AH 542

IN THE MATTER OF AN ARBITRATION

BETWEEN:

BC RAIL LTD.

(the “Company”)

AND:

UNITED TRANSPORTATION UNION, LOCALS 1778 AND 1923

(“UTU”)

AND:

CANADIAN UNION OF TRANSPORTATION EMPLOYEES, LOCAL 1

(“CUTE”)

(Re Addressing Material Change for Cessation of Cariboo Prospector

and Sale/Lease of Fort Nelson Subdivision)

ARBITRATOR: Vincent L. Ready

COUNSEL: Michael Keiran and

Paul Straszak for

the Employer

Robert Sharpe for

the UTU

Robert Samson for

the CUTE

HEARING: August 12, 21 and

22, 2002

Vancouver, BC

PUBLISHED: October 4, 2002

2659

The parties agreed I was properly constituted as a mediator/arbitrator, pursuant to the terms of their respective Collective Agreements, to resolve their disputes over minimizing adverse effects arising out of two material changes. Specifically, I am to address the impact on employees caused by the Railway’s decision to discontinue operating the Cariboo Prospector passenger service (the “Budd Car”), which operates between North Vancouver and Prince George, British Columbia. Notice of this change was given to the Union from the Company on April 15, 2002 and it is effective October 31, 2002. I am also to address the impact on employees arising out of the sale or lease of the Fort Nelson Subdivision to a private Shortline operator. Notice of this change was issued on June 17, 2002 and it is effective November 1, 2002.

The parties agree that my ruling on the adverse effects relating to the Cariboo Prospector will apply to employees affected on the Fort Nelson Subdivision.

In specific regards to the Fort Nelson initiative, the parties agree I have jurisdiction to determine the number of employees who are adversely affected. Further, I am to decide the order of transition from BC Rail to the new short line operator on the Fort Nelson Subdivision, in the event that BC Rail employees elect to move to the new operator. The parties agree, however, that my ruling on this latter issue will not in any way serve to prejudice the Unions on any argument they may make regarding the propriety of the Company’s decision to sell/lease the subdivision.

On August 12, 2002, I met with the parties to mediate the issues in dispute. The parties were far apart and an impasse was reached. Pursuant to the terms of the Unions’ respective Collective Agreements, the outstanding issues were referred to binding arbitration.

RELEVANT COLLECTIVE AGREEMENT PROVISIONS

1. BC Rail/UTU

Article 132 of the BC Rail/UTU Collective Agreement is entitled “Material Changes in Working Conditions”, and reads as follows:

ARTICLE 132

MATERIAL CHANGES IN WORKING CONDITIONS

1.(a) The Railway will not initiate any material change in working conditions which will have materially adverse effects on employee without giving as much advance notice as possible to the General Chairman concerned, along with a full description thereof and with appropriate details as to the contemplated effects upon employees concerned. No material change will be made until agreement is reached or a decision has been rendered in accordance with the provisions of Section 1 of this Article.

(b) The Railway will negotiate with the Union measures other than the benefits covered by Sections 2 and 3 of this Article to minimize such adverse effects of the material change on employees who are affected thereby. Such measures shall not include changes in rates of pay. Relaxation in schedule rules considered necessary for the implementation of a material change is also subject to negotiation.

(c) While not necessarily limited thereto, the measures to minimize adverse effects considered negotiable under paragraph (b)above may include the following:

(1) Appropriate timing.

(2) Appropriate phasing.

(3) Hours on duty.

(4) Equalization of hours.

(5) Work distribution.

(6) Adequate accommodation.

(7) Bulletining.

(8) Seniority arrangements.

(9) Learning the road.

(10) Eating enroute.

(11) Work enroute.

(12) Layoff benefits.

(13) Severance pay.

(14) Maintenance of basic rates.

(15) Constructive hours.

(16) Deadheading.

(17) Early Retirement (By agreement of the parties)

The foregoing list is not intended to imply that any particular item will necessarily form part of any agreement negotiated in respect of a material change in working conditions.

(d) The negotiations referred to in Clause (b) above shall be conducted between the Vice-President, Rail Operations (or his delegate) and the General Chairman and shall commence within twenty (20) days of the date of the notice specified in Clause (a) above. If the negotiations do not result in mutual agreement within thirty (30) calendar days of their commencement, the issue, or issues, remaining in dispute with the exception of the rule governing a change in established home terminals Article 209 (a), shall, within seven (7) days of the cessation of negotiations, be referred to the Manager, Labour Relations of the Railway and the General Chairman of the Union for mediation by a Board of Review composed of two senior Officers from each party. Such referral shall be accompanied by a Joint Statement of Issue, or Issues, remaining in dispute together with a copy of the notice served by the Railway on the Union under Section 1 (a) hereof and a summary of the items agreed upon.

