labour Code (the "Code") when it carried out massive layoffs in 2008.

The case dates back to December 2007 when TQS was granted an order for protection under the Companies' Creditors Arrangement Act (the "CCAA"). After the Superior Court of Québec had approved a formal process allowing offers to purchase TQS, Remstar presented an offer to acquire the TQS shares. This offer was approved by the Superior Court on March 10, 2008.

On March 14, 2008, Remstar entered into a temporary management contract with TQS pursuant to which Remstar was vested with extensive powers, the whole pending the approval of the change of control by the Canadian Radio-television and Telecommunications Commission (the "CRTC"). CRTC approval was granted on June 26, 2008.

In the meantime, specifically between the date of the signing of the management contract and the date when, following the CRTC's approval of the change of control, the management contract was terminated, Remstar carried out massive layoffs.

In the name of TQS's former employees, the Syndicat des employés-es de TQS Inc. (FNC-CSN) and other unions of TQS (collectively, the "Syndicat"), asked the CIRB to find that, under section 44 of the Code, the signing of the management contract constituted a sale of TQS's business to Remstar and that, consequently, Remstar had been the true employer of TQS's employees at the time of the layoffs and was bound by the applicable bargaining certificates and collective agreements. Remstar, for its part, argued that at the time of the layoffs, the sale of TQS had not been completed and that Remstar was not the true employer of the TQS employees but merely a temporary manager. Consequently, Remstar had refused, for example, to follow up on the grievances concerning monetary claims and severance packages payable to the former employees of TQS and to respect the collective agreements that were in force.

The CIRB concluded that section 44 of the Code must be broadly and liberally interpreted, its basic purpose being to prevent employees from losing union protection when a business is sold. The CIRB found, both in its initial decision and in its reconsideration decision, that there had been a sale of business within the meaning of section 44 of the Code as of the date of the signing of the management contract. The CIRB found that since that date, Remstar had been the true employer of TQS's employees and had been bound by all the applicable bargaining certificates and collective agreements. This meant that Remstar had an obligation to pay severance packages claimed by the former employees of TQS.

The FCA, in an order dated May 30, 2011, dismissed Remstar's application for judicial review and concluded that the CIRB's decision was not unreasonable. The FCA added that the CCAA and section 44 of the Code have different objectives that are not incompatible and that allow for a harmonious interpretation and application.

The Supreme Court's denial of leave to appeal does not really signify the end of this affair, since Remstar has not yet been ordered to pay any specific amounts. The Syndicat will therefore need to establish whether monetary claims and severance packages payable to the former employees of TQS are well-founded. Nevertheless, given the Supreme Court of Canada's refusal to hear Remstar's appeal, Remstar can no longer allege that it was not the true employer of TQS's employees at the time of the layoffs in order to justify its refusal to pay the severance packages. As is generally the case when the Supreme Court denies or grants leave to appeal, no reasons are given.

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