SHP - 440



Canadian Pacific Railway Company – Mechanical Services

(the "Company")


National Automobile, Aerospace, Transportation and General Workers Union of Canada (CAW-Canada) Local 101

(the "Union")

re: the contracting out of repairs of ocs and revenue cars


Sole Arbitrator: Michel G. Picher


Appearing For The Union:

A. Rosner – National Representative

R. Laroche – Financial Secretary, Local 101

G. Michalchuk – Vice-President, Local 101

J. Munch – Witness


Appearing For The Company:

K. E. Webb – Manager, Labour Relations, Calgary

D. E. Guerin – Labour Relations Officer, Calgary

D. K. Meyler – Director, Technical Support, Montreal

J. G. Cain – Director, Car Maintenance and Planning, Calgary


A hearing in this matter was held in Montreal on Friday, 11 April 1997.



The Union grieves the contracting out of repair work on OCS (on company service) freight cars. The background to the dispute and issues are related in the Joint Statement of Fact and Issue filed at the hearing, which reads as follows:


By letter dated January 17, 1997, the Company advised the Union that repairs to 40 Tie gondolas, 10 Airdumps and 30 Flat cars, all in the OCS fleet, would be "contracted out immediately". The letter stated that "this is only a temporary measure and (I) assure you that the work will be done in-house once we have been able to fill the vacant positions at Ogden."

By letters dated January 22 and 23, 1997, the Union grieved, stating that the contracting out in question was in violation of Rule 53 of the collective agreement, and proposing, by way of remedy, a manner of performing the work in Winnipeg which the Union stated would permit such performance "on a timely basis".

The Company denied the grievance on February 4, 1997, stating that there were no surplus Carmen available in Winnipeg, that it would consequently not be possible to re-open the Weston Car Repair Facility, and that "it should not be concluded that this work would have been performed at Weston Car even had the facility remained open."


The Union submits that the contracting out in question is in violation of Rule 53.1 of the collective agreement, in that none of the exceptions therein set out to the general prohibition are applicable. The Union requests a declaratory finding in this respect, an order that the contracting out in question cease and desist and that the work be returned forthwith to the bargaining unit, and that employees who remained laid off or lost overtime opportunities in connection with the contracting out of this work be made whole. The Union further submits that the Company violated Rule 53.5 in respect of the proposals made to it by the Union to keep the work in house.

The Company denies the Union’s contentions and submits that it was justified in contracting out the work in question as contemplated in Rule 53.1, exception (ii).

In October of 1996 the Company served notice on the Union, pursuant to article 8 of the Job Security Agreement, that it would close the Weston Car and Locomotive Shops effective February 1, 1997, as well as the Sudbury Mechanical Shop. The notice indicated the transfer of activities at Weston to Ogden Shops in Calgary, as well as a shift of the Sudbury work to Thunder Bay. In the result, some 166 carmen’s positions were abolished at the Weston Shops, and 73 new carmen’s positions were established at the Ogden Car Shop in Calgary. It appears that approximately forty-seven Winnipeg carmen opted to transfer to the Ogden Car Shop, along with seven carmen from Montreal, whose relocation rights arose under separate circumstances. It is also common ground that a substantial number of carmen employed at the Weston Shops opted for early retirement, bridging or separation with the benefit of a lump sum severance. The Arbitrator is advised that some ninety-one employees indicated their intention to terminate their employment by way of the foregoing options, effective February 1, 1997.

On January 17, 1997 Mr. Dave Meyler, Director of Mechanical Technical Support, wrote to the Financial Secretary of the Union, Mr. Robert Laroche, giving notice of the Company’s intention to contract out repair work on the OCS fleet, cars used for internal Company purposes. That letter reads as follows:

As you are undoubtedly aware, with the closure of our Mechanical facilities at Sudbury and Weston, certain work was transferred to other locations. In line with the provisions of Rule 23 of our collective agreement, transfer opportunities were made available to adversely affected employees at the locations from which the work is to be transferred.

