AWARD

I

DISPUTE

This grievance involves an allegation by the Brotherhood of Locomotive Engineers (BLE- the Brotherhood) that Canadian National Railway Company (CN – the Company) has improperly refused to allow conductors whose positions at VIA Rail (VIA – the Corporation) were abolished effective July 1, 1998, to return to work at CN. It seeks an order from the Arbitrator directing that CN comply with the terms of a Special Agreement dated March 6, 1987 and allow the conductors adversely affected by VIA’s initiative to return to active service with CN by the exercise of their seniority rights. The Brotherhood further requests that the Arbitrator retain jurisdiction to deal with further issues which may arise in the event that the grievance is successful, including such matters as compensation, benefits and seniority.

The dispute before the Arbitrator involved evidence adduced over fourteen days of hearing, the filing of some 108 exhibits and extensive post-hearing written submissions in argument and reply. It involves one of the most unfortunate and acrimonious disputes within the railway industry in recent memory, as the stakes involved are significant in both economic and human terms. That reality, coupled with a recent decision of the Canadian Industrial Relations Board (CIRB), discussed below, make it important for this award to issue as expeditiously as possible. Consequently, while the Arbitrator has thoroughly examined the evidence and all of the written submissions of the parties, I deem it important to hold to a standard of relative conciseness and brevity in the drafting of this award.

By letter dated November 5, 1998 the Arbitrator was advised of his appointment by the Minister of Labour to adjudicate this dispute. At the initial hearing, held in Montreal on November 18, 1998, CN objected to the jurisdiction of the Arbitrator arguing, among other things, that the Special Agreement and its addendum, the Transfer Agreement, which are the subject of this dispute are not in the nature of a collective agreement amenable to a final and binding disposition by arbitration under the Canada Labour Code. The Company also questioned the status of the BLE to assert the rights formerly held by the United Transportation Union (U.T.U.) under the Special Agreement and Transfer Agreement. By a Preliminary Award dated November 30, 1998 the Arbitrator rejected the submissions of CN and assumed jurisdiction. That decision was challenged on judicial review and was sustained by a decision of the Superior Court of Quebec, issued by the Hon. Daniel H. Tingley, J.S.C. on March 9, 1999.

The dispute flows from the decision of VIA, announced in March of 1997, to apply under Section 18 of the Canada Labour Code to consolidate the separate bargaining units of locomotive engineers represented by the BLE and conductors, assistant conductors and yardmasters, represented by the UTU, into a single bargaining unit. Key to its initiative was the simultaneous abolishing of all conductor and assistant conductor positions, as well as the abolishing of locomotive engineer positions, and the merging of their respective responsibilities into the single position of “operating engineer”. The change also involved certain administrative duties of the conductor’s position being reassigned to on-board service employees represented by the National Automobile, Aerospace, Transportation and General Workers Union of Canada (CAW).

The detail of the history of collective bargaining relations in the running trades within both CN and VIA, as well as the process which followed the announcement of VIA’s initiative in March of 1997, are related in the preliminary award and need not be repeated. Suffice it to say that the majority of VIA conductors transferred into work at VIA from CN, retaining the right to return to employment with CN where certain conditions are met, in accordance with the Transfer Agreement negotiated by their then bargaining agent, the UTU. Following a run-off vote conducted by the former Canada Labour Relations Board (CLRB), now the Canadian Industrial Relations Board (CIRB), the UTU was displaced and the BLE emerged as the sole bargaining agent for all running trades employees of VIA effective October 31, 1997. The positions of all conductors and assistant conductors ceased to exist on all VIA trains as of July 1, 1998.

Two of the BLE’s three geographic regions, East and West, excluding the Central Region, reached an agreement in principle with VIA on the material change aspects of the crewing reductions on May 12, 1997. However, as that agreement was subject to a number of conditions which were not eventually fulfilled, it never went into effect. Consequently, following certification of the BLE as sole bargaining agent the issue of the crew reductions fell to be dealt with in the broader scope of negotiations for the first collective agreement governing the merged classifications, conducted between VIA and the Brotherhood. Those negotiations resulted, in part, in the signing of a Crew Consist Adjustment Agreement between the BLE and VIA on June 12, 1998. That agreement acknowledged the abolishing of the positions of conductor and assistant conductor on all VIA Rail passenger trains and included a number of provisions designed to minimize the adverse impacts of that change on the employees affected.

Subsequently a number of VIA conductors, including Mr. Cairns and Mr. Galvin who were granted observer status in these proceedings, filed a complaint with the CIRB, alleging a failure of the duty of fair representation on the part of the BLE in the negotiation of the Crew Consist Adjustment Agreement. Without detailing the particulars of that complaint, the thrust of the allegations was to the effect that the BLE favoured locomotive engineers to the prejudice of the former conductors and assistant conductors in negotiating the Crew Consist Adjustment Agreement. The complaint asserted, among other things, that former conductors and assistant conductors were denied equal access to the new position of operating engineer, were bottom ended for seniority purposes and that the BLE failed to gain the necessary guarantees that conductors and assistant conductors unable to hold work at VIA would flow back to work at CN. On October 22, 1999 the CIRB issued a decision sustaining the complaint of the employees, in part.

It is necessary to consider the decision of the CIRB as a matter preliminary to this award, in light of the position taken by CN. By letter dated October 26, 1999 counsel for CN communicated to the Arbitrator CN’s position that the decision of the CIRB is tantamount to a termination of these proceedings. His letter reads, in part, as follows:

You will note that the Board has upheld the complaint against the Brotherhood of Locomotive Engineers finding, inter alia, that there was “improper collaboration” between VIA and the BLE in the matter. As a result, the Board has ruled that certain parts of the Crew Consist Adjustment Agreement are void and thus subject to renegotiation. Among the provisions determined by the Board to be void, are those relating to the application of the CN/VIA/UTU Inter-company Transfer Agreement.

As you know your jurisdiction in the present case stems from a BLE dispute claiming that CN refused the transfer requests and deemed transfer requests of conductors which were made as a consequence of the Crew Consist Adjustment Agreement.

Consequently, it is CN’s submission that the proceedings before you are now nugatory and that you have no alternative in the present case but to dismiss the BLE’s disputes.

On the basis of the submission received the Arbitrator issued a letter to all parties requesting their submissions on the issue. The BLE, the UTU and VIA are uniform in their position. They assert, in reply to the submission of CN made in its letter of October 26, 1999, that the decision of the CIRB does not suspend or vitiate the terms of the Special Agreement of March 6, 1987, which is the jurisdictional basis of the grievance before the Arbitrator. VIA and the BLE stress that the decision of the CIRB itself acknowledges the dispute pending before the Arbitrator and contemplates that it will resolve part of the overall dispute, namely the claimed right of VIA conductors and assistant conductors to return to work at CN, on the basis of their prior CN seniority, effective July 1, 1998 or at such time as they reasonably made a request to return to such service. The UTU submits, however, that this award should not issue until other matters are first resolved, including a grievance by the BLE against VIA with respect to the denial of locomotive engineer training to certain conductors and assistant conductors.

As it has become necessary to address this preliminary issue, I now turn to do so. On June 12, 1998 VIA and the BLE reached a tentative agreement on the terms of their collective agreement, Appendix A of which was the Crew Consist Adjustment Agreement. It should be noted that at the time of that agreement, which was subsequently ratified, VIA and the BLE were on clear notice from CN that it would not allow VIA conductors and assistant conductors to flow back to work at CN by the exercise of their CN seniority, a right which they claim pursuant to the Transfer Agreement and Special Agreement of March 6, 1987.

The rights of conductors, assistant conductors and yardmasters were dealt with under article 13 of the Crew Consist Adjustment Agreement which reads as follows:

CONDUCTORS, ASSISTANT CONDUCTORS AND YARDMASTERS:

FORMER CN EMPLOYEES:

13. Conductors, Assistant Conductors and Yardmasters who were VIA employees as of October 31, 1997 and to whom the Memorandum of Agreement dated march 6, 1987 in respect to the inter-Company transfer of employees between CN and VIA (The “Transfer Agreement”) is applicable as per item 10 of the said Transfer Agreement, may apply for one of the following opportunities:

(a) a voluntary retirement opportunity as defined in paragraph 9 above;

(b) training as Locomotive Engineer, in seniority order;

(c) exercise their right to return to CN under the terms of the Transfer Agreement;

(d) receive a voluntary severance payment as set out in paragraph 11.

An employee may apply for one or more of the opportunities, in which case the opportunities will be given priority by the Corporation in order of preference indicated by the employee. Should the employee fail to indicate his priorities, the opportunities will be given priority by the Corporation in the order in which they are listed above.

Should an employee fail to apply for any of the opportunities listed above, he shall be deemed to have applied to exercise his right to return to CN under the terms of the Transfer Agreement.

The opportunity to return to CN under the terms of the Transfer Agreement will be granted to eligible employees subject to the agreement of the parties in the event that CN should refuse to allow the eligible employees to return to CN under the terms of the Transfer Agreement.

It may also be noted that an addendum to the Crew Consist Adjustment Agreement, in the form of a letter of understanding dated June 12, 1998, also provided that pending the resolution of the dispute between VIA and CN with respect to the right of the conductors and assistant conductors to exercise their CN seniority to return to the service of that Company, VIA will (as it has) continue to pay those employees their basic weekly pay or maintenance of earnings, whichever is greater, as well as full benefits and pension accumulation. In the result, some seventy-five conductors and assistant conductors have remained on the VIA payroll, although providing no productive services, since July 1, 1998, awaiting the resolution of this dispute.

For the purposes of the jurisdictional submission made by CN on the basis of the CIRB award of October 22, 1999 I do not consider it necessary to consider the details of that decision at great length. It should be noted, however, that not all of the complainants’ allegations were sustained. In particular, a number of “corollary allegations” were rejected at p.30 of the decision of the CIRB, including an allegation to the effect that “the BLE and VIA colluded to eliminate the position of conductor”. In the words of the Board “… no convincing evidence was put forward on these matters,”. Any “improper collaboration” found by the CIRB, and referred to at p.37 of its decision, relates to the three grounds upon which the Board upheld the allegations of the complainants: the failure of the duty of fair representation on the part of the BLE in dealing with the selection and training process to apply to conductors and assistant conductors; the administration of seniority provisions affecting conductors and assistant conductors who qualify as locomotive engineers; and the apparent failure to obtain the necessary assurances with respect to the application of the Special Agreement and Transfer Agreement of March 6, 1987. It is in that context that the remedial direction of the CIRB must be understood. It is significant to note the following most fundamental part of the CIRB’s direction to the parties, at p.38:

Therefore the Board orders the following:

1. VIA and the BLE are to reopen the Crew Consist Adjustment Agreement on the following:

a. the selection process for conductors and assistant conductors;

b. seniority provisions as they affect conductors and assistant conductors who qualify as locomotive engineers;

c. the application of the Special Agreement negotiated between UTU, VIA and CN;

and any other related issues as the parties see fit with a view to providing for the interests and needs of the group of former conductors and assistant conductors. The parties are to conclude the negotiations of such amendments no later than December 15, 1999.

In the Arbitrator’s view nothing in the foregoing conclusions and directions derogates from the jurisdiction of this Board to resolve the dispute before it concerning the alleged violation by CN of the Special Agreement of March 6, 1987. It is common ground among all parties before me that that agreement continues in full force and effect. There is nothing in the decision of the CIRB purporting to amend, suspend or terminate the operation of that agreement in whole or in part. What the decision of the CIRB does is to direct VIA and the BLE to negotiate further, as between themselves, terms and conditions relating to the application of the Special Agreement, insofar as that is one of terms of the impugned Crew Consist Adjustment Agreement. There is nothing on the face of the decision of the CIRB, nor arguably could there be in law to the extent that CN was not a party to those proceedings, to suggest that VIA and the BLE are directed to in some way amend or suspend the Special Agreement of March 6, 1987. While it appears that the provisions of paragraph 13 of the VIA–BLE Crew Consist Adjustment Agreement are nullified as they might relate to the application of the Transfer Agreement, there is nothing in the decision of the Board which purports to nullify the original Special Agreement of March 6, 1987 between the UTU, VIA and CN, or the Transfer Agreement appended to it.

The dispute before me is not made under the Crew Consist Adjustment Agreement negotiated between VIA and the BLE. It is brought solely under the terms of the UTU, VIA and CN Special Agreement and Transfer Agreement of March 6, 1987. It is clear from a review of the decision of the CIRB that the Board was aware that this arbitration is pending and, indeed, that there is much at stake in the outcome of these proceedings concerning the rights and protections of the conductors and assistant conductors concerned. Nothing in the decision of the CIRB would suspend these proceedings. If anything, the decision of the CIRB, and its deadline for the parties to complete their re-negotiation by December 15, 1999 gives greater urgency to this arbitration. A final and binding resolution of the dispute between the BLE and CN with respect to the alleged right of the conductors and assistant conductors to return to CN will be a facilitating factor, if not an essential pre-condition, to VIA and the BLE meaningfully re-negotiating the terms of their Crew Consist Adjustment Agreement. For these reasons the Arbitrator rejects the submission of counsel for CN to the effect that the decision of the CIRB has rendered these proceedings “nugatory” or that there is no alternative in the circumstances but to dismiss the BLE’s dispute.

Nor am I persuaded that it is helpful or appropriate to delay the issuing of this award pending other grievances and disputes, such as a grievance filed by the BLE against VIA before the CROA concerning the access of conductors and assistant conductors to locomotive engineer training. I do not accept the suggestion of counsel for the UTU, made in the best of good faith, that the resolution of the training issue, or a number of other issues he cites, should necessarily precede a decision in this matter. A declaratory determination by the Arbitrator which would confirm the right of conductors and assistant conductors to return to the service of CN, assuming the success of the BLE’s position before me, is not tantamount to an irrevocable election by the employees concerned which must necessarily prejudice any alternative election which they may have made or may yet make. It is merely a clarification of their right, a clarification which should bring greater certainty to the range of options ultimately available. Nor do I see how the progressing and resolution of the training grievance before CROA (of which the same Arbitrator is separately seized) should prejudice conductors who might return to CN while their training grievance is outstanding, as long as they return without prejudice to their grievance against VIA, preserving their right to be made whole should their training grievance ultimately succeed. The eventual clarification and shake out of rights and displacements which might ensue is the stuff of any material change in the railway industry. That should not obscure the need for resolution of the critically important dispute before me.

