Under Canadian labour law employersare required to deduct dues for all employees covered under a collective agreement regardless of whether or not the individual wishes to join the union. This is true in both federal jurisdiction and most provincial jurisdictions). This is known as the Rand Formula named after Supreme Court Justice Ivan Rand who ruled in an interest arbitration case between Ford Motor Company and the then United Autoworkers of America (today known as Unifor) to settle a strike in 1945-46.
In Canada a unionized employer is sometimes referred to as a Union Shop. This refers to the fact that the company can hire anyone it wishes to but upon hiring, or after a short probationary period, the employee joins the union and must pay dies through payroll deductions. This deduction is called a mandatory check-off.
The law was developed to prevent employers from refusing to deduct dues. Unions often have difficulty ensuring their members pay dues and the Unions at the time found themselves in financial difficulty and with no leverage.. Moreover, some employees might want to opt out of paying the union even though they enjoy the benefits and pay levels provided for under the collective agreement. The Rand Formula ensures dues are collected from all employees and therefore unions are able to maintain financial stability and viability.
The alternative arrangement in Canada is a “Closed Shop” which is found in maritime industries like stevedoring and in the construction. Under this arrangement when the employer needs staff to complete their work, the employer must hire workers provided by the union (sometimes called the Union hiring Hall). Therefore they must be union members before they are hired on. Hence the name “Closed Shop”. Employers remit Dues to the union along with wages and benefit payments. The union then pays the employee. This arrangement is necessary because an employee typically can have several employers through the course of a year in these industries.
There is a third alternative known as the “Open Shop” where individuals may elect to join the union or not. This is not an option under any Canadian jurisdiction but is found in some U.S. States (under what is known as “Right to Work” legislation) as well as in Australia and in many European countries. At times some Canadian politicians have openly discussed Open Shop legislation but have been met with wide opposition from Unions.