Canada Labour Code, Parts I, II and III

Reasons for decision

Communications, Energy and Paperworkers Union of Canada, Locals 401 and 902,

applicant,

and

Island Telecom Inc. and Island Tel Advanced Solutions Inc.,

respondents.

CITED AS: Island Telecom Inc. et al.

Board Files: 18403-C

18729-C

Decision no. 59

February 24, 2000

Applications pursuant to section 35 of the Canada Labour Code, Part I.

Single employer - Discretion - Practice and procedure - The union seeks a declaration that Island Telecom Inc. (Island Tel) and Island Tel Advanced Solutions Inc. (ITAS) are a single undertaking or business for the purposes of the Code - ITAS is a wholly owned subsidiary of Island Tel established in 1996 to provide Internet access to Island Tel customers - Island Tel employees transferred to ITAS - Union alleges incumbents at ITAS performing functions in a non-bargaining unit environment identical to the functions previously performed by union members at Island Tel - Board concludes that employees who are doing the union's bargaining unit work at Island Tel are being transferred to or hired by ITAS to do the same work in a non-bargaining unit environment - Board satisfied that the criteria to a single employer declaration are met in this case - Board exercises its discretion under section 35 and makes the single employer declaration as there is convincing evidence that the unions' bargaining rights are being or likely to be undermined - Application granted. Constitutional jurisdiction - Telecommunications - Internet service providers - ITAS claims that the Board does not have jurisdiction to rule on this matter as ITAS is not operating as a federal work, undertaking or business - Board determines that ITAS is a federal business on its own account - ITAS's activities extends beyond the limits of the province - ITAS's service allows Internet-users to communicate, transmit and receive information across the world - In the alternative, ITAS falls under federal jurisdiction because it is part of a single federal enterprise - Physical and technological connection between ITAS and Island Tel – Significant degree of common management, control and direction – ITAS intended to be, and is, operated as an integral functional unit of Island Tel.

The Board was composed of Mr. Richard I. Hornung, Q.C., Vice-Chairperson, and Ms. Sarah E. FitzGerald and Mr. David Gourdeau, Members. A hearing was held on September 15-17, 1998, at Charlottetown, P.E.I.

Appearances

Mr. Ronald Pink and Ms. Bettina Quistgaard, counsel, accompanied by Messrs. J. McLeod, Keith Lambe and Ervan Cronk, for the applicants; and

Mr. John Mitchell, counsel, accompanied by Mr. Steve Murray, for the respondents.

These reasons for decision were written by Mr. Richard I. Hornung, Q.C. Vice- Chairperson.

I

[1] On October 23, 1997, the Communications, Energy and Paperworkers Union of Canada, Local 401 ("CEP") filed an application pursuant to sections 35 and 44 of the Canada Labour Code, seeking a declaration that Island Telecom Inc. ("Island Tel") and Island Tel Advanced Solutions Inc. ("ITAS") are a single undertaking or business for all purposes of Part I of the Code. In the alternative, it seeks a declaration that there has been a sale of business within the meaning of section 44(1) of the Code from Island Tel to ITAS. On May 4, 1998, Local 902 filed a similar application.

[2] In reply to the application, ITAS raised the Board's constitutional jurisdiction, alleging that it is not operating a federal work, undertaking or business.

II

[3] Pursuant to Board orders dated November 17, 1993, the CEP Local 401 was certified to represent "all plant/craft employees" and Local 902 was certified to represent "all level 1 Managers ... excluding personnel assistants" at Island Tel.

[4] In 1996, Island Tel established ITAS. This wholly owned subsidiary was to become an Internet Service Provider ("ISP") for Island Tel customers. As well, it would resell data transmission services and provide general computer consulting work.

[5] Following the establishment of ITAS, Island Tel transferred employees to ITAS. All employees who were working in connection with access to the Internet at Island Tel's operation moved to ITAS. As well, ITAS advertised internally (within Island Tel) for employees for a number of positions including: Systems Analyst; Solutions Specialist; Opportunity Manager; Sympatico Internet Support Specialist; Client Support Specialist; and Manager, Information Networks. ITAS alleges that two Sympatico Internet Support Specialist positions were filled. One person was formerly in the union's bargaining unit, while the other person was not.

[6] The applicants allege that the incumbents of the positions perform functions in a non- bargaining unit environment that are identical to the functions previously performed by union members at Island Tel. When this work was transferred, Locals 401 and 902 (the "Unions") decided to bring the current applications to preserve their bargaining rights.

[7] As indicated, in reply to the application, ITAS raised the Board's constitutional jurisdiction, alleging that it is not operating a federal work, undertaking or business. Furthermore, ITAS states that only one Sympatico Internet Support Specialist position was filled. The other position filled was a Systems Analyst. According to ITAS, the incumbents of these positions do not perform functions that are similar to any function performed by members of either union within the bargaining units at Island Tel.

III

[8] It was conceded by the parties at the hearing that if the Board finds that ITAS falls within federal jurisdiction, Island Tel and ITAS would meet the test of single employer within the meaning of section 35 of the Code. Accordingly, the remaining issues can be succinctly stated as follows.

1. Do the services provided by ITAS, as an ISP, constitute a federal work, undertaking or business, either by virtue of (a) the fact that the nature of the services provided by an ISP and its mode of operation in relation to the "Internet/Cyberspace," in and of itself, falls within federal jurisdiction, or (b) the fact that the work done by ITAS is so functionally integrated with that of Island Tel that it forms a single undertaking for jurisdictional purposes?
2. If the answer to the first question is affirmative, should the Board exercise its discretion with respect to the single employer application?

IV

[9] Dr. Vincent Mosco, an acknowledged authority in information technology, was qualified by the Board to testify as an expert in Telecommunications and the role of the Internet in Telecommunications in Canada.

[10] Dr. Mosco unravelled the history of the Internet and its purpose. Both "cyberspace" and the "Internet" are terms that have evolved in the past decade with the increased use of computers. "Cyberspace" is the place where the business or activity of the Internet takes place.