THE ISSUE

While the evidence and arguments adduced before the Arbitrator are extensive, the issue is relatively narrow and straightforward. As noted above, effective July 1, 1998 all positions of conductor, assistant conductor and yardmaster within VIA Rail were abolished. With the exception of a small number of yardmaster positions, virtually all other jobs within the craft previously represented by the UTU, and represented by the BLE at the effective date of the abolishment, namely conductor and assistant conductor positions, ceased to exist. The BLE maintains that as of their request to do so, some seventy-five conductors and assistant conductors in the employment of VIA Rail are entitled to invoke Item 5(a) of the Transfer Agreement, which is an addendum to the Special Agreement of March 6, 1987 negotiated between CN, VIA and the UTU. It reads as follows:

5(a) During the Reciprocal Rights Period referred to in paragraph (a) of item 4, if an employee who, in the exercise of seniority, is unable to hold a regular assignment in road service at VIA at his/her home station, and who does not wish to exercise his/her seniority on the seniority district at VIA, may exercise his/her seniority at CN pursuant to the terms of the applicable Collective Agreement.

Paragraph (a) of Item 4 of the Transfer Agreement defines the reciprocal rights period, which is the duration of the agreement, as “… the period of time between the effective date of transfer (June 26, 1987) and the date the last employee who holds seniority on the effective date of transfer (June 26, 1987) leaves the service.” In other words, all VIA conductors and assistant conductors with seniority at CN pre-dating June 26, 1987 have the protection of the Special Agreement and Transfer Agreement for the duration of their working careers. As specified in article (l) of the Special Agreement, it cannot be amended, revised, or otherwise changed without the agreement of all parties and the consent in writing of the Minister of Labour.

Under Item 4(c) of the Transfer Agreement employees at CN who bid successfully on vacancies at VIA during the reciprocal rights period are granted VIA seniority in the same relative standing as their seniority at CN, and they also continue to maintain their relative position on the CN seniority lists. However, CN takes the position that the provisions of Item 5(a) have no application in the circumstances of the abolishment of an entire craft. It maintains that the Transfer Agreement contemplates the operation of Item 5(a) in circumstances which would involve the ebb and flow of employees back and forth between VIA and CN where some work remains available for conductors and assistant conductors within VIA Rail. In CN’s view, the article contemplates the flow-back of conductors to CN where, for example, service reductions cause the elimination of a certain number of conductor or assistant conductor positions. Item 5(a) would allow for the movement of employees, in that circumstance, back to positions within CN which can be claimed on the basis of the prior CN seniority of the individuals concerned.

CN now refuses to allow some seventy-five conductors and assistant conductors to flow back from VIA to positions at CN following the abolishing of the conductor’s craft within VIA Rail as of July 1, 1998. The narrow issue before the Arbitrator is, therefore, whether Item 5(a) of the Transfer Agreement applies in the circumstances disclosed, so that CN is contractually obligated to take its employees back.

III

HISTORY OF THE TRANSFER AGREEMENT

In 1977, VIA took over passenger service in Canada, previously provided by CN and CP Rail. For a number of years VIA did not employ its own running trades employees. The services of locomotive engineers, conductors and brakepersons, later called assistant conductors, were contracted for from CN for passenger service on lines owned by CN. According to the evidence of Mr. Guy Scarrow, the UTU’s Senior Vice-President, the crafts then represented by the UTU which serviced VIA were conductors, brakepersons, baggagemen and flagmen. It would also appear that certain yard positions, not considered passenger-related, were filled from the UTU ranks, including switchtender, yard foreman, yard helper, car retarder operator, engine hostler, and others not material to this dispute. Mr. Scarrow relates that from 1977 to 1987 employees had certain protections against employer initiated material change under the terms of a 1977 Special Agreement, pursuant to notices provided under article J of that agreement. Typically, under that arrangement, CN would issue notices involving changes in passenger service impacting employees and the parties, being CN and the UTU, would negotiate terms and conditions to minimize the adverse impacts of those changes on the employees affected. The protective provisions of the 1977 Special Agreement included articles relating to training, relocation expenses, benefits, maintenance of earnings as well as layoff and severance payments.

Mr. Scarrow relates that the first notice which the UTU received of VIA’s intention to become the employer of its own running trades employees was a letter addressed to a number of union officers, including Mr. Scarrow in his then capacity of General Chairman. That letter, signed jointly by Mr. D.C. Fraleigh, Assistant Vice-President, Labour Relations for CN and Mr. J. Noel, Vice-President, Human Resources for VIA Rail Canada Inc., reads as follows:

The Companies have received advice from the Minister of Transport that the present Order-In-Council PC 1980-3492 dated December 18, 1980, which extended the “Railway Passenger Services Adjustment Assistance Regulations” to December 31, 1983, had been extended to December 31, 1985, and has been further extended to December 31, 1990.

VIA Rail Canada Inc., as the result of an initiative approved by the Federal Government, have decided that CN employees represented by the United Transportation Union and dedicated solely to VIA Passenger related duties will be transferred to VIA Rail Canada Inc.. It is planned that such transfer will commence on Friday July 11, 1986 and will be completed on or about September 30, 1986.

The current “Special Agreement” signed on July 7, 1978, will, in our opinion, require certain revisions in respect to the transfer of employees you represent between CN Rail and VIA. Both companies, therefore, request that a meeting be held at an early date to negotiate the required changes. We propose that the initial meeting on this notice be held on March 18, 1986, 10:00 hours, in the Rendez-Vous room – 6th floor – CN Headquarters, Montreal, Quebec. Would you please advise if the time and date are satisfactory.

As you are aware, the “Railway Passenger Service Adjustment Assistance Regulations” referred to above, contemplate notice from the Railways of their intent to negotiate a special agreement with respect to the provision of benefits employees adversely affected by the implementation of changes in Railway Passenger Services. As well, the Regulations contemplate an undertaking by the parties to the “special agreement process”, regarding the prescribed final disposition of any unsettled dispute arising during the “special agreement process”.

This letter will constitute both our notice and undertaking as contemplated by the Regulations. We would appreciate receiving a similar undertaking from you gentlemen on behalf of the employees you represent.

To this end, we have provided space for your respective signatures below. It will be appreciated if you would return one fully signed copy of this letter to each of the undersigned at your earliest convenience.

In the ensuing months there followed an exchange of correspondence and meetings between the officers of both CN and VIA and the officers of the UTU. After the expression of initial reservations, by letter dated May 27, 1986 the UTU gave notice to both companies that it was willing to negotiate the transfer of members of its CN bargaining unit into service at VIA Rail, on a “without prejudice” basis, stressing that it was not under an obligation to do so. Mr. Scarrow relates that one of the great concerns of the UTU at the time was the future viability of VIA Rail, and what would happen to its members who transferred from CN to VIA in the event that the passenger railway should, in his words, “go belly up”. To that end the representatives of the UTU sought assurances that its members transferring to VIA would have unrestricted flow-back rights to CN. The Union’s concerns are reflected in the minutes of a meeting held on March 20, 1986. The participants in that meeting included Mr. M. Delgreco for CN, Mr. R.J. Guiney for VIA, as well as Mr. R.A. Bennett and Mr. R.J. Proulx for the UTU. Commenting on the legislation which gave operating authority to VIA, Bill C-97, Mr. Proulx stated: “Concerning legislation. This is the slickest piece of legislation ever developed by a Minister of Transport. He has full power to determine the life of VIA. Such legislation puts fear in our membership to transfer. The future is unknown.”

At a further meeting held July 3 and 4, 1986 Mr. Bennett placed the UTU’s concerns squarely before Mr. Guiney and Mr. Delgreco in their capacity as representatives of VIA and CN respectively. Early in the meeting Mr. Bennett stated:

Why is CN so anxious to transfer employees? We want to make sure if our members have opportunity to transfer they are protected. It’s being said, “VIA won’t last”. We want to get all the guarantees we can. We’re prepared to start the process. Problem is how do we sign a commitment so that Company has opportunity to say, “We give you nothing, We’ll go to binding arbitration”. We don’t want other transfer agreements used against us before a third party. This is also applies to anything that may be signed with B.L.E.

During the course of that meeting Mr. Bennett reiterated his concerns about the long-term job security of UTU members transferring from CN to VIA. Specifically he wanted guarantees as to the ability of those employees to go back to CN. In an exchange critical to the issue before the Arbitrator Mr. Bennett expressed that concern to Mr. Delgreco who, on behalf of CN, confirmed that employees would be entitled to flow back in the event of a wholesale closing down of VIA. The minutes of the meeting record the following exchange:

R. B. (To M.D.) According to the news media CN’s not going to last and VIA’s not going to last. If this is so, then probably VIA will go first. Will you welcome us back with open arms?

M. D. Why not? Of course, the question is really when. This is probably the main item to be negotiated.

As Mr. Delgreco expressed later in the meeting, one of CN’s concerns was the duration of any flow-back provision. He acknowledged that employees would be given flow-back rights, but was uncertain as to how long such rights should be operable.

Against that background the Special Agreement of March 6, 1987 was finally negotiated, along with the appended terms of the Transfer Agreement. Under Item 3 of the Transfer Agreement for an initial transition period employees who transferred to VIA from CN were given the opportunity to return freely to service at CN at the change of timetable, until the fall of 1989. Following the transition period, which was apparently extended for a time, CN employees transferring to vacancies at VIA retained the permanent right to return to CN in the event they could not hold a regular assignment in road service at their home station at VIA. By the terms of a second agreement dated May 15, 1987 the same right was extended to those unable to hold positions in yard service or yardmaster assignments.

The evidence before the Arbitrator confirms that following the adoption of the Special Agreement, in or about April of 1987, a “road show” was organized by Mr. Delgreco to present the workings of the Special Agreement of March 6, 1987 and the Transfer Agreement to the local chairs of the UTU. It appears that Mr. Bennett, Mr. Guiney and Mr. Delgreco all participated in those meetings, using a script prepared by CN’s Labour Relations Department. In describing the workings of Item 5, where job reductions might occur at VIA, the text reads, in part, as follows:

ITEM 5 – REDUCTIONS AT VIA

Paragraph (A): This paragraph sets out an employee’s rights when there are reductions at VIA during the Reciprocal Rights Period. Essentially, an employee whose position is abolished or who is displaced and is unable to hold a regular assignment in Road Service at his/her home station at VIA, has the option of exercising his/her seniority on the seniority district at VIA or exercising his/her seniority at CN pursuant to the terms of the applicable collective agreement.

Evidence was adduced to demonstrate the workings of the Transfer Agreement over the years. In early 1990 VIA was compelled to implement substantial reductions in service as a result of budgetary restrictions imposed by the government of Canada. The resulting elimination of many road assignments caused concern to the UTU and to the BLE, which had its own transfer agreement dated June 4, 1987. In the result, the transition period in the Special Agreement of March 6, 1987 was extended to the change of timetable in the spring of 1990. In a letter dated March 13, 1990 the Assistant Vice-President, Labour Relations of CN and the Senior Vice-President, Human Resources and Administration of VIA Rail wrote jointly to the representatives of the UTU and BLE in part as follows:

As we understand it, the Brotherhood and the Union are now seeking an extension of the Transition Board on the basis of a concern over the possibility of future reductions at VIA Rail. In our opinion, such concerns are unwarranted in light of the provisions of Item 5 of the respective Memoranda of Agreement, which deal specifically with reductions at VIA Rail during the Reciprocal Rights Period. As you know, the Reciprocal Rights Period will continue until the date the last employee who held seniority on June 26, 1987 (UTU) and January 1, 1988 (BLE) leaves the service.

Therefore, although upon expiry of the Transition Period, CN employees who transferred to VIA Rail will no longer have the right to return to CN voluntarily at each change of timetable, they retain the right to return to CN in accordance with the provisions noted above, which, as mentioned, deal specifically with reductions at VIA Rail.

The ongoing concern of the UTU for the job security of its members in the face of the virtual halving of VIA’s passenger service in early 1990, and rampant rumours with respect to its possible privatization, prompted its then General Chairperson T.G. Hodges to request clarification from both VIA and CN as to the application of the Transfer Agreement in the event of a possible sale or privatization of VIA. Mr. Hodges’ letter, dated March 21, 1990 reads, in part, as follows:

This is further to previous correspondence in connection with the Transfer Agreement between Canadian National Railways, VIA Rail Canada Inc., and the United Transportation Union.

As you are aware, our membership has been expressing several concerns with respect to their entitlement under the VIA Transfer Agreement should VIA Rail, or a portion thereof, be either sold or privatized.

It is our understanding, based on the terms and conditions of the Transfer Agreement, that should VIA Rail be privatized, or a portion of VIA Rail be either sold or privatized, the employees covered by the Transfer Agreement would be entitled to return to Canadian National at such time.

We would appreciate your advice as to whether or not you are in concurrence with this position. If it is necessary to fully review this matter, prior to formal response, we would be available for a meeting on this subject, at your convenience.

Mr. Hodges quickly received a reply, signed jointly by Mr. Delgreco on behalf of CN and Mr. P. Thivierge on behalf of VIA Rail, dated April 5, 1990. They wrote, in part, as follows:

As you know, the tripartite Transfer Agreement provides certain CN employees with the opportunity to transfer to VIA Rail during the Reciprocal Rights Period outlined therein, which will continue until the date the last employee who held seniority on June 27, 1987, leaves the service. It also provides that an employee’s seniority at CN will be maintained while working at VIA Rail during that period and that such employee will retain the right to return to CN subject to certain conditions. More specifically, Item 5(a) of the agreement provides that an employee who in the exercise of seniority is unable to hold a regular assignment in road service at his/her home station at VIA Rail has the right to exercise his/her seniority at CN pursuant to the terms of the applicable collective agreement.

Simply stated, the whole purpose and intent of the Transfer Agreement was to establish terms and conditions to govern the inter-company transfer of employees between Canadian National Railways and VIA Rail Canada Inc.

Accordingly, this letter will confirm that an employee who in circumstances described above, i.e., the sale or privatization of VIA Rail, or portion thereof, is unable to hold a regular assignment in road service at his/her home station at VIA Rail has the right to return to CN in accordance with Item 5(a) of the Transfer Agreement. We trust the foregoing adequately addresses the Union’s concerns.

The consistent thrust of the evidence surrounding the negotiation and early implementation of the Transfer Agreement demonstrates the understanding of the authors of that document that in the event of any major change at VIA, including its possible closure or sale, conductors and assistant conductors unable to hold work within VIA by the exercise of their seniority would be entitled to flow back to CN. It should be appreciated that these arrangements, as generous as they appear, were facilitated by the fact that both VIA and CN were then Crown corporations in respect of whose dealings costs in relation to the Special Agreement of March 6, 1987 would be in the nature of transfer payments within the larger governmental purse. Nor can there be any doubt that from an economic standpoint the Transfer Agreement was mutually beneficial to both employers, avoiding what might otherwise be extraordinary costs in relation to material changes.

