SHP 308












There appeared on behalf of the Union:

A. Rosner Executive Secretary, CCRSU

F. Conway System General Chairman, SMWIA

R. Loiselle General Chairman, IBB&B

J. Brady System General Chairman, Carpenters

T. Wood System General Chairman, BRC



There appeared on behalf of the Company:

S. A MacDougald Manager, Labour Relations, Montreal

B. Laidlaw System Labour Relations Officer, Montreal

C. Methot Manager, Banking, Montreal


A hearing in this matter was held in Montreal on May 3, 1990.



The Union grieves the Company's announced mandatory implementation of a Direct Deposit System for the payment of employees. The Statement of Dispute and Joint Statement of Issue are as follows:


Grievance concerning the Company's implementation of the Direct Deposit System (D.D.S.) of payment of employees.


The Company advised the union by letter dated December 11, 1989 of its intention to discontinue paying employees wages by cheque and to implement the Direct Deposit System (D.D.S.) on a mandatory basis for all employees on June 8,1990.

The union contends that the proposed unilateral implementation of D.D.S. by the company is in violation of the Pay Procedures Rule 19 as set out in the collective agreement. In the alternative, and in addition to the above, the union maintains that the company is estopped from implementing such a change during the life of the current collective agreement.

By way of remedy, the union would ask the arbitrator for a declaration to the above effect, as well as to rule that employees who signed up for D.D.S. since the beginning of 1990 should be permitted to withdraw their authorization for same.

The company denies the union's contentions and has declined the remedy requested.

The material facts are not in dispute. Originally the Company paid its employees by cash. Later, generally estimated as being roughly in the 1950's, it converted to payment by cheque. From that time, until recently, pay cheques with pay stubs were delivered to employees at or near their regular place of work, generally referred to as the "pay-at point". In 1982 the Company entered into an agreement with the Brotherhood of Locomotive Engineers which provided for a direct deposit of the pay of employees directly into their bank accounts. It appears that that system was subsequently voluntarily adopted as well by the employees represented by the CN Police Association. It is not disputed that the initial Direct Deposit System (D.D.S.) which was implemented for the Brotherhood of Locomotive Engineers in 1984 was the result of negotiations which took place in respect of the renewal of that trade union's collective agreement. On March 13, 1984 Mr. John W. Asprey, then president and secretary-treasurer of the Canadian Council of Railways Shopcrafts Employees and Allied Workers, the Union's predecessor bargaining agent, wrote to the Company's then vice-president of employee relations stating, in part:

This office has been informed that the Railway is planning to implement a "Bank Direct Deposit" for employees' pay cheques.

We are requesting that no change be made in the pay procedure until such time as the matter has been fully discussed with the Negotiating Committee of this Council.

Rule 19 of Wage Agreement 12.1 should apply until agreement is reached to change the agreement.

Rule 19 referred to in the foregoing correspondence is as follows:

19.1 Employees will be paid bi-weekly during regular working hours.

19.2 Should the regular pay day fall on a holiday or days when the shops are closed down where practicable men will be paid on the preceding day.

19.3 When an employee is short paid more than a half day's pay a voucher will be issued within three working days of an employee's request for payment to cover the shortage. The time specified herein shall be exclusive of Saturdays, Sundays and holidays.

19.4 Employees leaving the service of the company will be furnished with a time voucher covering all time due within 24 hours at points where discharge checks are issued, and within 48 hours at other points, or earlier when possible. The time specified shall be exclusive of Saturdays, Sundays and holidays.

