United Transportation Union v. Central Western Railway Corp., 1990 CanLII 30 (SCC), [1990] 3 SCR 1112

United Transportation Union v. Central Western Railway Corp., [1990] 3 S.C.R. 1112

Central Western Railway Corporation Appellant

v.

United Transportation Union,

the Brotherhood of Maintenance of Way Employees,

Canadian Signal and Communications Union,

Brotherhood of Locomotive Engineers

and Canada Labour Relations Board Respondents

and

The Attorney General of Quebec and

the Attorney General for Alberta Interveners

indexed as: united transportation union v. central western railway corp.

File No.: 20802.

1990: April 30; 1990: December 20.

Present: Chief Justice Dickson* and Chief Justice Lamer** and Wilson, La Forest, L'Heureux‑Dubé, Sopinka, Gonthier, Cory and McLachlin JJ.

on appeal from the federal court of appeal

Constitutional law ‑‑ Division of powers ‑‑ Federal work or undertaking ‑‑ Labour relations ‑‑ CN rail subdivision incorporated as intraprovincial railway ‑‑ Railway continuing to transport grain and to deliver to CN and export network ‑‑ Whether employees subject to federal or provincial labour legislation ‑‑ Constitution Act, 1867, ss. 91, 92.

Labour law ‑‑ Jurisdiction ‑‑ CN rail subdivision incorporated as intraprovincial railway ‑‑ Railway continuing to transport grain and to deliver to CN and export network ‑‑ Whether employees subject to federal or provincial labour legislation.

Central Western operates a 165 km. railway line located entirely within Alberta. The line had been purchased from CN with its financial assistance: CN had been trying to secure approval for the abandonment of the line over the course of two decades. The line was joined to the CN rail network at one point but was separated by a four‑inch gap and a locked derailing device which was controlled by CN.

Central Western serves the grain industry. It arranges for the use of government‑owned grain cars and sees to the delivery of the cars to CN track for onward shipping. (CN does not run trains or cars on Central Western track.) The grain is then sent on to market via CN track to Vancouver. Federally regulated grain handling agencies and export channels are used.

The eight employees of Central Western are members of unions which had national collective agreements with CN. They filed an application with the Canada Labour Relations Board for an order that there had been a sale of the rail line which was governed by the Canada Labour Code. A successful application would bind the appellant to the unions' agreements with CN. The application was granted. An application to the Federal Court of Appeal under s. 28 of the Federal Court Act was dismissed. The constitutional questions before this Court queried whether the Canada Labour Code was constitutionally applicable to the short railway line owned and operated by Central Western.

It was unnecessary to address the matter of s. 92(10)(c) of the Constitution Act, 1867. Prior to the hearing in this appeal, the federal government passed legislation, retroactive to July 1, 1986, which operated to withdraw any s. 92(10)(c) declarations that might exist with respect to Central Western.

Held (Wilson J. dissenting): The appeal should be allowed.

Per Dickson C.J. and Lamer C.J. and La Forest, L'Heureux‑Dubé, Sopinka, Gonthier, Cory and McLachlin JJ.: There are two ways in which Central Western may be found to fall within federal jurisdiction and thus be subject to the Canada Labour Code. First, it may be seen as an interprovincial railway and therefore come under s. 92(10)(a) of the Constitution Act, 1867, as a federal work or undertaking. Second, if the appellant can be properly viewed as integral to an existing federal work or undertaking it would be subject to federal jurisdiction under s. 92(10)(a). These two approaches, though not unrelated, are distinct from one another. For the former, the emphasis must be on determining whether the railway is itself an interprovincial work or undertaking. Under the latter, however, jurisdiction is dependent upon a finding that regulation of the subject matter in question is integral to a core federal work or undertaking.

Railways, by their nature, form a network across provincial and national boundaries. As a consequence, purely local railways may very well "touch", either directly or indirectly, upon a federally regulated work or undertaking. That fact alone, however, cannot reasonably be sufficient to turn the local railway into an interprovincial work or undertaking within the meaning of s. 92(10)(a).

A close commercial relationship exists between Central Western and CN. Central Western is only connected with CN and the various contractual arrangements between the two railways added to the physical connection. These factors, however, did not show that CN operated Central Western. The sale of Central Western resulted in a fundamental change in the management of the rail line, most notably, in the daily control of the business of the rail line. CN exercises no control over the running of the rail line, making it difficult to view Central Western as a federal work or undertaking.

Something more than physical connection and a mutually beneficial commercial relationship with a federal work or undertaking is required for a company to fall under federal jurisdiction. The requisite degree of integration was absent on these facts, and consequently, Central Western was not integral to any federal work or undertaking.

Dependence of a core federal work or undertaking upon a group of workers tends to support federal jurisdiction over those workers. The first task is to identify a core federal work or undertaking in relation to which Central Western might conceivably be seen as integral. Three were identified here: CN, the grain elevators found along the railway, and the "Western Grain Transportation Network".

If work occurs simultaneously between the two enterprises functional integration may exist. This temporal integration does not exist, however, between Central Western and CN as each operates independently within its own sphere. Further, Central Western's employees worked wholly within Alberta and in the normal course of affairs had no occasion to travel beyond that province in a working capacity. Finally, CN was in no way dependent on Central Western's services and would not be severely disadvantaged if the Central Western's employees failed to perform their usual tasks.

Central Western was not essential to the operation of the grain elevators located along the rail line. Elevators exist to receive, grade, handle and store grain but are not directly concerned with the transportation of grain. Grain could be transported from the elevators by alternative means, such as trucking, without altering the usefulness of the elevators along the line. There is an insufficient nexus between the grain elevators and Central Western to bring the railway within federal jurisdiction.

The term "Western Grain Transportation Network" was a "catch all" phrase for the array of federal regulatory powers relating to the movement of grain in Canada. Such a network, however, does not exist for the purposes of the jurisdictional designation of the Central Western. The fact that several entities involved in the transport of grain fall under federal jurisdiction cannot on its own serve to bring everything connected with that industry under federal jurisdiction. Parliament cannot expand its legislative jurisdiction in this manner.

Per Wilson J. (dissenting): Central Western, while not itself a federal work or undertaking, is integrally connected with CN and its labour relations are therefore subject to the Canada Labour Code.

The concept of operational integration more completely and coherently accounts for the existing jurisprudence concerning federal authority over labour relations than does dependency of federal enterprises on "subsidiary" provincial operations which is merely a narrower articulation of the test of operational integration. It strikes a realistic balance between allowing sufficient federal authority over labour relations to avoid patchwork regulation over interprovincial and national industries and protecting provincial jurisdiction in the labour field from undue encroachment. The test must be applied in relation to a single federal work or undertaking. The interrelationship between Central Western and the "Western Grain Transportation Network", which encompassed several federal works or undertakings, could not be considered.

The primary entity to which Central Western is operationally integrated is CN. The analysis of their interrelationship need not be performed in an abstract and acontextual fashion. The entire set of circumstances should be considered, including CN's nature as a going concern, Central Western's nature as a going concern and the connections existing between their operations.

CN, as a "going concern", was an interprovincial railway under an intricate and extensive federal regime. Central Western, a former subdivision of CN, was connected via the intraprovincial rail network and was almost exclusively concerned with the transportation of export grain. The agreements between Central Western and CN clearly demonstrated an ongoing connection between the two operations. These involved sharing the business as to the available grain to be transported (as determined by the Grain Transport Agency), the profits, and the cost and maintenance of some of the physical facilities. The maintenance work on the interchange between the two lines was to be done by employees to be the joint employees of both companies. Under such circumstances Central Western's employees should not fall under a different statutory regime governing their labour relations than CN's.

The relationship between Central Western and CN did not turn solely on a contract of carriage. Both were engaged in the transportation of export grain, were under public duty to perform this function, were carrying out this enterprise for the Grain Transportation Agency, were using the same government‑owned boxcars, and were paid the same amount by the same authority. Lack of co‑ordination of work was a neutral factor. Opportunities for the simultaneous performance of work were limited because of the nature of the operation of the line and therefore employee integration was not a relevant factor. The nature and extent of employee contact was not altered by or since the sale.

The whole fabric of grain transportation, which is an area of massive federal regulation, would be unravelled if this Court were to hold Central Western's employees to be within provincial jurisdiction. Well‑established bargaining patterns and the public interest must be considered and protected by insulating certain sectors of the economy from the disruptive potential of industrial strife. Dividing up labour relations jurisdiction would deprive Parliament of the ability to keep grain flowing in times of industrial unrest and wreak havoc with Parliament's intention to control the transportation of export grain.

Characterizing Central Western's labour relations as falling within federal authority gave effect to the policy articulated by both governments that organized workplaces should not lose the rights they have gained upon a transfer of the business for which they are employed. The Constitution should not be applied in a manner which would defeat this policy.

Cases Cited

By Dickson C.J.

Considered: British Columbia Electric Ry. Co. v. Canadian National Ry. Co., 1931 72 (SCC), [1932] S.C.R. 161; Kootenay & Elk Railway Co. v. Canadian Pacific Railway Co., 1972 182 (SCC), [1974] S.C.R. 955; National Energy Board (Re), 1987 5285 (FCA), [1988] 2 F.C. 196; In re Cannet Freight Cartage Ltd., 1975 2218 (FCA), [1976] 1 F.C. 174; distinguished: Alberta Government Telephones v. Canada (Canadian Radio‑television and Telecommunications Commission), 1989 78 (SCC), [1989] 2 S.C.R. 225; Luscar Collieries Ltd. v. McDonald, 1927 472 (UK JCPC), [1927] A.C. 925; Reference re Industrial Relations and Disputes Act, 1955 1 (SCC), [1955] S.C.R. 529; Letter Carriers' Union of Canada v. Canadian Union of Postal Workers, 1973 183 (SCC), [1975] 1 S.C.R. 178; Northern Telecom Ltd. v. Communications Workers of Canada (No. 1), 1979 3 (SCC), [1980] 1 S.C.R. 115; Northern Telecom Canada Ltd. v. Communication Workers of Canada (No. 2), 1983 25 (SCC), [1983] 1 S.C.R. 733; referred to: City of Montreal v. Montreal Street Railway, 1912 352 (UK JCPC), [1912] A.C. 333; Canadian Pacific Railway Co. v. Attorney‑General for British Columbia, 1949 278 (UK JCPC), [1950] A.C. 122; Construction Montcalm Inc. v. Minimum Wage Commission, 1978 18 (SCC), [1979] 1 S.C.R. 754.