In the event neither party desires to submit the issue, or issues, remaining in dispute to a Board of Review the dispute shall be referred to the Arbitrator as provided in Clause (e) below;

(e) The Board of Review shall, within twenty (20) days from the date of reference of the dispute, make its findings and recommendations. If the Board is unable to arrive at a decision within the time limits specified herein or such extended time limits as provided in Clause (f) hereof, or if its recommendations are not agreeable to either party, a Joint Statement of Issue, or Issues, remaining in dispute may be referred within seven (7) days by either party to a single Arbitrator who shall be the person from time to time occupying the position of Arbitrator as defined in Article 104 under the heading “Final Settlement of Disputes Without Stoppage of Work”.

In the event that the parties do not agree upon a Joint Statement of Issue, or Issues, remaining in dispute, either or each may submit a separate statement to the Arbitrator in accordance with the procedure outlined above for the Joint Statement and the other party will be provided with a copy thereof.

The Arbitrator shall hear the dispute within thirty (30) days from date of the request for arbitration and shall render his decision together with reasons therefore in writing within fifteen (15) days of the completion of the hearing.

At the hearing before the Arbitrator, argument may be presented orally or in writing and each party may call such witnesses as it deems necessary.

(f) Time limits specified in Clauses (d) and (e) above may be extended by mutual agreement, or upon request of the Arbitrator, in respect of time limits specified for the hearing and the rendering of the decision.

(g) The decision of the Arbitrator shall be confined to the issue or issues placed before him which shall be limited to measures for minimizing the adverse effects of the material change upon employees who are affected thereby, and to the relaxation in schedule rules considered necessary for the implementation of the material change, and shall be final and binding upon the parties concerned.

2. BC Rail/CUTE Local 1

The relevant provision relating to material change pursuant to the BC Rail/CUTE Local 1 Collective Agreement reads as follows:

23.1 Negotiations On Material Changes

23.1.1 The Railway will not initiate any material change in working conditions which will have materially adverse effects on employees without giving as much advance notice as possible to the General Chairman concerned, along with a full description thereof and with appropriate details as to the contemplated effects upon employees concerned. No material change will be made until agreement is reached or a decision has been rendered in accordance with the provisions of Clause 23.1.

23.1.2 The Railway will negotiate with the Union measures other than the benefits covered by Clauses 23.2, 23.3, 23.4, 23.5 and 23.6 to minimize such adverse effects of the material change on employees who are affected thereby. Such measures shall not include changes in rates of pay. Relaxation in schedule rules considered necessary for the implementation of a material change is also subject to negotiation.

23.1.3 While not necessarily limited thereto, the measures to minimize adverse effects considered negotiable under Clause 23.1.2 may include the following:

1) Appropriate timing

2) Appropriate phasing

3) Hours on duty

4) Work distribution

5) Adequate accommodation

6) Bulletining

7) Seniority arrangements

8) Learning the road

9) Eating enroute

10) Work enroute

11) Layoff benefits

12) Severance pay

13) Early retirement (by agreement of the parties)

POSITIONS OF THE PARTIES

The Railway, the UTU and CUTE Local 1 each made submissions on their respective positions and included extensive proposals to resolve the outstanding disputed issues. These are as follows:

1. Company Position and Proposal

The Railway asserts my jurisdiction is restricted to that of a rights arbitrator who shall focus on minimizing adverse effects upon employees affected by the material changes. It argues that, pursuant to the Labour Relations Code of British Columbia, due consideration must be given to the economic viability of the business. Further, the nature and amount of benefits should not exceed those in place for BC Rail employees who were adversely affected by material changes caused by the relatively recent introduction of Beltpak technology.

The Railway resists CUTE Local 1’s proposal for a special bulletin to allow senior employees to bid into the affected positions. The Company takes the position that allowing a special bulletin will effectively provide benefits to employees who have experienced no impact whatsoever. The Company states there will be lingering effects if the CUTE 1 proposal on this matter is implemented because it will set off a series of relocations that the Company will have to pay for. On this matter, the Company argues it is essentially being asked to pay twice for the adverse effects of material change: once for severance payments and again for relocation benefits.

The Railway also argues that the Job Security Fund (JSF) contained in the Collective Agreements between it and its five non-running trade unions in the Council of Railway Unions, should serve as the basis for determining the amount of money paid out in early retirement allowance benefits. It argues this board should not create, or perpetuate, a disparity of benefits between the five Non-Operating Unions and the two Running Trades (CUTE 1 and UTU), who all belong to the Railway’s Council of Trade Unions.

