IN THE MATTER OF THE LABOUR RELATIONS CODE
AND IN THE MATTER OF AN ARBITRATION
B.C. RAIL LTD.
(hereinafter referred to as the “Railway”)
THE UNITED ASSOCIATION OF JOURNEYMEN
AND APPRENTICES OF THE PLUMBING AND
PIPEFITTING INDUSTRY OF THE
UNITED STATES AND CANADA
LOCAL NO. 170, METAL TRADES DIVISION
(hereinafter referred to as the “Union”)
(Contracting Out Arbitration)
Arbitrator: H. Allan Hope, Q.C.
Counsel for the Employer: David McDonald
Counsel for the Union: Rick Coleman
Place of Hearing: Prince George, B.C.
Date of Hearing: May 6 and 7, 2002
A W A R D
I – Dispute
(i) – The First Grievance
The parties brought a series of grievances to arbitration in an expedited process which involved procedural informality but which are intended to have application to them in the sense contemplated in Board of School Trustees, School District No. 57, Prince George and International Union of Operating Engineers, Local 858, (1977) 1 C.L.R.B.R. 45 (Weiler). This decision deals in particular with the interpretation and application of the contracting out language set out in Rule 62 of the collective agreement between the Railway and this Union.
In technical terms, the collective agreement is between the Council of Trade Unions on B.C. Rail. However, the Council is made up of seven unions that bargain in a structure which was reviewed and modified in a decision of the Labour Relations Board (LRB) in B.C. Rail Ltd. and Council of Trade Unions on B.C. Rail Ltd., March 31, 1998, unreported, BCLRB No. B131/98 (Hall). The jurisdictional implications of that decision as between constituent unions was reviewed by the LRB in B.C. Rail Ltd. and Council of Trade Unions on B.C. Rail and Canadian Union of Transportation Employees, Local No. 6, October 13, 1999, unreported (Hall). The significance of that structure in terms of this dispute is that, while the Council is the bargaining agent and seven constituent Unions represent a single bargaining unit, each Union enters into a separate collective agreement with the Railway. There is no “master” agreement between the B.C. Railway and Council. Each collective agreement contains its own dispute resolution structure which includes a grievance and arbitration procedure which incorporates a process for the selection of arbitrators.
Finally, various of the collective agreements contain common language, including the language at issue in this dispute. In the result, the potential exists for an arbitrator appointed under one of the constituent collective agreements to make decisions that may have application upon all Unions that share the same language. In that structure, issues can arise with respect to the School District No. 57 principles and whether a decision made by an arbitrator appointed by one constituent union with respect to the interpretation and application of a provision of one collective agreement is binding upon the remaining unions.
In addition, jurisdictional issues can arise as between constituent unions which may or may not be amenable to resolution under the process addressed by the LRB in its decision in B405/99. One of the issues raised in this dispute reflects that potential. It involves Grievance No. PG – 2001-16 filed by this Union on April 8, 2001 which, on the surface, involved an allegation that the Railway was in breach of its collective agreement by reason of having contracted out “make up air work performed on a trip side”. The Union alleged that the Railway had acted in breach of Rule 62.3 when it failed to give the Union “advance notice of work being performed”. The provision reads as follows:
62.3 Except in cases of emergency or where time constraints make it unreasonable to do so, the Railway will consult with the Union in advance of the date con-tracting out is contemplated. The cost effectiveness of proposed contracting out will be documented by the Railway, disclosed to, and discussed in detail with the Union affected. The Railway will consider in good faith and give due consideration to any alternative to contracting out advanced by the Union and will meet and discuss the alternative with the Union before making its decision as to whether the work will be contracted out. (emphasis added)
The response of the Railway recorded on May 3, 2001 was that the grievance was “denied [because the] Railway gave notice to [Canadian Union of Transportation Employees, Local No. 6] CUTE 6”. Filed in the material in support of that position was a copy of the contracting out notice given by the Railway. In the informal process adopted by the parties, it became apparent that a collateral issue raised by the UA grievance was whether the work at issue fell within the prohibition contained in Rule 62.2 of the UA agreement, (and in the CUTE 6 agreement). It provides as follows:
62.2 Work presently and normally performed by employees who are subject to the provisions of this collective agreement will not be contracted out except … (emphasis added)
As indicated, the collective agreement in force between CUTE 6 and the Railway contains the same contracting out provision that appears in Rule 62 of the UA collective agreement. It became apparent that the resolution of the dispute raised in the UA grievances involved an assertion that the work at issue was “work presently and normally performed by employees” who are members of the UA segment of the bargaining unit. At the commencement of the hearing an official of CUTE 6 was present and confirmed that his Union asserted that the work in question was “work presently and normally performed by employees” who are members of his Union. He also confirmed that he was not present in a representative capacity and was not in a position to defend his Union’s jurisdictional claim over the work.