[11] The Internet began out of a network set up by the research branch of the U.S. Department of Defence in the 1960s to link computers located in its major research facilities in the United States. Its purpose was to enable its researchers to communicate and share data and information using computers. The success this network enjoyed prompted its expansion, in the 1970s, to a wider range of research facilities in the U.S. as well as Canada and Europe. In the 1980s, with the advent of the personal computer, the Internet migrated from a research tool, used by institutions, to a personal "instrument of communication" used by individuals.

[12] The following excerpts are illuminating:

The Internet is an international network of networks that allows different computer users to share information and communicate interactively. Unlike most other forms of communication, the Internet has no fixed physical location, central control point or permanent intelligence. Instead, all stored information and network management is widely distributed, allowing each remote entity to be in charge of its own area. Each such entity has an equivalent level of authority, priority and control. All work together according to a common set of technical rules and standards.

The Internet's most powerful feature is that it allows computers and networks to communicate openly and effectively, regardless of make, architecture, speed, manufacturer, connection or resources. This is a striking example of open standards - and their beneficial consequences.

Its early developers were committed to establishing open networks that enabled disparate equipment and networks to link and to exchange information. This commitment led to development and use of a set of open standards, or common language, the TCP/IP protocols (Transmission Control Protocol/Internet Protocol). Adapted at an early stage in the evolution of the Internet, the TCP/IP protocols were vital to the expansion of the Internet outside its original military and research community environment...

(Preparing Canada for a Digital World: Final Report of the Information Highway Advisory Council (Ottawa: The Council, 1997), page 24)

The computers and computer networks that make up the Internet are owned by individuals, corporations, governmental and public institutions, and non-profit organizations. The resulting whole is a decentralized, global medium of communications - or "cyberspace" - that links individuals, corporations, institutions and governments around the world, allowing tens of millions of people to exchange information. These communications can occur almost instantaneously, and may be directed to specific individuals, to a broader group of people interested in a particular subject, or to any persons having access to the Internet as a whole.

...

The various components of a message sent between computers on the Internet do not necessarily travel along the same path. The Internet uses "packet switching" communication protocols to allow individual messages to be subdivided into smaller "packets"; the individual packets are sent independently to the destination, and are then automatically re-assembled by the receiving computer. While all packets of a given message often travel along the same path to the destination, any of the packets may be re-routed if any computers along the route become overloaded.

... networks were developed to link universities, research facilities, businesses and individuals around the world. Many of these networks overlapped and eventually were themselves linked together, allowing users of any computer connected to any network to communicate with users of any computer on another network. It is this series of linked networks, each linking computers and computer networks, that is commonly known today as the Internet.

...

No single entity - academic, corporate, governmental or non-profit - administers the Internet. It exists and functions because hundreds of thousands of separate operators of computers and computer networks use common data transfer protocols to exchange information with other computers (which in turn exchange information with other computers). There is no centralized storage location, control point, or communications channel for the Internet, and it would not be technically feasible for a single entity to control all of the information conveyed on the Internet.

(Alan M. Gahtan et al., Internet Law: A Practical Guide for Legal and Business Professionals (Carswell, 1998), at pages 3-4; see also evidence of Vincent Mosco on packet switching, Transcript, Volume I, page 30)

(See also Kevin Werbach, Digital Tornado, The Internet and Telecommunications Policy, OPP Working Paper Series, March 1997, Federal Communications Commission.)

[13] Dr. Mosco described how computers and the Internet - and the transfer of information and communication they have engendered - has lead to a convergence of once disparate industries and technologies:

The term convergence is used a lot and it has a variety of applications. Perhaps the most important is the way in which literally language is converging around the common digital code used in computer communication. In essence, the language of ones and zeros becomes, is becoming a principal means of communicating; linking people up around the world today. But more than that, convergence refers to the breaking down of barriers that once separated industries such as publishing, broadcasting, telecommunications and information technology. In essence, they are converging in what we might call a common electronic service arena. This may or may not be a tip on what stock to buy, but those companies that have recognized - - take for example the New York Times, which has been a very successful newspaper publisher, has recognized in recent years that it's an integral part of this electronic services arena. So in addition to publishing its daily newspaper, it provides a wide range of Internet information services that in the past would have been thought to be telecommunication or information technology kinds of services. Companies like Microsoft, or Time Warner or Rogers Communication here in Canada realize that they may have started in newspapers, T.V. production, cable television, telephone - - but their success depends on their recognition that they're all in the business of providing electronic information and entertainment services. And that's where convergence, I think, has its most powerful political and economic consequences because companies and industries are converging within this growing arena and this certainly creates serious problems for policy makers and regulators. After all, our legal system was set up to deal with these industries in their separate incarnations; so we have broadcast law, telecom law, various statutes dealing with the press. As these companies begin to converge, the question that policymakers need to address is what law applies to this converging arena? ...

(Transcript, Volume I, pages 38-39)

[14] Central to the convergence of electronic and digital communication networks is the ISP. Dr. Mosco described, in detail, the function and operation of an ISP:

... a company that for a fee provides you with the means to go out over the Internet; that is, it's a company that will have, let's say more sophisticated computers, more powerful computers than you have at home, and a set of devices, modems, that will link your connection to the outside world; that is the world beyond the Internet service provider to other computers that you may want to reach in order to secure information or communicate with other people.

(Transcript, Volume I, page 25)

[15] Dr. Mosco described an ISP as a value-added service. It adds value to the telecommunications system by permitting customers to use that system to connect to the Internet. In doing so, the customer can do much more than simply speak to someone on the telephone. With their computers, users can search and secure information from other computers. Users can also communicate with other users through services like electronic mail (e-mail) or chat rooms.

V

[16] There is no need to become overly technical about how a computer or its software operates. It is, however, beneficial for our purposes, to trace how one's personal computer ("PC") becomes connected to the Internet.

[17] In order to provide access to the Internet, ITAS put together several services. ITAS provides its customers with a software package (Sympatico), which the customer installs on a PC. Customers will then have direct access to the Internet via telephone lines. How does the signal travel through from the PC to reach the Internet? The process was described in the testimony of both Mr. Colin Affleck, ITAS Information Systems Manager, and Dr. Mosco. Reduced to its essence it can be described as follows.