Unfortunately, fewer employees opted for the work transfer relocations than are required to perform the necessary work. We are presently canvassing other locations, in compliance with the provisions of our special agreement, to attract employees to the Ogden Car Repair Facility but, at the moment, it seems doubtful that we will have sufficient employees to carry out the work on February 1st.

We are presently exploring other avenues for filling these positions, have contacted the Provincial apprenticeship boards in each of the provinces involved, and are preparing newspaper advertisements to attract new employees.

While we are confident that we will be able to fill the positions through Regional bids and local hiring of new employees, clearly we will not be in position to handle all of our required work in the short term. Of particular concern at the moment is the OCS fleet which, as you are well aware, must be available by early Spring for the upcoming track maintenance season.

Therefore, it is unavoidable that certain work on our OCS fleet be contracted out and I am writing, as required by the provisions of Rule 53.4, to advise you that the repairs to the following groups of cars will be contracted out immediately.

I emphasize that this work is only a temporary measure and assure you that the work will be done in-house once we have been able to fill the vacant positions at Ogden.

Should you wish to discuss this matter further, please feel free to call me.

The Union’s Prairie Region Vice-President, Mr. Glenn Michalchuk, responded by way of letters dated January 22 and 23, 1997. He objected to the contracting out, alleging it to be in violation of Rule 53 of the collective agreement. Mr. Michalchuk proposed, among other things, that the work be returned to be performed at the Weston Car Shops, with an extension, if necessary, of the article 8 notice to allow for the completion of the work, by retaining employees to work at that location beyond February 1, 1997 and, additionally, by the recall of any laid off carmen.

While it appears that a later communication from Mr. Meyler to Mr. Laroche indicated that an additional fifty revenue cars would be repaired on a contracted out basis, it is common ground that as of March 19, 1997 the contracted out work had been completed, and had been confined to thirty OCS flat cars and twenty-four revenue cars.

Rule 53, which governs the prohibition against contracting out, provides, in part, as follows:

53. Contracting Out

53.1 Effective July 9, 1995, work presently and normally performed by employees who are subject to the provisions of this collective agreement will not be contracted out except:

(i) when technical or managerial skills are not available from within the Railway and cannot be made available through a permanent transfer of employees from other locations on the system, through a reasonable level of training, re-training or upgrading of the active or laid-off employees; or

(ii) where sufficient employees, qualified to perform the work, are not available from the active or laid-off employees and cannot reasonably be made available through a permanent transfer of employees from other locations on the system; or

(iii) when essential equipment or facilities are not available and cannot be made available at the time and place required from Railway-owned property, or bona fide leased from other sources at a reasonable cost without the operator; or

(iv) where the nature or volume of work is such that it does not justify the capital or operating expenditure involved; or

(v) the required time of completion of the work cannot be met with the skills, personnel or equipment available on the property; or

(vi) where the nature or volume of the work is such that undesirable fluctuations in employment would automatically result.

53.2 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.

53.3 At a mutually convenient time at the beginning of each year and, in any event, no later than January 31, representatives of the Union will meet with the designated officers to discuss the Company’s plans with respect to contracting out of work for that year.

53.4 The Company will advise the Union representative involved in writing, as far in advance as is practicable, of its intention to contract out work which would have a material and adverse effect on employees. Except in case of emergency, such notice will not be less than 30 days.

53.5 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 completed. The Company will provide the Union with a description of the work to be contracted 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.

The Union submits that none of the exceptions provided under rule 53 can be invoked by the Company to justify the contracting out which took place. As a first position, its representative submits that it was within the prerogatives of the Company, as reflected in article 8 of the Job Security Agreement, to delay the implementation of the job abolishments at the Weston Shops, by resort to a new notice, as provided under articles 8.2 and 8.3 of the Job Security Agreement. He argues that it would have been relatively simple for the Company to prolong operations at the Weston Car Shops to retain a sufficient complement of carmen and, to a lesser extent pipefitters, to accomplish the work which was being contracted out. He submits that even though employees may have been put to an irrevocable election with respect to separation options, or moving to Calgary, effective December 18, 1996, nothing would have prevented the Company from discussing with the Union the possibility of delaying the implementation of the original article 8 notice so as to accommodate the completion of the work in question at Winnipeg. That, he submits would have been in keeping with the intention of article 53.5, which is characterized as providing the Union an opportunity to make a "business case" to the Company to propose a viable alternative to the contracting out option.

