Vavilov and Chevron: Does Canada need an Administrative Procedure Act?

The recent refusal of the Canada Industrial Relations Board to follow the direction of the Minister of Labour in connection with the labour dispute involving WestJet Airlines Ltd. (WestJet) and the Airline Mechanics Fraternal Association (AMFA)highlights an ongoing flaw in the administrative law principles that govern the regulatory state in Canada.

ALICE IN WONDERLAND

On June 27, 2024, Minister of Labour Seamus O’Regan declared: “As minister of labour, I am using my authorities under the Canada Labour Code … to help the parties reach their first collective agreements … I have directed the CIRB [Canada Industrial Relations Board] to impose final binding arbitration to resolve outstanding terms of the collective agreement.”

A rational interpretation of the Canada Labour Code would be that a strike or lockout in the face of a binding arbitration order is prohibited. However, the Canada Industrial Relations Board (CIRB) issued a statement in connection with the binding arbitration order reading as follows: “Ministerial referral does not have the effect of suspending the right to strike or lockout.”

This Alice in Wonderland logic shocked almost everyone, including the parties and the minister of labour.

It was not surprising to those who practice administrative law in Canada.

Over the last century, the regulatory state has grown and flourished under the idea that regulators have the right to be wrong about the interpretation of their own statutes and the legislation that has created them. This idea grew out of the theory that regulators would have knowledge, experience and expertise regarding the subject they regulate and that courts should defer to regulators as a matter of good public policy.

In theory, deference is defensible. In practice, deference often leads to chaos, abuse and disrespect for the rule of law:

1. The WestJet and AMFA dispute illustrates the chaos and economic harm caused by regulators who consider themselves above the legislative body that created them.
2. Certainty in the law is thrown out the window when regulators are allowed to make up definitions inconsistent with both the dictionary and statute (see West Fraser Mills v. British Columbia (Workers’ Compensation Appeal Tribunal), 2018 SCC 22, and the definitions of “owner” and “employer” used by the British Columbia Workers Compensation Board highlighted in the dissenting judgment of Justice Suzanne Côté).
3. The rule of law is trampled when municipalities purposely make laws to circumvent provincial legislation, with the strategy of reliance upon judicial deference to achieve objectives inconsistent with provincial legislation.

VAVILOV: THE STANDARD OF REVIEW IN CANADA

Under the current state of the law, not every decision by a regulator in Canada is entitled to deference. The Supreme Court of Canada established the rules for the standard of review in its often- quoted decision, Minister of Citizenship v. Vavilov, 2019 SCC 65:

The presumption of reasonableness review can be rebutted in two types of situations. The first is where the legislature has indicated that it intends a different standard or set of standards to apply. This will be the case where the legislature explicitly prescribes the standard of review. It will also be the case where the legislature has provided a statutory appeal mechanism from an administrative decision to a court, thereby signaling the legislature’s intent that appellate standards apply when a court reviews the decision. The second situation in which the presumption of reasonableness review will be rebutted is where the rule of law requires that the standard of correctness be applied. This will be the case for certain categories of questions, namely constitutional questions, general questions of law of central importance to the legal system as a whole and questions related to the jurisdictional boundaries between two or more administrative bodies.

Justice Côté summarized the extent of correctness review succinctly in Ontario (Attorney General) v. Ontario (Information and Privacy Commissioner), 2024 SCC 4 (Ontario v. Ontario):

In Vavilov, our Court recognized that “correctness review is necessary to resolve general questions of law that are of ‘fundamental importance and broad applicability’, with significant legal consequences for the justice system as a whole or for other institutions of government.”

In creating the “fundamental importance and broad applicability” exception to the reasonableness standard of review, the Supreme Court of Canada has ensured that it can impose a correctness review whenever justice requires it. A court need only find that the legal issue is one of “fundamental importance and broad applicability” in order to impose a test of correctness.

The supremacy of Parliament and the rule of law seem to be of fundamental importance and broad applicability. If this is true, then the interpretation of a statute, a common law principle or a constitutional provision should all attract a correctness review.

CHEVRON’S DEMISE 

That is the law in the United States after Loper Bright Enterprises v. Raimondo, 2024 U.S. LEXIS 2882 (Loper), issued on June 28, 2024. The decision, written by Chief Justice Roberts, made clear that the correctness approach should have been followed under the U. S. Constitution throughout that nation’s history.

Chief Justice John Roberts first identified the approach to judicial review articulated by Chief Justice John Marshall 220 years ago: “[it] is emphatically the province and duty of the judicial department to say what the law is.” The current Chief Justice acknowledged that the growth of the regulatory state had led the courts in the U.S. to grant some deference to regulators.

The courts first developed an approach that granted deference to a regulator where there was evidence to back up a decision of the regulator. Here is what the U.S. Supreme Court said about deference in the 1944 case of Skidmore v. Swift & Co., 1944, 323 U.S. 134:

The weight of such a judgement in a particular case [would] depend upon the thoroughness evident in the consideration, the validity of its reasoning, its consistency with earlier pronouncements, and all those factors which give it power to persuade, if lacking power to control.

