AD HOC 317: NEWFOUNDLAND CLOSURE

AWARD

This is the arbitration of a dispute which has been progressed for resolution pursuant to the terms of the Newfoundland Special Agreement, hereinafter referred to as the “Agreement”. It concerns the claim of two employees, C.W. Snow and B.D. Dicks to the benefits of a deferred separation plan contained in article 3 of the Agreement. The Union contends that both employees have satisfied the conditions of eligibility for deferred separation, while the Company maintains that they have not.

The dispute and joint statement of issue, filed at the hearing, outline the nature of the case and read as follows:

DISPUTE:

The dispute concerns the eligibility of employees C.W. Snow and B.D. Dicks to the provisions of Article 3 (Deferred Separation Plan) of the Special Agreement dated October 1, 1988 governing the closure of the Newfoundland Railway.

STATEMENT OF ISSUE:

On October 1, 1988, the Canadian National Railway Company (Terra Transport) and the United Transportation Union entered into a special agreement establishing the conditions and benefits to apply to employees who were adversely affected by the closure of the Newfoundland Railway. Included amongst the benefits available to affected employees was a Deferred Separation plan for employees who were not yet eligible for early retirement. Article 3.1 of the Special Agreement defines the criteria for eligibility to the Deferred Separation plan and reads as follows:

3.1 An employee who is at least 50 years of age and who will be eligible for early retirement under the Company’s pension plan(s) within five (5) years and whose position is abolished due to the closure of the Newfoundland Railway, or who is displaced by a senior employee, such displacement being brought about by the closure, will be entitled to go on a Deferred Separation plan.

In the case of both grievors, their last day of work on the Newfoundland Railway was November 22,1990. As of their last day worked both Grievors were but 49 years of age. Mr. Snow attained fifty years of age on April 11, 1991, while Mr. Dicks’ 50th birthday was not until December 12, 1991.

It is the Union’s position that the Grievors satisfied the requirements for entitlement to the Deferred Separation Plan as a result of the fact that they both attained fifty (50) years of age during the life of the Special Agreement, i.e. between October 1, 1988 and September 1, 1992.

It is the Company’s position that the Grievor’s did not qualify for the Deferred Separation plan by virtue of their failure to meet all the criteria for eligibility.

The facts material to the two grievances are not in dispute. Mr. Snow is not 51 years of age and began working for the Company on July 15, 1958. Mr. Dicks, is 50 years old and commenced working for the Company on July 29, 1961. Both employees spent their entire working lives in the service of the Company, with Mr. Snow providing 32 years of service and Mr. Dicks 29 years.

In March of 1979, the Newfoundland Railway, operated by Terra Transport became a division of the Company. On or about June 22, 1988, the Company issued notices advising the affected unions and employees of the closure of the Newfoundland Railway. As noted in the Joint Statement, the Company and Union then negotiated the terms of a special agreement “… to provide assistance to employees adversely affected” by the closure of the Newfoundland Railway. In accordance with its own recitals, the Special Agreement was in effect from October 1, 1988 until September 1, 1992. It is common ground that both grievors reached the age of 50 years before the expiry of the Special Agreement: Mr. Snow turned 50 on April 11, 1991 while Mr. Dicks attained the same age on December 12, 1991.

The material before the Arbitrator discloses that the official closing date of the railway was October 1, 1988. It appears that as of that date all employees who had not taken retirement, early retirement or deferred separation were effectively laid off. Shortly after that date, however, the Company initiated a track dismantling program which occasioned the recall of a number of laid off employees, including the grievors. Although most of the employees called to that service were non-operating employees, some of whom had employment security, certain running trades positions were established to staff work trains utilized in the dismantling of the rail lines on the island. It is common ground that the recall of the employees was in accordance with Appendix ‘D’ of the Agreement. The recall resulted in some two years of additional work for a number of trainmen and enginemen represented by the Union.

Mr. Snow worked as a conductor on assignments related to the dismantling program until December 20, 1990. He then went on weekly layoff benefits under article 4 of the Agreement from December 28, 1990 to November 21, 1991. He then took vacation between November 23 and December 31, 1991 and resumed layoff benefits on January 3, 1992. As noted above, he turned 50 on April 11, 1991. In the eyes of the Company, he continues to be an employee on laid-off status, still in receipt of layoff benefits pursuant to his entitlement under the Special Agreement.

