Executive Summary: Key Legal and Evidentiary Issues

• Five consolidated appeals challenged whether s. 38 of the Labour Relations Code requires common control or direction between franchisees themselves, not just between a franchisor and its franchisees, before a common employer declaration can be made.
   
• Appellants argued the Reconsideration panel of the British Columbia Labour Relations Board failed to address this horizontal-control question, rendering its decision patently unreasonable.
   
• Justice Fisher held that the broad language of s. 38 does not dictate how common control or direction must be established and does not require horizontal control among franchisees where substantial vertical control by the franchisor exists.
   
• Neither the Original Decision nor the Reconsideration Decision expressly analyzed horizontal control under the common-control criterion, but both addressed it in relation to the labour relations purpose, which was permissible.
   
• Although the Board's treatment of Shoppers Drug Mart Inc. v. U.F.C.W., Local 1518 was described as unfortunate in failing to clearly address its precedential value, the Court found this did not render the decision patently unreasonable.
   
• Marzari J.'s application of the patent unreasonableness standard on judicial review was found to be correct, and all five appeals were dismissed.
   

Facts of the case

The appeals arose from a common employer application under s. 38 of the Labour Relations Code, R.S.B.C. 1996, c. 244, involving a franchise arrangement between Sobeys Capital Incorporated and four franchisees operating FreshCo-banner grocery stores in British Columbia: 1315949 B.C. Ltd., 1197785 B.C. Ltd., Philly Foods Inc., and Stafflyn Retail Inc. Sobeys entered into franchise agreements with these franchisees in 2019, and in May and September of that year the United Food and Commercial Workers International Union, Local 1518 applied to the British Columbia Labour Relations Board for a declaration that Sobeys and the franchisees constituted a common employer under s. 38. After a hearing spanning several weeks between October 2021 and September 2022, the Board granted the Union's application on July 6, 2023, in what the Court referred to as the Original Decision, finding that Sobeys exercised substantial control over the franchisees and that a single bargaining unit was the appropriate structure. Sobeys and the franchisees sought reconsideration, which a three-member panel dismissed on June 26, 2024, in what the Court called the Reconsideration Decision. They then petitioned for judicial review, which Justice Marzari dismissed by an order dated August 1, 2025, in reasons indexed as 2025 BCSC 1483. The five appeals to the Court of Appeal followed.

Policy and legislative provisions at issue

Section 38 of the Code provides that if, in the Board's opinion, associated or related activities or businesses are carried on by or through more than one corporation, individual, firm, syndicate, association, or combination of them under common control or direction, the Board may treat them as constituting one employer for the purposes of the Code. The Board has long applied a four-part test for a common employer declaration: more than one entity carrying on business; common control or direction between the entities; associated or related activities or businesses; and a labour relations purpose for the declaration, with the last requirement developed by the Board itself. The appellants relied on the factors for assessing common control established in Concerned Contractors Action Group, BCLRB No. 32/1986, and on the "spokes of a wheel" analogy from Shoppers Drug Mart Inc. v. U.F.C.W., Local 1518, BCLRB No. B110/2006, which found common control between a franchisor and each franchisee individually but not among the franchisees as a group. The appellants argued this meant horizontal control between franchisees was a necessary precondition for a common employer declaration involving multiple entities, distinct from vertical control exercised by the franchisor.

Reasoning and analysis

Justice Fisher confirmed that the Court of Appeal owed no deference to the reviewing judge and could step directly into her position, focusing on whether the Reconsideration Decision was patently unreasonable under s. 58 of the Administrative Tribunals Act. Applying this highly deferential standard, she found that the appellants' interpretation of s. 38 was not the only reasonable interpretation available. The words "or a combination of them under common control or direction" do not specify how that common control must be established, and the Board has consistently applied a broad, generous reading of s. 38, treating common control as a fact-specific inquiry assessed on the totality of the evidence. She noted that in KFCC/PepsiCo Holdings Ltd. v. C.A.W.-Canada, Local 3000, BCLRB No. B283/2001, the Board had recognized that it is unlikely any one franchisee would exercise control over another franchisee's operations, so the absence of horizontal control does not undermine a finding of common control or direction where vertical control by the franchisor is substantial. Turning to whether the Reconsideration panel had failed to address a question fundamental to the case, Fisher J.A. acknowledged that neither the Board nor the Reconsideration panel clearly addressed the appellants' argument about the necessity of horizontal control, addressing it instead, albeit briefly, under the labour relations purpose analysis. She found this approach permissible because the two steps of the s. 38 analysis, while discrete, are related, with findings on control relevant to both. On the treatment of Shoppers, she agreed it was unfortunate that the Board did not clearly explain why that decision was not treated as precedential on the question of common control, since Shoppers' primary reasoning rested on the absence of common control between the associates rather than solely on labour relations purpose. Nonetheless, she found the Board's cautious, fact-specific approach to franchise arrangements, evident throughout both decisions, meant the failure to fully distinguish Shoppers did not amount to a failure to address a question fundamental to the case.

Ruling and overall outcome

Justice Fisher, with Justice DeWitt-Van Oosten and Justice Gomery concurring, concluded that the Reconsideration Decision was not patently unreasonable and that Justice Marzari did not err in her application of this highly deferential standard of review. Accordingly, the Court dismissed all five appeals brought by 1197785 B.C. Ltd., Philly Foods Inc., Sobeys Capital Incorporated and 101296729 Saskatchewan Ltd., Stafflyn Retail Inc., and 1315949 B.C. Ltd., leaving intact the Board's declaration that Sobeys and the franchisees constitute a common employer for purposes of the Labour Relations Code and preserving the single bargaining unit structure sought by the Union. The decision does not identify any monetary award, costs, or damages granted to any party.