B E T W E E N:

(the "Company")

anD

(the "Council")

ARBITRATOR: Michel G. Picher

A hearing in this matter was held in Montreal on July 15, 1994.

This matter, which is in the nature of an interest dispute, comes before the arbitrator by reason of the failure of the parties to agree upon measures to minimize the adverse effects on employees resulting from the sale of the Dominion Atlantic Railway, generally comprised of trackage between Windsor and Hansport, Nova Scotia a distance of some 20 miles. The Joint Statement of Issue, which outlines the nature of the dispute, is as follows:

It may be noted that the dispute comes before the arbitrator pursuant to the terms of article 45 of the United Transportation Union collective agreement and article 32 of the collective agreement of the Brotherhood of Locomotive Engineers. The jurisdiction of the arbitrator is generally reflected in article 45(g) of the UTU collective agreement which reads as follows:

Article 32(d) of the collective agreement of the Brotherhood of Locomotive Engineers reflects a similar wording.

The offer put forward by the Company prior to the Board of Review was described as follows in the Company's brief to the arbitrator:

Should the employee not wish to move they would be eligible for a monthly commuting allowance of $180 for a period of 12 months.

The offer also included a clause allowing employees who rent to terminate their unexpired lease. The Company would cover all legal costs associated with the transaction, and would cover up to a 3 month penalty payment, or more if required by law.

In recognition of their prior service, however, the Company recognized that prior service for the purposes of vacation, pension and health benefits, and job rates.

Moreover, the Company put forward a heretofore unheard of offer. DAR employees who relocated to Toronto or London, and pursuant to the letter dated September 15, 1993, which provides for a seniority date of August 1, 1993, would become eligible for Supplemental Unemployment Benefits (SUB) even though they were unprotected employees. The offer would allow these individuals to collect a maximum of 156 weeks (3 years) worth of wages, at 80% of their basis weekly pay, over a period of 5 years.

This concept was designed to allow employees to move their families to London or Toronto in the confidence that they would earn a living wage for a sustained period of time.

Rather than embrace this revolutionary approach the Council discarded it out of hand as being insufficient, and would not agree to anything less than a guarantee of 90% of the weekly basic pay. The Company subsequently withdrew this portion of the offer, and remains of the view that the lucrative provision should not be included in any arbitrated settlement and that the negotiated provisions of the collective are more than adequate.

The Company takes the position that the relocation benefits described in the offer above are outside the scope of the arbitrator's jurisdiction, and that the relocation benefits such as they appear within the collective agreement should apply. It further submits that early retirement allowances are also found in the collective agreement and are not to be dealt with in this award. Additionally, the Company takes the position that Appendix E of its offer, containing an optional lump sum severance payment of $45,000, along with shares of the $100,000 pot is considered withdrawn, as well as Appendix F, concerning preferred relocation to Toronto and London and a draft letter regarding August 1, 1993 as a seniority date.

As the Union's brief reflects, the circumstances of the employees, and the consequences upon each of them which flow from the sale of the railway are integrally related to the seniority system to which they are subject. Employees who remain within the Maritimes, Seniority District 1, will suffer no loss of seniority, whereas those who accept employment elsewhere with the Company, for example, in Seniority District 2, Quebec; District 3, Southern Ontario; or District 4, Northern Ontario will have the seniority of unprotected employees for the purposes of the Conductor-Only Agreement. The Council is opposed to the establishing of an August 1, 1993 seniority date for employees relocating to London or Toronto, as that would cause them to stand senior to other employees newly hired after that date and prior to the closing of the Dominion Atlantic Railway.

With respect to the issue of maintenance of basic rates, the Council objects to the formula for the basic weekly rate as applied to employees assigned to the yardman or common spareboard, where the Company proposes the spareboard guarantee as the basis for the rate calculation. The Union would prefer that the calculation be made in the same manner as is done with employees holding regularly assigned positions. The Council also disagrees with the tying of the maintenance of basic rates to employees being subject to a forced relocation to London or Toronto, as opposed to any location in Ontario or Quebec. Lastly, it would seek an MBR for all employees for a term of five years from the effective date of the benefit entitlement, subject only to a three-year MBR being payable to those who remain within Seniority District 1.

