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Courts will not enforce fines that unions impose on members who cross picket lines

Jurisdiction: - Alberta - Ontario - Saskatchewan

By dismissing two leave to appeal applications on May 7, 2009 - one from Ontario and the other from Alberta - the Supreme Court of Canada has stipulated that the courts in Canada (save for in Saskatchewan) will not enforce fines that unions impose on their members who cross legal picket lines.

In the Ontario case  - Union of Taxation Employees Local 70030 v. Jeffrey Birch et al. - the employees worked for Canada Revenue Agency and were members of the Union of Taxation Employees Local 70030, a component of the Public Sector Alliance of Canada.

During a legal strike in 2004, the employees crossed the picket law on three days so that they could continue to work. Pursuant to the provisions in its constitution and by-laws, the union suspended the employees' union memberships for three years and also fined them each $476, which was equivalent to the total of the employees' gross salary for the three days.

The employees refused to pay their fines, resulting in the union filing a lawsuit against them in Small Claims Court.  The case was subsequently elevated to the Ontario Superior Court as a test case.

The Ontario Superior Court (2007 CanLII 43894 (ON S.C.)) sided with the employees, ruling that:

  • A union's constitution is in the nature of a contract between the union and its members Berry v. Pulley [2002] 2 S.C.R. 493. The contract that is formed is essentially an adhesion contract because, practically speaking, the members have no bargaining power.
  • A union's constitution is subject to the typical rules of interpretation and construction for contracts.
  • The common law rule is that, on the grounds of public policy, the courts will not uphold a penalty clause in a contract unless the provision is a genuine pre-estimate of damages to be incurred in the event of a breach.
  • The fines imposed by the union amounted to a penalty imposed under a contract for the purposes of deterring members of the union from crossing the picket line. The fines did not amount to a reasonable pre-estimate of damages to be incurred in the event of a breach of the union's constitution by crossing the picket line.
  • The provisions in the constitution provide for the imposition of penalty for breach of the constitution, and not for the payment of an amount of money on the happening of an event for legitimate commercial purposes, which would have made it legal.

The court also went on to consider if the penalties imposed would be enforced if the equitable principle of unconscionability was applied. In this regard, the court ruled that the imposition of a fine and penalty equal to the gross income earned by any employee was unconscionable in the circumstances, making the penalty unenforceable even if equitable principles were applied.

Finally, the court concluded that the authority to levy fines in the Union's constitution and the authority to collect the fines imposed in the courts was not authorized by statute (as they are in Saskatchewan).

A 2 to 1 majority of the Ontario Court of Appeal upheld the decision (2008 ONCA 809). In doing so, it disagreed with the lower court in that it ruled that because a union's constitution represented a different kind of contract, a penalty provision in it is not necessarily unenforceable. However, the appeal court agreed with the lower court that the penalty provisions were unconscionable (based on the legal test) and thus unenforceable.

You can read a newspaper report about the case here.