Mr. Dicks was recalled to work as a trainman and engineman in the rail removal program until November 22, 1990. He then went on vacation from December 2 to December 15, 1990 and resumed layoff benefits from December 16, 1990 until he was again on vacation from November 17, 1991 to and including the date of his 50th birthday, December 12, 1991. As with Mr. Snow, the Company continues to treat Mr. Dicks as a laid-off employee whose entitlement to layoff benefits will continue into 1994.

The issue in dispute is relatively narrow. It concerns the interpretation of Article 3.1 of the Agreement, and its application to the circumstances of Messrs. Snow and Dicks. The Union submits that they are entitled to the protections of the deferred separation plan because they meet the criteria of that provision. In its view, by turning 50 years of age during the currency of the Special Agreement following the abolishment of their positions due to the closure of the Newfoundland Railway, and being eligible for early retirement within five years of their 50th birthday, they meet the requirements of the provision.

The Company advances two interpretations of the criteria provided for in Article 3.1 of the Agreement. Firstly, it submits that the intention of the provision is that an employee must have reached eligibility for benefits at the time of the closure of the Newfoundland Railway, that is to say, as of October 1, 1988. By this interpretation, only persons who were then 50 years of age would be eligible. In what it describes as an alternative and more generous application, the Company advances a second position. According to its alternative interpretation, an employee would fall within the purview of article 3.1 only if he or she turned 50 years of age during the currency of the Special Agreement while in active service, and at the time of his or her subsequent layoff during the term of the Special Agreement.

The Arbitrator has some difficulty with the initial position advanced by the Company. The material before me establishes, beyond controversy, that some five employees who were not 50 years of age at the closure of the railway, but who attained that age during the term of the Special Agreement were treated as entitled to elect deferred separation under the terms of Article 3.1 of the Agreement. On the face of the Article, two interpretations are possible. The first is, as the Company argues in its first position, that an employee must have been 50 years of age as of October 1, 1988 to be eligible for a deferred separation, assuming that the other conditions are met. The second is that eligibility is available for any employee who is 50 years of age, and is otherwise entitled, at any point during the currency of the Special Agreement. Clearly, the Company’s treatment of the five employees who were granted deferred separation upon turning 50 years of age during the term of the Agreement is inconsistent with the first interpretation which it now advances, and suggests that, apart from the issue of whether an employee must be on active service which is discussed below, the intention of Article 3.1 of the Agreement is to protect employees who attained 50 years of age, and are otherwise eligible for early retirement during the term of the Special Agreement.

The issue then becomes whether, as the Company maintains, an implied condition of Article 3.1 of the Special Agreement is that an employee be in active service, or presumably on vacation in tandem with active service, at such time as he or she becomes eligible for the deferred separation plan under Article 3.1 of the Agreement. The Company’s position is that both grievors, whose last day of work was November 22, 1990 when they were 49 years of age are not entitled to the protections of Article 3.1 because they were not in active service when they turned 50 during the term of the Agreement.

In the Arbitrator’s view the issue should be approached with some appreciation of the purpose of the Newfoundland Special Agreement. As noted in the recitals to the Agreement, its primary objective is to provide assistance to employees who are adversely affected by the railway closure. From the Employer’s point of view, by the implementation of the Agreement and the closure of the railway the Company was able to improve its profitability, presumably by ceasing an operation which was no longer economically viable. It was therefore in its interest to negotiate an agreement which would expedite the winding down of its operations in Newfoundland.

As with other such special agreements, the Company was faced with undertaking certain short and medium term costs to achieve long-term savings. In approaching such a decision, it is normal for an employer to seek to identify, as precisely as possible, the outside limit of the costs which it will be required to bear. That is a consideration which is plainly in the forefront of the minds of both parties as they negotiate a document such as the Agreement at hand. This reality was reflected in the comments of the Arbitrator in an earlier award involving the interpretation of an Employment Security and Income Maintenance Plan in a dispute between the Canadian National Railway Company and the International Association of Machinists and Aerospace Workers (Award dated December 7, 1989). In that case, an employee sought to rely on service rendered after the effective date of a notice of operational or organizational change to claim the requisite service to be entitled to employment security under the terms of the plan. The Arbitrator expressed some difficulty with the notion that the parties might have agreed to a scheme whereby the employees who would be adversely impacted by a notice under the plan could not be clearly identified at the time of the original notice. At pp. 3-4 of the Award, the following comments appear:

Article 8.1 of the ESIMP places upon the Company an obligation to provide not less than three months’ notice to the System General Chairman of the Union of any technological, operational or organizational change of a permanent nature that will adversely affect employees. Employment security is a right of obvious importance both to the employee who has the benefit of its protection and to the Company, which must know with as much certainty as possible what its ongoing liability will be. The employer may not know with precision which employees will ultimately receive employment security benefits, as it cannot know in advance the contingencies of early retirement, voluntary refusals to exercise seniority or relocate and elections of layoff by the employees affected. As a general matter, however, in making a business decision in respect of the implementation of a technological, operational or organizational change it is important for the Company to be able to assess the cost impact of such a change and, in doing so, make some reasonable estimate of the employees who are entitled to invoke employment security protection. If the interpretation of the Union should apply, however, the position of the Company would be substantially more uncertain. While it can look to its seniority lists to determine with precision the number of employees who will have achieved eight years of cumulative compensated service as at the effective date of an Article 8 notice, it can never know with the same certainty the number of employees who, if the Union’s interpretation is accepted, may by virtue of temporary recalls eventually acquire employment security which, if the Union is correct, can then be applied retroactively to the earlier Article 8 notice. In the Arbitrator’s view it is unlikely, absent clear language to the contrary, that the parties would have intended that the Company be placed in such a position. That conclusion casts substantial doubt on the merits of the Union’s argument.

The employees under the Special Agreement in the case at hand, as is generally true of running trades employees, do not have the protections of employment security. The principles expressed in the above award, however, are nevertheless applicable in the case of the closure of a railway and the negotiation of a Special Agreement to minimize the adverse impacts on running trades employees. It is unlikely that an employer in the position of the Company would agree to protections such as those found in the Special Agreement, including separation allowances, compensation for employees in the form of a deferred separation plan, layoff benefits and severance pay, without having the clearest possible appreciation of the potential cost of such an agreement. An essential factor in that estimate is an understanding of the identity and number of employees who would be eligible for the various benefits provided.

With that perception of the process, the interpretation advanced by the Company in the case at hand becomes questionable. If its position is to be accepted, there would be considerable uncertainty as to the number of employees who would ultimately become eligible to participate in the deferred separation plan under the terms of Article 3.1 of the Agreement. It does not appear disputed that the rail dismantling program was a project whose duration could not be accurately predicted when the Special Agreement first went into effect. There was, in other words, no certainty as to what number of employees, and which employees, would be actively employed at any point in time as the term of the Special Agreement progressed. If, as the Company maintains, the intention of the Agreement was that only employees who are actively employed upon reaching their 50th birthday are entitled to the benefits of Article 3.1, the parties would have agreed to a term with substantial financial consequences whose outside costs could not be predicted with any degree of accuracy. It is, of course, possible that the parties might have intended such a thing. However, for the reasons related in the award quoted above, the Arbitrator finds it difficult to believe that the Company, on the one hand, would have agreed to so unpredictable a formula for entitlement to deferred separation and, on the other hand that the Union would have accepted that the access of employees to such an important protection would have been left to the vagaries of sporadic recall to work assignments which would be occasional and unpredictable in their duration. In the Arbitrator’s view it is more plausible that the parties would, by the terms of their agreement, seek to establish a formula whereby all employees who would be covered by its various protections would, insofar as possible, be identifiable in advance, so that the costs and the benefits of the plan, as well as its beneficiaries, would be reasonably capable of assessment from the outset.

Nor does the language of Article 3.1, standing on its own, support the interpretation advanced by the Employer. As stressed by the Union, the language of the provision does not speak to employees on active service. Rather, it extends its protections to “an employee” who meets the conditions described therein. For the reasons related above, I am satisfied that one of those conditions is that the employee attain the age of 50 during the term of the Special Agreement, as evidenced by the treatment of five employees who did so. There can be no doubt that Mr. Snow and Mr. Dicks were, at all material times, employees of the Company within the meaning of Article 3.1 of the Special Agreement. While they may have been employees on layoff when they attained 50 years of age, they were nevertheless employees with rights such as recall, and the entitlement to vacation benefits, when they reached 50 years of age during the currency of the Special Agreement. As the Union’s representative notes, the term “active service” is not used in article 3.1, although it’s used in certain parts of the Special Agreement. For example, Article 3.2 provides that an employee on deferred separation is to be paid on a bi-weekly basis, in the same manner as he or she was paid “… while on active service with the Company”. The same article provides that the election of the benefits of Article 3 are deemed to sever “active employment” so as to disentitle the employee to future wage adjustments. There is nothing on the face of the language of Article 3.1 to support the requirement of active service at age 50 as a condition of entitlement.