With respect to the issue of layoff benefits the Union does not oppose the proposal for a supplemental unemployment benefit plan allowing five weeks of benefits for each year of continuous service, as proposed by the Company. It accepts the formula whereby an employee in receipt of an SUB would receive 80% of his or her "basic weekly pay" as defined in clause 3.3 of the Company's proposal. However, the Council is of the view that the method of calculating the basic rate for spareboard employees should be based on the formula applied to regular assigned employees found in clause 3.3(e) of the Company's proposal. In other words, it does not accept the Company's proposal in paragraph 3.3(d) of its offer to calculate the "basic weekly pay" of spareboard employees as 1/4 of the monetary equivalent of the monthly guarantee of such employees.

The Council also accepts, in principle, the modified SUB plan offered by the Company for employees opting to relocate into District 3, as contained in Appendix "D" of its offer. Noting that the proposal is similar to the sub-plan contained in the Conductor-Only Agreement, the Council submits that the enriched S.U.B. Plan should be available to employees, whether they relocate into Seniority District 2, 3 or 4. Lastly, the Council seeks to obtain for its members the full benefits of the S.U.B. Plan contained in the Conductor-Only Agreement. It therefore prefers a S.U.B. Plan which would be in force for ten years, rather than the five years proposed by the Company. It also notes that the maximum benefit duration of 156 weeks proposed by the Company is the minimum allowable under the Conductor-Only Agreement where the benefit level is at 85%. It seeks a maximum benefit duration of 416 weeks at a benefit level of 90% consistent with the Conductor-Only Agreement as it applies to persons with seniority of ten years or more. It appears that during the course of negotiations the Council offered to accept a formula of three and five, which would yield a maximum benefit of 156 weeks over a period of five years, subject to the Company withdrawing the proposal for establishing a seniority date of August 1, 1993 for employees transferring to Seniority District 3. It maintains that the Council could not condone an arrangement in May of 1994 which would back-date seniority for a period of nine months, when new employees had been hired in the interim in Seniority District 3.

With respect to the issue of an early separation allowance, the Council stresses that the proposal of the Company, which it accepts in principle, to make an early retirement plan available to employees who are eligible to retire and who possess two or more years of cumulative compensated service is in fact unavailable to any of the adversely affected employees, as they have insufficient seniority to take advantage of it. The Council therefore requests a bridging provision whereby the plan would be offered to all employees, in terms consistent with the Conductor-Only Agreement. That would allow an employee who is within five years of eligibility for early or normal retirement to make an irrevocable application for bridging, with retirement being deferred until the employee is eligible. It submits that such a bridging opportunity would be particularly helpful to employees who are senior in age and required to relocate to Ontario, as it would give them the opportunity to return home to Nova Scotia. In support of its proposal, the Council also cites the precedent of the freight Crew Consist Award issued by the instant arbitrator in a dispute between the United Transportation Union and CNR, on June 29, 1990.

With respect to relocation benefits, the Company's proposal is opposed, in part, by the Council. In paragraph 7(e) of the proposal, the Company offers seven days of leave, five of which are paid to allow an employee to seek accommodation and move to a new location. The Council seeks ten paid days for that purpose.

On the issue of severance payment, the Company's offer would allow one week's pay per year for the first seven years of an employee's service, and two weeks pay per year for the eighth year or more of service, to be available to all employees with two years or more of continuous employment. Again, the Council invokes the Conductor-Only Agreement whereby employees whose seniority is subsequent to March 7, 1979 are entitled to resign within 60 days and receive $65,000 while employees whose seniority pre-dates March 7, 1979 would receive $85,000.