By Wilson J. (dissenting)

Toronto Electric Commissioners v. Snider, 1925 331 (UK JCPC), [1925] A.C. 396; Northern Telecom Canada Ltd. v. Communication Workers of Canada (No. 2), 1983 25 (SCC), [1983] 1 S.C.R. 733; Reference re Industrial Relations and Disputes Act, 1955 1 (SCC), [1955] S.C.R. 529; Letter Carriers' Union of Canada v. Canadian Union of Postal Workers, 1973 183 (SCC), [1975] 1 S.C.R. 178; Northern Telecom Ltd. v. Communications Workers of Canada (No. 1), 1979 3 (SCC), [1980] 1 S.C.R. 115; Attorney General of Canada v. St. Hubert Base Teachers' Association, 1983 131 (SCC), [1983] 1 S.C.R. 498; Construction Montcalm Inc. v. Minimum Wage Commission, 1978 18 (SCC), [1979] 1 S.C.R. 754; In re Cannet Freight Cartage Ltd., 1975 2218 (FCA), [1976] 1 F.C. 174; Re The Queen and Cottrell Forwarding Co. (1981), 1981 1896 (ON SC), 124 D.L.R. (3d) 674; General Teamsters v. Consolidated Fastfrate Ltd. (1976), 76 C.L.L.C. 16,004; MIS (Canada) Holdings Ltd., [1987] O.L.R.B. Rep. 865; Loomis Messenger Service, [1985] O.L.R.B. Rep. 1131; CTG Telecommunications Systems, Inc. (1985), 10 C.L.R.B.R. (N.S.) 231; Inter‑City Truck Lines (Canada) Inc., [1979] 3 Can. L.R.B.R. 40; Kuehne & Nagel Int'l Ltd., [1979] 1 Can. L.R.B.R. 156.

Statutes and Regulations Cited

Act to amend the Industrial Disputes Investigation Act, 1907, S.C. 1925, c. 14.

Act to amend the Railway Act, S.C. 1990, c. 6.

Canada Grain Act, R.S.C., 1985, c. G‑10.

Canada Labour Code, R.S.C. 1970, c. L‑1, ss. 2, 4, 108.

Canadian National Railways Act, R.S.C. 1970, c. C‑10, s. 18(1).

Canadian Wheat Board Act, R.S.C., 1985, c. C‑24, s. 45.

Central Western Railway Corporation Act, S.A. 1984, c. 71.

Constitution Act, 1867, ss. 91(5), 91(29), 92(10)(a), (c), (13).

Federal Court Act, R.S.C. 1970 (2nd Supp.), c. 10, s. 28.

Labour Relations Code, S.A. 1988, c. L‑12, s. 44.

Prohibition Order No. 17, P.C. 1980‑84.

Prohibition Order No. 19, P.C. 1980‑251.

Prohibition Order No. 22, P.C. 1984‑4047.

Railway Act, R.S.C. 1970, c. R‑2, s. 6(1)(c).

Western Grain Stabilization Act, R.S.C., 1985, c. W‑7.

Western Grain Transportation Act, R.S.C., 1985, c. W‑8

Authors Cited

Scott, F.R. "Federal Jurisdiction Over Labour Relations ‑ A New Look" (1960), 6 McGill L.J. 153.

APPEAL from a judgment of the Federal Court of Appeal (1988), 1988 5649 (FCA), 47 D.L.R. (4th) 161, dismissing an appeal from a judgment of the Canada Labour Relations Board. Appeal allowed, Wilson J. dissenting.

T. W. Wakeling and G. D. Chipeur, for the appellant.

Douglas Wray, for the respondents United Transportation Union, Brotherhood of Maintenance of Way Employees and Canadian Signal and Communications Union.

Robert E. Houston, Q.C., for the respondent Brotherhood of Locomotive Engineers.

V. L. Marleau, for the respondent Canada Labour Relations Board.

No one appearing for the intervener the Attorney General of Quebec.

W. Henkel, Q.C., for the intervener the Attorney General for Alberta.

Dickson C.J.

The judgment of Dickson C.J. and Lamer C.J. and Wilson, La Forest, L'Heureux‑Dubé, Sopinka, Gonthier, Cory and McLachlin JJ. was delivered by

Dickson C.J. -‑ The issue in this appeal is whether the provincial or the federal government has jurisdiction, for the purposes of labour relations, over a 105 mile railway line situated wholly within the province of Alberta. The answer turns on whether the railway can be seen as a federal work or undertaking under s. 92(10)(a) of the Constitution Act, 1867, or is integral to such a work or undertaking, so as to bring it within federal jurisdiction, and hence make applicable the provisions of the Canada Labour Code, R.S.C. 1970, c. L‑1 (now R.S.C., 1985, c. L‑2). A significant fact is that the railway was previously owned by a national railway company that was clearly subject to federal jurisdiction, but the line of railway here in question is now owned and operated by a provincial company. In order to answer the jurisdictional question, the physical and operational character of the railway must be examined.

Facts

The appellant, Central Western Railway Corporation, is a railway company incorporated by a statute of the Alberta legislature: Central Western Railway Corporation Act, S.A. 1984, c. 71. It was created to acquire and operate a small railway line in Alberta formerly owned by the Canadian National Railway (CN). Though the railway was called the Stettler Subdivision when it was owned by CN, I will refer to it as ("Central Western").

Central Western runs approximately 105 miles between Ferlow Junction and Dinosaur in central Alberta. It was built between 1909 and 1911 by the Canadian Northern Railway Company (Canadian Northern). In 1919 the federal government acquired ownership of Canadian Northern and all of its holdings, including the whole of Central Western, were transferred to the newly formed CN, a federal crown company. In 1963, CN applied to the Board of Transport Commissioners (a federal government agency) to abandon Central Western. CN requested, however, that a decision on the application not be made until the McPherson Commission (which was looking into transportation issues) made its findings. After those findings were delivered, the federal government declared that 12,413 miles of rail would be protected from abandonment because they comprised a "basic rail network". Certain lines were recommended to be abandoned, however, because they were no longer in use. Decisions about other railway lines, of which Central Western was one, were to await the findings of the Grain Handling and Transportation Commission, more commonly known as the Hall Commission. While awaiting these findings, the federal government protected Central Western through a series of Orders in Council known as Abandonment of Branch Lines Prohibition Orders.

At the Hall Commission's hearings, CN submitted that roughly half of Central Western should be abandoned. In its report, the Hall Commission agreed, although it favoured abandonment of a smaller portion of the rail line. Despite that recommendation and CN's original desire to abandon Central Western, the federal government continued to protect it, as it had done since 1967, through a series of Prohibition Orders. Prohibition Order No. 17 (P.C. 1980‑84), would have extended protection of the railway until January 1, 1985, but it was revoked on September 19, 1980 by Prohibition Order No. 19 (P.C. 1980‑251). This left CN's 1963 application eligible for consideration.

On October 5, 1982, after holding a hearing, the Canadian Transport Commission (CTC) granted an order to abandon over 80 per cent of Central Western effective August 31, 1983. An appeal of this decision was accepted by the Review Committee of the CTC, however, with the result that the date for abandonment was postponed for one year to August 31, 1984. Before this new abandonment date was reached, however, the federal government asked the CTC to reconsider the status of Central Western. On May 30, 1984, the CTC extended the date of abandonment to December 31, 1984. In July, 1984, the federal government asked the CTC to hold a further hearing. The result of this hearing was Prohibition Order No. 22 (P.C. 1984‑4047) which pronounced Central Western to be part of the basic rail network and protected from abandonment until the year 2000. Under the terms of the Railway Act, R.S.C. 1970, c. R‑2, s. 6(1)(c), the validity of this Order is dependent upon the appellant's being subject to federal jurisdiction, which is directly in issue in this appeal.

In 1986, CN gave notice to the United Transportation Union, the Brotherhood of Locomotive Engineers, the Canadian Signal and Communications Union and the Brotherhood of Maintenance of Way Employees (the respondent unions) that the line would be leased for a period of three years to the appellant. In the same year, however, the lease turned into a sale, under the terms of which over half of the purchase price of $2,700,000 was advanced to the appellant as an interest free loan to be repaid no later than July 31, 1997. The appellant obtained the lands, trackage, improvements and chattels, and the leases and operating agreements associated with the property. Virtually all of the rail line (except about three miles) was transferred to the appellant, effective November 21, 1986. As part of the purchase agreement, the appellant agreed to deliver to CN the first 120,000 tonnes of grain transported on the railway during each crop year.

Central Western is, and always has been, used for the transportation of grain. There are nine grain elevators, operated by four grain companies, along the line. These stand on land originally leased from CN and now leased from the appellant. Prior to the sale of the rail line, CN would spot empty grain cars at the elevators to be filled with grain. When the cars were full, CN would dispatch a locomotive to pick up the grain cars and take them to the Camrose Yard, just north of Stettler, for delivery to Vancouver.

Since the sale, the operation is different. Significantly, the appellant's trains do not travel on CN lines, and vice‑versa. Empty grain cars are delivered to the north point of the rail line, at Ferlow Junction, by CN locomotives. Central Western then takes the cars to the various grain elevators, and after being filled with grain they are returned to Ferlow Junction by Central Western. CN then takes the filled grain cars to Vancouver. The division in operation is further reflected by the nature of the physical connection between Central Western and CN Whereas the movement of rail cars was uninterrupted before 1986, a four-inch gap in the line of rail now separates Central Western from CN at both ends. There is a locked derail device, controlled by CN, which allows the lines to be connected. This device is used only when CN locomotives deliver or retrieve grain cars from Ferlow Junction.

It is worth mentioning that all grain cars are owned by the federal or provincial governments. In addition, the transport of grain, in terms of quantity and destination, is determined by the Grain Transportation Agency, in consultation with the Canadian Wheat Board, the latter then informing rail companies of the scheduled movement. Both the Grain Transportation Agency and the Canadian Wheat Board are federal agencies.

The appellant has eight employees. Each of the respondent unions has a national collective agreement with CN, and when first notified of the proposed lease (which became a sale), they filed an application with the Canada Labour Relations Board for an order that there had been a sale of the rail line which was governed by the Canada Labour Code. The effect of a successful application would be to bind the appellant to the unions' collective agreements with CN. The application was granted. The appellant appealed to the Federal Court of Appeal pursuant to s. 28 of the Federal Court Act, R.S.C. 1970 (2nd Supp.), c. 10 (now R.S.C., 1985, c. F‑7). That appeal was dismissed, however, and the appellant has now appealed to this Court.

Relevant Legislation

The relevant statutory provisions are as follows:

Constitution Act, 1867:

92. In each Province the Legislature may exclusively make Laws in relation to Matters coming within the Classes of Subjects next herein‑after enumerated; that is to say,--

93. 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;

(b) Lines of Steam Ships between the Province and any British or Foreign Country;

(c) Such Works as, although wholly situate within the Province, are before or after their Execution declared by the Parliament of Canada to be for the general Advantage of Canada or for the Advantage of Two or more of the Provinces.

Canada Labour Code, s. 2 defines the relevant terms:

2. In this Act

"federal work, undertaking or business" means any work, undertaking or business that is within the legislative authority of the Parliament of Canada, including without restricting the generality of the foregoing:

(b) a railway, canal, telegraph or other work or undertaking connecting any province with any other or others of the provinces, or extending beyond the limits of a province;

(h) a work or undertaking that, although wholly situated within a province, is before or after its execution declared by the Parliament of Canada to be for the general advantage of Canada or for the advantage of two or more of the provinces; and

(i) a work, undertaking or business outside the exclusive legislative authority of provincial legislatures;

Section 108 (now s. 4) sets out the jurisdiction of the Canada Labour Relations Board:

108. This Part applies in respect of employees who are employed upon or in connection with the operation of any federal work, undertaking or business and in respect of the employers of all such employees in their relations with such employees and in respect of trade unions and employers' organizations composed of such employees or employers.

Issues

The following constitutional question was stated:

Is the Canada Labour Code, R.S.C. 1970, c. L‑1, constitutionally applicable to the short line railway owned and operated by the appellant Central Western Railway Corporation?