The Railway’s specific proposal to resolve all of the outstanding issues is contained in a draft agreement it submitted to this board:

1.0 Agreement Coverage

1.1 Employees eligible for benefits under this agreement are defined as those who are actively working positions governed by and represented by the UTU or CUTE #1 on BC Rail as of the Fall 2002 General Reassignment.

1.2 Employees who have less than five years of Cumulative Compensated Service (CCS) with the Company on the day immediately preceding the effective date of this material change are not entitled to Early Retirement Allowances under this agreement.

1.3 Employees who have less than two years of Cumulative Compensated Service (CCS) with the Company on the day immediately preceding the effective date of this material change are not eligible for other benefits under this agreement.

1.4 In order to be considered as an employee directly affected by this material change, employees must have established a position covering Passenger Service or service on the Fort Nelson Subdivision at the Fall 2002 General Reassignment.

2.0 Early Retirement Allowance

The Company will offer sufficient Early Retirement opportunities, to the maximum number of adversely affected positions in order to offset the adverse effects of this material change.

2.1 In order to offset the adverse effects of this Material Change, the Company is prepared to offer Early Retirement Allowances subject to the following principles:

a) "Affected employees" are defined as those employees who are incumbents of those positions being abolished by this change, including the spareboard factor of 25% as of the Fall 2002 General Reassignment. An affected location is defined as any terminal within an affected employee's zone.

b) For the purposes of awarding benefits under this agreement, the employee's assigned position and location as a result of the Fall 2002 General Reassignment will be utilized.

2.2 These Early Retirement Allowances are specific to this material change and will be offered to eligible employees in the following manner:

a) Early Retirement opportunities will first be offered, in seniority order, to the incumbents of the positions identified in s. 2.1 above.

b) Unclaimed Early Retirement opportunities will next be offered to employees at affected locations/zones in the order of seniority.

c) The number of Early Retirement Allowances taken will reduce an equal number of available cascading MBRs, relocation benefits and Severance opportunities.

2.3 Eligibility

An employee eligible for an Early Retirement Allowance is defined as an employee who is fifty five years of age or older, who has more than five years' cumulative compensated service, and who otherwise qualifies as per the Company pension plan.

2.4 An employee who accepts the offer of an Early Retirement Allowance must make an irrevocable commitment to retire from the service of the Company and that employee is then free to exercise the options available under the Company’s Pension Rules.

2.5 Early Retirement Allowance Benefits

An employee who is eligible for and accepts an Early Retirement Allowance:

a) will be entitled to receive an allowance of seven hundred and fifty dollars ($750.00) per month, commencing in the first month following the month in which retirement is elected, for a maximum period of sixty months, or until age 65, whichever comes first.

b) may opt to receive a one time lump sum early retirement payment equal to the net present value of the stream of his monthly benefit entitlements, as described in s. 2.5(a), discounted at a rate of 5 percent.

2.6 The Early Retirement Allowance will cease upon the death of the employee.

3.0 Maintenance of Basic Rates (MBR)

3.1 Employees whose rates of pay are reduced by reason of being displaced as a direct result of the implementation of this change and who have a seniority date on or before November 1, 2000 shall have an MBR established on a basic weekly rate of pay as defined in Clause 3.2 below.

3.2 Basic weekly pay will be calculated only once and is defined as follows:

a) For an employee assigned to a regular position in yard service, as of September 1, 2002, 5 days or 40 hours straight time pay, including shift differential, when applicable.

b) For an employee in road service, including employees on spare or auxiliary spare boards, one fifty-second (1/52) of the total earnings of such employee during the twenty-six (26) full pay periods preceding September 1, 2002.

c) When computing basic weekly pay, any pay period during which an employee is absent for seven (7) consecutive days or more because of bona fide injury, sickness in respect of which an employee is in receipt of weekly indemnity benefits, authorized leave of absence, or laid off, together with the earnings of an employee in that pay period, shall be subtracted from the twenty-six (26) pay periods and total earnings. In such circumstances basic weekly pay shall be calculated on a pro-rated basis by dividing the remaining earnings by the remaining number of pay periods.

3.3 The basic weekly pay of such employee shall be maintained by payment to the employee of the difference between actual earnings and two (2) times his basic weekly pay.

MBR will not be paid when the employee’s actual earnings in the checking period equal or exceed:

a) either eighty hours at the 2002 rate of pay for the classification from which displaced as a result of this change, or,

b) twice the employee’s basic weekly pay.