[18] Users direct their computers to connect with the Internet. The signal is converted into digital bits by the PC users' modem and, in the present case, travels through the telephone lines. The modem within the users' PC dials up the modem pool at Island Tel. The modem pool sends a request to ITAS's authentication server. The ISP's server is a computer that holds a list of authorized users and their password. If users are members of the ISP, the PC can access the Internet. Once the signal has reached the ISP, the ISP's server will identify the users. If those users are members of Sympatico, then ITAS's authentication server sends a message to Bell's authentication server. Bell's server will respond whether or not users are allowed access to the Internet. If members are approved, Bell's authentication server sends a message to ITAS's authentication server, which in turn sends a message back to Island Tel's modem to give users access. The door is then opened to give the customer access to Island Tel's router. Users are now connected to the Internet. The actual "signals" go from Island Tel's router to the line connected to Maritime Telegraph and Telephone Company Ltd. ("MT&T") in Halifax. The signals go through a router in Halifax and connect to a line that consolidates the traffic coming from Newfoundland and goes to Fredericton. From there it goes to Québec City where a router sends the signal to Montréal. From there, "the access to the rest of the world is through Toronto on Bell's services into MCI across the border" (Transcript, Volume I, page 95).

[19] At this point, on the home computer screen there appears the Sympatico home page, which is delivered from ITAS server. Users now have the ability to get on the Internet. According to Mr. Affleck, "The door is open so that [the user] can get on the Net" (Transcript, Volume II, page 83).

[20] Then, in order to access any of the sites on the Internet users wish to contact, their PCs must make use of ITAS's Domain Name Server ("DNS"). The DNS provides the equivalent of a phone book or a 411 service for ITAS's subscribers. ITAS has its own DNS located in Charlottetown and, according to Mr. Affleck, most ISPs will have a server within their local realm. Mr. Affleck described the function of a DNS as follows:

The function of the server is really to translate the request of a name, so as a user you look for www.microsoft.com . ... The DNS server translates that into a physical number or an IP number, Internet Protocol Number. ... And at that point, that's the destination you want to go to is the Internet Protocol Number. The DNS server is doing the look-up on that name. It delivers back to the host work station or your PC at home, it says, tells your computer to now go to this nine-digit number.

(Transcript, Volume II, pages 84-85)

[21] If ITAS's DNS does not have the number of the address requested, "it will refer the request off to another DNS server within a family of DNS servers around the world" (Transcript, Volume II, page 85).

[22] Once connected to the Internet, users can perform any of the following functions: electronic mail (e-mail); information searching (and retrieving information); education; electronic commerce (or e-commerce); chat rooms; news groups; radio/audio; television; phone conversation; and Internet fax. A similar process ensues when business users connect through ITAS's Advantage Internet.

[23] Whether access to the Internet is sought by a home or business computer, the ISP's authorization is absolutely necessary to access the Internet. As Mr. Affleck pointed out, the ISP's functions are integral to the Internet process. The ISP gives the connection itself, that is, the addresses or the "phone numbers" that allow users to communicate with other users and connect with other Internet sites. In order to achieve this, the ISP complies with international regulations and protocols when it supplies addresses to a user. Without the proper Internet Protocol Address or Domain Name, there is no possible electronic communication.

[24] In short, an ISP is the "gatekeeper" to the Internet. For general users, access can only be obtained through an ISP.

[25] According to Dr. Mosco, in order to operate locally, provincially, nationally or internationally, an ISP must use a telecommunications system, be it telephone, cable or satellite. Overwhelmingly today, the connections to the ISP, and from the ISP to its outside services, are done via a telephone line.

VI

[26] Stephen Murray, Manager of Information Solutions at ITAS, explained at length the Open Systems Interconnect Model ("OSI"), which is a standard adopted to allow computers to communicate with each other. There are two domains in the network: the transport domain, which is the physical link between the telephone companies, and the application domain, which consists of a set of software and protocols that allow a computer to communicate with another. Mr. Murray described the seven layers that make up the OSI. Because the distinction between the application domain and the transport domain was a key argument advanced by the respondents, we will summarize the description made of each of the seven layers.

1. Layer 1, the physical layer, is made up of cables and wires.
2. Layer 2, the data link layer, keeps track of whether or not the information "going down" the telephone line is in consistent blocks and if those blocks have some level of integrity. It is a set of protocols. There are devices hosted and operated by the telephone companies. They are called an assembler disassembler or frame assembler disassembler.
3. Layer 3, the network layer, manages the Internet Protocol (IP). That is the basic protocol of the Internet: "that's where the addresses are, it tells you how to get where you want to go" (Transcript, Volume I, page 87). It is operated in the router that is owned and operated by the telephone company.
4. Layer 4, the transport layer, makes sure that messages are delivered in the order in which they were sent and that there is no loss or duplication.
5. Layer 5, the session layer, is a logical relationship between two computing facilities. That is where a virtual relationship between two computers is established. For instance, Netscape Navigator can establish a session between the server on the one end and a home computer that is serving up the presentation layer, which is the next layer.
6. Layer 6, the presentation layer, is basically message formatting: it is the format on which the information is presented of the computer receiving that information.
7. Layer 7 is the application layer. In Mr. Murray's words, this layer is really "the ins and outs with respect to the communications ... e-mail would typically sit there, file transfer would sit there, some of the applications that are inherently part of the Internet domain" (Transcript, Volume I, page 90).

[27] Mr. Murray stressed that ITAS focused primarily on the application domain, that is, the session, presentation and application layers. ITAS is not involved in the transport domain, that is, the transport, network, data link and physical layers.

VII

[28] ITAS is principally an ISP. In 1997, 80% of its revenues came from its ISP business; in 1998, it was 60%. Approximately 20% comes from its consulting business to Island Tel.

