Supreme Court Reviews Division of Powers in Labour & Employment Law

Back when I practiced law for a living, some of my favorite cases involved sorting out whether provincial or federal labour & employment laws applied. I remember working on a case in B.C. that involved ‘water taxis’ that carried shipping employees to and from their boats. Is that work ‘integral to the federal undertaking of shipping’? If so, the water taxi drivers were covered by the Federal Canada Labour Code, otherwise they were governed by B.C. provincial legislation.  I also litigated the question of whether the people who answer the phones when shoppers call into The Shopping Network were federally regulated because they worked for a television channel.
These cases are great fun for lawyers, but trying to explain the law to clients is less fun. The ‘derivative jurisdiction” cases can be confounding to explain to non-lawyers. Last week, the Supreme Court of Canada revisited this law in a case called Tessier Ltee v. Quebec de la sante et da law securite du travail.  It’s a good case to use to provide a quick summary of the law of division of powers.
Introduction to the Issue
We need to know whether provincial laws or federal (Ottawa) laws apply to an employment relationship.  The issue can be complex because the Canadian Constitution Act, which defines the division of powers, doesn’t assign ’employment’ expressly to either the Feds or the provinces. Section 91 of the Constitution tells us what the Feds have power over, and Section 92 list provincial powers. For some workplaces, these sections provide the answer.  For example, since Section 91 says that the Feds have jurisdiction over banking, postal services, and extra-provincial or international navigation and shipping, employers that work exclusively in these industries are governed by Federal law.  But it becomes less clear what jurisdiction applies to many other workplaces not directly listed.

In a 1925 decision called Toronto Electric Commissioners v. Snider, it was ruled that legislation relating to labour and employment law fell ‘presumptively’ within the jurisdiction of provinces under the Section 92(13) power, “property and civil rights”. Thirty years later, in a case called Reference re Industrial Relations and Disputes Investigation Act [the Stevedores Reference), the Supreme Court clarified the law by finding that  provincial laws apply to a business, unless:
1.   The business was in an industry directly assigned to Federal authority in Section 91 (i.e. banking, extra-provincial or international shipping, postal, etc);
2.   The employees are employed by the Federal government;  or
3.   The employees at issue performed work that was ‘integral to a federal undertaking’.
This latter situation is the ‘derivative jurisdiction’ I mentioned above, and it has been the source of much litigation over the years.  How do we know when a business is ‘integral to a federal undertaking’?  Are airline baggage people at Pearson Airport integral to the federal undertaking of airline navigation?  Are custodians who clean the airports?  How about workers who repair runways, or do the security screening?

Facts in Tessier Ltee
Tessier was seeking to avoid a provincial health and safety statute that assessed it a fee, so it argued it was governed by Federal jurisdiction.  Tessier is a heavy equipment rental company operating in Quebec, which would presumptively fall within provincial jurisdiction. However, in 2005-06, approximately 14% of its revenue derived from performing stevedoring services (loading and unloading ships).  Based on this, Tessier argued it was Federal, since stevedoring is integral to the Federal undertaking of shipping.
Issue:   Is Tessier federally regulated because 14% of its work involved performing stevedoring services for federally regulated shipping companies?
Supreme Court of Canada:   No.
There are three ways that the derivative jurisdiction test can render an otherwise provincial company a federally regulated one.

“First, … federal labour regulation may be justified when the services provided to the federal undertaking form the exclusive or principal part of the related work’s activities (Stevedores Reference; Letter Carriersí Union of Canada).”
“Second, this Court has recognized that federal labour regulation may be justified when the services provided to the federal undertaking are performed by employees who form a functionally discrete unit that can be constitutionally characterized separately from the rest of the related operation. In Northern Telecom 2, for example, the installers were functionally independent of the rest of Telecom.”  That case involved a distinct unit of NT employees who performed vital installation and service work for Bell Canada, a federally regulated entity.
This case represented a third scenario:  where employees perform work that is vital to a federal undertaking, but the employees performing that work do not form a distinct unit within the business.  In that situation, the Court said, the employees would not fall under federal jurisdiction “if the work represents an insignificant part of the employees’ time or is a minor aspect of the essential ongoing nature of the operation”.

In this case, only a small portion (14%) of Tessier’s business involved performing stevedoring services to federal undertakings, and the employees who performed this work did not represent a distinct unit within Tessier.  Those employees were fully integrated into Tessier’s workforce–one day they performed stevedoring services, another day they performed work that was clearly provincial in nature.
Therefore Tessier was governed by provincial labour and employment laws.

Issues for Consideration
Which of the following employers would be governed by Federal laws?
A mechanics’ garage whose employees spend 25% of their time repairing trucks owned by a federally regulated national trucking company, and 75% of their time repairing cars dropped off by the public?
A security company with two divisions: (1) Home security systems; and (2) Banking security systems, which includes guarding the movement of cash to and from ATMs owned by federally regulated banks?  Would it matter if the employer assigns employees to one division only, as opposed to moving employees around each day?
Can you see how these issues can become complicated?  Fun stuff.