Counsel for the UA conceded that CUTE 6 should be afforded an opportunity to determine whether it wishes to be represented in the hearing on the preliminary jurisdictional issue with respect to the nature of the work. The Railway was of the view that CUTE 6 was not entitled to be present because the sole issue raised in the grievance was whether the Railway had complied with Rule 62.3 in terms of providing notice and, in any event, a decision in these proceedings would not bind CUTE 6 with respect to the essential question of whether it could advance and defend a claim of jurisdiction over the work involved.
A ruling was made that the proceedings be adjourned sine die and that CUTE 6 be given notice of the proceedings in a context which afforded it an opportunity to be present to defend its jurisdictional claim with respect to the work and, coincidentally, to make representations with respect to the interpretation of Rule 62.2 and the term, “work presently and normally performed”. As stated, that same language is used in other collective agreements negotiated under the Council structure and the prospect of an interpretation of that language that had the potential to become binding in the School District No. 57 sense required that at least the other Union advancing a jurisdictional claim be put on notice that the interpretation of Rule 62.2 is at issue in a policy grievance which may trigger a decision that has an impact upon constituent unions having the same language.
On that basis, the hearing of the grievance was adjourned sine die subject to CUTE 6 receiving a notice from the Railway of its right to be present and represents its interests as they appear. The notice will be subject to a requirement that CUTE 6 make itself available in the time frame fixed between the parties to this arbitration for the resumption of the hearing. I note in passing that the preferable practice in similar circumstances would be to give notice to the Council that an issue involving, or binding, two or more constituent Unions has arisen and leave it to the Council to address the representation issues that may arise.
(ii) – The Other Grievances
The hearing then addressed issues that arose from the failure of the Railway to replace a lathe located at the maintenance facilities in Prince George. The Railway and the Union had a different view of the “real issue in dispute”, as that term is used by the Labour Relations Board (LRB) to characterize the jurisdiction of arbitrators under the legislation. The Union saw the dispute as involving an initial assertion that the Railway could not decline to replace the lathe and then contract out all future lathe work.
The Union, while it did not express the issues in these precise terms, presented what amounted to a policy issue which was reflected in six individual grievances filed in response to the contracting out of particular lathe work. The policy issue was whether the decision not to replace the lathe, was a breach of the collective agreement which was particularized by individual incidents involving the contracting out of lathe work. That issue arose in retrospect in the sense that the Railway’s decision not to replace the lathe was only communicated coincidental with the individual incidents of contracting out. That issue was addressed by the Union in the filing of grievances challenging each individual contracting out. However, the real issue that evolved between the parties in the first instance, (as the issues were developed in these proceedings), was whether the decision not to replace the lathe was itself a breach that gave rise to a separate remedy.
As stated, the Union did not express itself in those precise terms. Rather, as the informal process developed, the Union made reference to six individual grievances filed over time in response to six individual instances of the contracting out of lathe work. However, the remedies claimed by the Union necessitated recognition of the underlying policy issue arising from the failure of the Railway to replace the lathe or to give timely notice of the decision not to replace it. In the result, in addition to seeking damages with respect to each incident of contracting out, the Union sought an order requiring the Railway to replace the lathe.
In responding to the issues as they were pleaded in the grievances and as they evolved in these informal proceedings, the position of the Railway was that these proceedings were confined to four individual grievances relating to individual acts of contracting out and that the question arising in each case was whether the particular contracting out fell within one of the exceptions identified in Rule 62.2. That provision, (sub-numbered for convenience), reads as follows:
62.2 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 the skills necessary are not available from within the Railway; or
[ii] when sufficient employees, qualified to perform the work, are not available from the active employees or those placed on layoff by the Railway; 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 which may be leased from other sources at a reasonable cost without the operator; or
[iv] where the nature, the volume, or the duration of the work is such that it does not justify the capital or opera-ting expenditure involved or the undue fluctuations in employment; or
[v] the required time for completion of the work cannot be met with the skills, personnel or equipment on the Railway.
The position of the Railway was that the dispute was limited to the resolution of each of the separate grievances and the fixing of a remedy, if any, responsive to the particular contracting out at issue. It was of the view that nothing in the collective agreement gave an arbitrator the authority to require the Railway to supply a lathe. The Railway presented a summary of the grievances in a written submission. Each of the grievances, said the Railway, involved contracting out of work in circumstances that fell within the exceptions set out in Rule 62.2. I will return to that submission later.
On the facts, the decision of the Railway that it would not replace the lathe amounted to a decision that all future lathe work, if any, would be contracted out. Its position in that regard amounted to an assertion that the failure of the Railway to give advance notice of the decision to contract out future lathe work, which was implicit when it elected not to replace the lathe, was a breach of Rule 62.3. That provision, as previously cited, required the Railway, prior to any consequential contracting out of lathe work, to “consult with the Union in advance of the date contracting out [of lathe work] is contemplated”.
That breach, said the Union, extended to each individual instance of contracting out of lathe work that followed. Its position was that it was entitled to claim damages under Rule 62.4 for what amounted to a continuing series of breaches of Rule 62.3. That provision reads as follows:
62.4 It is understood that if a third party arbitrator finds that the Railway has not engaged in proper consultation pursuant to this Rule, the arbitrator may assess damages against the Railway.
