SHP - 441



Canadian Pacific Limited

(the "Company")


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

(the "Union")


Sole Arbitrator: Michel G. Picher


Appearing For The Union:

B. R. McDonagh – National Representative, CAW-TCA Canada

R. Laroche – Financial Secretary, Local 101

R. Laughlin – Vice-President, Eastern Region, Local 101

S. Levert – Vice-President, Atlantic Region, Local 101

P. Doré – Local Chairperson, Lodge 511, Local 101

G. Antinozzi – Local Chairperson, Unité Québec, Local 101

Appearing For The Company:

A. de Montigny – Labour Relations Officer, Montreal

M. Senécal-Tremblay – Legal Services, Montreal

D. Miller – Director, Iron Highway, Mississauga

A. Parry – Director, Iron Highway, Mississauga

C. Marchand – Instructor, St-Luc Yard, Montreal

D. Meyler – Director, Mechanical Services, Montreal

G. St-Pierre – Human Resources Coordinator, Montreal

A hearing in this matter was held in Montreal on April 3, 1997.



The Union grieves that the Company has violated the contracting out provisions of the collective agreement. Specifically, it alleges that the use of workers provided by an outside contractor to perform car inspection and maintenance functions in relation to a pilot project known as "The Iron Highway" is in violation of the contracting out provisions of rule 53 of the collective agreement. The Joint Statement of Fact and Issue filed at the hearing reads as follows:


In the latter part of 1996 the Company set into place an entity known as the Iron Highway. The Iron Highway has locations in Montreal and Toronto. Approximately 30 workers are employed at Iron Highway and they are not bargaining unit employees.


It is the contention of the Union that:

Therefore the Union claims that the work in question must be returned to the bargaining unit employees and the appropriate number of laid off and/or active bargaining unit employees be reimbursed all lost wages, benefits and losses incurred as a result of this contracting out by the Company.

The Company denies the Union’s contentions and claim.

The evidence discloses that the Iron Highway is an important initiative undertaken by the Company to attempt to recover a share of the market which has been lost to the trucking industry over the last forty years. Specifically, the project is intended to introduce a new form of equipment and service in short and medium haul corridors which is designed to provide to trucking companies a cheaper and more efficient alternative to transporting trailers by the use of a new type of intermodal equipment.

The Iron Highway is a continuous platform on wheels, comprised of a 1,200 foot deck, referred to as an "element" which can accommodate as many as forty trailers of varying lengths, many of which might not otherwise be rail compatible. Unlike conventional flat car technology, the Iron Highway is made up of forty 30-foot articulated platforms, each of which is equipped with a hitch to accommodate any size of trailer. Rather than utilizing the conventional car coupling system, with its attendant problem of "slack", the platforms are linked with slackless draw-bar couplers. The wheel trucks, which are positioned at the coupling point, are axle-free, which allows forced steering to reduce curve forces. They are also equipped with an elastro-metric suspension system which provides a superior quality of ride for the element. As many as five elements can be connected to form a 6,000 foot train. Significantly, each 1,400 foot element splits in the middle to provide for two self-lowering loading ramps. That allows the element to be loaded without the use of cranes or other heavy equipment. Trailers to be placed on the platform are simply driven onto it, much like a roadway, using a tractor hostler unit. It is estimated that an element can be loaded in fifty minutes and unloaded in thirty minutes, thereby allowing substantial efficiencies in the loading and dispatching of the Iron Highway train. In its original design the Iron Highway is to have two dedicated power locomotive units, one at each end. However, with respect to the pilot project which is the subject of this dispute, the Company has, so far, used its own conventional type locomotives with modified cab controls, two of which are assigned to each element.

The material discloses that the Company has leased two Iron Highway elements or platforms for a pilot project in service between Montreal and Toronto, with one element being based in each city. The elements are owned by CSX Intermodal Inc., and are leased to the Company for a period of twenty-four months.