[29] ITAS purchases the "Sympatico" software from Bell Global Solutions ("BGS"). It does not own any of the assets necessary to "transport" the signals. It purchases the use of telephone lines owned by Island Tel and pays for the use of its modem pool and its router. In that sense, Stephen Murray described ITAS's activities as being "primarily ... a reseller ... of other people's services" that are provided to ITAS (Transcript, Volume I, page 83). ITAS buys access from Island Tel to the Canadian net or, in other words, the capacity to connect to the national - and international - network. "It would be like buying blocks of long distance time..." (Transcript, Volume I, page 83).

[30] ITAS pays monthly fees to Island Tel and BGS for services they provide. The payment of these tariffs constitutes about 50% of ITAS's budget. In addition, ITAS and Island Tel entered into a service agreement, by which Island Tel provides ITAS with the following operational services and facilities: market development; network repair and maintenance; corporate development; accounting; rates and regulatory affairs; investor services/internal affairs; business services in sales and support; and treasury. The costs of these services and facilities are determined by the Profit Centre Reporting system of Island Tel.

[31] Although, ITAS provides a number of services to Island Tel and, to a lesser extent, other clients (e.g., Sympatico Help Desk, Virtual Business Centre, Internet Facsimile, Remote Secure Access, Advantage Internet, Web hosting, Intranet, Extranet), the vast majority of its work revolves around providing telecommunication access for its clients to the Internet or services available therefrom.

[32] At the time of the Board's hearing, ITAS had approximately 16 employees. They were all physically located in Island Tel's building, at 69 Belvedere Avenue, Charlottetown, P.E.I. ITAS's clients are all P.E.I. residents.

VIII - General Principles

[33] The Board's jurisdiction over the labour relations of a federal work, undertaking or business is described in section 4 of the Code:

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

[34] The relevant definition of "federal work, undertaking or business" is set out in section 2(b) of the Code and is to the same effect as section 92(10)(a) of the Constitution Act, 1867. Section 2(b) of the Code reads as follows:

2. In this Act,

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

...

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

[35] It is well established that labour relations fall within the provinces' exclusive jurisdiction (see section 92(13) of the Constitution Act, 1867, "Property and Civil Rights in the Province"; and Toronto Electric Commissioners v. Snider et al., [1925] 2 D.L.R. 5 (P.C.)). Parliament may only assert exclusive jurisdiction over labour relations if it is shown that it is an integral part of its primary competence over some other single federal subject (see Re Eastern Canada Stevedoring Company Limited, [1955] S.C.R. 529; and Construction Montcalm Inc. v. Minimum Wage Commission et al., [1979] 1 S.C.R. 754, page 768). In respect of works or undertakings extending beyond the limits of a province, or connecting a province with any other province, the combined effect of sections 91(29) and 92(10)(a) of the Constitution Act, 1867, creates an exception whereby Parliament has exclusive jurisdiction over interprovincial transportation and communication works and undertakings.

[36] As stated in United Transportation Union v. Central Western Railway Corp., [1990] 3 S.C.R. 1112, there are two ways in which an undertaking may be found to fall within federal jurisdiction. First, it can constitute a federal undertaking if it carries on activities that are within the exclusive competence of Parliament under section 92 of the Constitution Act, 1867. Secondly, if it is not a federal undertaking, it may still fall under federal jurisdiction if it is integral to a core federal undertaking. As noted in Westcoast Energy Inc. v. Canada (National Energy Board), [1998] 1 S.C.R. 322, an enterprise may be found to constitute a federal undertaking in two different ways: an undertaking may fall under federal jurisdiction in its own right or it may be operated as a single enterprise, in common with one or more other undertakings, which together fall under federal jurisdiction. See also Day & Ross Nfld. Limited, [1999] CIRB no. 4; and 53 CLRBR (2d) 50; and CITY-TV, CHUM City Productions Limited, MuchMusic Network and BRAVO!, Division of CHUM Limited, [1999] CIRB no. 22; and 53 CLRBR (2d) 161.

[37] In the present case, ITAS would constitute a federal undertaking if its activities are found to be interprovincial communications or, alternatively, if it operates a single interprovincial communications enterprise in common with Island Tel. If ITAS does not constitute a federal undertaking pursuant to either of these tests, it may still fall under federal jurisdiction if its operation is integral to a core federal undertaking.

Interprovincial Communications

[38] This analysis turns on the particular facts of each case and must focus on the normal and habitual activities of the business as a "going concern" (see Northern Telecom Ltd. v. Communications Workers of Canada et al., [1980] 1 S.C.R. 115 page 132; and Westcoast Energy Inc., supra, page 361). The focus must be on the nature of the undertaking that is in fact being carried on. As stated in Alberta Government Telephones v. Canada (Canadian Radio-Television and Telecommunications Commission), [1989] 2 S.C.R. 225:

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.

(page 258; emphasis added)

[39] There are several examples, in the jurisprudence, of undertakings that fall within section 92(10)(a) of the Constitution Act, 1867. In the above-mentioned case, the Alberta Government Telephone (AGT) was a telephone company that provided local, interprovincial and international telecommunications services in the form of telephone service and data transmission facilities. The Supreme Court of Canada decided that AGT was an interprovincial undertaking within the meaning of section 92(10)(a) of the Constitution Act, 1867, and that it fell within the legislative authority of Parliament. The Supreme Court underlined that mere interconnection of physical facilities were insufficient. It concluded:

It is clear, however, that in the instant case the facts demonstrate much more than mere physical interconnection of AGT's system at provincial borders. It has been demonstrated that AGT is, through various commercial arrangements of a bilateral and multilateral nature, organized in a manner which enables it to play a crucial role in the national telecommunications system. It is through the organizational mechanisms described earlier that AGT is able to provide to its local subscribers services of an interprovincial and international nature.

(page 262)

[40] Likewise, in Téléphone Guèvremont Inc. v. Québec (Régie des télécommunications) (1992), 99 D.L.R. (4th) 241 (Que. C.A.) (affirmed by the Supreme Court of Canada in Téléphone Guèvremont Inc. v. Quebec (Régie des télécommunications), [1994] 1 S.C.R. 878), referring to AGT and Central Western Railway, the Quebec Court of Appeal stated:

... The concern which seems to be of primary importance now is to know if, considering the nature of the services offered and the way the company operates, there is a sufficient operational link between Téléphone Guèvremont and the national telecommunications system for the company to fall under the jurisdiction of the federal Parliament.