The courts in the United States did not, at that time, grant deference on questions of statutory interpretation.

In 1946, the U.S. Congress enacted the Administrative Procedure Act and explicitly restricted the power of federal regulators to decide questions of law. Section 706 of that statute reads as follows:

To the extent necessary to decision and when presented, the reviewing court shall decide all relevant questions of law, interpret constitutional and statutory provisions, and de- termine the meaning or applicability of the terms of an agency action.

According to reports prepared for Congress in 1946, s. 706 of the Administrative Procedure Act “provide[d] that questions of law are for the courts rather than agencies to decide in the last analysis.”

It was said at the time of enactment that the purpose of the Administrative Procedure Act was to serve “as a check upon administrators whose zeal might otherwise have carried them to excesses not contemplated in the legislation creating their offices.”

This was the law in the U.S. until 1984, when Chevron U.S.A. v. Natural Resources Defense Council, 1984, 467 U.S. 837, (Chevron) introduced the doctrine of deference. Under Chevron, a court was required to respect and accept the decision of a regulator on the construction of its governing statute, so long as the following conditions existed:

1. The intent of Congress in connection with the legislation was not
2. The statute was “silent or ambiguous with respect to the specific ”
3. The decision of the regulator was “a permissible construction of the ”

As a result of Chevron, the courts were required to defer to the regulator, even if the construction of the statute was not “the reading the court would have reached if the question initially had arisen in a judicial proceeding.”

Effectively, regulators in the United States were granted the right to be wrong.

Inexplicably, Chevron did not consider of the Administrative Procedures Act and the impact of s. 706 upon the decision-making authority of a regulator.

On June 28, 2024, the U.S. Supreme Court in Loper corrected that oversight:

Chevron has proved to be fundamentally misguided. Despite reshaping judicial review of agency action, neither it nor any case of ours applying it grappled with the APA — the statute that lays out how such review works. Its flaws were nonetheless apparent from the start, prompting this Court to revise its foundations and continually limit its application.

The law in the United States is now clear:

Chevron is overruled. Courts must exercise their independent judgment in deciding whether an agency acted within its statutory authority, as the APA requires. Careful attention to the judgment of the Executive Branch may help inform that inquiry. And when a particular statute delegates authority to an agency consistent with constitutional limits, courts must respect the delegation, while ensuring that the agency acts within it. But courts need not and under the APA may not defer to an agency interpretation of the law simply because a statute is ambiguous.

THE UNCERTAINTY OF REASONABLENESS

For now, the law in Canada remains unclear. It is not possible to predict with certainty when the correctness standard will be applied by the Supreme Court of Canada. This confusion is apparent from Justice Côté’s concurring reasons in Ontario v. Ontario:

With respect, my colleague … conducts her own interpretation of s. 12(1), and of the importance and nature of Cabinet privilege, and then measures it against that of the Commissioner. The fact that my colleague would have reached a different conclusion than that of the Commissioner does not make the Commissioner’s decision unreasonable. However, on the basis of my colleague’s reasons, which in my view involve a de facto correctness review, I conclude that the Commissioner’s decision is incorrect.

Even when the correctness standard of review is clearly mandated, the Supreme Court of Canada has nevertheless chosen to undertake a reasonableness analysis. This reality was discussed in Ontario v. Ontario by Justice Côté’s in her concurring reasons for the decision:

While I agree with my colleague’s interpretation of s. 12(1), it is exactly that — her interpretation. Correctness review, in addition to being required by Vavilov, serves to eliminate my concerns about the lack of deference accorded to the Commissioner. My colleague’s interpretation of s. 12(1) of the Act is correct; the requested letters are exempt from disclosure under that provision. I would therefore allow the appeal and set aside the Commissioner’s decision.

AN ADMINISTRATIVE PROCEDURE ACT FOR CANADA

Some academics have called upon the Supreme Court of Canada to adopt a correctness test for all questions of law. However, it is unlikely that the Supreme Court of Canada will move in that direction any time soon.

In order to bring certainty to the law governing the standard of review, Parliament could pass a Canadian Administrative Procedure Act. Such legislation could impose a rational and predictable approach by directing courts to refrain from giving deference to the opinions of a regulator unless the statute establishing the authority of the regulator requires such deference. The legislature of every province and territory could follow the same approach.

There are at least three compelling reasons for legislators to require a correctness review for all questions of law:

1. The principle of the rule of law in the
2. The certainty required by commercial organizations, specifically, and the economy,
3. The democratic process, which requires that regulators follow the will of the people, as represented by lawmakers in Parliament and legislative assemblies.

There are two additional and very practical reasons to require correct interpretations of the law:

1. Non-lawyers make up the majority of decision-makers appointed to regulatory bodies in Canada and are simply not in the best position to interpret the law as required by the
2. Some regulators, like municipalities, are made up of decision-makers who are directly influenced by political considerations.

This article was originally published by Law360 and is reproduced with permission.