SHP – 409
IN THE MATTER OF AN ARBITRATION
Canadian National Railway Company
National Automobile, Aerospace, Transportation and General Workers Union of Canada [CAW-CANADA], LOCAL 100
RE: Contracting Out of Oil Lab work
SOLE ARBITRATOR: Michel G. Picher
APPEARING FOR THE UNION:
J. R. Moore-Gough – President, Local 100
T. Wood – National Representative
A. Rosner – National Representaitve
R. Senz – Machinist, Edmonton
R. Shewchuk – Boilermaker, Winnipeg
APPEARING FOR THE COMPANY:
J. Coleman – Counsel
D. Hamilton – Manager, Locomotive Operations
D. Beaton – Strategic Development Co-Ordinator
R. Champagne – Mechanical Supervisor
D. S. Fisher – Manager, Labour Relations
K. Laviolette – System Labour Relations Officer
A hearing in this matter was held in Montreal on Monday, 8 July 1996.
AWARD OF THE ARBITRATOR
This arbitration concerns a dispute between the parties with respect to the decision of the Company to contract out work previously performed by members of the bargaining unit, traditionally classified as machinists and boilermakers. The Union alleges that the contracting out in question is in violation of the collective agreement. The Company maintains that it is justified under the amendments to the contracting out provisions following on the interest arbitration award of the Mediation-Arbitration Commission, established pursuant to the Maintenance of Railway Operations Act, 1995, released on June 14, 1995. Alternatively, the Company maintains that the action which it has taken is a justified exception to the prohibition against contracting out, found within the pre-existing provisions of the collective agreement. The nature of the dispute is generally reflected in the ex parte statements of dispute and issues filed separately by the parties. Both statements read as follows:
UNION’S STATEMENT OF DISPUTE:
The contracting out of oil lab work by the Company to an outside firm, as well as the notice provided to the Union with respect to such contracting out.
UNION’S STATEMENT OF ISSUE:
On May 10th 1996, Mr. D.C. Hamilton, Manager Locomotive Operations for Canadian National, met with Mr. J.R. Moore-Gough, President of Local 100, in Toronto, Ontario. Mr. Hamilton informed the Union at this meeting that it was the Company’s view that CN economically should not be in the business of doing testing and analysis of oil samples from CN locomotives. Mr. Hamilton provided to the Union a Company performed cost comparison of having the oil analysis performed by bargaining unit members versus having it done by an outside contractor. Mr. Hamilton told Mr. Moore-Gough that the Union had seven days in which to submit a cost competitive bid on oil lab work or the Company would contract the work out. The Union responded by way of letter dated May 14th 1996 stating that such contracting out of oil lab work would be in violation of Rule 52.1 of Agreement 12.35. Further, the Union stated that the Company cost analysis, as supplied to the Union on May 10th was flawed.
On May 27th 1996, Mr. J.P. Mathieson, Chief Mechanical Officer for Canadian National, wrote to the Union stating the Company had contracted out the oil lab work. Further the Company issued to the Union beginning on May 30th 1996 a series of Article 8 notices informing the Union of the Company’s intentions of closing the oil labs, due to a reorganization of workloads, effective 120 days hence. Notwithstanding the provisions of said 120 days notices, the Company began immediately closing the oil labs as the equipment had been sold to the company that had been awarded the oil lab contract.
It is the Union’s contention that the contracting out of the oil lab work is in violation of Rule 52.1 of Agreement 12.35. It is further the Union’s contention that, even if the Company cost comparisons were correct (which the Union disputes), this in itself does not justify contracting out the work. Rule 52.1 does not provide an exception to the no contracting out provisions based upon the Company being able to have the work done cheaper elsewhere. In addition, it is the Union’s contention that the Company failed to provide to the Union proper notice in accordance with the provisions of Rule 52.3 of Agreement 12.35. It is the Union’s position that the Company’s arguments in this dispute should be limited to the reasons for which they made the decision to contract out the work in the first place. The Company’s decision was based on their allegation that the work in question could be performed more economically by an outside contractor. It was the Company’s view that Rules 52.1 and 52.3 had no bearing on the matter as the Company was contracting out the work in accordance with Rule 52.2. As such self serving after the fact attempts at justification should be given little or no credence. Finally, it is the Union’s contention that the Company’s action of refusing to attempt to reach agreement on a Joint Statement of Issue with respect to the dispute is in violation of the agreed upon disputes procedures of the collective agreement.
