Merk: Protection for Whistleblowers

Merk v. International Association of Bridge, Structural, Ornamental and Reinforcing Iron Workers, Local 771, [2005] 3 S.C.R. 425, 2005 SCC 70, an appeal from the Court of Appeal for Saskatchewan, is an older case that deals with labour law “whistleblowing” and the definition of “lawful authority” in relation to the Labour Standards Act, R.S.S. 1978, c. L-1, s. 74.

In the fall of 2000, Bert Royer, a business manager at Local 771, received a Visa credit card for union expenses, which was paid directly by Local 771. Linda Merk, an employee at Local 771, learned that Royer and Charles Gumulcak, two of her immediate supervisors, were committing financial abuses. She claimed that Royer was double charging expenses on the credit card by receiving monetary compensation for expenses that were already paid by Local 771 on credit. She also alleged that Gumulcak was collecting unauthorized expenses.

Merk complained to Royer about the financial abuse, but was met with anger and resistance. Following this, she and several other union members wrote to Joseph Hunt, the General President of the International Union of Iron Workers in Washington, outlining the situation and complaining that the situation was not being remedied according to the union constitution. A union investigator was assigned by Hunt to the situation and spoke with the parties involved. The investigator determined that the by-laws of Local 771 did not specifically prohibit “double-dipping” expensing and called for the by-laws to be rewritten. After learning of this “report”, the Local 771 executive met in late September, 2001, and authorized the termination of Merk’s employment; however, her supervisors chose not to act on this for several weeks and she was left uninformed during this time period.

After waiting for a response to the investigation, Merk wrote to Joseph Hunt on October 19, 2001 outlining her complaints. On November 5, 2001, she received a letter terminating her employment for the “number of matters occurring during your employment…as well as you (Merk) forwarding your 19th of October 2001 correspondence to Joseph Hunt”. Merk alleges that she was terminated as office manager and bookkeeper of Local 771 because she “blew the whistle on alleged financial abuses committed by her immediate supervisors, Gumulcak and Royer”.

According to the Labour Standards Act, s. 74(a), “no employer shall discharge or threaten to discharge or in any manner discriminate against an employee because the employee: has reported or proposed to report to a lawful authority any activity that is or is likely to result in an offence pursuant to an Act or an Act of the Parliament of Canada”. At trial, the judge found that Merk was fired because she complained about the expenditures of Royer and that these expenditures were likely to result in an offence. The judge thought, however, that a “lawful authority” must be a person or institution authorized by law to investigate offences, rather than a private entity such as a union. In this case, because Merk complained to an internal authority, she would not be afforded the protection of s. 74 because the union, as a private entity, was not considered a “lawful authority”. The Queen’s Bench judge at Summary Conviction Appeal allowed the appeal on unrelated grounds, but agreed with the trial judge’s definition of “lawful authority”. At the Court of Appeal, the appeal was allowed and the interpretation of “lawful authority” was narrowed to one who is capable of exercising authority. This definition did not include the union because although they can enforce their own bylaws, they cannot address this “as an offence”.

At the SCC, the appeal was allowed and a conviction was entered. Applying a “contextual and purposive approach” to the legislation, “lawful authority” was interpreted to include the police, agents of the state authorized to address activity complained of “as an offence”, as well as individuals within the employer organization who possess lawful authority over the employee(s) who are named in the complaint, or over the activity that will, or will likely, result in the offence. Read in its grammatical and ordinary sense, the SCC’s interpretation of “lawful authority” fits the scheme and object of the Act, which is essentially, employee protection legislation. The object is to “reconcile an employee’s duty of loyalty to his or her employer with the public interest in the suppression of unlawful authority”. The SCC, using other authorities, including Re Ministry of Attorney-General Corrections Branch and British Columbia Government Employees’ Union (1981), 3 L.A.C. (3d) 140, explained that the “up the ladder” approach, which requires that the employee first exhaust all internal “whistle-blowing” means before “going public”, has been favoured by many courts and labour arbitrators. If an employee fails to attempt to resolve the matter internally, courts and labour arbitrators condemn this behaviour as prima facie disloyal and inappropriate. The SCC explained that the narrow interpretation of “lawful authority” adopted by the Saskatchewan Court of Appeal discourages internal resolution of matters. While in certain circumstances, an employee may feel the need to bypass the internal mechanisms (ie. in fear that their employer may destroy evidence), they should not be required to do so. Rather, a “lawful authority may be found inside as well as outside the employer organization, and if an employee chooses to go the inside route and suffers retaliation, the protection of s. 74 is still available”.

This is an important decision for employees as it broadens the interpretation of “lawful authority” and offers increased protection to workers who face whistle-blowing situations. By endorsing an “up the ladder” approach, the SCC not only encourages greater efficiency by reducing the number of claims public authorities must deal with and, in effect, saving public tax dollars that otherwise would have been spent investigating some of these claims, but the SCC also provides a greater voice to employees within companies, allowing them to speak out about activity that they believe is unlawful without fear of retaliation, such as termination. By providing workers with increased whistle-blowing protection, the corruption and unlawful activities that occur behind closed doors in some companies can hopefully be reduced. It should be noted that about a year following the Court of Appeal decision, the Saskatchewan legislature amended s. 74 to specifically include “up the ladder” supervisors as “lawful authority”.