The Company's alternative formula with respect to severance payment, found in Appendix "E" of its offer makes a distinction between employees who remain in the service of the new W&H Railway and those who opt to sever. Under the alternative proposal, employees resigning would receive a severance payment of $40,000 and a share in what the Company characterizes as a $100,000 pot and the Council submits is a $110,000 pot based on the number of employees involved, on a pro-rata basis. In the Council's view, severance should be unqualified by the choice of an employee to continue with the new employer or to go elsewhere upon resigning from Company service. In its submission, all adversely affected employees should share equally in the severance monies, in the event that the arbitrator should accept to apply the alternative formula offered by the Company.

The final issue addressed by the Council is relocation. It opposes employees who choose to relocate outside of Seniority District 1 being "forced" to relocate to the Toronto or London area. It would seek an unrestricted right of relocation for all of the affected employees. In other words, it would seek to gain for the employees, regardless of where they relocate, the eligibility for supplemental employment benefits put forward by the Company as part of Appendix "D" of its offer, as an incentive to attract them to Toronto and London, Ontario, regardless of where they relocate. Additionally, the enriched benefit offered to such persons involves their immediate placement at the 100% pay rate category and a retention of prior service for the purposes of vacation, pension and health benefit entitlements.

Before addressing the merits of the proposals put forward by both parties, the arbitrator deems it appropriate to make certain comments of general principle. Firstly, the Company asserts that relocation benefits, which it appears to define as all of those incentives which it offered to persons relocating to Toronto and London, are excluded from negotiation, and from arbitration, by the terms of both collective agreements. The arbitrator agrees that relocation benefits, as they are defined and appear in the terms of the collective agreements, are beyond the jurisdiction of the arbitrator. For example, paragraph 2(5) of article 45 of the UTU collective agreement provides for a seven consecutive calendar days leave, with pay to a maximum of five days, for an employee to seek accommodation in his or her new location and to move. I accept that it would be beyond my jurisdiction to exceed those limits of the collective agreement, in light of the language of article 45(g).

There are, however, elements of disagreement between the parties, characterized by the Company as relocation benefits, which in my view would not fairly fall within that description. The kinds of relocation expenses and benefits contemplated within the collective agreements are fairly clear: they generally reflect matters such as the payment of moving and incidental expenses, transportation costs, paid leave to seek accommodation and move as well as allowances for the loss on the sale of an employee's home or terminating an unexpired lease. What the collective agreement contemplates, therefore, are normal out-of-pocket expenses, and to some extent the cost in time involved, which normally relate to making a change of location. They do not, in the arbitrator's opinion, relate to such matters as adjustments in seniority dates or enriched supplementary unemployment benefit plans which are offered as an incentive to relocate to specific locations. In my view, such "sweeteners" are better characterized as employment or relocation incentives, and not as benefits relating to expenses incurred in relocating. The same would be true, in my view, of provisions such as those proposed by the Company to maintain the service standing of relocating employees for the purposes of pension, vacation scheduling and the like. These matters are not, in their essence, relocation benefits as contemplated under article 45 of the UTU collective agreement or article 32 of the BLE collective agreement and they may therefore be dealt with in the arbitration award. It is important, however, to bear in mind the purpose underlying the Company offer in this regard.

Secondly, the Company submits that the issue of early retirement allowances as relate to the employees governed by the UTU agreement are beyond the arbitrator's jurisdiction, having regard to the terms of article 45 of the collective agreement. In the arbitrator's view, that position is correct. Paragraph three of article 45 provides what appears to be a complete code for the application of an early retirement allowance. As reflected in paragraph 1(c) of article 45, issues such as layoff benefits, severance pay and the maintenance of basic rates are negotiable and arbitrable. The matter of an early retirement allowance however, is conspicuous by its absence from that list, and is plainly contemplated as excluded from negotiation or arbitration by the terms of article 45.1(b) which states that the parties are to negotiate measures "... other than the benefits covered by Sections 2 and 3 of this Article...". I must, therefore, accept the position of the Company that I am without jurisdiction to make any award in respect of an early retirement allowance, insofar as the UTU collective agreement is concerned. The same cannot be said, however, of the BLE collective agreement, as the only area of negotiations specifically excluded under the terms of article 32(2) of that agreement are relocation expenses found in Clause (k).