19.5 During inclement weather, provision will be made where buildings are available to pay employees under shelter.

19.6 All overtime earned shall be shown as a separate item on the pay cheques of employees

The material discloses that in 1984 the Company was already forwarding pay cheques for some of the Union's members directly to their banks, presumably by mail or some other form of courier. Mr. D.C. Fraleigh, Assistant Vice-President, Labour Relations, of the Company, replied to Mr. Asprey on March 15, 1984 by way of a letter advising him that the Company would ask employees who were then having their cheques forwarded to their own bank whether they would be willing to voluntarily join the Direct Deposit Service. Mr. Fraleigh further clarified matters by a letter dated April 10, 1984 which stated, in part:

There seems to be some confusion and rumours surrounding the application of the Direct Deposit System. In order to alleviate any misunderstanding on the issue, the following clarification seems required:

1. The D.D.S. is presently mandatory for B.L.E. and CNR Police Association members and all transportation non-schedule and middle management employees.

2. Only those employees who have had for some time their pay cheques forwarded to financial institutions, were asked if they wished to join D.D.S.

3. If employees who have an option, choose not to join D.D.S., the Company will discontinue direct deposit and will produce a cheque to be forwarded to the pay-at point where employees currently receive their statement of earnings effective April 19, 1984.

At the present time, only those of your members described in Item 2 above were approached by the Company. The pay procedure remains unchanged for the other employees. [Original emphasis]

It is common ground that the trade union raised no objection to what the Company was then proposing to do. Its spokesperson states that it had no objection to arrangements being made voluntarily between its members and the Company in respect of payroll by D.D.S., but was at all times clearly on record that the Company's right to impose such a system mandatorily on all employees was circumscribed by rule 19 of the collective agreement. It does not appear disputed that the D.D.S. met with substantial acceptability and success. In September of 1985 Mr. Fraleigh advised Mr. A. Rosner, Mr. Asprey's successor, that over 15,000 employees of the Company were enrolled in the Direct Deposit Service and put him on notice that pay cheques to be delivered on October 3, 1985 would contain a letter and brochure further explaining and offering D.D.S. to all employees on a voluntary basis on the Atlantic Region and in Newfoundland, with a similar initiative to follow in other regions shortly thereafter. Finally, on December 11, 1989 Mr. Fraleigh wrote to all bargaining agents, including the Union, advising them, in part, as follows:

In as much as over 50% of CN's employees are currently being paid by D.D.S., it is our intention to discontinue the present dual distribution system of paying employees' wages and, in this regard, terminate the outdated method of paying employees by cheque, effective June 8, 1990.

It is the foregoing communication which led to the filing of this grievance, the hearing of which has been processed in an expedited fashion for a determination on the merits prior to the planned date of implementation.

The Union's submission is two-fold. Firstly, it maintains that the language of rule 19 discloses the intention of the parties that the method of payment was intended to be the delivery of pay in the form of legal tender or a cheque to the employee at work, and that the entirety of the rule is not consistent with the unilateral implementation of a Direct Deposit System by the Employer. Alternatively it argues that the Company is estopped from introducing the D.D.S. payroll method during the currency of the collective agreement, principally on the basis of the statements made earlier in letters by the Company, indicating that D.D.S. would be available to the Union's members only a voluntary basis. In particular he relies on the letter of April 10, 1984 reproduced above, which he characterizes, in part, as a written promise that even those employees who chose to elect D.D.S. could, if they opted, revert to receiving a cheque at the pay-at point, effective April 19, 1984. He argues that that promise has never been withdrawn and cannot be gone back on now.

In the Arbitrator's view the instant grievance is not so clearly resolved on the basis of estoppel, as it is on the terms of rule 19 of the collective agreement. It is arguable, as the Union asserts, that the assertion of Mr. Asprey, first made in March of 1984 that D.D.S. must be a matter for mutual agreement in the light of the content of rule 19, an assertion which was never disputed by the Company, and which was followed by letters from Mr. Fraleigh indicating that the Company would only proceed with a voluntary program, does suggest something akin to representation by the Employer that mandatory D.D.S. would not be introduced without the Union's agreement. I do not deem it necessary to resolve that issue, however, given my view of the clear intention of rule 19.