In addition, the overall operation of the Agreement seems to support the interpretation of the Union. Specifically, the parties adverted to the concept of employees who were not on active service to the extent that special provision was made for employees who were already laid off prior to the closure of October 1, 1988. By the terms of Appendix ‘C’ to the Special Agreement it was agreed that such persons would be given a one time only selection opportunity to avail themselves of the severance or separation benefits of the Special Agreement. No such limitation, however, is placed upon employees who, like the grievors, were actively employed on October 1, 1988 and who, presumably, are entitled to exercise such rights and benefits as they may have during the full term of the Special Agreement.

In support of its position, the Company points to correspondence which suggests that Mr. Snow’s view of the operation o Article 3.1 of the Special Agreement coincided with that of the Company. In the Arbitrator’s view, that evidence is of little value in the resolution of this dispute. Firstly, as the Union stresses, it is the intention of the parties to the Special Agreement, and not the understanding or belief of an individual employee, which gives it its meaning. Additionally, it is far from clear whether Mr. Snow’s perception of his rights and liabilities, at the time he wrote the letter to the Company’s manager on May 1, 1990, was not prompted, in whole or in part, by the Company’s own view of the application of Article 3.

Nor is the Arbitrator persuaded that the treatment of another employee, Mr. M. Greening can be taken to indicate that the Union accepted the Company’s interpretation of Article 3 of the Special Agreement. Firstly, it appears that Mr. Greening, who was born on May 7, 1935 was more than 50 years of age as of the closure of the railway. It would seem that the concessions made in the Company in his case did not, in any event, relate to any condition of eligibility for deferred separation benefits based on age. To that extent, it is of limited value. The treatment of Mr. Greening, described in a letter from the Company’s President and General Manager to the Union’s General Chairman, dated October 1, 1988, does not take the form of a mutual agreement which can, in any event, be construed as an understanding between the parties with respect to the date upon which an employee must reach the age of 50 for the purposes of eligibility under the terms of Article 3 of the Special Agreement.

The interpretation advanced by the Union is not inconsistent with the treatment of employees under other Special Agreements. For example, as its representative points out, under the Memorandum of Agreement relating to the Freight Crew Consist, following an arbitration award dated June 29, 1990, a provision for bridging to early retirement was made for employees who had reached the age of 50. In that agreement, however, two windows of opportunity were provided, with the understanding that employees could avail of themselves of the second window of opportunity if they had turned 50 when it arose. In other words, employees were not considered ineligible if they had not turned 50 at the time of the first opportunity. On balance, the Arbitrator is compelled to accept the submission of the Union that, although the arrangement under the Newfoundland Special Agreement is somewhat different, there is nothing in the concept of extending the opportunity for deferred separation to employees who turned 50 over a defined period of time which does violence to the principles which generally underlie such special agreements. Similarly, under a Crew Consist Agreement negotiated with CP Rail, employees who turn 50 years of age during the life of that agreement, said to be four years, are entitled to elect a deferred separation to the extent that a credit is available. Indeed, in light of that background to the general practice within the industry, it is not surprising that the Company did extend deferred separation benefits to the five employees who turned 50 years of age during the term of the Special Agreement.

On the whole, the Arbitrator is satisfied that the grievors do satisfy the condition for eligibility for deferred separation as described in Article 3.1 of the Special Agreement. As with the five employees who were otherwise treated, their positions were abolished due to the closure of the Newfoundland Railway. They are employees within the meaning of the Agreement and they turned 50 years of age during the currency of its term. For the reasons touched upon above, the Arbitrator is satisfied that the Agreement does not intend to limit the protections of Article 3.1 to employees who are in active service at the time they attain 50 years of age. The only condition described is that they be employees, a status which the grievors enjoyed at the relevant time.

For the foregoing reasons, the grievance is allowed. The Arbitrator finds and declares that Messrs. Snow and Dicks are entitled to the benefits of the deferred separation plan as provided under Article 3 of the Special Agreement. The Company is directed to compensate them for all benefits lost, from the date of their original entitlement, and to accord to them the continuing benefit of Article 3 of the Special Agreement. I retain jurisdiction in the event of any dispute between the parties having regard to the interpretation or implementation of this award.

DATED AT TORONTO, this 18th day of December, 1992.

(signed) MICHEL G. PICHER

ARBITRATOR