Ruling will be based on how many elements of Zellers’ business Target is taking over
A hearing to determine whether Target is a “successor employer” to Zellers is underway in British Columbia. The outcome could determine the future of unionized workers at a Zellers store in the province, and set the pattern for workers at four other unionized Zellers stores in Ontario.
The United Food and Commercial Workers (UFCW) union filed the application earlier this year as a test case. The union claims Target, a retailer based in the United States that is expanding to Canada, is a “successor employer” to Zellers, and thus obligated to continue to employ 120 unionized workers at the Brentwood Mall location in Burnaby, B.C., and to, “honour the wages, benefits and seniority,” they have achieved through collective bargaining.
Target has argued the $1.8-billion acquisition of Zellers leases is a “real estate transaction” only and not the “continuity” of a business. The retailer plans to shut down Zellers stores for six to nine months for renovations before re-launching them as Target outlets starting in spring 2013.
Successor rights do not apply as, “there will be no transfer of Zellers assets, systems, technology, goodwill or employees to Target,” the company said in a statement.
UFCW Canada president Wayne Hanley sees things differently.
“What’s driving it is a desire to be union-free,” he says. “If you look at it from a purely business perspective, you would think the acquisition of more than 100 stores with readily trained staff would be a good thing. To dismiss them to get lower wages is discouraging.”
According to the union, Target employees in the U.S. earn between US$7.49 and US$9.11 an hour, while the average wage for unionized Zellers workers is between $10.25 and $14.42 per hour.
Non-unionized Zellers stores often matched what the union achieved in collective bargaining at unionized stores, adds Kevin Shimmin, UFCW Canada national representative.
“In this regard, a relatively small group of unionized employees in Ontario have often advanced the working conditions of all Zellers workers,” he says.
Successor rights are intended to strike a balance between workers and employers, says George Smith, a fellow in the Queen’s University School of Policy Studies in Kingston, Ont., and labour relations expert.
“There has been some chicanery in the past by employers trying to frustrate collective agreements,” he says. “The law recognizes employees have some rights and deserve protection.”
He is not surprised the UFCW has chosen British Columbia for its test case. Of the 11 labour board jurisdictions in Canada, B.C. has the longest list of “relevant factors” that need to be taken into account when determining whether the deal was, in fact, the sale of a business.
Factors include whether the business, technology and employees have been transferred, as well as things such as trademarks, accounts receivable, fixtures, furnishings, and inventory.
“Normally in a sale, assets or fixtures are purchased. Here nothing is being transferred except a lease,” says Mary Beth Currie, an employment lawyer with the firm Bennett Jones in Toronto. “I don’t understand how the shell of a retail space can be a transfer of business.”
Just because two businesses appear to be similar on the surface does not mean one is a necessarily a “successor” to the other, Currie says.
The British Columbia Labour Relations Board will likely also consider the clientele of both companies, she says. In documents filed with the labour board in B.C., Target appears to be launching this argument. It has stated, “When compared to Target’s guests in the U.S., Zellers attracts a different customer base, older and more likely to be ‘empty nesters.’ Zellers customers are also likely to spend significantly less per visit than a Target guest.”
Recently, Target also announced it is collaborating with high-end retailer Neiman Marcus to offer designer brand name goods.
“That would be part of their argument. It may be the same space, but it’s a different market and different branding,” Currie says. “If Holt Renfrew comes in, are they both retail?”
Where there has been evidence of a sale, lease or transfer of a business, labour boards side with the employees in the bargaining unit, Currie says. In this case, the UFCW will have to provide evidence there is more involved than the transfer of a lease, she says.
“HBC (the parent company of Zellers) was doing this closure regardless,” she says. “It wasn’t as if Target came in and said let’s take over Zellers.”
There are other issues clouding this case, including the fact the majority of Zellers sites are non-unionized, and lower skilled retail workers are often not deemed to be integral to a business in the same way as highly skilled employees might be, Smith says.
“The confusing thing about this for the average Canadian is that this is not about corporate or tax laws. It’s about labour laws,” he says. “They’re not as black and white as corporate law.”
Meanwhile, the union has mounted a public campaign against Target that included a protest at the company’s headquarters in Mississauga, Ont., in mid-August.
“The long-term implications of this is that we’ll have another U.S. retailer with a U.S. mindset,” Hanley says. “And that will have negative impacts for retail workers across the country.”