There are two ways in which Central Western may be found to fall within federal jurisdiction and thus be subject to the Canada Labour Code. First, it may be seen as an interprovincial railway and therefore come under s. 92(10)(a) of the Constitution Act, 1867 as a federal work or undertaking. Second, if the appellant can be properly viewed as integral to an existing federal work or undertaking it would be subject to federal jurisdiction under s. 92(10)(a). For clarity, I should point out that these two approaches, though not unrelated, are distinct from one another. For the former, the emphasis must be on determining whether the railway is itself an interprovincial work or undertaking. Under the latter, however, jurisdiction is dependent upon a finding that regulation of the subject matter in question is integral to a core federal work or undertaking.

Before examining in detail the application of s. 92(10)(a) to this appeal, I should mention the inapplicability of s. 92(10)(c). The Federal Court of Appeal considered the issue of whether Central Western came under federal jurisdiction by virtue of a declaration by Parliament that it was for the general advantage of Canada pursuant to s. 92(10)(c). The relevant provisions alleged to be declarations are sections of two federal statutes (see Canadian National Railways Act, R.S.C. 1970, c. C‑10, s. 18(1), and Railway Act, s. 6(1)(c)). Prior to the hearing in this appeal, however, the federal government passed legislation, retroactive to July 1, 1986, which operated to withdraw any s. 92(10)(c) declarations that might exist with respect to Central Western (see An Act to amend the Railway Act, S.C. 1990, c. 6, Royal Assent given March 29, 1990). It is unnecessary therefore to address the matter of s. 92(10)(c) in disposing of this appeal.

Judgments

Canada Labour Relations Board

The Canada Labour Relations Board agreed with the respondent unions that the rail line was subject to federal jurisdiction. It did not, however, view the railway as an interprovincial work or undertaking, but instead based its decision on a finding that, by virtue of physical and operational connections, the rail line was integral to the following federal works or undertakings: the CN, the grain elevators along the rail line and the "Western Grain Transportation Network". Having found the appellant to be within federal jurisdiction, the provisions of the Canada Labour Code pertaining to the sale of a business were applied and the Board concluded that the appellant was bound by the collective agreements CN had with the respondent unions. The Board acknowledged that the respondent unions' applications would have failed if it had not found Central Western to be a federal work or undertaking because the Canada Labour Code would not have been applicable. Since the Board found Central Western to fall within federal jurisdiction under s. 92(10)(a), it did not proceed to consider whether there existed a valid federal declaration under s. 92(10)(c).

Federal Court of Appeal

(cited as Central Western Railway Corp. v. UTU, 1988 5649 (FCA), [1989] 2 F.C. 186).

Two of the three judges who sat on the appeal held that the appellant was subject to federal jurisdiction, though each for a different reason. Marceau J. found that Central Western fitted squarely within s. 92(10)(a) as an interprovincial railway. Lacombe J., on the other hand, did not find that Central Western was an interprovincial railway or an integral part of a federal undertaking; he preferred to base federal jurisdiction on the finding that there was a declaration of Parliament stating that Central Western was for the general advantage of Canada.

Hugessen J., in dissent, concluded that Central Western correctly fell within provincial jurisdiction. He agreed with Lacombe J. that Central Western could not be seen as falling under s. 92(10)(a) either as a federal work or undertaking or as an integral part thereof. As to the applicability of s. 92(10)(c), however, Hugessen J. made a distinction between a work and an undertaking. He held that a valid declaration existed so as to bring the rail works under federal competence, but felt that this declaration did not extend to labour relations. In support of this distinction, he noted that the word "undertaking" appears in s. 92(10)(a) but not in s. 92(10)(c). Hugessen J. thus concluded that while the federal government can govern the trackage and the right of way of the rail lines, its constitutional authority does not extend to labour relations.

Analysis

The core issue to determine is whether the appellant can be subject to the Canada Labour Code. For this to occur it must first come within federal jurisdiction. As noted above, there are two possible bases for such jurisdiction, and I will deal with each in turn: (1) Central Western is itself a federal work or undertaking pursuant to s. 92(10)(a) of the Constitution Act, 1867, or (2) the appellant falls within s. 92(10)(a) as an integral part of a federal work or undertaking.

(1) Is Central Western a Federal Work or Undertaking?

At the Federal Court of Appeal, Marceau J. founded federal jurisdiction over Central Western on the basis that it fell directly within s. 92(10)(a) by virtue of being an interprovincial railway. The primary ground for this decision was his finding that prior to the sale the railway was an indivisible and integral part of CN. Having made these observations, Marceau J. stated, at p. 198:

It seems to me that such a character, which attaches to the work itself, cannot be seen as having disappeared for the sole reason that the line is now owned and operated by a different corporate entity, or that its connection with CN's line is now controlled by a special device. Being operated exactly as it was previously, the line remains a segment of a railway "connecting the province with other provinces".

This passage highlights the factors considered by Marceau J. in reaching his conclusion. In particular, he found neither the physical separation between Central Western and CN rail lines nor the change in ownership and operation of Central Western to be compelling factors in determining which level of government has consitutional jurisdiction over it. In examining the question of whether Central Western is itself a federal work or undertaking, I will examine these factors in turn.

(a) The Physical Connection

Marceau J. did not attach much significance to the fact that since the sale the rail lines have been separated by a four inch gap which is controlled by a special derail device. The respondents were of the same opinion, arguing that this tiny gap is not indicative of any important change in the railway. In fact, it is their position that the gap does not constitute a physical separation.

In as much as Marceau J. was relying on a physical connection to found federal jurisdiction, that, in itself, is insufficient. As I stated in Alberta Government Telephones v. Canada (Canadian Radio‑television and Telecommunications Commission), 1989 78 (SCC), [1989] 2 S.C.R. 225 (A.G.T. v. C.R.T.C.), at p. 262:

. . . mere interconnection of physical facilities in one province with those in a neighbouring province, territory or state may not be sufficient to attract the characterization of the undertaking involved as interprovincial in nature.

This view is not novel, having long had support in the case law. In City of Montreal v. Montreal Street Railway, 1912 352 (UK JCPC), [1912] A.C. 333 (Montreal Street Railway), for example, the Privy Council considered the validity of a federal statute which attempted to govern the through traffic on all railways, including intraprovincial ones. The statute was held to be ultra vires the federal government, and in the course of delivering judgment, Lord Atkinson commented on the question of whether a physical connection between rail lines was a sufficient basis for federal jurisdiction, at pp. 345‑46:

The right contended for in this case is in truth the absolute right of the Dominion Parliament wherever a federal line and a local provincial line connect to establish, irrespective of all consequences, this dual control over the latter line whenever there is through traffic between them, at least of such a kind as would lead to unjust discrimination between any classes of the customers of the former line. In their Lordships' view this right and power is not necessarily incidental to the exercise by the Parliament of Canada of its undoubted jurisdiction and control over federal lines, and is therefore, they think, an unauthorized invasion of the rights of the Legislature of the Province of Quebec.

The view expressed by Lord Atkinson in Montreal Street Railway is very persuasive. Railways, by their nature, form a network across provincial and national boundaries. As a consequence, purely local railways may very well "touch", either directly or indirectly, upon a federally regulated work or undertaking. That fact alone, however, cannot reasonably be sufficient to turn the local railway into an interprovincial work or undertaking within the meaning of s. 92(10)(a) of the Constitution Act, 1867. Furthermore, if the physical connection between the rail lines were a sufficient basis for federal jurisdiction, it would be difficult to envision a rail line that could be provincial in nature: most rail lines located within a province do connect eventually with interprovincial lines.

The force of the reasoning of this latter point is well illustrated in British Columbia Electric Ry. Co. v. Canadian National Ry. Co., 1931 72 (SCC), [1932] S.C.R. 161 (British Columbia Electric Railway). The British Columbia Electric Railway Company (B.C.E.R.C.) operated certain rail lines in British Columbia. One such line, the Central Park line, was connected to a Canadian Pacific Railway line and a line of the Canadian National Railway, both of which were under federal jurisdiction. The Board of Railway Commissioners for Canada concluded that because part of the B.C.E.R.C.'s rail line formed a connecting link between two other lines of railway under the Board's jurisdiction, it had jurisdiction over the intraprovincial rail line as well. This Court rejected the Board's conclusion and held that the Central Park line fell under provincial jurisdiction. Smith J., for the majority, held, at p. 170:

The mere fact that the Central Park line makes physical connection with two lines of railway under Dominion jurisdiction would not seem to be of itself sufficient to bring the Central Park line, or the portion of it connecting the two federal lines, within Dominion jurisdiction.

As in Montreal Street Railway, the reasoning in British Columbia Electric Ry. Co. make it clear that physical connection to an existing federal railway does not necessarily place a rail line under federal jurisdiction.

Compared to the rail line in British Columbia Electric Railway, Central Western illustrates a stronger case for coming within provincial jurisdiction. The line of track in British Columbia Electric Railway was only one mile long. In light of this relatively short length, it might by thought possible to see the rail line as being merely a link in the chain of a larger interprovincial network; yet, it was held to be under provincial jurisdiction. Central Western is 105 miles long. It is much more difficult to regard it as no more than a fully integrated part of CN's operations. Furthermore, there is no mention of any physical separation between the lines in British Columbia Electric Railway, unlike the situation in this appeal. On these bases, the argument that the physical connection between Central Western and CN brings the former within federal jurisdiction is weak.

(b) The Change in Ownership and Operation of the Railway

While the case law discussed above makes it clear that physical connection cannot be the determinative factor for jurisdictional questions, Marceau J. did not base his decision solely on this aspect of the relationship between CN and Central Western. His conclusion that Central Western fell within federal jurisdiction was also based on the view that the operation of the rail line had not changed subsequent to its sale to the appellant; in his opinion new ownership did not affect the jurisdictional question.

In so much as Marceau J. contends that corporate ownership is not determinative of the jurisdictional issue, he is correct. As I stated for this Court in A.G.T. v. C.R.T.C., at p. 265:

I do not find the fact that the members of Telecom Canada own their respective "works" to be significant. The separate ownership of works does not, in this case, take away from the degree of integration which exists between the member system and the level of cooperation and coordination which exists in the national telephone system; it does not make AGT's system less interprovincial and it does not make the Telecom Canada enterprise a mere loose association of interested parties. Ownership itself is not conclusive. [Emphasis added].

A change in corporate control can be significant, however, where it leads to alterations in the operation of the activity in question. The crucial determination is not simply whether there has been a change of corporate control, but whether the work in question can properly be described, with regard to its nature of operations, as being interprovincial.

In this case, the respondents argue that since Central Western had previously been owned by CN the sale to a provincial company cannot remove it from federal jurisdiction. Moreover, in arguing that there exists a significant operational connection between Central Western and CN, they point to the fact that Central Western is connected only with CN, and note that all of the appellant's freight goes to CN for onward transport. In the same vein, the respondents argue that the various contractual arrangements between the appellants and CN add to the physical connection between the two to establish a functional integration.

The respondents' points are not without merit, yet neither are they convincing. In my view, while the factors mentioned by the respondents indicate a close commercial relationship between the two railways they do not show that CN operates Central Western. Rather, the sale of Central Western has resulted in a fundamental change in the management of the rail line. Most notably, the difference is manifested in the daily control of the business of the rail line. The distribution of the grain cars along the rail line is handled by the appellant, and CN rail cars do not travel on Central Western, nor does the federal rail company participate in the management of any of the leases connected to the property. Basically, CN exercises no control over the running of the rail line, making it difficult to view Central Western as a federal work or undertaking.

