AH – 314




(the “Company”)



(the “Union”)




SOLE ARBITRATOR:                Donald R. Munroe, Q.C.



There appeared on behalf of the Company:

Bruce Greyell

Annabelle Donovan


And on behalf of the Union:

Theodore Arsenault



A hearing in this matter was held at Vancouver, B.C., on March 18 and 19, May 7, July 24 and 25, 1991; February 7 and 19, March 5, April 30 and June 2, 1992.




I was constitu


ted by the parties as an arbitration board under their collective agreement to hear and decide a grievance filed by the Union and dated March 12, 1990. Briefly, the grievance alleges a breach by the company of Rule 62 of the collective agreement. Rule 62 deals with contracting out. It was introduced into the collective agreement in 1985 (as the result of the report and recommendations of an industrial inquiry commission). It provides as follows:

62.1        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 is possible of the date contracting out is contemplated.

62.2        Early in each year, the Railway will meet with the Union and provide the Union with details of planned work which may involve contracting out.

62.3        If the Union representatives request a meeting to discuss matters relating to the contracting out, the Railway will meet promptly with them for that purpose.

62.4        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.

62.5        Except in cases of emergency, the union(s) involved will be consulted in advance of the implementation of a decision to contract out work which could be performed by unionized employees.

62.6        Subject to the above, the foregoing shall not restrict the right of the Railway to contract out work.

62.7        Disputes arising as a result of work contracted out will be referred to arbitration without delay.

Also pertinent, says the Railway, is Rule 24 of the collective agreement which deals with the grievance and arbitration procedure. More particularly, the Railway points to Rules 24.1 and 24.2 which describe the steps of the grievance procedure and the time limits for progressing from step to step. An issue of timeliness is raised by the Railway by way of preliminary objection. As well, the Railway has raised an allegation against the Union of unreasonable delay in the filing and prosecution of the grievance (i.e., apart from strict timeliness); and has made arguments of laches, abandonment, waiver and estoppel. Accompanying the Railway’s several arguments of that sort is a general assertion of substantial prejudice.


In 1988, the Railway undertook a major study of its existing and projected motive power requirements. One result of the study was a decision to replace 29 ageing locomotives with 22 new higher-horsepower locomotives. In early November, 1988, invitations to tender were sent to selected locomotive manufacturers including General Motors (GM) and General Electric (GE). As will be seen, GE was the successful bidder – despite an early bias in favour of GM. This early bias flowed from GM’s position as the Railway’s historical supplier of locomotive units; and from the fact that initially, the acquisition of the 22 new units was intended to be staggered over four years. Because of the intended staggering of deliveries, it was felt that an acceptance of a GM tender would allow for the interchangeability of components between the new and some of the older units; would avoid the costs associated with tooling-up for two manufacturers’ products; would avoid the necessity of duplicate parts inventories; etc.

The Railway expected that the acquisition of new locomotives would result in declining manpower needs in its mechanical shops (where the Union’s membership is employed) but that to some extent, this would be offset by certain re-engining requirements and other projects. All in all, the Railway anticipated that over the ensuing five years, the bargaining unit represented by the Union would suffer a linear reduction in the order of seven percent. The Railway was confident that the manpower reduction would be accomplished by attrition; that layoffs would not be necessary.

As I have indicated, the invitations to tender were sent out by the Railway in early November, 1988. Some two weeks later, on November 17, 1988, the Union’s acting business manager, Mike Suter, wrote to the Railway’s chief mechanical officer, George Kelly, as follows:

We are having a three day seminar on December 2, 3 and 4 in Vancouver where our local representatives from North Vancouver, Squamish and Prince George will be in attendance.

There is a great deal of concern shown and questions to be asked by our members on B.C. Rail as to what the future holds in the next five years or so in regards to the locomotive repair program, job opportunities and where the work is going to be performed. Therefore, we would appreciate your attendance at the Eldorado Motor Hotel … for lunch on … Friday, December 2, 1988 to be followed by your report and a question and answer period. …

Kelly attended the seminar as requested, along with Rick Leche, the Railway’s labour relations officer responsible for the relationship between the Railway and this Union. Kelly spoke from prepared notes, informing the Union representatives in some detail of the facts and the Railway’s intentions as he then understood them, including much of what I have summarized above.

