AH - 272









(the ”Union”)







(the “Railway”)



(Motrex Contracting Out)





Sole Arbitrator:            H. Allan Hope, Q.C.



There appeared on behalf of the Employer:

                                                Wayne R. Carkner



There appeared on behalf of the Union:

                                                Terry Robertson, Q.C.





A hearing in this matter was held at Prince George, British Columbia, on the 22nd day of February, 1990.




                In this arbitration the union challenged the right of the railway to place an operator who is not a member of the bargaining unit on a machine called a Motrex 215. The operator in question, Tim Burns, is an employee of Spruce Capital Contracting Ltd. He operated the machine for 24 shifts between July 31 and August 31, 1989. The union said that assigning the work to Mr. Burns was the equivalent of hiring him as an employee. Its position, in effect, was that the work assignment amounted to assigning work to a non-bargaining unit employee. The position of the railway was that the work in question had been contracted out to Spruce Capital Contracting and that it was entitled under the provisions of the collective agreement to contract out such work.


                The union’s alternative position was that if the assignment was a contracting out, it was made in bad faith in an effort to compel the union to forego its right to challenge compulsory work assignments by the railway. In the further alternative, the union asserted that if the work assignment was seen as a contracting out, the railway had failed to give the union notice of its intention to contract out the work as required under Article 34.1 of the collective agreement. That provision reads:

34.1        When the Railway decides to contract out on a regular basis work that is presently and normally performed by employees covered by the Council’s certification, the union(s) involved will be advised as far in advance as possible of the date contracting out is contemplated.


The position of the union was that there were qualified bargaining unit operators available to perform the work assignments and that if the union had received notice of the railway’s intention to contract out the work, it would have assisted the railway in finding such an operator. Hence, said the union, the railway deprived the union of its rights under Article 34.4. That article reads as follows:

34.4        If the union representatives can demonstrate that the work could be performed just as efficiently and economically by the Railway forces as by contract, every consideration will be given by the Railway to having the work performed by its own forces.


The position of the railway was that the assignment in question was a legitimate contracting out and that it had given the union verbal notice, followed up by written notice, of its intention to contract out the assignment. In any event, said the railway, even if valid notice had not been given before the work assignment commenced, there was considerable discussion between officials of the railway and the union about the assignment after it was made, thereby affording the union ample opportunity to exercise its rights under Article 34.4. On that outline of the issues, I turn to the material facts.



                The dispute commenced on May 12, 1989 when the railway posted a vacant position in the monthly job bulletin for a machine operator to operate a Motrex 215 at Chetwynd for a period of approximately four weeks commencing on June 9, 1989. On June 9, 1989, in the next monthly bulletin, the railway posted a vacancy for the operation of the same machine for a period of 16 weeks to commence on July 14, 1989. Once again, no qualified bids were received.


                In the period between the July bulletin and the August bulletin, the railway decided to engage the services of Spruce Capital Contracting to provide an operator for the machine. The decision was made by Ron Sikorski, the technical administrator of the engineering department, following consultation with various operating officials who had advised him that no bids had been received for the vacant operator’s position, that no qualified operators were available for placement in the position and that the work involved had to be done in order to maintain the maintenance schedule for that season.


                The machine in question was designated for a ditching program on various sections of the railway right-of-way and completion of the program was perceived as essential to the integrity of the operations, although not an emergency. Having made the decision, Mr. Sikorski wrote a letter to Robert Dhensaw, the president of the union, advising him of the intention to contract out the work. That letter reads as follows:

This is notice of Contracting Out as per Article 34 of the current Collective Agreement. Effective immediately the Railway will initiate a contract to contract an operator to operate a company owned Motrex in the Tacheeda area. Duration of contract would be until a qualified operator of our own becomes available.


Mr. Sikorski said that the normal practice between the parties with respect to notice under Article 34 was for the railway to give the union written notice once annually of the contracting out projects that had been assigned, and, during the year, to give verbal notice to Mr. Dhensaw or his designate, followed up by a memorandum if requested. He said that in this case he attempted to contact Mr. Dhensaw at his office and was informed that he was absent in Vancouver. He said that he was speaking coincidentally to Wayne Carkner, a labour relations official with the railway, who was also in Vancouver. Mr. Sikorski said that Mr. Carkner told him that he had given Mr. Dhensaw notice of the intended contracting out.