The Union requests in settlement of this matter that the Company cease contracting out the oil lab work and that such work be immediately returned to the bargaining unit. The Union also requests compensation for all wages, benefits and union dues lost, including overtime, as the result of the Company contracting out this work. In addition the Union requests that the Company be instructed that in the future reasonable and responsible efforts must be made to reach agreement on a Joint Statement of Issue.
COMPANY’S STATEMENT OF DISPUTE:
The Union contests the Company decision to contract out the locomotive lubrication oil analysis (lube oil).
COMPANY’S STATEMENT OF ISSUE:
Lube oil analysis work, traditionally assigned to employees of different crafts (old units) as light duty work, has evolved in the past two decades in both its complexity and volume. Furthermore, in the context of the closures of Taschereau (June 1, 1996) and the imminent closure of Moncton (September 1, 1996), the Company was required to reassess the performance of this work which is outside the core business of the railway and not specifically part of any specific craft classified work.
Consequently, the Company verified through a "Request for Proposals process" the appropriateness of outsourcing supply of all locomotive lube oil analysis services.
On May 10, 1996, Mr. D.C. Hamilton, Manager, Locomotive Operations for Canadian National, met with Mr. J.R. Moore-Gough, President of Local 100, in Toronto, Ontario, in order to discuss CN’s intention to contract out the lube oil analysis currently performed in the five line points. Mr. Hamilton shared with Mr. Moore-Gough CN’s business case for contracting out the work and invited the Union to submit a competitive business case to keep the work inside. The Union responded by way of letter dated May 14, 1996 and protested the legitimacy of the Company’s decision such that rather than submitting a business plan, the Union simply chose to attack the Company’s cost analysis.
It is the Company’s position that in view of the Union’s failure to submit a business case under new Rule 52.2 of the collective agreement, it is foreclosed from disputing the decision of the Company to contract out.
Furthermore, and in any event, it is the Company’s position that based on the historical assignment of oil lube analysis work, the Union has no claim to exclusivity, with the result that there is no prohibition whatsoever to contracting out the work.
Subsidiarily and without prejudice to the foregoing, if the Arbitrator were to find that such a prohibition exists under Rule 52.1, and in the context of 52.2, it is the Company’s position that the nature and volume of the work have changed such that the operating and capital expenditures involved are not justified in CN’s current operational environment. Consequently, the Company relies on the exception under 52.1(d).
There are two major points of fact which are not in agreement, for the purposes of this grievance. Firstly, the Union disputes the Company’s characterization of the oil testing work as having traditionally been assigned on the basis of light duty work to disabled employees. Secondly, the parties are disagreed as to the number of oil tests which are done or can be done using the Company’s facilities, and the unit cost of such tests, to the extent that the Company can justify its actions on the basis of the exception under rule 52.1(d) of the collective agreement. Before turning to the resolution of the factual issues, as well as the issues of interpretation, it is useful to now reproduce the provisions of the collective agreement which bear on the outcome of this grievance.
52.1 Effective February 3, 1988, work presently and normally performed by employees who are subject to the provisions of this collective agreement will not be contracted out except:
(a) when technical or managerial skills are not available from within the Railway; or
(b) where sufficient employees, qualified to perform the work, are not available from the active or laid-off employees; or
(c) when essential equipment or facilities are not available and cannot be made available at the time and place required (a) from Railway-owned property, or (b) which may be bona fide leased from other sources at a reasonable cost without the operator; or
(d) where the nature or volume of work is such that it does not justify the capital or operating expenditure involved; or
(e) the required time of completion of the work cannot be met with the skills, personnel or equipment available on the property; or
(f) where the nature or volume of the work is such that undesirable fluctuations in employment would automatically result.
The conditions set forth above will not apply in emergencies, to items normally obtained from manufacturers or suppliers nor to the performance of warranty work.
