With the Supreme Court's decision last week in Consolidated Fastfrate Inc. v. Western Canada Council of Teamsters, national and international freight forwarders operating in Canada, formerly regarded as subject to federal labour and employment law, may now fall under the jurisdiction of provincial law.  The Court reversed the decision of the Alberta Court of Appeal and held that Consolidated Fastfrate Inc., a freight forwarder providing service across several provinces, falls under provincial jurisdiction.  This decision will have significant consequences for the Canadian transportation industry generally, and the Canadian based international and inter-provincial freight forwarding industry specifically.

Fastfrate is a freight forwarding company with branches across Canada. It has an integrated national corporate structure which includes a head office in Mississauga, Ontario and a team of three regional vice-presidents who oversee a network of local branch offices throughout Canada, including the branch office in Calgary. Fastfrate operates by using its own employees and equipment to pick up and consolidate freight in one province, and again to deconsolidate the freight in another province. Fastfrate does not use its own employees or equipment to transport freight across provincial boundaries, but rather relies on third party carriers, most notably the Canadian Pacific Railway.

The union representing workers at the Calgary branch of Consolidated Fastfrate ("Fastfrate") brought an application to the Alberta Labour Relations Board ("ALRB") for a declaration on whether the labour relations at Fastfrate Calgary were subject to provincial or federal jurisdiction, pursuant to the Constitution Act, 1867. This application was in response to an earlier application brought by another union seeking certification by the Canadian Industrial Relations Board as the regional bargaining unit for Fastfrate employees in Alberta, Saskatchewan, and Manitoba. Fastfrate opposed the application.

Writing for the majority, Rothstein J. held that the lower court decisions erred by focusing on the overarching corporate structure of Fastfrate; instead, they should have focused on the nature of its operations, which were fundamentally intraprovincial. As Rothstein J. noted, an undertaking that performs consolidation and deconsolidation and local pickup and delivery service, such as Fastfrate, does not qualify as an interprovincial undertaking simply because it has an integrated national corporate structure and contracts with third party interprovincial contractors.

Rothstein J. relied heavily on the fact that neither Fastfrate equipment nor its employees were involved in any actual interprovincial transportation of goods, since Fastfrate contracted with third party carriers, such as the CPR, to actually move goods across provincial boundaries. In Rothstein J.'s view, the Constitution and the surrounding jurisprudence do not contemplate that a mere contractual relationship between a shipper and an interprovincial carrier would qualify the shipper as an undertaking connecting the provinces or extending beyond the limits of the province.

So what does this mean?

Presently there are numerous business enterprises that arrange for the transportation of the freight of their customers inter-provincially and/or internationally.  As a very common practice, these freight forwarding services or logistics services do not involve themselves in the physical movement of freight between the provinces or internationally.  For the purposes of those moves, they will contract the services of a carrier who will be engaged in moving that freight across the provincial borders within Canada, or to and from the provinces.  With the Fastfrate decision, most of these operators, who offer no equipment of their own in the physical movement of freight inter-provincially or internationally will now find that their local provincial operations are subject to provincial labour and employment laws.

It is uncertain what the future may hold for these business recognising that many may have already been found to be subject to federal jurisdiction following earlier decision.  What is clear is that the Fastfrate decision will have significant and far reaching effects with respect to the application of labour and employment law to a consequential section of Canada's transportation industry and others.  Any company or industry currently operating under federal labour laws should be aware of the reasoning behind this decision and its potential impact.

For more information on Transportation law you can visit our website here; or for information on Employment and Labour law you can visit our website here.  And, as always, you can find our Manfacturing and Distribution website at www.gowlings.com/industry/md.asp.