It should be noted here that the Railway’s invitation to tender had indicated a requirement of a four-year warranty on the locomotive equipment to be supplied. The usual locomotive warranty is for two years or 200,000 miles. The Railway was anxious to secure the four-year warranty because of previous unhappy experiences with some of its existing equipment. But this request for an extended warranty is not to be confused with the Major Component Protection Plan (the MCPP) which was submitted by GE to the Railway as an optional part of its tender. An extended warranty, like the usual two-year warranty, would cover parts but not labour. The MCPP (which I will shortly describe more fully) involves a “writ exchange”; and therefore, in effect, the provision by the warrantying manufacturer of both parts and labour. Thus, while the usual form of warranty (whether two-year or extended) does not involve a contracting out, the MCPP most assuredly must be construed (as is common ground) as a contracting out of labour.

The tenders were received by the Railway from both GM and GE on December 12, 1988. The evidence of one of the Railway’s officials was that the tender from GM was “disappointing” – appearing to the Railway to be “off the shelf” as distinct from being tailored to meet the Railway’s particular needs. The tender from GE, on the other hand, appeared to be carefully tailor-made for the Railway. In addition, it contained a couple of interesting options – one being that the delivery of the 22 locomotives would not be staggered but would occur simultaneously; another being the MCPP. The MCPP was described in the tender documents as being supplemental to the usual two-year locomotive warranty. Put as simply as possible, the MCPP amounted to a 17-year extended warranty (the usual two-years plus another 15 years) having four elements. The first might be described as a commonplace performance warranty. The second was a material supply commitment by which GE would consign to the Railway any necessary inventory to protect the fleet of locomotives against failure. The third was a unit exchange and overhaul program for major components (e.g., traction motor, diesel engine, turbocharger) by which, during the 15-year period of the program, GE would provide unit exchanges of major components at overhaul times. The fourth was the provision by GE of on-site technical assistance for the whole of the 17 years.

Before moving forward in the chronology, I should pause to make these few general observations. I earlier noted the common ground that the Railway’s ultimate decision to accept the MCPP option amounted to a decision to contract out. By way of further explanation, it must be understood that in the past the Railway’s own forces have done most of the repair work on locomotive engines and other major components. But under the MCPP, at least as regards the major components, the Railway’s forces would be doing the removing and replacing, but not the actual repairing.

My second general observation has to do with the use of the word “option” as it relates to the MCPP. It is true that GE’s tender documents separated out the MCPP as something that the Railway could but need not accept in order for GE to be committed to the supply of the 22 new locomotives (with the usual warranty). However, virtually from the moment the tenders were received, there was linkage in the minds of the Railway’s responsible officials between the locomotive supply features of the GE tender, and the MCPP. That was because of the proposal by GE to deliver all 22 locomotives in a single year (1990), not staggered over a period of years. As explained by one of the Railway’s witnesses, the acceptance of 22 new locomotives at roughly the same time carried implications for the future. Locomotives that go into service at about the same time are likely to require major overhauls at about the same time. Hence, one could envisage future ‘blips’ (as the witness put it) in the required work force which would be difficult to manage. Accordingly, in the early view of at least some of the Railway’s officials, the accelerated delivery of the new locomotives (which itself carried certain advantages to the Railway) would likely have to be accompanied by the MCPP, or something like it.

My final general observation at this stage is that the MCPP was by no means free. As proposed by GE and ultimately accepted by the Railway, its cost was $57,000 per year per locomotive (or $1,254,000 per year) commencing in the third year of the 17-year period aforesaid (the first two years being the usual warranty period). However, the MCPP was judged by the Railway’s treasury department to be financially attractive. The cost/benefit analysis of the MCPP conducted by the treasury department showed a net present value ranging from a low of 1.2 million dollars to a high of 5.8 million dollars, with the expected net present value being some 3.5 million dollars.


Rule 62.1 states that “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 is possible of the date contracting out is contemplated”. In the submission of the Railway, such advice was given to the Union – i.e., in relation to the MCPP – as early as January 12, 1989.

On that day, four members of management travelled from North Vancouver to the Squamish yard to meet with representatives of this and other unions. The four were Leche, Dick Dorosh (then the manager of mechanical facilities), Don Miles (then the assistant manager of mechanical facilities) and Deborah Meadley (then a trainee in the labour relations department). The representatives of this Union who attended the meeting were Suter, Seneka Malleappah (the chief shop steward), Lome Bell (a steward) and Frankie Ferguson (a steward and member of the Union’s executive).

The meeting on January 12 was an ordinary labour-management meeting. That is, it was not called specifically to discuss the purchase by the Railway of new locomotives or the MCPP. Indeed, those subjects were not even part of the agenda for the meeting. I do not mean to imply that labour-management meetings have formal agendas which place limitations on what may be raised or discussed. Rather, the point to be made is that Leche (and others in management) had only just come to realize that the GE tender (including the MCPP) had become a preferred course of action; that the Railway was anxious to discharge its obligation under Rule 62.1 as soon a possible; that in consequence, the subject was raised at a meeting called for other purposes without forewarning to the Union.

