SHP 578
IN THE MATTER OF AN ARBITRATION
BETWEEN
BC RAIL
AND
THE UNITED ASSOCIATION OF JOURNEYMEN AND APPRENTICES
OF THE PLUMBING AND PIPEFITTING INDUSTRY OF THE
UNITED STATES AND CANADA
LOCAL 170, METAL TRADES DIVISION
(Contracting Out: Air Brake Rebuild)
Arbitrator : Donald R. Munroe, Q.C.
For the employer : Charles G. Harrison
For the union : Rick Coleman
Dates and places of hearing : June 5-6 and
August 26-27, 2003
Vancouver and
Prince George, B.C.
I
I was constituted by the parties as an arbitration board under their collective agreement with jurisdiction to hear and decide two grievances filed by the union alleging breaches by the employer of Rule 62 (Contracting Out). The grievances are dated June 18, 2002 and July 29, 2002. They both arise from the employer’s decision to discontinue the rebuilding of air brake components at Prince George (work normally done by the bargaining unit), and to contract out the required rebuilding of air brake components to Red River Air Brake Inc. (Red River). The first grievance directly challenges the contracting out as being contrary to Rule 62.2 of the collective agreement. The second grievance alleges a failure by the employer to engage in prior consultation with the union as mandated by Rule 62.3; and further alleges that the contracting out effectively violated Rule 62.5.
II
I will deal initially and succinctly with the union’s allegation of a breach by the employer of Rule 62.5. That Rule states that:
The introduction of a contractor into a Railway operation will not result directly in the loss of employment of any permanent full-time employee except where justified by special circumstances.
The employer’s reply on this branch of the case begins by examining Rule 62.5 in juxtaposition with Rules 62.2 and 62.3. I will shortly be fully reproducing Rules 62.2 and 62.3. For the moment, it is enough to record that they restrict or limit the employer’s freedom to “contract out” work presently and normally done by the bargaining unit, whereas Rule 62.5 (as reproduced above) addresses the situation of a contractor being “…introduce[ed]…into a Railway operation”. Those are two quite different formulations (cf., Eurocan Pulp & Paper, April 28, 2000 [Kelleher]). And the employer’s argument, simply put, is that they were intended separately to address differing circumstances: on the one hand, contracting out (Rules 62.2 and 62.3); on the other, contracting in (Rule 62.5). The case at hand is one of contracting out. Hence, says the employer, Rule 62.5 has no application.
There is much to be said for the employer’s argument aforesaid. However, I need not finally decide the point. That is because, in all events, the evidence falls well short of establishing that the closure of the air brake shop at Prince George, and the contracting out of the rebuilding of air brake components, “result[ed] directly in the loss of employment of any permanent full-time employee….” The Prince George machinists formerly working in the air brake shop were simply re-assigned to other machinist work at Prince George and thus generally absorbed. At about the same time as the closure of the air brake shop at Prince George, the North Vancouver yard was being shut down, and some restructuring was occurring at Squamish. The union’s evidence about loss of employment (machinists) arising from the North Vancouver closure and the Squamish restructuring was at best ambiguous; and none of it was first hand. But to the extent loss of employment did occur, it cannot, on the evidence, be found to have “result[ed] directly” from the contracting out of the air brake rebuilding work at Prince George, even when examined from a system-wide perspective. Indeed, the evidence was to the effect that one of the Squamish machinists was actually re-deployed to Prince George. At one point in evidence, the union effectively suggested that the reassignment of the Prince George air brake machinists to other work at the same yard was some kind of contrivance. But on that point, and generally on this aspect of the case, the quality of the union’s evidence was entirely unsatisfactory. Reiterating what I said above, the evidence falls well short of providing a reasonable foundation for a finding of a breach by the employer of Rule 62.5.
III
The union’s case as it relates to Rules 62.2 and 62.3 is much more persuasive. Those rules are reproduced below, along with Rules 62.1 and 62.4:
62.1 It is the Railway’s intention to keep work within the Company provided the necessary facilities, licenses, equipment and qualified personnel are available, and that the work can be done in a manner that is competitive in terms of cost and quality and within projected time limits.
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:
· when the skills necessary are not available from within the Railway; or
· when sufficient employees, qualified to perform the work, are not available from the active employees or those placed on layoff by the Railway; or
· 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
· where the nature, the volume, or the duration of the work is such that it does not justify the capital or operating expenditure involved or the undue fluctuations in employment; or
· the required time for completion of the work cannot be met with the skills, personnel or equipment on the Railway.
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 contracting 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.
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 asserts that there was a complete failure of consultation as required by Rule 62.3; and further asserts that the employer’s decision to contract out the rebuilding of air brake components is prohibited by Rule 62.2 as not falling within any of the exceptions listed therein.