52.2 Except in cases where time constraints and circumstances prevent it, the Company will hold discussions with representatives of the Union in advance of the date contracting out is contemplated. The Company will provide the Union a description of the work to be contracted out; the anticipated duration; the reasons for contracting out, and if possible, the date the contract is to commence, and any other details as may be pertinent to the Company’s decision to contract out. During such discussions, the Company will give due opportunity and consideration to the Union’s comments on the Company’s plan to contract out and review in good faith such comments or alternatives put forth by the Union. If the Union can demonstrate that the work can be performed internally in a timely fashion as efficiently, as economically, and with the same quality as by contract, the work will be brought back in or will not be contracted out, as the case may be. Where a business case cannot be made to have the work performed by CAW members under the existing collective agreement terms and conditions, the parties may by mutual agreement modify such terms and conditions in an effort to have the work performed by CAW members.
Oil analysis tests, which involve testing locomotive engine oil for such factors as viscosity, the presence of water or dirt, and the testing of PH levels, give the Company a reliable method of diagnosing the condition of its locomotive fleet, and scheduling locomotives for periodic maintenance. The Arbitrator is advised that such tests are generally performed on a seven to ten day basis. In varying forms of technology and sophistication, they have been used since the 1960’s, following the conversion to diesel electric locomotives. Until recently such testing was carried out at the Company’s five principal maintenance points, Moncton, Montreal, Toronto, Winnipeg and Edmonton. With the recently announced closure of service facilities at Moncton and Montreal, the oil labs would be reduced from five to three in number.
It is also not disputed that technology has brought about substantial change in the methods utilized in oil analysis. While in the earliest times test were in the nature of relatively primitive physical tests to determine viscosity and impurities, the labs have evolved to include the use of an emission spectrometer, a device which measures light at specific frequencies by the burning of an oil sample. In the 1990’s still further technological innovations saw the introduction of a computerized software package which permits the tracking of tests on all locomotives, so as to allow for a predictive, rather than a reactive, approach. Under this system, referred to as Oil-Plus, the Company is able to predict oil failures by tracking oil constituents and contaminants, thereby having greater ability to schedule preventative maintenance. Further, the performance of physical tests by lab employees was eliminated by the introduction of infra-red technology in 1994. In the result, rather than performing the traditional physical tests, the employee now sets up automatic testing equipment which allows large quantities of oil samples to be tested for viscosity, fuel dilution, water, dirt and other factors. According to the Company’s estimates, these changes in technology and equipment reduced the labour requirement from an estimated one hundred person shifts per week in 1988 to approximately forty-five person shifts in April of 1996. It is common ground that at all times relevant to this grievance the work in question was performed by seven full-time and five part-time bargaining unit employees.
With respect to the first issue, the Arbitrator is satisfied that the position of the Union is more accurate. Its assertion that the work in question has traditionally been bid by employees on the basis of seniority is confirmed by the evidence of boilermaker Bob Shewchuk, who has been employed in the oil testing laboratory at Symington Shops in Winnipeg for some thirteen years. While it may be that on some isolated occasions employees suffering from physical disabilities have been assigned to oil testing as a form of light duty work, the preponderance of the evidence would appear to confirm the position of the Union that the work is, in fact, work which has traditionally been assigned to machinists and boilermakers in the bargaining unit in the form of both permanent bulletined assignments and regular part-time assignments.
Considerable documentation and argument was addressed to the question of the number of oil samples tested annually, and the related costs to the Company, as a function of the savings which could be realized by contracting out the oil testing work. Upon a review of the material the Arbitrator is satisfied that the numbers tendered in the Company’s presentation are the best evidence of the number of locomotives in the Company’s fleet, said to be some 1,500 Alco, General Motors and General Electric yard and road locomotives, as well as 200 GTW locomotives. More importantly, the Company’s figure of 52,758 samples having been taken in 1995 is, according to the evidence of Mr. Don Hamilton, Manager of Locomotive Operations, based upon an actual count conducted by the Company. The Arbitrator has no substantial or compelling reason to doubt the accuracy of that figure.
With the facts so determined, I turn to consider the two alternative issues of interpretation to be resolved. The first concerns the Company’s application of rule 52.2 in the wake of the decision of the Mediation-Arbitration Commission. It submits that the award of the Commission, chaired by Adams, J., has substantially altered the contracting out provisions of the collective agreement, in such a way as to allow more latitude for the Company to resort to contracting out in market competitive situations. Its counsel argues that rule 52.2 is not linked to rule 52.1 in its application. In other words, according to his submission, the introduction of rule 52.2 gives to the parties more than procedural rights, and extends substantive rights to them in respect of the rules which apply to the outsourcing of services.
