Sept-Îles (City) v. Quebec (Labour Court), 2001 SCC 48, [2001] 2 SCR 670

Sept-Îles (City) v. Quebec (Labour Court), [2001] 2 S.C.R. 670, 2001 SCC 48

City of Sept-Îles                                                                                               Appellant

v.

Canadian Union of Public Employees, Local 2589                                      Respondent

and

Labour Court                                                                                                 Respondent

and

2862-3775 Québec inc.                                                                                  Respondent

and

Services sanitaires du St-Laurent inc.                                                         Respondent

Indexed as:  Sept-Îles (City) v. Quebec (Labour Court)

Neutral citation: 2001 SCC 48.

File No.:  27291.

2000:  October 30;  2001:  July 13.

Present:  McLachlin C.J. and L’Heureux‑Dubé, Gonthier, Iacobucci, Major, Bastarache and Arbour JJ.

on appeal from the court of appeal for quebec

Labour law — Transfer of operation of part of undertaking —  Subcontracting of municipal service — Definition of undertaking — Degree of autonomy subcontractors given — Decision of labour commissioner finding transfer of operation of part of undertaking and transferring certification and collective agreement to new subcontractors — Degree of autonomy required to find transfer of operation of part of undertaking — Whether commissioner adopted functional definition of undertaking — Labour Code, R.S.Q., c. C‑27, s. 45.

Administrative law — Judicial review — Standard of review — Labour Court — Standard of review applicable to decisions of Labour Court in relation to whether undertaking alienated or operated by another — Labour Code, R.S.Q., c. C‑27, ss. 45, 46.

The appellant City contracted out garbage collection in certain districts of the City to subcontractors.  In accordance with art. 15 of the collective agreement between the City and the respondent union representing the City’s salaried manual labourers, no unionized employees were laid off, had wages cut or lost benefits as a result of the contracts with the subcontractors.  The union filed motions under s. 45 of the Labour Code with the labour commissioner general, seeking to have the transfer of the certification and the collective agreement to the subcontractors recorded.  According to the evidence adduced, the subcontractors used their own staff and their own equipment, continued to exercise complete authority to manage their staff and were required to comply with the City’s instructions regarding the proper performance of the contract.  The City continued to be ultimately responsible for a number of aspects of the garbage collection service.  In a decision affirmed by the Labour Court, the commissioner recorded the partial transfer of the City’s rights and obligations to the subcontractors and held that they were bound by the certification and collective agreement.  The Superior Court found that it was patently unreasonable to consider only the transfer of functions and allowed the applications for judicial review brought by the City and one of its subcontractors.  The Court of Appeal restored the decision of the Labour Court, stating that the applicable standard of review was patent unreasonableness and that the decision of the Labour Court in the case at bar did not contain any error that might justify intervention by the superior courts.

Held (Bastarache J. dissenting):  The appeal should be dismissed.  The  Labour Court’s decision is not patently unreasonable.

Per McLachlin C.J. and L’Heureux-Dubé, Gonthier, Iacobucci, Major  and Arbour JJ.:  The standard of review is patent unreasonableness.  Under the principles developed by the Labour Court following Bibeault, s. 45 of the Labour Code may apply to subcontracts where the transferee, in addition to performing functions similar to those performed by the transferor to which the certification originally applied, receives a right to operate part of the transferor’s undertaking.  Those principles are not patently unreasonable and do not conflict with the decisions of this Court, which provide that it is up to the specialized decision‑making authorities to weigh the applicable criteria in order to determine whether a transfer of the operation of an undertaking has occurred.  Moreover, the decisions of the commissioner and the Labour Court in this case do not represent a return to a functional definition of an undertaking.  On the contrary, the specialized decision-making authorities have sought to identify the essential elements of the part of an undertaking of which the operation had been transferred, by considering the nature of the undertaking and the relative importance of its various components.  That approach is consistent with the definition of an undertaking adopted by this Court in Bibeault.

In addition, in situations involving the transfer of the operation of part of an undertaking, the Labour Court has developed reasonable principles for adapting the requirement that the transferee be given a sufficient degree of autonomy so that a conclusion may be made that the operation of an undertaking has been transferred.  The existence of a contract laying down certain precise methods of performing the work is not a barrier to applying s. 45.  In previous decisions, this Court has not adopted a rigid and absolute requirement that a subcontractor must have total control over the part of the undertaking of which the operation was transferred.  In this case, the commissioner and the Labour Court used the criterion of the subordination of the employees to the contractors in order to determine the degree of legal autonomy that the contracts gave the contractors in operating the part of the undertaking that had been transferred.  The function of developing the criteria for assessing the degree of autonomy that the transferee must be given in order to conclude that s. 45 applies is central to the specialized jurisdiction of the labour commissioner as it relates to the transfer of the operation of an undertaking.  The principles that were applied in this case do not result in absurdity, but rather ensure the rational and realistic application of s. 45.

Article 15 of the collective agreement, which authorizes subcontracting on certain conditions, does not amount to a waiver of the application of s. 45, or a contractual exception to that provision.  Indeed, since s. 45 is a provision of public order, its application cannot be precluded by a contractual provision.

Although the collective agreement will normally follow the certification, a distinction can be made, under ss. 45 and 46 of the Labour Code, between first transferring the certification and then deciding whether it is appropriate to transfer the entire collective agreement.  Contractual provisions designed to protect the employees in the event of a transfer of operation, as well as the concrete fact situation prevailing in the undertaking and the industry in general, are relevant factors that the commissioner may consider when deciding whether the collective agreement should be transferred.  However, the commissioner and the Labour Court have the sole authority to examine the factors in question and select the solution they consider most appropriate.  In this case, the specialized decision-making authorities opted for transfer of the collective agreement.  That solution involves certain disadvantages, but they are not sufficient to warrant judicial review in a situation where the standard of review to be applied is patent unreasonableness.

