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Only the clearest release will stop a class action: Superior Court of Québec authorizes class action by former employees against Air Canada

class actionOn May 15, 2018, the Superior Court of Québec rendered judgment in Mc Mullen v. Air Canada, authorizing a class action against the airline by former employees working in its operational and overhaul centres. The class action will determine whether Air Canada is liable towards these employees for having reduced the volume of maintenance and overhaul work carried out in Winnipeg, Montreal and Mississauga, which is alleged to have caused the demise of its service provider, Aveos, and resulted in the termination of these employees.

Background

In 1988, Parliament privatised Air Canada by adopting the Air Canada Public Participation Act, RSC 1985, c 35 (4th Supp.) (the “Act”). Paragraph 6(1)(d) of the Act required Air Canada: “to maintain operational and overhaul centres in the City of Winnipeg, the Montreal Urban Community and the City of Mississauga”. In 2003, Air Canada spun off its internal technical services division into a new entity called Air Canada Technical Services, which eventually became Aveos. Despite the creation of this new entity, the unionized workforce performing the maintenance and overhaul work was still formally employed by Air Canada.

In 2009, Aveos and Air Canada reached an agreement to transition these unionized employees from Air Canada to Aveos, which was approved by the Canada Industrial Relations Board in 2011. As a condition of this approval, the Board stipulated that Air Canada would be liable to pay an indemnity to its former employees if Aveos became insolvent before June 30, 2013. As part of the agreement approved by the Board, Air Canada obtained a release from the transitioned employees limiting their rights against Air Canada to the indemnity to be paid if Aveos became insolvent.

The Board’s decision was contested by the union before the Ontario Superior Court of Justice, which dismissed the union’s claim in 2011, concluding that Air Canada was abiding by its obligations under the Act and that in any event the union was precluded by the terms of the release from invoking a violation of the Act.

Aveos filed under the Companies’ Creditors Arrangement Act in March 2012 and ceased operations. The Attorney General of Québec filed proceedings against Air Canada claiming it was violating its obligations under the Act by failing to maintain an operational and overhaul center in Montreal further to Aveos having ceased operations. Both the Superior Court of Québec and the Court of Appeal of Québec agreed with the Attorney General of Québec.

In June 2016, Parliament amended the Act to reduce Air Canada’s obligations, such that going forward Air Canada is only required to “carry out or cause to be carried out aircraft maintenance activities […] in Ontario, Quebec and Manitoba”.

Despite having received the indemnity provided for in the Board’s decision on the transition of his employment from Air Canada to Aveos further to Aveos’ insolvency, and despite being bound by the release provided for therein, Mr. Mc Mullen argues that the former employees have a right of action in damages against Air Canada. This right of action is based on the allegation that Air Canada deliberately infringed the Act by substantially reducing the volume of maintenance and overhaul work it directed to Aveos, causing its insolvency and the termination of its workforce.

Reasons of the Court

The Court dismissed Air Canada’s argument that the class action could not be authorized because of the release. The Court accepted that the release may in fact be fatal to the action on the merits, but concluded that it was not sufficient at the authorization stage. Indeed, the Court highlighted that the Ontario judgment that confirmed that Air Canada was abiding by its obligations under the Act was rendered in 2011, before Air Canada reduced its maintenance and overhaul work in Canada to insignificant levels as of March 2012. The Court relied instead on the conclusions of the Superior Court of Québec in 2013 and the Court of Appeal of Québec in 2015 that Air Canada had in fact violated its obligations under the Act.

As such, while it could be argued that Air Canada was abiding by its obligations when it obtained the release in 2009 and when it was approved in 2011, the Court highlighted that a hearing would have to be held to consider the validity of the release in light of the events that transpired after 2011. In the Court’s view, the validity of the release could be impacted depending on whether Air Canada was acting in good faith and whether it was the effective cause of Aveos’ insolvency. Citing prior case law from the Court of Appeal of Québec that provides that releases can only defeat authorization of class actions when they are clearly applicable, the Court concludes that the situation here does not satisfy this standard.

As such, the Court authorized the class action on the basis that it was arguable that Air Canada had deliberately violated the Act by reducing the volume of work sent to Aveos, knowing that this would cause it to cease operations. The Court also accepted that the former employees had sustained harm that may not have been adequately compensated by the indemnities paid by Air Canada pursuant to the Board’s decision. Finally, the Court also authorized a claim for punitive damages on the basis that Air Canada could be found to have unlawfully and intentionally interfered with its former employees’ rights to personal security, inviolability and dignity.

By Alexandre Fallon and Félix-Antoine Duchesne, Osler

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