The Constitution Act, 1867 has historically been interpreted as conferring legislative authority over employment matters to the provinces: Toronto Electric Commissioners v. Snider,  A.C. 393 (P.C.). While there has remained some scope for federal involvement within this context, the weight of authority has been clear that federal legislation will only be tolerated under the following exceptions:
- When the employment relates to a work, undertaking or business within Parliament's express legislative authority (direct jurisdiction); or
- When the employment is integral to a federally regulated undertaking (derivative jurisdiction).
The boundaries of these established exceptions were recently tested in Tessier Ltée v. Québec (Commission des lesions professionnelles), 2012 SCC 23 [Tessier]. The appellant in that case, Tessier Ltée, was a Québec-based transportation company that performed the majority of its work within its home province. Despite the localised nature of its operations, the company argued that its employment relations should be federally regulated because its stevedoring work, which represented only 14% of total company revenue, related to the federal power over shipping and navigation.
Justice Abella (writing for the Court) disagreed with this interpretation, holding instead that the appellant was subject to provincial employment legislation and rates. In reaching this conclusion, she cemented the limits of federal jurisdiction over employment matters and clarified the strict evidentiary requirements for establishing such jurisdiction.
Section 91(10) of the Constitution Act, 1867 subjects shipping and navigation to federal jurisdiction. However, as noted by the Court in Tessier, this particular power is not all-encompassing. It is tempered by the provincial power over local works and undertakings such that there is shared jurisdiction that "turns on the territorial scope of the shipping activities concerns". If the activities are local in nature, the provincial power will be engaged in priority to Section 91(10).
The Court aptly noted that stevedoring is a geographically localized activity and "is not itself a transportation activity that crosses provincial boundaries" (para. 34). Accordingly, employment matters connected to stevedoring cannot be said to relate to Parliament's Section 91(10) power over shipping and navigation.
With this decision, the Court resolved any lingering confusion from Reference re Validity of Industrial Relations & Disputes Investigation Act (Canada),  S.C.R. 529 (S.C.C.) [Stevedores Reference] that stevedoring was somehow an activity that could support direct federal jurisdiction over employment. At paragraph 34, the Court stated:
The effect of the Stevedores Reference as interpreted over time, then, is that stevedoring is not an activity that brings an undertaking directly within a federal head of power, at least for purposes of labour relations regulation.
The analysis with respect to derivative jurisdiction focuses on the relationship between "the activity, the particular employees under scrutiny, and the federal operation that is said to benefit from [their] work" (para. 38). If the "effective performance" of the federal undertaking is dependent on this relationship, derivative jurisdiction may be established (para. 46).
Prior to Tessier, derivative jurisdiction had been established in two distinct contexts:
- Where the services provided to a federal undertaking form the exclusive (or principal) part of the related work's activities. For instance, in the Stevedores Reference, the employees devoted all of their time to the federally regulated company. Similarly, in L.C.U.C. v. C.U.P.W.,  1 S.C.R. 178 (S.C.C.), federal labour laws were found to apply to a letter carriers' union that performed 90 percent of its work for Canada Post, a federal undertaking.
- Where the services provided to a federal undertaking are performed by employees who form a functionally discrete unit that can be characterised separately from the related operations. This was the case in Communications Workers of Canada v. Northern Telecom Canada Ltd.,  1 S.C.R. 733 (S.C.C.) [Northern Telecom] where Estey J. found that "the almost complete integration of the installers' daily work routines with the task of establishing and operating the telecommunications network makes the installation work an integral element in the federal works" (p.766).
The facts in Tessier did not fit within either one of these contexts. Stevedoring marked an insignificant portion of the appellant's operations and the stevedoring work was performed by an indivisible workforce. In other words, unlike in Northern Telecom, stevedoring was not performed by a discrete workforce with little, or no, involvement in the company's other, more localised operations.
These factual distinctions were too great to overcome and, in the result, Abella J. found that "provincial hegemony" should remain over the employees in question. To hold otherwise would have defied a long line of jurisprudence and significantly expanded federal jurisdiction over employment relations in very tenuous circumstances.
The significance of Tessier is not limited to its cementing of the status quo. On the contrary, this case also reveals the strict evidentiary requirements for establishing federal jurisdiction over employment. The question is factual, not theoretical, and proponents of federal jurisdiction must lead cogent evidence establishing a high degree of integration. As stated candidly by Abella J. in Tessier, the appellant utterly failed in this task:
It is worth noting that we have, in any event, little evidence that [the appellant's] stevedoring services were integral to the federal shipping companies it serviced. [The appellant] focused its argument on establishing that it was a federal shipping company directly under s. 91(10) or 92(10 and did not lead any evidence to show any derivative link to federal shipping undertakings. As a result, while we know that [the appellant] provided some shipping companies with cranes and operators to assist with the loading and unloading of their ships, we do not know much else. (para. 60)
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