The day prior to the meeting, Leche prepared a one-page document which he headed “Update – Acquisition of New Locomotives”, and which he intended to use as the basis of his commentary to the Union. The document reads as follows:

Quotations were invited for the supply of new locomotives in accordance with BC Rail specifications dated November, 1988 with target deliveries as follows:

Five (5) only during fourth quarter of 1989

Five (5) only during fourth quarter of 1990

Six (6) only during fourth quarter of 1991

Six (6) only during fourth quarter of 1992

Two affirmative quotes, meeting the basic criteria, were received;

I.              General Motors of Canada ltd., London, Ontario.

2.             General Electric of Canada, Inc., Peterborough, Ontario.

A pre-tender report by the Mechanical Department rated the two makes of locomotives as being generally equal in performance and suitability. However, differences in the quotes in areas concerning price, delivery, parts-support, provision of major component spares, customer support and warranty matters clearly favour the choice of the proposal from General Electric Canada, Inc.

The major features of the proposal are to:

1.             Accelerate the delivery of the locomotives and supply BC Rail Ltd. with all 22 4000 HP locomotives by the first quarter of 1990. All 29 3000 HP MLV Locomotives will be disposed of at the time of delivery of the new units.

2.             To provide an “Extended Warranty Plan” on the new units over a fifteen year life cycle. The plan will place on consignment all major components and will replace such components upon failure with a unit exchange component overhauled at their plant. Scheduled replacement components such as Diesel engines and Traction Motors will also be supplied at intervals during the unit life cycles.

The price of the General Electric Locomotives was significantly better than that offered by General Motors and the list of standard equipment including A/C driven air compressors was also better than that offered by General Motors.

Leche’s testimony of what was said at the meeting on January 12, 1989, was as follows:

… [The management team] discussed how it would be presented to the Union. There was much discussion about the anticipated reaction by the Union which we figured would be very adverse …

It was agreed that when we got to the issue, I’d be the Spokes …

[As the meeting progressed on other items] there were concerns expressed by the unions about employees being recalled to Squamish, and that overtime was excessive at Squamish, and there was a wish that we could recall electricians and mechanics from Prince George to Squamish. We used that opportunity to jump in and say it didn’t look like it would be feasible … and I presented the update of the GE loco proposal. I said that far from being able to recall positions to Squamish, that the acquisition of the GE locos would result in a lessened requirement for manpower overall … I indicated that as of the day before, the plans indicated by Mr. Kelly in December for the delivery of the new locos over an extended period were being revisited, and I explained the features of the GE proposal to deliver all 22 locos at once, and that GE was offering, concurrent with the delivery of the 22 locos, a 15-year major component protection plan covering such items as turbochargers, diesel engines, traction motors and other major components. I explained that this would reduce the activity of BC Rail staff to a remove and replace type of activity and that this would result in decreased manpower requirements, but that the Railway was confident that even this accelerated delivery and the component protection plan could be absorbed through the process of attrition of staff without the need for any direct layoffs.

… I indicated that (the GE tender) was going to be approved by the board of directors or the management committee, I forget which, on January 23, 1989.

In cross-examination, Leche said this:

I’m not sure if I read [the written update document] verbatim but the full detail and direction of this document was explained at the meeting. I assume I read from it because that’s the purpose for which I brought it.

At one point in his testimony, Leche said that he brought copies of the written update to the meeting to hand out to the Union representatives; further that his best recollection was that copies were handed out as intended. However, the weight of the evidence is against a finding that Leche’s recollection is correct in that regard.

Dorosh’s testimony about the meeting on January 12, 1989 was as follows:

… Mr. Leche gave a summary of the … update document … He said that the offer from GE of the delivery of 22 all in the first quarter of 1990 was being considered by the board of directors later that month. I believe the date stated was January 23. In addition, that there was an offer, contingent upon the order for 22 locos, for an extended warranty on major component parts; that GE would put consignment stock on BC Rail’s property for the replacement of failed components; that those that had failed would be returned to GE for repair or replacement.

Leche also said this would escalate the downsizing of the workforce somewhat different from that projected by Mr. Kelly in December; however, that it was not expected that any layoffs would occur, but rather the reduction would be handled through attrition. Suter then commented, “I’ve heard that before”; and Malleappah said, “We’ll see”. It was reiterated that we had a number of projects on the go that would take up some slack: the re-engining project [for example] …

… Leche told [the Union representatives] that the extended warranty program was a unit life-cycle program; that it was 15 years longer than the normal two years; that GE had extended warranty programs with the other railways who use the 15-year life-cycle span as a term of reference.

