How the End of Hero Pay Changed Canadian Law

It’s been just over two years since Canada’s biggest grocery store chains declared the pandemic over and canceled the premium they’d been paying their front-line staff for all of three months.

MP Nathaniel Erksine-Smith

Nathaniel Erskine-Smith (HoC)

On 13 June 2020, according to the Financial Post:

…Canada’s top three grocery chains simultaneously cancelled their $2-per-hour “hero pay” bonuses for front-line workers — the store clerks and warehouse staff who continued showing up to keep supermarkets running despite lockdowns, uncertainty, and widespread absenteeism in the first few months of the COVID-19 pandemic.

Can I just note that “widespread absenteeism” is a very Financial Post way of describing people who were in quarantine, sick or afraid of getting sick in the days before vaccines?

The article is about Liberal MP Nathaniel Erskine-Smith (Beaches-East York), who heard about this simultaneous wage cut, got angry about it and decided to take action:

On June 15, 2020, Erskine-Smith’s motion asked the House of Commons industry committee to summon grocery executives to explain why they cut the bonuses and “how those decisions are consistent with competition laws.”

On 10 July 2020, representatives from the three largest chains—Sobeys, Loblaw and Metro—appeared (virtually) before the committee and readers, I tried to go back and watch them testify but they were unbearable.

I made it through Sobeys President and CEO Michael Medline’s opening remarks, in which he recited a potted history of the retail chain (which he joined in 2017), referred to Sobeys employees repeatedly as “teammates” and declared himself “blessed” to live in a country as great as Canada. He also whined about Sobeys, Metro and Loblaw getting called onto the carpet when two major American-owned retailers (whose names he did not utter but who are obviously Walmart and Amazon) did not. (I remember this defense strategy from my time as a child. I also remember it rarely worked.)

I started watching Sarah Davis, president of Loblaw Companies Ltd, who referred to Loblaw employees as “colleagues,” and talked about their wonderful efforts in the early days of the pandemic, choosing to interpret Canadians’ appreciation of the work of front-line retail workers as their “new appreciation for the industry we work in.” (Davis “retired” from Loblaw less than a year later, in May 2021. She now sits on the boards of Victoria’s Secret and Pet Valu.)

Finally, I switched from the video to the transcripts, which were somehow less painful, and read the opening remarks of Eric La Flèche, president of and CEO of Metro Inc, who at least referred to his employees as employees, but otherwise sang a very similar song.

All three initially swore up and down there had been no collaboration or collusion in the decision to cut hero pay. Each insisted they’d made the decision independently based on that fact that—and this makes for rather rich reading two years later—the “peak” of the pandemic had passed.

But under questioning, as the FP noted:

Loblaw president Sarah Davis said she sent a “courtesy email” to let competitors know about her decision ahead of time. Metro CEO Eric La Flèche said he called executives at competing chains trying to get information about when they planned on cutting the bonuses. All three companies stressed that they made their decisions on hero pay independently, and denied any wrongdoing.

These are, after all, the same grocery chains that remain under investigation by Canada’s Competition Bureau over allegations they overcharged customers for bread to the tune of an estimated $5 billion over 16 years. (Loblaw made a deal with the bureau in 2017 to avoid criminal charges. Sobeys and Metro continue to proclaim their innocence. In 2019, a Quebec Superior Court Justice authorized a class action lawsuit against a group of retailers including Loblaw, Metro and Sobeys and in January 2022, a similar suit was authorized in Ontario. None of the allegations has been proven in court and the Competition Bureau has not laid any charges to date.)

 

Banners

Before we go any further, I think it’s worth remembering just how concentrated Canada’s retail industry is. I’ve listed the various “banners” associated with each company and bolded the ones found here in Cape Breton.

LOBLAW

Loblaw Companies Ltd is a subsidiary of George Weston Limited headquartered in Brampton, Ontario. It operates more than 2,400 stores across Canada under the following banners:

  • Loblaws
  • Atlantic Superstore
  • Shoppers Drug Mart
  • No Frills
  • Dominion
  • Zehrs
  • Your Independent Grocer
  • Provigo
  • Fortinos
  • Independent City Market
  • Freshmart
  • Valu-mart
  • ARZ Fine Foods
  • Real Canadian Wholesale Club
  • T&T Supermarket
  • Real Canadian Liquorstore,
  • Real Canadian Superstore
  • Maxi
  • Extra Foods
  • Pharmaprix

 

EMPIRE (SOBEYS)

Headquartered in Stellarton, NS, Empire owns 100% of Sobeys Inc which operates 1,547 retail stores across the country under the following banners:

  • Sobeys
  • Foodland
  • Needs Convenience
  • Lawtons Drugs
  • Cash & Carry
  • IGA Extra
  • Safeway
  • Thrifty Foods
  • IGA
  • Marché Bonichoix
  • Les Marches Tradition
  • Fresh Co
  • Price Chopper
  • Rachelle-Béry
  • Bonisoir
  • Sobeys Liquor

 

METRO

Montreal-based Metro operates or services of network of some 950 food stores and 650 drug stores in Quebec and Ontario under the following banners:

  • Metro
  • Metro Plus
  • Super C
  • Food Basics
  • Marché Richelieu
  • Les 5 Saisons
  • Marché AMI
  • Servi Express
  • Dépanneurs Gem
  • Jean Coutu
  • Brunet
  • Metro Pharmacy
  • Food Basics Pharmacy

 

WALMART

Walmart (and I’m adding this just FYI) operates 408 retail outlets in Canada: 343 Walmart Supercentres and 65 Walmart Discount Stores.

 

‘Temporary pride’

MP Michelle Rempel Garner

Michelle Rempel Garner

The three grocery chain executives admitted some other things under questioning by members of the industry committee, like when Conservative MP Michelle Rempel Garner (Calgary Nose Hill), having established that Q1 2020 was the period in which the country was panic buying and the grocery store was one of the few places to spend money, asked Davis:

For the record, you had an increase of $42 million in net earnings from Q1 2020 as compared to Q1 2019. Is that correct?

To which Davis replied:

 That sounds about right.

The two subsequently had this exchange:

Rempel Garner: You also said that the reason for the increase in wages was that you were proud of your employees. Was that a correct characterization of your statement?

Davis: Yes, absolutely proud, and also for the extenuating situations they were working in….

Rempel Garner: Was the decrease in their wages because you are less proud of them now?

Davis: The wages were not decreased. We just went back to where they were before. As I’ve highlighted, it was a temporary premium and they understood that.

Rempel Garner: So…temporary pride, then, perhaps.

I have never been a Michelle Rempel Garner fan, but credit where credit is due, that was well played. And a little later, when Medline started arguing with Erksine-Smith instead of answering his questions, Rempel Garner raised a point of order:

 I’d just like to point out to you, Madam Chair, and perhaps to our witnesses here, that when a member is questioning witnesses, it is their time. If one would like to argue with a member of Parliament, they should put their name on a ballot to join the committee.

Touché!

 

Competition Bureau

Having established the three chains had communicated with each other prior to canceling the hero pay, Erksine-Smith had hoped Canada’s Competition Bureau would investigate the issue, but it didn’t. As the FP reports:

In a letter to Erskine-Smith in 2020, Competition Commissioner Matthew Boswell explained that the Competition Act did not consider it to be a criminal offence when employers collude to fix wages or agree not to hire each other’s staff — known as “no-poach agreements.”

The paper goes on to explain:

That’s because, at least in the eyes of the law at the time, collusion between businesses to lower the cost of inputs isn’t always a bad thing for consumers. If, for example, independents pool their resources to get a deal on ingredients, then their customers potentially benefit from lower retail prices.

Even the Financial Post sounds like it’s struggling to swallow that.

Stymied by the Competition Bureau, the House of Commons industry committee in 2021 asked the government to add wage-fixing and no-poach agreements to the list of criminal offenses.

And now we get to the point of this story (I have well and truly buried the lede today, folks): the government did.

As the FP explains:

The Liberals tucked a series of Competition Act amendments into its spring budget bill. And that bill received royal assent on June 23, including a change that will criminalize wage-fixing and no-poach agreements. That amendment comes into effect in June, 2023.

The paper turns to a Toronto competition lawyer, Michael Kilby, for comment and he says the new rules will “seriously change the way he advises employers on labour issues”:

Before, he would have told clients that the bureau can only pursue wage-fixing in civil cases, and even then “there’s no real track record of them doing so and there are no real penalties associated with them doing that.” Now, he said, employers convicted of wage-fixing or no-poach agreements could face unlimited fines, jail time, and class action lawsuits.

(I love how matter-of-fact he is about having previously advised clients to go ahead and fix wages.)

The FP also quoted Vass Bednar, an “outspoken advocate for competition reform in Canada,” which is how I found out about this issue, because I subscribe to Bednar’s Regs to Riches newsletter.

Bednar actually spoke to Erksine-Smith about the wage-fixing amendment in this episode of his Uncommons podcast, situating it within the bigger picture of Canadian competition reform. The short version is that making it illegal for companies to fix wages is a step in the right direction, but there’s a lot more to be done.

Equally, there’s a lot more to be written, but that’s all I have time for this week.