AH – 318




(the “Company”)



(the “Union”)




SOLE ARBITRATOR:                Michel G. Picher



There appeared on behalf of the Company:

M. S. Hughes                            - System Labour Relations Officer, Montreal

C. St. Cyr                                  - Manager Labour Relations, Montreal

C. Kimmerly                              - Manager S&C Installations, Toronto

J. P. Rainville                             - System Labour Relations Officer, Montreal


And on behalf of the Union:

John E. Platt                             - International Representative

A G. Cunningham                      - System General Chairman

R. E. McCaughan                      - System General Chairman



A hearing in this matter was held at Montreal on January 21, 1993.



This arbitration concerns a grievance alleging that the Company failed to abide by the terms of the Employment Security and Income Maintenance Agreement (ESIMP) between the parties in relation to the abolishment of positions on the Great Lakes Region. The dispute and joint statement of issue filed at the hearing are as follows:


On March 28, 1991 the Union was advised by the Company that they were abolishing twenty positions on the Great Lakes Region effective April 11, 1991.


The Union contends that this was a technological, operational and organizational change as contemplated in Article 8 of the Employment Security and Income Maintenance Agreement. That the Company should have given the Union at least three months advance notice and negotiated any adverse effects.

The Company denies the Union’s contentions.

The facts are not in dispute. The Brotherhood represents employees of the Signal and Communications (S&C) Installation Department on the Great Lakes Region. The Department operated with twelve permanent gangs, three of which were headquartered at McMillan Yard in Toronto. On March 19, 1991 the Company gave notice to the Brotherhood of the abolishment of 20 positions on the Great Lakes Region. This equated to the removal of four gangs, including the wiring gang headquartered at McMillan Yard. The abolishment of the four installation gangs had a considerable impact on the bargaining unit, as it represented some 36 percent of the Unions members working in the department on the region.

The Union submits that the abolishment of the positions constitutes an operational or organizational change within the contemplation of article 8 of the Employment Security and Income Maintenance Plan. It provides as follows:

Article 8.1

The Company will not put into effect any technological, operational or organizational change of a permanent nature which will have adverse effects on employees without giving as much advance notice as possible to the General Chairman representing such employees or such other officer as may be named, by the Union concerned, to receive such notices. In any event, not less than three months’ notice shall be given, with a full description thereof and with appropriate details as to the consequent changes in working conditions and the expected number of employees who would be adversely affected.

Under the Plan, if a change that is operational or organizational adversely impacts employees, provision is made for the negotiation, and failing settlement, ultimate arbitration, of terms and conditions to minimize the negative consequences for the employees affected. It also provides special protections for employees with employment security, as well as maintenance of basic rates, layoff benefits and severance payments, as well as other forms of protection for employees.

Employees are not protected by the ESIMP, however, if their jobs are abolished by reason other than a technological, operational or organizational change. For example, in certain circumstances, if layoffs are occasioned by a decline in business beyond the Company’s control, article 8 of the ESIMP has no application. The Company takes the position that that is what has transpired. In this regard it relies on the “NOTE” to paragraph I to the definitions section of the ESIMP. Page 5 of the Plan booklet contains the following:

“Operational or Organizational Change” means: a change in the manner, method, procedure or organizational structure by which the employer carries on the work, undertaking or business not directly related to the introduction of equipment or material provided that any such change is not brought about by:

(i)            a permanent decrrease in the volume of traffic outside of the control of the company; or

(ii)           a normal reassignment of duties arising out of the nature of the work in which the employee is engaged; or

(iii)         a normal seasonal staff adjustment.

NOTE:   Any permanent shutdown or permanent partial shutdown of an operation, facility or installation, shall be considered as a Technological, Operational or Organizational change. Any permanent Company-initiated change, excluding changes which are brought about by general economic conditions, and which result from the reduction or elimination of excess plant capacity shall also be considered as Technological, Operational or Organizational changes.