The Union’s position with respect to what I have characterized as a policy issue was that failing to replace the lathe was itself a breach of Rule 62.2 because the inevitable result was the contracting out of lathe work, being “work presenting and normally performed by employees who are subject to the provisions of this collective agreement”. The position of the Union in that context was that the decision not to replace the lathe was not excused by any of the exceptions set out in Rule 62.2. The remedy sought by the Union was an order requiring the Railway to replace the lathe.
The position of the Railway, as stated, was that I had no jurisdiction to order the Railway to replace the lathe, and, in any event, the issues in dispute were confined to four separate and individual incidents of the contracting out of lathe work, each of which it saw as falling within the exceptions identified in Rule 62.2. The Railway’s position in that context was that the dispute was confined to Grievances #52, #55, #57 and #66 and that the contracting out in Grievances #52 and #55 fell within the exceptions set out in Rule 62.2[iii] and [iv]. Its position with respect to Grievances #57 and #66 was that they also fell within the exceptions set out in Rule 62.2[iii] and [iv] but with an added assertion that the work involved was of an emergent nature.
II – The Facts
As stated, the Railway provided a written submission that contains a convenient summary of the facts in issue, (as opposed to agreed facts), which serves to set out the perimeters of the dispute. The submission reads as follows:
PG-2001-52 & PG-2001-55 – Lathe in Prince George
1. These grievances were filed on July 24, 2001 and August 14, 2001 respectively. They both have to do with work that was done by a contractor named Valon Kone Brunette Ltd. (“Brunette’s”).
2. The lathe was removed from service on April 30, 2001. The lathe was a Pratt and Whitney model built in the early 1940’s. By April 2001, the lead screw was stripped and the on/off switch was defective causing the lathe to start up unexpectedly. The Railway removed the lathe from service due to safety concerns.
3. The lathe has not been replaced. The Railway’s position is that this is due to the fact that the amount of work done in Prince George requiring machining is minimal. The total amount of machining work that has been done in Prince George by a contractor between April 29, 2001 and May 2, 2002 is less than $2,500.00, which includes parts, labour and taxes. The Union takes the position that the work is not minimal.
4. The Union and the Railway agree that some employees in Prince George have the ability to operate a lathe. The Union’s position is that there is an idle lathe in an unused Squamish facility and that the Railway is obligated to make that piece of equipment available to the Prince George shop employees.
5. Grievance PG-2001-52 was with respect to contracting out notice that was given to the Union on May 31, 2001. The work required was the machining of 10 spacers for setting governors on General Electric locomotives. The contractor who did the work was Brunette’s. The invoice was charged to the Railway on June 6, 2001 and was for a total of $158.63 before tax.
6. PG-2001-55 has to do with a half hour of machining which was the subject of notice to contract out No. L004-01. The notice to contract out was provided to the Union on July 11, 2001. The work required was machining a piece of steel (a filter cap) the cost of this piece of work was $18.24 including tax. (emphasis added)
PG-2001-57 – Machining steel shims for unit #606 Auxiliary Drive Coupling
1. This grievance was filed on August 14, 2001. It is with respect to contracting out notice No. L005-01. The Railway provided the Union with notice that it was contracting out machining work to machine shims for a coupling drive.
2. This was emergency work. The locomo-tive in question could not safely operate without this work being done.
3. The work was done by Brunette’s on July 27, 2001. The approximate value of the work was $139.40. (emphasis added)
PG-2001-66 – Machining of four hy-rail wheels
1. This grievance was filed on October 20, 2001. It has to do with the machining of wheels for a buggy built for an employee named Toor. Mr. Toor was on a modified return to work program from an injury and required a buggy to assist him in his duties, such as steam cleaning locomotives.
2. The work to build the majority of the buggy had been done in the shop. The wheels were sent out to a contractor to be machined so that they could be attached to the buggy.
3. There was an urgency to the work, as an occupational health consultant who had been working with Mr. Toor was attending to inspect the buggy, and other forms of accommodation prior to Mr. Toor’s return to work …
4. Nature of intent to contract out was sent to the Union on October 15, 2001. (Notice no. L008-01).
5. The invoice was returned from Brunette’s for $192.00 before tax. (emphasis added)
The position of the Railway with respect to PG–2001–17 and PG-2000-50 was that they should not be included in the process. (There was some discussion of the grievances but it was not sufficient to permit their adjudication in these proceedings). The Railway’s position with respect to the four remaining grievances was that, while the lathe work at issue was “work presently and normally performed” by UA employees, the contracting out in each case fell outside the prohibition set out in Rule 62.2.