The Union disputes that interpretation. It submits that both a reading of the collective agreement and of the award of the Commission confirms that the Commission did not intend to change the general prohibition against contracting out, nor the exceptions which have long been spelled out in rule 52.1. Rather, according to its representative, the award of the Commission provides to the Union the opportunity to enter into discussions and possible proposals to the Company to avert contracting out in circumstances where one of the exceptions under rule 52.1 is established, and the Company is at liberty to consider the option of outsourcing.
Upon a review of the language of the collective agreement, and the analysis reflected in the award of the Commission, the Arbitrator has substantial difficulty with the position advanced by the Company. At pages 60 and 61 of its award the Commission dealt with the positions of the parties on the issue of contracting out. That portion of the award reads as follows:
The Company proposes that a new exception be added to the contracting out provisions of the collective agreement which would allow contracting out when the work cannot be performed internally on a cost competitive basis in prevailing market conditions. It argues that the present provision leads to excessive rigidity in CN’s organization of work and unnecessarily raises its costs. It points out that much of the repair work which is at issue does not require the types of craft skills which, it says, relate more to the vested interests of the Union than to the realities of a cost efficient railway operation.
The CAW maintains that adopting the Company’s proposal would, combined with CN’s proposed changes to ES, be disastrous for its members. Even with the current restrictions on contracting out, the practice is rampant and increasing. Instead, the Union has proposed adding an enhanced consultation procedure which it says is modeled along the lines of the agreement on contracting out that it reached with CP. In the Union’s proposal, it would have to demonstrate that the work in question could be performed internally on a cost and quality competitive basis in order to forestall the contracting out of that work.
The Commission is attracted to the tenor of the CAW’s argument in this respect but not convinced that the contractual language it proposes is entirely appropriate. To grant CN’s proposal at this time would undermine the trade flexibility initiative agreed to by the parties in mediation. Instead Article 52.2 will read:
Except in cases where time constraints and circumstances prevent it, the Company will hold discussions with representatives of the Union in advance of the date contracting out is contemplated. The Company will provide the Union a description of the work to be contracted out; the anticipated duration; the reasons for contracting out, and if possible, the date the contract is to commence, and any other details as may be pertinent to the Company’s decision to contract out. During such discussions, the Company will give due opportunity and consideration to the Union’s comments on the Company’s plan to contract out and review in good faith such comments or alternatives put forth by the Union. If the Union can demonstrate that the work can be performed internally in a timely fashion as efficiently, as economically, and with the same quality as by contract, the work will be brought back in or will not be contracted out, as the case may be. Where a business case cannot be made to have the work performed by CAW members under the existing collective agreement terms and conditions, the parties may by mutual agreement modify such terms and conditions in an effort to have the work performed by CAW members.
In the Arbitrator’s view an intellectually honest reading of the above simply cannot support the position argued by the Company with respect to the primary issue of the interpretation of rule 52.2 as handed down by the Adams Commission. As is clear from the first paragraph under the heading "Decision" the Commission pronounced itself as being more favourable to the position of the Union, although it made an adjustment to the language proposed. It clearly and categorically rejected granting the Company’s proposal "at this time" for the reasons related. Most significantly, it is clear from the first paragraph of the above-quoted passage that in so doing the Commission viewed itself as rejecting the proposal of the Company "that a new exception be added to the contracting out provisions of the collective agreement". Clearly, the Commission did not intend to establish rule 52.2 as a separate substantive ground for an exception to the prohibition against contracting out. Indeed, as the Union submits, it would appear to the Arbitrator that if rule 52.2 is to have the meaning which the Company would give it, there would be little reason for maintaining the specific enumerated exceptions found in rule 52.1. On balance, therefore, I am satisfied that the interpretation of the Union with respect to the operation of rule 52.2 is correct, and that rule 52.2 only comes into play once the conditions are established which allow for contracting out, in accordance with the exception found under rule 52.1.
