Travel nurse company asks court to strike down 'unconstitutional' law designed to nullify contracts

Canadian Health Labs wants the Court of King's Bench to strike down, as unconstitutional, legislation that the province enacted last month in a bid to avoid any legal or financial penalties over travel nurse contracts between the staffing agency and Vitalité Health Network.

In documents filed with the court in Saint John, Canadian Health Labs alleges the Travel Nurses Act represents "unlawful interference" by the legislature of New Brunswick into a "freely negotiated commercial relationship between two commercial entities."

It claims the act was "legislated in bad faith and constitutes an abuse of power by the province."

The act is "improper, unconstitutional and unconscionable and must be struck down in its entirety," Canadian Health Labs argues in the documents, filed in response to Vitalité's statements of defence and counterclaims to the company's three lawsuits over the contracts.

The Ontario-based company has also notified the provincial and federal attorneys general about the "questions of constitutionality raised in this matter," according to the documents.

New Brunswick's attorney general declined to comment Friday through Department of Justice and Public Safety spokesperson Jadesola Emmanuel. She cited the matter being before the courts.

The Office of the Attorney General of Canada has received notice of a constitutional question related to the provincial Travel Nurses Act, confirmed federal Department of Justice spokesperson Ian McLeod. It will "review in order to determine next steps," he said in an emailed statement.

Bill was introduced in March

Health Minister Dr. John Dornan introduced the Act Respecting Travel Nurses in March, after Vitalité cancelled the remaining shifts of travel nurses employed by Canadian Health Labs, even though its contract wasn't set to expire until February 2026.

"The contract that we signed was not a good contract for New Brunswickers, for taxpayers," Dornan said at the time. It was signed in 2022 in the midst of the COVID-19 pandemic and dire staffing shortages, he said. "We were desperate."

Canadian Health Labs charged about $300 an hour per nurse — roughly six times what a local staff nurse earns, Auditor General Paul Martin found in a report last summer. "The contracts with private nursing agencies were not reflective of best practices and did not demonstrate value for money," Martin said.

Two days after the legislation was introduced, Canadian Health Labs launched its first lawsuit against Vitalité, alleging breaches of contract and seeking damages.

Then, before the legislation was adopted, the company filed two more lawsuits over two other contracts, which were also signed in 2022 but had both expired in 2024. Canadian Health Labs alleged, among other things, that Vitalité deployed fewer "human health resource professionals" than stipulated, failed to pay invoices, and terminated a renewal "unilaterally and improperly."

Dornan subsequently appeared before the legislature's standing committee on economic policy to discuss proposed amendments to the bill. Vitalité's lawyers had raised concerns about the expired contracts not being included, Dornan said. So the government decided it would be "prudent, and perhaps safer, to nullify all three contracts," which covered from July 2022 to February 2026 and totalled $98 million, according to the auditor general.

Canadian Health Labs alleges the act "has the effect of allowing Vitalité and the province of New Brunswick to not pay its debts, obtain statutorily protected unjust enrichment, not to be held accountable to the various liabilities Vitalité incurred during its commercial relationship with CHL and attempts to shield Vitalité and the province of New Brunswick from judicial oversight and reprimand for its bad faith conduct."

The "use of legislation to avoid payment of accounts receivable for services rendered is tantamount to theft," it claims.

None of the allegations have been proven in court.

Canadian Health Labs goes on to argue that despite the title of the legislation, the Travel Nurses Act "does not address travel nursing in the province."

Travel nursing contracts between Vitalité and other companies — Canadian Health Labs' competitors — remain in place and "unaffected," it says.

"When the government, acting as a commercial entity, decided it could pay less for the same services, it used its legislative power to deprive CHL of the contracted benefit," according to the documents.

The Court of King's Bench of New Brunswick must be free to hear these matters and determine whether the conduct of Vitalité and/or the province of New Brunswick was unlawful, inequitable or deserving of sanction.- Canadian Health Labs

In addition, "in anticipation of the legislation, Vitalité made a decision not to terminate the contract which would have triggered damages becoming due and owing on the date of termination."

The company argues the government and Vitalité "sought out and induced CHL to enter contractual relationships with Vitalité because of an urgent and desperate need for healthcare providers to keep the hospitals open in New Brunswick," it says.

Vitalité "voluntarily agreed to the terms of the contracts with CHL, with the full knowledge and approval of the province."

"Without CHL providing nurses, patients would have died," it claims.

"The Court of King's Bench of New Brunswick must be free to hear these matters and determine whether the conduct of Vitalité and/or the province of New Brunswick was unlawful, inequitable or deserving of sanction."

Act does not prevent 'action or arbitration'

If the act is not deemed "entirely unconstitutional," Canadian Health Labs argues the legislation does not prevent it from "bringing an action or arbitration for damages." 

In that alternative scenario, the company seeks a declaration that Vitalité is bound by the terms of the contracts with Canadian Health Labs and that arbitration and/or the lawsuits can proceed on their merits.

It also requests that Vitalité's counterclaims be dismissed with costs, and seeks a court order appointing an arbitrator.

Vitalité declined to comment, citing the ongoing court proceedings.

Canadian Health Labs did not respond to a request for comment.