Leche said the board of directors had to consider this matter. I don’t believe, though, that it was tentative because management had to feel quite confident or they wouldn’t be going to the board.

In cross-examination, Dorosh acknowledged that he had not himself read the documents comprising the proposed MCPP prior to the January 12 meeting; that his knowledge of the MCPP at that time was limited to what he had seen in Leche’s written update and to what Leche told him. Also in cross-examination, Dorosh recounted the examples of major components that had been mentioned by Leche at the January 12 meeting as being part of the contemplated unit exchange program. And he was insistent that the Union representatives would immediately have understood the meaning and implications of such a program: “We all know what a major component is, and the difference between repair versus remove and replace”.

Ms. Meadley attended the January 12 meeting “… to observe and take notes”. She later gave her notes to Leche, who in turn prepared minutes, a copy of which he sent to the Union. The minutes were prepared and sent to the Union on or about February 20, 1989. In their material parts, they read as follows:

… The Union was advised that the Railway was negotiating with General Electric for the delivery of 22 … locomotives in 1990-91. The manufacturer is offering BC Rail a 15 year extended warranty/component exchange and rebuild program on these units.

It is expected that a general downsizing will occur, but it is equally expected that normal attrition will meet the Railway’s needs without the need for layoffs.

I turn now to the testimony given by the Union witnesses about the meeting on January 12, 1989. In chief, Suter was first asked to recall who was present at the meeting on behalf of management. His reply was, “I imagine Rick Leche was there; Dick Dorosh; I can’t remember anybody else; I imagine they, i.e. Leche and Dorosh, were there”. As regards any discussion about the acquisition of new locomotives, Suter’s initial statement in chief was as follows:

A comment was passed by someone that new locos might be purchased. I can’t recall who said it; just a comment passed. It was not a matter of concern to us because what I recall of it was that they might be purchasing new locos but there was no other comment.

A minute or two later in chief, Suter said this:

As far as I remember there was mention of a warranty program, but it was mentioned in an offhand way.

In cross-examination, Suter repeated that he “imagined” that Leche was present at the January 12 meeting. He was asked if he had a specific recollection of Leche being in attendance. The best Suter could say was that, “If he was looking after the industrial relations at that time, he would be there”. Indeed, early in his cross-examination, Suter testified that he did not have much recollection of the meeting at all. A short while later in the cross-examination, there followed these questions and answers:

Q.            What do you recall being said about the GE issue?

A.            There was a comment passed.

Q.            About what?

A.            About a purchase of new locomotives.

Q.            What was the comment?

A.            That they might be purchasing new locomotives, and a warranty program.

Q.            So there was mention of those two topics?

A.            Yes.

Q.            What was said on those two topics?

A.            Just that they might be purchasing new locomotives, and that there would be a warranty program. That’s all that I recall. …

Q.            Did you get a copy of the [Railway’s] minutes of the January 12 meeting?

A.            I imagine we did, yes.

Q.            Do you have a specific recollection of receiving those minutes?

A.            Yes, I imagine so.

Q.            Was there anything said about a 15-year extended warranty program?

A.            As far as I remember, there was no subject raised about a 15-year extended warranty.

Q.            Do you deny it or just not recall it?

A.            All I can state is there was mention of the purchase of new locos and a warranty program.

Malleappah’s recollection of what was said at the meeting on January 12, 1989 was even sparser. In chief, he was asked to recount what was said during the meeting “… regarding the GE locomotives”. His answer was as follows:

I have no recollection of the purchase of the GE locos being discussed at that meeting. None.

Malleappah’s total absence of recollection was despite his later acknowledgement that he had received a copy of the minutes of the meeting as prepared for the Union by Ms. Ferguson; that he was in possession of a copy of the Railway’s minutes of the meeting; and that he “may have” received his copy of the Railway’s minutes of the meeting at about the time they are dated – i.e. February 20, 1989. I have already reproduced the material parts of the Railway’s minutes. The Union’s minutes, as prepared by Ms. Ferguson, are briefer. But even they record that:

… new developments were noted, i.e. [the] Board of Directors will decide January 23, 1989 on offer from GE of 22 locomotives for 29 as a package. This would accelerate attrition of employees. Locomotives could be expected by first quarter of 1990.

Nor am I able to reconcile Suter’s de minimus recollection of the meeting of January 12, 1989, with the rather fulsome letter he wrote to the Railway on January 19, 1990 – just over one year subsequent to the meeting. I will have more to say later about this letter. But for present purposes, consider the following extracts:

There were ten items covered during the January 12, 1989 meeting, one being item #5 of the [Railway’s] minutes of that meeting, in particular, that the manufacturer was offering a fifteen (15) year extended warranty, component exchange and rebuild program on the units being negotiated.