The Act respecting sales of municipal public utilities is not relevant in determining whether s. 45 of the Labour Code applies.  The fact that there are special mechanisms to enable a municipality to alienate certain public utilities does not affect the analysis of the consequences, in labour law, of the alienation or transfer of those  services.

Per Bastarache J. (dissenting):  The Labour Board’s decision – that the contracting out of the garbage collection was a partial operation by another of the City’s undertaking sufficient to trigger s. 45 of the Labour Code – was patently unreasonable. First, Bibeault prohibited a purely functional definition of “undertaking” in s. 45 that would be revived by a finding of successorship in a situation where all that was transferred was tasks or work. In that decision, a “total control” understanding of the type of subcontracting that could trigger s. 45 was adopted.  Here, while the subcontractors had responsibility over their personnel, the City did not assign them total control over the garbage collection service but rather continued to play a management and supervisory role. Section 45 can only apply to subcontracting situations in which the former employer gives up overall responsibility for the work performed and the contractor assumes complete responsibility for that work. Second, the  autonomy requirement in a successorship analysis found in Lester was not met.  This requirement involves two  elements. The first element is the idea that what is being transferred must be a viable functional economic vehicle or entity.  The second element is one of finality to the transfer in the sense that the first business no longer has control over the part of the business that has been given over.  When, as here, what is being ceded is work alone and the transferor maintains responsibility over the transferee, this element of  finality has not been satisfied.

Cases Cited

By Arbour J.

Followed:  Ivanhoe inc. v. UFCW, Local 500, [2001] 2 S.C.R. 565, 2001 SCC 47, aff’g [1999] R.J.Q. 32; U.E.S., Local 298 v. Bibeault, [1988] 2 S.C.R. 1048; Lester (W.W.) (1978) Ltd. v. United Association of Journeymen and Apprentices of the Plumbing and Pipefitting Industry, Local 740, [1990] 3 S.C.R. 644; considered:  Université McGill v. St-Georges, [1999] R.J.D.T. 9; Syndicat des employées et employés professionnels et de bureau, section locale 57 v.  Commission scolaire Laurenval, [1999] R.J.D.T. 1; referred to:  Syndicat des cols bleus de Ville de Saint-Hubert v. Ville de Saint-Hubert, [1999] R.J.D.T. 76, aff’g St-Hubert (Ville de) v. Prud’homme, J.E. 95-1642, rev’g Syndicat des cols bleus de Ville de St-Hubert v. Entreprises Gilles Tisseur inc., D.T.E. 95T-318; Maison L’Intégrale inc. v. Tribunal du travail, [1996] R.J.Q. 859, leave to appeal refused, [1996] 3 S.C.R. xi.

By Bastarache J. (dissenting)

Ivanhoe inc. v. UFCW, Local 500, [2001] 2 S.C.R. 565, 2001 SCC 47, aff’g [1999] R.J.Q. 32; Ajax (Town) v. CAW, Local 222, [2000] 1 S.C.R. 538, 2000 SCC 23; U.E.S., Local 298 v. Bibeault, [1988] 2 S.C.R. 1048; Lester (W.W.) (1978) Ltd. v. United Association of Journeymen and Apprentices of the Plumbing and Pipefitting Industry, Local 740, [1990] 3 S.C.R. 644.

Statutes and Regulations Cited

Act respecting sales of municipal public utilities, R.S.Q., c. V-4, s. 1 [repl. 1987, c. 57, s. 814].

Act respecting the conditions of employment in the public sector and the municipal sector, S.Q. 1993, c. 37.

Labour Code, R.S.Q., c. C-27, ss. 45, 46 [repl. 1990, c. 69, s. 2].

Authors Cited

Gagnon, Robert P.  Le droit du travail du Québec:  pratiques et théories, 4^e éd.  Cowansville, Qué.:  Yvon Blais, 1999.

APPEAL from a judgment of the Quebec Court of Appeal rendered  March 16, 1999, setting aside a decision of the Superior Court, D.T.E. 96T-747, which had quashed a decision of the Labour Court, [1995] T.T. 395, affirming a decision of the labour commissioner, D.T.E. 94T-1246.  Appeal dismissed, Bastarache J. dissenting.

Claude Bureau, for the appellant.

Gaston Nadeau and Richard Gauthier, for the respondent the Canadian Union of Public Employees, Local 2589.

Benoit Belleau, for the respondent the Labour Court.

No one appeared for the respondents 2862-3775 Québec inc. and Services sanitaires du St-Laurent inc.

English version of the judgment of McLachlin C.J. and L’Heureux-Dubé, Gonthier, Iacobucci, Major and Arbour JJ. delivered by

Arbour J. —

I.  Introduction

1                                   This appeal was heard together with Ivanhoe inc. v. UFCW, Local 500, [2001] 2 S.C.R. 565, 2001 SCC 47, in which reasons are pronounced with this decision.  The issue is whether the Quebec Labour Court has adopted an interpretive policy with respect to the application of s. 45 of the Labour Code, R.S.Q., c. C-27, regarding transfer of the operation of part of an undertaking that is in conflict with U.E.S., Local 298 v. Bibeault, [1988] 2 S.C.R. 1048, or the subsequent decisions of this Court.  More specifically, the question to be decided is whether the Labour Court has the power to conclude that a union’s certification and collective agreement may be transferred to a subcontractor of the employer.  For the reasons that follow and the reasons given in support of my decision in Ivanhoe, I find that the approach taken by the Labour Court constitutes a reasonable exercise of its specialized jurisdiction that is not in conflict with the decisions of this Court.  Accordingly, the appeal must be dismissed.

2                                   Sections 45 and 46 of the Labour Code are in issue in this case.  Those sections provide:

45.  The alienation or operation by another in whole or in part of an undertaking otherwise than by judicial sale shall not invalidate any certification granted under this code, any collective agreement or any proceeding for the securing of certification or for the making or carrying out of a collective agreement.

The new employer, notwithstanding the division, amalgamation or changed legal structure of the undertaking, shall be bound by the certification or collective agreement as if he were named therein and shall become ipso facto a party to any proceeding relating thereto, in the place and stead of the former employer.

