Thank you, Mr. Chair.
We are indeed discussing the motion that was introduced and read before the members of this committee a few minutes ago.
I am going to complete the argument I was advancing, with the aid of the document I was using as evidence, to emphasize clearly and resoundingly the dangers that this bill represents not only for the government's budgetary expenditures, but also for all the very important investments linked to unions, particularly workers' retirement schemes and pension plans.
Putting aside the economic impact, this bill would represent a massive invasion of privacy, as pension funds that come from union plans will be forced to report the name and address of hundreds of thousands of pensioners to the government every year. That, too, will also be made public.
At a time when the economic recovery in Canada and around the world is still precarious, New Democrats condemn the economic recklessness in this bill. For the sake of our economy and the stability of our markets, C-377 cannot be allowed to pass.
It is quite clear that a number of cost and money issues are related to the motion we have introduced.
Mr. Chair, I am going to take the liberty of addressing a particular topic. First I am going to introduce it because I feel that some members might challenge it. I'm going to talk about the constitutionality of the bill that has been tabled.
Why are we addressing this matter in a context in which we are talking about costs? That is because, if this bill is not deemed constitutional at the outset by most experts, it will involve excessive costs to the federal government. In the unfortunate event this bill becomes law, organizations or provinces would definitely institute proceedings in the courts. Submitting a bill that presents constitutional problems from the outset means exposing oneself to potential lawsuits and legal fees. When you institute proceedings concerning the constitutionality of an act and have to go as far as the Supreme Court, it takes years and represents tens and even hundreds of thousands of dollars.
The argument I want to advance on the non-constitutionality of the bill before us is directly related to the federal government's costs. I am going to share with you the serious objections and questions raised by Mr. Alain Barr., who is a professor of labour law at Laval University's Department of Industrial Relations. He writes as follows:
Bill C-377, An Act to amend the Income Tax Act (requirements for labour unions), was introduced at first reading on December 5, 2011. If Bill C-377 were to be enacted and brought into force as it now stands, all labour organizations in Canada would be required to file an annual return...
The essential issue raised by this bill is its legality, or constitutional validity, having regard to the division of legislative powers set out in sections 91 and 92 of the Constitution Act, 1867. That is the mandate we have been assigned. One member of Parliament has already anticipated this kind of problem: in debate on the bill at second reading, Joe Comartin (Windsor-Tecumseh) said that "we have a problem with the bill because it probably extends itself into [provincial jurisdictions]" (House of Commons Debates, Official Report, 41st Parliament, 1st Session, February 6, 2012, p. 4863). However, the member did not provide substantiation for his assertion.
Sections 91 and 92 of the Constitution Act, 1867 establish the division of powers by "classes of subjects" (in French, "categories de sujets") within which "matters" (in 2 French, "matières") are listed. Section 91 establishes the classes of subjects assigned exclusively to Parliament, while section 92 establishes the classes of subjects assigned exclusively to the provincial legislatures. After examining the content of the bill under consideration, we contend that the drafters of Bill C-377 have failed to properly assess the extent of the constraints that the Constitution of Canada imposes on Parliament in this regard. The reasons follow.
To assess the constitutional validity of any legislation (in some cases, its sphere of application), we must analyze its content, applying a two-step process. The first step, discussed in section 1 below, is to determine the "matter" ("matière") of the impugned legislation. In other words, its "pith and substance" (in French, "caractère véritable") must be determined. That step is the most important and delicate part of the exercise: when the dominant nature, the substance or the essence of legislation is determined correctly, its constitutional validity can be assessed. When that has been done, the matter identified must then be assigned to the appropriate class of subjects, under sections 91 and 92. If the legislation can be placed under a head of jurisdiction assigned to the legislative body that enacted it, once it has been analyzed, then its constitutional validity will be recognized; otherwise, the legislation will be invalid. In other words, in order to determine the constitutionality of any legislation, the "matter" to which it relates, its essence—its pith and substance—must first be established.(1)
The second step is to determine, having regard to the pith and substance of the legislation, whether it was enacted by the legislative body that has jurisdiction. In order to decide whether the legislation under consideration is valid, or what its sphere of application is, we must therefore identify the federal jurisdiction in relation to labour relations, and clarify the extent of that jurisdiction.(2)
After analyzing the substance of the legislation as it is drafted, we find that Bill C-377 is not tax legislation that might incidentally trench on the sphere of labour organizations. In fact, it is labour legislation, whose sole purpose is to regulate the operation of labour organizations. Accordingly, having regard to the constitutional limitations on federal jurisdiction in relation to labour relations, we must conclude that this bill is invalid in terms of the division of legislative powers set out in the Constitution of Canada. Furthermore, there is no need even to consider its sphere of application, since as it is drafted, the bill is totally invalid, given that its very "substance" relates to an area that is under the exclusive jurisdiction of the provinces of Canada, based on section 92(13) of the Constitution Act, 1867: "Property and Civil Rights in the Province". Accordingly, this bill, as it is drafted, cannot apply to any labour organization in Canada.