… When the railroad talked [at the meeting] about an extended fifteen (15) year warranty it was received in the light that it would be similar to the warranty of the General Motors locomotives purchased several years ago. Under the General Motors extended warranty employees of BC Rail did the actual warranty work while being supervised by representatives of General Motors. …

In respect to the component exchange, we believed that that which is presently done with other locomotives was to remain unchanged in that component exchange would only be on items that the railroad does not have facilities to handle. …

In regards to the rebuild program, we received it in the light of past practice on the railroad. …

The first of those extracted paragraphs confirms that at the meeting on January 12, 1989, the Railway did tell the Union of the proposal by GE for “… a fifteen (15) year extended warranty, component exchange and rebuild program”. The other extracted paragraphs, although cast in a particular context, likewise confirm that at the meeting on January 12, 1989, the Railway “talked” about an extended warranty including a component exchange and a rebuild program. Overall, the letter clearly suggests that a great deal more was said at the meeting than Suter or Malleappah are now willing or able to recount.

Thus, I think that I must prefer the evidence of the Railway’s witnesses about what was said at the meeting on January 12, 1989, over the evidence of the Union’s witnesses.

But that said, there is one aspect of the testimony given by the Railway’s witnesses that I find disturbing and which at least gives one pause about the effectiveness of what was said at the January 12 meeting. All three of the Railway’s witnesses who testified on this score spoke about the management team’s “amazement” at the lack of any meaningful reaction from the Union representatives at the information being conveyed to them. Indeed, shortly after the meeting, one or more of the management team commented to the others that it was as though the information “… had gone over [the representatives’] heads”.

Clearly, Rule 62.1 of the collective agreement contemplates that the “advice” to an affected union about a contemplated contracting out of work will be effective advice: sufficient in its content to allow the Union to appreciate the nature of what is contemplated and its potential implications. If the Railway had reason to believe that its advice to the Union had not been effective in the sense just described, then surely it was running the risk of travelling down a perilous path. Thus, a question arises: Was the Railway’s advice to the Union on January 12, 1989 ineffective as alleged by the Union; or, was it a matter of the Union representatives understanding what they were told but choosing to hold their reactions close to their vests, or even, as counsel for the company speculated in argument, “dropping the ball”?

One piece of evidence touching that question is the May-June, 1989 issue of “The coupler” which is a publication by the Railway, put out six times per year, and mailed to all employees and their unions (among others). In the May-June edition, there is quite a lengthy article under the headline: “A sneak peek – BC Rail’s new locos.” The text of the article reviews the background to the Railway’s decision to substantially replace its locomotive fleet and then says this:

General Electric’s proposal was the most appropriate for BC Rail. It offered to deliver all locomotives in early 1990, together with a considerable consignment of parts stock. Additionally, GE proposed extensive training and service support and significant trade-in allowance for the obsolete MLW’S.

GE offers an extended warranty feature for their locomotives called the ‘Major Component Plan’. This plan covers the engine, alternator, traction motors and many other major components for a 15-year period. During this period GE will provide the on-site consignment stock, and replacement components on failures and scheduled changeout.

In late December, 1988, the power management committee recommended selection of the GE locomotive. About a month later, management and the board approved the purchase of all 22 locomotives from GE, and the order was placed. …

Significantly, Malleappah, in his cross examination, acknowledged that the article in The coupler was a “… fairly explicit statement of what the 15-year major component plan is all about”; that from a reading of the article, as a machinist, he would “… understand what [was] happening”; that had he known in January, 1989, what was said in The coupler, “… there would have been hell to pay”. Malleappah denied having seen the article in The coupler until some time in the spring of 1990. But that is not the point. Rather, the point is that I am unable to (distinguish) what was said in The coupler from what was said by the Railway a few months earlier - i.e., at the meeting on January 12, 1989. That is, I am unable to find that the information conveyed by the Railway at the January 12 meeting was materially less than the information conveyed by the subsequent article in The coupler. It follows that given my finding about what was said at the January 12 meeting, and given Malleappah’s testimony about the significance of the information contained in The coupler, I am hard pressed to find that the advice given by the Railway to the Union at the January 12 meeting was as ineffective as the Union now claims.