(page 255)

[41] It was decided that the local phone company fell within section 92(10)(a) of the Constitution Act, 1867, and was thus under Parliament's legislative authority. Téléphone Guèvremont interconnected with Bell Canada and, through Bell's facilities, the local phone company could send and receive messages to and from anywhere in Canada and in the rest of the world. Through Téléphone Guèvremont, local subscribers receive interprovincial and international communications. In a brief judgment, the Supreme Court of Canada affirmed the Quebec Court of Appeal's decision:

We are all of the view that Téléphone Guèvremont Inc. is an interprovincial work and undertaking within the legislative authority of the Parliament of Canada by virtue of ss. 92(10)(a) and 91(29) of the Constitution Act, 1867 by reason of the nature of the services provided and the mode of operation of the undertaking, which provides a telecommunication signal carrier service whereby its subscribers send and receive interprovincial and international communications as set out in the reasons of Rousseau-Houle J. A. ...

(page 879)

[42] In its judgment, the Quebec Court of Appeal made the following findings:

The evidence has shown that Téléphone Guèvremont offers a signal transmission for telecommunications purposes and that it is the medium by which its local subscribers receive interprovincial and international communications. It is indeed Téléphone Guèvremont's switch that transforms voice signals into numerical signals and that automatically transmits these numerical signals to a junction which meets the limit of the Bell Canada network and, via Bell Canada, these signals penetrate into the national network.

(pages 255-256)

[43] The Court of Appeal concluded that Téléphone Guèvremont was "merely one of the links in a chain that reaches its subscribers or that links its subscribers to other provinces and to the rest of the world" (page 256). In fact, Téléphone Guèvremont had to use Bell Canada's services in order to be able to receive and transmit numerical signals to its customers. The Court added:

... For the call to reach its destination, Téléphone Guèvremont must receive the signal, supervise the operation and the duration of the call and ensure its transmission. These operations require that Téléphone Guèvremont comply with technical standards of conversion, transmission and interconnection set by Bell Canada which, as a member of Telecom Canada, must itself ensure the integration of the Téléphone Guèvremont system into the Telecom Canada national network.

(page 256)

[44] How do these constitutional principles apply to cases concerning new computer technologies and new media? There is very little jurisprudence that deals with the Internet. In fact, apart from the Board's recent decision in CITY-TV, CHUM City Productions Limited, MuchMusic Network and BRAVO!, Division of CHUM Limited, supra, there is none. In that case, the Board had to decide whether CityInteractive's business, which designs and markets Web sites and provides interactive services, such as taking the Internet to television - thus allowing live on-line chats - and taking television on-line (webcasting), fell within federal or provincial jurisdiction. The Board found that CityInteractive operated in common with one or more federal enterprises. It also concluded, albeit in obiter, that CityInteractive's business was a federal business on its own. It concluded as follows:

[164] Based on the evidence, in the Board's respectful opinion, there is little doubt that, even if the respondent's interactive business could be viewed as a separate operation, severable from CHUM's core broadcasting undertaking, that operation would also come under federal jurisdiction on its own account. In the Board's view, the webcasting services currently performed by CityInteractive amount to a form of broadcasting, and the other interactive services it provides are interprovincial in nature. All of these services are performed on a regular and continuous basis as an integral part of CityInteractive's new media services operation. The fact that the design and marketing of Web sites and the posting of information on the Web constitute CityInteractive's primary activity, and that such an activity may not itself be federally regulated, is not determinative. What is significant, is that the extra-provincial activities performed by CityInteractive as an integral part of its operations are regular and continuous ...

[165] The test for determining whether CityInteractive is an interprovincial undertaking on its own account boils down to the question of "what is the ordinary business of CityInteractive?" The answer to that question leads to the conclusion that CityInteractive's ordinary business connects provinces on a regular and continuous basis, rendering it federal in nature. CityInteractive is not a mere publisher on the Web. It carries on activities that in effect take television on-line and the Internet to the air. The scope and complexity of the Internet as "a network of computer networks interconnected by means of telecommunications facilities using common protocols and standards that allow for the exchange of information between each connected computer" (C. Pinsky, supra, page 3), and the instantaneous, ubiquitous, and borderless nature that characterizes digital communications, lead to the natural conclusion that these activities, viewed functionally and realistically, bear a clear interprovincial communication stamp.

(pages 67-68)

[45] What flows from these decisions, and particularly from the Alberta Government Telephones and the Téléphone Guèvremont cases, is that the use of the physical equipment of telecommunications is not in itself sufficient to bring the business under federal jurisdiction. Conversely, the ownership or operation of the physical equipment is not a prerequisite for a business to fall within federal jurisdiction. In other words, it is not because a business does not do the "switching" or does not operate the "router" that it is automatically excluded from federal jurisdiction. One must examine the nature of the services provided and the mode of operation of the undertaking.

[46] In the present case, ITAS is not itself a carrier or a physical link in the "transport domain." It does not operate a "router," nor any piece of "physical" equipment. The Board heard from Stephen Murray that the telephone company was responsible for the physical transmission of information along the telephone network. That is part of what is called the "transport domain." In the respondent's view, ITAS cannot constitute a federal undertaking because its services are restricted to the "application domain," which are the sets of software and protocols that allow computers to communicate with others.

[47] However useful it is to understand the complexities of the technical aspects of Internet communication, this categorization does not answer the fundamental question: "what is the ordinary business of ITAS?"

[48] Counsel for the Unions argued that ITAS, as an ISP, falls within the definition of "telecommunications" or "broadcasting," its "business" is that of telecommunications and it is therefore subject to the Board's jurisdiction in the present case. They note the following definitions pursuant to section 2(1) of the Telecommunications Act, c. 38, Statutes of Canada, 1993:

"telecommunications" means the emission, transmission or reception of intelligence by any wire, cable, radio, optical or other electromagnetic system, or by any similar technical system;

"telecommunications service" means a service provided by means of telecommunications facilities and includes the provision in whole or in part of telecommunications facilities and any related equipment, whether by sale, lease or otherwise; ...