I was not provided with documentation relating to Grievances #17 and #50. As stated, those grievances were discussed in the process and some degree of agreement was reached on the facts. For example, Grievance #17 involved contracting out which was initiated by a machinist, Mike Woolley, who was not authorized by the Railway to take that initiative. However, it turned out that only part of the work fell into that circumstance and the parties were going to address the grievance further in the context of this Award. Subject to those observations, I conclude that the issues are limited to those raised in #52, #55, #57 and #66 and the underlying policy issue arising from them.
It can be seen from the recitation of the facts by the Railway that there was no clear indication of how the decision to take the old lathe out of service was made. That is, the decision to “remove [the lathe] from service” was made on April 30, 2001 but no definitive date or process was disclosed with respect to the decision not to replace it. The inference to be drawn from the facts was that there was no statement from the Railway that the lathe would not be replaced. Rather, notification to that effect was given coincidental with the filing of the grievances. In particular, the decision was recorded in a response to the various grievances as a prelude to invoking the exceptions in Rule 62.2 to support the decision to contract out the particular lathe work.
The Railway filed a schedule of invoices paid to the contractor who did the lathe work after the old lathe was decommissioned. The invoices commenced on May 15, 2001 and covered a period ending February 12, 2002. During that nine-month period there were 12 invoices recorded. The total was $2,394.64. (It was not clear that all of the invoices related to lathe work and, in any event, the Railway urged that the actual amount involved in the grievances could be seen as limited to $508). For reasons I will record later, I don’t find it necessary to sort out the amount of lathe work which was contracted out.
Accepting that the lathe was removed from service on April 30, 2001 and that a decision not to replace it was made sometime later, there was no evidence that a notice had been issued under Rule 62.3 to the effect that the Railway had made the decision to contract out all lathe work in Prince George. As stated, the first indication in the documentary evidence with respect to the Railway’s decision that it would not replace the lathe was in the grievances. The notice was limited to the individual grievance. The first occasion was in the reply to Grievance #52. The reply was filed on June 5, 2001 and contained a reference to the effect that, “lathe work doesn’t amount to enough work to have one in Prince George”. In the “disposition of the grievance” the Railway recorded that “there is not enough machining work to justify the installation of a replacement”.
In short, the first notice given to the Union that the lathe would not be replaced was on June 5, 2001, five days after the first of the four grievances was filed with respect to a notice of an intention to contract work filed on May 31, 2001, being the same date as the proposed performance of the work. The reason given for that contracting out was “no material or tools available”. That notice did not expressly record the decision not to replace the lathe. However, it does record that fact by implication in the statement that the machining work available did not “justify the installation of a replacement”.
Notices were given with respect to each of the four incidents of contracting out that triggered the grievances. However, in all of the notices, as in the case of #52, notice was given coincidental with the contracting out itself. If it is accepted that the decision not to replace the lathe amounted to a decision to contract out all future lathe work, the Union received no Rule 62.3 notice of that proposed contracting out of bargaining unit work. In any event, the Railway did not comply with the requirements of the rule in any of the four grievances. That is, the provision required the Railway to “consult with the Union in advance of the date contracting out is contemplated”. There was no evidence of advance consultation on the part of the Railway, not only with respect to the decision not to replace the lathe, thus requiring the contracting out of all lathe work, but also with respect to each individual incident of contracting out.
III - Positions of the Parties
(i) – The Union
As stated, the position of the Union was to the effect that the grievances should be seen as raising a policy issue with respect to the Railway’s failure to give notice of the contracting out of work which would follow as a result of the decision not to replace the lathe. In the first of the four grievances, #52, the Union wrote that:
[The Railway] contracted out plates to Brunettes, reason [cited] material and tools. Tools are available but [Railway] chooses not to replace lathe.
The exchanges between the parties in that grievance were thematic in the three grievances that followed. The position of the Union, in summary, was that the Railway had failed to give proper notice of the decision to contract out all future lathe work and, in any event, to bring the disputed incidents of contracting out within the exceptions contemplated in the collective agreement.
The Union relied on the reasoning in BC Rail Ltd. and the Canadian Auto Workers Union, December 10, 1992, unreported (Ready). Its submission was that in order to bring itself within any of the exceptions, the Railway was first required to establish that it had given proper notice within the meaning of Rule 62.3, thus giving the Union an opportunity to engage in the Rule 62.3 process with respect to the proposal to contract out all future lathe work in Prince George. On the facts, said the Union, the Railway failed to meet its Rule 62.3 obligations with respect to the initial decision not to replace the lathe but also in each case of contracting out. On that basis, said the Union, it was entitled to damages under Rule 62.4.
The Union’s further position was that arbitrators have the jurisdiction under Rule 62 to require the Railway to purchase necessary equipment in appropriate circumstances and that the circumstances in this dispute supported an order that the Railway replace the lathe. Its position, in effect, was that the Railway could not justify a continuing breach of the contracting out provision by refusing to replace equipment required to avoid assigning bargaining unit work out of the unit. The thrust of its position was that arbitrators have the jurisdiction to fashion a remedy that meets the circumstances and that directing the Railway to replace the lathe met that criteria.