I also find it difficult to credit the suggestion that the article in The coupler was widely unread. As I have said, it is mailed to all employees and all unions. Like Malleappah, Suter denied having read the above-cited article until several months after it publication (although he receives The coupler both at his home and at the Union office). But consider the following exchange during Malleappah’s cross-examination:

Q.            Are you saying The coupler did not generate any questions from Union members?

A.            It may have done.

Q.            Therefore why not raise the issue [with the company] at that time?

A.            They should have told us.

Moving on, the evidence of one of the Union’s witnesses was that throughout the spring and fall of 1989, rumours on the shop floor were “feeding on one another like wildfire” about such things as contracting out and attrition – job security generally. Having been approached on the subject by rank and file Union members and by Malleappah, Suter sent the following letter to Kelly dated November 15, 1990:

As it is imminent that the new General Electric locomotives are about to appear on the BC Rail system, we are requesting in writing as soon as possible, what plans management have for the service and maintenance of these locomotives, including repair of parts.

Rumours are rife on the Railway that all of this work is going to be contracted out, with the current work force under the jurisdiction of U.A. Local 170 being reduced.

Therefore, to dispel these rumours and to alleviate the concerns of the employees, we feel it is only too right in the interests of ongoing labour/ management relationships for such communication to take place.

Looking forward to your positive written comments as soon as possible. …

One week later, on November 22, 1989, Kelly provided Suter with a four-page response (the response having been penned by Leche for Kelly’s signature). In his written response, Kelly reviewed the information given to the Union on January 12, 1989; and he then outlined in considerable detail the arrangements between the Railway and GE, including the MCPP.

It was not until two months later, on January 19, 1990, that Suter wrote back. This is the letter from which I earlier extracted and reproduced certain paragraphs. As will be recalled, one of those paragraphs attempts to give context to some of what was said by the Railway on January 12, 1989, by talking about a similar extended warranty on General Motors locomotives purchased by the Railway several years previously. But on the evidence, there never was an extended warranty given by GM. Rather, the various GM warranties to which the Railway has been party over the years have all been of the usual two-year variety with standard coverages.

Suter’s letter of January 19, 1990, closes with the following observations:

It is amazing to us that a Crown Corporation which has worked so effectively in this province for over three decades and who employs Canadians, British Columbians in particular, to take a position of the multinationals and sell out jobs of British Columbians in a quest to improve profits when an improvement in profits is doubtful at best.

I fear a negative reaction in the industrial relations and goodwill of your employees in the years to come when such a contract has been signed.

We would therefore ask that you give the utmost consideration to renegotiating your contract with General Electric to one similar to that which you had with General Motors, which would allow your employees, B.C. residents, to be employed in the operation of our railroad.

Further, you make it imperative for our Union, in conjunction with other constituent unions, to make this an issue in our upcoming negotiations.

Thus, the Union’s arguments at that stage were pitched to the Railway at the political level, and in terms of the upcoming collective bargaining. Even having received Kelly’s letter dated November 22, 1989, there was no mention of a grievance.


One of the arguments by the Railway is that the senior Union officers consciously decided not to file a grievance alleging a breach of Rule 62 of the collective agreement because they knew that in the final analysis, Rule 62 was toothless (being simply an advise and consult provision); that the senior officers of the Union concluded that a satisfactory outcome was more likely to be achieved either in the political arena or at the bargaining table, and that a grievance might actually get in the way of the political and collective bargaining strategies.

Considerable support for that theory is found not only in subsequent events (political protests; collective bargaining demands) but also in the cross-examination of Malleappah who was the Union official who authored and finally lodged the grievance dated March 12, 1990 (to which the Railway promptly replied by saying, among other things, that the grievance was untimely). It was pointed out to Malleappah that the grievance alleged a breach by the Railway of Rule 62 of the collective agreement. Thereupon, there was the following exchange:

Q.            When did you come to that conclusion?

A.            From Kelly’s reply to Suter’s letter, that is, November 22, 1989.

Q.            You concluded then that the Railway was in breach?

A.            Yes. I saw the letter at about its date. Suter and I talked about it. I also talked with Ray Collard’ toward the end of November or the start of December.

Q.            Why wait four months after that to grieve?

A.            Because Collard wanted to make it an issue at bargaining. I wasn’t satisfied with that. He said that if I put in a grievance at that time I might hurt the process of negotiations. His idea was to make it an issue at negotiations, or politically. But I was getting heat from the floor at Squamish, so I took it on myself to file the grievance anyway. …

Q.            When you got the letter from Kelly in late November, 1989, you concluded that the company was in breach of the collective agreement, but you had a disagreement with Collard about how to proceed; that is, on strategy?

A.            Yes.

Q.            You wanted to pursue by a grievance, and he wanted to pursue it by negotiations or politically, that is, with the politicians in Victoria?