The workings of the Transfer Agreement are well illustrated by the implementation of a crew consist agreement involving VIA and the UTU. The Crew Consist Agreement, negotiated in 1991, involved the reduction of positions at VIA following upon the combining of the positions of flagman, brakeperson and baggageman into a consolidated position of assistant conductor. In that setting it was again confirmed by VIA, as reflected in a letter dated September 26, 1991, that any employees who should be unable to hold a road assignment at his or her home station would “regardless of the circumstances” be entitled to return to CN.

Mr. Scarrow also confirmed in his testimony that the largest single application of the flow-back provisions of the Transfer Agreement arose in 1990 as a result of the major reductions in VIA service mandated by PC 1989-1974 of the Government of Canada. By his estimate approximately 148 employees flowed back to CN at that time. Mr. Scarrow further points to the example of the closure of the Niagara Falls terminal in 1988. He explained that as a result of that initiative, undertaken pursuant to an article 79 material change notice, a number of employees flowed back to CN from VIA, apparently with maintenance of earnings protection. Mr. Scarrow points to other flow-backs when VIA closed its terminal at Jasper, when it closed its yards at Montreal and Toronto and when it reduced its crews as a result of an interest arbitration award of the Mackenzie Commission, effective June 13, 1995. Mr. Scarrow stresses that the closure of the Montreal and Toronto yards, coupled with the prior elimination of all other yards, amounted to the abolishing of a craft, the effect of which was to trigger the undisputed application of the Transfer Agreement for the benefit of the yard foremen and yard helpers whose positions were abolished.

The thrust of Mr. Scarrow’s evidence, which stands unchallenged by any contrary testimony, is that at the outset the UTU had little to gain from its members moving into the permanent service of VIA. Its representatives expressed grave concern for the future viability of the passenger railway and insisted, at virtually every step of the negotiations, on job security protections which would allow their members to return to CN in the event they should lose work opportunities in their home stations at VIA. Initially the UTU sought to have Item 5(a) phrased so as to be triggered where employees “lose their regular positions for any reason”, an extremely broad protection which Mr. Scarrow characterized as “Christmas shopping”. While that wasn’t achieved, apart from the wording of Item 5(a), it is clear from the minutes of the meetings which took place, as well as from the “road show” which followed the Special Agreement, Mr. Scarrow’s own recollection of events and from the early administration of the Transfer Agreement, that Item 5(a) was intended to protect UTU members in the event of the loss of gainful employment with VIA, specifically by allowing them in that circumstance to exercise their seniority to return to CN. The evidence of Mr. Scarrow is substantially corroborated by the evidence of Mr. Guiney, VIA’s principal spokesman in the negotiation of the Special Agreement, now retired. It is also generally consistent with the evidence of Mr. Delgreco, now retired from CN. Specifically, when asked whether the provisions of the Transfer Agreement would apply if, hypothetically, VIA had abolished all assistant conductor positions, Mr. Delgreco expressed his view that Item 5(a) would operate in that circumstance to allow the employees whose classification was abolished to return to employment with CN by the exercise of their seniority. He specifically acknowledged that, according to his understanding, Item 5(a) would not be restricted to apply only in circumstances of reduced train service, and that it could well go beyond that. According to the Arbitrator’s notes Mr. Delgreco said, in part: “If I’d been asked back then if VIA abolishing the assistant conductors’ positions four weeks after the Special Agreement would trigger the Transfer Agreement I would have said ‘yes’.”

HISTORY OF N.E.P.O.

The decision of VIA to abolish all conductor and assistant conductor positions first announced on March 7, 1997, is referred to as the “New Era Passenger Operation” or “NEPO”. Mr. Paul Côté, Vice-President, Customer Services of VIA, gave evidence with respect to the genesis of VIA’s decision. Between September of 1995 and June of 1998, the time relevant to the Corporation’s decision-making in respect of NEPO, Mr. Côté was Vice-President of Human Resources and Public Affairs, and primarily responsible for the development and advancement of NEPO.

Mr. Côté noted in his evidence that the Corporation had taken initiatives in 1991 to explore the possibility of operating passenger trains with a single locomotive engineer, rather than the two locomotive engineers traditionally utilized. The right to operate on that basis was confirmed at arbitration and sustained on judicial review, with the BLE’s attempt to appeal the judicial review of the issue to the Supreme Court of Canada ultimately declined in 1995. Mr. Côté also gave evidence that the position of VIA before the interest arbitration commission chaired by Mr. Justice Mackenzie in 1995 was to obtain further crew reductions in the UTU bargaining unit. He related that the Corporation succeeded before Mr. Justice Mackenzie in reducing some forty assistant conductor’s positions. He explained that as the Corporation then became pre-occupied with the implementation of the Mackenzie award in the period following June 14, 1995, it chose not to proceed with implementation of the reduction of one of the locomotive engineers in the cab.

Mr. Côté related that early in 1996 the Corporation’s president inquired as to the status of the one locomotive engineer in the cab initiative. Along with Mr. Gushue, Vice-President of Customer Services, Mr. Côté convened a committee of three individuals to consider the status of that option. The committee was comprised of Mr. Bannon Woods, Mr. Jean-Marc Lalonde and Mr. Marc Tessier. He recounted that at a meeting on February 6, 1996 the committee advised him and Mr. Gushue that they had thought of another alternative for crew reductions which might be of interest. They then elaborated the concept of merging the positions of conductor and assistant conductor with that of locomotive engineer. Mr. Côté related that he and Mr. Gushue then gave the three person committee the green light to flesh out their idea.

The next meeting on this issue occurred in August of 1996, according to Mr. Côté. He related that by that time the new initiative had become a higher priority for discussion than the one person in the cab initiative. Mr. Côté stated that the committee, along with Mr. Gushue, himself and the president of the Corporation met again on November 17, 1996. At that meeting it was decided to prepare a presentation which would recommend the merging of the running trades positions of locomotive engineer and conductor for the consideration of a management committee meeting to take place on January 21, 1997. The Corporation’s meeting notes of its management committee for January 21, 1997 reflect that the running trade initiative, then referred to at the “UTU initiative”, received the approval and support of the management committee. The notes also record that preliminary meetings with safety officials of Transport Canada had indicated that there would be no objections raised to the planned changes, and that the initiative should proceed by filing an application with the then Canada Labour Relations Board to allow the merging of the duties of conductor and locomotive engineer, with the re-assignment of some conductor responsibilities to customer service employees in on-board service.

The evidence confirms that shortly afterwards, on January 15 and 16, 1997, the Corporation made a documented presentation to Transport Canada and to the office of the Minister of Transport to explain its NEPO initiative. Soon thereafter, in February of 1997, the Corporation evolved a “Train Crewing Initiative – 1997 Implementation Plan”. The record confirms that the plan was tabled and accepted by the Corporation’s board of directors at its meeting on February 25, 1997. In the result, as reflected in the evidence of Mr. Côté and the documents supporting his testimony, the decision of the Corporation to proceed with the NEPO initiative was for all practical purposes taken in February of 1997. In March of 1997 the Corporation made its plan public and proceeded with its application to the Canada Labour Relations Board under Section 18 of the Canada Labour Code for an order consolidating the bargaining unit of locomotive engineers with the bargaining unit of conductors, assistant conductors and yardmasters. The Corporation simultaneously served a notice of material change on the affected unions with respect to the elimination of all conductor and assistant conductor positions on VIA passenger trains. As noted above, the Corporation’s initiative ultimately resulted in the certification of the BLE as bargaining agent for all running trades employees of the Corporation on October 31, 1997.

POSITIONS AND ARGUMENTS

– A –

BLE

With respect to the interpretation of the Special Agreement the first position advanced by counsel for the BLE is that the language of Item 5(a) of the Transfer Agreement is clear and unambiguous. He submits that in such a circumstance it is incumbent upon a board of arbitration to give the words of the flow-back provision their ordinary meaning, to be ascertained by the immediate context in which the words and phrases appear, and as they relate to the text of agreement as a whole. There is, counsel submits, in the instant case no need to resort to extrinsic evidence, as the words of Item 5(a) are clear and unambiguous. Counsel notes that the key words in Item 5(a) are “unable to hold a regular assignment in road service at VIA”. Those words, he argues, entirely describe the condition precedent to an employee being able to exercise his or her right, by the application of seniority, to return to employment at CN. That, counsel submits, includes any and all circumstances which might lead to the elimination of road assignments at VIA.

Counsel also points to the title of Item 5, “Reductions at VIA”, as supporting the Brotherhood’s position. Stressing that the ordinary meaning of the word reduction is “to decrease” or “to make smaller”, counsel argues that any action taken by VIA resulting in a decrease in regular road assignments must be viewed as triggering the application of the provision. He submits that it would clearly apply to a decrease in road assignments to the vanishing point, as a result of the elimination of all classifications within the former UTU bargaining unit.

With respect to the wording of the key phrase of Item 5(a), counsel for the BLE reminds the Arbitrator that it is beyond the jurisdiction of a board of arbitration to gratuitously read in or imply terms into a collective agreement when its words are themselves clear and unambiguous. He submits that the position argued by CN, as related below, would effectively amend the key phrase to read “unable to hold a regular assignment in road service at VIA at his/her home station, except when the reductions result from the elimination of classifications”. That, counsel submits, is an unduly narrow and plainly incorrect interpretation of what he characterizes as the plain words of Item 5(a). In the BLE’s submission if employees are unable to hold regular road assignment at their home stations at VIA, for any reason, they are entitled to exercise their seniority to return to work with CN.

With respect to the broader context of the agreement, counsel argues that the interpretation advanced by the BLE is still further supported. He notes that the very purpose of the Transfer Agreement is to allow for the return of protected employees during the reciprocal rights period, whenever the loss of positions due to reductions at VIA would result in employees being unable to hold their regular road assignments at VIA. He stresses that the protection was intended for all employees, and that it should not cease to operate because all, and not merely some, employees are negatively impacted by a particular reduction, including the abolishment of all conductor and assistant conductor positions. He submits that it is immaterial whether the reductions in question are the result of reductions in train service or, as in the instant case, the abolishment of classifications.

As an alternative position, counsel for the BLE submits that should the Arbitrator view the language of Item 5(a) to be ambiguous, the extrinsic evidence which would then be admissible is overwhelming to the effect that the parties themselves intended the fullest protection to employees in the event of the wholesale loss of all bargaining unit positions at VIA. Noting that there is clearly no language within Item 5(a) to sustain the argument that the provision should not operate in the case of the abolishment of classifications, counsel stresses the evidence of Mr. Delgreco, who conceded that there was no discussion as between CN and VIA to the effect that the Transfer Agreement should not apply to any particular form of crew consist reductions. In that regard he points to specific parts of Mr. Delgreco’s testimony where the former CN officer agreed that, for example, the abolishing of one of the locomotive engineer’s positions within the cab, or the abolishing of the classification of assistant conductor, would trigger the application of Item 5(a). That evidence, coupled with the evidence of negotiation discussions involving Mr. Bennett, Mr. Delgreco and Mr. Guiney are highlighted in the submission of counsel for the BLE as reflecting the original intention of the Transfer Agreement to provide an unqualified protection to VIA conductors and assistant conductors with the requisite seniority, in the form of the right to exercise their seniority to return to work at CN in the event that they are unable to hold work in road assignments at their home station with VIA.

On that basis the BLE seeks a declaration that the Transfer Agreement applies to the NEPO crewing initiative of VIA and that employees who elected to transfer back to CN are entitled to do so. The Brotherhood seeks an order from the Arbitrator that CN comply forthwith with article (g) of the Special Agreement and Item 5 of the Transfer Agreement to allow conductors and assistant conductors to exercise their seniority rights to return to CN. He further requests that I reserve jurisdiction to deal with all remaining outstanding issues, including possible rights to compensation, benefits and seniority.

– B –

The submissions of CN, organized under eight headings, are made without prejudice to its position, rejected by the Arbitrator in the preliminary award herein dated November 30, 1998, to the effect that the Special Agreement and Transfer Agreement are not in the nature of a collective agreement enforceable under the Canada Labour Code, that the CN–VIA–UTU Special Agreement and Transfer Agreement are not enforceable at the instance of the BLE and that the Arbitrator is without jurisdiction to entertain the dispute. The Arbitrator’s award rejecting those positions, and the decision of the Quebec Superior Court sustaining the award, are presently being appealed to the Quebec Court of Appeal.

– 1 –

The first position argued by counsel for CN is that the inter-company Transfer Agreement was negotiated in contemplation of the discrete scope and object of the parties’ understanding, namely the existence of the UTU craft. The Company submits that the agreement must be interpreted as though it relates exclusively to a single whole bargaining unit spanning both companies, a fact not changed by the substitution of the BLE as the new bargaining agent for the merged running trades bargaining unit at VIA. Counsel for the Company further submits that the original contemplation of the parties at the time of the negotiation of the Special Agreement and Transfer Agreement was that the same bargaining agent would represent conductors at both VIA and CN. This, it submits, reflects an understanding that the UTU’s interests within one company would be counterbalanced by its interest at the other. In the Company’s submission the workability of the agreement is predicated upon the same bargaining agent representing the employees within the conductor and assistant conductor craft at both VIA and CN, a situation which no longer obtained once the UTU was displaced as the bargaining agent for conductors and assistant conductors at VIA. Although not expressed in these terms, the Company’s position implicitly suggests that the existence of different bargaining agents for the same craft in the two companies could give rise a clash of interests not contemplated in the original operation of the Transfer Agreement.

– 2 –

Secondly, counsel for CN submits that there has been a fundamental breach of the Special Agreement by virtue of VIA’s initiative, which is tantamount to the unilateral termination of the reciprocal rights arrangement. CN submits that the cornerstone understanding of the Special Agreement was that there would, for the duration of the reciprocal rights period, always be the possibility of a continuous ebb and flow of employees back and forth between the two companies. CN submits that the unilateral abolishment of the entire conductor craft by VIA is tantamount to a repudiation of the fundamental bargain which underpins the Special Agreement and the Transfer Agreement. By the calculations of CN, the reciprocal rights period, which it characterizes as the lynch-pin of the Transfer Agreement, was contemplated to extend to the year 2024, the date Mr. Guiney estimated to represent the point at which the last employee in service at CN on the date of the original transfer would be due for normal retirement. Counsel submits that that period was viewed by all of the parties to the Transfer Agreement as representing the time during which CN conductors would have the opportunity to fill vacancies in the former UTU bargaining unit at VIA, that VIA employees in that unit would have the reciprocal right to exercise their seniority to UTU positions within CN and, in accordance with Item 8 of the Transfer Agreement, medically restricted employees in either company would be able to exercise their seniority to suitable positions at CN or VIA. In counsel’s submission the unilateral crewing initiative of VIA, NEPO, has violated that expectation. It has done so, not by eliminating the work of conductors and assistant conductors, but by transferring their continuing work to positions outside the scope of the Transfer Agreement. In counsel’s submission the effect of VIA’s actions has been to nullify the ability of CN employees to exercise their seniority to perform work within the conductor’s craft at VIA, including opportunities for medically restricted employees at CN to hold lighter duties at VIA under Item 8. These consequences are described by counsel for CN as amounting to a fundamental repudiation of the tri-party Transfer Agreement, a characterization of VIA’s actions which he notes is reflected in correspondence from BLE General Chairman Brad Wood to Mr. Bannon Woods of VIA dated September 29, 1998. Counsel also points to the comments of Mr. Scarrow, recorded in a meeting on March 27, 1997 between VIA and the UTU, wherein he asks Mr. Woods whether VIA’s initiative does not destroy the intent of the Transfer Agreement, which he characterizes as follows:

The Inter-Company Transfer Agreement between CN, VIA and the running trades provides for work opportunities for the majority of our members, forever and a day, how will this be affected?

