BETWEEN

AND

SOLE ARBITRATOR: H. Allan Hope, Q.C.

V.L. Paull

P.M. MacPhail

A hearing in this matter was held at Prince George, British Columbia, on March 12, 1986

The Employer in this dispute operates a Railway throughout the Province of British Columbia. The Union is one of seven unions included in a single bargaining unit certified to represent employees of the Railway. Each Union enters into a separate collective agreement. In this dispute the Union alleges that the Railway breached its collective agreement when it sought and accepted a bid from a salvage company to scrap eight rail cars at a derailment site in northern British Columbia.

The derailment occurred on June 27, 1985 at Anzac Siding, a site located approximately eighty miles north of Prince George. The position of the Union is that the work of scrapping cars is work which belongs exclusively to employees in its union and that the work should not be assigned to employees belonging to other unions in the bargaining unit or to persons outside the bargaining unit. In advancing its claim the Union relied on the following provision of its collective agreement:

The term "mechanic" is used in this and other collective agreements in the bargaining unit to encompass skilled tradesmen in various crafts rather than employees in a particular job category. The Union interpretation is that Rule 41 represents an agreement between the parties that the work of scrapping "tanks and cars" will be done exclusively by members of the Union. The Railway’s submission is that the provision does not deal with work jurisdiction, but relates instead to the obligation to have scrapping work performed under the supervision of a mechanic.

The Railway’s alternative position is that the circumstances amount to a salvage sale of the wrecked cars which were then scrapped and removed by the purchaser of the salvage rights. Hence, says the Railway, the salvage operation did not represent work done by the Railway at all. The Railway’s final position is that the scrapping and removal of the cars was, at most, a contracting out of work to the salvage company and that it is entitled to contract out such work under the terms of the collective agreement. The Railway said there is no prohibition against contracting out in the agreement and, in fact, there is an express reservation of its right to contract out all work. The agreement upon which the Railway relies is contained in a Letter of Understanding appended to the collective agreement.

The seven unions in the bargaining unit bargain jointly through a council, but, as stated, each union enters into its own collective agreement with the Railway. Again as noted, there is only one bargaining unit. That unit was described by the Labour Relations Board of British Columbia in British Columbia Railway Company and Council of Trade Unions on the British Columbia Railway et al [1981] 1 C.L.R.B.R. 366 (Munroe) on p. 368 as follows:

Hence, one could say that any restriction against assigning work outside of the "bargaining unit" would require proof of its assignment beyond all seven constituent parts of the single, multi-union bargaining unit. But that is clearly not the case. Whatever deficiencies in terminology may exist, there is a well-established and historical recognition of the fact that, for purposes of work jurisdiction, there are seven "sub-units". Within that reality, each union can make claim to Jurisdiction over particular work as against the other unions included in the single bargaining unit.

That is an important fact in this dispute. It is important because it assists in understanding what the parties may have intended with respect to Rule 41. The Union raises the question, if that provision does not prevent the Railway from assigning the work of scrapping cars to persons other than Union members, what does it mean? The submission of the Railway is that if Rule 41 has a jurisdictional component, a finding the Railway contests, it only exists to ensure that when the scrapping of cars is done by employees of the Railway, those employees must be Union members.

The submission of the Union is that the Rule exists to prohibit the assignment of such work to any persons other than employees who are members of the Union. In the view of the Union, any assignment of that work to a non-member of the Union, whether it be to employees represented by other unions in the bargaining unit, outside individuals or firms or by sub-contract, is a breach of Rule 41. I will return to that issue later in this award.

Turning back to the facts, the dispute commenced when a train was derailed near Anzac Siding on June 27, 1985. There were some differences with respect to the number of cars ultimately involved in the derailment. The first indication is that 53 cars were pulled from the scene by the train crew and 12 were left there to await further action. That further action came from a special group of employees put together as a team to respond to derailments. That group is called by various names. The one I will use for consistency and convenience is, the "Auxiliary Crew". The Auxiliary Crew is made up of supervisors and bargaining unit employees drawn from this Union. It first attended at the derailment site on June 28, 1985.