As a second alternative, the Union’s representative submits that it was open to the Company to utilize its car shop work force at the Ogden Shops in Calgary, to perform the work. This, he submits, could have been accomplished by resorting to a limited amount of overtime, at least while awaiting the filling of the full complement of new positions at that location. In this regard he notes that some fifty-four of the seventy-three positions at the Ogden Shops car facility were filled effective February 1, 1997, and that an additional fourteen car employees who were on layoff at Ogden Car were available for recall. The Union’s representative emphasizes that the performance of the work by recourse to overtime at Ogden Shops would not, as a general matter, have been unusual or offensive to normal practice. He notes, for example, that although the approximately 238 carmen at Ogden Car Shop worked virtually no overtime in the period January, February and March of 1997, in excess of 25,000 hours of overtime were worked by the 510 employees on the Ogden Locomotive Shop, while more than 14,000 hours of overtime were worked by some 215 employees at the Alyth Diesel Shop, also located in Calgary.

By the Union’s reckoning, assuming that a full complement of carmen at the Ogden Car Shop would be seventy-three, the shortfall of nineteen carmen at the Ogden Shop during the period in question could have been met by resort to overtime which its representative calculates, on average, would have totaled 3.2 hours of overtime per employee per week for a period of several weeks. That, he submits, is a reasonable amount of overtime, regard being had to the average of overtime in other shops in Calgary, including the Ogden Locomotive Shop.

The Company’s representative stresses that, as undertaken in the Company’s letters to the Union, every effort was made to cancel the contracting out of the car repairs as the capacity to perform them became available. In the result, he advises that some forty tie gondolas, ten airdumps, ten flat cars and eleven box cars were returned for repair work at Ogden and Lethbridge. That reduced the contracted out work to thirty RSQ flat cars in OCS service and twenty-four flat cars and box cars in revenue service.

The Company representative submits that the Company’s response was predicated, in substantial part, on considering the suggestions being put forward by Mr. Michalchuk, all of which concerned the possible continuation of operations at the Weston Car Shops. He submits that the Company was not in a position to consider that option, given the irrevocable elections made by a substantial number of employees, effective December 18, 1996. In light of the special arrangements negotiated pursuant to the article 8 notice under the Job Security Agreement, the Company had incurred obligations, and employees had made career choices, which made it impracticable to consider a delay in the February 1 closing of the Weston facility. It also appears from the Company’s submissions that the transfer of tools and equipment from Winnipeg to Calgary was under way prior to February 1, 1997. The Company’s spokesperson notes that the position of the Union, which is to effectively prolong the operation of the Weston Shops, is arguably beyond the jurisdiction of an arbitrator who might be seized of any dispute with respect to the negotiations under article 8 of the Job Security Agreement, as reflected in the language of article 8.6. He suggests that the Union is attempting indirectly to achieve arbitral second guessing of the decision of the Company to make the operational change which was then being implemented.

The Company’s representative submits that the facts, and in particular the transfer of staff and equipment to Ogden Shops from the Weston Car Shop, justifies the Company’s actions under item (iii) of rule 53.1, as the essential equipment or facilities were not available to perform the work. He further argues that the Union cannot claim lost overtime opportunities for employees who were actively at work at the time of the contracting out. In this regard he refers the Arbitrator to CROA 1004, 1490 and 2005. Finally, he submits that the Union did not itself make any serious or elaborated proposal in the nature of a "business case" as contemplated under rule 53.5 of the collective agreement. The Company’s representative submits that Mr. Michalchuk’s bare suggestion that the Weston Car Shop be continued in operation to accomplish the contracted out work falls well short of the requirements of specificity which he submits appear in the final sentence of the rule. He further submits that the Union cannot establish that there were any material and adverse effects on employees as a result of the Company’s actions, stressing that all former employees from the Winnipeg area had either transferred to Calgary or were in receipt of their full protections under article 8.1(a) of the Job Security Agreement.