The drive-on loading feature, as well as the elimination of switching and conventional loading by means of cranes or hoists, allows the Company to operate the Iron Highway train on a regular scheduled basis, much like a passenger train, which makes it extremely attractive to trucking companies. A computerized booking system allows customers to make arrangements directly with the Iron Highway operation. The use of hand-held computer terminals by terminal loading staff is part of the paperless, computerized reservation monitoring system which oversees inventory, tracking, billing with real-time information. The Company has established dedicated sections of its terminals in St-Luc Yard in Montreal, and the West Toronto Yard to handle the loading, unloading, inspection and maintenance of its two Iron Highway platforms. To maximize efficiency, the platforms are operated between Montreal and Toronto on a 24 hour cycle, with pre-established departure times. The work activities relating to the Iron Highway trains, and related time periods, are presented as follows by the Company:

Time Of Activity In The

Activity Total 24 Hour Cycle

    1. Train enroute ( 10:30 - 18:00 ) Mtl to Tor 450 mins.
    2. Train enroute ( 21:00 - 04:00 ) Tor to Mtl 450 mins.
    3. Trailer check-in AM 360 mins.
    4. Trailer check-in PM 360 mins.
    5. In bound pull-by 2 mins.
    6. Split ramp 5 mins.
    7. Off load trailers 70 mins.
    8. Rejoin ramp 5 mins.
    9. Inspection and #1 brake test of equipment 60 mins.
    10. Pre-departure requirement for locomotive 20 mins.
    11. Split ramp 5 mins
    12. Load trailers 90 mins.
    13. Join ramp 5 mins.
    14. #3 brake test and SBU 5 mins.
    15. Outbound pull by 5 mins.
    16. Hostler maintenance 60 mins.

It is common ground that, although there were preliminary discussions with the Union about using its members to perform all functions in relation to the loading, unloading, inspection and Maintenance of the Iron Highway trains, for the purposes of the pilot project presently underway, the Company has contracted that work to an independent company, Rail-Term Inc.

The Iron Highway operation commenced on or about November 15, 1996. The evidence discloses that the Company maintains a single supervisor at each of the Montreal and Toronto terminals, and that Rail-Term provides a staff of some thirty to thirty-five foremen and workers to perform all work in relation to the loading, unloading, inspection and maintenance of the Iron Highway trains, with one exception. It is common ground that the locomotive power units utilized by the Company, which are not leased, but are its own equipment, have continued to be inspected and serviced by members of the Union.

There is little dispute that normal running repairs, such as the replacement of brake shoes, or the changing out of wheels, is performed by the employees of Rail-Term. They are also responsible for performing pull-by inspections of the equipment, as well as mechanical inspections and mandatory brake tests.

The Union grieves that all of the foregoing functions are bargaining unit work which has traditionally been performed by carmen, and that the Company’s arrangement with Rail-Term Inc. is in clear violation of the prohibitions against contracting out found within rule 53 of the collective agreement. That rule provides 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.

Very simply, the position of the Union’s representative is that the employees of Rail-Term Inc. assigned to the Iron Highway terminal projects in both Toronto and Montreal are, on a daily basis, regularly performing "… work presently and normally performed" by carmen in the Union’s bargaining unit. The performance of pull-by inspections, mechanical inspections, the repair of cars, including the changing out of brake shoes and wheels, and the performance of brake tests are, he submits, the essential functions performed by carmen in rail operations across the Company’s system. He argues that the facts disclosed in evidence do not bring the Iron Highway train within any of the exceptions found under rule 53.1. In this regard he stresses that carmen presently work within both the Montreal and Toronto terminals, not infrequently in areas adjacent to the dedicated Iron Highway terminals. There is nothing, he submits, which would prevent assigning carmen from the bargaining unit to perform the traditional carmen’s work which is now assigned to the employees of the contractor who, as noted above, handle all aspects of the work in relation to the loading, unloading and inspection and maintenance of the Iron Highway equipment, with the sole exception of the locomotive power.

The Union’s representative further submits that if in fact the Company can bring itself within one of the exceptions to rule 53.1, it nevertheless violated the obligation to provide the Union with an opportunity to make a "business case" as contemplated under rule 53.5 of the collective agreement. In other words, should contracting out be permissible, it is alleged that the Company failed to provide the Union a fair opportunity to put an alternative proposal forward to the Company with respect to the performance of the same work by bargaining unit members.