The work necessary to clear the line was done, in the course of which the crew salvaged whatever could be salvaged from the 12 cars left behind. In that preliminary work, which was done between June 28 and July 3, it would appear that four of the cars were found to be in a condition to be removed intact on their own wheels, leaving eight to be disposed of at the site. In the preliminary derailment report dated July 3, 1985, it was indicated that nine cars had been left to be scrapped at the site. The discrepancy was not explained, but an explanation is not vital to a resolution of the dispute. The fact is that it was concluded by the Auxiliary Crew that the remaining cars, however many there were, would have to be scrapped at the derailment site.

That decision was based on a determination that the damage to the remaining cars was such that they could not be pulled from the site on their own wheels and, further, because of disfiguration, they could not be loaded intact and pulled from the site on flat cars or gondola cars. In the result, the cars were left at the scene for a decision to be made by the Railway on how the on-site scrapping would proceed. In preparation for leaving the cars, the Auxiliary Crew, as stated, removed their wheels and salvaged all other parts which were deemed to be salvageable.

Sometime prior to August 13, 1985, the Railway made its first attempt to dispose of the remaining cars. John Upton, an official in the Purchasing Department who is responsible for disposing of salvage, contacted salvage companies in Prince George and Vancouver to determine if he could obtain an offer to purchase the eight cars in what the parties describe as an "as is – where is" condition. The exact date sequence of that initiative was not given but it obviously took place shortly before August 13, 1985. It was on that date that the Union filed a grievance, later abandoned, which challenged the right of the Railway to sell the cars for scrap at the site without involving the Auxiliary Crew in their removal from Railway property.

That grievance was filed when the Union learned that the Railway had solicited "as is – where is" bids for salvage rights to the cars. In the grievance the Union particularized the actions of the Railway which it saw as violating various provisions of the collective agreement. The grievance reads in part as follows:

The Railway was unsuccessful in obtaining bids for purchase of the salvage rights and, as stated, the August 13 grievance was abandoned. Several of the salvage companies declined to even consider making a bid. Those which sent representatives to the site concluded that there was no economic viability in purchasing salvage rights because of the remoteness of the location and the consequent high cost of scrapping and removing the cars.

I digress to note that when the Auxiliary Crew attended in the first instance, the crew pushed the cars away from the right-of-way to clear the main line. It was determined that scrapping the cars on site would require that they be cut up into pieces, hauled back to a location convenient for loading, and then loaded onto flat cars or gondola cars for transportation to a centre where the pieces could be sold for scrap. (Ultimately some of the cars were scrapped, removed and sold to a company in Edmonton. Further work was postponed due to winter).

Returning to the initial grievance which was later abandoned, it will be remembered that a Letter of Understanding between the parties with respect to contracting out was one of the aspects of the collective agreement said by the Union to have been violated by the Railway. The grievance was responded to by Martin Wojtula, the Railway official responsible for salvage operations. On August 23, 1985 he wrote to the Union in the following terms:

It was explained in evidence that the Railway, as stated, does not consider the sale of scrap cars to be the contracting out of work. Rather, the Railway views such a transaction as the sale of equipment which, for various reasons, is no longer serviceable. Such sales are beyond the reach of the collective agreement entirely, says the Railway. The Union later treated that reply as a concession by the Railway that it was limited in its rights to disposing of cars "intact". But that restricted view of the letter is not supported in its context or by the other evidence. In any event, the initial grievance was abandoned after the proposed sale of salvage did not materialize and there the matter sat until December 18, 1985, when the Union filed a second grievance, being the grievance giving rise to this arbitration.

The second grievance was filed in response to a further initiative taken by the Railway to dispose of the cars. That initiative included a proposal to pay a disposal fee to a scrap dealer to augment the scrap value of the cars and thus make their removal a viable proposition. The sequence of events giving rise to the second grievance commenced with Mr. Upton. When he was unsuccessful in his effort to sell the cars for scrap, he proposed to higher management that the removal of the cars be put up for tender on a salvage and removal basis. In response to his recommendation he received the instructions from the Railway on October 1, 1985 to "proceed with a tender call for a salvage clean-up operation to remove the cars from the site."