As a final submission, the Company’s representative submits that item (ii) of rule 53.1 applied to allow the Company to resort to contracting out. He submits that there were not sufficient employees qualified to perform the work available from the active or laid off employees. In the result, the Company submits that there was no violation of the contracting out provisions of the collective agreement.

I turn to consider the merits of this dispute. As a first consideration, the Arbitrator must deal with the dispute between the parties as to whether the prohibitions against contracting out would allow the Union to claim that work could reasonably be performed on an overtime basis. A close review of the jurisprudence tends to support the Union’s position. The earliest decisions of the CROA appear to have recognized that the possibility of performing work on an overtime basis must be weighed in assessing whether there has been a violation of the prohibition against contracting out. In CROA 688, Arbitrator Weatherill expressly found there was an adverse effect on employees by the actions of the Company in contracting out, if only to the extent that they were deprived of a reasonable opportunity to perform the work on an overtime basis. In that regard he commented, in part, as follows:

The contracting-out of this work (no less a contracting-out in that it was "passive", that is permitted by the Company), while it did not, in my view, tend to "erode" the bargaining unit in that no positions were depleted, did in fact "adversely affect" employees in that they were deprived of a reasonable opportunity for overtime work. The project (insofar as it involved the switch) was well within the capacity of the employees concerned, working reasonable overtime hours.

In that case the arbitrator awarded compensation in the form of overtime rates to employees who would, in the normal course, have worked on the contracted out project.

A similar result was reached in a relatively recent decision in an arbitration between VIA Rail Canada Inc. and the International Association of Machinists and Aerospace Workers, an award of Arbitrator Frumkin noted as SHP-381. In that case the Union grieved the contracting out of work on a paint spray booth, arguing that the railway could have scheduled the work on an overtime basis. Arbitrator Frumkin rejected the Corporation’s suggestion that overtime need not be a consideration in respect of the issue of contracting out. At pp 11-13 the following comments appear, in part:

The Arbitrator can see nothing in the wording of any of the exception set out in Section 24.1 which would excuse the Company from the general prohibition against contracting out upon the sole basis that work comprised within an assignment must be allocated as overtime. …

More specifically, the second exception enumerated in Section 24.1 speaks of availability from the active or laid off employees which would indicate that the contracting out against which the Section militates should not be proceeded with where there are available from amongst active employees, (as well as those on layoff), employees to assume it. It would follow that the possibility for allocation of work functions as overtime to active employees is not excluded and that such avenue should be considered before resorting to a contracting out.

The Arbitrator is not saying that the exceptions enumerated in Section 24.1 are not broadly framed and should, in particular circumstances, operate to exclude a particular assignment from the umbrella of bargaining unit protection afforded by Section 24.1 where such assignment, if allocated as overtime, may, in certain respects, prove impractical, difficult or disruptive. But even in such a case, it will be for the Company to demonstrate what the consequences of allocating an assignment as overtime would have been and that these consequences justified the contracting out with which it proceeded.

The Arbitrator has not ignored a decision in Canadian Pacific Limited and International Brotherhood of Electrical Workers, March 17th, 1989, J.F.W. Weatherill, arbitrator, where it is suggested that the fact that an assignment cannot be performed "without quite substantial overtime being involved" may bring that assignment within the ambit of the second exception enumerated in Section 24.2. In this case Arbitrator Weatherill expressed himself thusly:

The contracting out of work on the GE traction motors was indeed the contracting out of work "presently and normally performed" by members of the bargaining unit. The company, however, contends that the contracting out comes within exceptions 2, 5 and 6 of the Letter on Contracting Out. Exception 2 relates to the availability of qualified employees. I am satisfied, from the material before me, that the qualified active employees at Angus could not have performed all of the work required to be performed without quite substantial overtime being involved. There were no employees then laid off: there were employees who had been laid off from Angus but who had, in the exercise of their seniority rights, gone to work at the Cote St-Luc shops. The company was not required to increase its work force at Angus to accommodate them, and they were not affected by the contracting out. In my view, the contracting out did come within the scope of exception 2. [emphasis added]

[original emphasis]

The Arbitrator cannot reject the submission of the Union’s representative that there appears to be some inconsistency in the CROA jurisprudence with respect to the issue of the possibility of resort to overtime as an alternative to contracting out. I must agree that in reviewing the cases it is imperative to appreciate that CROA 1004 arose out of a case where there was no collective agreement prohibition against contracting out. In that context, the authority of CROA 1490 and 2005 should be viewed as relatively limited.