46.  It shall be the duty of the labour commissioner, upon the motion of an interested party, to rule on any matter relating to the application of section 45.

For such purpose, the labour commissioner may determine the applicability of that section and issue any order deemed necessary to effect the transfer of rights or obligations contemplated therein.  He may also settle any difficulty arising out of the application of that section.

II.  The Facts

3                                   The respondent, the Canadian Union of Public Employees, Local 2589 (the “union”), has been certified since May 19, 1982, to represent all of the salaried manual labourers employed by the appellant, the City of Sept-Îles.  The manual labourers employed by the appellant had been the subject of a similar certification since 1961.  There was a collective agreement between the City and the union for the period from October 1, 1990 to September 30, 1993.  That agreement was extended to September 30, 1995, pursuant to the Act respecting the conditions of employment in the public sector and the municipal sector, S.Q. 1993, c. 37.  In 1991, the City decided to contract out garbage collection in the Clarke, Ferland and de la Rive districts to C.A. Construction enr., 2862-3775 Québec inc. (“C.A. Construction”), under a contract that was in effect from January 1, 1992 to December 31, 1994.  In 1992, the City also awarded two waste collection and removal contracts to Services sanitaires du St‑Laurent inc. (“Services sanitaires”).  The first contract was for commercial buildings and multi-family buildings with five or more units located in the downtown area and covered the period from August 1, 1992 to July 31, 1997.  Services sanitaires also agreed to supply the City with steel containers which would become the property of the City at the end of the contract.  The second agreement provided that Services sanitaires was to collect and remove garbage from homes and apartment buildings with four or fewer units in the downtown area, for the period from January 4, 1993 to January 3, 1998.  Before these contracts were awarded, garbage collection had always been handled by City employees covered by the certification held by the respondent, except in the de la Rive district, where collection had always been subcontracted.

4                                   Since 1968, all collective agreements signed by the City with associations representing manual labourers had contained a provision authorizing subcontracting subject to certain conditions.  Article 15 of the agreement in effect from 1990 to 1995 provided:

[translation] ARTICLE 15     SUBCONTRACTING

15.01   No employee covered by this agreement may be dismissed or laid off or have his or her wages cut as a result of the subcontracting of work normally performed by permanent employees of the City. Employees may be transferred or assigned to other equivalent duties.

15.02   The City agrees to recall temporarily laid off employees before having work normally done by regular employees to whom this agreement applies performed by subcontractors, provided that they are able to perform the work immediately and that the City has the necessary equipment.

15.03   The City agrees not to temporarily lay off any regular employees if at the time of the layoff it is employing subcontractors to perform work normally done by regular employees to whom this agreement applies.

15.04   The Employer will simultaneously forward to the union a copy of the invitations to tender that it publishes in the newspapers.

15.05   The Employer will use rented machinery only where the machinery of the same type owned by the City is unavailable.

Accordingly, no unionized employees were laid off, had wages cut or lost benefits as a result of the contracts with which we are concerned.  C.A. Construction and Services sanitaires did not hire any permanent or full-time employees of the City.  Furthermore, it is admitted that the City did not transfer technology, equipment, permits or immovable property to the subcontractors, who used their own staff and their own equipment.

5                                   On January 28, 1993, the union filed two motions under s. 45 of the Labour Code with the labour commissioner general, seeking to have the transfer of the certification and the collective agreement, except for the de la Rive district, to C.A. Construction and Services sanitaires recorded.

6                                   The contractors’ bids and the contracts signed pursuant to those bids were drawn up on the basis of detailed specifications prepared by the City and incorporated into the contracts.  According to the evidence adduced before the labour commissioner, the City continued to be responsible for the landfill site and for a number of aspects of the garbage collection service, even for the districts which the subcontractors were in charge of.  For example, the City normally decided when and how often garbage would be collected for each district, and what days were public holidays.  It set the number and volume of the containers to be installed for the various establishments and approved the machinery used by the subcontractors.  If the subcontractors failed to perform their obligations within the time allowed, the City could perform them itself using its own employees and its own equipment, at the contractor’s expense.

7                                   The subcontractors were required to comply with the instructions given by the City regarding the proper performance of the contract.  For this purpose, the contracts provided that a radio link would be installed in the contractors’ trucks or that the contractors would have to provide cellular telephones, so that the City foreman could contact the truck driver if necessary.  The City engineer could add tasks not included in the specifications if he considered them to be essential for carrying out the project, and he had the authority to manage the work and interpret the specifications.  The City also continued to be responsible at all times for dealing with customers.  The City received complaints and managed changes, stoppages and temporary interruptions of service based on seasonal conditions, weather and customer needs.

8                                   However, under the contracts, the contractors continued to exercise complete authority to manage their staff.  They alone were responsible for hiring and paying their employees and for the employees’ working conditions.  They could also subcontract part of their work if they complied with certain conditions.  The contractors had to ensure that their employees did a clean job, did not make too much noise, did not take any items for themselves that taxpayers put out for collection and were polite to the public at all times.  They had to take the disciplinary measures that were needed to ensure compliance with these requirements.  If any breach occurred, the City could take action against the contractors, but never directly against their employees.

9                                   The contractors also had to comply with all obligations imposed on employers by the applicable occupational health and safety legislation. They were responsible for eliminating any danger to the health, safety, or personal security both of their own employees and of anyone present at the work site.  They were also liable for any harm done to persons or property through carelessness, negligence, want of skill or failure to perform the work, and they had to provide any additional staff needed to avoid delays.