Mr. Upton sought tenders from salvage dealers and received only one bid. It was a bid in which the salvage company offered to scrap the remaining cars at the derailment site and remove them for a contract price of $6,000 in addition to rights to the salvaged material. That bid was accepted by the Railway on October 25 and it then took steps to advise the Union of its intentions with respect to the cars. In particular, R.E. Leche, a labour relations officer for the Railway, wrote to the Union that same day in the following terms:

On that basis the work of removal proceeded and, as stated, four cars were scrapped and removed before the onset of winter. The scrap was removed to Edmonton by the salvage. dealer. The scrap was shipped to Edmonton via the Railway and the Railway was paid for that service.

The Railway, as stated, took as its first position the submission that the transaction in issue did not amount to a contracting out of work any more than its initial proposal to sell the cars for scrap on an "as is – where is" basis was a contracting out. The nature of the transaction from the point of view of the Railway was a sale of the cars for salvage, coupled with a payment to subsidize the salvaging of the cars so as to make it economically attractive to potential bidders.

Alternatively, the Railway said that even if the sale amounted to a contracting out, it is entitled to contract out any form of work it pleases under the Letter of Understanding. That Letter of Understanding reads as follows:

The Union took two positions. Its first submission was that the transaction in question did not amount to a contracting out, but was simply the assignment of the work of scrapping cars on site to non-bargaining unit persons. In that regard the Union emphasized that the Railway did not assert that it had sold the cars to a salvage company, but rather that it had entered into an agreement to pay the salvage companies $6,000 to scrap the cars on site and haul them away.

The work involved in on-site scrapping of rail cars, said the Union, had always been performed by the bargaining unit and could not be assigned to anyone outside of the bargaining unit. Alternatively, the Union said that if the transaction amounted to a contracting out, the Letter of Understanding with respect to contracting out had to be seen as subject to what the Union saw as an express jurisdiction conferred on the bargaining unit in Rule 41 whereby all scrapping of rail cars on Railway property was to be done by employees who are members of the Union.

There is little doubt on the evidence that the transaction consisted of a disposition by the Railway of the salvage rights to the cars, a condition of which disposition was a requirement that the cars be removed from the Anzac Siding site. The terms of the transaction appear to have contemplated that property in the cars to be scrapped was to pass to the salvage company. The confusion, to the extent it exists, arises with respect to the further condition of the agreement with the salvage company that it be paid a fee of $6,000 over and above the salvage rights in order to subsidize the removal.

However, there seems little point in the context of the dispute in seeking to determine whether the transaction amounted to an outright sale, a contracting out of work, or a combination of those two types of transaction. Certainly it must be conceded that if the Railway were to have succeeded in its first attempt at selling the cars for scrap value, even assuming the sale was made subject to a condition that the cars be removed from the site, the transaction could not have been described as a contracting out of work.

But the payment of $6,000 is problematical. It will be remembered that the letter to the Union informing it of the Railway’s intentions, contained the statement "[The cars] are to be removed … for a contract price of $6,000." Further, in the instructions given by senior management to Mr. Upton, he was told to "proceed with a tender call for a salvage clean-up …" That terminology implies the letting of a contract by the Railway for the performance of the work of scrapping the cars and cleaning up the site, rather than an outright sale of the cars. Whether or not it would be seen as something else as a strict matter of law, the transaction appears, as the Union pointed out, to involve a payment by the Railway to the scrap company for the performance of a category of work which could have been performed by the Union component of the bargaining unit.

For those reasons I propose to deal with the facts on the assumption that the contract entered into between the Railway and the salvage company amounts to an assignment of work which had been performed previously by employees who are members of the Union. More precisely, the work falls within the description of the disputed Rule in the sense that it involved the scrapping of cars. Thus, the first question is whether the work was contracted out within the meaning of the Letter of Understanding. The initial submission of the Union was that the facts do not amount to a contracting out in the terms contemplated in the Letter. The Union submitted that the facts amounted simply to an assignment of work to non-Union and non-bargaining unit persons. I do not agree with the Union submission.

