|
Employment - Federal - General. Quebec (Attorney General) v. SGS Canada inc.
In Quebec (Attorney General) v. SGS Canada inc. (SCC, 2026) the Supreme Court of Canada considers "how Parliament can acquire jurisdiction over employees working in federal works or undertakings".
Here the court addresses federal-provincial constitutional jurisdiction regarding labour (and logically employment?) issues, initially stating the presumption that the province has such jurisdiction. It then explores the concepts of 'direct or derivative federal jurisdiction' and the distinction between local and federal 'works and undertakings' as they feed into the applicable 'test' for this jurisdictional issue:[1] ... Although labour relations are presumptively provincial, this presumption can be rebutted in limited circumstances.
....
[4] The applicable principles were most recently articulated in Tessier Ltée v. Quebec (Commission de la santé et de la sécurité du travail), 2012 SCC 23, [2012] 2 S.C.R. 3. To determine whether federal jurisdiction applies, a court or tribunal must first identify the entity at issue and assess its essential operational nature. If the entity is a unit within a business organization, and not an entire organization, a court or tribunal must also be satisfied that the unit is functionally distinct from other units within it. Next, a court or tribunal must then assess whether the tests for direct or derivative federal jurisdiction apply. Direct jurisdiction applies when the entity owns, manages, controls, or otherwise operates a federal work or undertaking. Derivative jurisdiction applies if the entity is a third party providing services that are vital, essential or integral to one or more federal works or undertakings, and those services are significant to the entity itself.
[5] Three rationales underpin this framework. First, the federal government must have the analogous jurisdiction to regulate labour relations in order to maintain effective control over the operations of the federal works or undertakings. Second, to respect the careful balance of legislative powers reflected in the Constitution, federal jurisdiction must not overreach into provincial matters. Third, groups of employees working for the same organization should not be artificially divided and governed by different labour regimes unless their functions are divisible.
[6] Federal labour jurisdiction is exceptional and should be approached restrictively. At the same time, the functional analysis to establish federal jurisdiction over labour relations remains flexible and contextual. It is not a rigid checklist. It means that the party invoking federal jurisdiction must establish, on the evidence, direct control or a sufficiently close functional and operational relationship with one or more identifiable federal works or undertakings.
....
B. Labour Relations and the Division of Powers
(1) Labour Is Presumptively a Matter of Provincial Jurisdiction
[32] Labour relations are presumptively a matter of provincial jurisdiction under the Constitution Act, 1867. While ss. 91 and 92 do not expressly assign legislative jurisdiction over labour relations to either level of government, this Court’s jurisprudence has long considered that labour relations generally fall into the provincial competency over property and civil rights under s. 92(13) (Tessier, at para. 11).
[33] This presumption can only be rebutted by exception (NIL/TU,O Child and Family Services Society v. B.C. Government and Service Employees’ Union, 2010 SCC 45, [2010] 2 S.C.R. 696, at para. 11). By virtue of the doctrine of interjurisdictional immunity, Parliament may have jurisdiction over the labour relations associated with its federal works and undertakings. Because the regulation of labour relations has been held to be an essential aspect of Parliament’s primary jurisdiction over federal works or undertakings, provincial labour laws are constitutionally inapplicable to them (Commission du salaire minimum v. Bell Telephone Co. of Canada, 1966 CanLII 1 (SCC), [1966] S.C.R. 767, at p. 772; Bell Canada v. Quebec (Commission de la santé et de la sécurité du travail), 1988 CanLII 81 (SCC), [1988] 1 S.C.R. 749 (“Bell Canada 1988”)), at p. 762).
[34] The rationale for granting the federal government analogous jurisdiction over labour relations when it enjoys exclusive authority over a work or undertaking is to ensure the stability of its operations (Tessier, at para. 15). This is why our Court has recognized that federal jurisdiction over “hours of work, rates of wages, [and other] working conditions” is “a vital part of the management and operation of any commercial or industrial undertaking” (Reference re Industrial Relations and Disputes Investigation Act, 1955 CanLII 1 (SCC), [1955] S.C.R. 529 (“Stevedores Reference”), at p. 592; see also Bell Canada 1988, at p. 772).
