Grain inspectors and graders who work for a third-party testing company at federally regulated elevators can fall under federal labor law, the Supreme Court of Canada ruled in a split decision involving SGS Canada.
In Quebec (Attorney General) v. SGS Canada inc., 2026 SCC 37, released Nov. 6, the court voted 5-4 to dismiss an appeal by Quebec's attorney general. The case involves 14 inspectors and graders in the Montreal branch of SGS's Agriculture and Agri-Food Division. They work almost exclusively for six grain elevators along the St. Lawrence River. Those elevators are declared works for the general advantage of Canada under section 55(1) of the Canada Grain Act, which places them under federal jurisdiction.
SGS's agriculture division performs 80% of the testing for the entire Canadian grain market and has eight branches across the country, according to the ruling. The Montreal elevator operated by Viterra is the Montreal branch's largest client.
The dispute began when the Syndicat des travailleuses et travailleurs des industries manufacturières – CSN applied to Quebec's Administrative Labour Tribunal to represent the 14 employees under the Quebec Labour Code. The tribunal dismissed the application, finding the branch's labor relations were federally regulated. Quebec's Superior Court and Court of Appeal both upheld that result.
The distinction the court drew matters for elevator operators and their contractors. Direct federal jurisdiction applies to an entity that owns, manages, controls or operates a federal work. Derivative jurisdiction applies to a third party whose services are vital, essential or integral to a federal work, provided those services are also significant to the third party itself.
Writing for the majority, Justice Andromache Karakatsanis, joined by Justices Malcolm Rowe, Sheilah Martin, Mahmud Jamal and Mary Moreau, found that direct jurisdiction did not apply because SGS does not operate the elevators. The branch is functionally distinct within SGS, is largely managed independently and is dedicated to grain inspection in Quebec. Its work is integral to the six elevators, and 90% of its services go to them, which meets the significance test.
The majority also stressed limits. Federal labor jurisdiction is exceptional and should be approached restrictively, and significance is a high threshold meant to keep companies that also serve provincial businesses under provincial rules.
Justice Nicholas Kasirer dissented, joined by Chief Justice Richard Wagner and Justices Suzanne Côté and Michelle O'Bonsawin. The dissent would have applied the Quebec Labour Code. It held that the Canada Grain Act declaration covers elevators as physical works and does not give Parliament jurisdiction over the labor relations of SGS's grain inspectors.
The ruling keeps the Montreal branch's labor relations under federal rules. The majority's factors for judging whether a unit is functionally distinct include employee tasks, contact with other units, management and location, and the unit's role in the company. Those factors will guide future disputes over third-party workers at federally declared grain facilities.