The respondents, however, rely on a number of cases in support of their argument on this point. One of these is Luscar Collieries Ltd. v. McDonald, 1927 472 (UK JCPC), [1927] A.C. 925 (Luscar), which is said to aid the contention that the appellant's ownership of Central Western does not immunize the railway from federal jurisdiction. Luscar concerned a short branch line railway that was situated within Alberta. The line was owned and built by a provincial coal company, Luscar Collieries, but was operated by CN and had been constructed for the purpose of future sale to CN. In these circumstances the railway was held to fall under federal jurisdiction, but in delivering the judgment of the Privy Council, Lord Warrington of Clyffe appeared to base his decision on the fact that the local railway was operated by the national company. He stated, at pp. 932-33:

It is, in their [Lordships'] view, impossible to hold as to any section of that system which does not reach the boundary of a Province that it does not connect that Province with another. If it connects with a line which itself connects with one in another Province, then it would be a link in the chain of connection, and would properly be said to connect the Province in which it is situated with other Provinces.

In the present case, having regard to the way in which the railway is operated, their Lordships are of opinion that it is in fact a railway connecting the Province of Alberta with others of the Provinces, and therefore falls within s. 92, head 10 (a) of the Act of 1867. . . . If under the agreements hereinbefore mentioned the Canadian National Railway Company should cease to operate the Luscar Branch, the question whether under such altered circumstances the railway ceases to be within s. 92, head 10(a), may have to be determined, but that question does not now arise. [Emphasis added].

As the above quotation indicates, the Privy Council in Luscar viewed the operation of the line as the determinative factor. This reading of the decision was supported by this Court in British Columbia Electric Railway, supra, at pp. 169‑70. Left open by Luscar, however, is the very issue before the Court on this appeal, namely, whether a transfer of ownership of the rail line could result in a change of jurisdiction. Although there is a connection between the business of the appellant and CN, the arrangement is different from that in Luscar. Most obviously, while the railway in Luscar was owned by a provincial company, it was operated in common with the federal work or undertaking. That is not the case here. CN does not operate Central Western nor does it have any future plan or expectation to take over the railway, as was the case in Luscar. Furthermore, to see the two situations as similar fails to give sufficient notice to the fact that CN has consistently sought to abandon Central Western since 1963.

The respondents also rely on Kootenay & Elk Railway Co. v. Canadian Pacific Railway Co., 1972 182 (SCC), [1974] S.C.R. 955 (Kootenay), to argue that the connection with CN is sufficient to bring Central Western within federal jurisdiction. In Kootenay, the Kootenay and Elk Railway Co. applied to the Canadian Transport Commission for various orders to allow for the free interchange of traffic between a line it had built and a line built by an American company. The purpose of the connection between the two was to allow for the transport of coal from two mining properties in southeastern British Columbia through the United States and then over to the Pacific Coast to be shipped to Japan through British Columbia. One issue raised in Kootenay was whether the B.C. legislature had the authority to incorporate a company for the purpose of building and operating the rail line in question. Relying on Montreal Street Railway, Martland J., for the majority, stated that the railway would neither connect the province with any other province nor extend beyond the limits of British Columbia. He went on to state, at pp. 979‑80:

. . . we are concerned with the nature of the undertaking which it [the legislature of British Columbia] authorized. That undertaking is one which is to be carried on entirely within the province. I do not overlook the fact that its undertaking when coupled with that of Burlington would provide a means of transport of goods from British Columbia into the United States. It may be, as is pointed out in the reasons of the Commission, that when the two lines are joined an overall undertaking of international character will emerge. But in my opinion that possibility did not preclude the British Columbia Legislature from authorizing the incorporation of a company to construct a railway line wholly situate within the borders of the province.

The above quotation indicates that the mere possibility of a rail line acquiring an international character coupled with its physical connection with interprovincial lines does not deprive the provincial legislature of all legislative authority over a railway company. Martland J. also went on to consider Luscar, deciding that the operation of the rail line in that case was determinative. Applying this reasoning to the case before him, he noted that the operation of the Kootenay and Elk Railway would be the sole responsibility of the British Columbia company and thus found the line to fall within provincial jurisdiction.

The respondents rely on Kootenay for the proposition that subsequent interconnection and joint operation with an interprovincial railway may subject a rail line to federal jurisdiction. While this reading of the case is not incorrect, such a proposition does not provide strong support for the respondents' position. Rather, the passage quoted above does not detract from or add anything to what was said in Luscar. In fact, by referring with approval to Luscar, it would appear that Martland J. was of the opinion that the operation of the company is paramount in deciding jurisdictional issues.

A final case relied upon by the respondents is A.G.T. v. C.R.T.C., which is not surprising given that this decision illustrates how a provincially owned company may fall within s. 92(10)(a) by virtue of a functional integration with a national system. Although federal jurisdiction was upheld in that case, it provides little assistance to the respondents. The linchpin in the A.G.T v. C.R.T.C. decision was this Court's finding that A.G.T., by virtue of its role in Telecom Canada and its bilateral contracts with other telephone companies, was able to provide its clients with an interprovincial and, indeed, international telecommunications service. In contrast, the appellant Central Western does not (through bilateral arrangements or otherwise) provide an interprovincial service to its clients: it simply moves grain within central Alberta. Clearly, the required degree of functional integration is absent.

A discussion of the relevant case law thus emphasizes that the basic question remains whether the operation of Central Western permits its characterization as an interprovincial rail line connecting the province of Alberta to other provinces. As has already been stated, the appellant controls and operates its railway without interference or aid from CN, and I therefore reiterate my conclusion that there exists insufficient operational connection between the two railways to support a finding that Central Western falls within federal jurisdiction as an interprovincial railway under s. 92(10)(a) of the Constitution Act, 1867.

(2)Is Central Western an Integral Part of a Federal Work or Undertaking?

To conclude that Central Western is not itself a federal work or undertaking pursuant to s. 92(10)(a) does not necessarily preclude a finding that the railway falls within federal jurisdiction. If Central Western can be characterized as an integral part of a federal work or undertaking, it will nonetheless come under s. 92(10)(a) and be subject to the provisions of the Canada Labour Code. Indeed, it was on this basis that the Canada Labour Relations Board found Central Western to be subject to federal jurisdiction.

(a) The appropriate test

The issue of whether the federal government has jurisdiction over the labour relations of a work or undertaking not in itself federal has been before this Court on a number of occasions. The basic criteria for deciding this issue were addressed in Reference re Industrial Relations and Disputes Act, 1955 1 (SCC), [1955] S.C.R. 529 (the Stevedores' Reference), a case which concerned the constitutional validity of Parliament's attempt to regulate the labour relations of stevedores by means of a predecessor to s. 4 of the Canada Labour Code. In the Stevedores' Reference, the undisputed federal undertaking was the international and interprovincial flow of cargo carried by ships into and out of the port of Toronto. The loading and unloading services were supplied to the shipowner and the cargo shippers by a stevedoring company, which was in no way connected, through corporate ownership, to the shipping concerns. The goods were unloaded by the stevedores and then were placed upon domestic land‑operating transport facilities for onward transportation to the consignee.

This Court found the legislation in question to be intra vires the federal government. In an eight to one decision, the stevedoring operations were found to be an integral or essential part of the interprovincial or international transportation of goods by ship. The operational connection and integration between the federal undertaking and the stevedores was complete ‑‑ the stevedores were an essential "link in the chain" of the federal operation. Effective performance of the federal undertaking would not be possible without the services of the stevedores. Federal jurisdiction there seems to have been based on a finding that the core federal undertaking was dependent to a significant degree on the workers in question.

The above reading of the Stevedores' Reference was verified in Letter Carriers' Union of Canada v. Canadian Union of Postal Workers, 1973 183 (SCC), [1975] 1 S.C.R. 178 (Letter Carriers'), where the same issue was considered. In Letter Carriers', the Canadian Union of Postal Workers challenged the jurisdiction of the Saskatchewan Labour Relations Board to certify a union for the respondent company. The respondent company had a number of contracts with Canada Post for the delivery and collection of mail, these contracts comprising 90 per cent of the respondent company's business. In finding that the employees of the respondent company fell under federal jurisdiction, the court seems to have been much influenced by the dependence of the post office upon its subcontractors for mail delivery. Ritchie J., speaking for the Court, held, at p. 183:

In my opinion the work so described which is performed by these employees is essential to the function of the postal service and is carried out under the supervision and control of the Post Office authorities . . . . [Emphasis added.]

He later commented, at p. 186, that the work of the respondent company's drivers "was an integral part of the effective operation of the Post Office".

Both the Stevedores' Reference and Letter Carriers' cases indicate that dependence of a core federal work or undertaking upon a group of workers tends to support federal jurisdiction over those workers. In subsequent judgments of this Court, this jurisdictional test has been elaborated upon. Prime among these more recent decisions is Northern Telecom Ltd. v. Communications Workers of Canada, 1979 3 (SCC), [1980] 1 S.C.R. 115 (Northern Telecom No. 1), where this Court considered the proper interpretation and application of ss. 2 and 4 of the Canada Labour Code. Specifically, the issue in Northern Telecom No. 1 was whether the employees of Telecom were employed upon or in connection with the operation of any federal work or undertaking, so as to bring them within the jurisdiction of the Canada Labour Relations Board. The core federal work in question was the telephone and telecommunications system operated by Bell Canada.

This Court reviewed the relevant case law and devised a test for the determination of whether a group of employees falls within federal or provincial jurisdiction. This test involves looking for a practical or functional integration between the core federal work or undertaking and the employees in question. In Northern Telecom No. 1, the guiding principles were summarized from the decision of Beetz J. in Construction Montcalm Inc. v. Minimum Wage Commission, 1978 18 (SCC), [1979] 1 S.C.R. 754, and set out as follows at pp. 132‑133:

(1) Parliament has no authority over labour relations as such nor over the terms of a contract of employment; exclusive provincial competence is the rule.

(2) By way of exception, however, Parliament may assert exclusive jurisdiction over these matters if it is shown that such jurisdiction is an integral part of its primary competence over some other single federal subject.

(3) Primary federal competence over a given subject can prevent the application of provincial law relating to labour relations and the conditions of employment but only if it is demonstrated that federal authority over these matters is an integral element of such federal competence.

(4) Thus, the regulation of wages to be paid by an undertaking, service or business, and the regulation of its labour relations, being related to an integral part of the operation of the undertaking, service or business, are removed from provincial jurisdiction and immune from the effect of provincial law if the undertaking, service or business is a federal one.

(5) The question whether an undertaking, service or business is a federal one depends on the nature of its operation.

(6) In order to determine the nature of the operation, one must look at the normal or habitual activities of the business as those of a "going concern", without regard for exceptional or casual factors; otherwise, the Constitution could not be applied with any degree of continuity and regularity.

A recent decision of the British Columbia Labour Relations Board, Arrow Transfer Co. Ltd., provides a useful statement of the method adopted by the courts in determining constitutional jurisdiction in labour matters. First, one must begin with the operation which is at the core of the federal undertaking. Then the courts look at the particular subsidiary operation engaged in by the employees in question. The court must then arrive at a judgment as to the relationship of that operation to the core federal undertaking, the necessary relationship being variously characterized as "vital", "essential" or "integral". As the Chairman of the Board phrased it, at pp. 34‑5:

In each case the judgment is a functional, practical one about the factual character of the ongoing undertaking and does not turn on technical, legal niceties of the corporate structure or the employment relationship.