[35] The functional test refined in Tessier operationalizes the doctrine of interjurisdictional immunity in the labour relations context. Under that test, Parliament has jurisdiction over labour relations in two distinct circumstances (para. 17; P. W. Hogg and W. K. Wright, Constitutional Law of Canada (5th ed. Supp.), at § 21:11). First, Parliament has jurisdiction when the entity owns, manages, controls or otherwise operates a federal work or undertaking. This is known as direct jurisdiction. Second, Parliament has jurisdiction when the entity, through its normal and habitual activities, is an integral part of one or more federal works or undertakings, and that work is significant to the entity itself. This is known as derivative jurisdiction (Tessier, at paras. 17-18).
....
C. The Legal Framework
[40] Prior cases set out how to determine whether an entity should fall under federal jurisdiction (e.g., Tessier; Ontario Hydro; Northern Telecom Ltd. v. Communications Workers of Canada, 1979 CanLII 3 (SCC), [1980] 1 S.C.R. 115 (“Northern Telecom 1”); Northern Telecom Canada Ltd. v. Communication Workers of Canada, 1983 CanLII 25 (SCC), [1983] 1 S.C.R. 733 (“Northern Telecom 2”); NIL/TU,O; Construction Montcalm Inc. v. Minimum Wage Commission, 1978 CanLII 18 (SCC), [1979] 1 S.C.R. 754; Stevedores Reference; Four B Manufacturing Ltd. v. United Garment Workers of America, 1979 CanLII 11 (SCC), [1980] 1 S.C.R. 1031). Many of the cases set out factors and criteria for establishing federal jurisdiction before Tessier distilled the categories of “direct” and “derivative” jurisdiction. As a result, it is sometimes unclear to which aspects of the doctrines these factors relate. This can cause confusion, as demonstrated by the decisions below.
[41] The framework to establish whether an entity falls under federal jurisdiction, as set out in Tessier, requires a court or tribunal to identify the entity and its essential operational nature. If the entity is a unit within a larger organization, that unit must be functionally distinct from the rest of the organization. Next, a court must determine whether the entity meets the tests for direct or derivative jurisdiction.
(1) Step 1: Identify the Entity and Its Essential Operational Nature
[42] The first step is to identify the entity at issue. Is it an entire business organization or a discrete and identifiable unit within it? The court must then assess its “essential operational nature”, that is the nature of its work, operations, and day-to-day activities (Tessier, at para. 18; Construction Montcalm, at p. 769). This is a “functional inquiry” that analyses the entity’s functions “as a going concern and considers only its ongoing character” (Tessier, at para. 19; see also Bell Telephone, at pp. 771-72). The focus is on what the entity actually does and who it does that work for — but not on any exceptional or unusual activity, outside the usual scope of its work (Tessier, at para. 19; Construction Montcalm, at p. 769).
[43] As part of this analysis, a court must identify a federal work or undertaking to which the work of the entity relates. When there is no federal work or undertaking, the analysis fails.
[44] Works (“ouvrages” or “travaux” in French) are distinct from undertakings (Bell Telephone, at p. 772; Stevedores Reference, at p. 553). They are “physical structure[s]”, such as grain elevators and nuclear plants, in which the activities of the undertaking take place (Consolidated Fastfrate Inc. v. Western Canada Council of Teamsters, 2009 SCC 53, [2009] 3 S.C.R. 407, at para. 41; see also Hogg and Wright, at § 22:10, citing City of Montreal v. Montreal Street Railway, 1912 CanLII 352 (UK JCPC), [1912] A.C. 333 (P.C.), at p. 342; Ontario Hydro, at p. 349).
