Executive Summary: Key Legal and Evidentiary Issues

• Whether Sobeys and its franchisees could legally be declared a common employer under section 38 of the Labour Relations Code.

• The degree of control exercised by Sobeys over its franchisee operations and labour relations.

• Validity of the Labour Relations Board’s reasoning and application of precedent, especially the Shoppers and White Spot decisions.

• Whether the Board improperly failed to consider inter-franchisee control as a legal requirement.

• The appropriateness of maintaining a single province-wide bargaining structure post-franchising.

• Whether the Labour Relations Board’s decision was patently unreasonable and subject to judicial intervention.

Facts and outcome of the case

The petitioner was one of several franchisees operating FreshCo stores previously owned by Sobeys Capital Incorporated. These stores had originally been part of a province-wide collective agreement between Sobeys and the United Food and Commercial Workers International Union, Local 1518. After Sobeys converted and franchised many of its Safeway stores to FreshCo, it attempted to sever its obligations under the collective agreement, arguing that labour relations matters should now be directed to the independent franchisees.

The Union applied to the Labour Relations Board under section 38 of the Labour Relations Code, seeking a declaration that Sobeys and its franchisees were a single “common employer.” The Board granted the declaration, reasoning that Sobeys maintained substantial control over critical aspects of the franchisees’ operations—including financial, operational, and labour practices—even after the stores were franchised. It concluded that a single bargaining unit continued to serve an important labour relations purpose and preserved the structure imposed by an earlier arbitration award known as the Ready Award.

Sobeys and the franchisees sought judicial review, arguing primarily that the Board erred by failing to find any common control among the franchisees themselves. They relied on precedent from Shoppers Drug Mart, asserting that without inter-franchisee control, a group common employer designation was improper. They also claimed that the Board gave excessive weight to labour relations purposes over the statutory requirement of common control.

Justice Marzari of the B.C. Supreme Court rejected these arguments. The Court found the Labour Relations Board’s decision to be within its jurisdiction and expertise, and not patently unreasonable. It held that the Board appropriately applied section 38, found substantial control by Sobeys over each franchisee, and correctly interpreted the law to mean that control among franchisees was not required. The Board was also entitled to prioritize preserving the existing bargaining structure to prevent erosion of unionized employees’ rights.

Accordingly, the judicial review was dismissed. The Union was declared the prevailing party, and costs were awarded against Sobeys and the franchisees, although the specific amount was not fixed in the decision.