Winnipeg Restaurant Used Federal Emergency Wage Subsidy ‘Scab Loophole’ to Keep Kitchen Open During a Strike

A Winnipeg restaurant confirms it used the Canada Emergency Wage Subsidy to subsidize scab labour during a strike.

Last September, workers at the flagship Stella’s restaurant location in Winnipeg went on strike, citing a “complete lack of respect” from restaurant management. Workers primarily demanded fair scheduling, a small wage increase and respect in the workplace.

In November, Stella’s management shut down the restaurant, claiming that the “union’s demands” and a lack of “financial resources” had made it impossible to continue operating. Although the restaurant placed “for sale” signs in its windows, its kitchen continued to operate for takeout.

Despite suggesting the union’s demands were too costly, Canada Revenue Agency records show Stella’s applied for and received government support through the Canada Emergency Wage Subsidy (CEWS).

Stella’s ownership has now confirmed to PressProgress that it used CEWS to cover the wages of three scab employees who continued to work during the strike.

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“Stella’s properly qualified for the subsidy and the funds were used to pay staff at our struggling locations, including the wages of three employees who opted to continue working,” Stella’s owner Tore Sohlberg told PressProgress.

Sohlberg indicated that the employees were “preparing takeout orders after our Sherbrook Street dining room closed” and that he strongly objects to “the use of the offensive word ‘scabs’ in reference to our valued staff members.”

“Those who chose to continue working during the strike should not be bullied and called names,” Stella’s owner insisted. “We repeatedly stated that the Sherbrook dining room had closed because Stella’s is unable to operate under the demands of the union, especially in a pandemic.”

Sohlberg stressed that his use of CEWS was well within the rules of the program.

“This is exactly what the federal benefits were designed to do, to help Canadian employers who experienced a drop in revenue due to COVID-19, and to prevent job losses,” Sohlberg said. “The subsidy is only granted for actual earnings paid out, not for employees on strike or temporary layoff.”

Jeff Traeger, President of UFCW 832 which represents workers at Stella’s, said that while Sohlberg may be entitled to apply for the wage subsidy, his union is upset to see CEWS being used to subsidize scab labour.

“I think it’s shameful that Stella’s would even apply for a wage subsidy for scabs during a labour dispute, but obviously there was a benefit there and they accessed it,” Traeger told PressProgress.

“The benefit ideally should have not allowed that to happen. Certainly, now that it has happened, it should be corrected so it doesn’t happen again.”

Manitoba Federation of Labour President Kevin Rebeck said he is concerned that using CEWS to subsidize scab labour shifts the balance of power away from workers during a labour dispute.

“The whole point of a strike or lockout is to cause economic hardship and to try to get back to the table and get a deal,” Rebeck told PressProgress.

“When the federal government steps in and gives extra resources to the employer while workers are stuck on strike, it really tips the scales even further.”

Stella’s is not the only company involved in a labour dispute that appears to have received the emergency wage subsidy.

In Ontario, workers at Tropicana Community Services Association of Scarborough were on strike for seven weeks, ending just days before Christmas. Tropicana is listed as a  CEWS recipient, although the company did not respond to requests for comment from PressProgress to clarify how it used its subsidy.

Cessco Fabrication and Engineering, an Alberta-based company where boilermakers have been locked-out since June 2020, faced criticism last month after news that the company received CEWS.

The Alberta Federation of Labour said it suspects “CEWS money is being used to subsidize the use of replacement workers” and called on the federal government to “close this loophole in the CEWS.” Company executives have declined to clarify details about how their wage subsidies were used.

Here’s our news release on the topic: Federal pandemic relief money is supposed to be used to help workers, not hurt them. Close the Cessco loophole! https://t.co/28YTfPawdS

— Gil McGowan (@gilmcgowan) January 14, 2021

Brock University Labour Studies professor Larry Savage told PressProgress that Stella’s use of CEWS is especially problematic since it could allow the employer to extend a labour dispute instead of coming to an agreement.

“In this case, the CEWS loophole helps the employer and undermines the union’s strike by subsidizing the wages of replacement workers,” Savage told PressProgress. “This is a problem because it reduces any incentive the employer has to reach a settlement and literally leaves striking workers in the cold for longer than would otherwise be the case.”

Savage noted that the “lack of federal or provincial anti-scab legislation allows employers to hire scab workers during strikes or lockouts in the first place” and said that outside of a pandemic, “anti-scab legislation would level the playing field during labour disputes.”

“The Federal government should not be in the business of propping up anti-union employers.”

In a statement to PressProgress, a spokesperson for Finance Minister Chrystia Freeland would not specify if using CEWS to hire scab labour is an appropriate use of CEWS, but instead highlighted that the program has penalties to deal with fraud.

“Should these funds have been abused, the penalties can include repayment of the wage subsidy, an additional 25% penalty, and potentially imprisonment in cases of fraud,” the spokesperson said.