[45] A federal undertaking (“entreprise” in French) is an arrangement encompassing [translation] “all the operations that make it possible to carry out” activities falling under federal jurisdiction under s. 91 of the Constitution Act, 1867 (e.g., postal service, shipping; H. Brun, G. Tremblay and E. Brouillet, Droit constitutionnel (6th ed. 2014), at para. VI-2.287). These include the operation and management of federal works under s. 92(10) via s. 91(29) (see Consolidated Fastfrate, at para. 41; Westcoast Energy Inc. v. Canada (National Energy Board), 1998 CanLII 813 (SCC), [1998] 1 S.C.R. 322, at para. 47; see also Brun, Tremblay and Brouillet, at paras. VI-2.274-VI-2.284). In other words, the term “undertaking” can define an arrangement that supports the operation of a single work, such as a grain elevator, or a broader arrangement like the postal service.
[46] If the entity can be characterized as a single business organization, its entire operations may fall under direct or derivative jurisdiction, assuming one of the applicable legal tests is met. By contrast, if the entity at issue is a unit within the business organization, the tribunal or court must first be satisfied that it is a “functionally discrete unit” that can be constitutionally characterized separately from the rest of its organization (Tessier, at para. 49). An indivisible, integrated operation should not be artificially divided for purposes of constitutional classification (para. 55; Hogg and Wright, at § 22:5).
[47] To determine whether a unit is functionally distinct, a court or tribunal must be satisfied that it can be separated or divided from other employees at their organization (Northern Telecom 2, at p. 770). If it turns out that the unit cannot be separated because it routinely works with or is depended upon by another unit that is not affiliated with the federal work or undertaking, then from an operational standpoint, it makes no practical sense for workers working for the same employer to be governed by different labour regimes.
[48] There is no set criteria to determine a unit’s functional distinctiveness. Instead, the inquiry is flexible and focuses on a unit’s “dominant character” and whether that character is distinct enough from other units in the organization (Tessier, at para. 55, citing Westcoast Energy, at para. 124). Importantly, corporate structure or geographical location alone cannot determine constitutional classification. Rather, the focus should be on the services the unit provides (Alberta Government Telephones v. Canada (Canadian Radio-television and Telecommunications Commission), 1989 CanLII 78 (SCC), [1989] 2 S.C.R. 225, at pp. 263-64; Northern Telecom 1, at p. 133). Jurisdiction depends on substance, not labels.
[49] From Northern Telecom 1 and Northern Telecom 2, we can extract the following non-exhaustive factors that may assist a judge in assessing a unit’s functional distinctiveness: (i) the tasks performed by the employees in the unit and how they differ from those performed by employees in other units in their organization; (ii) the relationship and amount of contact between the unit and other units in their organization; (iii) the management/operational environment and location of the unit; and (iv) the role and function of the unit within the organization as a whole (Northern Telecom 1, at p. 135; Northern Telecom 2, at p. 770).
[50] These factors inform the underlying rationale that employees at the same organization should not be governed by different labour regimes unless they are functionally distinct. A court must be satisfied that “the services provided to the federal undertaking are performed by employees who form a functionally discrete unit that can be constitutionally characterized separately from the rest of the related operation” (Tessier, at para. 49).
[51] The AGQ takes the position that a unit can only be functionally distinct when the nature of its services is different from other units in the organization. SGS counters that even if a company provides the same kinds of services, employees might still be found to be functionally distinct if they work in different industries, in different locations, and perform different tasks from others in the organization. As I will explain further below, I agree with SGS. The cases confirm that divisions of this nature are appropriate when a unit can be separated from the rest of the organization without artificially dividing it (Northern Telecom 2, at p. 770).
[52] In sum, the first step requires the court to identify the entity — whether it is an entire business organization or a unit within it — and assess its operational nature. As part of this step, if the proposed entity is a unit, the court must also be satisfied that the unit is functionally distinct from others in the organization, for constitutional analysis.