Professor Barré continues, Mr. Chair, considering the pith and substance of the bill before us.
In any challenge to the constitutional validity of legislation, the courts must first classify the legislation. To do that, they must identify its pith and substance (in French, its "caractère veritable"). Identifying the pith and substance of legislation "in fact involves identifying the 'matter' to which the legislation essentially relates" (Henri Brun, Guy Tremblay, Eugénie Brouillet, Droit constitutionnel, 5th ed., Cowansville, Éditions Yvon Blais inc., 2008, p. 448). This means determining its "dominant characteristic", its "true nature" or its "pith and substance". In short, the actual substance of the legislation must be identified. English-Canadian authors refer to the "true meaning", the "dominant feature", the "leading feature", the "true nature and character", or the "dominant or most important characteristic"....In other words, does the legislation under consideration relate to "labour relations"? Can it be described as "labour law"?
In determining the pith and substance of legislation, the first task is to identify its real objective, and not its effects. Its "dominant purpose" must be considered: "the secondary purposes and effects of the legislation do not affect its validity" (Henri Brun, Guy Tremblay, Eugénie Brouillet, Droit constitutionnel, 5th ed., Cowansville. Éditions Yvon Blais inc. 2008, p. 450). However, since we must strive to identify "the real objective of the impugned legislation, and not its stated or apparent objective" (idem, p. 449), knowledge of the effect of the legislation may be useful, and even essential, particularly in the case of colourable legislation—legislation in which a legislature is regulating a matter other than the one announced in the "stated" purpose of the legislation (see André Tremblay, Droit constitutionnel. Principes, 2nd ed., Montréal, Les Éditions Thémis, 2000, pp. 316 and 319). This point seems particularly germane in this case. Professor Hogg has spoken clearly on this point:
...the search for pith and substance will not remain within the four corners of the statute if there is reason to believe that the direct legal effects of the statute are directed to the indirect achievement of other purposes.
Extrinsic evidence (in particular, parliamentary debates) may therefore also be considered in identifying the pith and substance of any legislation being considered (see Hogg, pp. 15-15). The question is therefore a simple one: does Bill C-377 (in the event that it is enacted by Parliament and brought into force) relate to tax policy or labour relations? In other words, is this tax legislation or labour legislation; more specifically, is it legislation whose purpose is to regulate labour organizations?
The question seems to have received little notice to date. However, in a document published on its website, "Bill C-377: Costly and Discriminatory", the Canadian Labour Congress (the CLC) does seem to have recognized it as an attempt at colourable legislation....
In another CLC document ("CLC Summary of Bill C-377"), the author clearly refers to the lack of connection between the regulation proposed in the bill and the enforcement of tax requirements:
The nature of Bill C-377 would seem to go more to the regulation of labour organizations, a matter unrelated to fiscal enforcement or taxation. There simply does not appear to be an income tax enforcement basis for the disclosure entailed in Bill C-377.
Is this a case of colourable legislation?
Is the inclusion of this regulation in the Income Tax Act a disguise—a clever stratagem to cloak it in a legal garment appropriate to the circumstances, in order to "legitimize" its enactment, in terms of the division of legislative powers established by sections 91 and 92 of the Constitution Act, 1867? Is Parliament pursuing a goal that is incompatible with the division of powers?
In its submission to the Standing Committee on Finance, the Canadian Bar Association noted that the bill could "have a serious impact on the operations of labour unions" and observed that it was "inappropriate for operational restrictions to be brought forward as amendments to taxation legislation". In our opinion, this is a blatant case of "colourable legislation": under cover of tax legislation, Parliament is attempting to intrude in a field that is under the exclusive jurisdiction of the provincial legislature.
First, the mere fact that the regulation is incorporated into the Income Tax Act does not mean that a court construing the legislation may conclude that its pith and substance is tax policy: the courts take no notice of the form of legislation when they determine its legal classification The evidence is that this could easily have been regulated by a separate bill having no connection with the Income Tax Act. On that point, we might note, for comparative purposes, that since the enactment of the Landrum-Griffin Act in the United States in 1959, the obligation placed on labour organizations to file returns has been created in labour legislation. In addition, the scheme in question is administered by the Labor Department.
It is therefore by examining the summary, content and factual background in which legislation is enacted that its pith and substance will be determined. We would first note that the summary (the explanatory notes) of the bill make no effort to establish any connection between the proposed regulation and the provisions of the Income Tax Act. Other than the reference to the title of the act to be amended, the summary in no way suggests that the objective of the bill is related to tax policy. On the contrary, the summary clearly suggests that the "stated" objective of the legislation is nothing other than to compel labour organizations to provide "financial information" to the federal government. In other words, the "stated" objective suggests that this is a matter of regulating labour organizations, a subject that in fact falls under the exclusive jurisdiction of the provinces.