As a further alternative, the Union’s representative questions whether, in fact, the arrangement between the Company and Rail-Term Inc. can fairly be characterized as a true contracting out or whether, as he suggests, the Company has retained such a significant degree of supervision and control of the operation, that in fact it is the true employer of the Rail-Term staff at the Montreal and Toronto terminals. On that theory, he submits that the employees of Rail-Term Inc. should be viewed as employees of Canadian Pacific Limited, who should be treated as falling within the bargaining unit. In support of that proposition he refers the Arbitrator to the following awards: Re United Automobile Workers, Local 397 and Brantford Trailer & Body Ltd. (1968), 19 L.A.C. 93 (Hanrahan); Re Board of Governors of Riverdale Hospital and Canadian Union of Public Employees, Local 79 (1974), 7 L.A.C. (2d) 40 (Schiff); Re Regional Municipality of Waterloo and London and District Service Workers Union, Local 220 (1977), 16 L.A.C. (2d) 280 (Brandt); Re City of Kelowna and Canadian Union of Public Employees, Local 338 (1980) 25 L.A.C. (2d) 315 (Larson); Re Royal Ontario Museum and Service Employees Union, Local 204 (1984) 16 L.A.C. (3d) 1 (Adams); Re Rogers Cable T.V. and Vancouver and International Brotherhood of Electrical Workers, Local 213 (1987), 32 L.A.C. (3d) 158 (Hope); Re Fraser Burrard Hospital Society (Royal Columbian Hospital) and Health Services Association (1988), 35 L.A.C. (3d) 257 (Munroe); Re Metro-Calgary & Rural General Hospital, District No. 93 and United Nurses of Alberta, Local 121 (1988), 3 L.A.C. (4th) 265 (Beattie); Re Goodhost Foods Ltd. and Retail, Wholesale Union, Local 580 (1988), 5 L.A.C. (4th) 237 (Bird); Re Cambrian College and Ontario Public Service Employees Union (1989), 5 L.A.C. (4th) 325 (Swan); Re Government of Province of British Columbia and British Columbia Government Employees’ Union (Podger) (1990), 14 L.A.C. (4th) 308 (Chertkow); Re Lakehead Regional Family Centre and Ontario Public Service Employees Union, Local 707 (1991), 24 L.A.C. (4th) 23 (Solomatenko); Re Carecor Health Services Inc. & Participating Hospitals and Ontario Nurses’ Association (1992), 30 L.A.C. (4th) 391 (Knopf); Re Board of Management of Metropolitan Toronto Zoo and Canadian Union of Public Employees, Local 1600 (1994) 41 L.A.C. (4th) 186 (Knopf); Re Children’s Aid Society of Northumberland and Ontario Public Service Employees Union, Local 344 (1994) 40 L.A.C. (4th) 129 (Mitchnick); Re Radio Shack and United Steelworkers of America, Local 6709 (1994), 44 L.A.C. (4th) 69 (Beck); Re Regina Exhibition Association Ltd. and Saskatchewan Joint Board – Retail, Wholesale & Department Store Union (1996), 52 L.A.C. (4th) 170 (Moore); Re St. Jude’s Anglican Home and British Columbia Nurses’ Union (1996) 53 L.A.C. (4th) 111 (Larson).

The Company submits that the Iron Highway project does fall within the exceptions provided under rule 53 of the collective agreement. Firstly, its representative stresses that the Iron Highway pilot project is a new concept, which involves work of a type not performed in the past within the railway. The Company submits that it did not have the internal expertise to operate a scheduled, short-term, hauling system. It submits that the majority of the tasks performed by the employees of the contractor do not resemble functions normally or currently performed by carmen in the Union’s bargaining unit. The Company also submits that the Union cannot claim work jurisdictions which would expand beyond the boundaries of the work normally performed under the collective agreement, to include work on an entirely new form of project which, it stresses, utilizes non-company equipment. Consequently, while the Company concedes the right of the union to perform work on CP locomotives which are used to haul the Iron Highway elements, it disputes the Union’s claim that servicing the new type of equipment which is utilized can fairly be utilized as bargaining unit work. It representative further notes that the lease arrangement between itself and CSX Intermodal Inc. specifically requires in part:

… at the direction of Lessor, Lessee shall, during the Term, use "Rail-Term Inc." for the performance of all maintenance and repair, or approved alterations or modifications of the Equipment.