III.  Previous Decisions

A.  Labour Commissioner, D.T.E. 94T-1246

10                               Commissioner Garant granted the union’s motions and recorded the partial transfer of the City’s rights and obligations to the contractors, who would be bound by the certification and collective agreement.  He noted that according to the previous decisions of the Labour Court, s. 45 could be applied to the transfer of a right to operate janitorial or green space upkeep services.  In his opinion, the situation was the same for garbage collection.  With regard to the degree of control retained by the City, the commissioner was of the view that this was not a barrier to applying s. 45, since garbage collection is a job that must be done in a specific, routine way in order to keep up the quality of the service.  The contractors were still autonomous in terms of how they did the work and most importantly how they managed their staff, since the City exercised no control over their employees.  The fact that the collective agreement contained a clause authorizing subcontracting could not defeat the application of s. 45, which is a provision of public order.

B.  Labour Court, [1995] T.T. 395

11                               Judge Yergeau dismissed the application for leave to appeal made by C.A. Construction, because it was brought late. He dismissed the appeals by the City and Services sanitaires on the merits, affirming the decision of commissioner Garant.  In his opinion, the decisions of the Labour Court and the principles in Bibeault, supra, holding that the transfer of part of the operation of an undertaking can result in s. 45 applying with respect to janitorial services had to be followed.  The same principles apply to garbage collection.  The City, which continues to be responsible to the public for collection services, may nevertheless contract out the operation of the services to someone else.  The judge expressed his agreement with the Labour Court’s decision in Syndicat des cols bleus de Ville de St-Hubert v. Entreprises Gilles Tisseur inc., D.T.E. 95T-318, which recognized that s. 45 applied to the transfer of part of the operation of a municipality’s snow removal activities.  More specifically, he concurred with Judge Prud’homme’s comments that, although contracts for services involve much closer control now than they used to, this does not mean that s. 45 cannot be applied.  In service industries, the transfer of technology or equipment is of much less significance to the analysis that must be done under s. 45, and the fact that taxing authority is not transferred is not decisive either.  The clause in the collective agreement authorizing subcontracting cannot defeat the application of s. 45, which is a provision of public order.

C.  Superior Court, D.T.E. 96T-747

12                               Corriveau J. allowed the applications for judicial review brought by the City and Services sanitaires against the decision of the Labour Court.  He found that Judge Yergeau had applied the functional definition of an undertaking that was rejected by this Court in Bibeault, supra, since he had recognized that only garbage collection tasks had been transferred.  It was patently unreasonable to consider only the transfer of functions and ignore the other factors such as the transfer of assets, goodwill, decision-making authority or accountability.  The decision by Judge Prud’homme in St-Hubert, supra, on which Judge Yergeau relied, had been quashed by the Superior Court (St-Hubert (Ville de) v. Prud’homme, J.E. 95-1642 (aff’d on other grounds [1999] R.J.D.T. 76 (C.A.))).  Corriveau J. adopted the Superior Court’s reasoning in that case and was of the view that the Labour Court had committed the same errors in this case as in St-Hubert and that Judge Yergeau’s decision should therefore be quashed on the same grounds.

D.  Court of Appeal, March 16, 1999

13                               Rothman and Thibault JJ.A. and Philippon J. (ad hoc) allowed the union’s appeal and restored the decision of the Labour Court.  They stated that the applicable standard of review was patent unreasonableness and that the decision of the Labour Court in the case at bar did not contain any error that might justify intervention by the superior courts.  They referred to a number of decisions of the Court of Appeal subsequent to the decision by Corriveau J., including Maison L’Intégrale inc. v. Tribunal du travail, [1996] R.J.Q. 859, leave to appeal refused, [1996] 3 S.C.R. xi, in which the court stated the applicable standard of review and found that the approach taken by the Labour Court, that the transfer of a right to operate may result in s. 45 being applied, was not patently unreasonable.

14                               The court also referred to Ivanhoe inc. v. Travailleurs et travailleuses unis de l’alimentation et du commerce, section locale 500, [1999] R.J.Q. 32 (C.A.), and to three other cases, Saint-Hubert (C.A.), supra, leave to appeal refused, [1999] 3 S.C.R. xii, Université McGill v. St-Georges, [1999] R.J.D.T. 9 (C.A.), and Syndicat des employées et employés professionnels et de bureau, section locale 57 v. Commission scolaire Laurenval, [1999] R.J.D.T. 1 (C.A.), which it had decided at the same time as Ivanhoe.  In Ivanhoe, writing for the majority of this Court, at paras. 13-20, I summarize the approach adopted by the Court of Appeal in the series of decisions rendered in December 1998.  Essentially, the majority of the court found that the approach taken by the Labour Court to the application of s. 45 to transfers by way of subcontracting was not patently unreasonable.  In the case at bar, the Court of Appeal followed that principle and concluded that this case could not be distinguished from the other decisions cited.

IV.  Issues

15                               In this Court, the City of Sept-Îles is seeking to have the decision of the Superior Court allowing its application for judicial review restored.  In its view, the decisions holding that the certification and the collective agreement had to be transferred  are patently unreasonable and inconsistent with the decisions of this Court.  It submits, first, that those decisions adopt the functional definition of an undertaking which was rejected in Bibeault, supra, by applying s. 45 to mere subcontracting of functions, and second, that the labour commissioner and the Labour Court failed to comply with the requirement that the transferee have received an identifiable and autonomous part of the undertaking, established by this Court in Lester (W.W.) (1978) Ltd. v. United Association of Journeymen and Apprentices of the Plumbing and Pipefitting Industry, Local 740, [1990] 3 S.C.R. 644, and Bibeault, supra, since the evidence could not support their finding that the contractors were legally independent of the City in the conduct of their operations.

16                               In the appellant’s submission, art. 15 of the collective agreement provides the employees with adequate protection.  Refusing to apply s. 45 would not have caused any harm to the employees, since they kept their jobs and were not disadvantaged in any respect because of the contracts entered into with the contractors, whereas the transfer of municipal collective agreements to subcontractors could inhibit the use of subcontracting by Quebec municipalities, since contractors would refuse to bid, or would bid subject to conditions that would not make it possible to save any public funds.  The appellant also believes that the operation of a municipal service could be transferred only if the requirements of the Act respecting sales of municipal public utilities, R.S.Q., c. V-4 (“ASMPU”), were met, and that no transfer took place in the instant case.

