SCC Addresses Test for "Federal Undertakings" under the Constitution

When do parties qualify as federal transportation undertakings for purpose of s. 92(10) of the Constitution Act, 1867? This question arose in Tessier v. Québec (Commission de la santé et sécurité du travail), the Supreme Court of Canada (“SCC”) decision rendered on May 17, 2012.

This case differs from those previously decided by the SCC, in that it is the first time the SCC had the opportunity to assess the constitutional implications which arise when the employees performing the work do not form a discrete unit and are instead fully integrated into the related operation.

 

Background

This case arises pursuant to a declaration made by Quebec’s Commission de la santé et de la sécurité du travail (“CSST”) in 2006. The CSST stated that Tessier Ltée (“Tessier”)’s activities fell under provincial jurisdiction. The evidence showed that Tessier Ltée is a heavy equipment rental company that rents out cranes and heavy equipment.  Tessier also engages in intra-provincial road transportation, maintenance, and the repairing of equipment.

Tessier’s rationale for seeking such a declaration is the following: federal undertakings are not subject to Quebec’s occupational health and safety statute, which is administered by the CSST, and financed by contributions based on rates of assessment the CSST imposes on employers under its jurisdiction. Federal undertakings in Quebec, must, however, contribute to the administration of Quebec’s workers’ compensation statute. Therefore, if the CSST classifies a company as being a federal undertaking operating in Quebec, a “particular” rate applies to it. This particular rate excludes any fees that are directed at financing Quebec’s Operational Health and Safety Act.

In 2005‑2006, some of Tessier’s cranes were used for stevedoring, which represented 14% of its overall revenue and 20% of the salaries paid to employees. The stevedoring services were not performed by a discrete unit of employees. These employees were fully integrated into the company’s workforce, and worked interchangeably across the different sectors of the organization. At the relevant time, all of Tessier’s activities took place within the province of Quebec.

Decisions Below

In 2006, Tessier’s parent company first sought a declaration from the CSST that Tessier’s activities fell under federal jurisdiction and that it was not, as a result, subject to the CSST’s general rates. It was argued that Tessier’s stevedoring activities were part of the federal government’s jurisdiction over shipping, with the result being that its employees should be federally regulated. The CSST concluded that Tessier’s activities came under provincial jurisdiction. This conclusion was upheld by the Commission des lésions professionnelles (the “CLP”).

The decision was overturned by the Superior Court on judicial review in 2009.

The Quebec Court of Appeal agreed with the CSST and CLP that provincial regulation applied, based primarily on the findings that stevedoring represented only a minor part of Tessier’s overall operations, that it did not have a special stevedoring division, and that it had not adduced evidence of the nature of its contractual or organizational relationships with the federal shipping companies it serviced.

The Decision

In the Stevedores Reference, the SCC established that the federal government has jurisdiction to regulate employment in two circumstances:

  1. when the employment relates to a work, undertaking, or business within the legislative authority of Parliament; or
  2. when it is an integral part of a federally regulated undertaking, sometimes referred to as derivative jurisdiction.

Following the SCC, a stevedoring work or activity will be subject to federal labour regulation if it is integral to a federal undertaking in a way that justifies imposing exceptional federal jurisdiction. The Stevedores Reference did not establish that a company that does any stevedoring is automatically subject to federal regulation for purposes of labour relations. Parliament will only be justified in regulating these labour relations if the stevedoring activities at issue are an integral part of the extra-provincial transportation by ship contemplated under s. 92(10)(a) and (b).

The SCC then exposes most previous historical decisions on the matter. It restates that there is no simple litmus test. The test is flexible. In applying the derivative jurisdiction approach, one must keep in mind that exceptional federal jurisdiction, “would only be justified when the related operation was functionally connected to the federal undertaking in such an integral way that it lost its distinct provincial character and moved into the federal sphere.”

In addition, the SCC took the view that:

if there is an indivisible, integrated operation, it should not be artificially divided for purposes of constitutional classification. Only if its dominant character is integral to a federal undertaking will a local work or undertaking be federally regulated; otherwise, jurisdiction remains with the province.

 

Since Tessier can only qualify as a federal undertaking derivatively given the evidence, federal jurisdiction is only justified if the federal activity is a significant part of its operation. In this case, only 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.

Given that Tessier’s essential operational nature is local, and that its stevedoring activities, which are integrated with its overall operations, form a relatively minor part of Tessier’s overall operations - which consist of provincially regulated activities - the SCC took the view that Tessier is subject to provincial jurisdiction.

Potential Significance

The Supreme Court’s ruling should be of great interest to the transportation sector, and should also be relevant to businesses engaged in other types of federal undertakings under s. 92(10) of the Constitution Act.

Case Information

Tessier Ltéev. v. Quebec (Commission de la santé et de la sécurité du travail), 2012 SCC 23

Supreme Court Docket: 33935

Decision Date: May 17, 2012

Constitution Act federal jurisdiction federal transportation undertakings stevedoring

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