Sunday, 25 January 2015

Making Sense of the Division of Powers in Employment Standards Legislation

The regulation of employment standards in Canada is complicated and confusing. Both the federal and provincial governments have the legal ability to regulate employment, but only within their own, separate spheres of influence. The power is divided; not shared. This division of powers can result in confusion and debate as to exactly which set of laws govern the workplace.

The debate is not wholly academic. For example, in Ontario “Family Day”, being the third Monday in February, is prescribed as a public holiday for the purpose of the definition of “public holiday” in section 1 of the Ontario Employment Standards Act, 2000. Family Day is a ‘statutory holiday,’ but only for employees whose employment is subject to that statutory law. Not all employees who work in Ontario are subject to the Ontario Employment Standards Act, 2000; some workers are subject to the provisions of the Canada Labour Code.

Deciding which statute applies to the employment relationship can be a frustrating exercise. More than once employers and employees have found themselves before Canada’s highest court seeking direction as to which law is to apply. The 2009 decision of the Supreme Court of Canada in Consolidated Fastfrate Inc. v. Western Canada Council of Teamsters, [2009] 3 SCR 407, 2009 SCC 53 (CanLII) is a paradigmatic example of such a case.

The purpose of this page is to attempt to provide an overview as to the division of powers and which law may apply. The page should be read with caution, as resolving which law applies can be much more complicated than it first appears. A reading of the Consolidated Fastfrate decision should disabuse anyone of the notion that this is a straightforward issue. Employers and employees uncertain as to which employment standards legislation applies to their situation would be prudent to seek a formal opinion on the subject before acting.

Context: The Constitutional Division of Powers

The source of all this confusion is Canada’s constitution. Drafted in 19th century England, the Constitution Act, 1867 (originally the British North America Act), divided the ability to pass laws into three categories: those over which the federal government would have exclusive power, those over which the provincial governments would have exclusive power, and just for fun, they included some areas over which both governments could have power. The debate concerning into which category a law falls has been a source of constitutional litigation ever since.

In Consolidated Fastfrate, Justice Rothstein wrote the following for the majority of the Supreme Court of Canada:

[27] The basic rule in the division of powers over labour relations is that the provinces have jurisdiction over industries that fall within provincial legislative authority and the federal government has jurisdiction over those that fall within federal legislative authority. However, as the jurisprudence makes clear, federal jurisdiction has been interpreted narrowly in this context. In Toronto Electric Commissioners v. Snider, [1925] A.C. 396, the Judicial Committee of the Privy Council held that the s. 92(13) provincial head of power over “Property and Civil Rights” in the provinces includes labour relations. It is only where a work or undertaking qualifies as federal that provincial jurisdiction is ousted.

[28] …Under s. 92 of the Constitution Act, 1867, therefore, provincial jurisdiction is the norm. Federal jurisdiction extends only to those classes of subjects expressly excepted from the provincial heads of power and those enterprises deemed integral to such federal works and undertakings.

The Supreme Court of Canada has thus been clear on one point: with respect to the issue of labour relations provincial jurisdiction is the norm. However, as with all good rules, there are exceptions.

The Canada Labour Code

As both the constitution and the relevant jurisprudence make plain, there are some industries over which the federal government has jurisdiction to pass laws concerning labour and employment standards.

The statutory law that prescribes employment standards in federally regulated industries is the Canada Labour Code. Importantly, the Canada Labour Code applies to “federal works and undertakings”, which is defined by section 2 of that law as follows:

“federal work, undertaking or business” means any work, undertaking or business that is within the legislative authority of Parliament, including, without restricting the generality of the foregoing,

(a) a work, undertaking or business operated or carried on for or in connection with navigation and shipping, whether inland or maritime, including the operation of ships and transportation by ship anywhere in Canada,

(b) a railway, canal, telegraph or other work or undertaking connecting any province with any other province, or extending beyond the limits of a province,

(c) a line of ships connecting a province with any other province, or extending beyond the limits of a province,

(d) a ferry between any province and any other province or between any province and any country other than Canada,