In support of its submission, with respect to work being performed on equipment which does not belong to the Company, the Arbitrator is referred to an award in a grievance between these same parties, dated October 9, 1996 concerning the scrapping of rail cars by an outside contractor on Company premises. In that case the Arbitrator found that the Company did violate the prohibitions against contracting out. However, the employer notes the following passage at p. 2:

In the arbitrator’s view, if the cars in question had in fact been sold unconditionally to Intermetco, there would appear to be no basis to assert any violation of the work jurisdiction provisions of the collective agreement. On closer examination, however, it is not accurate to say that Intermetco Limited purchased the cars outright. As appears from the representations made at the hearing, in fact, the arrangement between Intermetco and the Company is that Intermetco purchased the scrap metal from the super-structure of the cars, on the understanding that the wheels, trucks and brake equipment in the undercarriage would be retained by Canadian Pacific Limited. More precisely, what Intermetco purchased was the scrapable plate steel from the cars, to be paid for at a set price per net ton. In the circumstances, the arbitrator cannot agree that the cars which were dismantled could fairly or accurately be described as the property of Intermetco Limited. As best, the scrap company had a conditional interest in part of the cars or, more accurately, an interest in such scrap as could be removed, while leaving the undercarriage to the Company. What the evidence reveals, therefore, is that rail cars which remained within the effective possession and ownership of CP Rail were dismantled by persons other than bargaining unit members on the understanding that certain useable scrap would be purchased by Intermetco Limited. The fact that the Company retained a substantial portion of the cars, namely the wheels, trucks, and brake assemblies, critically colours the nature of the transaction. In essence, the Company arranged with persons other than bargaining unit employees to disassemble rail cars in which it retained a substantial ownership interest.

In the instant case the Company submits that the ownership of the equipment by CSX Intermodal Inc., and the contractual arrangement for its servicing by Rail-Term Inc. take the work in question outside the purview of the collective agreement.

Alternatively, the Company submits that if in fact the work should be found to be sufficiently similar to work currently performed by bargaining unit members, the exceptions in sub-paragraphs (iv), (v) and (vi) rule 53 would apply. It’s representative argues, firstly, that the nature and the volume of the work in relation to the Iron Highway train is extremely time sensitive and that the operating expenditure which would be incurred by bringing carmen to and from the Iron Highway terminal facility to perform inspection work and routine maintenance would be prohibitive, and would jeopardize the overall efficiency of the project. Stressing that the work claimed by the Union would represent only a small fraction of the work associated with the Iron Highway project, estimated at approximately 90 of the total of 1,952 minutes on a 24-hour cycle, or 4.6% of the work activities performed, the Company submits that to incur the possible delays and interruptions, both foreseen and unforeseen, involved in bringing carmen to and from the terminal area for relatively short activity periods would effectively jeopardize the viability of the project. The Company submits that the unique nature of the technology utilized requires the assignment of one person to perform work on a multi-task basis.

There can be little doubt, in the Arbitrator’s view, that the multi-task system utilized through the contracting out engaged in by the Company allows it to realize cost savings. It is well established, however, that the fact that contracting out may allow the Company to perform certain work more cheaply does not, of itself, justify contracting out. (See SHP-156, a decision of Arbitrator Weatherill dated July 10, 1984.)

Nor can the Arbitrator ascribe substantial weight to the fact that the equipment which is the subject of this grievance is leased from another company. It is not disputed that many forms of equipment, including locomotives, are leased by the Company for its regular operations, and are nevertheless subject to maintenance by bargaining unit employees. While leasing arrangements may, in some circumstances, provide for major maintenance or overhauls to be performed by the lessor, the mere fact that equipment may be leased does not, of itself, support the conclusion that inspection or maintenance work performed on Company premises in relation to that equipment can be contracted out as being other than "work presently and normally performed by employees" in the bargaining unit.