(ii) – The Railway
In support of its position on the general issue the Railway relied on CP Rail and CAW, (1996) 57 L.A.C. (4th) 1 (Picher); CN Rail and CAW, June 20, 1997, CROA No. 2869 (Picher); and Arbitrator Ready’s decision in B.C. Rail and CAW. The Railway first acknowledged the comments of Arbitrator Ready on pp. 7-8 with respect to the role cost factors play in the application of the contracting out language. There he wrote:
The entire contracting out article would lose much of its meaning if I were to accept that existing bargaining unit work can be contracted out simply if the Company can demonstrate that the work can be done outside the Company at a lesser cost. In my view, the test under the fourth exception under Clause 55.2 is quite different than simply a cost test; rather, it involves demonstrating that to do the existing work in-house would require the Company assuming meaningful capital or operating expendi-tures. I believe my interpretation of this fourth exception under Clause 55.2 is supported by the basic principle set out in Clause 55.1. (emphasis added)
Accepting that cost is not a determinative factor, the Railway relied on the following passage from the decision of Arbitrator Picher in CP Rail to support its position in this dispute:
The Union relied, in part, on the decision of Arbitrator Vincent L. Ready in an award between B.C. Rail Ltd. and Canadian Autoworkers Union, an unreported decision dated December 10, 1992 [Re B.C. Rail Ltd. and C.A.W., summarized 30 C.L.A.S. 5]. In that case, Arbitrator Ready found that the decision of B.C. Rail to contract out the cleaning of pulp cars was in violation of the collective agreement governing carmen’s work, including contracting out provisions similar to those found in the instant collective agreement. At page 15 of the Award, he rejected the suggestion that the exception with respect to the outlay of capital or operating expenditures, in relation to the nature and volume of the work, had any application. He reasoned, in part, as follows:
Moreover, the nature and volume of the work in this case is such that it does not require a major outlay of capital or operating expenditures. Nor am I satisfied, on the evidence, that the work could not be completed on time with bargaining unit employees. Although the Railway argued that it was more convenient and less costly to contract out the car cleaning work, these reasons do not fall within the exceptions provided for under Clause 55.2 (unless the capital and/or operating expenditures involved with mobilizing existing Railway equipment and/or workplace do not justify keeping the work in house).
In my view, the circumstances in the case at hand are also to be distinguished. That is not, as was the case in the B.C. Rail award, a situation where the Company merely sought to find a cheaper way of having the work done so as to increase its profitability. Rather, it was faced with an “all or nothing” proposition, as it could not hope to continue to service Domtar if its freight rates were structured so as to include the cost of chip car repairs at CP Rail’s own facilities. (emphasis added)
The Railway relied on similar reasoning by Arbitrator Picher in CROA 2869. The facts upon which the Railway relied to bring this dispute within the reasoning in those authorities related to the cost of replacing the lathe. It was conceded that a replacement lathe was available from the major repair facility operated by the Railway at Squamish. In seeking to bring itself within the exceptions set out in Rule 62.2(iii) and (iv), the Railway did not demonstrate that a capital outlay was required to purchase the lathe. Rather, it tied its position to the cost of moving the Squamish lathe to Prince George.
The estimate prepared by the Railway was that it would cost as much as $10,000 to remove the lathe from the Squamish shop, transport it to Prince George and install it in the Prince George shop. A requirement to expend $10,000 to perform normal lathe work was contrary to the provisions in Rule 62.2(iii) and (iv), said the Railway. In addition, said the Railway, two of the four grievances arose with respect to the contracting out of lathe work in emergency circumstances within the meaning of the preamble to Rule 62.3 and Rule 62.2(iii). In summary, the Railway’s position was that each contracting out of lathe work that triggered an individual grievance is to be addressed and resolved on a individual basis and, in any event, there is no jurisdiction in an arbitrator under this collective agreement to compel the Railway to replace the lathe.
Cited in support of that position was BC Rail and Council of Trade Unions on BC Rail Ltd. (Snowplow Arbitration), September 13, 1999, unreported (Hope). At issue in that case was whether purchasing locomotive snowplows rather than fabricating them in-house amounted to a contracting out of work. The Railway cited the decision for its discussion on p. 30 of the principles that govern remedies for breaches of contract. In particular, the Railway’s assertion was that any remedy available in this dispute is confined to damages sufficient to place the Union and its members “in a monetary position as near as possible to that which [they] would have been had the contract been performed”. See Miracle Foods and UFCW, (1995) 45 L.A.C. (4th) 209 Dumoulin @ p. 210. The governing principles, said the Railway, do not contemplate the remedy sought by the Union.
