Inter or Intra? Consolidated Fastfrate and the Division of Powers

There is nothing sexier than a good, old-fashioned division of powers case. OK, that is not true; however, the cases are important because they spell out who has to obey which laws. The Supreme Court of Canada’s recent decision in Consolidated Fastfrate Inc v Western Canada Council of Teamsters, [2009] 3 SCR 407 [Fastfrate] involves a narrow interpretation of the Court’s past precedents in this area, and reveals an interesting battle between originalism and the “living tree” approach to constitutional interpretation that is so familiar to first-year law students.

Fastfrate boils down to a labour dispute (of sorts) between a provincial and a federal union, each seeking to be certified as the bargaining unit for the company’s Calgary employees. Fastfrate is a national freight consolidator: it picks up shipments from various clients in each province and builds full container-loads that it then passes to third parties (generally CP Rail) to ship across the country. The third parties deliver the shipments to Fastfrate warehouses in other provinces, where Fastfrate employees then “deconsolidate” the shipments and deliver them to their destinations. This keeps costs down – Fastfrate’s clients do not, individually, ship enough freight to fill a container, meaning that in the absence of the consolidation service they would have to send half-empty containers across the country. Fastfrate is able to divide the cost of a full load among all of its clients.

The Western Council of Teamsters had applied to the Canadian Industrial Relations Board to be certified as the regional bargaining unit for Fastfrate’s employees in Alberta, Saskatchewan, and Manitoba. That prompted the Consolidated Fasfrate Transport Employees’ Association of Calgary to apply to the Alberta Labour Relations Board (“ALRB”) for a declaration on whether the company’s labour relations were subject to provincial or federal jurisdiction. The ALRB found that Fastfrate was an interjurisdictional undertaking, and therefore governed by federal labour law. The Board’s decision was appealed, and eventually ended up before the Supreme Court of Canada.

The Decision

The case turned on the proper interpretation of section 92(10) of the Constitution Act, 1867. That section gives exclusive authority to the provinces over:

92(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: …

The exceptions fall under exclusive federal authority pursuant to s. 91(29). The issue, then, was whether Fastfrate was an undertaking connecting two provinces or extending beyond the limits of a province. If it was, it would be subject to federal authority.

Rothstein J., writing for the six-member majority, quashed the ALRB’s decision, and found that Fastfrate was, in effect, a series of intraprovincial operations, linked together by a national management structure. In his view, a requirement of federal jurisdiction “is that the undertaking itself physically operates or facilitates carriage across interprovincial boundaries.” Since Fastfrate did not transport goods across provincial lines itself, it did not meet the requirements for the s. 92(10) exception.

Interpretational Hair-splitting

While Rothstein J.’s judgment demonstrates a concern for not getting bogged down in the details of how a company works (preferring an approach that looks at the industry as a whole), he chose to make an odd legal distinction based on the fact that Fastfrate is a transportation undertaking. That distinction allowed him to distinguish a previous Supreme Court case that seems to be directly on point: Alberta Government Telephones v (Canada) Canadian Radio-Television and Telecommunications Commission, [1989] 2 SCR 225 [AGT].

The AGT case was a dispute over whether the Alberta Government Telephones company was subject to federal jurisdiction. Its physical equipment stopped at the Alberta border, where it connected with the equipment of other companies. However, it was party to agreements with Telecom Canada, which was an unincorporated group of telecommunications companies that existed to provide a framework for delivering a seamless national communications service (ensuring that you could pick up a phone in Calgary and call St. John’s). In that case, it was argued that “where an individual organization lacks the ability to effect, on its own, an interprovincial connection, that undertaking retains its local character.” Dickson C.J. rejected that argument, holding that “[t]he primary concern is not the physical structures or their geographical location, but rather the service which is provided by the undertaking through the use of its physical equipment.”

In the present appeal, the Teamsters relied on AGT by drawing an analogy between that company’s interprovincial arrangements (contracting with other companies to send its signals beyond Alberta’s borders) and the ones of Fastfrate. Rothstein J. was not persuaded that the analogy was sound, based on the fact that AGT was a telecommunications case, whereas Fastfrate was a transportation undertaking. But as Justice Binnie points out in dissent, the Court has never applied different legal tests under s. 92(10)(a) depending on the nature of the undertaking. Dickson C.J.’s comment, quoted above, also seems to suggest that the true focus should be on the service provided, and not on the way in which that service is provided. Here, Fastfrate is offering its customers an integrated cross-country shipping solution. The fact that it contracts out the actual shipment to another company should not act as a barrier to federal regulation any more than AGT’s contracting with other companies to provide national phone service did.

Part of Rothstein J.’s concern with an interpretation based on the service provided (instead of the actual operations) is that it “has the potential to sweep under federal jurisdiction many enterprises that heretofore have been understood as being subject to provincial jurisdiction”. He cites the example (taken from the submissions of the Attorney General of Ontario, who was intervening in the case) of a travel agency whose dominant purpose is to facilitate interprovincial and international travel. Under a service-based test, would the agency now fall under federal jurisdiction? Would an online company that arranges for door-to-door delivery of its products?

With respect, the Attorney General’s concerns are somewhat overblown. A travel agency acts as an intermediary between a customer and the eventual service provider to arrange travel on particular terms. Its service is the arrangement of a travel itinerary, and the provision of that service does not cross provincial boundaries. The agency does not undertake to have its employees pick up customers, drive them to the airport, see them through security and on to the plane, and then meet them at their destination and drive them to their hotel. Similarly, an online company does not generally take care of the delivery of its own goods. After engaging in the sale transaction, the company passes off the goods to a third party that takes care of the shipping service, such as the post office or an express shipping service. Neither of these examples succeeds in demonstrating the danger in the approach favoured by the dissenters (and the Court’s precedents).

Constitutional Herbicide?

Rothstein J. grounds his transportation/communication distinction in a historical interpretation of the Constitution Act, 1867. He quotes Professor Hogg (who, in turn, cites R v Big M Drug Mart Ltd, [1985] 1 SCR 295) for the proposition that “Constitutional language, like the language of other texts, must be ‘placed in its proper linguistic, philosophical and historical contexts’.” This is true, but I think, with respect, that the quoted passage is aimed more at explaining the interpretation of phrases such as “property and civil rights” (which certainly does not accord with today’s concept of civil rights) than of the proper scope of provisions of sections 91 and 92. As Binnie J. argues, “Canadian courts have never accepted the sort of ‘originalism’ implicit in my colleague’s historical description of the thinking in 1867.” The fact that the majority did not deal with this argument is somewhat odd, though it probably does not indicate any sort of shift in the Court’s overall approach to this issue.

In the end, the majority seems to sidestep its own test. As Binnie J. points out, Fastfrate seems to meet the test for federal jurisdiction laid down by Rothstein J.: that the “the undertaking itself … facilitates carriage across interprovincial boundaries.” If Fastfrate is not in the business of facilitating the interprovincial carriage of goods, then what is it doing?