Further, the Arbitrator is unaware of any principle whereby the undertaking of a new project, or of a different style of operation, necessarily takes the work outside the ambit of work protected by the contracting out provisions of rule 53. In a world of evolving technologies, there can be no doubt that premises, equipment and operations may be subject to radical change through the process of ongoing modernization. That, however, does not remove work from the bargaining unit which has traditionally performed it, albeit in a less modernized form. That principle is reflected in an award of this arbitrator in a shopcraft arbitration between the Canadian National Railway Company and the CAW, Local 101, concerning the contracting out of oil lab work, a decision dated July 16, 1996. In that case, at p. 8, the following analysis appears:

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.

There can be little doubt but that the Company has contracted out work presently and normally performed by bargaining unit members. Specifically, such functions as pull-by inspections, mechanical inspections and related running point repairs, as well as brake tests, are all functions which are the core duties and responsibilities of carmen in the service of the Company, both in Toronto and Montreal. Indeed, these very functions continue to be performed for other trains in the same yards as presently house the Iron Highway operations.

Can it be said that the exceptions to rule 53 apply in this case? I have difficulty seeing how they can. Even allowing for the different nature of the equipment utilized by the Iron Highway, this is not a circumstance where it can be said that the technical or managerial skills to perform the work are unavailable from within the Company or where sufficient qualified employees, whether active or laid off, are unavailable. Nor, in my opinion, can it be fairly said that the nature of the work is such that it does not justify the operating expenditure involved, as contemplated under sub-paragraph (iv). While it may be, as the Company submits, that the percentage of work in relation to the overall operation and loading of an Iron Highway train is relatively small, as concerns carmen’s functions, the same can be said of any train which is assembled and marshalled within the Company’s operations, whether in intermodal or other forms of service. This is not, in other words, such an extraordinary or unusual circumstances as to bring the exception into play, assuming that sub-paragraph (iv) could, in any event, have application in this kind of situation.

The Arbitrator cannot accept the alternative suggestion of the Union, however, that the employees of Rail-Term Inc. should be characterized as in fact being the employees of the Company, under its full supervision and control. The evidence before me is otherwise. There appears to be little doubt that the day-to-day yard operations of the Iron Highway, and the work performed by the contractor’s employees, is under the direction of the contractor itself, subject only to a general liaison with a single Company officer in both Montreal and Toronto responsible for the Iron Highway operation. This is, I am satisfied, a true contracting out, and not a circumstance of indirect employment.

Nor am I inclined, on the facts before me, to sustain the Union’s argument that there was a violation of rule 53.5,, concerning the opportunity to present a "business case". The evidence discloses that in fact the Company did arrange for the responsible Union officer to meet with the Company, on a predetermined day, to be provided the information with respect to the projected Iron Highway operation. It appears that the Union officer’s involvement in a political protest elsewhere on the day in question caused the cancellation of the meeting. On the whole, I am not prepared to find that the Company was unwilling to hold appropriate discussions with representatives of the Union, in advance of the contracting out, as contemplated within rule 53.5.

For the reasons related above, however, the case must succeed on its merits, with respect to the primary allegation of the Union. I am compelled to conclude that the work which was contracted out was plainly work "presently and normally performed by employees" of the bargaining unit. Nor can I find any evidence which would sustain the Company’s submission that the exceptions to the prohibition to the contracting out are made out in the case at hand. Needless to say, the contractual arrangement with the lessor CSX Intermodal Inc., whereby Rail-Term Inc. is to perform the inspection and maintenance work, can be given no weight, as it is an integral part of the Company’s violation of rule 53. However, given the innovative nature of the operations, and the fact that the parties have not had the opportunity to consider together the best means by which the work in question could be performed, in whole or in part, by carmen in the bargaining unit, the Arbitrator deems it appropriate, for the present time, to reserve on any further remedy beyond a declaration to the effect that the Company has violated the contracting out provisions. Should a direction to cease and desist, or an order for compensation, be necessary or justified, that may be dealt with expeditiously. It appears to me more important to allow the parties to confer in light of the determination of the Arbitrator, in a good faith attempt to resolve any remedial issues themselves. Should they be unable to do so, the matter may be further be spoken to.

For the foregoing reasons, the grievance must be allowed. The Arbitrator declares that the Company has violated rule 53 of the collective agreement by contracting out the work of bargaining unit members to Rail-Term Inc. I retain full jurisdiction for the purposes of any further remedy.

Signed at Toronto, May 6, 1997