He also notes the testimony of Mr. Côté that confirms that although similar numbers of employees have been affected by job abolishments by VIA in the past, the circumstances were different.

In the result, CN submits that the actions of VIA in abolishing the conductor’s craft are tantamount to a unilateral termination of the Special Agreement which, it submits, is contrary to the letter and spirit of Item (l) of the Special Agreement, a restatement of the Railway Passenger Services Adjustment Assistance Regulations whereby a Special Agreement cannot be amended, revised or otherwise changed without the agreement of the parties signatory to it and the consent of the Minister of Labour. CN submits that it was unlawful for VIA to take a unilateral step which effectively nullifies and terminates the reciprocal rights period defined within Item 4 of the Transfer Agreement. CN’s position is succinctly put at paragraph 168 of its written brief in the following terms:

CN is, under these circumstances raising a defense to VIA’s request for specific performance of a term [of] a reciprocal rights agreement where VIA, has, by its actions, eradicated the reciprocity of the agreement and indeed, thereby, brought about its premature termination. In that regard the Arbitrator is referred to Re Northern Electric Co. Ltd. and United National Automobile, Aerospace, Agricultural Implement Workers’ Union, Local 1355 (1972), 29 D.L.R. (3d) 300 (Ont. Div. Ct.) and Re TSCO of Canada Ltd. v. Chateauneuf [1995] R.J.Q. 637 (CA).

These authorities, counsel submits, stand for the proposition that VIA cannot seek the enforcement of the reciprocal right of its conductors and assistant conductors to return to service with CN when it has itself destroyed the counterbalancing reciprocal right of CN employees to assume work in the same craft at VIA. In other words, the wholesale abolishment of the craft has made the enforcement of reciprocal obligations impossible, and has thereby terminated the agreement itself by fundamental breach. To the extent that reciprocity, which CN characterizes as the “fundamental assumption” of the Transfer Agreement, has been rendered impossible, the agreement itself has effectively been repudiated and terminated by VIA’s unilateral action.

– 3 –

CN next argues that the exercise of seniority contemplated under the Transfer Agreement is predicated on the existence of active positions existing within both railways. Its counsel notes that Item 5(b) of the Transfer Agreement contemplates the recall to VIA of employees who have exercised their flow-back rights to CN. Failure to accept such recall would result in the forfeiture of VIA seniority. Similarly Items 6 and 7 deal with the seniority status of protected passenger trainmen and engine service brakemen, while Item 8, which deals with medically restricted employees, also ties in the concept of seniority. CN submits that the very notion of the exercising of seniority to, from and within VIA must be predicated on the continued existence of jobs and positions within both VIA and CN. In essence, CN submits that the initiative of VIA is tantamount to a unilateral destruction of the seniority rights of VIA and CN employees who have the benefit of the reciprocity. It submits that the understanding of the parties fundamental to the Transfer Agreement is that positions will continue in effect at both railways, the claiming of which will allow the exercise of employees’ seniority rights. The removal of all bargaining unit positions within VIA relating to the conductor’s craft effectively destroys the possibility of the exercise of seniority as contemplated, in a manner inconsistent with the fundamental purposes of the Special Agreement and the Transfer Agreement. In that regard counsel for CN points to the decisions of this Arbitrator in CN and IAMAW (SHP-286), an unreported award dated December 7, 1989 and Canadian Broadcasting Corp. and Communications, Energy and Paperworkers’ Union of Canada, (1996) CLAD No. 113 (M.G. Picher).

– 4 –

CN also submits that the title of Item 5 of the Transfer Agreement is significant for the interpretation of the meaning of Item 5(a) which concerns the right of conductors and assistant conductors to return to service at CN. The title of Item 5 is “Reductions at VIA”. Analogizing to prior awards in the railway industry which have interpreted the word “reduction” within the context of technological, operational or organizational change implemented by a railway (e.g. Re Canadian Pacific Ltd. and BRC, April 17, 1990, Canada, (MG Picher)), counsel for CN submits that the concept of the entire abolishment of a craft is beyond what is normally understood as a reduction. To the same effect he cites general jurisprudence in which arbitrators have drawn distinctions, particularly in grievances concerning layoffs and recall, between the reduction of a workforce and the permanent elimination of positions (e.g. Re Bethany Care Society and UNA, Locals 9 & 173, September 22, 1997 (Sims) Alta.).

In summary, CN points to the title of Item 5 as further reflecting its position that the operation of Item 5(a) is predicated on the notion of fluctuating workforces, with an ebb and flow of conductors moving between VIA and CN, and vice versa, all of which is preconditioned on the existence of conductor and assistant conductor positions in both railways. Counsel’s submission is that the provisions of Item 5(a) were predicated upon the concept of periodic reductions in the workforce at VIA, and were not negotiated in contemplation of the unilateral abolition of the entire craft of conductors. On that basis, he submits that Item 5(a) has no application to the NEPO initiative of VIA.

– 5 –

CN further submits that the abolition of the conductor classification would have been beyond the possible contemplation of the signatories to the original Special Agreement and Transfer Agreement, as in 1987 such an initiative would have been illegal. Counsel submits that if the initiative of VIA had taken place when the UTU was the bargaining agent representing conductors and assistant conductors, and the actions of VIA had been to effectively transfer into the hands of locomotive engineers, and on-board service personnel represented by the CAW, all of the work of conductors and assistant conductors, thereby eliminating the craft and destroying the bargaining unit, such an initiative would have been viewed as contrary to the protections of the Canada Labour Code as well as the terms of the UTU collective agreement. In support of that proposition counsel for CN refers the Arbitrator to the award in CROA 2169, where it was found that the attempt of VIA to re-assign an on-board services job of the then bargaining unit of the Canadian Brotherhood of Railway, Transport and General Workers (now the CAW) entirely into the hands of a member of management was in violation of the collective agreement. CN submits that the actions of VIA, confirmed by agreement with the BLE in the Crew Consist Adjustment Agreement, made after certification between VIA and the BLE, effectively frustrated the operation of virtually all of the provisions of the Special Agreement and Transfer Agreement which would have allowed CN employees to flow to work at VIA, including medically restricted employees under Item 8, and likewise prevented the recall of CN employees into service at VIA, as contemplated under Item 5.

– 6 –

Counsel for CN further submits that the extrinsic evidence adduced by the BLE should not be viewed as relevant to the interpretation of Item 5(a) of the Transfer Agreement. He submits that the concerns reflected in the evidence of Mr. Scarrow, dealing with Mr. Bennett’s comments raising the spectre of the possible bankruptcy or closure of VIA, are simply of no relevance and do not assist in understanding the intent of the agreement as relates to an entirely different order of facts, namely the unilateral decision of VIA to abolish the conductor’s craft. Counsel notes that there is no suggestion in the evidence that the NEPO initiative was in any way dictated or even influenced by the Government of Canada. Rather, it is in the nature of a decision taken independently and internally by VIA as a matter of its own management. Changes of that order, he submits, were not the kinds of issues and pre-occupations discussed by the UTU in the meetings preliminary to the negotiation of the Special Agreement in 1986 and 1987. Similarly, he argues that the letter of April 5, 1990 dealing with the UTU’s concerns about potential privatization is of no particular significance, as it merely describes a circumstance in which a subsequent purchaser might well be subject to the terms of the Special Agreement, by virtue of successorship obligations. In that context the letter is merely an assertion of the continuing impact of the Transfer Agreement. Counsel further asserts that the separate letter of Mr. Thivierge in response to the UTU’s General Chairman Mr. Hodges, dated September 2, 1991, which purports to guarantee the return to service in CN of any employee unable to hold a regular assignment at VIA “regardless of the circumstances” is a unilateral assertion of VIA, to which CN was not a party and by which it cannot be bound. In that regard counsel recalls that the initial proposal of Mr. Scarrow which would have allowed an employee to flow back to CN where he or she lost a regular position “for any reason” was not successful, and never found its way into the language of the Transfer Agreement.

– 7 –

Counsel for CN further argues that the deeming provisions of the Crew Consist Adjustment Agreement negotiated between VIA and the BLE must be viewed as null and void. Section 13 of the agreement provides, in part:

Should an employee fail to apply for any of the opportunities listed above, he shall be deemed to have applied to exercise his right to return to CN under the terms of the Transfer Agreement.

Counsel submits that there is no authority in two parties to the Special Agreement and Transfer Agreement to determine, without the agreement of CN, what does or does not constitute an exercise or deemed exercise of an employee’s seniority rights. To this he adds that the elections of employees to return to CN which might have been made under what he characterizes as the threat of the illegal deeming provision are themselves null and void. Counsel submits that this provision is, on its face, evidence of what he characterizes as the intent underlying VIA’s initiative, which was to force CN to bear the costs of the NEPO strategy, while giving preferential protection to the BLE’s locomotive engineers to the detriment of conductors and assistant conductors previously represented by the UTU.

– 8 –

The final argument of CN is that VIA’s initiative was in fact undertaken in bad faith, and must therefore be viewed as unenforceable as against CN. In this regard counsel asserts the provisions of articles 5, 7 and 1375 of the Quebec Civil Code, as adopted in 1994:

6. Every person is bound to exercise his civil rights in good faith.

7. No right may be exercised with the intent of injuring another or in an excessive and unreasonable manner which is contrary to the requirements of good faith.

1375. The parties shall conduct themselves in good faith both at the time the obligation is created and at the time it is performed or extinguished.

Noting that the Special Agreement and Transfer Agreement were executed in Montreal, counsel submits that the foregoing provisions of the Quebec Civil Code have application, and were violated by VIA’s initiative. Counsel submits that the foregoing provisions, which to some extent codify the decision of the Supreme Court of Canada in B.C.N. v Houle (1993) S.C.R. 122, mandate that it is unlawful for take steps in bad faith which have the consequence of effectively destroying contractual rights and obligations. Counsel analogizes the Code provisions to the arbitral jurisprudence which holds that management rights must be exercised in a manner that is not in bad faith, arbitrary or discriminatory.

In the instant case CN submits that VIA has exercised bad faith in singling out two parties to the Special Agreement, the UTU and CN, as those who must unfairly bear the consequences of its decision to abolish the conductor’s craft within VIA. It notes that in the initial period from February of 1996 to October 1997 VIA developed its initiative alone, and arguably did so with the cooperation, “witting or unwitting”, of the BLE. In a later period, from October of 1997 to July of 1998, CN asserts that VIA and the BLE consciously negotiated and implemented the Crew Consist Adjustment Agreement, in furtherance of the initiative undertaken in bad faith.

CN charges that over the entire period there was no attempt on the part of VIA to discuss its plans, or to attempt to review and negotiate with CN possible changes to the commercial agreements between the two parties which relate to the administration of the 1987 Special Agreement. VIA’s intention, as characterized by CN, was effectively “to evade the significant financial consequences of its plan”, and to visit them upon CN, which would be responsible for accepting into its service conductors and assistant conductors surplus to its own needs. Counsel for CN submits that there should have been a dialogue among all of the parties to the Special Agreement prior to VIA unilaterally taking the initiative that it did. He also questions the terms of the initial material change agreement negotiated with two of the three geographic areas of the BLE in May of 1997 whereby those segments of the BLE agreed in principle to what he characterizes as to “assume the duties of the conductors for a fee”. Noting that the BLE–VIA material change agreement, which never went into effect, was not copied to the UTU, CN asserts that the entire course of conduct is reflective of a failure of good faith on the part of VIA and, eventually, of the BLE as well. On the whole, counsel for CN characterizes VIA’s position and strategy as intended to “ram the initiative down the throats of CN and the UTU and … present the world with a “fait accompli” …”

On the basis of all of the above arguments CN submits that the BLE’s dispute must be dismissed. Alternatively, it maintains that the Arbitrator might recommend that the BLE and VIA renegotiate their Crew Consist Adjustment Agreement (an outcome now compelled by the order of the CIRB) and that CN and the UTU be made parties to any such negotiations if they are to be in any way impacted by them. Finally, in a further alternative, CN urges the Arbitrator to remind VIA of its contractual obligation to continue to pay the conductors in accordance with its agreement with the BLE pending the settlement of those negotiations.

In its reply submissions CN affirmed the various positions and arguments outlined above. In addition, in amplification of its position on the issue of the alleged bad faith exhibited by VIA in its failure to negotiate openly with CN and the UTU, and its alleged preferential dealing with the BLE, CN makes a somewhat different submission with respect to the impact of the Crew Consist Adjustment Agreement negotiated between VIA and their BLE on June 12, 1998, shortly before the implementation of the abolishment of the conductor and assistant conductor positions on all trains, effective July 1, 1998. CN submits that the BLE, then the exclusive bargaining agent for all running trades employees, including conductors, must be taken to have made an agreement on behalf of the conductors, effectively acceding to elimination of the conductors’ and assistant conductors’ positions, and the redistribution of the work of those jobs to locomotive engineers and on-board service employees represented by the CAW. In that circumstance, CN argues, the conductors effectively agreed to the abolishing of their positions. On that basis CN asserts that it is the conductors themselves, through their bargaining agent the BLE, who have agreed to forego their right to claim or hold conductors’ work within VIA. It therefore submits that having voluntarily relinquished the right to hold work at VIA, they can no longer claim that they are “unable to hold a regular assignment in road service” at their home station in the sense contemplated in Item 5(a) of the Transfer Agreement. In other words, CN maintains that the conductors cannot assert individual rights to return to CN on the basis that they cannot hold work at VIA when, by the exercise of their own collective rights, their bargaining agent agreed that very work out of existence.