In its response, the Union disputed the Railway’s estimate for replacing the lathe and urged that it had failed to prove its accuracy or reliability. The Union relied in that regard on B.C. Rail vs. Council of Trade Unions,  B.C.C.A.A.A No. 411. The Union cited the following extracts:
The basic rule is that the burden of proving particular facts is upon the party who must rely on those facts in order to succeed in the dispute. Where the Railway asserts that a particular contracting out of work falls within one of the exceptions, it bears the onus of proving facts that support that assertion. Read in context, the comments by Arbitrator Keras reflect the general arbitral principle that a party who asserts a breach of an agreement bears the onus of proving the facts necessary to support the allegations of the breach. However, that does not alter the evidentiary burden of proof on parties to assert and prove facts upon which they must rely if they are to succeed in the dispute. Here, the Railway cannot claim the benefit of one of the exceptions unless it is able to plead and prove facts that bring the circumstances within the terms of the exception. However, the issue in the first instance is whether the disputed work is bargaining unit work. Proof of the facts necessary to support that assertion lies on the Council. On that basis I conclude that the onus is upon the Union in the first instance to establish that the work in question is bargaining unit work. Thereafter the evidentiary burden of proof falls to the Railway to prove facts which would bring the circumstances within one or more of the enumerated exceptions. (emphasis added)
The “estimate” prepared by the Railway fell far short of meeting the onus imposed on it in the authorities, said the Union. Further, said the Union, the Railway’s position failed to take account of the continuing nature of the loss of lathe work as compared with a one-time expenditure to move a replacement lathe from Squamish to Prince George.
IV – Decision
The provisions of the collective agreement that govern the resolution of this dispute include Rules 62.3 and 62.4. In my view, those provisions impose a positive obligation on the Railway to embark upon a process of consultation prior to the contracting out of “work presently and normally performed” by employees represented by the Union involved. Here the Railway conceded that the work in question is bargaining unit work in the sense defined in Rule 62.2. In light of that admitted fact, I turn to whether the Railway met its obligations under Rule 62.
The first question in that regard is whether the Railway was obliged to comply with the notice and consultation provisions in Rule 62.3 as a condition precedent to contracting out work that admittedly falls within the Rule 62.2 proscription. That is, accepting that the lathe work in question is “work presently and normally performed” by UA members of the bargaining unit, can the Railway avoid compliance with Rule 62.3? The Railway’s assertion, in effect, was that the giving of notice in each individual contracting out was adequate and brought it within one or more of the exceptions enumerated in Rule 62.2.
In my view, the failure to give timely notice was a breach of Rule 62.3, not only with respect to each contracting out, but of its decommissioning of the lathe and its intention to contract out all future lathe work. That is not to say that the Railway is required to meet the strict requirements of Rule 62.3 in every case of a routine contracting out where a formal discussion is not required, either because of the trivial nature of the contracting out or because it involves a circumstance that has been addressed between the parties on prior occasions. However, the requirements of Rule 62.3 can’t be waived unilaterally by the Railway in the case of a contracting out which involves an issue that has not been addressed or has not been resolved between the parties.
That is the circumstance that exists in this dispute. It was open to the Railway to give notice to the Union that lathe work would be contracted out when the decision was made that the lathe would not be replaced. Contrary to the Railway’s submission, this dispute does not involve a circumstance in which the decision whether to contract out lathe work was made on a case-by-case basis. The Railway’s decision not to replace the lathe amounted to a decision to contract out all lathe work in the foreseeable future. On a reasonable interpretation of the language of Rule 62, the Union was entitled to notice of that decision and an opportunity to address it in the sense contemplated in Rule 62.3.
On those facts, the Railway, having made the decision not to replace the lathe, could not fit itself within the emergency language in the preamble to Rule 62.3 or the exception in Rule 62.2(iii) and (iv). That conclusion is based upon the fact that the circumstances only became emergent because of the decision of the Railway not to replace the lathe. If the lathe had been available, “emergency” work would have been done on the lathe. Hence, the question arising is whether the Railway can avoid its obligation to consult under Rule 62.3 on the basis of emergent circumstances it has created and which it could have avoided.
Leaving aside the question of whether the contracting out fell within one of the exceptions enumerated in Rule 62.2, the facts invite the conclusion that the Railway failed to meet its obligation to consult with respect to the four grievances involved. The submission of the Railway was that there had been joint consultation that resulted in discussions and agreement between the parties that some lathe work would be sent to the Squamish repair facility to be performed by Union members. However, that response, at best, was late in the day and only a partial and retrospective answer to one of the grievances. It failed to address the fundamental question arising with respect to what amounted to a decision to cease performing all lathe work in Prince George and contract it out.
I agree with the submission of the Railway that incidents of contracting out are generally discrete, and, ordinarily, that grievances should be dealt with separately. That is, in the ordinary course, every incident of contracting out that results in the filing of a grievance must proceed in terms of a preliminary question of whether the work at issue is bargaining unit work in the sense contemplated in Rule 62.2. It is only when that question is answered in favour of the Union that the question of whether the Railway can show that it met the requirements of Rule 62.3 arises. If the Railway passes that hurdle, the contracting out must be addressed in terms of whether the Railway can bring itself within one or more of the exceptions enumerated in Rule 62.2.