On that basis, Mr. Sikorski sent the letter of July 28, 1989 to Mr. Dhensaw to confirm the circumstances. That letter was received in the union offices on August 2, two days after the contracting out commenced. Mr. Carkner did not give evidence. Mr. Dhensaw, who did give evidence, said he did not receive verbal notice of the contracting out. The position of the union was that the hearsay evidence of Mr. Sikorski could not be relied on to prove a disputed fact, being the question of whether notice was given to the union. That submission is in accord with the authorities. See Board of School Trustees of School District No. 68 (Nanaimo) and C.U.P.E, Local 606 (Mid-Island School Employees), [1977] 1 C.L.R.B.R. 39 (Baigent).


Hence, I must conclude that the railway initiated what it characterized as a contracting out without giving notice under Article 34 to the union. I will consider the significance of that oversight later. Before doing so, it is desirable to continue a review of the relevant facts. The uncontradicted evidence of the union was that Mr. Burns, while he was paid by Spruce Capital Contracting, received all of his direction from railway employees. Further, he resided and took his meals with the employees of the railway at a camp provided for that purpose and, in every respect other than remuneration, was indistinguishable from bargaining unit employees who were performing the same work.


Considerable evidence was led by the parties with respect to whether Mr. Burns was a good operator, the extent to which he required continuous supervision as compared with bargaining unit operators and various other issues having to do with his ability as an operator. That evidence is relevant only to the issue of  bad faith. That is, the collective agreement provides expressly that the railway is free to contract out work, provided only that it gives notice to the union. Hence, leaving aside the issue of bad faith, the ability of the operator was a matter for the railway to assess. Article 34.6 reads as follows:

34.6        Subject to the above [notice], the foregoing shall not restrict the right of the Railway to contract out work.


Hence, leaving aside the question of adequate notice and bad faith, the initial question is whether the disputed work assignment was a contracting out or whether it amounted to an assignment of work to a non-bargaining unit employee. (I note by way of aside that the employees of the railway are members of a multi-union bargaining unit and that this union represents the employees of the engineering service.) Returning to the collective agreement, it provides as follows:

36.3        Except in cases of emergency or temporary urgency, employees outside of the Engineering Service shall not be assigned to do work which properly belongs to the Engineering Service, nor will Engineering Service Employees be required to do any work except such as pertains to the division or department of the Engineering Service.


In the first instance, if a particular work assignment is deemed to be a contracting out, the question of whether there were alternatives to contracting out the work is irrelevant. The issue becomes on e of whether proper notice has been given and the union has been afforded an opportunity to make representations with respect to having bargaining unit employees perform the disputed work. If, however, the railway’s initiative is seen as the equivalent of a hiring , then assigning the work to Mr. Burns, accepting that it was work “which properly belongs” to bargaining unit employees of the engineering service, would amount to a breach of Article 36.3.


There is no issue here that the work in question falls within the scope of that provision in the sense that the operation of a Motrex 215 is normally assigned to a bargaining unit operator in the engineering service. Hence, if the railway is not entitled to rely on the contracting out provision, the assignment to Mr. Burns is in breach of the collective agreement and the issue becomes one of remedy. Ordinarily I would address that preliminary question first and dispose of it. However, the evolution of this dispute is such that it is desirable to address the bad faith issue first. I turn now to that issue.



                An allegation of bad faith must be proven by the party alleging it to a high degree of probability. That subject was canvasses between these parties in British Columbia Railway Company and Canadian Union of Transportation Employees, Local 6 (Catenary Maintainers Arbitration), September 17, 1986, unreported @ pp. 22-5, citing Re Inglis Ltd. and United Steelworkers, Local 4487, (1978), 17 L.A.C. (2d) 380 (Beck). In my view the evidence in this case fell far short of establishing bad faith. The union developed facts which questioned the intent of the railway, but a finding of bad faith requires either direct evidence from which the element of motivation is proven or circumstantial evidence in which bad faith is the only inference possible on the facts.


                Here there was more than ample evidence to indicate that the railway confronted a circumstance in which its decision to pursue the filling of the necessary vacant position by a contracting out was explicable. The union did establish with the benefit of hindsight that there were alternatives to the action taken by the railway. In particular, it was established that there was at least one other qualified operator who was willing to take the assignment and whose availability was not challenged by the railway in the context of the facts. Further, there was at least one other operator who lacked formal qualifications who was willing to take the assignment and who had operated a Motrex 215 without supervision on a prior occasion. In that case the availability of the operator was challenged by the railway.


