A B.C. judge has upheld a Labour Relations Board decision that found grocery giant Sobeys Inc. obtains the majority of the profits and exercises “substantial financial control” over its franchised FreshCo grocery stores.
The Aug. 1 ruling represents a win for United Food Commercial Workers International Union, Local 1518, who had challenged the grocer and several franchisees—claiming they had attempted to escape an existing collective bargaining agreement through re-branding.
In 2017, the union represented nearly 5,000 workers at Sobeys’ roughly 60 Safeway stores in B.C. The workers had a 10-year collective agreement that ran until 2023. Part of the agreement required further negotiations with the union if Sobeys sought to open stores under a new name.
That year, the grocer gave the union notice it planned to convert up to a quarter of its existing Safeway stores in Western Canada into stores under the FreshCo banner.
In 2018, the company told the union its planned restructuring would lead the company to close 10 B.C. Safeway stores and terminate the employees who worked there. Sobeys also said five of the stores may reopen as FreshCo locations pending negotiations of the collective agreement.
In negotiations with the union, the grocer sought to create single-store collective bargaining agreements. The dispute ended when an arbiter required a single province-wide agreement for both Safeway and FreshCo stores, in line with the union’s demands.
A year later, Sobeys said it would continue closing several Safeway stores, converting them into FreshCo and other discount banners—this time under a franchise model, according to a recent judicial review. In 2019, Sobeys told the union to direct any labour relations issues to the new owners of the stores.
The union then took Sobeys and five of the franchised stores to the Labour Relations Board, where it sought to maintain the B.C.-wide collective agreement.
In its original decision, the board found Sobeys used contractual arrangements, clearly interdependent operations, and common management to exercise “substantial control” over the FreshCo franchisees. It granted the union’s application and declared Sobeys and the franchisees to be a single employer.
Sobeys challenged the decision before the Labour Relations Board’s reconsideration panel. In a June 26, 2024, decision, the panel re-examined two questions: whether the entities were under common control and direction; and whether there was a labour relations purpose served in making the declaration.
Among other things, Sobeys submitted evidence it said showed the franchisees operate as business competitors with conflicting interests.
Ultimately, however, the reconsideration panel was not persuaded that the board had erred in its original decision and reiterated that Sobeys exercises substantial control over the franchisees’ FreshCo stores.
Sobeys and the franchisees then escalated the dispute to the B.C. Supreme Court.
In her judicial review, Justice Francesca Marzari found the reconsideration panel’s decision was entirely within their expertise. The panel members were “clear and comprehensive” when it set out “a rationale for its decision on the fundamental question of common control” of the companies, wrote the judge in the decision handed down last week but released Tuesday.
Marzari once again rejected arguments that individual franchisees must exercise control over each other to show a group of companies has common control or direction as a single employer.
“This court only interferes with such decisions where the reasoning or result borders on the absurd,” wrote the judge.
Marzari dismissed the application for judicial review and ordered Sobeys and the FreshCo franchisees to pay the union's legal costs.