However, in the case of the Prince George lathe work, while each incident of contracting out was separate, the four incidents must be viewed in light of the fact that the Railway, by electing not to replace the lathe, effectively, made the decision that all lathe work in Prince George would be contracted out but did not give notice of that decision in a timely way. In every incident of the contracting out of lathe work, it was conceded by the Railway that the work in question was bargaining unit work in the sense contemplated in the preamble to Rule 62.2 and, barring some agreement with the Union, it became necessary for it to comply with Rule 62.3 or face an assessment of damages under Rule 62.4.
On the facts present in this dispute, the Railway was obligated to give the Union notice of its intention to contract out lathe work when that decision was made. The evidence supports the conclusion that, effectively, the decision was made when the Railway concluded that it would not replace the lathe. Thereafter, all lathe work would have to be contracted out or, as agreed latterly between the parties in one circumstance, sent to Squamish.
Had the Union been given a Rule 62.3 notice of the Railway’s decision not to replace the lathe, and, by necessary implication, its decision to contract out all future lathe work, the Union would have had a reasonable opportunity to explore alternatives and, inferentially, to challenge the legitimacy of the contracting out in the context of Rule 62.2. In any event, the Railway also failed to meet its Rule 62.3 obligation with respect to each of the individual grievances. On that basis, I conclude that the Union is entitled to damages under Rule 62.4 with respect to the four grievances jointly submitted by the parties. I reserve jurisdiction to consider, if required, whether the ruling should extend in whole or in part to #17 and #50.
I turn now to the assertion by the Union that, in addition to damages, it is entitled to an order compelling the Railway to replace the lathe. The Union did not cite authority for that proposition. However, there is a well-established line of authority in the railway industry in which language equivalent to the provisions at issue in this dispute are recognized as vesting in arbitrators the jurisdiction to prohibit contracting out seen as a breach of the contracting out language.
In Canadian Pacific Railway and Brotherhood of Maintenance-of-Way Employees, May 14, 1999, CROA No. 3041 (Picher), it was acknowledged that arbitrators can issue orders prohibiting railways from disposing of equipment used in the performance of bargaining unit work. In that decision, Arbitrator Picher reviewed prior decisions in which such orders had been made. In the case before him, Arbitrator Picher issued a declaration that the CP Rail’s proposal to dispose of equipment used to perform bargaining unit work and then contract out the work was a violation of language equivalent to the provisions at issue in this dispute; and to further direct that it “[maintain] all affected employees in their current positions”.
But the facts in this dispute differ in the sense that the Union’s application involves the loss of incidental work which does not affect employment and which requires an order which would compel the Railway to replace a piece of equipment which was unserviceable. An immediate factor distinguishing the circumstances is cost, being the factor relied on generally by the Railway in this dispute. Cost of acquisition is a factor in replacing unserviceable equipment. But it was not a factor in CP Rail and BMWE where the issue involved the disposition of assets, not their acquisition. The Railway was entitled in the circumstances to measure the cost of replacing the lathe against the cost of contracting out lathe work. I will review its decision in that regard shortly. At this stage of the analysis, the question is whether the Railway, even assuming its decision to contract out the work was flawed, is therefore required to replace the lathe.
The essential question raised by the facts is whether the Railway intends to continue contracting out lathe work in the future and, if so, what are the rights of the parties in light of the finding that it was in breach of the collective agreement by reason of its failure to give timely notice of its intention to contract out the work? The first aspect of that question is whether the Railway, assuming proper notice, could bring future contracting out within one of the exceptions set out in Rule 62.2. The position of the Railway with respect to that question was that its decision not to replace the lathe was justified on the basis of the cost of replacing it and the consequences flowing from its absence. Leaving aside the initial failure to give notice, I agree with the submission of the Railway that the question raised in future contracting out of lathe work will be whether it falls within the exceptions in Rule 62.2 [iii] and [iv].
I commence an analysis of the facts applicable to the exceptions by noting the Railway’s submission that one of the ongoing factors to be taken into account in assessing the reasonableness of its decision is maintenance and repair costs associated with the operation of a replacement lathe. I conclude on the facts that those costs are not relevant because they were costs required in the operation of the existing lathe and would likely be substantially less than the excessive maintenance and repair which was indicated in the evidence as being required to keep the old lathe running
Those costs are no more relevant than operational costs associated with cleanup around the lathe or the supply of electrical power required for its operation. The real question is whether the Railway, if it gives proper notice, could establish that the volume of work does not justify the expenditure involved. Accepting that the cost of moving a lathe from Squamish was a capital expenditure in the sense contemplated in the authorities, the question is reduced to one of whether the Railway, to paraphrase its position, succeeded in proving that the “expenditure involved” was such that it “did not justify” replacement of the lathe.
I conclude that the Railway failed to prove facts which would support that finding. The Railway’s evidence was that the estimated cost was $10,000. The official who prepared that estimate was qualified to prepare estimates with respect to work of that nature. However, he was frank in his admission that he did not prepare an actual estimate in the form of a quote on the cost of the move. He described what he characterized as a ROM (rough order of magnitude) process. There was no basis for questioning the official’s expertise or the factors he addressed in his ROM estimate. The difficulty was with respect to the process itself.