                Further the union established from the evidence that assigning the work to Mr. Burns and Spruce Capital Contracting was not cost effective. In particular, it was established that Mr. Burns was required to have with him a railway employee qualified to take out railway protection and that when the cost of that additional employee and the contracting rate were taken into account , the cost factor to the railway of having Mr. Burns operate the machine was three times that which it would have paid to a bargaining unit operator. However, to the extent the railway was required to meet the issue, it was not established that it was aware of the options available, simply that it did not canvass those options thoroughly.


                The bad faith motivation urged by the union was a desire on the part of the railway to discourage the union from resisting the compulsory assignment of employees to vacant positions by the railway. The union said that the railway was letting it be known that if those vacancies were not filled by members of the bargaining unit on a voluntary basis, the work would be contracted out and thus taken beyond the reach of the union. In seeking to develop that theory, the union called evidence from Jim Fetterly, the then newly-elected member of the union’s general committee of adjustment for the interior region. His responsibility is to address issues at an early stage before they develop into grievances.


                Mr. Fetterly was on vacation when the events giving rise to this dispute commenced. He became involved later in August and he was unaware that a grievance challenging the hiring of Mr. Burns had been filed by the union president. Mr. Dhensaw, on August 2. In any event, Mr. Fetterly approached Mr. Carkner to discuss the issue of a non-bargaining unit operator being assigned to operate the Motrex 215. He ventured the opinion that Mr. Carkner did not appear interested in having the dispute resolved and seemed bent on having it go to grievance and arbitration.


                Mr. Fetterly was new to his position and did not realize that in the grievance procedure hierarchy, his initiative should have been to Mr. Sikorski. Ultimately he was referred to Mr. Sikorski, and continued his discussion with him. Mr. Sikorski gave evidence and denied that there was any decision on the part of the railway at any level to frustrate the grievance procedure or to pursue a test case of its right to contract out work where positions deemed integral to the railways’ operations were left unfilled.


                I pause to note that even if the railway were bent on pursuing the issue in order to obtain an arbitral interpretation of its rights in that regard, that would not amount to bad faith. Either of the parties are at liberty to pursue an issue as a test case in order to obtain an interpretation with respect to a contentious issue involving the application of the collective agreement. It was quite apparent that the union did not agree that the railway had the right to assign the work to Mr. Burns, even through Spruce Capital Contracting. In short, the parties were not ad idem with respect to the issue and the railway could not be deemed to be acting in bad faith because it decided to press that matter for resolution by an arbitral interpretation of the collective agreement.


                As stated, the union theory with respect to bad faith was that the employer had deliberately sought a circumstance in which it could contract out work in order to create an issue to provide it with a factual basis for having the issue addressed. Once again, setting aside the denial of the railway that it was no motivated, either party is at liberty to create circumstances that will encapsulate an issue of interpretation so as to provide a basis for having it resolved under the grievance and arbitration provisions of the agreement.


                Ultimately the theory of bad faith reposed in the submission of the union that the railway contracted out the work as a device to intimidate the union and the bargaining unit with the intentions of preventing bargaining unit members from refusing compulsory assignments and to prevent the union from challenging such compulsory assignments by grievance. However, there was no sufficient evidence to support such a finding and I must conclude that the union failed on the bad faith issue. On the basis of hat conclusion, I return to the preliminary issue of whether the work assignment is to be seen as a contracting out or as the assignment of work to a non-bargaining unit employee.



                On the evidence it is clear that the only indicia of employment status between Mr. Burns and Spruce Capital Contracting with respect to the operation of the Motrex 215 was the payment of wages. In all other respects Mr. Burns performed that work as if he were an employee of BC Rail. In that context the union relied on a body of authority that stands for the proposition that where an employer purports to contract out work in circumstances that amount to a hiring, the assignment will be deemed to be the equivalent of an assignment to a non-bargaining unit employee. The union relied on a line of arbitral authority which includes Maple Leaf Mills Ltd. (1986), 24 L.A.C. (3d) Devin; Royal Ontario Museum (1984), 16 L.A.C. (3d) 1 (Adams); Domtar Inc. (1988), 2 L.A.C. (4th) 295 (Simmons). I refer in particular to the following extract form Domtar Inc. at p.304:

The issue is whether or not the employer actually contracted out the work to an independent contractor in such a manner that the employer has relinquished all involvement in the work that had previously been performed by employees so that it is a real contracting out situation. One of the test that is commonly referred to as being the more persuasive to determine whether what has transpired in a real contracting out situation is that of control …


Applying the reasoning in that line of authority, and , in particular, applying the control test articulated by arbitrator, it is clear that the engagement of Mr. Burns through Spruce Capital Contracting was not a contracting out. It was a hiring. All that happened it that the railway, lacking an available employee to whom it would normally assign the work, had Spruce Capital Contracting dispatch an operator to perform the work under the exclusive direction and control of the railway. In the result, I find that the railway was in breach of the collective agreement unless it is able to bring itself within the arbitral exception contemplated by Professor Bora Laskin, as he then was, in Algoma Steel Corp. and United Steelworkers (1958), 8 L.A.C. 273.