(e) aerodromes, aircraft or a line of air transportation,

(f) a radio broadcasting station,

(g) a bank or an authorized foreign bank within the meaning of section 2 of the Bank Act,

(h) a work or undertaking that, although wholly situated within a province, is before or after its execution declared by Parliament to be for the general advantage of Canada or for the advantage of two or more of the provinces,

(i) a work, undertaking or business outside the exclusive legislative authority of the legislatures of the provinces, and

(j) a work, undertaking or activity in respect of which federal laws within the meaning of section 2 of the Oceans Act apply pursuant to section 20 of that Act and any regulations made pursuant to paragraph 26(1)(k) of that Act;

While that list might seem rather long, when one considers the spectrum of industries in Canada, it is actually rather narrow.

Works for the General Advantage of Canada

With respect to paragraph 2(h) of the Canada Labour Code and those works or undertakings that, although wholly situated within a province, are declared by Parliament to be for the general advantage of Canada or for the advantage of two or more of the provinces, there are very few such cases. They include the following:

  • Any work involving the navigation of the Ottawa River;
  • The works carried on by the Cape Breton Development Corporation on and after June 15, 1967;
  • The works associated with Bell Canada;
  • Every flour mill, feed mill, feed warehouse and seed cleaning mill;
  • Any work or undertaking constructed for the development, production or use of nuclear energy or for the mining, production, refinement, conversion, enrichment, processing, reprocessing, possession or use of a nuclear substance or for the production, possession or use of prescribed equipment or prescribed information – including those carried on at nuclear power plants owned and operated by Ontario Hydro, see Ontario Hydro v. Ontario (Labour Relations Board), [1993] 3 SCR 327, 1993 CanLII 72 (SCC); and
  • All works of the National Capital Commission.

Works Outside the Exclusive Legislative Authority of the Provinces

With respect to paragraph 2(i) of the Canada Labour Code and those works, undertakings or businesses “outside the exclusive legislative authority of the legislatures of the provinces”, the question is actually a lot more complicated.

The case of Barry's Ltd. v. Fishermen, Food and Allied Workers' Union, 1993 CanLII 7764 (NL CA), concerned a dispute over whether a fishing business operated in Newfoundland fell under provincial or federal jurisdiction.

As was set out by the Court of Appeal for Newfoundland and Labrador:

[4] The appellant [employer] is engaged in the processing of fish for export. Its operations are regulated in part by the Fish Inspection Act, R.S.C. 1985, c. F-12, an Act of the Parliament of Canada, and the Fish Inspection Regulations made thereunder. The Act provides that the Governor-in-Council may for the purpose of regulating the export or import of fish make regulations respecting the processing, storing, grading, packaging, marketing, transporting and inspection of fish. The Regulations make provisions for those things. The employees for whom the Union was certified as bargaining agent are engaged in doing those things which are regulated by the federal statute.

[5] The appellant’s operations are also regulated by the Fish Inspection Act, R.S.N. 1990, c. F-12, and regulations made thereunder respecting, inter alia, the same sort of things that the federal regulations regulate.

The court went on to consider whether, given this overlapping of legislation concerning the processing of fish for export, the work was one that was subject to federal jurisdiction. In resolving that the industry was provincially regulated for the purposes of labour relations, the court said as follows:

[19] A good deal of jurisprudence has developed around the question of federal involvement in labour relations.

[20] Much of it is summed up in Montcalm where Beetz, J., said at pages 768 to 769:

“The issue must be resolved in the light of established principles the first of which is that Parliament has no authority over labour relations as such nor over the terms of a contract of employment; exclusive provincial competence is the rule: Toronto Electric Commissioners v. Snider, [1925] A.C. 396. By way of exception however, Parliament may assert exclusive jurisdiction over these matters if it is shown that such jurisdiction is an integral part of its primary competence over some other single federal subject: In the matter of a reference as to the validity of the Industrial Relations and Disputes Investigation Act, [1955] S.C.R. 529 (the Stevedoring case). It follows that primary federal competence over a given subject can prevent the application of provincial law relating to labour relations and the conditions of employment but only if it is demonstrated that federal authority over these matters is an integral element of such federal competence; thus, the regulation of wages to be paid by an undertaking, service or business, and the regulation of its labour relations, being related to an integral part of the operation of the undertaking, service or business, are removed from provincial jurisdiction and immune from the effect of provincial law if the undertaking, service or business is a federal one; In the Matter of a Reference as to the application of the Minimum Wage Act of Saskatchewan to an employee of a Revenue Post Office, [1948] S.C.R. 248 (the Revenue Post Office case); Commission du Salaire Minimum v. The Bell Telephone Company of Canada, [1966] S.C.R. 767 (the Bell Telephone Minimum Wage case); The Letter Carriers’ Union of Canada v. Canadian Union of Postal Workers, [1975] 1 S.C.R. 178 (the Letter Carriers’ case). The question whether an undertaking, service or business is a federal one depends on the nature of its operation; Pigeon, J., in Canada Labour Relations Board, Public Service Alliance of Canada v. City of Yellowknife, [1977] 2 S.C.R. 729, at 736 S.C.R. But, in order to determine the nature of the operation, one must look at the normal or habitual activities of the business as those of ‘a going concern’, (Martland, J., in the Bell Telephone Minimum Wage case at p. 772), without regard for exceptional or casual factors; otherwise, the Constitution could not be applied with any degree of continuity and regularity: Agence Maritime Inc. v. Conseil Canadien des Relations Ouvriéres, [1969] S.C.R. 851 (the Agence Maritime case); the Letter Carriers’ case.”

[21] The principle has emerged that there is federal jurisdiction over labour relations only if such jurisdiction forms an integral part of primary federal jurisdiction over some other federal subject. The issue is even more restricted than that. Federal jurisdiction over labour relations can be no broader than what is set out in the Canada Labour Code. Unless a business comes within the definition of federal undertaking in the Canada Labour Code, no question of federal jurisdiction in labour relations arises. It is unnecessary to go beyond the Act to look for federal jurisdiction in labour relations.

[22] The first question that arises here is whether the appellant is a federal undertaking as that term is defined in the Canada Labour Code. If it is found to be a federal undertaking, then the second question arises, namely whether the labour component of the appellant’s operations forms an integral part of whatever it is that makes the undertaking of the appellant federal.

[23] There are only three considerations on this first question.

[24] The first is whether the appellant comes within the general description in the first part of the definition of federal undertaking in the Canada Labour Code - a work, undertaking or business that is within the legislative authority of Parliament. The appellant is not an undertaking that comes within the legislative authority of Parliament unless it somehow falls within that authority by virtue of s. 91(2) - the regulation of trade and commerce. There is nothing in the Constitution Act, apart from s. 91(2), that could possibly make the appellant’s operation a federal undertaking. Section 91(2) is discussed below.

[25] The second, which really requires no comment in view of the answer to the first, is whether the appellant falls within subparagraph (i) of the definition - a work, undertaking or business outside the exclusive authority of the legislatures of the Provinces. At first glance, this seems very wide indeed for virtually all undertakings are bound by some federal legislation, such as the Competition Act, the Copyright Act, the Criminal Code, the Food and Drugs Act, the Trademarks Act and many more; however, they are not by reason of such legislation outside the exclusive authority of the legislatures of the provinces. To so hold would produce an absurd result. It is therefore necessary to look for a meaning more in keeping with the nature of the Canada Labour Code.

[26] One does not have to look very far. The opening wording of s. 92 of the Constitution Act says that the legislatures of the provinces may “exclusively make laws” in relation to the matters therein enumerated. Similarly, the opening wording of s. 91 says that Parliament may make laws for the “Peace, Order and good Government of Canada, in relation to all Matters not coming within the Classes of Subjects by this Act assigned exclusively to the Legislatures of the Provinces”.

[27] Subpargraph (i) echoes these provisions. The Canada Labour Code was drafted to confine itself to those matters within the legislative authority of Parliament. It does not and, of course, could not presume to exercise authority in labour relations in matters not otherwise within the jurisdiction of Parliament.