(2) Step 2: The Test for Direct Jurisdiction
[53] Direct jurisdiction is reserved for entities directly operating a federal work or undertaking. It covers a broad range of employees who support the management and operation of the federal work or undertaking (Ontario Hydro, at p. 362; Stevedores Reference, at p. 592).
[54] In cases where the entity owns, manages, controls, or otherwise operates both federal and provincial work or undertakings, the analysis must confirm that its essential operational nature or its “normal or habitual activities” are dedicated to the federal work or undertaking (Ontario Hydro, at p. 351, per Lamer C.J.). If not, the presumption that provincial jurisdiction applies will not be displaced. For example, in Canadian Pacific Railway, the Privy Council distinguished employees working for a hotel run by the Canadian Pacific, a local undertaking under provincial jurisdiction, from Canadian Pacific’s interprovincial railway network, a federal undertaking. The Privy Council held that the employees of Canadian Pacific Railway-owned hotels could be considered separately from the employees that actually worked on and for the railways. The hotel operations were an independent, separate subsidiary of Canadian Pacific Railway, with its own dedicated workforce.
[55] Ontario Hydro offers another example. There, this Court held that only the employees supporting the management or operation of the nuclear plants could be regulated by the federal government because their “normal or habitual activities” were distinct from workers who were employed in connection with electricity generation. All other employees remained under provincial jurisdiction (pp. 355-57).
[56] The Court of Appeal in this case found that direct federal jurisdiction [translation] “entails control over the labor relations of employees who are necessary and essential to [a work or undertaking’s] operations” (para. 85). As I will explain below, this conflates the tests for direct and derivative jurisdiction. This Court has only applied direct jurisdiction in situations where the employees were directly employed by an entity that owns, manages, controls, or otherwise operates a federal work or undertaking.
(3) Step 3: The Test for Derivative Jurisdiction
[57] When the entity providing services to one or more federal works or undertakings is a third party, its labour relations may nonetheless be subject to federal jurisdiction under the principle of derivative jurisdiction when its services are “‘vital’, ‘essential’, or ‘integral’” to the core operation of the federal work or undertaking, and those services are “significant” to the entity itself (Tessier, at para. 37, quoting Northern Telecom 1, at p. 132). In other words, a court must consider the relationship from the perspective of both the entity and the federal work or undertaking (Tessier, at para. 46).
[58] The test to assess whether an entity’s services are vital, essential, or integral to the core operation of the federal work or undertaking is flexible. Because different decisions have emphasized different factors, there is “no simple litmus test” (Tessier, at para. 45). These factors include (Northern Telecom 1, at p. 135; Northern Telecom 2, at pp. 755-56):(i) A close physical and operational connection between the entity and the federal undertaking or when their work forms a joint operation.
(ii) A corporate interrelationship between the entity and the federal undertaking.
(iii) The importance of the work done by the employees of the entity for the federal undertaking. [59] The goal is to establish a connection between the entity and a federal work or undertaking that is “intimat[e]”, “vital”, “truly ancillary”, or “necessarily incidental” (Stevedores Reference, at pp. 535, 544, 548, 582 and 592; Northern Telecom 1, at p. 132; see also Letter Carriers’ Union of Canada v. Canadian Union of Postal Workers, 1973 CanLII 183 (SCC), [1975] 1 S.C.R. 178, at pp. 185-86). In Tessier, Abella J. distilled these cases into a simple takeaway: integration, for the purpose of derivative jurisdiction, requires a federal undertaking to be dependent on the functions of a particular entity, such that the federal undertaking could not operate without it (para. 32). It requires a “permanent, or at least ongoing, relationship” to ensure the Constitution is always applied with “continuity and regularity” (Hogg and Wright, at § 22:9). An exceptional or temporary relationship will not suffice.