V.  Analysis

17                               The standard of review that applies to judicial review of decisions dealing with s. 45 of the Labour Code is patent unreasonableness, as I state in Ivanhoe, supra, at paras. 24-30.  The principle of judicial deference therefore had to serve as a guide for the courts in reviewing the administrative decisions made in this case.  That principle is especially important in labour law, as I also point out in Ivanhoe, at para. 32.

18                               The decisions of the administrative authorities in the case at bar comprise a direct application of the principles developed by the Labour Court following Bibeault, supra.  Pursuant to decisions of that court, s. 45 may apply to subcontracts where the transferee, in addition to performing functions similar to those performed by the transferor to which the certification originally applied, receives a right to operate part of the transferor’s undertaking.  I explain in Ivanhoe, supra, at paras. 62-81, that those principles are not patently unreasonable and do not conflict with the decisions of this Court, which rather provide that it is up to the specialized decision-making authorities to weigh the applicable criteria in order to determine whether a transfer of the operation of an undertaking has occurred.

19                               In the case at bar, Judge Yergeau stated that [translation] “[i]t seems clear that technology or equipment is not as important a consideration in a service undertaking” (p. 404).  He therefore believed that it was not necessary for physical items to be transferred to the subcontractors in order to find that a transfer of the operation of an undertaking had occurred.  The right to operate that was transferred related not only to the function of collecting and removing garbage, but also to the undertaking itself, since it authorized the contractors to perform their activities on land belonging to the municipality and the public, and to use the municipality’s landfill site.  In McGill, supra, LeBel J.A., as he then was, wrote, at p. 14:

[translation]  In U.E.S., Local 298 v. Bibeault, and also later in Lester (W.W.) (1978) Ltd. v. United Association of Journeymen and Apprentices of the Plumbing and Pipefitting Industry, Local 740, the Supreme Court did not impose a uniform view of what an undertaking is in concrete terms.  On the contrary, it expressed the view that the components of the undertaking vary depending on the economic sector in question. [Emphasis added.]

20                               The decisions of the commissioner and the Labour Court in this case do not therefore represent a return to a functional definition of an undertaking.  On the contrary, the specialized decision-making authorities have sought to identify the essential elements of the part of an undertaking of which the operation had been transferred, by considering the nature of the undertaking and the relative importance of its various components.  That approach is consistent with the definition of an undertaking adopted by this Court in Bibeault, supra, which LeBel J.A. described as follows at p. 54 of Ivanhoe, supra:

[translation]  On that occasion, however, the Supreme Court certainly did not decide that it was necessary that the new transferee be responsible for all of the activities of the undertaking or that it was necessary, at least, to establish that the undertaking in respect of which a transfer of operation had occurred had been perfectly miniaturized.  The Supreme Court’s decision seems rather to rest on the concept of sufficiency, which is taken from the decision in Mode Amazone.

21                               Furthermore, in Ivanhoe, at paras. 78-81, I review the approach taken by the Labour Court to the requirement that the transferee be given a sufficient degree of autonomy, without which it would be impossible to conclude that the operation of an undertaking had been transferred.  I note that the Labour Court has developed reasonable principles for adapting this requirement to situations involving the transfer of the operation of part of an undertaking.  In such cases, there continues to be a degree of integration between the main undertaking and the part of the undertaking of which the operation has been transferred.  In the view of the Labour Court, as LeBel J.A. put it in Ivanhoe, at p. 59, [translation] “[b]y its very essence, a transfer of the operation of part of an undertaking must remain within the sphere of the main undertaking, which gives it its identity”. In those circumstances, it is not surprising that the transferor can impose constraints on the new employers relating to how they perform their work, since it is still in charge of controlling the operation of the main undertaking from which the transfer derives.  This was why the Labour Court held that the existence of contracts laying down certain precise methods of performing the work was not a barrier to applying s. 45.

22                               In addition, with respect for the contrary opinion, I do not believe that Bibeault, supra, established a requirement that in order for s. 45 to apply the transferee must have total control over the part of the undertaking of which the operation was transferred.  In my view, the explanations given by Beetz J. regarding terminology, at pp. 1079‑81, were intended only to clarify the type of subcontracting involved in that case and to properly characterize the contracts between the Commission scolaire régionale de l’Outaouais and its subcontractors.  Those passages did not relate to the issue of the degree of autonomy that a subcontractor must be given in order for s. 45 to apply, since that point was not in issue in Bibeault.  Furthermore, as I state in Ivanhoe, supra, at paras. 78‑79, this Court also did not, in my view, adopt a rigid and absolute requirement in Lester, supra, that a subcontractor must have total control over the part of the undertaking of which the operation was transferred, although the Court implied that some degree of autonomy on the part of the transferee was required.

23                               Indeed, requiring total control would be incompatible with the very concept of the transfer of the operation of part of an undertaking which, by virtue of the wording of s. 45 of the Labour Code, must result in the transfer of the certification.  Since this Court has never ruled out the transfer of the operation of part of an undertaking and has, on the contrary, expressly recognized the possibility of applying s. 45 to subcontracting (see Bibeault, supra, at pp. 1059‑60 and 1105; Ivanhoe, supra, at para. 64), it is not possible, in my view, to require that the transferee have absolute and exclusive control of the part of the undertaking the operation of which has been transferred.  In the case at bar, it was up to the labour commissioner and the Labour Court to assess the degree of autonomy that the subcontractors had to have been given in order for s. 45 to apply, and to develop criteria that would enable it to determine whether, in fact, Services sanitaires and C.A. Construction had the necessary autonomy.