3.4 Rates of pay for purposes of MBR are frozen at rates in effect on September 1, 2002.

3.5 MBR shall be payable provided an employee is available for service for the entire checking period. Subject to the following, if not available for service during the entire checking period, his MBR for that period will be reduced by the amount of earnings he would otherwise have earned:

a) MBR cannot be used to replace a loss of guaranteed earnings as a result of an employee who lays off of his own accord, or misses a call.

b) An employee subject to more than two (2) reductions in the amount of the guarantee payable to him in accordance with his collective agreement shall forfeit his MBR.

c) A Yard employee will have his MBR reduced by one-tenth (1/10) for each tour of duty for which he is unavailable.

d) An employee will be considered as having made himself unavailable for service if he books in excess of ten (10) hours rest or, if in assigned service, is unavailable on an assigned working day.

3.6 All compensation, including guarantees paid an employee by the Railway during each checking period will be taken into account in computing the employee’s MBR.

3.7 The payment of an MBR, as calculated above, will continue to be made until:

a) the employee’s actual earnings are equal to or greater than that prescribed in 3.3;

b) the employee fails to exercise seniority to a position, including a known temporary vacancy as prescribed by the collective agreement with higher earnings than the earnings of the position held and for which the employee is senior and qualified in the zone or adjacent zone in which he is employed; or,

c) the employee’s services are terminated by discharge, resignation, death, retirement or transfer to another bargaining unit.

d) MBR for an individual will be applicable for a maximum duration of up to five (5) years from the date of initial displacement.

3.8 In the application of 3.7(b) above, an employee who fails to exercise seniority to a position with higher earnings, for which he is senior and qualified, will be considered as occupying such position and his MBR will be reduced correspondingly.

a) In case of a known vacancy as prescribed by the collective agreement, the employee’s MBR will be reduced only for the period of the temporary vacancy.

3.9 MBR will not be paid if created due to an employee electing to exercise seniority to a position where earnings are reduced.

3.10 The number of cascading MBRs which result from this agreement shall never exceed the number of assignments cancelled by reason of these material changes

3.11 The number of cascading MBR opportunities will be reduced by the number of accepted early retirement/severance opportunities.

NOTE: Notwithstanding anything to the contrary this Agreement, the Company reserves the right to make a determination as to whether or not an employee will be assigned to protect his MBR status, by relocating to another zone. In this instance, MBR will be maintained.

4.0 Relocation Benefits

The relocation benefits as provided in the Material Change Articles of the collective agreements will apply. These benefits will apply to employees who are displaced as a direct result of this material change and who are unable to hold any position within their zone, and who are able to exercise their seniority to claim a permanent position in another zone.

5.0 Severance Payments

5.1 An employee with two or more years of Cumulative Compensated Service (CCS) as of the implementation date of this material change and who has been laid off as a direct result of this change may, upon submission of formal resignation from the Company’s service claim a severance payment as set forth below.

5.2 For each year of Cumulative Compensated Service or major portion thereof calculated from the last date of entry into the Company’s service as a new employee, an employee will be allowed credit weeks as follows:

- for each of the first five years – two weeks pay

- for each of the sixth through fourteenth years – three weeks pay

- for each of the fifteenth and subsequent years – four weeks pay

5.3 Such severance shall not in any event exceed:

a) the value of 24 months (104 weeks) at the employee’s basic weekly rate at the time of resignation, or,

b) a lump sum payment equal to the basic pay he would have earned had he worked until eligible for an early retirement pension.

5.4 The basic pay is to be calculated at the employee’s basic rate of pay in effect at the time of his resignation.

5.5 In no case will the number of Early Retirement Allowances and severance opportunities combined exceed the number of directly affected employees.

The Company proposes a Letter of Understanding with the following terms to address the order of transition from BC Rail to the new Shortline operator in the event BC Rail employees elect to move to the new Shortline operator:

The following terms and conditions will govern employees represented by the CUTE 1 and UTU who wish to transfer to the short line operation.

The following will apply in the administration of this letter of understanding.

A. Definitions

1) Directly Affected Positions

- are those positions identified in the Material Change Notice dated June 17, 2002.

2) Directly Affected Employee

– is that employee who is working a directly affected position following the Fall 2002 General Reassignment.

3) Affected Location

1 is that location where directly affected employees are employed. An affected location may also be the location where a directly or indirectly affected employee displaces to as a consequence of this change.