When the Railway’s estimate is measured in the context of contradictory estimates introduced by the Union, the cost of the move was left in doubt for two reasons, both of which defeat the Railway’s position. The first is that the evidence does not support a finding of fact with respect to what the move would actually cost, (such as a firm quote), and thus does not meet the legal onus on the Railway in that regard. The second is that the deficiency with respect to proof of the actual cost of a move arose in the context of a failure of the Railway to meet its contractual obligations under Rule 62.3.
It is reasonable to assume that if that consultative process in Rule 62.3 had been undertaken, the parties would be in a position to at least resolve the question of the likely cost of moving the lathe. In particular, both parties would have been in a position to obtain quotes on the work involved. Since it was for the Railway to prove the actual “capital expenditure involved”, and since it failed to meet that obligation, its reliance on Rule 62.2[iv] fails. That is, the Railway failed to establish the cost involved in moving the lathe was $10,000 and thus failed to substantiate its assertion that the volume of lathe work “[did] not justify the capital or operating expenditure involved”.
The question arising from that finding is whether the Railway is in a position at this stage to bring itself within one of the cost exceptions. My conclusion on the facts present in this dispute is that it could not bring itself within their terms. In my view, the Railway fell short of establishing that an expenditure of $10,000 to replace the lathe met the criteria in the language and the arbitral authorities. In particular, the decisions of Arbitrator Picher cited by the Railway served to distinguish the facts required in order to justify a contracting out on the basis of cost from the facts in this dispute. The comparison made by the Railway was with respect to its $10,000 estimate and the cost of contracting out lathe work in the period following the decision not to replace the lathe. It was of the view that the work involved in the contracting out as being insufficient to justify expending $10,000 to replace the lathe. But the Railway’s analysis fails to give any weight to the fact that the loss of lathe work is continuing and, barring a replacement of the lathe in Prince George, will be permanent. That loss may be mitigated to some extent by sending work to Squamish, but if the contracting out continues, an expenditure of $10,000 does not justify the cumulative loss of bargaining unit work involved. The language at issue prohibits contracting out unless it can be brought within one of the exceptions. It is language that is common in collective agreements in the railway industry and which has triggered a number of decisions. They support the view that measuring the competing interests of the parties on a simple cost basis is inconsistent with the language and the mutual intent to be imputed to them with respect to it.
On the facts developed in this dispute, the loss to the bargaining would continue in the foreseeable future. That erosion of bargaining unit work can only be justified on a cost basis where the disparity between the work involved and the cost of maintaining it is sufficiently disproportionate to meet what Arbitrator Ready and Arbitrator Picher have described as “a major outlay of capital or operating expenditures”. (See CP Rail and CAW citing Arbitrator Ready on p. 8). I conclude on the facts that the Railway did not succeed in bringing its decision not to replace the lathe within the exceptions set out in Rule 62.2. It is not a case where an acquisition cost of $10,000 can be seen as justifying the failure to retain work the bargaining unit has continuously performed whenever the need arose.
I conclude that the contracting out of lathe work in Prince George constitutes a continuing breach of the collective agreement. However, returning to the replacement issue, there is a fundamental distinction to be made between disposing of equipment as a prelude to contracting out the work performed on it and electing not to replace equipment that has become unserviceable. Accepting that the cost of replacement, even on the Railway’s estimate, does not justify the permanent loss of the work, any future contracting out of lathe work of the kind performed by the bargaining unit will be in breach of the agreement. However, it is for the Railway to determine how the performance of any necessary lathe work will be achieved.
I agree with the Railway that the circumstances do not justify an order requiring the replacement of the lathe. That is one option open to the Railway to avoid the contracting out of lathe work in breach of the agreement. However, it is open to the Railway to address its needs in the context of other available options. For example, it was established on the facts that the Railway has elected in some circumstances to send lathe work to Squamish to be performed by UA members in that facility. In addition, it appears that there may be a capacity to avoid lathe work in favour of other repair techniques. Hence, I conclude that the Union failed to establish that replacement of the lathe is the only option available to the Railway to avoid contracting out lathe work in breach of the collective agreement.
In the result, I conclude that the four grievances are granted on the basis that the Railway failed to provide timely notice of its intention to contract out lathe work. The Union is therefore entitled to damages. However, no basis was established for requiring the Railway to replace the lathe, and, while the Union is entitled to a declaration that contracting out lathe work in the present circumstances in Prince George is in breach of the agreement, it is not entitled to an order requiring the Railway to replace the lathe. It is left to the parties to address the calculation of damages. I will reserve jurisdiction to assist if required and to assist in the application of any other aspect of this Award.
DATED at the City of Prince George, in the Province of British Columbia, this 31st day of July, 2002.
“H. Allan Hope, Q.C.”
H. ALLAN HOPE, Q.C. – Arbitrator