In a recent decision,[1] Ontario's Divisional Court (the Court) found that Rouge River Farms Inc.'s (Rouge River) employees are exempt from the overtime provisions of the Employment Standards Act, 2000 (ESA). In doing so, the Court overturned the Ontario Labour Relations Board's (Board) decision that Rouge River's employees were entitled to overtime pay because - the Board found - they were not working on a farm and their work was not directly related to the primary production of an agricultural product. Specifically, the Court disagreed with the Board's conclusion that Rouge River did not fall within the farm worker exemption provided by section 2(2) of Regulation 285/01 (the Farm Exemption). In a rare move, the Court substituted its own decision for that of the Board, ruling that the only reasonable conclusion is that the Farm Exemption applies to Rouge River.

The Court's decision is now the leading authority on the Farm Exemption. It provides critical clarity to the farming community, which often relies on overtime work to produce agricultural products. It also provides guidance about the interpretation of employment standards legislation across Canada and the availability of a substituted decision as a remedy on an application for a judicial review.

Two teams of Fasken lawyers acted in this case: John Craig, Jackie VanDerMeulen and Tala Khoury acted for Rouge River; and Christopher Pigott and Gillian Round acted for the Intervenor, the Labour Issues Coordinating Committee.

Background on the Case

Rouge River is a family farm that grows sweet corn. The dispute began after an Employment Standards Officer (ESO) conducted a proactive inspection of Rouge River's centralized facility. The centralized facility is used exclusively for post-harvest production and is located on a tract of land separate from the land where the sweet corn is grown. To perform their work, many Rouge River employees move between the corn fields and the centralized facility.

The Farm Exemption applies if the employer is a "farm" and the employees' work is "directly related to the primary production" of an agricultural product.[2] The ESO concluded that the centralized facility was not a "farm" and issued a compliance order (Order).

Rouge River challenged the Order before the Board. The Director of Employment Standards (Director) defended the Order. The Board found the Farm Exemption did not apply to Rouge River's employees at the centralized facility on the basis of a new "Double Nexus" test that called for a consideration of a "constellation of factors" to determine whether the Farm Exemption applies.

The Court overturned the Board's decision, finding that the centralized facility "is a farm and those who are working there are employed in activities that are directly related to the primary production of sweet corn."

Key Principles for Interpreting Employment Standards Legislation

The Court confirmed there is a single statutory interpretation approach. It requires words to be interpreted contextually in accordance with their plain and ordinary meaning in light of the purpose of the legislation.

Interpreting the Farm Exemption requires a balance between the purpose of the ESA, which establishes minimum employment standards, with the purpose of Regulation 285/01, which identifies circumstances where the minimum standards do not apply. The Court found the Board's interpretation of the Farm Exemption unreasonable because it did not balance these two purposes.

Notably, the Director did not present any evidence at the hearing before the Board. Conversely, Rouge River presented expert evidence from Dr. Frank Ingratta, a former Ontario Deputy Minister of Agriculture, Food, and Rural Affairs, and called two witnesses to describe the farm's history, its employees, and sweet corn production. The Court found the Board's interpretation of the Farm Exemption unreasonable because the Board disregarded, without any explanation, this unchallenged evidence.

Understanding the Farm Exemption

Since the word "farm" was neither defined in the legislation nor previously interpreted by case law, Dr. Ingratta defined a "farm" as an enterprise that performs all the functions involved in the production of plant and animal products. He expressly stated that a farm includes tracts of land where post-harvest work is conducted. Therefore, Rouge River argued that the centralized facility is a part of Rouge River's enterprise, all of which is a "farm".

The Director offered a narrower definition contending that a "farm" is a tract of land used for growing agricultural products. The centralized facility was not a "farm" because it was located on a tract of land separate from the growing land. The Board concluded that a tract of land is a "farm" if it has a nexus or connection to the location where the agricultural product is grown.

The Court found the Board's interpretation of a "farm" unreasonable. Specifically, the Board disregarded Dr. Ingratta's unchallenged expert evidence that Ontario farms commonly operate on non-contiguous tracts of land and sometimes locate aspects of post-harvest primary production on non-growing land. Further, the Board's interpretation depended solely on where the employees were standing while doing work, even though the work itself was the same. Finally, the Board's interpretation imposed significant record keeping challenges on employers who were required to track where their employees were working every day.

What Does "Directly Related to Primary Production" Mean?

Relying on a 2009 decision[3] that interpreted the requirement that the work be "directly related to primary production," Rouge River argued that the Farm Exemption applies to farms whose primary production process is seamlessly integrated, regardless of where the agricultural product is grown. To that end, Rouge River led extensive evidence about its operations. Dr. Ingratta also stated that in Ontario, aspects of post-harvest production are commonly geographically distinct from the land where the agricultural product is grown.

The Director argued that the Farm Exemption only applies if the work is being done at the physical location where the agricultural product is grown. The Director also required an employer to demonstrate, taking into consideration a "constellation of factors", a nexus between the work performed and the agricultural product. The Board accepted the Director's interpretation.

The Court found the Board's interpretation unreasonable. The Board had, among other things, ignored important contextual evidence led by Dr. Ingratta and the other witnesses, relied on case law for a proposition that actually contradicted the Board's findings in that decision, and chose an interpretation that was not easily understood by the farmers affected by the Farm Exemption.

Substituted Decision as a Remedy

In exceptional circumstances, a Court on an application for a judicial review may substitute its own decision for that of a tribunal rather than return the matter back for redetermination. This happens where there is only one "possible, acceptable outcome" that is defensible in respect of the facts and law. In this case, the Court concluded that the Farm Exemption applies to Rouge River.

Broader Impact of the Decision

This decision confirms important principles applicable to the interpretation of employment standards legislation. First, the Court endorsed a common sense interpretive approach that must consider the real word context within which employers and employees work. Second, administrative decision-makers must interpret employment standards legislation so it is easily understood by the people to whom it applies, "particularly so that employers can avoid inadvertently running afoul of the statute". An interpretation that creates uncertainty because it is confusing, overly complex, uses vague terms, or poses significant challenges in record keeping may be unreasonable.