[29] The third consideration is perhaps less obvious. Parliament has authority to legislate with respect to the regulation of trade and commerce. There can be no doubt that it had authority to enact the Fish Inspection Act. The power to regulate trade and commerce does not, however, make a company engaged in trade and commerce and bound by some federal enactment in relation thereto a federal undertaking.

[30] A simple illustration demonstrates the folly of a contrary conclusion. Section 7 of the Food and Drugs Act provides that no person shall manufacture, prepare, preserve, package or store for sale any food under unsanitary conditions. Is the corner grocery store, being bound by that section, thereby a federal undertaking within the meaning of the Canada Labour Code? The answer unquestionably must be that it is not.

[31] It follows that operation of the appellant as a fish processor is not a federal undertaking. It is not such within the definition in the Canada Labour Code, and the power of Parliament to regulate trade and commerce, having been exercised in this case in the form of the Fish Inspection Act, does not make the appellant a federal undertaking for the purpose of that Act.

The Barry's Ltd. decision was cited with approval by the Supreme Court of Canada in the case of Ward v. Canada (Attorney General), [2002] 1 SCR 569: “labour relations in the fisheries were held to be matters essentially falling within the provincial power to regulate business in the province and outside the federal fisheries power.”

The Barry's Ltd. decision is important because fisheries are one of those industries that is heavily dominated by federal legislation. In addition to the Fish Inspection Act cited by the court in that case is the Fisheries Act, one of the oldest pieces of federal legislation in Canada.

For what it is worth, the Montcalm decision, cited by the Newfoundland Court of Appeal was a 1978 decision of the Supreme Court of Canada, Construction Montcalm Inc. v. Min. Wage Com., [1979] SCR 754 in which the top court held that the construction of an international airport was a provincial work. Said the majority of the Court on this point, “the construction of runways is a matter so far removed from aerial navigation or from the operation of an airport that it cannot be said that the power to regulate this matter forms an integral part of federal competence over aeronautics.”

The distinction thus turns on whether the provinces have exclusive legislative jurisdiction over the work, undertaking or business. In what cases do the provinces have such exclusive jurisdiction? With respect to matters concerning “property and civil rights within the province:” Constitution Act, s. 92(13).

As was noted in the Stevedores case ([1955] SCR 529), paragraph 2(i) is “merely an omnibus paragraph”; it does not create any new jurisdictional powers.

Key Takeaways

There are a number of key takeaways that those concerned with this issue should consider. The first is that it is immaterial that the employer may be, in some ways federally regulated. To this end, it is immaterial whether the employer is incorporated pursuant to the provisions of the Canada Business Corporations Act or the Ontario Business Corporation Act. It is further immaterial whether the employer must follow some federal laws, such as the Income Tax Act, Criminal Code, or other piece of legislation.

What matters is whether the employer is engaged in a matter expressly excepted from the provincial heads of power or is otherwise engaged in one of those enterprises deemed integral to such federal works and undertakings. Unless the work or undertaking falls within one of the established categories of federal jurisdiction or is integrally connected to such an undertaking, it is provincial and the provisions of the Canada Labour Code do not apply. Nor do, for what it is worth, the provisions of the Personal Information Protection and Electronic Documents Act.

If you find yourself still confused after reviewing this page, and with no disrespect taken you should be, it may be prudent to seek a specific legal opinion with respect to your case before making any final decisions. The professional, experienced and cost-effective employment lawyers for employers at Ottawa's Kelly Santini LLP would be happy to be of service to your business or organization.

Contact Me

To reach the author of this blog, Sean Bawden, email sbawden@kellysantini.com or call 613.238.6321 x260. You may also use the contact box at the top of this page.

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As always, everyone’s situation is different. The above is not intended to be legal advice for any particular situation. It is always prudent to seek professional legal advice before making any decisions with respect to your own case.

Sean Bawden, publisher of Labour Pains, can be reached by email at sbawden@kellysantini.com or by phone at 613.238.6321.

Sean P. Bawden is an Ottawa, Ontario employment lawyer and wrongful dismissal lawyer practicing with Kelly Santini LLP. He is also a part-time professor at Algonquin College teaching Trial Advocacy for Paralegals and Small Claims Court Practice.



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