In dismissing that argument I note that it proceeds on the assumption that only a sale of the cars would constitute a "contracting out" within the meaning of the Letter. But that narrow interpretation is not supported in law or in the language of the Letter. The "contracting out" spoken of in the Letter is the contracting out of work. It may be that the work will be coincidental with a contract incorporating a wider consideration, but it is the contracting out of work which is the subject matter addressed in the Letter. No distinction can be made on the facts and in the authorities between the contracting out of the work of removing a car "intact" from a derailment site and the work of scrapping the car on site and removing it in pieces.

On the facts before me the transaction in question amounts to either an outright sale of the cars, with a condition that they be removed, or the contracting out of the work associated with scrapping the cars and loading them onto rail cars for removal. If it was an outright sale, the collective agreement does not apply. If it is the contracting out of the work of scrapping the cars, the Rule does not apply. The Letter of Understanding contemplates a right in the Railway to have work performed by its own forces or to contract out the performance of work to non-employees. There is no restriction on the type of work which may be contracted out. In my view, Rule 41 does not restrict the right of the Railway to contract out work. I turn now to an explanation of the basis upon which I made that finding.

There was evidence to indicate that when the Railway itself retrieves cars intact from derailment sites and transports them to either Prince George or Squamish for their scrapping, it is members of the Union who perform the work associated with retrieving the cars. If they are later scrapped by the Railway, it is Union members who do the scrapping work. In addition, although the evidence was somewhat vague, it would appear that, in the past, some cars have been scrapped by Union members at derailment sites and then loaded out for disposition elsewhere.

On the evidence the fair inference is that the incident in question is the first occasion upon which the Railway has retained persons other than Union employees to scrap cars on Railway premises, either on-site at derailments or elsewhere on Railway premises. In short, the transaction with respect to the cars at Anzac Siding, whether it be an outright sale subject to scrapping and removal, or a contracting out of the work of scrapping and removal, amounts to a change in the Railway’s long-standing practice with respect to the scrapping of cars, a fact which accounts in large part for the dispute.

On the evidence, the Railway has dealt variously with the task of scrapping cars. The implication is that some scrapping of cars occurs as a routine consequence of the deterioration of equipment. In that process, cars are removed from service and forwarded to a location, usually Squamish, where the scrapping takes place in shop facilities. In addition, the scrapping of damaged cars is an on-going process on the Railway and various scrapping procedures have been employed in response to the particular circumstance. The practice depends largely on the degree of damage the car has sustained. Cars damaged beyond repair but capable of being run on their wheels and hauled on the track, are hauled, usually to Squamish but sometimes to Prince George, where the scrapping takes place. Cars damaged too heavily to be hauled on their wheels but capable of being loaded onto a gondola car or flat car and hauled on the track, are loaded out and taken to either Prince George or Squamish for scrapping. It is only when the damage has distorted cars to the point that they cannot be hauled intact on the track that the issue of on-site scrapping arises. Then, as stated, cars have been buried or scrapped on-site and removed by the Union employees. The practice followed in this dispute, as stated, is new to the parties.

The Union relied heavily on the Railway’s practice with respect to the scrapping of rail cars as extrinsic evidence which supports its interpretation of the collective agreement. In support of that extrinsic evidence of practice, the Union produced a letter dated April 10, 1980 from the Railway’s vice president of operations and maintenance to the general chairman of the Union, which sets out the policy of the Railway with respect to the scrapping of rail cars at Squamish. The letter reads as follows:

The Union sees that letter as reflecting a policy binding upon the Railway which confines it to the use of Union employees in any scrapping of cars that takes place on Railway property. The Union submits that the letter, coupled with the practice of the Railway, reinforces its interpretation of Rule 41 as reflecting a mutual agreement prohibiting the Railway from assigning scrapping work to any non-bargaining unit person, including the contracting out of such work.

In advancing its position the Union says that the letter amounts to a concession that all cars scrapped on Railway property must be scrapped by Union members and that the Railway is limited, in the sale of cars, to permitting a purchaser to remove cars intact from Railway property. The Union sees the letter as an express concession that purchasers of rail cars will "not be allowed to cut up equipment and scrap it in our yard."