In further support of its allegations of bad faith CN points to a number of meetings and discussions which occurred between VIA and representatives of the BLE during the period VIA was developing its NEPO initiative. It refers to a meeting which occurred on October 10, 1996 between Canadian Director of the BLE, Mr. Gilles Hallé and Mr. Paul Côté and Mr. Bannon Woods on behalf of VIA. At that meeting both parties were accompanied by their respective legal counsel. It is common ground that during that meeting the parties discussed the interpretation of rule 106 of the Canadian Rail Operating Rules, a regulatory provision which delineates the circumstances in which a locomotive engineer operates a train without the assistance of a conductor. Rule 106 reads, in part, as follows:

When a train is without a conductor, the locomotive engineer will perform the duties of the conductor.

Counsel for CN further points to a follow-up meeting at a restaurant in Montreal on October 23, 1996 attended by Mr. Côté, and Mr. Gushue of VIA Rail.

Counsel for CN submits that the accounts given with respect to theses meetings, namely that they were intended to deal with a crisis localized in Toronto where conductors were withholding their services, is highly questionable. Effectively CN asks the Arbitrator to draw the inference that the discussions at these meetings involved exploration of the ability to undermine the interests of the UTU and the conductors it represented, if only by a trial balloon to see to what extent the BLE would be amenable to working without conductors on VIA trains, albeit in discussion that might not have involved the full detail of the eventual NEPO initiative. Counsel for CN further suggests that the timing of these events, and in particular the approval of the NEPO initiative by VIA’s President, Mr. Terry Ivaney on November 4, 1996, is more than coincidental.

CN also points to certain references to the UTU and BLE in internal VIA documents which, it submits, support the view that VIA essentially conspired to rid itself of the UTU, and that it indirectly courted the complicity of the BLE in that effort. By way of example, it notes that the earliest iterations of VIA’s plan referred to NEPO as the “UTU initiative”. It also stresses that draft communication plans initially contemplated earlier notice of NEPO being given to the BLE, in advance of the UTU. VIA documents prepared in late February and early March reflect the then intention to give one day of advance notice to the BLE. It does not appear disputed that that suggestion, as well as an earlier suggestion of a three day prior notice to the BLE, were ultimately vetoed by the advice of Mr. Woods, and that in fact both the BLE and the UTU received notice of VIA’s NEPO initiative at the same time. Nevertheless, counsel for CN submits that these aspects of the evidence further suggest bad faith on the part of VIA, reflecting its intention to leave the UTU “out of the loop” while favouring the BLE. Counsel further suggests that the failure of VIA and the BLE to share with the UTU the draft material change agreement reached with two sections of the BLE following the material change notice of March 7, 1997 is further evidence of VIA’s plan to isolate the UTU and, explicitly or otherwise, to enlist the support of the BLE for NEPO.

– C –

VIA

Counsel for VIA submits that there is no evidence of bad faith or collusion on the part of VIA which would support the submissions of CN. With respect to the implementation of the crewing initiative, she notes that in light of the prior inability of VIA and the BLE to agree on its implementation, VIA gave notice to the BLE on April 8, 1998 of its intention to unilaterally implement the initiative on April 16, 1998. That caused the BLE to move before the Canada Labour Relations Board with charges of unfair labour practices against VIA, alleging a threatened illegal lockout during the freeze period. It is only after the CLRB ordered VIA not to unilaterally implement its crewing initiative, in a decision dated April 23, 1998, that VIA and the BLE set about to negotiate the terms of the Crew Consist Adjustment Agreement, finalized on June 12, 1998. Far from demonstrating complicity, counsel submits that these events clearly reflect an arms-length, if not a deeply adversarial, relationship between VIA and the BLE on the issue of the implementation of NEPO after the certification of the BLE as bargaining agent for all running trades employees.

In VIA’s reply submission its counsel provides a terse response to the combined allegations of fundamental breach and bad faith advanced by CN. Part of its submission, attached to a letter to the Arbitrator dated October 12, 1999, reads as follows:

15. The theories of reciprocity and conditional obligations put forward by CN in paragraphs 36 to 40 ignore the reality of the Transfer Agreement when it was negotiated by all the parties then involved: VIA wanted to hire its own employees and CN did not want to keep those employees previously assigned to passenger service; the UTU reluctantly agreed to let those employees transfer to VIA with full seniority provided they kept their seniority at CN and provided they could flow back to CN should they become unable to hold a regular road assignment at VIA.

16. It is therefore obvious that this agreement has nothing to do with reciprocity and conditional obligations. It is rather the case of two employers satisfying the demands of one union in order to achieve their own goals: VIA to have its own work force and CN to unload its passenger service employees. And this is why the same two employers, but without the involvement of the union, signed a commercial agreement at approximately the same time in order to determine the compensation payable to one party by the other, according to circumstances applicable under the Transfer Agreement. There is no reciprocity involved in such an arrangement: different circumstances give rise to different rights to be exercised by the employees concerned and once these rights are exercised, the compensation payable by CN or VIA, as the case may be, is determined by this commercial agreement to which the UTU is not a party.

17. In this light, the contractual good faith theory of CN does not apply because the Transfer Agreement does not provide for reciprocity nor for conditional obligations. Depending on the nature of the rights exercised by employees in accordance with the Transfer Agreement, a consideration must be paid by CN to VIA or by VIA to CN and that consideration is the object of the commercial agreement between VIA and CN.

Counsel for VIA submits that if any bad faith has been displayed, it is CN’s bad faith in demanding more money, by attempting to predicate the application of the Transfer Agreement on an amendment of the separate and private commercial agreement between CN and VIA which governs compensation payable between the companies when employees flow back. Stressing that this Arbitrator has no jurisdiction in respect of those commercial agreements, counsel for VIA emphasizes the view that the Transfer Agreement is unconditional, and its operation cannot be held up by imposing additional conditions attaching to commercial arrangements between the two railways, a matter whose merits would be subject to adjudication in another forum. Counsel maintains that it is CN’s obligation to respect the transfer rights of the conductors and assistant conductors unable to hold work at their home VIA location, and that any commercial dispute between VIA and CN concerning compensation attaching to those transfers can have no bearing on the flow-back rights of the employees concerned.

With respect to the interpretation of the Special Agreement and the Transfer Agreement of March 6, 1987, counsel for VIA stresses, as confirmed in the evidence of Mr. Delgreco, that when the Special Agreement was initially negotiated CN was primarily responsible for drafting the language of the agreement. In that regard she invokes the contra proferentem rule which holds that the party which drafts the language of an agreement should not receive the benefit of the doubt as to any uncertain meaning or ambiguity in its terms. (Consolidated Bathurst Exports Limited v. Mutual Boiler and Machinery Company [1980] 1 S.C.R. 888 at pp. 899-900)

The fundamental position of VIA is that the language of the Transfer Agreement is clear and unambiguous, as argued by the BLE. In the event that the language in question should be viewed as ambiguous, it stresses the history of the negotiation of the terms of the Transfer Agreement, and in particular the initial position of CN to the effect that the Transfer Agreement would apply to a notice under article J of the Special Agreement. In fact the final language of Item 5 is more broadly expressed, and reflects the evidence of Mr. Delgreco that the parties understood that the Item would apply not only to a reduction in service, but also to reductions in train crew size, the elimination of home terminals, or the abolishment of a classification.

Very simply, VIA asserts that on the face of the Transfer Agreement there are no conditions or restrictions on the right of employees to exercise their seniority to transfer back to service within CN, save that they be unable to hold work at their home VIA station. Nothing within the language of the Agreement makes an exception for the abolishing of an entire classification of employee or the transfer of the work of a craft outside the bargaining unit. Moreover, as reflected in the extrinsic evidence, there is no suggestion that the parties contemplated any such limitations at the time the Special Agreement and Transfer Agreement were negotiated and executed.

During the course of the hearing VIA registered a number of objections to the relevance and admissibility of evidence which CN sought to adduce. It submits that the Arbitrator should not receive in evidence the record of the section 18 proceedings before the CLRB, the internal decision making process followed at VIA in respect of NEPO, the steps taken to implement that initiative, the content of meetings within VIA, or between VIA and other parties such as Transport Canada, or communications with the BLE, including negotiations of the Crew Consist Adjustment Agreement. VIA’s position has consistently been that none of these areas of evidence have any bearing on the meaning and application of the Transfer Agreement as it was agreed upon on March 6, 1987. The Arbitrator reserved on the objections of VIA throughout the proceedings, allowing CN the broadest latitude to adduce evidence which its counsel submitted would be essential to establishing a course of conduct tantamount to bad faith inconsistent with the application of the Transfer Agreement, the effect of which would be to vitiate the right of individual employees to return to service at CN.

In sum, the position of VIA is that there is no evidence establishing bad faith or collusion on the part of VIA Rail which would sustain the position of CN, that its arguments with respect to the unilateral termination of the reciprocal rights period, and the implicit suggestion that VIA must be obligated to maintain the status quo in running trades employees and classifications for a period of thirty years, is legally untenable. Its counsel submits that the clear and unequivocal terms of the Transfer Agreement must apply in the circumstances disclosed, and that in the event that the Arbitrator should find any ambiguity within the terms of Item 5(a), such extrinsic evidence as exists through the testimony of Mr. Scarrow, Mr. Guiney and Mr. Delgreco amply supports the position of the BLE and VIA with respect to the right of the employees concerned to exercise their seniority to return to work at CN.

–D–

UTU

There can be little doubt of the interest of the UTU in these proceedings. While it has, by the certification of the BLE, lost its right to represent the conductors and assistant conductors as well as the yardmasters employed by VIA Rail, it has a continuing interest in the impact of the application of the Transfer Agreement, to the extent that any employees who return to service with CN from VIA Rail will re-enter the bargaining unit of the UTU at CN, possibly impacting the rights of other CN employees represented by the Union. Not surprisingly, the UTU is less than pleased with the initiative taken by VIA, and the manner in which VIA went about planning and implementing the crewing changes which have led to this dispute. Apart from the UTU’s obvious reluctance at the time the initiative was first announced to engage in negotiations relating to a material change which would result in the entire demise of the craft it represented, its representations clearly reflect displeasure at VIA’s failure, at the outset of its planning in relation to the NEPO initiative, to make any attempt to involve the UTU or inform it of the course of action that was being considered.

Notwithstanding the above, the UTU affirms its position that the conductors and assistant conductors who are the subject of this dispute do have the right to exercise their seniority under the Transfer Agreement to return to work at CN. On the issue of the interpretation of the Transfer Agreement it supports, without qualification, the submissions of the BLE regarding the clear and unambiguous meaning of Item 5(a) of the Transfer Agreement. It further stresses the credible and unrebutted testimony of Mr. Scarrow concerning the genesis of the Transfer Agreement and the concerns and positions advanced by the UTU during its negotiation, precisely to ensure that its members would be able to return to work at CN if they should eventually be unable to hold work at their VIA home station, regardless of the reason. Its counsel stresses that the rights of the employees protected under the Transfer Agreement should not be defeated by reason of what it characterizes as “a very acrimonious, complex and expensive dispute between the two employers” relating to their own private commercial agreements tied separately to the administration of the Transfer Agreement.

Counsel for the UTU notes a number of issues, not directly related to the merits of the instant dispute, which are still of concern to the UTU. Among those is its view that should VIA conductors be affirmed in their right to return to work at CN, VIA should nevertheless be responsible for the cost of adverse effects suffered by UTU members employed within CN. A second concern relates to the right of conductors and assistant conductors at VIA to apply for opportunities for training as locomotive engineers. Counsel notes that a grievance has been filed before the Canadian Railway Office of Arbitration (CROA) by the BLE against VIA, which is presently outstanding, with respect to that issue. He suggest that the prior resolution of that grievance might have the effect of clarifying the rights of the individuals in question and result in a better picture of the actual number of employees who might eventually return to work at CN, a matter of obvious interest to the UTU. He also notes that there are a number of other unknowns which may weigh in the mix as the knot of this dispute becomes unravelled, including issues relating to VIA conductors and assistant conductors who may be physically restricted from working in freight service or for whom return to such physically onerous assignments might be particularly difficult after as much as twenty years in the lighter duties of passenger service.

In his submission on remedy, counsel for the UTU argues that it would be appropriate for the Arbitrator to delay resolution of the instant dispute pending the conclusion of the BLE’s grievance filed with CROA (CROA 3050) with respect to the claims by employees relating to the denial of opportunities for training as locomotive engineers. He submits that the success of that grievance could reduce the number of employees who might otherwise be compelled to exercise their seniority to return to CN, a factor which will have a ripple effect on UTU members within its CN bargaining unit. Counsel further raises a number of unknowns, including the degree to which employees returning to CN will require relocation, training, rules instruction, benefits, clothing, orientation, and subsidies such as for boots and clothing. Counsel urges that any award in this dispute not be implemented until VIA and/or CN have made appropriate material change notices or agreements to accommodate the myriad of adverse effects which may flow. He further requests that the Arbitrator direct that the conductors remain under full wage protection with VIA until such time as all issues are fully resolved.

DECISION

I turn to consider the merits of this dispute. As noted above, three of the parties before me submit that the Transfer Agreement is clear and unequivocal, and that by the terms of Item 5(a) the conductors and assistant conductors whose positions were abolished at VIA, and who are therefore unable to hold any work at their home locations, are entitled to exercise their seniority to return to employment with CN. Of all of the parties (VIA–BLE–CN) and former parties (UTU) to the Special Agreement and Transfer Agreement, only CN asserts that the employees affected by the job abolishments at VIA cannot exercise their seniority to return to their former positions at CN.

At the outset the Arbitrator has no difficulty understanding CN’s fundamental concern with the action taken by VIA and its ultimate impact on CN’s own operations. A number of things have changed since the execution of the Transfer Agreement in March of 1987. Significantly, CN has become a publicly held private corporation, and is no longer a Crown corporation under the control and financing of the Government of Canada. Costs which it might incur in the event of a massive flow-back of conductors to CN from VIA are no longer mere transfer payments from one part of the public purse to another. They could impact in a very real sense on the productivity and profitability of CN’s operations.

Another important change since 1987 gives further substance to the concerns which CN must naturally feel. Since the negotiation of the Transfer Agreement CN, like other railways, has moved to conductor-only operations, largely eliminating brakepersons or assistant conductors in freight operations. Its initiative in that regard has resulted in fewer work opportunities for employees within the UTU bargaining unit at CN, in addition to the added cost of certain job security protections negotiated as part of its conductor-only agreement with the UTU, including the wage protection of furlough boards in certain regions of CN’s operations. The prospect of deep concern within CN caused by absorbing a large number of employees into the UTU bargaining unit, with the possible added burden in respect of job security and furlough board obligations which did not exist at the time the original Transfer Agreement was negotiated, is readily understandable. Against that background the Arbitrator can appreciate the reaction expressed by CN at the lack of prior notice and consultation by VIA at the stages of the initial conception and planning of the NEPO initiative. While the matter may now be academic, it is arguable that sensitive consultation at that stage might have allowed for a degree of mutual planning in both railways for measures to cushion the blow to CN of VIA’s initiative, whether by phasing, with reliance on attrition, or otherwise.