[49] Finally, section 23 provides:

23. For the purposes of this Part and Part IV, "telecommunications service" has the same meaning as in section 2 and includes any service that is incidental to the business of providing telecommunications services.

[50] ITAS's authentication server and its DNS server are specifically designed to provide screening and access in order to permit interprovincial and international telecommunications. The very nature of the service that ITAS delivers is to provide critical access to local, national and international telecommunications. Counsel for the Unions argues that even if that service is determined to be "incidental" to the business of providing telecommunications, by section 23 of the Telecommunications Act, it falls within the definition of "telecommunications service."

[51] Although it appears from the facts and the above-noted sections that ITAS falls within the regulatory authority of the Telecommunications Act, supra, a determination in that respect, even if we were inclined to make it, would not be determinative of our constitutional jurisdiction over ITAS for the purposes of the Code. Our focus, as indicated earlier, is the ordinary business of ITAS and the service it provides.

[52] Because of the functions carried out by its authentication server and its DNS server, ITAS is an integral part of the process of transmission of digital bits from one province to another, and from one country to another, via telephone lines, for interconnected computers. As Dr. Mosco stressed, any computer may be loaded with software such as Netscape, a graphical user interface. However, this "does not give the connection itself," that is, the addresses or the phone numbers that allow users to connect to others. The primary concern, from our perspective, is not the physical structures or their actual location, but rather the service that is provided by the undertaking; see Alberta Government Telephones, supra (page 259).

[53] The ISP allows those computers connected through the networks to communicate, transmit and receive information across the world. Once access to the Internet is guaranteed, there are no geographical boundaries to the movement of digital bits. Once ITAS's authentication authorizes P.E.I. Sympatico or P.E.I. Advantage Internet users to access Island Tel's router, users have access to the international network.

[54] The fact that ITAS is involved in the "application domain" as opposed to the "transport domain," as argued by the respondents, is irrelevant in terms of constitutional findings. What is essential is that the nature of the services provided by ITAS is critical for PC users in P.E.I. to access the international networks. In essence, what ITAS does is enable and permit telecommunications via the Internet. Without ITAS and its authentication and domain name servers, these users could not telecommunicate. The word that, everyone agreed, best described ITAS's role as an ISP is that of "gatekeeper" to the Internet. That word by itself, in our view, speaks descriptive volumes of the nature of the services provided by ITAS as well as its mode of operation. At the risk of gilding that descriptive lily, ITAS, as an ISP, provides access to telecommunications. Without it, users could not telecommunicate via the Internet, Island Tel's transport domain notwithstanding.

[55] The nature of the work done by ITAS - which, as the facts above disclose, clearly extends beyond the limits of Prince Edward Island - brings it within the definition of a federal work as defined in section 2(b) of the Code; see Alberta Government Telephones, supra; and National Pagette (1990), 83 di 56; 15 CLRBR (2d) 54; and 91 CLLC 16,018 (CLRB no. 836). In the Board's view, ITAS, because of the nature of the service it provides and its mode of operation as an ISP, is a federal business on its own account.

Several Operations as a Single Federal Undertaking

[56] Alternatively, if the Board had found that ITAS was not federal on its own account, we would still have concluded that it falls under federal jurisdiction on the basis that it is part of a single federal enterprise. Recently, in Westcoast Energy Inc., supra, the Supreme Court of Canada set out the applicable test to determine whether several operations constitute a single federal enterprise or undertaking. The issue in that case was whether the Westcoast mainline transmission pipelines, gathering pipelines and processing plants, including the proposed facilities, together constituted a single federal work or undertaking. The proposed pipeline and processing plant facilities were to be located entirely within the province of British Columbia. As a general principle, the Supreme Court stated:

In order for several operations to be considered a single federal undertaking for the purposes of s. 92(10)(a), they must be functionally integrated and subject to common management, control and direction. Professor Hogg states, at p. 22-10, that "[i]t is the degree to which the [various business] operations are integrated in a functional or business sense that will determine whether they constitute one undertaking or not". He adds, at p. 22-11, that the various operations will form a single undertaking if they are "actually operated in common as a single enterprise". In other words, common ownership must be coupled with functional integration and common management. A physical connection must be coupled with an operational connection. A close commercial relationship is insufficient. See Central Western, supra, at. 1132.

(page 359; emphasis added)

[57] The Supreme Court further stated that it was the overall degree of functional integration and common management that had to be assessed. Examples of some of the relevant facts were given. They include whether one aspect of a business is dedicated exclusively or primarily to the operation of the core interprovincial undertaking, whether the operations are under common ownership, whether the goods or services provided by one operation are for the sole benefit of the other operation and for its customers, or whether they are generally available.

[58] It was made clear, through the testimony of Ron Waite, President of ITAS and Director of Business Development for Island Tel, that providing access to the Internet is an important part of Island Tel's strategy to preserve its market, remain competitive and keep its customers satisfied. Mr. Waite explained the extent to which Island Tel thought that the development of its information technology business was essential for the company's growth. Before the creation of ITAS, Island Tel had a 50% partnership with On-Line Support in a company called P.E.I. Net. It was the main Internet access provider operating in P.E.I. Later on, Island Tel's shares, in P.E.I. Net, were bought by On-Line Support. In Mr. Waite's words:

... we went from being a 50 percent owner in the main ISP in the province to not being in the business at all. So for a period of time we ... were struggling, trying to find a way to get back into the Internet, as an Internet Service Provider.

(Transcript, Volume II, page 138)

[59] ITAS was incorporated as a separate entity on April 25, 1996. Before then, Island Tel had a department called Advanced Communications, which essentially constituted its operational attempt to get into the information technology business. The first employees were Bernie McIntyre, who started the company, and Carl Cooper. The decision to set up a separate company was made by Island Tel's management and was ratified by Island Tel's board of directors.