In that dispute the employer confronted an emergency situation in which work had to be performed immediately in circumstances where all available bargaining unit employees were fully engaged and were performing extensive overtime, and where the hiring of outside employees was impractical. There Professor Laskin found that the work fell within the scope of bargaining unit work and that the collective agreement prohibited the employer from contracting out bargaining unit work. (To that extent, the provisions of the collective agreement differed from this agreement, but the same issue of substance arose.) There, as here, the union sought a declaration that the contracting out of the emergency work was a breach of the collective agreement. Professor Laskin granted that declaration on p. 274 when he wrote:

The board finds, therefore, that this work is covered by art. 1.02 (a) and that the union is entitled to declaratory relief to this extent.


It is implicit in the decision that the union was seeking both declaratory relief and damages arising from the fact that 200 hours of work had been done by employees of an outside contractor. Professor Laskin denied damages on the basis that the employer was acting in good faith in response to an emergency which was not of its own making. However, he made it clear that the assignment did amount to a breach of the collective agreement and, if it was repeated in any less narrow context, it would give rise to redress. On p. 276 he wrote as follows:

An emergency situation arose, the more so by reason of the unusually large amount of damage, which had to be met promptly. The board does not doubt that the situation would have resulted in less friction if the company had consulted the union even though in the end it took the same action. While it did not so consult, and while in principle that work in question is subject to the terms of the collective agreement, the application of the principle on the facts of this case does not establish a redressable grievance. What the situation would be if the company continued on the one hand to accept the principle and on the other hand to deny its application in practice, is a question that does not arise here. The facts of the present case leave no room to impute bad faith in the way the repair situation, an isolated and pressing matter, was dealt with. Different considerations would be present if work falling within the bargaining unit under art. 1.02 (a) were regularly contracted out to the disadvantage of existing employees or by reason of an inadequate work force which the company unreasonably was willing to enlarge.


It was clear from the evidence presented in the case that the circumstances did not fall within the perimeters of the facts in Algoma Steel Corp. There might well b circumstances in which the railway is unable to obtain an operator for a necessary work assignment which do fall within the decision, including circumstances which may not constitute an emergency but which involved work that must be done in order to meet the requirements of necessary maintenance. However, as stated, I am not able to agree that those circumstances existed here.


The machine was assigned to perform ditching over the coursed of the 1989 season. The railway posted the vacancy on four separate monthly bulletins and was finally successful in obtaining an operator. The contracting out did not occur until July 31, 1989 and the railway had ample opportunity to anticipate the problem created by the absence of qualified applicants. In particular, the railway had the time to hire an outside employee to fill the vacancy if that was deemed necessary. Hence, I find that the railway acted in breach of the collective agreement when it engaged the services of Mr. Burns through Spruce Capital Contracting. The issue becomes on eof remedy.


As in Algoma Steel Corp., I find that the union is entitled to the declaratory relief it seeks. On the issue of damages, I accept the submission of the railway that there was no evidence that any qualified Motrex operator lost work by reason of the employment of Mr. Burns and that the most that can be qualified in terms of pecuniary loss is one month of union dues. The union did not seek compensation in the form of union dues and, without seeking to make the payment of dues of one month trivial, it would be an empty gesture to make such an award.


The position of the union was that I should give consideration to whether it is an appropriated circumstance in which to fashion a remedy designed to deter the railway from engaging in similar breaches in the future. I agree with the union that I have such a jurisdiction and that the right of arbitrators to fashion remedies to fit the circumstances is recognized in the general arbitral authorities and in clear terms under the provision of the Industrial Relations Act.


However, there is no evidence here that this circumstance has arisen in the past or that the railway was deliberately flouting the provisions of the agreement. It is truly a circumstance in which declaratory relief is appropriate so that the parties will be aware of their respective rights and obligations in the future. If the pattern of breach were to continue, the question of fashioning a more deterrent remedy would arise. In the result, the grievance is granted in the terms set out.


Dated at the City of Vancouver, in the Province of British Columbia, this 14th day of March, 1990.


H. ALLAN HOPE, Q.C. - Arbitrator