The better view would appear to be that expressed by Arbitrators Frumkin and Weatherill in the passages quoted above. That is to say, where it can be demonstrated that a "reasonable amount of overtime" could have allowed bargaining unit work to be performed without contracting out, the Company may be unable to claim that qualified active employees could not have performed the work required. By the same token, if the work in question can only be accomplished by resort to overtime so substantial as to be unduly burdensome, the exception may well be established. The determination of what constitutes a reasonable amount of overtime must, I think, be resolved on the facts of each particular case, regard being had to a number of factors, including the general practice or pattern with respect to the scheduling of overtime work in the workplace in question.

In the instant case, as discussed above, it would appear that the contracted out work could, in fact, have been performed in the Ogden Car Shop at Calgary through the scheduling of a relatively limited amount of overtime, calculated on an average basis. When regard is had to the substantial amounts of overtime being worked during the same period in other shops within the same establishment, including the locomotive diesel shop, it becomes doubtful to the Arbitrator that it would have been unreasonable or unduly burdensome for the Company to accommodate the work in question through the scheduling of some overtime within the car shop.

On the foregoing basis, the Arbitrator must accept that the grievance is well-founded. I find and declare that the Company did violate the contracting out provisions of rule 53 of the collective agreement by failing to assign the work in question to members of the bargaining unit at the Ogden Car Shop, on an overtime basis.

In the instant case, however, the Arbitrator has some substantial difficulty with directing any monetary compensation. As stressed by the Company’s representative, and reflected in a close review of the documentation by the Arbitrator, there is no suggestion in the correspondence between the parties, commencing with Mr. Michalchuk’s objection to the contracting out of the work, that the Union ever claimed or sought anything other than performance of the contracted out work within the confines of the Weston Shops, at Winnipeg. There was never an indication on the part of the Union that it viewed the contracting out provisions as having prejudiced and adversely affected its members working at the Ogden Shops at Calgary. Indeed, the grievance was not filed by any Union officer at that location. While the Arbitrator appreciates that the bargaining unit is a single, national whole, a degree of equity should nevertheless apply in dealing with remedial issues. That is particularly so where specific remedial claims of substance are not advanced until the actual hearing of the grievance at arbitration. That is what transpired in the instant case, insofar as the Union’s claim for overtime work in Calgary is concerned. The Arbitrator accepts the Company’s position that it was impracticable to roll back the closure of the Weston Car Shops in the circumstances disclosed. It may also be noted that no employees lost employment by reason of the contracting out engaged in by the Company, and that the work in question is relatively limited. In the circumstances, in the Arbitrator’s view the remedy should be restricted to a declaration in favour of the Union’s interpretation, and an affirmative direction that the Company cease and desist forthwith from the contracting out. In light of the approach taken by the Union itself in its discussions with the Company, this is not an equitable case in which to direct the payment of compensation for overtime opportunities lost in Calgary.

For the foregoing reasons the grievance is allowed. The Arbitrator finds and declares that the Company violated rule 53.1 of the collective agreement by contracting out the OCS and revenue car repair work which is the subject of this grievance. The Company is directed forthwith to cease and desist such contracting out, and to assign the work in question to bargaining unit members, to be performed on the basis of reasonable overtime, if necessary. The Arbitrator also finds that the Company violated rule 53.5 by failing to give the Union a reasonable opportunity to advance a proposal, with disclosure of the full particulars as contemplated under that article.

This matter is referred back to the parties for implementation of this award, and in the event of any dispute with respect to its interpretation or implementation, I retain jurisdiction

Signed at Toronto, May 6th 1997