[60] From the perspective of the entity, a court must also consider the significance of the work to the entity itself (Tessier, at para. 46). The question is whether the “the services provided to [one or more] federal [works or] undertaking[s] form the exclusive or principal part of the related [entity]’s activities” (para. 48). To meet this part of the test, the entity must work predominantly for one or more federal works or undertakings. In other words, that work must be the “main and principal part” of its business (Tessier, at paras. 41-42; Letter Carriers’ Union of Canada, at p. 188). Some cases suggest that this could be met by establishing that the entity performs a high percentage of work for a federal work or undertaking (see Northern Telecom 2 (suggesting 80 percent as an example); Stevedores Reference; Letter Carriers’ Union of Canada). Other cases emphasize flexibility and do not explicitly articulate a percentage (Tessier, at para. 45; United Transportation Union v. Central Western Railway Corp., 1990 CanLII 30 (SCC), [1990] 3 S.C.R. 1112, at pp. 1139-40; Westcoast Energy, at para. 128). However significance is established, it is clear that it is a high threshold. As Justice Abella stressed in Tessier, even if the work of those employees is vital to the functioning of one or more federal works or undertakings, “it will not render federal an operation that is otherwise local if the work represents an insignificant part of the employees’ time or is a minor aspect of the essential ongoing nature of the operation” (para. 50).
[61] Evaluating significance at this step is critical to ensuring an entity that is also working on provincial undertakings is not improperly characterized as falling under federal jurisdiction.
[62] The parties dispute whether, for the purpose of derivative jurisdiction, an entity needs to be integrated into a single work or undertaking. As I will explain below, there is nothing in this Court’s jurisprudence that would support this requirement. The analysis may consider an individual or a group of federal works or undertakings, so long as there is sufficient evidence to establish integration. To the extent that lower court decisions, such as Madysta Télécom ltée v. Commission des normes, de l’équité, de la santé et de la sécurité du travail, 2020 QCCA 183, say otherwise, they are incorrect in law.
[63] In sum, the framework to establish federal jurisdiction can be summarized as follows:(i) Identify the entity and its essential operational nature.a. Determine whether the entity is an entire business organization or unit within it.
b. Determine the nature of the entity’s work by considering its character as a going concern, rather than any incidental or exceptional aspects.
c. If the entity is a unit, it must be functionally distinct from the rest of the organization. (ii) Determine whether direct jurisdiction applies.a. The entity must own, control, manage, or otherwise operate a federal work or undertaking. (iii) Determine whether derivative jurisdiction applies.
a. The entity’s services must be vital, essential, or integral to the core operation of one or more federal works or undertakings.
b. Those services must be significant to the entity itself.
....
[87] The distinction between direct and derivative jurisdiction is important. Direct jurisdiction is reserved for employees directly employed by entities operating a federal work or undertaking. Unless those companies also operate provincial works or undertakings, the jurisdiction over labour relations will likely be federal. Derivative jurisdiction, by contrast, only applies in limited cases where an employer is a third party providing services to a federal work or undertaking — and not itself operating it. The doctrine ensures that essential work outsourced by federal undertakings are also regulated by Parliament. Conflating direct and derivative jurisdiction risks a significant and unwarranted expansion of direct federal jurisdiction, potentially drawing any contractor performing legally mandated functions at a federal work or undertaking into the federal sphere regardless of the otherwise local character of its own operations.
....
[109] .... In my view, an integration analysis for the purpose of derivative jurisdiction may consider one or more federal works or undertakings, so long as there is sufficient evidence to establish integration, as set out above.
[110] This is perhaps most obvious in the Stevedores Reference, where this Court considered the labour relations of stevedores who worked interchangeably for seven different shipping companies. Although the stevedores worked for different entities related to shipping, a federal head of power under s. 91(10) of the Constitution Act, 1867, they were all working for a “discrete and identifiable” undertaking. After concluding that the stevedores served a core federal transportation function and were integral to the operation of seven companies dedicated to federal navigation and shipping, a majority of judges found federal jurisdiction should apply to avoid fragmenting the regulation of these workers.