Further, the arbitrator has some difficulty with a general theme which recurs in a number of positions which the Council advances. In respect of several issues, it argues that the benefits negotiated in major agreements of general application, such as the Conductor-Only Agreement and the award of the arbitrator in the Crew Consist Agreement, should be seen as bench mark benefit measures in a dispute relating to the closure or sale of a part of the Company's operations. The purposes which underlie agreements such as the Conductor-Only Agreement, and those which arise in relation to material changes such as run-throughs, the closing of a terminal or the sale of part of the Company's operation are substantially different. While it is true that in both instances the Company seeks to reduce costs, maximize productivity and improve its profitability, the nature of the bargain being negotiated is substantially different. In agreements such as the Conductor-Only Agreement the Company seeks to gain productivity and profitability over the long term by incurring higher costs in the short term. This it does by effectively buying out, through the payment of incentives, the vested rights of employees. In that circumstance, it is understandable that attractive early retirement incentives and enhanced severance payments can be negotiated. They are an appropriate form of extraordinary compensation for employees who would otherwise not surrender their vested rights. The higher stakes trade offs found in such agreements do not, however, operate in a case involving a small scale closure or transfer of part of the Company's operation, in the normal course of business. The benefits gained in such general agreements as the Conductor-Only Agreement must, therefore, be understood in that context.

I turn to consider the final disposition of the matters in dispute. As a general matter, the arbitrator considers the offer advanced by the Company on May 19 and 20, 1994 as an appropriate basic framework for an award to minimize the adverse effects on the employees concerned. However, I am satisfied that certain adjustments should be made in respect of the terms of that offer, insofar as they would become part of this award. In approaching the terms of the Company's offer, I see nothing inappropriate in its proposal of enriched incentives for adversely affected employees willing to relocate to Toronto or London, in Seniority District 3. The fashioning of a package which mutually benefits the employees and the Company, by promoting relocation to terminals with a particular manpower need is, in my view, clearly in keeping with the spirit and purpose of the collective agreements. In this regard, the arbitrator sees no difficulty with the proposal of the Company to establish a preferred seniority date for employees relocated to Seniority District 3. As reflected in the language of the collective agreements, "Seniority Arrangements" are matters specifically addressed for negotiation and arbitration, as reflected for example in paragraph 1(c)(8) of article 45 of the UTU collective agreement. Nor is there anything in the BLE collective agreement which would prohibit consideration of such a measure. As a matter of principle, therefore, the arbitrator accepts the appropriateness of the enriched incentives offered by the Company for relocation to Toronto and London, with the establishing of a preferential seniority date of August 1, 1993 and the retention of the vested rights of the relocated employees in respect of vacation, pension and health benefits as well as job rates. The arbitrator also accepts the appropriateness of the enriched supplemental unemployment benefits offer put forward by the Company as part of the relocation package found in Appendix "D" of its offer.

The arbitrator also accepts the distinction which the Company makes in respect of employees who hire on with the W&H Railway and those who do not. It is, in my view, at least arguable that employees who remain at work, albeit for a new employer, can be said to be less adversely impacted by the sale of the railway than those who become unemployed. In that respect, the arbitrator accepts the appropriateness of the severance payments package described in Appendix "E", with a minimum payment of $45,000 per employee who severs his or her employment relationship and the establishing of a pot of $10,000 per affected employee to be divided evenly among those who do not accept employment with the W&H Railway or who do not relocate and work elsewhere with the Company.