The answer of the Railway is that the letter does not address the circumstances present in this dispute. In particular, the Railway pointed out that the letter addresses the policy governing the scrapping of cars in the Squamish Yard, a circumstance the Railway saw as totally different from the scrapping of cars at a remote derailment location. Secondly, the Railway said that the letter deals with a policy regarding the sale of cars as scrap as an alternative to the Railway scrapping the cars with its own forces.

Finally, the Railway submitted that neither the practice nor the policy relates to the question of the Railway’s right to contract out work. The policy, said the Railway, neither addresses nor compromises the general right of the Railway to contract out any type of work. Even assuming the text of the letter could be extended beyond its narrow application to a particular circumstance in Squamish Yard, said the Railway, it could not be seen as contradicting the clear right of the Railway to contract out any work it pleases. As to the practice, the Railway said that the fact that work is not contracted out does not in any way indicate an agreement that it will not be contracted out in future. I agree with the Railway’s submission.

The policy letter does not address the facts in Issue. Nor can it be said that a failure to contract out a particular kind of work is evidence of a mutual intention that it will not be contracted out at some future time. Finally, I note that the language and structure of Rule 41 does not represent an express intention to reserve all work in the scrapping of cars to the Union. The language is at least ambiguous in that regard. Perhaps the most fundamental principle of the interpretation of collective agreements is that extrinsic evidence cannot be used to contradict or vary the terms of a collective agreement. The Letter of Understanding is part of the collective agreement and the consequence of accepting the interpretation of the Union would be to negate the clear rights spelled out in the Letter.

The principles governing the interpretation of a collective agreement were addressed extensively by the Labour Relations Board in the context of extrinsic evidence in its decision in University of British Columbia and Canadian Union of Public Employees, Local 116 [1977] 1 C.L.R.B.R. 13 (Weiler). The Board said on p. 17:

The reasoning in UBC and CUPE relates to extrinsic evidence of bargaining history, but it applies with equal force to all forms of extrinsic evidence. The Labour Relations Board extended the reasoning specifically to extrinsic evidence of past practice in The Corporation of the District of Burnaby and Canadian Union of Public Employees, Local 23 [1978] 2 C.L.R.B.R. 99 (Weiler) @ pp. 100-02.

The Union is entitled to rely on any extrinsic evidence which augments the terms of the contracting out provisions contained in the letter, but cannot rely on extrinsic evidence to amend or contradict those terms. On that understanding, I note that there is no evidence of bargaining history and I find that the evidence of practice relied on by the Union is, at best, ambivalent with respect to the basic issue of contracting out the work of scrapping cars. In particular, the practice of the Railway in the scrapping of cars does not imply a waiver of its right to contract out the work of scrapping cars.

In addition, the evidence does not disclose that any clear practice has developed which is referable to the scrapping of cars in the field. The evidence from both parties is that the Railway had never disposed of cars in the field on a previous occasion in the manner adopted in this dispute. But that is not the only issue raised with respect to practice. What is absent from the evidence is an established practice of restricting the scrapping of cars in the field to Union members. The apparent fact is that on-site scrapping has not occurred with sufficient frequency for a singular practice to have developed in the sense contemplated in the authorities. See: Re Dominion-Consolidated Truck Lines Ltd. and Teamsters Union, Local 141 (1981), 28 L.A.C. (2d) 45 (Adams) @ p. 49. Even if such a practice had developed, it could not be seen as a basis for amending the language of the collective agreement with respect to the express right of the Railway to contract out work. See: Re Corporation of City of Victoria and Canadian Union of Public Employees, Local 50 (1974), 7 L.A.C. (2d) 239 (Weiler).

The conclusion I must reach is that the Railway confronted a circumstance in which it was required to remove damaged cars from the Anzac Siding site. The Railway addressed that problem on the basis of the cost-effectiveness of various options. Its first step, as already stated, was to enquire whether the cars could be sold for salvage. When that option proved to be unrealistic, the Railway considered the viability of having the Auxiliary Crew scrap the cars on site and remove them.