The issue then becomes whether the Company can succeed on the alternative basis that its decision to contract out is justified by the exception found in rule 52.1(d), namely that the nature or volume of the work is such that it does not justify the capital or operating expenditure involved in maintaining the oil testing program. In this regard, and setting aside the question of whether rule 52.1(d) was intended to apply to a "new or occasional venture", the Arbitrator is not persuaded that it can have any application in the case at hand. It is not disputed that the closure of the service facilities at Moncton and Montreal, and the related transfer of work from those locations to MacMillan Yard at Toronto has or will occasion expenditure to the Company in relation to the oil testing work. It is estimated that the Company may be required to spend as much as $125,000.00 to expand and relocate off-site the oil testing lab at MacMillan Yard. Further, there may also be some expense in relocating the lab in Edmonton, as it is believed that seismic vibrations from passing train movements over tracks which are adjacent to the lab in that location may affect test results.
While the Arbitrator is not unsympathetic to the fact that the Company is faced with certain additional expense, principally in the form of expanding its facility at MacMillan Yard, that is a consequence which flows from its own decision, obviously motivated to realize other permanent monetary savings, in closing the facilities in Moncton and Montreal. It is also significant, in my view, that there are virtually no capital expenditures to incur in respect of equipment. Indeed, it is not disputed that the contractor to whom the work has been outsourced has obtained and is using the very equipment previously owned and operated by the Company. On what basis can it be said that the ownership and operation of such equipment, whether in five locations or three, is an expenditure not justified by the nature or volume of the work involved? Firstly, there has been no substantial change or decline in the amount of work, in the sense that the same number of locomotives require the same degree of regular testing now, just as they did previously. This is not a case, therefore, where it can be said that the amount of work performed has dwindled to a degree of insignificance, so as to render the continued capital and operating expenditures non-justifiable.
Nor can the Arbitrator accept the argument of the Company that, by reason of technological advances and the introduction of computer and laser technology, the work performed by the employees involved cannot be said to be work "presently and normally performed" by employees, in a sense contemplated by rule 52.1 of the collective agreement. Firstly, I have some difficulty with the argument of the Company that the work there protected is work as may have existed on February 3, 1988. It would appear to the Arbitrator that a straight-forward reading of the article suggests that the phrase "presently and normally" is intended to have an ongoing meaning referable to the present as it might exist at any point during the term of a collective agreement, and not as it may have existed on the day the contracting out rule became effective. I find it unnecessary to rest this part of my decision on that reasoning, however. More fundamentally, even if it were necessary to characterize the work of the employees as work such as existed on February 3, 1988, that work plainly continues to be done. The introduction of new equipment, methods, tools or technology does not change the fundamental nature of the work which, in this case, is the ongoing testing of locomotive oil for viscosity, water content, impurities and other properties which have consistently been monitored for many years. While the methods and sophistication of the work may have changed, the tasks to be performed has not, and it cannot be said that the tasks in questions are other than "work presently and normally performed by employees" who are members of the bargaining unit.
In summary, the Arbitrator is satisfied that the work which is the subject of this dispute is work presently and normally performed by members of the bargaining unit, whether that assessment is made at the present time or as of February 3, 1988. I am also satisfied that the rationalizing of the Company’s operations, including the closing of the service facilities at Moncton and Montreal, with the redistribution of certain work to MacMillan Yard in Toronto does not bring the circumstances of this case within the exception of rule 52.1(d) of the collective agreement. The work in question is work which the Company has performed for many years, on the basis of an obviously justified capital and operating expenditure, in respect of which there has been little material change save for the possible expansion of its facilities at MacMillan Yard, and the still speculative possibility of a physical move of the laboratory in Edmonton. For the reasons related above, I am also satisfied that the interpretation of the Union with respect to the operation and application of rule 52.2 of the collective agreement is correct, and that it was not the intention of the Adams Commission to create, either directly or indirectly, a further exception to the prohibition against contracting out by the amendment of rule 52.2.
For all of the foregoing reasons the grievance is allowed. The Arbitrator directs that the Company cease the contracting out of the oil lab work, and that such work be returned to the bargaining unit. Employees affected shall be compensated for all wages and benefits lost, and the Union shall likewise be compensated for any related union dues. The Arbitrator retains jurisdiction in the event of any dispute between the parties with respect to the interpretation or implementation of this award.
Signed at Toronto, July __________, 1996
(signed) MICHEL G. PICHER