[60] Increasingly, Island Tel realized that its success lay in providing efficient ways for communicating information via computers. Thus, it sought new technologies to enhance its services. Allowing electronic communication between computers over the Internet is now a critical part of the "going concern" of telephone companies. In view of the changing nature of the telephone business, the issue is not whether Island Tel can still provide telephone services (local and/or long distance) to its customers without the assistance of an ISP. Obviously it can. Rather, the issue is whether Island Tel can provide access to the Internet through its facilities without an ISP. As the evidence revealed, it cannot. The fact that ITAS functions as an ISP is fundamental to allow the connectivity in the transmission process.

[61] In addition to this physical/technological connection, the evidence clearly demonstrates that there is a significant degree of common management, control and direction between Island Tel and ITAS.

[62] The founding directors of ITAS were also managers of Island Tel: Fred Morash is the Chair of the Board and President of Island Tel; Philip Acorn is Vice-President of Island Tel; Douglas Hart is Vice-President of MT&T; Bernie McIntyre is Vice-President of Island Tel, Chief Technology Officer of ITAS and of Island Tel and, until March 1998, President of ITAS.

[63] ITAS is a wholly-owned subsidiary of Island Tel and its board of directors is made up "primarily, if not exclusively, of senior management of Island Tel" (Transcript, Volume II, page 136).

[64] Ron Waite is President of ITAS and Director of Business Development for Island Tel. The senior officers of ITAS, Ron Waite and Bernie McIntyre, Chief Technology Officer, remain employees of Island Tel.

[65] In addition, Ron McDougall is an employee of Island Tel who reports "functionally" to Stephen Murray. If ITAS needs transport services, Stephen Murray interfaces with him to make sure that it is appropriately provisioned by Island Tel. In Colin Affleck's group, Jeff MacDonald and Barry Kneebone have a functional report to Colin Affleck, but both remain employees of Island Tel.

[66] Evidence was presented with respect to "Strategic Planning Meeting of Level 1 Managers of Island Tel and ITAS." Paul E. Hickey, Human Resource Officer, Manager at Island Tel, sent a memorandum to "all managers" on the "strategic design follow-up." That document contained two parts: part I summarized the results of a meeting of First Level Managers (and higher) of Island Tel and ITAS that went on for two days; part II was, according to Mr. Waite, "a framework for what needs to be accomplished in the area of quick short-term results if we are to achieve our Corporate objectives in 1998." The content of these documents speaks volumes with respect to the functional integration of ITAS and Island Tel.

[67] It is clear, from the documentary evidence as well as that given by the witnesses called by the respondents, that there is no real managerial or functional distinction between ITAS and Island Tel. Even leaving aside for the moment the physical technical integration between the operations of ITAS and Island Tel (which is itself, of course, significant and persuasive in the circumstances), ITAS is intended to be operated as an integral functional unit of Island Tel. This point is perhaps made most graphically evident by the content of the Memorandum (Exhibit 12) relating to the results of Island Tel's Strategic Design meetings. The memo makes it clear that Island Tel's "corporate objective" is that "ITAS will be an external, not an internal distinction," and that ITAS and Island Tel will present "one face to the customer." This singularity of operation is evidenced further by the declared objective of achieving a "greater interchange of staff" and the fact that persons listed under "Partners" and "Resources" within each project are predominately Island Tel managers.

[68] Furthermore, as Exhibit13 evinces, ITAS is considered as just another part of the overall operations of Island Tel (25 divisions). For the purpose of calculating the "Team Awards" and bonuses received by its employees, ITAS is regarded as part of the overall "team"; Ron Waite, candidly admitted that the performance of ITAS is measured in the overall performance of the Island Tel as a whole. And, if ITA did poorly, it would drag down the company's performance as a whole.

[69] Thus, had the Board concluded that ITAS was not federal in its own right, we are nevertheless satisfied that the operations of ITAS and Island Tel are "operated in common." There was no dispute that the two companies were commonly owned. The evidence previously referred to leaves us no doubt about the functional integration of the two operations. Simply put, Island Tel could not offer Internet service without an ISP; and ITAS as an ISP could not offer Internet service without Island Tel. This obvious physical connection in and of itself is not determinative. However, the operational connection, coupled with the common management that the evidence disclosed, lead us to conclude that ITAS and Island Tel are a single federal undertaking.

[70] Having concluded that ITAS constitutes a federal undertaking under either of the two tests mentioned in Westcoast Energy Inc., supra, it is not necessary to examine whether ITAS is a subsidiary operation integral to a core federal undertaking.

IX - Application of Section 35

[71] Having concluded that it has jurisdiction over the labour relations of ITAS, the Board must decide whether to declare ITAS and Island Tel a single employer pursuant to section 35, which provides as follows:

35.(1) Where, on application by an affected trade union or employer, associated or related federal works, undertakings or businesses are, in the opinion of the Board, operated by two or more employers having common control or direction, the Board may, by order, declare that for all purposes of this Part the employers and the federal works, undertakings and businesses operated by them that are specified in the order are, respectively, a single employer and a single federal work, undertaking or business. Before making such a declaration, the Board must give the affected employers and trade unions the opportunity to make representations.

(2) The Board may, in making a declaration under subsection (1), determine whether the employees affected constitute one or more units appropriate for collective bargaining.

[72] At the outset, the parties conceded that if ITAS were found to be a federal undertaking, the remaining criteria for a single employer declaration had been met. Having reviewed the evidence, the Board confirms that, in its view, the employers in the present application do indeed constitute a single employer. The criteria upon which this determination is made are set out in Murray Hill Limousine Service Ltd. et al. (1988), 74 di 127 (CLRB no. 699), as follows:

1. two or more enterprises, i.e., businesses,
2. under federal jurisdiction,
3. associated or related,
4. of which at least two, but not necessarily all, are employers (Emde Trucking Ltd., supra),
5. the said businesses being operated by employers having common direction or control over them.

(page 145)

[73] In this case, the Board is satisfied that these five criteria are met.