That said, however, the Arbitrator is compelled to conclude as a matter of interpretation that there is no contractual obligation of consultation or prior notice of critical internal workforce decisions binding either of the two railways signatory to the Transfer Agreement. There is nothing in the Special Agreement or Transfer Agreement which would suggest, for example, that CN would have been under an obligation to engage in prior consultation with VIA before the implementation of its own conductor-only initiative, even though it may have reduced the work opportunities and earnings potential of VIA employees who might in the future flow back to CN. Moreover, it should be stressed that at the time of the execution of the Transfer Agreement in March of 1987 all of the parties involved were familiar with the concept of crew consist reductions, and their possible impact. From earlier agreements relating to the reduction of non-essential brakepersons through the crew consist reductions in the interest arbitration award of Commissioner Mackenzie, the issue of train crews and their ongoing reduction in the face of technological and operational changes has been an ongoing reality within the industry for many years, including years pre-dating the 1987 Transfer Agreement. If the parties signatory to the Special Agreement and Transfer Agreement of March 6, 1987 had intended that substantial adjustments in crew consists would not trigger the transfer rights of employees protected under those agreements, they were well positioned to say so in clear and unequivocal terms in the language of their agreement. They obviously did not.

More significantly, as the evidence before the Arbitrator amply confirms, during the reciprocal rights period there were a number of job abolishments at VIA, including the abolishment of entire classifications, which did trigger the operation of the Transfer Agreement, apparently without objection from CN. Examples cited in the testimony of Mr. Scarrow and Mr. Côté include the closure of the Montreal and Toronto yards of VIA following a notice of November 15, 1996, effectively abolishing all yard foreman and yard helper assignments, as well as the merger of the function of flagman, brakeman, and baggageman into the classification of assistant conductor, resulting in the elimination of UTU positions within VIA. The latter adjustment was implemented pursuant to a material change notice in October of 1989. In that circumstance VIA and the UTU negotiated a material change agreement providing options such as early retirement opportunities, bridging opportunities, lay off benefits and relocation benefits. Additionally, however, employees with rights under the Transfer Agreement of March 6, 1987 were allowed to exercise their seniority to return to CN, as a number in fact did.

The Arbitrator has substantial difficulty with the submissions made by CN in support of its argument that the CN employees who are the subject of this dispute, many of whom have seniority dating back twenty years, are without any protection or right to invoke the Transfer Agreement following the abolishing of their positions at VIA Rail effective July 1, 1998. The first submission of CN is to the effect that the Special Agreement and Transfer Agreement are predicated upon the UTU remaining as bargaining agent for conductors and assistant conductors in both CN and VIA. It submits that the possible representation of employees within the same craft at the two railways by separate unions is in some way inconsistent with the understanding and expectations of the parties at the time the agreement was negotiated in March of 1987.

The Arbitrator has no difficulty with the assertion of CN that the original UTU–CN–VIA Special Agreement and Transfer Agreement for conductors is not to be confused or melded with the separate BLE–CN–VIA Special Agreement and Transfer Agreement of June 1987 for locomotive engineers. I cannot accept, however, that a condition precedent to the operation of the UTU–CN–VIA Special Agreement and Transfer Agreement is, as counsel for CN put it “…that the UTU’s interests at one company would always be counterbalanced by its interests at the other company.” To be sure, the representational rights held by the UTU within both railways at the time the Transfer Agreement was negotiated facilitated the ability of the parties to make that arrangement. The parties must, however, be understood to have negotiated the Special Agreement and Transfer Agreement, which I have found to contain collective agreement rights and obligations enforceable under the Canada Labour Code, in the full awareness that bargaining rights could eventually transfer from one union to another, and that such rights could continue to be enforced and applied through the normal rules of successorship.

CN next argues that there has been a fundamental breach of the reciprocal rights agreement contained within the Special Agreement and Transfer Agreement by the unilateral termination of the conductor’s craft within VIA. As elaborated above, it submits that article G of the Special Agreement and the terms of the Transfer Agreement contemplate an ongoing ebb and flow of conductors and assistant conductors moving in both directions, between VIA and CN. It cites, for example, the operation of Item 8 of the Transfer Agreement, whereby medically restricted employees unable to hold work either at CN or VIA are afforded an opportunity to exercise their seniority to the other company to find a suitable assignment. CN submits that VIA’s actions have unilaterally foreclosed that possibility by effectively emptying the former UTU bargaining unit at VIA of all of its positions. It argues that VIA has, in that sense, unilaterally terminated the Transfer Agreement in advance of the full term of the reciprocal rights period contemplated within it.

I cannot agree. Firstly it should be stressed that neither the BLE nor the UTU, the unions representing the employees in both railways who would be most directly affected, made any such submission. Even accepting that CN has standing to assert the position it does, I can see no substantial basis upon which its argument can be sustained. Implicit in CN’s submission is the suggestion that both VIA and CN undertook, for the entire duration of the reciprocal rights period, to continue to employ conductors and assistant conductors, and to maintain positions within those crafts to which employees in both railways could exercise rights to flow back and forth, in accordance with the conditions specified within the Transfer Agreement. Such a conception of the Transfer Agreement fails utterly to understand its fundamental purpose, and the obvious reason for the duration of the reciprocal rights period. The fundamental raison d’être of the Transfer Agreement is the decision of VIA, taken in 1986, to be the employer of its own running trades employees. The first and most fundamental purpose of the agreement was to allow the CN employees who then operated VIA trains to transfer into the employment of VIA as its own employees while responding to the job security concerns then expressed by the UTU’s officers. The Transfer Agreement and its reciprocal rights period are extraordinary contractual instruments fashioned primarily to protect the rights of employees of a certain seniority to retain and accrue their relative seniority at CN and to exercise that seniority to return to work at CN in the event of their eventual inability to hold work at VIA. It is against that reality that all of the provisions of the Transfer Agreement are to be construed.

The exercise of the rights in question is obviously subject to conductor and assistant conductor positions being available for bidding on the basis of an employee’s seniority, in either railway. The Arbitrator knows of no compelling basis upon which, for example, an assistant conductor at VIA might have grieved against the abolishment of brakepersons’ positions within CN, upon the negotiation of conductor-only operations within that road, as an alleged diminishing of the employee’s rights under the Transfer Agreement. In that circumstance CN could reply, quite properly, that all that the Transfer Agreement does is to allow employees to exercise their seniority to claim jobs in either company by the exercise of their seniority, to the extent that those jobs exist. There is clearly no implied obligation on the part of either railway signatory to the Transfer Agreement to maintain particular jobs or classifications for any period of time. It is difficult to believe that CN, which has itself initiated rounds of crew reductions, would here intended otherwise.

No right of management is arguably more fundamental than the ability to create and abolish work assignments and classifications, subject only to the limitations of the law, including the terms of a collective agreement. A board of arbitration must require clear and unequivocal evidence to conclude that an employer has, by collective agreement language, undertaken to maintain certain jobs or job classifications in perpetuity or for any given period of time. There is nothing in the language, nor in overall scheme, of the Special Agreement and Transfer Agreement of March 6, 1987 to establish that either CN or VIA intended to fetter its discretion with respect to so fundamental a management right. Taken as a whole, what the agreements represent is an understanding whereby CN employees are given the opportunity to move into the service of VIA Rail while retaining their status as CN employees for the purpose of returning to CN should there be a lack of work for them within the passenger railway. Corollary provisions such as the obligation to accept recall to VIA, or the ability of CN employees to bid into lighter duty positions as conductors and assistant conductors at VIA, do not alter the fundamental nature of the bargain struck. At the root of the Special Agreement is an implicit recognition that employees can flow back and forth between the two companies only to the extent that positions which they can claim by their qualifications and seniority are available.

For the foregoing reasons the Arbitrator cannot sustain the argument of CN to the effect that VIA’s NEPO initiative constitutes a “fundamental breach” or an improper “unilateral termination of the reciprocal rights agreement”. The agreement continues in effect, and would apply should VIA, for whatever reason, decide to again employ conductors or assistant conductors, before the expiry of the reciprocal rights period.

Counsel for CN next maintains that the transfer agreement only operates to the extent that active conductor and assistant conductor positions continue to exist within both railways. In this part of its argument CN maintains that VIA’s initiative is tantamount to the destruction of seniority rights, to the extent that it renders impossible of the operation of the reciprocal movement back and forth of employees between the two railways, as well as such factors as recall rights and, for example, the ability of CN employees with medical disabilities to bid on lighter duty positions at VIA, in accordance with Item 8.

In many respects the argument so phrased is a restatement of the fundamental breach submission dealt with immediately above. For the reasons touched upon above, I am satisfied that this argument can be no more successful. It is clear to the Arbitrator from the language and scheme of the Transfer Agreement that both railways maintained their fundamental management right to not only reduce positions in any classification, but in fact to abolish classifications within their running trades operations, as both railways have effectively done. Moreover, as an alternative base of analysis, if Item 5(a) of the Transfer Agreement is to be viewed as ambiguous in its terms, the extrinsic evidence adduced before me is entirely contrary to the thesis here advanced by CN. The testimony of Mr. Scarrow and Mr. Delgreco is categorical in that regard. One of the chief concerns of the UTU at the time of VIA’s decision to employ its own running trades employees was clear: what should happen if VIA should fail or be terminated as an operating enterprise? The UTU demanded assurances that its members would be protected in the event that there might no longer be any jobs whatsoever for its members at VIA. When that very question was squarely put to Mr. Delgreco by Mr. Bennett, as the minutes of the meeting reflect, there was no hesitation on the part of Mr. Delgreco, then CN’s principal negotiator, to the effect that the employees would then be “welcomed back”. The only issue outstanding in CN’s mind at the time, as expressed by Mr. Delgreco, a railroader of the highest reputation and integrity, was the length of time that right should endure. Subsequently that period of time became defined as the reciprocal rights period.

It is true, of course, that there is nothing in the record to suggest that the parties discussed or contemplated what would occur in the event that VIA should abolish the entire conductor’s craft. That is neither here nor there, however, for understanding the fundamental bargain between the parties. One element of the bargain, as reflected in the negotiating history, is clearly that the Transfer Agreement would not cease to operate or be unavailable to VIA conductors and assistant conductors in the event that VIA would no longer have any positions within their classifications, as would plainly occur should VIA cease to exist.

In the result, whether the issue is approached from the standpoint of the interpretation of the terms of the Transfer Agreement, which in my view cannot fairly be construed as imposing upon either railway an obligation to maintain active positions in any given classification and is not predicated on any status quo in that regard, or through the prism of the extrinsic evidence surrounding the negotiating of the Transfer Agreement, it is clear that the parties did not intend as a pre-condition to the operation of the Transfer Agreement that conductor and assistant conductor positions must be maintained within both railways. The material and evidence before me is entirely to the contrary.

Nor am I persuaded by the submission of CN based on the title “Reductions at VIA” which is attached to Item 5 of the Transfer Agreement. This argument is almost entirely semantic, suggesting as it does that “reduction” means something less that complete abolishment. It is equally arguable, however, that the concept of a reduction must logically be taken to include the notion of a reduction to zero. There is little to be gained, I think, in self-serving assertions founded on a single word within a title attached to a paragraph of the Transfer Agreement, particularly when that word can have more than one meaning. The elimination of any conductor or assistant conductor position, or the elimination of all of them, can fairly be characterised as a reduction of such positions within VIA’s operations. It would in my view be a questionable approach to interpretation to seize upon a possible meaning of the title to Item 5 to interpret the substantive content of Item 5(a), which is categorical in its language. That paragraph is not phrased in terms of employees in the plural, nor does it deal with general concepts of reduction and job abolishments. Rather, it is expressed in the more direct terms of the rights of an individual employee, and concerns the circumstance in which he or she “… is unable to hold a regular assignment in road service at VIA at his/her home station”. The substantive rights contained within Item 5(a) are not made conditional upon the size and scale of reduction, or indeed the cause or management motive which results in the individual employee being unable to hold work at VIA. In the Arbitrator’s view, to give effect to CN’s argument in this regard would be perilously close to giving greater substance to a title, assuming one accepts CN’s questionable definition of “reductions”, to the detriment of the substantive content of the provisions of Item 5(a) Itself. To give undue, and in my view incorrect, importance to the title in this way would amount to the tail wagging the dog.

Finally, from a purposive point of view, this aspect of CN’s argument is highly questionable. If, as it maintains, the use of the word “reductions” in the title to Item 5 of the Transfer Agreement connotes an understanding that the Transfer Agreement continues to operate only so long as there are active conductor and assistant conductor positions maintained in VIA, what would prevent VIA from reducing conductor positions just short of the vanishing point, for the sole purpose of keeping the agreement alive? If, for example, VIA determined that it could dispense with the services of conductors and assistant conductors in all trains except its transcontinental service, and that initiative would, for the sake of argument eliminate 80%, or perhaps 90% and the conductor and assistant conductor assignments, would the Transfer Agreement then be operative in accordance with CN’s interpretation? Such a scenario would have almost all of the same adverse impacts as the entire abolishment of the conductor and assistant conductor craft within VIA. There would be a large number of employees who could exercise their seniority rights to return to CN, recall rights to VIA would be substantially less significant, the bidding opportunities of CN employees into VIA, including the opportunities of disabled employees under Item 8, would be reduced to the point of near insignificance. And yet the all-important condition of conductors’ and assistant conductors’ positions being maintained actively within both railways would be maintained.

This line of analysis raises the obvious question of what would be the critical number beyond which VIA could not go in supposed violation of what CN maintains is the necessary condition of active employment of conductors and assistant conductors in both railways, for the operation of the Transfer Agreement. Would reduction to a 25% threshold be acceptable, or a 5% threshold, or a 1% threshold? To ask these questions is to realize that the Special Agreement of March 6, 1987, and the Transfer Agreement, contain no language, nor implicit terms, to support the position of CN that the operation of the Transfer Agreement must necessarily depend upon the continued presence, in any proportion, of the trade of conductor and assistant conductor in either railway. If the parties to the Special Agreement had intended any such limitation, seasoned as they are in the ways of collective bargaining, they would no doubt have made express provision within the language of their agreement to that effect. Needless to say a board of arbitration should exercise great care before finding that the very existence of a complex and critically important agreement is entirely negated by the operation of condition which is not found within its terms, and which is at best an implied term unsupported by any objective evidence. I am not prepared to do so in the case at hand.

