Unifor wins $15 million arbitration over Wescast layoffs and severance dispute
In a significant victory for Unifor, an arbitrator has ruled that Wescast Industries Inc. breached its collective agreement with Unifor, Local 4207, by failing to provide proper notice of a plant closure and withholding severance and termination pay owed to laid-off employees at its Wingham, Ontario casting facility. This decision mandates Wescast to compensate affected employees in accordance with the collective agreement and the Employment Standards Act, 2000, with payments estimated at about $15 million for 200 former workers.
The dispute originated from two grievances filed by the union. The first grievance alleged that Wescast provided inadequate notice of the plant closure, violating the Plant Closure Agreement within the collective agreement. The second grievance contended that Wescast failed to pay severance and termination pay after the 35-week temporary layoff period ended, as required under the Employment Standards Act (ESA).
Wescast, a subsidiary of Bohong Industries Group, has operated in the automotive industry for over a century. In April 2023, Wescast placed employees at its Wingham casting facility (WCW) on temporary layoff and subsequently informed customers that production would be “temporarily suspended” as of July 30, 2023. However, it did not inform employees or the union of this decision until June 12, 2023, during collective bargaining discussions. The employer argued that the shutdown was temporary and that WCW was expected to reopen in 2026 following equipment upgrades. However, the union maintained that the closure effectively amounted to a permanent layoff requiring severance payments under the collective agreement and the ESA.
The arbitrator ruled that Wescast’s failure to provide six months’ notice of the closure, as required by Article 22.08 of the collective agreement, breached the Plant Closure Agreement. The union successfully demonstrated that employees were deprived of critical information needed to make informed decisions about early-exit packages and recall rights. Furthermore, the arbitrator rejected Wescast’s argument that WCW was merely “temporarily closed” and found that the layoff exceeded 35 weeks, triggering the termination and severance pay provisions under the ESA. The Plant Closure Agreement required the employer to provide eight weeks of notice or pay in lieu, plus severance at a rate of 2.4 weeks per year of service. Employees were entitled to severance regardless of whether WCW reopened in the future.
Additionally, the arbitrator examined the interpretation of the Current Programs Commitment within the collective agreement. The employer contended that the term “customer” referred to Wescast’s machining divisions, which could independently decide to terminate production. The arbitrator rejected this view, concluding that “customer” referred to external buyers such as Ford, GM, Volvo, Pierburg, and Borg Warner. Since these customers had not terminated contracts, the arbitrator ruled that Wescast violated the Current Programs Commitment by ceasing production at WCW.
As a remedy, the arbitrator ordered Wescast to pay all outstanding termination and severance pay to employees who elected to abandon recall rights. The payments, calculated according to the Revised Spreadsheet (Exhibit 7.3), must be issued by February 28, 2025, with interest applied from April 12, 2024. Employees who retained recall rights or failed to make an election will have their severance funds held in trust by the Director of Employment Standards. Furthermore, employees who accepted early-exit packages without full disclosure of the plant closure must be compensated for the difference between their severance entitlement and the package received. The employer must also pay severance to employees who declined recall or were otherwise terminated, subject to further resolution between the parties. Post-judgment interest will accrue at 5% per annum if payments are not made on time.
This decision reinforces the importance of adherence to collective agreement obligations regarding notice of closure and severance entitlements. Employers cannot circumvent statutory and contractual severance obligations by labeling a closure as “temporary” when layoffs exceed statutory limits. The arbitrator remains seized of the matter to resolve any outstanding implementation issues, with further hearings scheduled in March 2025 if needed.
https://www.canlii.org/en/on/onla/doc/2025/2025canlii9734/2025canlii9734.html
This decision underscores the critical importance for employers to strictly adhere to the terms outlined in their collective agreements, particularly regarding notice of closure and severance entitlements. Collective agreements are legally binding contracts between employers and unions that set out the terms and conditions of employment, including procedures for layoffs and plant closures.
When an employer fails to provide the required notice of a plant closure, as stipulated in the collective agreement, it deprives employees of essential information needed to make informed decisions about their future. This includes decisions about early-exit packages, recall rights, and other employment opportunities. Proper notice ensures that employees have adequate time to prepare for the closure, seek alternative employment, and understand their entitlements.
Moreover, the decision highlights that employers cannot evade their statutory and contractual obligations by labeling a closure as “temporary” when the duration of layoffs exceeds statutory limits. In this case, the arbitrator found that the layoff period exceeded 35 weeks, which triggered the termination and severance pay provisions under the Employment Standards Act (ESA). This means that even if an employer claims that a closure is temporary, if the layoff period surpasses the statutory threshold, the employer is still required to provide severance and termination pay as mandated by law.
By attempting to circumvent these obligations, employers risk legal challenges and financial penalties. The ruling serves as a reminder that adherence to both collective agreement terms and statutory requirements is non-negotiable. Employers must ensure that they follow proper procedures and provide the necessary compensation to affected employees to avoid disputes and uphold their legal and ethical responsibilities.