A.            Yes.

Q.            What was Suter’s view?

It should be noted that Ray Collard is the Union’s Business Manager, for whom Suter was acting (Suter being normally the Assistant Business Manager) for a one-year period while Collard was on sabbatical leave. Collard’s sabbatical leave ended in or about June, 1989.

A.            I think he favoured the bargaining and political strategy – like Collard

Q.            They felt the grievance might get in the way or be an obstacle to the strategy they favoured?

A.            Yes.

Q.            And they discouraged you from filing the grievance?

A.            Yes.

As I have intimated, there was a flurry of political action by the Union (correspondence with government etc.) but to no avail. As well, the matter was front and centre at the bargaining table. Indeed, the Union’s “Demand 1” at the collective bargaining which followed in the spring and summer of 1990 was:

That BC Rail agrees to re-negotiate the GE contract and agrees to amend such contract to return all work to the employees on BC Rail that has been traditionally performed by them.

This deals with the warranty and component exchange and the service maintenance plan that was signed on April 7, 1989 and further spelled out in Mr. Kelly’s letter dated November 22, 1989.

The above demand was the primary driving force behind a strike which commenced in early September, 1990, and which lasted some 27 days. The strike came to an end following the intervention of an industrial inquiry commissioner whose report and recommendations included improvements (from the Union’s perspective) to the contracting out language, but with prospective effect only. The industrial inquiry commissioner very specifically declined to give his 23 recommendations for settlement of the contracting out issue the retrospective effect sought by the Union.

Finally, on October 12, 1990, the Union wrote to the Railway referring the subject grievance to arbitration. That was 21 months after the meeting at Squamish on January 12, 1989; or some 16-17 months after the publication of the May-June, 1989 issue of The coupler; or some 11 months after the receipt by the Union of Kelly’s letter dated November 22, 1989; or some seven months after the filing of the grievance.


Let us now look at the scheme of Rule 62. The first step contemplated by that rule is one of advice by the Railway to the Union as to a contemplated contracting out. Here, the first date on which such advice could be found to have been given would be January 12, 1989. And in my view, the very latest date on which such advice could be found to have been given would be November 22, 1989 (Kelly’s letter to Suter). If the former, the Union would have no argument to present of a breach by the Railway of Rule 62. If the latter, the Union would be able to muster an argument that the Railway fell down in its obligation under Rule 62. 1, but subject to the Railway’s arguments about timeliness, etc.

It is worth noting that the obligations created by Rule 62 are not all one-sided. The Union, too, has obligations. Once notice has effectively been given by the Railway under Rule 62.1, an onus shifts to the Union to “… request a meeting to discuss matters relating to the contracting out”, if the Union considers it necessary or worthwhile to do so (Rule 62.3). Here, the first meeting requested by the Union that might conceivably be said to have been a Rule 62.3 meeting was not until early March, 1990, and then only as part of the Union’s general strategy of escalating the matter from the labour relations arena to the political arena.

Rule 62.4 might be said to contain mutual obligations: the provision by the Railway of reasonable opportunity the taking up by the Union of the opportunity to demonstrate relative costs in its favour.

Finally, Rule 62.7 imposes an obligation on a grieving party to refer the dispute to arbitration “without delay”.

That there was delay by the Union both in the filing of the grievance and in the later reference to arbitration cannot seriously be denied. Nor, in my view, can there be any doubt that the delay was conscious and deliberate: as part of a chosen strategy.

I am inclined to agree with the Union that the time limits set forth in Rule 24 are not strictly applicable. I reach that view not by drawing a distinction (as does the Union) between individual grievances, on the one hand, and Union or policy grievances, on the other. Rather, it is because in my judgement, Rule 62 is a procedural as well as substantive provision of the collective agreement. By that, I mean that Rule 62 is a complete code for the resolution of differences between the parties about contracting out. Very simply, questions or concerns about a contemplated contracting out including differences arising between the parties in that regard, are to be run through the steps established by Rule 62; failing resolution, the grieving party is required to submit the dispute to arbitration “without delay”.

I think that the proper focus of the Railway’s objection as to timeliness is Section 98(f) of the Industrial Relations Act which empowers an arbitration board:

… to dismiss or reject an application or grievance, or refuse to settle a difference, where in the arbitration board’s opinion, there has been unreasonable delay by the person bringing the application or grievance, or requesting the settlement and the delay has operated to the prejudice or detriment of the other party to the difference. …

As I have said, the Union clearly was guilty of delay. I believe, too, that the delay must be characterized as unreasonable. I reach that conclusion for essentially three reasons. The first is that the delay was considerable, regardless of which reference point one selects to start the measurement of the delay. The second is that contracting out disputes are inherently time-sensitive, involving as they do contractual relations with third parties. The third is that the Union’s delay in prosecuting the matter (that is, its breach of Rule 62.7) was studied, conscious and deliberate.