In approaching that alternative, the Railway requested an estimate from Mr. Wojtula of the cost of completing the process using bargaining unit forces. Mr. Wojtula divided the cost into two parts, one being the actual work of scrapping the cars on site. His figure in that regard was $26,805. His second estimate was the cost of having the Auxiliary Crew attend to remove the salvaged cars from the site. His estimate in that regard was $22,046.

There was considerable controversy between the parties as to the accuracy of that estimate. However, it is clear on the evidence that the cost of having the work performed by bargaining unit forces would substantially exceed the amount which resulted from assigning the salvage in the cars to a salvage company and paying the salvage company a $6,000 subsidy to remove then. There was a salvage value in the cars, but they had no salvage value at Anzac and the cost of their removal was estimated to exceed that value.

Thus, even taking into account the potential salvage value, it is clear on the evidence that the cost to the Railway of having the salvage and removal done by bargaining unit forces would substantially exceed the cost it faced if it accepted the proposal of assigning the salvage to a salvage company and subsidizing its removal. But even if the cost of contracting out the work was in excess of the costs of assigning the work to the bargaining unit, it would not affect a determination of the dispute. Accepting that the Railway has the right to contract out the work, the practicality and cost implications of exercising that discretion is for the Railway to judge.

In my view the question raised is fully answered by the submission of the Railway that the transaction was either an outright disposition of an asset which was then to be removed by the purchaser, or it was a contracting out of work which the Railway was entitled to contract out under the terms of the collective agreement. In either case, the grievance must fail.

The Railway relied on earlier contracting out decisions made in arbitrations with another union included in the multiple bargaining unit. Those decisions include the British Columbia Railway and CUTE, Local 6 (Contracting Out Arbitration), July 24, 1982, unreported; and BCR and CUTE, Local 6 (Kennedy Grievance), September 12, 19853 unreported. Turning to the most current of those decisions, being the Kennedy Grievance, the arbitrator commented on a Letter of Understanding on contracting out which is worded in the same language as the Letter of Understanding in this dispute. On p. 13 the arbitrator said as follows:

In my view that same reasoning applies to the facts in this dispute and the grievance must be dismissed. The Union submitted that if the determination was to be that the work was contracting out and fell outside the reach of the collective agreement, I should address what I consider to be the proper meaning to be assigned to Rule 41. The submission of the Railway is that the interpretation of Rule 41 does not arise from the facts and that it is improper to interpret it in a vacuum.

I agree in substance with the Railway’s submission. The jurisdictional aspects of this collective agreement are sufficiently sensitive and vital to the relationship that they should not be the subject of interpretation in the absence of facts which raise the issues of interpretation to be addressed. Hence, it is more prudent to await a set of facts in which the application of Rule 41 is raised squarely in issue before seeking to define its interpretation and application.

However, I do not agree with the submission that the significance of Rule 41 in terms of the dispute is beyond comment. I can make the general observation that the concept of work jurisdiction appears to be an intrinsic part of this collective agreement and that it is clear that the Railway has recognized the work jurisdiction of this Union with respect to a wide range of tasks as between the various components of the bargaining unit. It is equally clear that the Railway intended to reserve to itself a complete discretion with respect to the contracting out of any of the work that is otherwise subject to the provisions of the collective agreement.

The rationalization of those separate approaches to the question of work jurisdiction may be found in the fact that this is a multi-union bargaining unit. It may well be that Rule 41, as the Railway said, applies to restrict the Railway with respect to the assignment of work as between those component unions. It may also be a restriction against assigning the work of scrapping cars to Union members other than those working under the direction of a "mechanic". However, in the final analysis, I agree with the Railway that the meaning of the provision with respect to other applications is not a matter before me. Whatever else may be said about Rule 41, it does not amount to an express prohibition against contracting out the work of scrapping cars. That, at best, is the nature of the transaction giving rise to the dispute. In the result, the grievance is dismissed.

DATED at the City of Vancouver, in the province of British Columbia, this 5th day of May, A.D., 1986.