Exercise of Discretion

[74] Having determined that ITAS and Island Tel meet the criteria of single employer, the Board must decide whether or not to exercise its discretion and make the appropriate declaration pursuant to section 35, on the basis that doing so will effect a sound labour relations purpose (Prince Rupert Grain Ltd. and British Columbia Terminal Elevator Operators' Association (1996), 101 di 1 (CLRB no. 1155)).

[75] There is no need to belabour this issue. We have no difficulty in concluding that employees who are doing the applicants bargaining unit work at Island Tel are being transferred to or hired by ITAS to do the same work in a non-bargaining unit environment. Further, as the contents of Exhibit 12 graphically reveals, there are non-bargaining unit level 1 managers at ITAS who are doing exactly the same level work as their bargaining unit counterparts at Island Tel. In short, there is convincing evidence that the Unions' bargaining rights are being or are likely to be undermined. A conclusion in this regard warrants the exercise of the Board's discretion under section 35. Accordingly, the Board makes the requested declaration as set forth in the order below.

X - Bargaining Unit Configuration

[76] At this juncture, the Board sees no need to become involved in reconfiguring the bargaining unit structure between the respective sister Unions. During the course of argument, counsel for the applicants proposed that any matters with respect to the distribution of employees between bargaining units be referred to the Board's Regional Director, Mr. John Vines, for investigation and resolution. In the event no agreement can be reached, the Board retains jurisdiction to deal with any matter should it become necessary on application of any party. It appeared at the time that there was general consensus on this point. However, that notwithstanding, the proposal makes eminent sense and the Board's order below reflects the same.

XI - Order

[77] Accordingly the Board orders and declares as follows:

1. ITAS is a federal undertaking falling within the jurisdiction of the Board;
2. ITAS and Island Tel are a single employer within the meaning of section 35 of the Code;
3. Any matters with respect to the distribution of employees between bargaining units, and any issues relating to which employees of ITAS or Island Tel are performing or have performed bargaining unit work, as well any questions related to compensation for the same, shall be referred to the Board's Regional Director, Mr. John Vines, for investigation and resolution directly with the parties. In the event no agreement can be reached, the Board shall retain jurisdiction to deal with the same, on application of any party, should it become necessary.

File Numbers: 18403-C, 18729-C

IN THE MATTER OF THE

Canada Labour Code

- and -

Communications, Energy and Paperworkers Union of Canada, Local 401,

- and -

Communications, Energy and Paperworkers Union of Canada, Local 902,

applicant unions,

- and -

Island Telecom Inc.,

- and -

Island Tel Advanced Solutions Inc.,

respondent employers.

WHEREAS, the Canada Labour Relations Board received applications from the applicant, the Communications, Energy and Paperworkers Union, Local 401 ("CEP, Local 401"), on October 23, 1997 (Board File 18403-C) and the applicant, Communications, Energy and Paperworkers Union, Local 902 ("CEP, Local 902"), on May 4, 1998 (Board File 18729-C), pursuant to sections 35 and 44 of the Canada Labour Code (Part I - Industrial Relations) ("the Code"), seeking an order declaring that Island Telecom Inc. ("Island Tel") and Island Tel Advanced Solutions Inc. ("ITAS") are a single employer and a single federal work, undertaking or business for all purposes of the Code or, in the alternative, that there has been a sale of business from Island Tel to ITAS, and certain consequential orders;

AND WHEREAS, pursuant to the provisions of an Act to Amend the Canada Labour Code (Part I) and the Corporations and Labour Unions Returns Act and to make consequential amendments to other Acts, being Chapter 26 of the Statutes of Canada, 1998, effective January 1, 1999, the present matter was continued by the Canada Industrial Relations Board;

AND WHEREAS, after hearing the evidence and submissions of the parties, the Board has determined that Island Tel and ITAS constitute a single employer and a single federal work, undertaking or business pursuant to section 35(1) of the Code;

AND WHEREAS, pursuant to its powers under section 20(1) of the Code, the Board reserves its jurisdiction to dispose of any issues arising out of its order concerning bargaining unit configuration and compensation for membership in same;

NOW THEREFORE, the Canada Industrial Relations Board declares that Island Tel and ITAS constitute a single employer and a single federal work, undertaking or business pursuant to section 35(1) of the Code.

ISSUED at Ottawa, this 24th day of February 2000, by the Canada Industrial Relations Board.

(signature)

Richard I. Hornung, Q.C.

Vice-Chairperson

CASES CITED

Alberta Government Telephones v. Canada (Canadian Radio-Television and Telecommunications Commission), [1989] 2 S.C.R. 225

CITY-TV, CHUM City Productions Limited, MuchMusic Network and BRAVO!, Division of CHUM Limited, [1999] CIRB no. 22; and 53 CLRBR (2d) 161

Construction Montcalm Inc. v. Minimum Wage Commission et al., [1979] 1 S.C.R. 754

Day & Ross Nfld. Limited, [1999] CIRB no. 4; and 53 CLRBR (2d) 50

Eastern Canada Stevedoring Company Limited (Re), [1955] S.C.R. 529

Murray Hill Limousine Service Ltd. et al. (1988), 74 di 127 (CLRB no. 699)

National Pagette (1990), 83 di 56; 15 CLRBR (2d) 54; and 91 CLLC 16,018 (CLRB no. 836)

Northern Telecom Limited v. Communications Workers of Canada et al., [1980] 1 S.C.R. 115

Prince Rupert Grain Ltd. and British Columbia Terminal Elevator Operators' Association (1996), 101 di 1 (CLRB no. 1155)

Téléphone Guèvremont Inc. v. Quebec (Régie des télécommunications), [1994] 1 S.C.R. 878

Téléphone Guèvremont Inc. v. Québec (Régie des télécommunications) (1992), 99 D.L.R. (4th) 241 (Que. C.A.)

Toronto Electric Commissioners v. Snider et al., [1925] 2 D.L.R. 5 (P.C.)

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

Westcoast Energy Inc. v. Canada (National Energy Board), [1998] 1 S.C.R. 322

STATUTES CITED

Canada Labour Code, Part I, ss. 2(b); 4; 35; 44

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

Telecommunications Act, ss. 2(1); 23