It is well established that the method of payment can be made a term of a collective agreement, and this may be by either express or implied terms. Regard must be had to the language of the collective agreement and the facts of each case to determine whether the parties have agreed, directly or indirectly, to limit the Employer's discretion of the method of payment. (See Maritime Telegraph and Telephone Company Limited, (1986) 24 L.A.C. (3d) 381 (MacMillan) and see also CROA 1810, an award concerning a grievance between the Company and the Canadian Brotherhood of Railway Transport and General Workers).

In my view articles 19.1, 19.5 and 19.6 are persuasive of the outcome of this grievance. The first provision contemplates that employees are to be paid during "regular working hours". It cannot be seriously disputed that what is contemplated are the working hours of the employee who is receiving his or her pay. As the Union's representative points out, the electronic transfer of funds into an employee's bank account during normal banking hours would, for an employee whose regular working hours are on a midnight shift, be plainly in violation of article 19.1. While, strictly speaking, computer operations might be arranged to avoid that anomaly, what is more significant is the underlying understanding or expectation revealed in article 19.1, namely that employees are entitled to receive their pay while they are at work. In its origins this provision may have been fashioned to avoid the possibility of an employee being compelled to come to work in off-hours to collect a paycheque. However, it does reflect an understanding that the payment is to be made at a pay-at point.

That conclusion is reinforced by the language of article of 19.5. The provision that during inclement weather payment is to be made in a sheltered location is equally consistent with an understanding between the parties that employees are to be paid by means of an exchange of money, in some form, at work, and as indicated in article 19.1, during regular working hours. That understanding and expectation is further reaffirmed by article 19.6 which speaks expressly of overtime being shown separately "... on the pay cheques of employees...". While technically the computation of overtime is disclosed on a paycheque stub, and more recently on a specially designed payroll envelope, the use of the term "pay cheques" within article 19.6 cannot be entirely ignored. In the Arbitrator's view, when read together with the remainder of rule 19, it emerges as further confirmation of the understanding of the parties that employees in this bargaining unit are to be paid during their regular working hours, at work, by means of a cheque.

It also appears to the Arbitrator that the provision for the payment of shortages to employees by means of a voucher, as specified in rule 19.3 as well as to terminating employees under rule 19.4 are consistent with that conclusion. It seems to the Arbitrator counter-intuitive to conclude that the parties would have intended that the Company should have fullest discretion to make electronic payment transfers into employees' bank accounts, but must provide a form of cheque for shortage payments and the payment of discharge cheques. In the Arbitrator's view it is more logical to conclude that rules 19.3 and 19.4 contemplated the payment of monies to employees in those circumstances by the same means as agreed in respect of their regular bi-weekly pay, that is to say by means of a written negotiable instrument or cheque.

None of the foregoing should be construed as a comment on the advisability of the Company converting to a uniform D.D.S. payroll for all of its employees. There is little doubt that the Employer is motivated by good faith and valid business considerations in wishing to move to a universal D.D.S., with the elimination of administrative duplication that it would involve. The issue before the Arbitrator, however, is not the advisability of such a system but whether it is permitted under the terms of the collective agreement which the Company has made with the Union. For the reasons related above, I am compelled to the conclusion that rule 19 does, as indicated in Mr. Asprey's letter in March of 1984, reflect an agreement between the parties that members of this bargaining unit are to be paid at work, during their regular working hours, by means of a pay cheque or voucher.

For the foregoing reasons the grievance is allowed. The Arbitrator finds and declares that the unilateral implementation of D.D.S. by the Company constitutes a violation of rule 19 of the collective agreement. The Arbitrator further directs the Company to allow all of those employees who enrolled in D.D.S. after the Company's announcement of mandatory enrolment in December of 1989 be given a reasonable opportunity to withdraw their authorization and be restored to the pay at point system previously in effect, if they so elect. Needless to say, none of the conclusions arrived at herein prevent the parties from negotiating an amendment to rule 19 on mutually agreeable terms.

The Arbitrator retains jurisdiction in the event that any dispute between the parties with regard to the interpretation or implementation of this award.

DATED at Toronto this 7th day of May, 1990.

(sgd) M. G. Picher