The Company maintains that the abolishment of the 20 positions on the Great Lakes Region was brought about by general economic conditions, and therefore falls within the exception contained within the “NOTE” reproduced above.

The Union submits that the exclusion phrase contained in the second sentence of the “NOTE” is linked to the following phrase “and which result from the reduction or elimination of excess plant capacity …”. It submits that the first sentence gives clarification to the concept of an operational or organizational change, in that it provides that any permanent shutdown or permanent partial shutdown of a Company operation, Company facility or Company installation is, by definition, an operational or organizational change. The second sentence, according to the Union, goes on to provide that any permanent Company-initiated change is also to be considered a technological, operational or organizational change, with the exception of changes brought about by general economic conditions and resulting from the reduction or elimination of excess plant capacity. On that basis it argues that the indefinite abolishment of the installation gangs must be taken to be a permanent shutdown or, at the least, the permanent partial shutdown of an operation.

The Union draws to the Arbitrator’s attention a number of precedents, dating principally from the 1980s, which it submits represent similar fact situations which resulted in article 8 notices being issued when jobs were abolished. The Company submits that little weight should be given to those examples, however, largely because the ESIMP has been substantially amended since then. Specifically, its representative notes that there was no employment security protection in the Plan at the time of the cases cited by the Union, a factor which might have caused the Company to be more generous in the exercise of its discretion to issue an article 8 notice in borderline cases. Also, the language of the “NOTE” reproduced above was not found in the Plan at that time.

In the Arbitrator’s view it is important to bear in mind the evolution of the Employment Security and Income Maintenance Plan and to pay particular attention to the origins of the “NOTE”. It is common ground that the “NOTE”, as it now appears in the ESIMP was introduced pursuant to the arbitration award of Dalton L. Larson, dated April 11, 1988, as subsequently clarified by certain further rulings of that arbitrator. It is, I think, instructive to refer to the award of arbitrator Larson insofar as it contains discussion of his intention with respect to the issue of technological, operational and organizational change. At page 51 of his award arbitrator Larson notes that the Unions demanded that the ESIMP be amended so that employees would be entitled to employment security regardless of the reason for the change implemented. At p 52 the arbitrator rejected the Union’s submission, commenting as follows:

Once again I am not convinced that eligibility should be extended in that manner for precisely the same reasons that I rejected an extension based on years of service. It flies in the face of the purpose for which the plan was established in the first place. Under the plan, the companies have accepted responsibility for employees displaced due to circumstances within their exclusive control. Since it is within the discretion of each railway company to decide whether a technological, operational or organizational change ought to be introduced, they have undertaken an obligation to protect employees who are displaced as a result of any such initiative.

After discussing the evidence with respect to the prior interpretation of article 8 by arbitrators, Mr. Larson went on to state, at pp.53-54:

The fact is, however, that in spite of the arbitral record, I am not convinced that the plan has been consistently administered by the companies with a strict regard to the rationale of the plan which is that they are responsible for employees displaced for reasons entirely within their control. With reference to the three kinds of changes covered by the plan, it would appear that there has been no difficulty with strictly technological changes since those are easily identifiable. But the two other categories are another matter.

It is always arguable that “operational” or “organizational” changes are financially driven and, in that sense, are not made at the initiative of the company. Yet those same changes may be made to achieve productivity objectives in precisely the same manner as a technological change.

At present there is no specific definition of technological, operational or organizational change in the employment security plan. Under the circumstances, I intend to provide such a definition in order to ensure that the plan is administered consonant with its purpose. In providing that definition, I should make it clear that in my view, it was never intended that the kinds of organizational and operational changes that are to provide employment security benefits to displaced employees are to be limited only to those that are generated by technological change, as it is under Section 149 of the Canada Labour Code. Each of those terms is independent of the other. Each imports a separate circumstance whereby an employee is to be given employment security who has eight years of service. In particular, any organizational or operational change which is initiated at the discretion of the company to achieve productivity objectives which is not due primarily to a permanent decrease in the volume of traffic, normal reassignment of duties or seasonal staff adjustments should be covered.

