Name of Case: Consolidated Fastfrate Inc. v. Western Canada Council of Teamsters

Date of Decision: November 26, 2009

Supreme Court Panel: Justices Louis LeBel, Marie Deschamps, Rosalie Abella, Louise Charron, Marshall Rothstein and Thomas Cromwell (concurring); Chief Justice Beverley McLachlin, Justices Ian Binnie and Morris Fish (dissenting)

Judgment under Appeal: Judgment of the Alberta Court of Appeal dated July 27, 2007

Facts: Consolidated Fastfrate Inc. is a national freight forwarding company based in Mississauga, Ontario, with local branch offices throughout Canada. Fastfrate employees pick up individual shipments from local customers; consolidate them into much larger common-destination shipments at terminals in major cities in the originating province; arrange for interprovincial transportation with a third-party carrier, largely CP Rail; receive the shipments at the other end in a different province and deconsolidate them; and deliver them to their individual destinations. By pooling the many small shipments into full-railcar or full-truck loads, Fastfrate achieves economies of scale that enable it to reduce the transportation costs of its customers.

In 2003, the union representing Fastfrate employees in Calgary, Alberta, the Consolidated Fastfrate Transport Employees' Association of Calgary, was faced with a raiding attempt by the Western Council of Teamsters, which applied to the Canada Industrial Relations Board for certification as the regional bargaining agent for Fastfrate employees in Alberta, Saskatchewan and Manitoba. The local union responded by applying to the Alberta Labour Relations Board for a declaration as to whether the labour relations of Fastfrate in Calgary were subject to provincial or federal jurisdiction.

Section 92 of the Constitution Act, 1867 provides that "[i]n each Province the Legislature may exclusively make Laws in relation to Matters coming within the Classes of Subjects next hereinafter enumerated; that is to say, ... 10. Local Works and Undertakings other than such as are of the following Classes: (a) Lines of Steam or other Ships, Railways, Canals, Telegraphs, and other Works and Undertakings connecting the Province with any other or others of the Provinces, or extending beyond the Limits of the Province."

Case History: In a July 2005 decision, the Board concluded that Fastfrate's Calgary operations were within federal jurisdiction and under the Canada Labour Code, because examination of "the operations of the Calgary Fastfrate location and the rest of the Fastfrate organization for unity of ownership, unity of purpose and unity of control" showed that "the Calgary Fastfrate location is part of a single, indivisible interprovincial undertaking."

On judicial review, a judge of the Alberta Court of Queen's Bench reached the opposite conclusion, ruling in December 2005 that in the absence of any physical involvement in the interprovincial carriage of goods, there was "insufficient reason to displace the dominant presumption of provincial jurisdiction over labour relations."

The Alberta Court of Appeal by majority decision restored the Labour Relations Board's determination of federal jurisdiction, finding that Fastfrate "operates an interprovincial freight collection and delivery service." The majority concluded: "Fastfrate is a single company, with integrated operations and centralized control that operates a regular and continuous freight forwarding business designed to receive and deliver freight throughout Canada.... The fact that it arranged to regularly hire CP Rail to physically transport the freight did not change its service provided to its customers, nor change it from the national enterprise those customers could logically assume that it is. Fastfrate was rightly found by the A.L.R.B. to be a federal undertaking."

The Supreme Court of Canada granted leave to appeal on March 6, 2008.

Issue(s): Whether the Alberta Court of Appeal erred in determining that Fastfrate's Calgary labour relations fall within federal jurisdiction pursuant to the exception in s.92(10)(a) of the Constitution Act, 1867 for interprovincial undertakings.

Supreme Court's Decision (6-3): The majority allowed the appeal, restoring the decision of the Court of Queen's Bench, and confirming that Fastfrate's local operations were subject to provincial jurisdiction.