24                               In this case, the commissioner and the Labour Court used the criterion of the subordination of the employees to the contractors in order to determine the degree of legal autonomy that the contracts gave the contractors in operating the part of the undertaking that had been transferred.  This criterion can be used to establish whether the legal transaction between the parties gives the transferee sufficient authority to enable it to effectively become the new employer in charge of operating the part of the undertaking  in question.  If so, s. 45 applies to ensure that there is an employer legally capable of controlling the employees’ working conditions.  This is a contextual interpretation of the transfer of the operation of part of an undertaking, adapted to the purposes of s. 45.  The approach taken by the Labour Court also seems to be consistent with what was said in Bibeault, supra, regarding the concept of the transfer of the operation of an undertaking.  At p. 1120, Beetz J. wrote:

For the purposes of collective bargaining, the employer who negotiates and is bound by the terms of the collective agreement must at the same time be the one who controls the undertaking: otherwise, the employer would be unable to perform the obligations imposed by the agreement.

In the instant case, the City does not have the authority under the contracts to decide what the employees’ working conditions will be or what disciplinary action may be taken against them.  It can only ensure that the contracts are properly performed by the contractors, which have complete authority to manage their staff.

25                               The function of developing the criteria for assessing the degree of autonomy that the transferee must be given in order to conclude that s. 45 applies is central to the specialized jurisdiction of the labour commissioner as it relates to the transfer of the operation of an undertaking.  The principles that were applied in this case do not result in absurdity, but rather ensure the rational and realistic application of s. 45.  There is therefore no justification for intervention by the superior courts.  This was in fact the conclusion of the majority of the Court of Appeal in Laurenval and McGill, supra.  In those cases, the transferors reserved the authority to control the manner in which the work was performed by the subcontractors.  In Laurenval, one of the subcontractors was required to comply with instructions given by the transferor, who also had the authority to supervise the work as a whole.  In McGill, in addition to supervising the work generally, the university set the timetable for completing the contracts and reserved the authority to step in, in emergencies.  LeBel and Brossard JJ.A. concluded that it was not patently unreasonable to apply s. 45 in those circumstances, although Brossard J.A., erroneously in my view, was of the opinion that the approach taken by the Labour Court conflicted with the decisions of this Court.

26                               In Saint-Hubert (C.A.), supra, which involved municipal snow removal, the City, which had contracted out the work, had reserved a substantial power of control, similar to what the contracts in this case left with the City of Sept-Îles.  The Court of Appeal in that case held that the decision of the Labour Court concluding that s. 45 applied was patently unreasonable, although the majority of the court based that conclusion solely on the union’s lack of diligence in pursuing its remedies and on the confusion in the evidence as to the intended scope of the original certification in respect of the City.  With respect to the reasoning of the Labour Court on the merits, with which Judge Yergeau indicated his agreement in the instant case, it should be noted that the majority of the court relied on its decisions in Ivanhoe and Laurenval, supra, in which it had held that the approach taken by the Labour Court was not patently unreasonable.

27                               The commissioner and the Labour Court also held that art. 15 of the collective agreement did not preclude the application of s. 45.  That clause, which authorized subcontracting on certain conditions, could not be described as a waiver of the application of s. 45, or a contractual exception to that provision. As LeBel J.A. stated in McGill, supra, at p. 13:

[translation]  In that regard, the function of s. 45 L.C. differs from the function of collective agreements.  That provision is a legal mechanism that is not the same as the contractual arrangements provided by the collective agreements.  Section 45 L.C. is not prohibitive in nature in that, contrary to what we may sometimes read, it does not prohibit the sale of the undertaking, the transfer of the operation of the undertaking in whole or in part or the reorganization of the undertaking.  Its purpose is quite simply to attach certain consequences to these transactions with respect to the certified union, the collective agreement and certain related actions.  [Emphasis added.]

If s. 45 does not prohibit subcontracting or transfer of part of the operation of an undertaking, but merely attaches consequences to those transactions, it cannot be said that a clause imposing conditions on subcontracting is intended to create an exception to that provision.  Indeed, even had the parties so intended, the application of s. 45 could not have been precluded by a contractual provision.  On this point, R. P. Gagnon wrote, in Le droit du travail du Québec:  pratiques et théories (4th ed. 1999), at p. 324:

[translation]  The courts have unanimously recognized that section 45 is a provision of public order which cannot be waived, at least in advance, whether by a provision in a collective agreement or by any other agreement.

28                               In addition, the protection provided by the collective agreement in this case is different from and, in some respects, less than what is provided by s. 45.  Article 15 of the agreement protects only the City’s permanent and full-time employees. Article 4 of the agreement provides for several other types of employees, including employees on probation, temporary employees, surplus employees, students and part-time employees, who do not enjoy the protection of all the provisions of the  collective agreement but nevertheless have certain advantages in terms of wages and working conditions that will not be preserved by applying art. 15 if the employer decides to subcontract.  Furthermore, there is nothing in the collective agreement that would ensure that the certification was transferred in such a manner as to be binding on another party, whereas s. 45 seeks above all to maintain a collective bargaining framework in the undertaking by transferring the certification to the new employer.

29                               On the other hand, the fact that s. 45 is a provision of public order does not mean that the labour commissioner may not take into account the existence of a contractual provision that protects employees in the event of a transfer of operation by a subcontract.  As I indicate in Ivanhoe, supra, at paras. 106-10, s. 46 of the Labour Code confers broad powers on the commissioner to resolve any difficulties arising out of the application of s. 45.  For example, the commissioner may rule that s. 45 applies, but decline to transfer a collective agreement, as was done in Ivanhoe, although in general the agreement will follow the certification.

30                               There may be some disadvantages involved in transferring the generous collective agreements negotiated at the  municipal level to subcontractors.  First, this may limit the municipality’s opportunities for subcontracting by deterring potential bidders.  Second, it may prove difficult to put into effect in the case of contractors that employ a small number of workers.  Before the labour commissioner, C.A. Construction pointed out that serious difficulties should be anticipated if the collective agreement were transferred to it when it had only two employees.  Where contractual protection has been negotiated for employees who suffer no disadvantage when the operation is transferred to a subcontractor, as is the case here, the commissioner may examine all of the difficulties that would result if s. 45 were applied, and has the authority, if he considers it appropriate, to refuse to transfer the collective agreement.