There are, however, some particulars within the Company's proposal which the arbitrator does not find appropriate. While I accept the S.U.B. Plans offered by the Company as being appropriate, for the purposes of the layoff benefits, I have some difficulty with the concept of "basic weekly pay" adopted by the employer as relates to spareboard employees. The purpose of a Supplementary Unemployment Benefit plan is, I believe, to provide additional protection to an employee based upon his or her prior rate of earnings. For a spareboard employee, the tying of such a benefit to a minimum guarantee departs from that principle, at least in the case of any spareboard employee whose earnings were normally in excess of the guarantee. For that reason, the arbitrator accepts the position of the Union that the calculation of "basic weekly pay" for the purposes of any Supplementary Unemployment Benefits Plan, whether as part of layoff benefits or the relocation incentives, should be calculated on the basis of Clause 3.3(e) of the Company's offer.

I am also of the view that the establishing of the maintenance of basic rates should likewise be calculated. The concept of maintenance of basic rates is to be distinguished from the concept of a spareboard guarantee. The guarantee reflects the understanding of the parties that, in some locations and in some seasons, spareboard work may be less intensive than at other times and places. The guarantee is in partial recognition of the need of the Company to maintain a corps of available employees to be called as needed, and as a minimum form of insurance for such employees against the uncertainty of a reduced availability of work.

The formula for maintaining basic rates, however, has an entirely different focus. Its purpose is to give employees, for a period of time, the protection of continued earnings at the rates which they maintained over an agreed period of time. Pursuant to that formula, persons required to move to less lucrative positions maintain, for a time, earnings commensurate with those which they had previously by virtue of the time and effort expended in the service of the employer. In that context, it appears appropriate to the arbitrator to establish the maintenance of basic rates for spareboard employees on the basis of their actual earnings, as is done for regularly assigned employees, rather than on the basis of a minimum guarantee. The guarantee should, I think, be used only as a minimum in the calculation of an M.B.R. The arbitrator therefore awards that the calculation of the basic weekly rate to apply for yardmen and common spareboard employees shall be calculated on the basis of the formula which applies to regular assigned employees, as reflected in Clause 3.3(e) of the Company's proposal. The arbitrator is also of the view that the maintenance of basic rates should apply for a three-year term, as offered by the Company.

Further, for the reasons reflected above, the arbitrator accepts the submission of the Company that, as regards the UTU collective agreement, this board has no jurisdiction to award early retirement allowances beyond those contained in the terms of the collective agreement. For the same reasons, no award can be made beyond the provisions of the U.T.U. collective agreement or the B.L.E. collective agreement in respect of relocation expenses, including the allowance of one week's leave, with a maximum of five days paid to seek accommodation and/or to move. In the circumstances, the arbitrator does not deem it appropriate to award to the member of the B.L.E. early retirement allowances beyond those which would be available to the other employees who are adversely impacted by the sale of the railway.

Finally, the arbitrator does not deem it appropriate to award a bridging provision for early separation allowance, as requested by the Council nor to open the enriched relocation options, virtually without qualification, as the Council would propose. I have difficulty accepting the suggestion that relocation to a small city such as London, Ontario would involve an unacceptable degree of dislocation to employees accustomed to living in Nova Scotia. While any move must surely involve some adjustment, the degree of what may be unacceptable must surely be kept in perspective, as compared with the prospect of unemployment. Secondly, I accept that the Company should not be forced to incur the cost and risk of subsidizing the move of an employee to a location in another seniority district where the prospect of that person's employment longevity is questionable. In addition, in light of these observations, the case for a bridging provision for access to early retirement is also not compelling. I do feel, however, that in recognition of the longer service of the affected employees, within Seniority District 1, it is not unfair or inappropriate to give them a seniority date which will advantage them slightly over newly hired employees in Seniority District 3.

In the result, the arbitrator awards the terms of the offer made by the Company on May 19 and 20, 1994, and appended as Exhibit 4 to its brief before the arbitrator, subject to the adjustments described above. In the circumstances, I deem it appropriate to remit the matter to the parties for the drafting of the appropriate language, and remain ceased in the event of their inability to do so.

DATED at Toronto this 8th day of August, 1994.

ARBITRATOR