It appears clear to the arbitrator that Arbitrator Larson did not intend to depart from the fundamental principle that employees are to have the protections of the ESIMP in respect of changes initiated by the Company in those circumstances where a change is within the Company’s exclusive control. He specifically denied the Union’s request to extend the protections of the plan to all changes, regardless of their cause. In the language of the “NOTE”, the arbitrator reflects the same theme. The second sentence of the “NOTE” clearly focuses on Company initiated change. Upon a close examination of that sentence I am inclined to agree with the Union that the phrase “… and which result from the reduction or elimination of excess plant capacity…” intends to refer to changes brought about by general economic conditions. That appears to follow from the fact that the verb “result” is expressed in the plural. I do not believe the arbitrator intended to say “any permanent company initiated change … which result from the reduction”. It appears more grammatical to conclude that he intended to mean “changes which are brought about by general economic conditions, … which result from the reduction or elimination of excess plant capacity”.

In the Arbitrator’s view the issue can be characterized as whether the reduction of the installation gangs can fairly be described as a reduction in plant capacity occasioned by general economic conditions. The evidence before the arbitrator leaves little doubt that external economic conditions did give rise to the Company’s decision to reduce its installation activities. The material tabled before the arbitrator establishes, beyond controversy, that substantial shortfalls in anticipated projects relating to fibre optics installation and GO Train projects effectively reduced the labour budget of $5,707,000 forecasted for 1991 to an actual expenditure during that period of $2,077,900. Those projects were cancelled by customers of the Company, such as GO Transit, Rogers Communications and Unitel, in a manner clearly beyond the Company’s control. The evidence discloses a clear and direct relationship between the lost contracts and the reduction in the manpower expenditure. From the standpoint of the “NOTE”, therefore, it can be fairly be said that the abolishment of the installation gangs came about as a result of general economic conditions. In the circumstances, the vehicles, tools and equipment which would normally be utilized by those gangs clearly could be characterized as “excess plant capacity”. To the extent that such tools or equipment are not utilized they could be said to be eliminated. In a general sense, the idling of equipment and the related reduction of manpower can be said to involve the reduction or elimination of “excess plant capacity”. On that basis, having regard to the overall intention of arbitrator Larson, as reflected in the definition section of the ESIMP, I am inclined to prefer the interpretation of the Company.

In my view, although the case was not argued on this basis, the same result could be arrived at by the application of paragraph (ii) under the definition of operational or organizational change. There seems to be little doubt that the normal work of the installation gangs is to carry out projects which are generated either from within the Company or from outside customers, such as GO Transit and Unitel. In that context, it would seem to the arbitrator that a substantial reduction in work orders for outside customers which causes a reduction in work opportunities could fairly be characterized as a normal reassignment of duties arising out of the nature of the work in which the employees are engaged. On the whole the arbitrator cannot accept the submission of the Union that the reduction in the number of installation gangs constitutes a “permanent partial shutdown of an operation” as that phrase intended to apply within the first sentence of the “NOTE”. The “operation” of installation work continues, save that the fluctuations in available contract work have occasioned a reassignment of duties intrinsic to the nature of the work performed by the employees in the installation gangs.

On the whole, I am satisfied that the definition sections of the ESIMP reflect the intention that, subject to the exceptions therein defined, changes which are beyond the control of the Company, including changes brought about by general economic conditions, do not constitute operational or organizational change within the meaning of article 8.1 of the ESIMP. For the reasons related, I must find that the reduction of the installation crews on the Great Lakes Region effective April 11, 1991 was the result of economic forces external to the Company, and beyond its control, which forced a reduction in its installation capacity. In the circumstances, I cannot find that the Company initiated an operational or organizational change within the meaning of article 8.1 of the ESIMP.

For the foregoing reasons the grievance must be dismissed.


DATED AT TORONTO, this 8th day of February, 1993.