In Northern Telecom Canada Ltd. v. Communication Workers of Canada, 1983 25 (SCC), [1983] 1 S.C.R. 733 (Northern Telecom No. 2), the same issues were before the Court, though with respect to a different set of workers. It was again emphasized that the jurisdictional question depends mainly upon the nature of the relationship between the core federal work or undertaking and the enterprise in question.

The principles enunciated in Northern Telecom No. 1 are not intended to be applied in a strict or rigid manner; instead, the test should be flexible and attentive to the facts of each particular case. As was stated in A.G.T. v. C.R.T.C., at p. 258:

It is impossible, in my view, to formulate in the abstract a single comprehensive test which will be useful in all of the cases involving s. 92(10)(a). The common theme in the cases is simply that the court must be guided by the particular facts in each situation, an approach mandated by this Court's decision in Northern Telecom, 1980, supra. Useful analogies may be found in the decided cases, but in each case the determination of this constitutional issue will depend on the facts which must be carefully reviewed as was done by the trial judge in the present appeal.

The issue in A.G.T. v. C.R.T.C. differed somewhat from that arising in Northern Telecom No. 1 and Northern Telecom No. 2 as the jurisdictional question related to the Canadian Radio‑television and Telecommunications Commission rather than the Canada Labour Relations Board. Nevertheless, the flexible approach advocated in A.G.T. v. C.R.T.C. is equally applicable in the context of labour relations.

Applying the Northern Telecom No. 1 approach to the facts of this case, the first task is to identify a core federal work or undertaking in relation to which Central Western might conceivably be seen as integral. As stated above, the Canada Labour Relations Board identified three core federal undertakings connected to Central Western: CN, the grain elevators found along the railway, and the "Western Grain Transportation Network". I will examine each of these in turn.

(i) Canadian National Railway

Operating interprovincially, as it does, CN is undoubtedly a federal work and undertaking. The more difficult question is whether there exists between it and Central Western a nexus sufficient to justify placing the latter within federal jurisdiction. In answering this question, the approach set out in Northern Telecom No. 1 suggests that it is necessary to look to the nature of the normal or habitual operation of Central Western.

As described in the facts above, Central Western is used for the transportation of grain. Although the method of moving grain along Central Western has not changed significantly since its sale to the appellant, CN no longer participates in the day to day operations of moving grain between Ferlow Junction and Dinosaur. Presently, CN's only contact with Central Western occurs when its locomotives deliver and retrieve grain cars at the north end of the line. Unlike in Northern Telecom No. 1, there is no daily or simultaneous connection between the two enterprises. In that case, at p. 773, it was noted that the employees of Telecom:

... have contact with, and must closely co‑ordinate their work with, Bell Canada employees. In this overall context, installation is not the end of the manufacturing process. It is not even properly described as the beginning of the operation of the federal undertaking. [Emphasis in original.]

As the above passage indicates, if work occurs simultaneously between the two enterprises functional integration may exist. This temporal integration does not exist, however, between the appellant and CN, as each operates independently within its own sphere. The appellant is responsible for taking empty grain cars to the various elevators, filling them with grain and then transporting them to Ferlow Junction where they are transferred to CN locomotives. Only when the grain cars are transferred do the two companies co‑ordinate their work. The transfer can thus be seen as a connection at the end of the local transportation process, unlike in Northern Telecom No. 1 where the service provided by Telecom took place simultaneously with the service provided by Bell. Both Bell Canada and Northern Telecom were seen to work together in order to provide a single service. Furthermore, it was necessary for Telecom workers to be on Bell premises on a daily basis. Such is not the case in this appeal because CN employees and trains only enter upon Central Western's property in order to transfer grain cars to or from Ferlow Junction.

It is also significant that in both Northern Telecom No. 1 and No. 2, the employees concerned were located in five different provinces, a situation which would seem to advance the conclusion that their work was integral to an interprovincial work or undertaking. The appellant's employees, on the other hand, are located wholly within Alberta and in the normal course of affairs have no occasion to travel beyond that province in a working capacity.

Finally, and perhaps most importantly, it cannot be said that CN is in any way dependent on the services of the appellant. Since 1963, CN has consistently wanted to abandon the Central Western rail line, indicating that the line is not vital or essential to its operations. Consequently, in contrast to the Northern Telecom cases, the core federal undertaking (CN) would not be severely disadvantaged if the appellant's employees failed to perform their usual tasks. In sharp contrast to the Stevedores' Reference or Letter Carriers' case, the effective performance of CN's obligation as a national railway is not contingent upon the services of the appellant. These factors point strongly, almost decisively, against a finding of federal jurisdiction over the employees in question.

(ii) Grain Elevators

The Canada Labour Relations Board also founded federal jurisdiction over Central Western on the conclusion that work performed by employees of the appellant was integral to the operation of the grain elevators located along the rail line. The grain elevators are viewed as a core federal undertaking because there exists a s. 92(10)(c) declaration that they are "for the general Advantage of Canada".

In my view, this issue can be dealt with summarily. As the intervener Attorney General of Alberta argued, the elevators are not dependent upon the continued operation of Central Western. Elevators exist to receive, grade, handle and store grain but are not directly concerned with the transportation of grain. Grain could be transported from the elevators by alternative means, such as trucking, without altering the usefulness of the elevators along the line. There is thus an insufficient nexus between the grain elevators and Central Western to bring the railway within federal jurisdiction.

(iii) Western Grain Transportation Network

The final ground upon which the Canada Labour Relations Board upheld federal jurisdiction over Central Western concerned the rail line's place in what the Board referred to as the "Western Grain Transportation Network". My understanding is that the Board used this term as a "catch all" phrase for the array of federal regulatory powers relating to the movement of grain in Canada. It is fair to assume that the Board was referring to the fact that: (i) the interprovincial rail lines carry grain for transport overseas; (ii) some of the grain cars are owned by a federal government authority; (iii) the movement and distribution of grain is controlled by federal agencies; and (iv) grain elevators are federal works. In my view, however, in order for Central Western to be integrated with a federal work or undertaking, there must exist a discrete and identifiable work or undertaking that is clearly within federal jurisdiction. Such is not the case here.

Put simply, I do not agree that a Western Grain Transportation Network exists for the purposes of the jurisdictional designation of the Central Western. One cannot ignore, of course, the significant federal involvement in the field. But the fact that several entities involved in the transport of grain fall under federal jurisdiction cannot on its own serve to bring everything connected with that industry under federal jurisdiction. Parliament cannot expand its legislative jurisdiction in this manner.

I am in agreement with the Federal Court of Appeal's unanimous rejection of this basis for federal regulatory control. To conclude otherwise would be to grant Parliament a licence to "sweep in" provincial jurisdiction dealing with all matters integral to the so‑called grain transport system. Such a proposition long has been rejected by the courts. For example, in Canadian Pacific Railway Co. v. Attorney‑General for British Columbia, 1949 278 (UK JCPC), [1950] A.C. 122 (the Empress Hotel case), the Privy Council rejected the argument that the regulation of the labour relations of the employees of the Empress Hotel in Victoria was integral to a "unified system" of transportation. Lord Reid, at p. 140, held:

. . . their Lordships can find neither principle nor authority to support the competence of the Parliament of Canada to legislate on a matter which clearly falls within the enumerated heads in s. 92 and cannot be brought within any of the enumerated heads in s. 91 merely because the activities of one of the parties concerned in the matter have created a unified system which is widespread and important in the Dominion.

I find this dicta equally applicable to the case at bar, and thus conclude that the federal government cannot obtain jurisdiction over Central Western by reason of the rail line's relationship with a grain transport system.

(b) Application of the Test in Other Industries

While the general approach to jurisdictional questions adopted in the Northern Telecom cases is critical to the disposition of this appeal, it must not be forgotten that the nature of telecommunication systems is quite different from the railway business. It is worthwhile, therefore, to consider other cases which deal with the same division of powers issues under s. 92(10)(a), but with respect to different industries. In doing so, it will become apparent that the application of the Northern Telecom approach is consistent with jurisdictional rulings made in other cases.

A result comparable to that which I advocate in this appeal was obtained by the Federal Court of Appeal in National Energy Board (Re), 1987 5285 (FCA), [1988] 2 F.C. 196. The issue there was whether a bypass pipeline built entirely within a province in order to link a plant with an interprovincial gas pipeline was subject to federal jurisdiction. After reviewing much of the case law referred to above, MacGuigan J. commented on the nature of the jurisdictional test, stating at p. 216:

In this context it is immediately apparent that in the vast majority of cases under paragraph 92(10)(a) the courts have explicitly required the parties alleging federal jurisdiction to meet what the NEB initially termed the "vital, essential or integral to the undertaking" test, and then shortened to the "essential test". . . . Whatever the terminology adopted, the courts say again and again in these cases that for a work or undertaking to fall under federal jurisdiction under paragraph 92(10(a), it must either be an interprovincial work or undertaking (the primary instance) or be joined to an interprovincial work or undertaking through a necessary nexus (the secondary instance). [Emphasis in original.]

Though built for the express purpose of linking up to an interprovincial pipeline, the pipeline in question was physically contained within the province. For this reason, it was held to fall under provincial jurisdiction. MacGuigan J. found that there did not exist a nexus with the interprovincial work sufficient to bring the intraprovincial pipeline under federal jurisdiction.

The pipeline analogy provides useful support for the disposition that I advocate in this appeal. Central Western is physically contained within the province of Alberta, much like the pipeline in National Energy Board (Re). In both instances, spatial boundaries limit the range of the business' operations, something which can less easily be said with regard to broadcasting systems, where territorial boundaries are not extremely critical to the nature of the enterprise. Indeed, the circumstances surrounding Central Western provide an even stronger case for provincial control than is evident in the pipeline example, it being entirely possible for the appellant to conduct other business along its railway.

I also find it useful to refer to a series of cases commonly known as the "freight forwarder" cases. These cases deal with labour jurisdiction over companies engaged in "freight forwarding"‑‑ the business of collecting freight in a province for the purpose of shipping it outside the province by railway. The leading case is In re Cannet Freight Cartage Ltd., 1975 2218 (FCA), [1976] 1 F.C. 174, where the Federal Court of Appeal held that freight forwarding companies were subject to provincial jurisdiction. I find the comments of Jackett C.J., at pp. 177‑78, applicable in the present appeal:

Even if the applicant's activities and those of the Cottrell Company are viewed as integral parts of a whole, in my view they do not constitute an "undertaking" that falls within section 92(10)(a) of the British North America Act or within the definition of "federal work, undertaking or business" in the Canada Labour Code. In my view, the only interprovincial undertaking involved here is the Canadian National interprovincial railway. Clearly, a shipper on that railway from one province to another does not, by virtue of being such a shipper, become the operator of an interprovincial undertaking. If that is so, as it seems to me, the mere fact that a person makes a business of collecting freight in a province for the purpose of shipping it in volume outside the province by public carrier, does not make such a person the operator of an interprovincial undertaking.

