Business Law / Litigation

Hudson’s Bay Files Lockdown Lawsuit Against Ontario Government

As the pandemic numbers began to increase in March 2020, the Ontario government reacted by closing or pausing many services and businesses that were deemed ‘non-essential’. At the time, this included most retail stores, some of which continued limited operations by offering curbside pickup, while others were forced to close entirely. This resulted in significant losses for many businesses, causing layoffs and closures across the province. The federal government implemented a new subsidy program intended to assist business owners experiencing a reduction in profits with employee wages during the pandemic, called the Canada Emergency Wage Subsidy. When lockdown restrictions eased, retailers and other non-essential businesses were able to resume business as usual, however, with many Canadians experiencing financial insecurity due to the pandemic, it’s safe to say that retailers continued to be hard hit financially throughout 2020.

When the government announced new province-wide lockdown measures in late December aimed at curbing the rapid increase in new COVID-19 cases, the protocols once again called for a closure of all non-essential retail stores for a period of one month, from December 26th (typically one of the busiest and most profitable shopping days of the year) to at least January 23rd, 2021. With Ontario continuing to see record infection rates, it’s unclear whether this lockdown period will be extended further, particularly in areas with a high concentration of infection rates throughout the Golden Horseshoe region.

Prior to the provincial order, Toronto and Peel Region had been under these lockdown rules for several weeks already, with non-essential stores, services and malls shuttered since November. In response, a coalition of Ontario retailers, including the Hudson’s Bay Company, wrote a letter to the Ford Government arguing against the measures and saying that the move allows big box stores such as Walmart and Costco to thrive, while smaller businesses were suffering.

Which Retailers are Deemed “Essential” in Ontario?

In order to meet the criteria to be considered essential, and therefore remain open during the lockdown, a retailer must fit within one or more of the following categories:

  • Businesses that primarily sell food, beverages and consumer products necessary to maintain households and businesses including:
    • Supermarkets and grocery stores
    • Convenience stores
    • Discount and big box retailers selling groceries
    • Beer and wine and liquor stores
  • Pharmacies
  • Gas stations and other fuel suppliers
  • Vehicle retail, including auto
  • Hardware
  • Safety Supply Stores
  • Garden Centres

These essential businesses are allowed to continue to keep their doors open to the public, even under the province’s most strict lockdown rules. These businesses may continue to sell non-essential products (such as electronics and home decor items) as well as essential products.

When the November and December lockdown measures were announced, HBC filed an application for judicial review of the province’s decision, saying it was unfair and arbitrary and would punish retailers at the most profitable time of year. According to the court filing:

Ontario offered no explanation or justification for this about-face, which excluded HBC while allowing other big-box retailers like Walmart, Costco, and Canadian Tire to remain open and to sell all of their non-essential goods including those sold by HBC and many other closed retailers, large and small.

In a statement, the company said:

On behalf of thousands of large and small retailers in Toronto and Peel, we have been left with no choice but to ask the court to recognize the unfairness of the current situation. The situation is dire and untenable for thousands of retailers, but it’s not too late for the government to make a better decision for Ontario.

Superior Court Dismisses Application While Leaving ‘Wisdom and Efficacy’ of Province’s Decision Open to Question

On December 23, the Superior Court of Justice issued a decision on HBC’s application, ultimately dismissing it. However, the court did side with the retailer on the issue of big box stores being permitted to sell non-essential items to shoppers in addition to essential items such as groceries. The Court noted that it was required only to determine whether the lockdown policies were consistent with the Reopening Ontario Act, which they were. However, the Court did question whether the policies allowing shoppers to access even non-essential items were consistent with the purposes of the lockdown, pointing out that Quebec had limited the scope of these essential businesses to only the essential items, blocking customers from accessing other areas of the stores.

Our business lawyers can advise on how best to protect your business and maintain staffing through this period of uncertainty. Contact GLG LLP in downtown Toronto for efficient and skilled advice on the management of your business. Call the firm at 416-272-7557 or contact them online to schedule a confidential consultation.