[111] The requirement for a “discrete and identifiable work or undertaking”, as set out in Central Western, is not about the number of works or undertakings considered in the integration analysis. Rather, the requirement aims to ensure the analysis does not rely on an ill-defined industry or collection of works or undertakings, and that it is instead anchored in an indisputably federal work or undertaking (p. 1143).
[112] In Central Western, the key issue was whether employees of Central Western Railway Corp., an Alberta railway company, fell under federal or provincial jurisdiction. Although Chief Justice Dickson took no issue with the discreteness or identifiability of the Canadian National Railway (a federal undertaking) or grain elevators in Alberta (federal works), he found the “Western Grain Transportation Network”, which was a “‘catch all’ phrase” for railways, grain cars, federal agencies, and grain elevators, to be too vague to form a “discrete and identifiable” undertaking for the purpose of his integration analysis (p. 1143). This risked sweeping provincial jurisdiction related to the transportation of grains into federal jurisdiction (p. 1144). On a fair reading, the case does not impose a requirement to consider a single work or undertaking.
[113] To the extent that the Quebec Court of Appeal’s decision in Madysta interprets these principles differently, Madysta is wrong in law. The case is inconsistent with authority, and produces arbitrary results.
[114] There is no question that the work or undertaking in this case is discrete and identifiable. All grain elevators are individually and collectively declared works for the general advantage of Canada. As s. 55(1) of the Canada Grain Act makes clear: “All elevators in Canada heretofore or hereafter constructed . . . , are and each of them is hereby declared to be a work or works for the general advantage of Canada.” The words “are and each of them is” in the English version and the words “constituent, collectivement et séparément” in the French version confirm that each grain elevator is a work (or several grain elevators are works). They are individually and collectively federal works.
[115] I see no principled reason why an entity that works for multiple federal works should be regulated differently than an entity servicing only one work. The purpose of declaring grain elevators as works for the advantage of Canada is to ensure coherent and effective national regulation of activities that are said to be necessary to the Canadian economy. This centralized jurisdiction supports the orderly, reliable, and efficient functioning of the federal work and allows the federal government to ensure that these nationally significant works are operated properly, without disruption.
[116] In sum, courts are entitled to look at any one or more works for the purpose of an integration analysis. No matter how the integration analysis is structured, what is essential is that sufficient evidence is led to support the elements of the test. . Osman v. Canada (Attorney General) [E'rs right to access medical records]
In Osman v. Canada (Attorney General) (Fed CA, 2026) the Federal Court of Appeal dismissed a federal labour JR, this brought against "a decision of the Federal Public Sector Labour Relations and Employment Board" which "dismissed two complaints filed by the applicant pursuant to the Canada Labour Code, R.S.C. 1985, c. L-2 ("“the Code”"), and two grievances filed pursuant to the Federal Public Sector Labour Relations Act".
Here the court considers the issue of an employer's rights wrt an employee's medical records:[14] As for the second grievance relating to the applicant’s termination, we also find that the Board’s decision was reasonable. Again, the applicant argues that it was unreasonable for the Board to conclude that the employer had just cause under paragraph 12(1)(e) of the Act to terminate his employment based on his refusal to undergo a FTWE [SS: 'fitness to work evaluation']. He relies on Burke v. Deputy Head (Department of National Defence), 2019 FPSLREB 89 [Burke], for the proposition that an employer cannot compel disclosure of personal medical information absent the employee’s consent.
[15] Here again, we agree with the Board’s reasoning and its interpretation of Burke and related Federal Court jurisprudence; the case law stands for the proposition that the applicant’s right to privacy and bodily integrity must be balanced with the employer’s obligation to ensure a safe workplace: Canada (Attorney General) v. Grover, 2007 FC 28 at para. 65.
|