B. Transfer of Employees

To facilitate the transfer of employees to the Short Line operator, the following will apply:

1 The Shortline will establish the number of positions it requires for each classification by location.

2 To the extent positions within each classification are available at the Shortline, employees who wish to transfer to [Shortline RR] will be selected by seniority in the following order:

a) Employees designated as a directly affected holding a position at an affected location following the 2002 General Reassignment.

b) Employees at affected locations

c) Other employees on the Master Seniority list, subject to the operational requirements of BC Rail.

3 Employees who wish to transfer to the [Shortline RR.] will not receive material change benefits.

4 Employees who transfer to [Shortline RR] in accordance with the terms of this letter of understanding will have their employment record at BC Rail closed. They will however carry with them all collective agreement rights and obligations in effect at the time to the new employer.

2. UTU Position and Proposal

During the course of these proceedings the UTU submitted a proposal which contained significant movement towards resolving many of the contentious matters in dispute between the parties. There are three main outstanding issues which relate to separation allowance entitlements, the extent to which early retirement/separation allowance benefits are to be offered, and the monetary amount of benefits.

On the key financial incentive matter, the Union has steadfastly rejected the Company’s proposals for early retirement benefits based on amounts contained in the JSF between the Railway and its non-running trade unions. The UTU asserts it has never been part of the JSF, and commitments contained in that agreement are not applicable to it in the circumstances. The UTU seeks an early retirement package, based on a point system related to an employee’s years of service, with a maximum amount of $100,000.00.

The UTU’s specific proposal to resolve the outstanding matters and reads, in its entirety, as follows:

1.0 Effective Date

On or about October 31, 2002, the Company will cease to operate intercity passenger service on the corridor between North Vancouver and Prince George as outlined in the material change notice dated April 15, 2002.

Unless otherwise provided, it is mutually agreed that the benefits described herein will be awarded no sooner than the actual date that the Company ceases operation of the Cariboo Prospector.

As a result of this change, the positions detailed in Appendix “A” will be abolished. A total of twenty (20) positions will be abolished as a result of this material change as follows:

UTU Local 1778 North Vancouver 9

Lillooet 2

Spareboard Factor (25%) 3

Total 14

CUTE Local 1 North Vancouver 3

Lillooet & Williams Lake 2

Spareboard Factor (25%) 1

Total 6

North Vancouver will be designated as the location to which benefits generated by the 25% spareboard factor will apply.

2.0 Agreement Coverage

2.1 Employees eligible for benefits under this agreement are defined as those who are actively working positions governed by and represented by the UTU on BC Rail as of October 25, 2002.

2.2 Employees who have less than five (5) years of Cumulative Compensated Service (CCS) with the Company on the day immediately preceding the effective date of this material change are not entitled to Early Retirement Allowances under this agreement.

2.3 Employees who have less than two years of Cumulative Compensated Service (CCS) with the Company on the day immediately preceding the effective date of this material change are not eligible for other benefits under this agreement.

3.0 Early Retirement Allowance

Sufficient Early Retirement opportunities will be offered to the maximum number of positions identified in s.1 in order to offset the adverse effects of this material change. If there are fewer qualified successful applicants than the number specified in s. 1, the other material change benefits specified in s. 5 and 6 will be triggered as applicable.

3.1 In order to offset the adverse effects of this material change, Early Retirement Allowances will be offered subject to the following principles:

a) For the purpose of this agreement, the positions offered for Early Retirement opportunities are defined as twelve (12) positions in the North Vancouver zone which includes the spareboard factor (25%) or three (3) positions and two (2) positions in the Lillooet zone at date of material change notice being served (Squamish and Lillooet – April 15, 2002; Fort Nelson – June 17, 2002).

b) To facilitate a timely calculation of pension entitlements and Early Retirement Allowances, the Railway will request by bulletin that employees who have an interest in taking advantage of an Early Retirement Allowance under this agreement make application to the Railway.

c) Employees who have indicated an interest in an Early Retirement Allowance and who are in, or likely to be in a position to take advantage of this benefit in accordance with s. 3.3 will be advised as to the amounts of their entitlement under s.3.5 of this agreement, and their projected pension entitlement no later than September 30, 2002.

d) Employees who have expressed interest in an Early Retirement Allowance in accordance with 3.1(a) above and who meet the eligibility requirements for an Early Retirement Allowance under this agreement must ensure that their application is received by the Company prior to October 25, 2002.

e) For the purposes of awarding benefits under this agreement, the employee’s assigned position and location as of 0001, October 25, 2002 will be utilized.

f) Employees who accept an Early Retirement Allowance must comply with the conditions attached thereto at the earliest opportunity. The decision to accept an offer of an Early Retirement Allowance is irrevocable.