I agree. To hold otherwise would be to undermine completely the division of powers for, absent a requirement of functional integration, virtually any activity could be said to "touch" a federally regulated interprovincial undertaking. In my view, moreover, this Court's dicta consistently suggests that something more than physical connection and a mutually beneficial commercial relationship with a federal work or undertaking is required for a company to fall under federal jurisdiction. In my opinion, the requisite degree of integration is absent on these facts. Consequently, I conclude that Central Western is not integral to any federal work or undertaking.

Conclusions

The issues arising in this appeal may be resolved as follows:

(1) Is Central Western a federal work or undertaking under s. 92(10)(a) of the Constitution Act, 1867 so as to make it subject to the Canada Labour Code?

Answer: No.

(2) Is Central Western nonetheless subject to the Canada Labour Code by reason of its being an integral part of a federal work or undertaking so as to bring it within s. 92(10)(a)?

Answer: No.

The constitutional question is answered as follows:

Is the Canada Labour Code, R.S.C. 1970, c. L‑1 constitutionally applicable to the short line railway owned and operated by the appellant Central Western Railway Corporation?

Answer: No.

The appeal is thus allowed, with costs to the appellant.

Wilson J.

The following are the reasons delivered by

Wilson J. (dissenting) -‑ I have had the benefit of the reasons of my colleague Chief Justice Dickson and I agree with him that the Central Western Railway ("Central Western") is not itself a federal work or undertaking. I disagree, however, that Central Western is not integrally connected to a federal work or undertaking and that therefore the labour relations of the appellant company are subject to provincial jurisdiction. In my view, Central Western is an integral part of the Canadian National Railway ("Canadian National" or "CN") and the labour relations of Central Western are governed by the Canada Labour Code, R.S.C. 1970, c. L-1 (now R.S.C., 1985, c. L-2.)

1. The Relevant Legislation

The Constitution Act, 1867 provides:

91. ... it is hereby declared that (notwithstanding anything in this Act) the exclusive Legislative Authority of the Parliament of Canada extends to all Matters coming within the Classes of Subjects next herein‑after enumerated; that is to say, -‑

92. Such Classes of Subjects as are expressly excepted in the Enumeration of the Classes of Subjects by this Act assigned exclusively to the Legislatures of the Provinces.

93. In each Province the Legislature may exclusively make Laws in relation to Matters coming within the Classes of Subject next herein‑after enumerated; that is to say, -‑

94. 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:

13. Property and Civil Rights in the Province.

The Canada Labour Code, R.S.C., 1970, c. L-1, provides:

2. In this Act

"federal work, undertaking or business" means any work, undertaking or business that is within the legislative authority of the Parliament of Canada, including without restricting the generality of the foregoing:

(b) a railway, canal, telegraph or other work or undertaking connecting any province with any other or others of the provinces, or extending beyond the limits of a province;

(h) a work or undertaking that, although wholly situated within a province, is before or after its execution declared by the Parliament of Canada to be for the general advantage of Canada or for the advantage of two or more of the provinces; and

(i) a work, undertaking or business outside the exclusive legislative authority of provincial legislatures;

108. This Part applies in respect of employees who are employed upon or in connection with the operation of any federal work, undertaking or business and in respect of the employers of all such employees in their relations with such employees and in respect of trade unions and employers' organizations composed of such employees or employers.

2. The Appropriate Test

My colleague Dickson C.J. suggests that the older authorities stand for the proposition that federal jurisdiction over the labour relations of provincial operations follows where federal works or undertakings are dependent on those provincial enterprises. He goes on to observe that there has been a shift in the jurisprudence from this approach to one which permits a broad range of factors to be taken into account but which retains dependency as the sine qua non for federal jurisdiction in labour matters. In my view, the authorities do not reveal that dependency of federal enterprises on "subsidiary" provincial operations is the bench mark of federal jurisdiction over labour relations. A brief review of the relevant caselaw bears this out.

In Toronto Electric Commissioners v. Snider, 1925 331 (UK JCPC), [1925] A.C. 396, the Privy Council determined that the constitutional power to pass laws in relation to labour relations is vested in the provinces by virtue of s. 92(13). The Snider case established the general rule in respect of labour relations matters under the Constitution Act, 1867. Primary provincial competence over labour relations remains the rule to this day: see Northern Telecom Canada Ltd. v. Communication Workers of Canada, 1983 25 (SCC), [1983] 1 S.C.R. 733 (Northern Telecom (No. 2)).

Parliament responded to this decision by amending its legislation to provide that the federal Act applied only to "employment upon or in connection with any work, undertaking or business which is within the legislative authority of the Parliament of Canada": see An Act to amend The Industrial Disputes Investigation Act, 1907, S.C. 1925, c. 14. This approach to Parliament's jurisdiction in labour matters has remained largely unchanged and is now reflected in ss. 2 and 108 (now s. 4) of the Canada Labour Code quoted above.

The idea that Parliament could validly legislate in relation to labour matters in those industries over which it had primary constitutional jurisdiction was not tested for some 25 years until this Court decided what is now known as the Stevedores' Reference (Reference re Industrial Relations and Disputes Act, 1955 1 (SCC), [1955] S.C.R. 529). That case concerned a dispute between two unions over which one was entitled to represent a group of stevedores in the Port of Toronto. One union was certified under federal labour law and had entered into a collective agreement with the company. Subsequently, a different union applied for certification as exclusive bargaining agent under Ontario law. The Ontario Labour Relations Board found that it had jurisdiction over the stevedores and determined to proceed with the application for certification. An order of reference was made to obtain the opinion of this Court regarding the constitutional issue. Kerwin C.J., writing for the majority, held that the federal law which purported to apply to "businesses operated or carried on for or in connection with navigation and shipping" was valid and that it was applicable to the workers in question. Kerwin C.J. stated at p. 535:

... the Act before us should not be construed to apply to employees who are employed at remote stages, but only to those whose work is intimately connected with the work, undertaking or business.

The Stevedores' Reference has provided the "test" by which constitutional jurisdiction over labour relations is determined. Its application was not authoritatively examined by this Court until some 20 years later in Letter Carriers' Union of Canada v. Canadian Union of Postal Workers, 1973 183 (SCC), [1975] 1 S.C.R. 178. In that case Canada Post contracted out some of its delivery and collection of mail work to another company, M & B Ltd. The services performed for the post office constituted approximately 90 per cent of M & B's work. Ritchie J., writing for a unanimous Court, held that as the bulk of the work of the truck drivers in question was performed for the post office, and as the post office was undoubtedly governed by federal law under s. 91(5) of the Constitution Act, 1867, the union in question could not be certified by a provincial labour board to represent the employees of M & B Ltd.

The most recent and authoritative restatement of the approach to be followed in assessing whether a provincial enterprise is sufficiently functionally integrated with a core federal undertaking so as to fall within federal jurisdiction for labour relations purposes is that of Dickson J. in Northern Telecom Ltd. v. Communications Workers of Canada, 1979 3 (SCC), [1980] 1 S.C.R. 115 (Northern Telecom (No. 1)). At page 132 he set out the factors to be considered by the Court as follows:

(1) Parliament has no authority over labour relations as such nor over the terms of a contract of employment; exclusive provincial competence is the rule.

(2) By way of exception, however, Parliament may assert exclusive jurisdiction over these matters if it is shown that such jurisdiction is an integral part of its primary competence over some other single federal subject.

(3) Primary federal competence over a given subject can prevent the application of provincial law relating to labour relations and the conditions of employment but only if it is demonstrated that federal authority over these matters is an integral element of such federal competence.

(4) Thus, the regulation of wages to be paid by an undertaking, service or business, and the regulation of its labour relations, being related to an integral part of the operation of the undertaking, service or business, are removed from provincial jurisdiction and immune from the effect of provincial law if the undertaking, service or business is a federal one.

(5) The question whether an undertaking, service or business is a federal one depends on the nature of its operation.

(6) In order to determine the nature of the operation, one must look at the normal or habitual activities of the business as those of "a going concern", without regard for exceptional or casual factors; otherwise, the Constitution could not be applied with any degree of continuity and regularity.

A recent decision of the British Columbia Labour Relations Board, Arrow Transfer Co. Ltd., provides a useful statement of the method adopted by the courts in determining constitutional jurisdiction in labour matters. First, one must begin with the operation which is at the core of the federal undertaking. Then the courts look at the particular subsidiary operation engaged in by the employees in question. The court must then arrive at a judgment as to the relationship of that operation to the core federal undertaking, the necessary relationship being variously characterized as "vital", "essential" or "integral".

In Northern Telecom (No. 2), supra, operational integration was confirmed as the test for determining federal jurisdiction over labour relations under the Constitution and the decision in that case provides a modern example of how the test is applied in practice. There, this Court held that installers employed by Telecom, a subsidiary of Bell Canada, were governed by federal labour relations legislation. The majority of the Court (at pp. 766‑67) was impressed by the fact that "[t]he 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."

What do the foregoing authorities reveal in terms of the appropriate test to be applied in determining constitutional jurisdiction over labour relations? In my view, dependency of the federal work or undertaking on a provincial enterprise does not provide a unifying basis on which to understand the caselaw as a cohesive whole. First, it is evident from the passages excerpted above that the terminology used by this Court in describing the type of relationship which must exist between federal and provincial businesses before federal authority over labour relations can be invoked has never included "dependency" but rather words such as "integration" or "connection". Additionally and more substantively, I do not believe that the decisions can be explained on the basis of federal dependency on the work performed by provincial enterprises. For instance, in both Northern Telecom (No. 2) and Letter Carriers', no suggestion was made that Bell Canada or the post office respectively were dependent on the services of the provincial enterprises involved. In fact, the Court's emphasis in both cases that the provincial enterprise relied on the federal work for virtually all of its business indicates that provincial dependency on a federal work or undertaking is a significant factor in determining constitutional jurisdiction over labour relations.

In my view, the concept of operational or functional integration or interconnection more completely and coherently accounts for the existing jurisprudence concerning federal authority over labour relations. This is not to say that the dependency of federal enterprises on provincial enterprises is irrelevant to the jurisdictional analysis. On the contrary, because dependency is included within and describes one form of interrelationship, it may often provide a clear and cogent basis for determining federal jurisdiction. It is, in other words, merely a narrower articulation of the test of operational integration.

It has been argued, however, that the narrower test is the preferable one since to construe federal jurisdiction broadly in this area will undermine provincial powers in the field of labour relations. In my view, it does not follow that to afford Parliament with more than very circumscribed jurisdiction will necessarily lead to such a result. Scott in his article, "Federal Jurisdiction Over Labour Relations -‑ A New Look" (1960), 6 McGill L.J. 153, put it well when he said at p. 161: "the alternative to federal authority is not always or necessarily provincial autonomy; it may well turn out to be anarchy".

