The Rand Formula was named for a provision in a labour relations decision handed down on 29 January 1946 by Justice Ivan Rand of the Supreme Court of Canada. Rand was arbitrating the deadlocked and volatile Windsor Strike at Ford Motor Company in Windsor, Ontario, which had lasted from September to December 1945 — one of the country's largest post-war strikes.
Unions had gained influence during the Second World War, particularly at Canadian manufacturing plants, because of wartime labour shortages and the heightened demand for military products. But when the war ended, soldiers came home, and labour was more available.
In this climate, the United Automobile Workers (UAW) union at the Ford plant in Windsor, fought to hold on to and strengthen the power and influence it had achieved. The main issue in the Ford strike was whether the plant should become a closed union shop (requiring all workers to join the union — the UAW's position) or an open shop (making union membership voluntary — Ford's position).
In his arbitration decision, which was binding on the union and the company, Justice Ivan Rand issued a compromise. He denied the union's demand that the Ford plant become a closed shop. But he also ruled that all workers falling within the bargaining unit — whether they were actual union members or not — must contribute funds in the form of union dues, to pay the union's costs of negotiating and administering the labour contract.
Rand reasoned that while employees should not be compelled to join a union, those who opt out should not get a free ride in terms of enjoying the wages or benefits that resulted from a collective contract. Prior to the ruling, union officers would have to stand at a plant gate or office entry, and collect dues from employees going to work. Not everyone paid. The Formula required the company to deduct fees from employee wages and pass them on to the union in the form of dues.
Despite the compromise, the decision was considered a victory for the UAW in the Windsor case — and a watershed moment in Canadian labour relations — because it had the effect of guaranteeing the union the financial security to thrive and carry out its programs. Although the Formula did not strictly create a closed shop at Ford, the effect was the same.
However, Rand's ruling also placed obligations on the union: the Ford plant had been the site of several illegal, wildcat strikes during the war, and the ruling established financial penalties for workers and the union if they engaged in illegal work stoppages. For employees, these sanctions could consist of daily fines and loss of seniority; for the union, the suspension of union dues.
Adopting the Formula
The Rand Formula, or modifications of it, became a model for labour relations in Canada, adopted in numerous collective agreements in the decades that followed. Some provinces even gave it legal force in provincial labour codes.
The Formula has come under public scrutiny and criticism in recent years. One of the modern arguments against it is that large, sophisticated unions use money collected under the Formula not only to negotiate and administer collective agreements — as was Rand's intent — but to fund an array of programs unrelated to the workplace, from political advocacy to social justice campaigning.
In 1991 the Supreme Court of Canada ruled that such practices were acceptable. It said unions should have the latitude to spend their money as they see fit, and that the Formula — by requiring all contract employees to contribute union dues whether they wished to or not — did not undermine the right of Canadians to freedom of association.