For all of the foregoing reasons I cannot accept the submission of CN with respect to the effect of the title “Reductions at VIA” in the heading of Item 5 in the Transfer Agreement. Very simply, in my view, absent any contractual language to the contrary, reductions must include reductions to the point of complete abolishment.

Does the Transfer Agreement bear the meaning which CN advances because, as its counsel maintains, the NEPO initiative would have been “illegal” if undertaken in 1987? At the core of this argument is the principle that an employer cannot undermine a union’s bargaining unit by purporting to assign the core duties of the employees within it to others, be they members of management or members of another bargaining unit. In this regard CN cites the example of CROA 2169, where VIA was prevented in its attempt to re-assign on board services work into the hands of newly established managerial position.

With respect, the Arbitrator is bound to deal with the dispute at hand, and not with hypothetical disputes which may or may not have arisen in the past. Could the UTU have successfully grieved against the abolishment of the conductor’s and assistant conductor’s crafts, and the redistribution of their work to members of the BLE and the CAW, if that had been the nature of VIA’s initiative? Perhaps. Significantly, however, that is not what transpired. VIA determined not to take the route of abolishing the conductors’ work to give it to other crafts in a way which could be interpreted as undermining the bargaining rights of the UTU. Rather, it proceeded to make an application under section 18 of the Canada Labour Code, as was its right, for a merger of the running trades bargaining units into one, to be represented by either the BLE or the UTU, depending upon the outcome of a representational vote. It is fundamental to the scheme of the Canada Labour Code that employers are entitled to seek such amendments of their collective bargaining structures as are appropriate, having regard to well elaborated policies governing the configuration of bargaining units, including such concepts as the community of interest among employees and the overall viability of bargaining units. That is the course VIA chose to follow, and the Arbitrator can see no value, for the purposes of interpreting Item 5(a) of the Transfer Agreement, in speculating on what might or might not have been permissible had VIA chosen another route. It must be stressed that whatever characterization CN may wish to bring, VIA went before the then Canada Labour Relations Board with a proposal to abolish all running trades positions, including the position of locomotive engineer, as part of its crew consist reorganization plan. Its initiative received the assent of the Board, and in that circumstance there is little utility in musing upon the possible “illegality” of a road not taken. To paraphrase from Frost, the choice made by VIA has made all the difference.

Nor, it may be added, has the more recent decision of the CIRB found that it was unlawful for the BLE, as the successful single bargaining agent for all running trades employees, to acknowledge the abolishment of the conductor and assistant conductor positions as part of the Crew Consist Adjustment Agreement of June 12, 1998 – an agreement which I hasten to stress is not a document under which this arbitration is constituted or in respect of whose terms I have any jurisdiction. In summary, in my view the more pertinent question would be whether VIA could properly, shortly after the execution of the Special Agreement of March 6, 1987, have made the decision which it recently made to merge its running trades into a single bargaining unit, to redistribute the responsibilities of former conductors and assistant conductors to other employees and to implement the whole through a section 18 application before the then Canada Labour Relations Board. It my view it could properly have done so, and could not have been met with any allegations of illegality at that time. More fundamentally, by taking the route which it has, VIA has avoided any possible taint of illegality which might have arisen had it chosen to simply re-assign the core functions of conductors and assistant conductors into the hands of employees of other bargaining units without the imprimatur of the Canada Labour Relations Board. Plainly, nothing in the language of the Transfer Agreement or the Special Agreement can be taken as precluding the right of VIA to seek appropriate adjustments in its collective bargaining structures through the exercise of its rights under section 18 of the Canada Labour Code. It is, I think, a full answer to this part of CN’s argument to note that by taking the approach it did VIA effectively insulated itself from any possible charge of having improperly undermined the bargaining rights of either of the running trades unions. In effect, from a legal standpoint, VIA did it right. It is of little value to speculate as to what might have happened if it had done it wrong.

I turn next to deal with the submission of CN to the effect that the extrinsic evidence adduced by the BLE should not be viewed as relevant in the interpretation of Item 5(a) of the Transfer Agreement. The submission of counsel for CN is essentially that the kinds of issues discussed during the negotiation of the agreement are not informative of the issues central to the dispute at hand. Counsel stresses that the exchanges between Mr. Bennett of the UTU and Mr. Delgreco of CN bear almost exclusively on concerns which the Union then had with respect to either the full economic collapse of VIA or a unilateral decision of the Government of Canada to shut down the passenger service. Later concerns discussed in correspondence with Mr. Hodges dealt with the spectre of VIA possibly being privatized. None of these factors, counsel submits, are particularly informative for the purposes of understanding the intention of the Transfer Agreement as might relate to the unilateral abolition of the conductor’s craft.

With respect, I cannot agree. Firstly, it is the Arbitrator’s view that the extrinsic evidence is not in fact necessary, as the language of the Transfer Agreement, and in particular of Item 5(a), is clear and unambiguous. It would seem to me that if extrinsic evidence should be necessary it would be adduced to support the position of CN, which effectively argues that there is an ambiguity in the language and scheme of the Transfer Agreement whereby it is implicitly understood that both railways are to maintain active positions in the conductor’s trade. Setting that aside, however, and assuming for the purposes of this discussion that the language of Item 5(a) is ambiguous so as to allow for the introduction of extrinsic evidence, I consider that the evidence adduced is instructive to the issue in dispute.

It is true that the discussions between Mr. Bennett and Mr. Delgreco were prompted by the Union’s concerns about the future viability of VIA, or the possibility of a political decision of the federal government which might put an end to the passenger railway. While that fairly characterizes what prompted the questions put by the UTU’s representatives to CN’s chief negotiator, it does not change the substance of what went between them. The substance of the concern of the UTU was, very simply, “What happens if there are no VIA jobs whatsoever left for our members?” That is the critical question to which both parties addressed their minds at the time of the negotiation of the Transfer Agreement. As the exchange of positions reflects, they eventually worked out an understanding that the crucial right of an employee at VIA to return to service at CN would turn on his or her individual circumstance, namely whether that employee should be unable to hold a position in road service (and subsequently in yard service) at his or her home station at VIA. That condition, and no other condition, entitles the individual to the ability to return to CN so long as the reciprocal rights period endures. Nothing more, nothing less.

If anything, the extrinsic evidence makes it clear that the parties deliberately chose the formulation they did so as to respond to the concerns of the bargaining agent as to what would happen should there be no work for its members at VIA. In analyzing and understanding that evidence it is of no moment, for example, that the parties might not then have contemplated that CN would subsequently become privatized, that it would eventually move to conductor-only operations, or any number of other unknown future contingencies. The only issue before me is whether Item 5(a) of the Transfer Agreement applies today as it would have applied the day after it was executed. If anything, the extrinsic evidence before me is uniform in its fundamental thrust: the language of Item 5(a) was crafted precisely to give protection to the members of the former UTU bargaining unit at VIA in the event that there should be no work for them at their VIA home station.

CN’s next submission concerns its argument to the effect that the deeming provisions found within the Crew Consist Adjustment Agreement negotiated between VIA and the BLE on June 12, 1998 must be viewed as null and void. As stressed above, I have no jurisdiction to apply or interpret the terms of the Crew Consist Adjustment Agreement. The sole question before me is whether the terms of Item 5(a) of the Transfer Agreement of March 6, 1987 applies in the circumstances of the abolishment of all conductor and assistant conductor positions at VIA effective July 1, 1998. There may be questions which arise within the context of that issue, properly before me, as to whether an individual did or did not make a proper request to exercise his or her seniority to return to service at CN as of the effective date. That, however, is not a matter which is to be determined at this point, although I shall remain seized should there be any question, in respect of the rights of any individual, concerning whether he or she did or did not make a timely request for the exercise of seniority rights as contemplated under Item 5(a) of the Transfer Agreement. Most importantly, the Crew Consist Adjustment Agreement negotiated separately between the BLE and VIA, and which does not involve any contractual privity between the two parties to the dispute before me – the BLE and CN – is fully outside my jurisdiction. It should be equally obvious that the BLE and VIA plainly have no capacity to themselves alter or amend the terms of the Special Agreement of March 6, 1987, and the Transfer Agreement which is the document in dispute before me, and in respect of which I do exercise full jurisdiction. If it were necessary to so decide, I would have difficulty understanding how VIA and the BLE could alter provisions of the Transfer Agreement governing employees’ requests to return to VIA, whether through their Crew Consist Adjustment Agreement or otherwise. In the circumstances, however, there is in my view little value in commenting extensively upon any aspect of the content of the Crew Consist Adjustment Agreement of June 12, 1998.

I turn now to consider CN’s submission, based on many days of evidence, to the effect that the decision taken by VIA is tainted by bad faith, so as to be inconsistent with the fundamental understanding reflected in the terms of the Transfer Agreement. At the outset, I am not persuaded that provisions of the Quebec Civil Code, including articles 6, 7 and 1375 cited by counsel for CN are necessarily binding for the purposes of determining an industrial relations dispute which falls exclusively within the federal jurisdiction. That said, however, I would agree with counsel for CN, as a general matter, that it would plainly be contrary to the spirit and letter of the Transfer Agreement for any party to that agreement to engage in fraudulent conduct, bad faith or sharp practice calculated to defeat the contractual rights or interests of any party to the agreement. If any jurisdictional underpinning is necessary for so fundamental a notion, it can be found in the widely accepted arbitral precept which holds that the exercise of any management right, including the right to reorganize an employer’s work force in a collective bargaining regime, cannot be carried out in bad faith, arbitrarily, or discriminatorily (see, generally, Brown & Beatty Canada Labour Arbitration (3d) (Canada Law Book, 1998) at para. 5-2300). I would be prepared to find that that cornerstone obligation would flow as among all three signatories to the Special Agreement and Transfer Agreement and could, indeed, be pleaded and enforced by CN in the protection of its own rights under the agreement.

The question then becomes whether the evidence does disclose bad faith in the actions of VIA involving the conception and eventual implementation of the NEPO initiative. Counsel for CN submits that the issue of bad faith needs to be examined in two separate time frames, namely from February of 1996 to October of 1997, and secondly from October of 1997 to July of 1998. I am satisfied that the most critical period to be examined for the purposes of my jurisdiction concerning the application of Item 5(a) of the Transfer Agreement is that period of time leading to the decision of VIA to implement NEPO, as announced in March of 1997. It is that decision, ultimately approved by the Canada Labour Relations Board in its disposition of the section 18 application, and eventually implemented on July 1, 1998, which must stand or fall for the purposes of determining the right of employees to return to CN under the provisions of Item 5(a) of the Transfer Agreement. Specifically, the fact that the BLE might be found to have engaged in questionable conduct in the negotiation of the Crew Consist Adjustment Agreement or that that agreement was in part tainted by questionable collaboration between VIA and the BLE, as found in the decision of the Canadian Industrial Relations Board made against the BLE, cannot, in my view, be controlling as to the independent Transfer Agreement right of employees affected by the NEPO initiative to return to their employment at CN. Central to this aspect of the dispute before me is one critical point of fact and law: VIA did abolish all conductor’s and assistant conductor’s positions effective July 1, 1998. It did so following the approval of the Canada Labour Relations Board with respect to its abolishment of all running trades positions and the reorganization of those positions into one new position in a single bargaining unit, with a portion of the duties assigned to on-board service employees. Its initiatives in that regard have not been reversed by grievance or otherwise. All that can be said is that certain conductors have successfully questioned the quality of their representation by the BLE in the negotiation of the Crew Consist Adjustment Agreement of June 12, 1998, as discussed above. The fact remains that VIA’s decision to implement the abolishment of the conductors’ and assistant conductors’ positions did effectively occur on July 1, 1998 and it has not been reversed by the CIRB. The abolishment of the conductor’s craft at VIA is an immutable fact which I cannot ignore in considering the meaning and application of Item 5(a) of the Transfer Agreement, subject only to bad faith on the part of VIA which would take its actions outside the contemplation of that Agreement.

A charge as serious as bad faith must be made out on the basis of compelling evidence. A review of the evidence of the internal discussions within VIA prior to the initial announcement of the NEPO initiative, in March of 1997, does not in my view reveal any bad faith on the part of VIA or its officers. As indicated above, the evidence of Mr. Côté confirms that in February of 1996 a three person committee charged with considering the question of reducing the size of running trades crews indicated that it was contemplating a new initiative which would involve merging the positions of conductor and assistant conductor with the position of locomotive engineer. It is obvious to the Arbitrator that so sensitive a project required a high degree of discretion on the part of the Corporation’s officers dealing with that proposal. I do not find anything sinister in the evidence of Mr. Côté to the effect that he directed that in the initial stages there should be little or nothing in writing concerning the matter being considered by the committee, until such time as it should require presentation to higher management and government authorities.

To be sure, there are elements of the proposals, particularly in its embryonic stages, which might raise questions in the minds of those familiar with the complexities of collective bargaining rights. For example, the written copy of the Corporation’s presentation of its proposal to the office of the Minister of Transport on January 15, 1997 refers, in part, to a “proposal for non-renewal of UTU contract”. While that might, on its face, suggest a certain naïvety on the part of its author, given that the UTU’s bargaining rights would plainly endure beyond the term of its then current collective agreement, the balance of the document plainly reflects an understanding that the UTU and the BLE would be on a footing of equality with respect to the material change being implemented by VIA. Indeed, the presentation to the Minister contains the following statements:

CLRB SUBMISSION & MATERIAL CHANGE NOTICE

Request one bargaining unit to represent operating employees

· All VIA operating employees to vote on choice of labour representation

· Simultaneous with the CLRB, the UTU and BLE will be issued a material change notice

The document so construed, and the evidence of the Corporation given through Mr. Côté and Mr. Bannon Woods, amply establishes, to the Arbitrator’s satisfaction, that there was no intention on the part of VIA to disadvantage the UTU and give preference to the BLE in the evolution of the NEPO initiative. It may be that some individuals within VIA had the expectation that the BLE would likely emerge the successful bargaining agent for the single running trades bargaining unit, which could explain certain entries in the internal documentation of VIA concerning the implementation of its NEPO initiative. For example, a confidential document apparently developed by the Public Affairs Department, dated March 4, 1997, contains a description of the strategic approach to the timing of VIA’s announcement. Under that scenario briefing of the BLE is contemplated to take place one day before the official announcement, while both the UTU and the BLE are to be briefed on the day of the announcement. Standing alone such a distinction would raise obvious concerns as to the fairness of the process, and whether indeed there was an inclination to favour one union over the other in the development of NEPO.