3.2 These Early Retirement Allowances are specific to this agreement and will be offered to eligible UTU members in the following manner:

a) Early Retirement opportunities will be offered in seniority order to the United Transportation Union (UTU) members in the zones materially adversely affected by the elimination of the passenger service between North Vancouver and Prince George (North Vancouver zone and Lillooet Zone) and sale/lease of the Fort Nelson subdivision (Fort St. John/Fort Nelson zone). UTU members must have held seniority in the applicable zone on April 15, 2002 or June 17, 2002.

b) Positions not claimed by UTU members in the North Vancouver zone, Lillooet zone or Fort Nelson zone will then be awarded to UTU members on a system seniority order basis.

c) Employees who may not be in a position to see the Bulletin when issued due to authorized leave of absence, bona fide sickness or annual vacation will be advised of the contents of the Bulletin by registered mail to their last known address.

d) It will be the responsibility of the employee to apply within the specified time limits, and failure to make timely application may result in denial of an Allowance to that employee.

e) The number of Early Retirement Allowances taken will reduce an equal number of available severance opportunities as per s. 6.

f) Early Retirement Allowances will become effective as of November 1, 2002, unless alternate prior arrangements have been made.

3.3 Eligibility

An employee eligible for an Early Retirement Allowance is defined:

a) as an employee who is fifty-five (55) years of age or older, and who has more than five (5) years’ cumulative compensated service, and who otherwise qualifies as per 3.1 or 3.2 above.

3.4 An employee who accepts the offer of an Early Retirement must make an irrevocable commitment to retire/resign/terminate from the service of the Company and that employee is then free to exercise the options available under the Company’s pension rules.

3.5 Early Retirement Allowance Benefits

An employee who is eligible for and accepts an Early Retirement Allowance:

a) will be credited with “points” for each year (or major portion thereof) of service with BC Rail

- five (5) points for each of the first fifteen (15) years of service

- three (3) points for each of the subsequent five (5) years of service, and

- 1 point for each subsequent year of service

Maximum point entitlement = one hundred (100) – each point is worth the equivalent of $1,000.

The value of the points an employee is eligible for may not exceed the employee’s normal earnings until retirement at age 65. An employee’s normal earnings will be based upon his earnings for the preceding twelve (12) months.

4.0 Relocation Benefits

4.1 The relocation benefits as provided in the current collective agreement relocation policy will apply. Any UTU members who are displaced as a direct result of this material change and who are unable to hold a position within their home terminal and are able to exercise their seniority to claim a permanent position in another zone.

5.0 Severance Payments

5.1 An employee with two (2) or more years of Cumulative Compensated Service (CCS) as of the implementation date of this material may upon submission of formal resignation from the Company’s service claim a severance payment as set forth below.

- for each of the first five (5) years of CCS – two weeks pay

- for each year between the sixth (6^th) and fourteenth (14^th) year of CCS – three weeks pay

- for each of the fifteenth (15^th) and subsequent years of CCS – four weeks pay

- An employee’s normal earnings will be based upon his earnings for the preceding twelve (12) months.

5.3 In no case will the number of Early Retirement Allowances and severance opportunities combined exceed the number of affected employees as defined in s. 1 and ten (10) positions with respect to the Fort Nelson subdivision sale/lease.

6.0 Final Disposition

This agreement disposes of all Union demands in respect of the abolishment of positions resulting from the termination of operation of the Cariboo Prospector as previously described pursuant to the provisions of “Material Changes in Working Conditions” articles of the listed collective agreements.

The Union requests that the arbitrator remain ceased of this issue until all aspects of these material changes have been fully implemented.

3. CUTE Local 1 Position and Proposal

CUTE Local 1 disputes a number of matters arising out of the material changes before this board. As a starting point, this Union vehemently opposes the Railway’s submission regarding its ability to pay, and the appropriateness of utilizing the JSF to deal with the adverse effects of the material changes at issue. The Union also strongly resists the Company’s proposal that the MBR be adopted by the parties, as it was ordered in the Beltpak arbitration. It rejects the Company’s proposal on these matters, out of hand, pointing out it is not covered by the JSF Agreement, nor does its Collective Agreement contain reference to MBR. It wants no part of these benefits, and seeks a combined early retirement/severance package which far exceeds the amounts proposed by the Company.