Did the delay operate to the prejudice or detriment of the Railway? Not surprisingly, the Railway argues the affirmative side of that question, while the Union argues otherwise. In large degree, the Union’s argument about an absence of prejudice rests on the proposition (vigorously resisted by the Railway) that even at the point of the arbitration hearing, there did not exist a binding contract between the Railway and GE as regards the MCPP.

I have reviewed with care the course of dealings and the flow of documentation between the Railway and GE. I am left without the slightest doubt that by March 23, 1989, there existed between the Railway and GE a binding mutual commitment as regards the MCPP (in addition to the binding mutual commitment as regards the purchase and sale of the 22 new locomotives). That was the date on which Carl Pedersen (then the executive assistant to the Railway’s senior vice president) got the “OK to proceed [with the MCPP]” from Mac Norris (then the Railway’s president). It was also the day that Pedersen, in consequence of the “OK to proceed”, telephoned Bob Ballou of GE to say that “… we would be proceeding with the Major Component Plan”. As Pedersen testified, “I asked Bob if he needed something in writing; he said, ‘No, that’s all I need’; we both regarded ourselves as committed”. Pedersen also spoke a few days later to R.D. Parisi of GE (Ballou’s then superior), confirming that the Railway would be accepting the MCPP as part of its overall agreement with GE. Pedersen then did a “memorandum to file” dated April 4, 1989, recording that conversation.

Thus, the statements in the purchase order dated April 7, 1989 about the MCPP amount to much more than merely an agreement to agree. Rather, they reflect a present intention to enter into legal relations in terms of the MCPP, as well as in terms of the purchase of the 22 locomotives.

Also relied upon by the Union is a letter dated February 6, 1989 from Parisi to D.L. Anstee of the Railway, advising, among other things, that “… If BC Rail is unable to accept the unit exchange provisions of the Major Component Protection Plan due to organized labour restrictions, GE agrees to renegotiate the scope of the plan in an attempt to overcome restrictions that may arise”. But it seems clear to me, as Ballou said in his evidence, that that statement by GE was made while GE was still in a “sales mode” and while the two parties were still negotiating about the content of the MCPP. It cannot have been expected that such a statement would survive the deal being reached; the purchase order being issued; the consignment parts being manufactured and shipped; etc.

Had the Union pressed a grievance with proper dispatch, it might well have been possible for the Railway to guard against the growing prejudice. I say the “growing prejudice” because with each passing day, so to speak, the contractual relationship between the Railway and GE was becoming more and more embedded: as GE was taking the various steps necessary to ensure compliance with its part of the MCPP bargain. Frankly, by the time this matter was referred by the Union to arbitration, I think it would have been unrealistic in commercial terms to seek to divide the relationship between the Railway and GE into separate watertight compartments – the one being the accelerated purchase of the 22 new locomotives (with the usual form and duration of warranty); the other being the MCPP.

There is another matter to be considered under the general heading of the assessment of prejudice. I believe, as I have said, that the Railway would be greatly prejudiced by allowing the Union to pursue this grievance to its potential remedial conclusion. But this question must also be asked: Would the Union be greatly prejudiced by my acting at this stage under Section 98(f) of the Industrial Relations Act – i.e., by dismissing the grievance on grounds of unreasonable delay with resulting prejudice? In other words, what would be the relative prejudice as between the parties by my acting or refusing to act under Section 98(f)?

The answer to that question requires another look at Rule 62 - especially Rule 62.6 which states that, “Subject to the above, the foregoing shall not restrict the right of the Railway to contract out work.” I earlier characterized Rule 62 as an “advise and consult” provision. True, such provisions can sometimes lead to concrete arbitral intervention. But at the least, were this grievance to proceed further, the Union would have to show, to a preponderance of probabilities, that had the Railway’s alleged breach of the “advise and consult” provisions of Rule 62 not occurred, the MCPP would not have been entered into (or that its content would have been materially different). I consider the likelihood of the Union being able to make such a showing to be rather low. Accordingly, while the prejudice to the Railway is both real and substantial, the prejudice to the Union is only arguable at best.


Referring once more to Section 98(f) of the Industrial Relations Act, I find that the Union was guilty of unreasonable delay with resulting prejudice to the Railway. Exercising my discretion under Section 98(f), dismiss the grievance.




(signed) DONALD R. MUNROE, Q.C.