While Professor Scott may have overstated the case, it is my opinion that the concern which he expressed is one which deserves some recognition. Indeed, this Court has in the past recognized the disintegrative potential of too technical an application of ss. 91 and 92 of the Constitution Act, 1867 in the area of labour matters. For instance, in Northern Telecom (No. 2), Estey J. treated as relevant the fact that the Court's determination as to jurisdiction would not disrupt established bargaining patterns. He correctly observed that in that case the designation of labour relations jurisdiction in the federal or provincial governments would have no disruptive effect because judicial opinion on the jurisdictional question had been deeply divided over many years resulting in a confusing and inconsistent body of regulation. On the other hand, in Attorney General of Canada v. St. Hubert Base Teachers' Association, 1983 131 (SCC), [1983] 1 S.C.R. 498, a case involving the question of jurisdiction over Dominion servants, Chouinard J. writing for the Court commented that the difficulties in dividing up jurisdiction over the federal public service could be easily imagined. And in Construction Montcalm Inc. v. Minimum Wage Commission, 1978 18 (SCC), [1979] 1 S.C.R. 754, the Court rejected a construction contractor's claim that its work at the Mirabel Airport was subject to federal and not provincial employment standards law. At issue was the liability of Montcalm as an employer for certain levies owed to the respondent Commission. In response to Montcalm's argument that jurisdiction over its labour relations varied with the construction projects with which its employees were engaged, Beetz J. said at p. 776:

What is implied, in other words, is that the nature of a construction undertaking varies with the character of each construction project or construction site or that there are as many construction undertakings as there are construction projects or construction sites. The consequences of such a proposition are far reaching and, in my view, untenable: constitutional authority over the labour relations of the whole construction industry would vary with the character of each construction project. This would produce great confusion. For instance, a worker whose job it is to pour cement would from day to day be shifted from federal to provincial jurisdiction for the purposes of union membership, certification, collective agreement and wages, because he pours cement one day on a runway and the other on a provincial highway. I cannot be persuaded that the Constitution was meant to apply in such a disintegrating fashion.

These decisions confirm that ss. 91 and 92 of the Constitution Act, 1867 are not to be applied in an overly narrow fashion and that present day realities, including labour reality, is not to be disregarded. None of this is to say that the constitutional characterization of an enterprise for labour relations purposes is to be wholly guided by concerns over the potential disruption of existing labour relations. On the other hand, the Court would be ill advised to make jurisdictional determinations respecting labour relations without regard to the destructive effects that its decision might produce. Indeed, I would have thought that the Stevedores' test was fashioned with just such considerations in mind. It seems to me that part of the purpose of permitting federal jurisdiction over labour relations in those cases where the work performed by a provincial business is interconnected with a federal business is to ensure that interprovincial and national industries are governed cohesively and coherently under a single labour relations regime. In my view, therefore, the operational integration test strikes a realistic balance between allowing sufficient federal authority over labour relations to avoid patchwork regulation over interprovincial and national industries and at the same time protecting provincial jurisdiction in the labour field from undue encroachment.

3.Is Central Western Functionally Integrated With a Federal Work or Undertaking?

Turning now to the application of the test, a unique aspect of this appeal is the availability of more than one potential federal work or undertaking to which the operational connection of Central Western may be tested. The Canada Labour Relations Board considered the appellant's connection to Canadian National, to the grain elevators and to an overall system it called the "Western Grain Transportation Network". It has been suggested that the Board committed a serious error when it treated the system regulating the trade of export grain as a single entity for the purposes of the jurisdictional characterization under ss. 91 and 92 of the Constitution Act, 1867. I agree with Dickson C.J. that the approach adopted by the Board in this regard was improper and that the "integrally connected" test must be applied in relation to a single federal work or undertaking. Accordingly, I agree that it was not open to the Board to consider the interrelationship between Central Western and the "western grain transportation network".

It is also my view, however, that even although the jurisdictional inquiry is limited to single entities, the analysis of the interrelationship between such a federal entity and a provincial enterprise need not be performed in an abstract and acontextual fashion. The entire set of circumstances should be considered. In this case I believe that the primary entity to which Central Western is operationally integrated is the CN. In examining that relationship I believe that consideration of Canadian National's role in the federal regulatory regime governing export grain and its transportation is crucial.

It is therefore appropriate in this case to restate the questions put in Northern Telecom (No. 1) as follows: (1) what is the nature of Canadian National as a going concern? (2) what is the nature of Central Western as a going concern? and (3) what connections exist between the operation of Central Western and the operation of Canadian National?

It is trite to say that Canadian National is an interprovincial work within the meaning of s. 92(10)(a) of the Constitution Act, 1867 by virtue of the fact that its trackage traverses several provincial boundaries. There is more, however, to the nature of the CN as a "going concern" than the fact that its physical facilities extend beyond the geographic boundary of the province of Alberta. Canadian National is also an interprovincial undertaking in the sense that it is engaged in the business of the transportation of export grain. Along the track on land leased by Canadian National there are nine grain elevators operated by four grain companies. These elevators are used by local grain producers who, in order to have access to these facilities, must comply with federal law governing grain storage. Legislation governing the production and marketing of grain includes the Canada Grain Act, R.S.C., 1985, c. G-10, the Canadian Wheat Board Act, R.S.C., 1985, c. C-24, and the Western Grain Stabilization Act, R.S.C., 1985, c. W-7. Grain transportation from the elevators to world markets is governed by the Western Grain Transportation Act, R.S.C., 1985, c. W-8, under which a federal body determines when, where and how much grain is to enter the transportation system. Finally, the ports from which the grain is shipped from Canada are also federally regulated.

Canadian National operates its grain transportation business under this intricate federal regime. Upon notification by the Grain Transportation Agency that the grain cars were full, the CN would dispatch a train to pick up the loaded grain cars and take them to the north end of the Stettler line. There the loaded grain cars would be dropped off to be picked up by another crew, eventually to make their way to Vancouver. On the return trip, empty grain cars would be picked up to "spot" (drop off) at the various grain elevators. Government reports showed that all of the outbound traffic from the Stettler Subdivision consisted of grain. Besides the inbound traffic of empty grain cars some inbound traffic existed consisting of agricultural implements and the like but this traffic was very minimal.

It should be evident that the degree of federal involvement in the CN's grain transportation business is expansive indeed. Historically, rail has been the primary mode by which grain has been transported to port. Many of the grain elevators across the Prairies were specifically built along the railway in order to have close access to transportation facilities. Many of these elevators have been declared to be works for the general advantage of Canada under s. 92(10)(c) of the Constitution Act, 1867. The railways are under a public obligation to transport grain. They have no say in how much or where grain is to be shipped. The boxcars used in the shipment of grain are owned by the federal government. The production, movement and distribution of grain is controlled by an array of federal agencies. Finally, the federal government sets the freight rates for the railways and pays carriers such as the CN a subsidy (if necessary) to fulfill its public obligation to transport grain to port.

I conclude, therefore, that for the purposes of this appeal, the CN operates as an interprovincial railway largely concerned with the transportation of export grain and that the Stettler Subdivision was used almost exclusively for this purpose.

What is the nature of Central Western as a going concern? The evidence discloses that Central Western is similarly engaged in the transportation of export grain. Like Canadian National its contracts of carriage for other commodities comprise an insignificant proportion of its business. While it argues that it would like to expand its operation to include the transport of other items, such as yet unrealized hopes for the future are not constitutionally significant. As was said by Kerwin C.J. in the Stevedores' Reference, supra, at pp. 536-37:

... the fact that the Company by its charter has power "to carry on a general dock and stevedoring business in all its branches" does not require us to consider the possibility of such a power being used, or indeed the possibility of anything except the facts as they are presented to us. The circumstance that the Company is an organization independent of the steamship companies with which it contracted, does not, in my opinion, affect the matter, and I find it difficult to distinguish the employees we are considering from those, engaged in similar work, employed directly by a shipping company whose ships ply between Canadian and foreign ports.

Central Western carries on precisely the same business on the line as performed by Canadian National prior to the sale of the Stettler Subdivision. Paragraph 37 of the Agreed Statement of Facts filed with the Canada Labour Relations Board states that the CN would spot empty grain cars at the various grain elevators along the route which would be filled by the grain companies. Upon notification that they were full, the CN would dispatch a train crew out of Hanna to pick up the cars and carry them to the Camrose Yard which is located at Ferlow Junction. The Hanna crew would drop the loaded cars at the Camrose Yard and pick up a load of empty cars to spot at the various grain elevators on their trip back to Hanna. The loaded cars at the Camrose Yard would be taken by a different crew to Edmonton and so on to the coast for overseas delivery.

Central Western operates the Stettler Subdivision in much the same way. Paragraph 35 of the Agreed Statement of Facts informs us that once the Grain Transportation Agency has determined the number of cars needed and their destination, Central Western receives notice from that Agency as well as the CN. Canadian National delivers the appropriate number of cars to the interchange at Ferlow Junction (i.e., the location of the derail device some 1.75 miles south of the Camrose Yard) to be picked up by Central Western and distributed to the various grain elevators. Once the cars are filled, Central Western returns the loaded hoppers to Ferlow Junction to be carried to the coast by the CN in the same manner as had previously been done.

Like the CN, Central Western's grain transportation business is heavily regulated by federal authorities. It has no autonomy regarding when, where or whether to transport grain; these matters are dictated to it by the Grain Transportation Agency pursuant to statutory authority. It services grain elevators which are subject to s. 92(10)(c) declarations: see s. 45 of the Canadian Wheat Board Act, supra. It transports grain in boxcars that are owned by the federal government. Finally it receives its compensation for the transport of grain from two sources: (1) the grain companies, and (2) the Ministry of Transport.

I conclude therefore that Central Western is an intraprovincial railway which, as a part of an interprovincial rail network, is almost exclusively concerned with the transportation of export grain.

I now turn to the last leg of the jurisdictional analysis, ie., an inquiry into the degree of interconnection between the two operations.

The agreement of sale reached between Central Western and the CN clearly demonstrates that an ongoing connection between the two operations and their joint participation in the transportation of export grain was contemplated. By the terms of the agreement Canadian National sold to Central Western almost all of the lands of the Stettler Subdivision, the trackage, improvements and chattels, and the leases and operating agreements attached to the property. Canadian National advanced to Central Western approximately $1,900,000 to be applied towards the purchase price and in return the purchaser agreed to deliver to Canadian National in each crop year the first 120,000 metric tonnes of export grain originating on the line. The agreement further provides that export grain in excess of the stipulated amount "shall be negotiable with the Vendor as to interchange and as to rate division". According to the witness who executed the agreement on behalf of Canadian National, the figure of 120,000 tonnes represented the average haulage of the railway per crop year based on a five year sample. It was further disclosed that the transportation of export grain represented almost the sum total of the business carried out on the branch line. It is thus evident that the essence of the deal entered into between the two rail carriers was that the vendor would loan the purchase price to Central Western in exchange for the latter's agreement to provide the CN and not its competitors with all of its export business. In the event that Central Western becomes unable to perform its obligations under the agreement, Canadian National is entitled to take back the property and all other items conveyed in the sale.

Central Western and Canadian National also entered into an "Interchange Agreement" and a "Maintenance and Repair Services Agreement". These agreements govern the rights and obligations of the parties regarding the construction and maintenance of the interchange facilities and the maintenance and repair of rolling stock. Under the maintenance and repair agreement, the CN has agreed to repair and maintain all of the rolling stock passing between the two lines, except for that owned by Central Western. According to the terms of the interchange agreement, there is to be cost sharing for the construction of the interchange facilities. Central Western is responsible for maintaining the interchange, which is located on its property, in good repair. Central Western is to keep accounting records concerning these matters and is obliged under the contract to submit its records to the CN on a monthly basis for its inspection. Employees who perform maintenance work on the interchange are deemed, under the contract, to be the joint employees of Central Western and Canadian National.