Now let us talk about the content of the legislation. An examination of the content of the legislation discloses only a very tenuous connection with the fiscal provisions of the Income Tax Act. There is no structural connection between the content of Bill C-377 and the tax exemption enjoyed by labour organizations under section 149(1), nor is there with the tax deduction that taxpayers may claim under section in calculating their income from employment.
Earlier we talked about the fairness or even discriminatory aspect this bill.
The fact that new section 149.01 has been added immediately after section 149, which allows that tax exemption, has no effect: as we will recall, the courts take no notice of the form of legislation in classifying it: in determining its essence.
Under section 149(1)(k), no tax is payable by “a labour organization or society”. However, the Income Tax Act contains no definition of the expressions “labour organization” or “labour society". In other words, it is enough that a "labour organization" exists, within the usual meaning of the word "exist", for it to claim the tax exemption under section 19(1)(k) of the Income Tax Act. The Canada Revenue Agency added nothing more when it stated that a labour organization "corresponds generally to an association of workers in the same or allied fields, organized for the purposes of furthering their occupational, economic or other interests".
In another case, the reference to furthering the occupational interests of workers was expressed as:
...for the purpose of securing the most favourable conditions, wages, or hours of work for its members.
In short, in order to qualify as a "labour organization" and thus benefit from the tax exemption,
The organization must be organized and operated for the benefit of labour, [which] is normally understood to refer to the workers or employees.
Thus, an organization whose objects are
to consider and adopt methods for promoting and regulating sound labour relations, to [negotiate] collective agreements with a trade union, and to pursue related undertakings on behalf of its employer-members
is not considered
“a labour organization”
within the meaning of section 149(1)(k). That is plainly consistent with the usual meaning of the expression "labour organization".
Mr. Barré continues:
Certainly, we may note that Bill C-377 defines the concept of "labour organization", a definition that would apply both under section 149, which establishes the right to the tax exemption, and under new section 149.01, which creates a new obligation for labour organizations to provide annual financial information.
I would add a note here and talk as well about a new obligation for the Canada Revenue Agency, given what we learned this morning, that is to say that the act's administration would cost only $10.6 million in the first two years. Going back to Mr. Barré's comments:
Two comments are called for here. First, the effect of that text is not to expand or narrow the concept of the “labour organizations” that are entitled to the tax exemption provided for in section 149(1)(k). Whether the labour organization is one whose purpose is "the regulation of relations between employers and employees (new s. 149.01(1)) or one that may be defined "an association of workers …
… the essence is the same: in all cases, it is in fact a definition of a labour organization in the ordinary meaning of the expression. Second, adding the definition given in section 149 creates no connection between the two provisions such as would alter the pith and substance of the new legislation. In short, the fact that sections 149 and 149.01 both include the same definition of a "labour organization" does not in any way alter the pith and substance of section 149.01. Once again, that would amount to placing more weight on the "form" of the legislation than on its "substance".
We also note that the legislation does not require that the labour organization be "certified" or "recognized", as the case may be, under provincial or federal law, to enjoy the tax status conferred by section 149(1)(k). Any labour organization, within the usual meaning of that expression, is entitled to that tax status.
Under section 8(1)(i), a taxpayer who pays “annual dues” to a trade union may claim and obtain a deduction in calculating their income from employment. For the meaning to be given to the expression "trade union", the Act simply refers to the definition already found in section 3 of the Canada Labour Code: an "organization of employees … the purposes of which include the regulation of relations between employers and employees". However, Bill C-377 creates no organic connection between the right to that deduction and the obligation imposed on the labour organization to file an annual return with the prescribed information. Absent an express connection, must the objective of Bill C-377 be understood to allow the Canadian public to obtain information about how their dues are used by their labour organizations? In that case, the pith and substance of the legislation would related to the "regulation" of labour organizations.
Because the expression "labour organization" is not defined in the legislation, there is not precise requirement to be met in order to enjoy that tax status and the tax exemption associated with it. Accordingly, any labour organization theoretically enjoys that tax status. The purpose of the information required by Bill C-377 is therefore apparently not to ascertain whether or not a particular labour organization is entitled to the tax status conferred by section 149(1)(k). In other words, there is apparently no organic connection between the information the legislation seeks to obtain and the tax exemption enjoyed by the labour organizations.
Because this is a private member's bill and not a government bill, we also have to examine the statements made by its sponsor, to identify the stated objective of the bill. This does not mean looking for anti-union animus on the author’s part. It is sufficient to establish the "stated" objective, it being understood, however, that the "real" objective may be different from that "stated" objective.
