Should big box retailers be allowed to stay open while other businesses are forced to close?
In response to COVID-19, the Ontario government enacted Rules for Areas in Stage 1, O. Reg. 82/20 under the Reopening Ontario (A Flexible Response to COVID-19) Act, 2020 (“ROA”), a Regulation restricting the operation of retail businesses in regions designated as being under Stage 1 (i.e., the parts of Ontario with the highest rates of COVID-19). Such businesses are to be closed unless they are specifically listed in Schedule 2 of the Regulation.
Hudson’s Bay (“HB”) challenged s. 2(1)3 of Schedule 2 of the Regulation—which provides that “discount and big box retailers selling groceries” are permitted to open—on the basis that the Regulation is ultra vires the ROA. HB argued that this provision drew an irrational distinction between HB stores and stores such as Walmart because, other than selling groceries, the types of merchandise both stores sell is essentially the same. The distinction allowed stores that sell the same types of products as HB to continue selling those products only because they also sell groceries. Without this distinction, HB stores would also be allowed to open.
HB argued that it had to lay off over 3,000 employees since the lockdown began, and anticipated significant economic harm resulting from the closures given that the December shopping season usually represents 15% to 20% of its sales. It also argued that there was no evidence that COVID-19 was more likely to be transmitted in its stores than in the other retail stores that were allowed to remain open.
Parties who challenge regulations as ultra vires bear the onus of demonstrating that the regulations are invalid. They must demonstrate that the regulations are inconsistent with the objective of the enabling statute or the scope of the statutory mandate. Assessing whether a regulation is ultra vires is a two-step process. The first step is to determine the purpose and scope of the authority under the enabling statute. The second step is to assess whether the regulation is authorized by the statute, including whether it falls within its purposes. It would take an “egregious” case to strike a regulation down as ultra vires.
The Regulation was originally made under the Emergency Management and Civil Protection Act (“EMCPA”). Once the Premier of Ontario declared a state of emergency in response to COVID-19, EMCPA gave the Lieutenant Governor in Council (“LG”) significant powers to make orders that the LG believes are necessary and essential in the circumstances to prevent, reduce or mitigate serious harm to persons or substantial damage to property (including the power to close any business). When the ROA came into force on July 24, 2020, it provided that all orders made under the EMCPA that addressed the pandemic would continue, including the Regulation.
The overall purpose of the ROA is to provide a flexible approach to balancing the health and safety of Ontarians during the pandemic against the province’s economic and business interests. The Regulation falls within a scheme that allows for different regions of the province to be under different restrictions, depending on the severity of the pandemic in a particular region. The Regulation imposes more restrictive closures in those areas that are more affected by COVID-19.
The listed retailers allowed to open under s. 2 of Schedule 2 offer goods that are necessary, such as groceries and pharmaceuticals. The inclusion of “discount and big box retailers selling groceries” is not about making items such as clothes and furniture available to members of the public. Rather, it is about giving members of the public access to additional retail venues through which to buy necessary goods like groceries and pharmaceuticals. While the restriction may be overly inclusive in the sense that it allows people to go to certain types of retail stores in Stage 1 areas to buy more than necessary goods, this does not mean that the provision does not fall within the purposes of the ROA.
The operation of the Regulation and its effect may seem unfair to HB and other retailers that do not sell groceries, but unfairness is not a legal ground to challenge the Regulation. Most of the exempt businesses listed in Schedule 2 are tied in some way to what could reasonably be considered the provision of essential goods or services.
HB’s evidence about whether the continued closure of its stores is effective, as compared to big box stores or discount stores, is irrelevant. The effectiveness or wisdom of the Regulation is irrelevant. It is not the role of the courts to decide whether regulations would achieve their goals or fix the historical problem addressed by the regulations. The Court concluded that s. 2(1)3, Schedule 2 of the Regulation is intra vires and dismissed HB’s application for judicial review.
Counsel: Jonathan C. Lisus, Rahool P. Agarwal, James Renihan, Zain Naqi and Carter Liebzeit of Lax O’Sullivan Lisus Gottlieb LLP for the Applicant and Richard Ogden, Heather McIvor and Domenico Polla for the Respondent.
Judges: Penny, Emery and Favreau JJ.