31                               Although the collective agreement will normally follow the certification, a distinction can be made, under ss. 45 and 46, between first transferring the certification and then deciding whether it is appropriate to transfer the entire collective agreement.  Contractual provisions designed to protect the employees in the event of a transfer of operation, as well as the concrete fact situation prevailing in the undertaking and the industry in general, are relevant factors that the commissioner may consider when deciding whether the collective agreement should be transferred.  However, as I indicate in Ivanhoe, supra, at paras. 114-17, the commissioner and the Labour Court have the sole authority to examine the factors in question and select the solution they consider most appropriate.  In this case, the specialized decision-making authorities opted for transfer of the collective agreement.  That solution involves certain disadvantages, as did the opposite solution which was adopted in Ivanhoe,  but those disadvantages are not sufficient to warrant judicial review in a situation where the standard of review to be applied is patent unreasonableness.

32                               Furthermore, under s. 1 ASMPU, no municipality may alienate any public utility service belonging to it, “except by a by‑law which requires the approval of the qualified voters and of the Government”.  In this case, no by‑law was submitted for the approval of the voters or the government before contracts were awarded to C.A. Construction and to Services sanitaires.  In my view, the ASMPU is not relevant in determining whether s. 45 of the Labour Code applies.  The fact that there are special mechanisms to enable a municipality to alienate certain public utilities does not affect the analysis of the consequences, in labour law, of the alienation or transfer of the operation of those services.  Where the commissioner determines that there has been an alienation or transfer of the operation of an undertaking within the meaning of s. 45, the certification and, in most cases, the collective agreement will be transferred to the new employer.  The ASMPU can be applied only to invalidate an alienation that is contrary to the provisions of that Act.  As Zerbisias J. (ad hoc) stated in Saint-Hubert (C.A.), supra, at p. 82:

[translation]  This contract between the City and the subcontractors is not subject to the Act respecting sales of municipal public utilities.  However, that does not mean that application of s. 45 L.C. cannot be triggered.  It is quite conceivable that an identifiable part of the municipal snow removal undertaking could be transferred to a new undertaking without liability to third parties, and the means of financing the activity sold, being transferred.  [Emphasis added.]

The argument that s. 45 cannot be applied because the City cannot rid itself of its obligation to collect garbage without complying with the requirements of the ASMPU must therefore be rejected in this case.

33                               In conclusion, the decision that there was a transfer of the operation of part of an undertaking which triggered the application of s. 45 in this case is neither patently unreasonable nor in conflict with the decisions of this Court or the applicable legislation.  There were therefore no grounds for the Superior Court to intervene and the decision of the Court of Appeal must be upheld.

VI.  Disposition

34                               For these reasons, I would dismiss the appeal with costs.

The following are the reasons delivered by

35                               Bastarache J. (dissenting) — I have had the benefit of reading the reasons prepared by my colleague Madam Justice Arbour for the majority in this case and in Ivanhoe inc. v. UFCW, Local 500, [2001] 2 S.C.R. 565, 2001 SCC 47, released concurrently, and must respectfully dissent here as I have done in Ivanhoe on the approach taken toward the successorship provision in s. 45 of the Quebec Labour Code, R.S.Q., c. C-27.

36                               In Ivanhoe, my objections were essentially three:  (i) the lack of connection between the party who was “[t]he new employer” under s. 45 (the four contractors) and “the former employer” (Moderne) meant that the nexus requirement in Ajax (Town) v. CAW, Local 222, [2000] 1 S.C.R. 538, 2000 SCC 23, went unsatisfied; (ii) Bibeault’s (U.E.S., Local 298 v. Bibeault, [1988] 2 S.C.R. 1048) prohibition of a purely functional definition of “undertaking” (“entreprise”) in s. 45 could not be inverted by reliance on the argument that in a situation in which all there was to be transferred consisted merely of work, tasks or functions, this was a satisfaction of the “organic” definition of undertaking set out by Beetz J. in that case; and (iii) the “potential employer” or retrocession approach in which Ivanhoe is said to be “the former employer” for the purposes of s. 45 is nowhere supported by the text of this provision and is a patently unreasonable interpretation of it.

37                               The present case, while intersecting with some of the issues raised in Ivanhoe, raises fewer of them.  Of the three objections cited above, only the second one is engaged here.  Both the “potential employer” or retrocession argument as well as the complete absence of a nexus between the new and former employer are not issues here simply because this is a case of single-layer subcontracting.  The appellant, City of Sept‑Îles (the “City”) has contracted out its garbage collection service to two companies, C.A. Construction enr. and Services sanitaires du St-Laurent inc. (the “companies”).  Hence, it is uncontroversial that “the former employer” is the City and “[t]he new employer” are the companies.  There is no third link in the chain which is missing from the legal relation requirement, and no “potential employer” or retrocession argument is needed to artificially reconnect that party under s. 45.  In other words, this is a simple case of contracting out, and what needs to be decided is whether the Labour Court’s decision ([1995] T.T. 395) that the contracting out of the garbage collection was a partial operation by another of the City’s undertaking sufficient to trigger s. 45 was patently unreasonable.

38                               My own view is that this is a patently unreasonable decision, and I base this on (i) substantially the same view of Bibeault, supra, that I explained in my dissenting reasons in Ivanhoe, namely, that this decision prohibited a purely functional definition of “undertaking” (“entreprise”) in s. 45 that would be revived by a finding of successorship in a situation where all that was transferred was tasks or work; and (ii) this Court’s decision in Lester (W.W.) (1978) Ltd. v. United Association of Journeymen and Apprentices of the Plumbing and Pipefitting Industry, Local 740, [1990] 3 S.C.R. 644, in which the tasks attached to the transferred undertaking were subjected to an autonomy requirement in a successorship analysis.