The terms of these agreements demonstrate, in my opinion, that an extensive amount of integration exists between the operations of Canadian National and Central Western. They share in the available work (i.e., the available grain to be transported as determined by the Grain Transport Agency), the profits, and the cost and maintenance of some of the physical facilities. Of particular significance to me is the fact that in so far as the maintenance work on the interchange is concerned, employees who engage in this work are deemed to be the joint employees of both companies. Under such circumstances it cannot be that the employees of Central Western should fall under a different statutory regime governing their labour relations than the employees of Canadian National.

Central Western has argued, however, that this case is analogous to what have become known as the "freight forwarding" cases: see In re Cannet Freight Cartage Ltd., 1975 2218 (FCA), [1976] 1 F.C. 174; and Re The Queen and Cottrell Forwarding Co. (1981), 1981 1896 (ON SC), 124 D.L.R. (3d) 674 (Ont. H.C.). These decisions have been followed by a number of labour relations boards across the country and now form part of the "labour jurisprudence" concerning division of constitutional powers in the labour relations setting: see General Teamsters v. Consolidated Fastfrate Ltd. (1976), 76 C.L.L.C. 16,004 (Alta. Board of Industrial Relations); MIS (Canada) Holdings Ltd., [1987] O.L.R.B. Rep. 865 (Ont. L.R.B.); Loomis Messenger Service, [1985] O.L.R.B. Rep. 1131 (Ont. L.R.B.); CTG Telecommunications Systems, Inc. (1985), 10 C.L.R.B.R. (N.S.) 231 (Ont. L.R.B.); Inter-City Truck Lines (Canada) Inc., [1979] 3 Can. L.R.B.R. 40 (B.C.L.R.B.); and Kuehne & Nagel Int'l Ltd., [1979] 1 Can. L.R.B.R. 156 (B.C.L.R.B.). Both Cannet and Cottrell concerned the constitutional characterization of shippers who contracted, for the benefit of their customers, with federal railways to ship goods out of province. In each case, the provincial operation or its subsidiary would pick up the consigned goods and take them to a railway terminal which was rented from the railway. There the goods would be consolidated and loaded into boxcars owned by the railway for shipment. In Cottrell the only issue was whether the shipping company was itself a federal work or undertaking within the meaning of s. 92(10)(a) of the Constitution Act, 1867 (a question which was resolved in the negative by the Divisional Court) and is of no relevance to the following discussion. In Cannet at issue was the jurisdiction over the labour relations of Cannet, a subsidiary trucking operation of Cottrell. The Federal Court of Appeal held Cannet's employees were employed on or in connection with the shipping enterprise and not with the railway. The essence of the Court of Appeal's decision in Cannet is perhaps best captured by the words of Heald J. at p. 181:

The factual situation in this case is rather the exact reverse of the situation in Eastern Canada Stevedoring. In the Eastern Canada Stevedoring case (supra), the shipping companies engaged Eastern Canada Stevedoring to load and unload whereas, in the case at bar, Cannet, in the course of its business rented from the CNR railway cars and loaded those cars with goods belonging to Cannet's customers in the Toronto area. Cannet's entire sphere of operation in its business is local, i.e. the Toronto, Ontario area. It is the CNR that is in the business of transporting the railway cars and their contents across provincial boundaries, not Cannet.

Central Western argues that this case is similar. It maintains that the only thing which distinguishes this case is the nature of the product transported. The fact that Central Western is engaged in the transportation of grain ultimately bound for export is not, according to the appellant, sufficient to subject its labour relations to federal jurisdiction.

I do not agree. In Cannet the employees in question were not in any way involved with the operation of the railway. Instead, they were involved primarily in the loading and unloading of goods onto railway cars which their employer had contracted to ship. The Court found that the only connection between the work and the railway was through a contract for carriage. The relationship between Central Western and the CN, in contrast, could not possibly be characterized as one turning solely on a contract of carriage. Here, the CN and Central Western are both engaged in the same enterprise (the transportation of export grain), are both under public duty to perform this function, are both carrying out this enterprise for the same entity (the Grain Transportation Agency), are both using the same government-owned equipment (the boxcars), and are both paid the same amount by the same authority. It is my opinion that the freight forwarding cases simply do not assist the appellant and accordingly I would hold that the labour relations of Central Western are governed by federal law.

It has also been suggested that the fact that there is no simultaneous connection between the employees of the CN and Central Western dictates against the labour relations of the latter being swept under federal jurisdiction. My colleague has quite rightly noted that, unlike the situation in Northern Telecom (No. 2), the employees of the two railways in question here do not really perform their tasks simultaneously. To my mind, however, lack of co-ordination of work is a neutral factor in this case. It is the nature of the enterprise at issue here which dictates against employee integration as a relevant factor. As I indicated previously, employees of the CN on the Stettler Subdivision worked only on that line. Their only point of contact with other employees of CN would be at the Camrose Yard where the boxcars would be transferred to another locomotive. The same system has remained in place since the sale. Thus, because of the nature of the operation of the line, opportunities for the simultaneous performance of work are limited indeed. The most that can be said is that the nature and extent of employee contact has not been altered by or since the sale.

In my view, the finding that Central Western is sufficiently integrated with Canadian National so as to bring its labour relations within the scope of federal authority accords well with the history and purpose behind the new manner in which the branch line was conceived and is in fact being operated.

As has been noted, the sale of the line was effected as part of a test project to examine alternatives to branch line abandonment. The general features of the proposed project were described by Transport Canada in its Information Bulletin (dated June 19, 1986) as follows:

... The Stettler Subdivision has been selected for a short line railway demonstration project to evaluate alternatives to railway branch line abandonment.

Under the concept, producers will deliver grain to the elevators as normal. It will then be moved by the CWR to an interchange with Canadian National Railways at either end of the line, or with Canadian Pacific Railway at the Town of Stettler. During the test period, financial assistance will be provided by the federal government to CWR, to maintain producer rates at the level set by the Western Grain Transportation Act.

Here again the point should be made that Central Western was envisioned and indeed operates as one component of a highly integrated system of grain transportation. There is no doubt that Central Western is carrying on the very same function performed by Canadian National prior to the sale. Quoting from the cross-examination of Mr. Payne, president of Central Western, by Mr. Wray, counsel for three of the respondent unions:

Q.I take it that the, that the ultimate destination of these customers is the same under your operation as it was under CNR?

A.I would think so, yes.

Q.In other words the, the whole, the whole thrust of this transportation is to get the grain to port?

A.Yes.

Q.And that's true whether it was CNR taking it there or whether it's you feeding into the CNR taking it to port?

A.Yes.

Q.And the port is, is the west coast, in the vast majority of cases, is it?

A.Yes.

Q.So you've got the same customers, you're transporting the same product, the ultimate destination is the same. Correct?

A.Yes.

Q.And it's moving down the same track?

A. Yes.

Q.And once it's handed over to CNR, or possibly CPR, it'll head to the coast in exactly the way it's always done?

A.Yes.

It seems to me that if Canadian National is obliged to continue to operate the Stettler Subdivision it cannot avoid that responsibility by simply selling that portion of the line which it has unsuccessfully sought to abandon. As originally conceived, the purpose of the project was simply to explore other ways of operating the line. Federal assistance was granted to achieve that end. It was always understood that Central Western would do as Canadian National did but would seek more cost efficient ways of fulfilling that function. And in the event the project fails, the line and everything associated with it will revert back to the CN and it will continue to be bound by the order prohibiting abandonment.

The fact that alternative mechanisms have been attempted to make the system of grain transportation more effective as a whole cannot, without more, change the constitutional characterization of the enterprise. Simply put, Central Western is a short line railway whose operation has been carved out from the CN. Its tracks go nowhere but to Canadian National tracks. Central Western's business consists almost entirely of the transportation of grain to CN and the return of emptied cars from CN. Operationally, it is part of the CN which, it is to be remembered, must continue to operate the line until the protection order expires and the line is permitted to be abandoned. Were this Court to hold otherwise, the whole fabric of grain transportation, an area inundated by federal regulation, would be unravelled.

In closing, I should like to add that this disposition of the jurisdictional issue makes good labour relations sense. It is in the public interest that the integrated elements of an interprovincial work or undertaking be subsumed under federal jurisdiction for the purposes of collective bargaining so that the disruptive effects of industrial unrest be contained and minimized. Especially in those industries which form a vital part of Canada's export economy a rational and cohesive system of labour relations is vital. In such industries it is often the case that labour is organized on a nation-wide or region-wide basis. Part of the purpose of designating such large bargaining units is to ensure that work stoppages in discrete sub-elements of the scheme do not bring the whole system to a crashing halt. From the point of view of labour as well it may be that regulation under a single legislative regime may be desirable as it prevents the fragmentation of bargaining units and hence the dislocation of communities of workers.

Protection of well-established bargaining patterns and protection of the public interest in insulating certain sectors of the economy from the disruptive potential of industrial strife are both considerations of some consequence in the present appeal. The labour relations reality of the situation is that the railway workers employed by Canadian National and Canadian Pacific are subject to the Canada Labour Code as were the members of the unions who brought the present application before their discharge upon the sale of the Stettler Subdivision to Central Western. The terms and conditions of employment of these workers are governed by national collective agreements. This has been the pattern of bargaining in the railway sector for many years.

As well, as was noted by the Canada Labour Relations Board, dividing up labour relations jurisdiction in this case would deprive Parliament of the ability to keep grain flowing in times of industrial unrest. I agree with the Board when it said that to find provincial jurisdiction in this instance would wreak havoc with Parliament's obvious intention to control the transportation of export grain.

Finally, the constitutional characterization of the labour relations of Central Western as falling within federal authority is desirable from the point of view of legislated labour policy. These proceedings were commenced when the respondent unions applied to the Canada Labour Relations Board for a declaration that a sale of a business had taken place within the meaning of s. 144 of the Code. The purpose of this application was, of course, to preserve the bargaining rights of the respondent unions and the employees they represent who were adversely affected by the sale. Like the federal Code, s. 44 of the Alberta Labour Relations Code, S.A. 1988, c. L-12, provides that bargaining rights survive a sale of a business. The respective governments of both jurisdictions have thus articulated the same policy namely that organized workplaces should not lose the rights they have gained upon a transfer of the business for which they are employed. It would be unfortunate indeed if the Constitution were applied in a manner which defeated this laudable policy.

4. Disposition

I would dismiss the appeal with costs to the respondents.

I would answer the constitutional question as follows:

Is the Canada Labour Code, R.S.C. 1970, c. L-1 constitutionally applicable to the short line railway owned and operated by the appellant Central Western Railway Corporation?

Answer: Yes.

Appeal allowed with costs, Wilson J. dissenting.

Solicitors for the appellant: Milner & Steer, Edmonton.

Solicitors for the respondents United Transportation Union, Brotherhood of Maintenance of Way Employees and Canadian Signal and Communications Union: Caley & Wray, Toronto.

Solicitors for the respondent Brotherhood of Locomotive Engineers: Soloway, Wright, Ottawa.

Solicitors for the respondent Canada Labour Relations Board: Canada Labour Relations Board, Ottawa.

Solicitor for the intervener the Attorney General of Quebec: The Attorney General of Quebec, Ste‑Foy.

Solicitor for the intervener the Attorney General for Alberta: The Attorney General for Alberta, Edmonton.

• Chief Justice at the time of hearing.

** Chief Justice at the time of judgment.