On this aspect of the evidence, however, I am satisfied by the evidence of Mr. Côté, confirmed by the testimony of Mr. Bannon Woods, with respect to the internal documentation, and what in fact occurred. Both witnesses testified that when Mr. Woods saw the implementation plan he immediately advised VIA’s officers responsible for it that there could not be any preferential treatment or earlier notice to one of the two running trades unions involved. In fact the situation was corrected and there was no prior notice given to the BLE in advance of the official notification, which went to both running trades unions on the same day in March of 1997. At most what the documentary evidence would reflect is a failure on the part of one or more individuals involved in developing the communication plan to appreciate that in substance the initiative involved the abolishment of all positions, including locomotive engineers’ positions, and that good faith relations with the BLE and the UTU would require equal treatment in respect of communication with them about the initiative. Whether that erroneous approach was prompted by the impression that in fact locomotive engineers’ positions would survive NEPO, albeit with somewhat different duties and responsibilities, the fact remains that those responsible for the collective bargaining dimensions of the initiative corrected the document and ensured that both unions were treated the same.

CN further attempts to rest its allegation of bad faith, and alleged favouritism directed towards the BLE, on meetings which took place between Mr. Hallé of the BLE and representatives of VIA, first in Ottawa on October 10, 1996 and shortly thereafter in Montreal on October 23, 1996. It should be stressed that the Arbitrator allowed CN great latitude in obtaining disclosure of documents from VIA, including such things as Mr. Côté’s appointment agenda, to assist in the presentation of its case concerning alleged bad faith. During his testimony, making reference to his agenda book, Mr. Côté confirmed that he did meet with Mr. Hallé on both occasions, the first of which also involved legal counsel for both parties.

In the Arbitrator’s view a full and satisfactory explanation of the purpose and content of both of those meetings was given in evidence, and remains uncontradicted. In October of 1996 VIA was met with difficulties emanating from the UTU Toronto local where, it appears, UTU members were becoming unavailable to work on VIA’s trains. In that context, the meeting with Mr. Hallé was convened to discuss the willingness of locomotive engineers, then represented by the BLE, to operate passenger trains without a conductor. Such operation is contemplated in emergency circumstances within rule 106 of the Canadian Rail Operating Rules. It would appear that the representatives of VIA wished to obtain an assurance from Mr. Hallé that the BLE would be supportive of VIA in the face of the labour difficulties it was encountering with its conductors. According to Mr. Côté’s evidence, which I accept, the result of the meeting was an assurance from Mr. Hallé that the BLE’s members would respect the spirit and letter of rule 106, an undertaking of obvious importance to the passenger railway. I am also satisfied that the subsequent luncheon meeting between Mr. Côté and Mr. Hallé, at a restaurant in Montreal on October 23, 1996, a meeting also attended by Mr. Gushue of VIA Rail, was for the purpose, as Mr. Côté explains, of expressing the Corporation’s gratitude to Mr. Hallé for his assistance in resolving the critical situation which had arisen in Toronto. While it may be open to counsel for CN to express skepticism about this aspect of the evidence, and to stress the coincidental timing of private communications between VIA and Mr. Hallé of the BLE, a board of arbitration cannot lightly convert suspicion into legal conclusions absent good and compelling evidence. There is, very simply, nothing in the evidence before me to affirm that the meetings in question were other than for the purposes described in the testimony of Mr. Côté and confirmed in the evidence of Mr. Hallé. The record before the Arbitrator is devoid of any evidence whatsoever to suggest, much less establish, that the BLE was given prior information or notice with respect to the plans of VIA prior to the announcement of its NEPO initiative in March of 1997 – nor do I see anything in the conduct of VIA, or of the BLE, assuming that its conduct would be relevant, to establish the elements of bad faith in the implementation of NEPO which would nullify the application of the Transfer Agreement.

On the whole the record is contrary to any pattern of collusion or bad faith as regards the BLE. The relations between the BLE and VIA in the months immediately following the certification of the BLE as the bargaining agent of all running trades employees are far from consistent with the BLE and VIA being in a “sweetheart” relationship. As the record before me discloses, following certification of the BLE as bargaining agent by the CLRB on October 31, 1997 the Brotherhood gave notice to VIA to bargain on behalf of all running trades employees. When, in December of 1997 VIA purported to take the position that because the collective agreements of both former bargaining units had expired, it would proceed unilaterally with its implementation of NEPO as of April 1, 1998, the BLE moved immediately before the CLRB by way of a complaint under section 92 of the Canada Labour Code, and was successful in obtaining an order of the Board from preventing VIA from proceeding with its unilateral implementation. I am not prepared to find, as might arguably be implicit from the submissions of counsel for CN, that those endeavours were an elaborate piece of theatre intended to mask the true relationship between VIA and the BLE as regards the implementation of NEPO.

For the reasons touched upon above, I do not consider that the negotiation of the Crew Consist Adjustment Agreement between the BLE and VIA on June 12, 1998 adds meaningfully to the merits of the dispute before me. That the agreement might contain arguably otiose provisions with respect to the right of conductors and assistant conductors to return to CN, or debatable deeming provisions with respect to requests to do so, is of no moment for the purposes of the issue before me. Nor do I find surprising or particularly compelling the fact that the Crew Consist Adjustment Agreement recites the understanding that all conductor and assistant conductor positions are to be abolished. That, in fact, is a mere acknowledgement of the very material change which gave rise to the initial section 18 application before the CLRB, the contest for the bargaining rights in respect of the new single bargaining unit of running trades employees and the eventual emergence of the BLE as bargaining agent under the new order of running trades operations. Whether substantive provisions of that agreement could successfully pass muster as regards the BLE’s duty of fair representation towards the conductors and assistant conductors is clearly not a matter for this tribunal’s consideration. Those issues were fully dealt with by the CIRB in the exercise of its jurisdiction in that regard. Most significantly, I fail to appreciate on what basis the actions of the BLE, which prompted remedial directions from the CIRB could, in any event, be viewed as germane to the independent contractual protections of conductors and assistant conductors under the separate terms of the Special Agreement of March 6, 1987 and the Transfer Agreement appended to it. Those agreements, unamended from the time of their inception, are the agreements which I am called upon to interpret and apply in this dispute. Nothing in the actions of the BLE, or the arguable “improper collaboration” between VIA and the BLE in the negotiation of the Crew Consist Adjustment Agreement, can impact the interpretation, application or administration of the terms of the Transfer Agreement, a discrete and separate document whose terms could not be amended or curtailed by the BLE and VIA acting together.

For the reasons touched upon above, I am satisfied that there is nothing in the decision of the CIRB concerning the negotiation of the Crew Consist Adjustment Agreement which would sustain CN’s position to the effect that the origin and eventual implementation of the NEPO initiative is tainted by bad faith in such a way as to vitiate or nullify the application of the Transfer Agreement. As noted above, the “improper collaboration” found by the CIRB to have occurred is confined to the process of the negotiation of those terms of the Crew Consist Adjustment Agreement relating to access to training, seniority and the application of the Special Agreement between the UTU, VIA and CN. There is nowhere any finding on the part of the CIRB to the effect that the NEPO initiative, and in particular the abolishment of the conductor and assistant conductor positions, was in violation of any collective agreement obligation or any duty of VIA or the BLE under the Canada Labour Code. If, as the BLE submits, the abolishment of those positions is the triggering event to the exercising of seniority rights to return to CN, and to my jurisdiction to arbitrate any dispute in relation to that question, that triggering event has occurred and remains in effect. I am satisfied that the BLE is correct in that position.

Nor can the Arbitrator find that the failure of VIA to consult with CN, the UTU or the BLE during the developmental stages of NEPO can be fairly characterized as bad faith inconsistent with the spirit or letter of the Special Agreement and Transfer Agreement of March 6, 1987. Few decisions of an employer are more sensitive that those which relate to the radical reduction of its workforce and the reorganization of duties and responsibilities among its employees. That is no doubt a reality not unknown to CN in the implementation of substantial reductions in its own workforce which it has found necessary to its ongoing productivity and profitability. There is, very simply, nothing within the Special Agreement or Transfer Agreement to suggest that either railway is fastened with a duty of prior disclosure or advice to the other concerning workforce reduction initiatives, be they minor or major.

For all of the foregoing reasons I am satisfied that CN has not established bad faith in the conception, development and implementation of NEPO which can be advanced to support its argument that the Special Agreement and Transfer Agreement do not apply with respect to the right of conductors and assistant conductors whose jobs have been abolished to return to service at CN by the exercise of their seniority, assuming a proper and timely request to do so after July 1, 1998.

One further argument raised by CN requires a response from the Arbitrator. In its reply submission, apparently for the first time, CN submits that the conductors and assistant conductors who would avail themselves of the benefits of the Transfer Agreement to return to work at CN cannot do so because their bargaining agent, in the person of the BLE, agreed to the abolishment of the conductor and assistant conductor positions as one of the terms of the Crew Consist Adjustment Agreement of June 15, 1998. That submission, which must fairly be characterized as remarkable in its resourcefulness and imagination, is nevertheless an exercise in logical bootstrapping. To suggest that the cause of the abolishment of the conductors’ and assistant conductors’ positions at VIA is the BLE’s agreement to their abolishment is a gross mischaracterizing of events which entirely disregards the history of this dispute.

When the NEPO was announced in March of 1997 it was plainly within the management rights of VIA to abolish the conductor and assistant conductor positions, and indeed to abolish all locomotive engineer positions, as it then intended to do. VIA followed a determined and resolute course to achieve that end, including the reorganization of its collective bargaining structures through an application under section 18 of the Canada Labour Code. As those familiar with railway collective bargaining readily appreciate, what the BLE faced following its certification was the unavoidable obligation to negotiate a special agreement concerning the abolishment of the conductor and assistant conductor positions. That was the reality it was dealing with, and which it continued to deal with when, as the evidence confirms, it was decided to fold the NEPO special agreement negotiations into the larger framework of the negotiations for the first collective agreement following the BLE’s certification as bargaining agent for all running trades employees. For all practical purposes NEPO was a fait accompli, and the BLE’s role was then to negotiate as best it could such terms and conditions as would minimize the adverse impact of NEPO on all running trades employees affected by it. The fact that the Crew Consist Adjustment Agreement might recite the acceptance by the bargaining agent of the abolishment of running trades positions, a provision which might not be uncommon in any material change special agreement, can scarcely be characterized as changing the fundamental truth of what transpired. The positions of conductors and assistant conductors were abolished effective July 1, 1998 by the exercise of VIA’s management rights, in furtherance of a material change of which all parties had notice since March of 1997. To suggest otherwise, however self serving it may be, is to disregard the facts. I must therefore reject CN’s argument, more bold than persuasive, that the conductors cannot invoke the Transfer Agreement because they agreed to abolish their own jobs.

As a further matter, the Arbitrator considers it important to respond to certain submissions made in the final letter received from counsel for CN, dated November 11, 1999. Those submissions arise in the context of the issue of my jurisdiction following the CIRB decision of October 22, 1999. In that letter my jurisdiction is characterized, in part, as relating to the refusal of CN to allow VIA employees to exercise transfer rights back to CN “… as a direct result of, certain provisions negotiated between VIA and the BLE in the Crew Consist Adjustment Agreement concluded on June 12, 1998.” Counsel submits, in part: “In other words, as of the Board’s decision, there are no provisions in place whereby anyone is in a position to exercise (or be deemed to have exercised) alleged transfer rights under any agreement. … If the BLE or VIA would like to seek a declaratory opinion from an arbitrator, they will require a consent of all parties to the Special Agreement. As the matter stands however, at this time, in light of the CIRB’s ruling, there is no dispute before you as arbitrator under the terms of the Special Agreement given that no conductors are at this time seeking or being deemed to flow back to CN.”

Counsel also expresses concern over a submission in VIA’s letter to the Arbitrator which includes a comment about the possible rights of conductors “or engineers, whoever they may be, to flow back to CN” as improperly expanding the scope of the dispute before me. The Arbitrator is obviously not in a position to understand what motivated the reference to engineers contained in VIA’s letter. It might arguably relate to the status of certain conductors who have now been trained into positions of locomotive engineer and who might nevertheless claim transfer rights back to CN as conductors should they be removed from their locomotive engineers’ positions. The status of such individuals is not a matter which has been raised or dealt with to any significant extent in the dispute before me, nor am I asked to deal with it. What I am left with is a determination of the right of persons who held the classification of conductor and assistant conductor after July 1, 1998 with respect to the exercise of seniority to return to work at CN by reason of being unable to hold a position in road or yard service at their VIA home station.

As stressed above, and at the risk of repetition, notwithstanding the characterization of dispute and issues contained in the final letter from counsel for CN, this tribunal has no jurisdiction to apply or interpret the Crew Consist Adjustment Agreement of June 12, 1998. To be clear, the existence and terms of that agreement are irrelevant to the dispute before me. As previously determined in the preliminary award of November 30, 1998, the only issue at stake in these proceedings is whether conductors and assistant conductors in the employ of VIA, now represented by the BLE, can exercise their seniority to return to the service of CN by the application of Item 5(a) of the Transfer Agreement appended to the Special Agreement of March 6, 1987. Their right to do so is a discrete and independent right under the Transfer Agreement which has continued in effect from 1987 to the present, without amendment or modification. VIA and the BLE are without power, absent the consent of CN and the Minister of Labour, to make any amendment of the Transfer Agreement. Nothing negotiated within the context of the Crew Consist Adjustment Agreement of July 15, 1998 can change that reality. With respect, to suggest otherwise or to suggest that my jurisdiction is impacted by that agreement is to throw sand in the air and to unduly obscure the merits of an otherwise straightforward dispute. Nor have I been addressed to any provision in the Special Agreement which would sustain the rather startling proposition that the arbitration of an alleged violation by a party can only proceed with that party’s consent. No such provision, express or implied, can be gleaned from the procedures of Article K of the Special Agreement of March 6, 1987, which governs this dispute.

For all of the foregoing reasons the Arbitrator finds and declares that the implementation of NEPO by VIA, effective July 1, 1998 has had the effect of abolishing all conductor and assistant conductor positions. The individual employees affected are undisputably unable to hold a position in road or yard work at their VIA home station. They are, in that circumstance, entitled to exercise their seniority to return to work at CN, conditional upon the making of a proper and timely request to do so. In the circumstances the Arbitrator has no alternative but to find and declare that the refusal of CN to accept such conductors and assistant conductors back into its employment is in violation of Item 5(a) of the Transfer Agreement of March 6, 1987. The Arbitrator therefore directs CN to comply with article G of the Special Agreement and Item 5 of the Transfer Agreement, and to permit conductors and assistant conductors affected by the NEPO initiative to exercise their seniority rights to return to CN, forthwith.

I reserve jurisdiction to deal with all remaining issues relating to the right of any individual employees to flow back to CN, including any rights to compensation, benefits or seniority.

Dated at Toronto this 25^th day of November 1999.

(signed) Michel G. Picher

ARBITRATOR