I.  Bibeault

39                               In Bibeault, Beetz J. placed the word “subcontractor” in quotation marks and in the terminology section of the decision, at p. 1080, comments on his decision to do this, suggesting that he would rather use the word “contractor” rather than “subcontractor” to describe a situation in which successorship may be triggered.  In his discussion of the use of “subcontractor” by the courts below, he said, at p. 1080, that subcontracting in this context does not describe a situation in which a person assumes [translation] “responsibility for certain parts of a project, supply contract or undertaking for which another has overall responsibility” but rather it means the [translation] “[p]ractice by which an organization assigns the performance of certain work to an independent specialized contractor [where] [t]his contractor assumes complete responsibility for th[e] work, which he performs himself or has performed by his own employees” (p. 1080 (emphasis added)).  In other words, he adopted a “total control” understanding of the type of subcontracting that could trigger s. 45.

40                               This is not a situation in which the City has assigned total control over garbage collection to the companies.  The City continues to play a management and supervisory role in the provision of garbage collection service.  For example, the collection times are fixed by the City and can only be changed by the City; the City handles complaints regarding the service; the City meets with clients if they need more information about such things as the volume of garbage, etc.  While it is true that the companies have responsibility over their personnel (e.g. working conditions and behaviour on the job), the companies could not be said to have anything close to complete control over the work.

41                               This idea that s. 45 can only apply to subcontracting situations in which the former employer gives up overall responsibility for the work performed and the contractor assumes complete responsibility for that work is consistent with this case’s rejection of the purely functional definition of an undertaking.  As I stated in Ivanhoe, at para. 140, according to Bibeault, “an undertaking for the purposes of s. 45 cannot consist merely of work, tasks or functions performed by the employees under the former employer.  Something more must be sold or operated by another in order for the successorship provision to be triggered.”  Using the language adopted by Beetz J. in Bibeault, what is sold or operated by another must be the undertaking understood as “a going concern”; it cannot solely be the work.  However, what we have in this case is the type of subcontracting that is the work alone and the City remains responsible for the provision of the service.  This is precisely the situation in which Bibeault held that s. 45 would not be triggered.  Again, I cannot agree that work alone is sufficient to satisfy s. 45 where work alone is all that is available to be transferred.

II.  Lester

42                               Speaking of successorship provisions in Lester, McLachlin J. (as she then was), writing for the majority of the Court, said, at p. 676:

Case law from jurisdictions across Canada is to the same effect.  While there are slight variations from province to province in terms of scope (i.e., some Acts speak only of disposition of a business whereas other Acts provide for disposition of a part of a business) a common theme throughout the jurisdictions is that something must be relinquished from the first business and obtained by the second.

This idea of the one party “relinquishing” something that the other “obtains” is conjoined with the idea that this “something” must be what is variously called “a functioning entity that is viable in itself or sufficiently distinguishable to be severable from the whole” (p. 676) or “a functional economic vehicle” (p. 677).  Moreover, McLachlin J. says, “in some way the first company no longer has the business or part of the business, which has been conveyed to the second company” (pp. 675-76).

43                               This, it seems to me, involves two important elements.  First, there is the idea that what is transferred must be a viable functional economic vehicle or entity.  Second, there is an element of finality to the transfer in the sense that the first business no longer has control over the part of the business that has been given over, i.e. relinquished it to be obtained by another.  This echoes the total control understanding of subcontracting adopted by Beetz J. in Bibeault.

44                               In the Court of Appeal decision in Ivanhoe inc. v. Travailleurs et travailleuses unis de l’alimentation et du commerce, section locale 500, [1999] R.J.Q. 32, and accepted here by the majority, LeBel J.A. (as he then was) said that what was being transferred did not need to be a [translation] “full miniaturization of the undertaking” (p. 54) or the [translation] “miniaturized original undertaking, containing all of the original elements” (p. 60).  He said that it is enough that the part of the undertaking [translation] “be potentially autonomous” but it need not be [translation] “capable of being sold or be completely economically viable as an autonomous unit” (p. 60).

45                               With great respect, I cannot agree.  In my view, s. 45 requires whatever is sold or operated by another to be factually autonomous, not notionally, provisionally or possibly autonomous.  This is not enough to satisfy Lester’s first requirement of being a viable functional economic vehicle or entity.  Moreover, when what is being transferred is work alone, and the transferor maintains responsibility over the transferee, I do not see how the second requirement of finality has been satisfied.

III.  Conclusion

46                               While I agree with the majority that Lester discussed the specificity of the construction industry (see Ivanhoe, supra, at para. 67) and a successorship evaluation may differ somewhat depending on the nature of the industry in question, I cannot accept that an industry-related classification such as “entreprise de services” (“service undertaking”) means that what would otherwise be no more than a transfer of functions can be taken to satisfy Bibeault’s organic approach.

47                               I agree with the majority that services such as janitorial services and garbage collection can legitimately trigger the successorship provision if enough of the business engaged in providing those services is transferred.  I want to be clear that nothing here turns on “how important” or integral such a service may be taken to be to the original employer.  However, when a new company takes on the provision of those services, I do not think that a mere industry designation can stand as substantive satisfaction of the “going concern” understanding of “undertaking” in Bibeault.

48                               As I stated in my dissent in Ivanhoe, Ajax shows that this Court has moved somewhat away from its earlier attitude towards successorship provisions in Bibeault and Lester.  However, Ajax did not touch on Bibeault’s prohibition of a purely functional definition of undertaking, nor did it affect the requirements in Lester that did not relate to the existence of related companies and their commercial history.

49                               I would allow the appeal on the grounds of a patently unreasonable interpretation of this Court’s decisions in Bibeault and Lester.

Appeal dismissed with costs, Bastarache J. dissenting.

Solicitor for the appellant:  Claude Bureau, Sept-Îles.

Solicitors for the respondent the Canadian Union of Public Employees, Local 2589:  Trudel, Nadeau, Lesage, Larivière & Associés, Québec.

Solicitors for the respondent the Labour Court:  Bernard, Roy & Associés, Montréal.