Reasons:

The Majority Decision

Writing the Court's 6-3 majority decision, Justice Marshall Rothstein held that Fastfrate's local operations fall under provincial jurisdiction because "an undertaking that performs consolidation and deconsolidation and local pickup and delivery services does not become an interprovincial undertaking simply because it has an integrated national corporate structure and contracts with third party interprovincial carriers. Fastfrate does not perform any interprovincial carriage itself. Absent this, [there is] no compelling reason to depart from the general rule that works and undertakings are regulated by the provinces."

Countering the argument that Fastfrate's contractual relations with third-party carriers made it function as an interprovincial undertaking pursuant to s.92(10)(a), Justice Rothstein stated: "The difficulty with this argument is that the text of s.92(10)(a) and the jurisprudence interpreting it do not contemplate that a mere contractual relationship between a shipper and an interprovincial carrier would qualify Fastfrate as an undertaking connecting the provinces or extending beyond the limits of the province. Rather, it is the carriers that physically transport the freight interprovincially that constitute federal transportation works and undertakings. There is no indication that contracting alone can make intraprovincial undertakings subject to federal jurisdiction."

Justice Rothstein stated unequivocally that "[i]n the transportation context, it is not possible for an undertaking to operate an interprovincial transportation service where it does not itself perform the interprovincial carriage. A business can, of course, act as an intermediary between interprovincial carriers and consumers who want to access those carriers at a reduced price. This does not mean that such a business becomes the operator and provider of the interprovincial carriage, however. The fact that customers may be unaware that the intermediary company is not in fact performing the interprovincial carriage is, in my view, irrelevant to the constitutional inquiry. Section 92(10)(a) is concerned with the nature of undertakings, not how they are subjectively understood by consumers."

The Supreme Court's decision effectively overturns the jurisprudence established by the Canada Labour Relations Board 15 years ago in Teamsters, Local 362 v. DHL International Express Ltd. (1994), 27 C.L.R.B.R. (2d) 95., in which the Board held that DHL, a freight forwarder similar to Fastfrate, was subject to federal jurisdiction because "the undertaking has as its dominant purpose an interprovincial or international operational connection extending its activities – services to its clients – 'beyond the limits of the province', on a regular and continuous basis." Rothstein made clear that scrapping the DHL reasoning was the intended result, holding that "[t]he 'dominant purpose' test in DHL – measured in terms of the contractual service offered rather than the actual operations of the undertaking – has the potential to sweep under federal jurisdiction many enterprises that heretofore have been understood as being subject to provincial jurisdiction based on their actual operations.... This kind of indeterminate fluidity in the division of powers surely cuts against the balance that underlies our federal system."

The Minority Decision

Writing on behalf of the dissenting minority, Justice Ian Binnie held that Fastfrate should be considered an interprovincial transportation undertaking and its labour relations subject to federal regulation. Noting that the contracting out of elements of a service business is commonplace today, Binnie argued that the modalities of how a "truly interprovincial" transportation operation "undertakes" to move its customers' freight from one part of Canada and deliver it to another should not contrive to defeat federal jurisdiction. "Checkerboard provincial regulation," he wrote, "is antithetical to the coherent operation of a single functionally integrated indivisible national transportation service."

In Binnie's view, in order to be characterized as an interprovincial transportation undertaking, there is no requirement that the entity must itself physically transport goods across a provincial boundary. Instead, whether an undertaking, service or business is a federal one depends on the nature of its operation. In this case, Binnie noted, Fastfrate's undertaking is much more than that of a mere shipper. "It provides a customer-to-customer interprovincial service. It handles the shipment both in the province of origin and in the province of destination. An undertaking that offers an interprovincial service is no less an interprovincial undertaking because part of the performance of its undertaking is contracted out to unaffiliated service providers."

Lancaster Reference: For analysis of the Alberta Court of Appeal and Court of Queen's Bench decisions, see Lancaster's Federal Labour & Employment Law E-Bulletin, October 5, 2007, Issue No. 14 and Federal Labour & Employment Law Reporter, January/February, 2006.