CUTE 1 proposes that the Company provide a number of severance/early retirement packages equal to the number of its members who will be affected by the material changes. CUTE 1 proposes to post a special bulletin – in effect a “mini-bid” – so as to allow its members to bid into the positions affected by the material changes. The Union argues that its members’ system-wide seniority rights must be recognized by allowing individual Locomotive Engineers to make an informed choice about which location they wish to bid into. CUTE 1 contends this process is equitable, and has no lingering effects for the Company because the voluntary departures of senior employees will leave the remaining employees unaffected by the loss of positions.

CUTE Local 1 makes the following proposal to address substantive and procedural matters arising out of adverse effects triggered by the Cariboo Prospector material change. As noted at the outset the parties agree identical terms will apply to employees affected by the sale/lease of the Fort Nelson Subdivision:

1) As a result of BC Rail’s cessation of the Cariboo Prospector passenger service, six (6) locomotive engineer positions will be abolished. In order to minimize adverse effects of this material change on employees, six (6) voluntary departure incentive packages will be made available in order to encourage more senior employees to make-way for those remaining.

2) With the voluntary departure of one employee related to each abolished job, the adverse affects related to that specific material change will be considered settled with finality and no further benefits will apply to that particular material change.

3) Affected positions will be bulletined (see article 23.1.3(6)) system-wide (see article 23.1.3(7)) and will become effective simultaneously with their abolishment as a result of the applicable material change. An explanatory notation will be appended to the above mentioned bulletins stating:

“Items number _____ of Bulletin number ____ will become effective simultaneously with the job’s abolishment, precipitating a material change in working conditions related to (the short-lining agreement with company-X or the discontinuation of the Cariboo Prospector passenger service). Successful applicants to these positions will be entitled to voluntary departure incentive packages as outlined in the Vince Ready material change arbitration award of (date)”.

The order in which incentive packages will be offered is as follows:

i. First: to the incumbent applicant of the above mentioned system-wide bulletin. If the incumbent fails to voluntarily depart the company’s employment then 3ii.

ii. Second: by bid within the zone where the specific job abolishment occurred and posted immediately upon the employee’s refusal under 3i; awarded to the incumbent with the greatest seniority. If the bulletin fails to elicit an applicant, then 3iii.

iii. Third: by system-wide bid posted immediately should 3ii elicit no voluntary departure; awarded to the incumbent with the greatest seniority. If the bulletin fails to elicit an applicant, then 3iv.

iv. Fourth: in the event that no employee takes advantage of the incentive departure package opportunities in 3i, 3ii or 3iii; it will be put up for bid system-wide, to be awarded to the incumbent with the greatest seniority, over the next 2 consecutive general reassignments or until such time as that specific incentive package is acted upon.

v. Finally: in the event that no employee takes advantage of any specific incentive package after 2 consecutive general reassignments, the adverse affects related to that specific material change will be considered settled with finality on the basis of attrition.

4) An employee who qualifies under item 3 and chooses to avail him or herself of a voluntary severance/early retirement incentive opportunity shall be entitled to provisions as outlined below.

5) Voluntary Severance/Early Retirement Package:

The voluntary severance/early retirement package is available to all employees regardless of age and will consist of the following:

Credit weeks for incentive departure payments are earned and accumulated on the basis of years of cumulative compensated service as follows:

For each of the first five years 2 weeks

For the sixth through fourteenth years 3 weeks

For the fifteenth and subsequent years 4 weeks

Departure payment will be based on the number of credit weeks multiplied by the basic weekly rate at the time of severance.

6) Voluntary departure incentive could be paid as a lump-sum cash payment within one month of acceptance or, at the discretion of the recipient, deferred, in whole or in part, to late January of the year following acceptance.

7) Locomotive engineers working in a managerial capacity do not qualify for voluntary departure incentive packages.

ANALYSIS AND CONCLUSIONS

The role of an arbitrator, appointed pursuant to a Collective Agreement to determine measures to minimize the adverse effects of material change, involves balancing the parties’ respective competing interests to arrive at a result dependent upon the particular circumstances at hand. There is clearly an “interest” element to the “rights” dispute raised, and due consideration must be given to the myriad, and often subtle, aspects that would drive a consensual bargain. These include, for example, the historical and present contexts, prevailing economics and similar negotiated resolutions.

To this end, I have carefully assessed the parties’ positions and have arrived at the following conclusions.

1. The number of affected employees in the Fort Nelson Subdivision are: five (5) Locomotive Engineers; ten (10) Trainmen.

2. In regards to the Railway’s dispute with the UTU, I award the terms set out in Appendix “A” to this decision, which contains all matters of agreement and determination. In respect to the specific outstanding UTU issues I make the following observations.

