The Supreme Court of Canada (the "SCC") in Consolidated Fastfrate Inc. v. Western Canada Council of Teamsters1 ("Consolidated Fastfrate"), recently held that a national freight forwarding company which utilizes the services of other companies to physically cross provincial borders is subject to provincial rather than federal jurisdiction. This decision will have significant impact on companies whose business, although interprovincial or international in nature, may now fall within the jurisdiction of provincial labour and employment laws, particularly if their employees do not cross provincial boundaries in the course of their work.
The genesis of the eventual SCC decision was an application by the Consolidated Fastfrate Transport Employees' Association of Calgary (the "Calgary Association") to the Alberta Labour Relations Board (the "ALRB") for a declaration of whether the Calgary branch operations of Consolidated Fastfrate Transport Inc. ("Fastfrate") were subject to provincial or federal regulations. Fastfrate is a national forwarding company that picks up and consolidates freight in one province and deconsolidates the freight in another. Fastfrate relies on third party carriers to transport the freight over provincial borders and their employees do not cross provincial borders.
The ALRB held that the operations of Fastfrate were subject to federal jurisdiction as it viewed the operation as a single, indivisible, interprovincial freight transportation undertaking. The Alberta Court of Queen's Bench disagreed and held that the operations of Fastfrate were subject to provincial legislation, concluding that the existence of a national corporate structure was insufficient to bring the operations within federal jurisdiction. The Court of Appeal of Alberta agreed with the ALRB. The majority concluded that Fastfrate operated as an interprovincial freight collection and delivery service bringing it within federal jurisdiction.
On appeal, the SCC found that Fastfrate fell under provincial jurisdiction. It held that the functional analysis undertaken to determine how an entity is governed must centre on what operations it actually performs. On the basis of Fastfrate's business model, the SCC held that it was not possible for an undertaking to operate an interprovincial transportation service where it does not itself perform the interprovincial carriage.
This ruling overturned the 1994 decision of the Canada Labour Relations Board (the "CLRB") in Teamsters, Local 362 v. DHL International Express Ltd., (1994) 27 C.L.R.B.R. (2d) 95, where the CLRB relied on the "dominant purpose" of the undertaking to hold that DHL, a freight forwarder, was subject to federal jurisdiction.
Rothstein J., writing for the majority of the SCC in Consolidated Fastfrate held the following:
...the '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 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.2
The implications of the Consolidated Fastfrate decision are significant. First, it means that freight forwarding companies who contract with interprovincial carriers instead of providing interprovincial transportation services themselves, are subject to provincial jurisdiction and therefore their labour relations will be governed by provincial laws. Second, this decision could change the current regulation of many national companies operating in multiple jurisdictions whose employees do not physically cross provincial boundaries in their work by bringing their operations within provincial jurisdiction.
Footnotes
1 Consolidated Fastfrate Inc v. Western Canada Council of Teamsters, 2009 SCC 53, [2009] 3 S.C.R. 407.
2 Ibid. at para. 62.
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