As noted above, the parties dispute three specific matters relating to separation allowance entitlement, the extent to which early retirement/separation benefits are offered, and the amount of benefits.

I am satisfied that a lump sum payment offer be made to affected employees without drawing a distinction between early retirement benefits and a severance allowance.

There shall be twenty-four retirement/separation payment benefit packages made available for affected UTU members: fourteen arising out of the cessation of the Budd Car, and ten for the Fort Nelson Subdivision. The number of packages to be offered to employees adversely affected by the sale/lease of the Fort Nelson subdivision shall be reduced by the number of Trainmen who elect to transfer to the new Shortline operator under Appendix “C” of this Award. The packages shall first be offered to employees at the affected locations as at the date the Union was given notice of the respective material changes (i.e., April 15, 2002 for Budd Car, and June 17, 2002 for Fort Nelson).

I do not accept the Railway’s position that the amount of the financial incentive offering to affected employees should be equal to those outlined in the Job Security Fund (JSF) Agreement. That Fund is only one part of the Agreement which the Railway has with its non-running trades. I also do not accept the Maintenance of Basic Rate (MBR) is an appropriate result, notwithstanding reference to this benefit in the UTU Collective Agreement and its applicability to the circumstances considered in the Beltpak arbitration.

The information before me reveals that North American railways and their running trades unions have negotiated more generous early retirement packages for employees affected by material changes than have been offered by the Company in this case. In arriving at my conclusion on the key financial matters in dispute, I have attempted to balance the parties competing interests and arrive at an appropriate compromise between the two disparate positions advanced by the parties regarding early retirement and severance allowances.

The Early Retirement/Separation Payment benefit will be based upon a point formula with a maximum entitlement of $60,000.00 based on each point being valued at $600.00. Entitled employees age 55 and up will be credited with five points for each of the first fifteen years of service. Three points are credited for each additional year up to twenty years of service. One point is added for each subsequent year to a maximum of one hundred points. A reduction formula shall apply whereby one’s entitlement is reduced by one-fifth for each year over age sixty.

3. The terms addressing members of CUTE Local 1 are contained at Appendix “B” to this award. Suffice it to say, the economic terms essentially mirror those contained in Appendix “A” governing the UTU. The running trades share a common context and this is reflected by agreements reached throughout North America.

As noted above, I find the amounts set out in the JSF are not appropriate in the present circumstances. Nor do I accept the application of the MBR, particularly as that concept does not exist in CUTE 1’s Collective Agreement. The Union vehemently opposed the MBR and I accept it should not be included in the terms to address the adverse effects of the material changes in issue. Rather, I have accepted that a retirement/separation payment benefit based on a point formula is appropriate in all of the circumstances. The maximum value of such a package is $60,000.

There shall be eleven (11) retirement/separation payment benefit packages made for affected CUTE Local 1 members: six (6) arising out of the cessation of the Budd Car, and five (5) for the Fort Nelson Subdivision. The number of packages to be offered to the employees affected by the sale/lease of the Fort Nelson Subdivision shall be reduced by the number of Trainmen who elect to transfer to the new Shortline operator under Appendix “C” of this Award.

I have determined that the term “affected employee” in the present circumstances covers those who were employed at the relevant locations at the time notices were issued by the Company (i.e., April 15, 2002 for the Cariboo Prospector and June 17, 2002 for the Fort Nelson change). The purpose of Article 23.1 is to minimize the adverse effects of material change “on employees who are affected thereby”. To my mind this purpose would not be achieved by allowing for a special bulletin which would likely benefit individuals whose day-to-day positions are completely unrelated to and unaffected by the material changes in the present case.

The Union’s position, based on recognized system-wide seniority, has some initial appeal. Employees within the system have a right to exercise informed choices about their contractually entitled location bids. In the present circumstances, however, I am not prepared to award a special bulletin.

4. The order of transition from BC Rail to the new Shortline operator, in the event BC Rail employees elect to move to the new operator, is contained at Appendix “C” to his award. These are appropriate terms for the circumstances at hand.

As stated at the outset of this Award, the parties have agreed that my decision on this issue will not in any way serve to prejudice any argument either Union may make regarding the propriety of the Fort Nelson initiative.

These matters conclude my task of determining measures to minimize the adverse effects of material changes relating to the cessation of the Cariboo Prospector (Budd Car), and the sale/lease of the Fort Nelson subdivision. I shall remain seized with jurisdiction to resolve any disputes arising out of the implementation of this decision.

It is so awarded.

Dated at the City of Vancouver in the Province of British Columbia this 4^th day of October, 2002.

Vincent L. Ready

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Vincent L. Ready