Referring to the opening words of Rule 62.2 and the first sentence of Rule 62.3, the employer acknowledges that the rebuilding of air brake components was “work presently and normally performed by employees who are subject to the provisions of this collective agreement”; and further acknowledges (for purposes of this case) that such work has been “contracted out” to Red River. However, the employer denies the union’s assertion of a failure of required consultation (Rule 62.3); and says further that the decision to contract out the rebuilding of air brake components is permissible as falling within the fourth exception listed in Rule 62.2:
· where the nature, the volume, or the duration of the work is such that it does not justify the capital or operating expenditure involved....
It is useful to refer here to the following passage at page 25 of the “lathe” award between these parties dated July 31, 2002 (Hope):
…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.
Here, the “preliminary question of whether the work at issue is bargaining unit work in the sense contemplated by Rule 62.2” is resolved by agreement. Accordingly, following the path logically suggested by the above extract, I turn initially to “the question of whether [the employer] can show that it met the requirements of Rule 62.3” (although some of the narrative on that question overlaps with the facts pertaining to the issues under Rule 62.2 which will be addressed subsequently).
IV
For many years, the rebuilding of air brake components was done by bargaining unit employees at a shop in the Squamish yard. Early in 2001, a decision was made, as part of restructuring initiatives at that time, to re-locate the air brake shop (including certain equipment) to the Prince George yard; more particularly, to a room formerly used for tool storage (and the like) in the Prince George Loco Shop. The room itself did not require reconfiguring for the new use. However, it did require re-piping for compressed air purposes (the compressor was installed on the platform floor, underneath what became the air brake room) and the installation of work benches and various equipment. The relocation of the air brake shop from Squamish to Prince George, which was completed by the end of March 2001, was accompanied by a transfer of positions from the former yard to the latter.
Lloyd Sopel, now the General Supervisor at Prince George, testified in cross examination that, “In 2001, when we moved the air brake shop to Prince George, I was aware our costs on a number of components were above industry standard”. Mr. Sopel said that having considered the costs of rebuilding the air brake components in-house in relation to contracting out possibilities, he raised the subject of contracting out with Gordon Younger, the employer’s Manager of Motive Power. Mr. Younger’s reply was that the cost differential was not sufficient cause on its own to contract out the rebuilding work.
However, in early 2002, additional considerations arose. This was in the context of a corporate plan known as the “2004 Strategic Plan”. The Plan was not adduced in evidence. However, its main elements were generally described by the employer’s witnesses. The underlying premise of the Plan was that the status quo was not economically viable in the medium to long run. Simply put, the “operating ratio” (Mr. Younger’s expression) had to improve substantially for the railway to become and remain a viable entity. I was told that in 2001, the debt burden was in the order of 600 million dollars; and that the profitability of the railway operations was insufficient: (1) to service the debt; (2) to sustain capital requirements; and (3) to pay a dividend to the provincial government as owner. Concerns were heightened by two things on the near-term horizon. One was the knowledge that the northeast coal traffic would come to an end by April, 2003. The other was a provincial government policy that would require the employer to pay property taxes in the ordinary way, rather than a grant-in-lieu customarily paid by Crown Corporations. The grant-in-lieu has most recently been approximately 1.8 million dollars. Assuming no infrastructure changes, the projected property taxes were estimated to be as much as 9.2 million dollars. (The implementation of the new property-tax policy was delayed from its initial target date of year-end 2002; however, the present expectation is that implementation will occur upon the earlier of the currently-planned divestiture of the railway or the end of 2003.)
Addressing the situation, the 2004 Strategic Plan called for: (1) substantial reductions in operating costs; (2) the abandonment of unprofitable businesses like passenger and inter-modal; and (3) attempts to enhance or create new revenues, although this was thought to be marginal at best.
One major step taken to reduce the operating costs has been to reduce and alter the composition of the loco fleet. Another major initiative has been to dramatically reduce infrastructure; most especially, by reducing the number of operating buildings -- thereby reducing everyday operating costs (e.g., hydro, natural gas and routine maintenance), and mitigating as well the projected impact of property taxes.
The first focus of the infrastructure change was the Squamish yard: where, in 2001, a number of buildings were closed (including the closure of the air brake shop and its relocation to Prince George). Then, in 2002, the focus shifted to Prince George. The infrastructure review at that location was partly to achieve cost savings associated with the consolidation of operating groups into fewer buildings; and partly in conjunction with a system-wide examination of practices respecting inventory storage. In Prince George (like other yards, I gather) there had long been a separate Stores Building which housed much of the inventory for the operating or other user departments. It was thought that quantifiable cost savings and less-quantifiable efficiencies would be realized by, firstly, paring down the on-hand inventories to what was truly necessary, and secondly, putting the required inventories more closely at each of the user-departments’ fingertips. The consolidation and inventory-management decisions at Prince George included the following: (1) the relocation of Loco Shop and Car Shop inventories from the Stores Building to the Loco Shop and Car Shop, respectively; (2) the relocation of the B & B Shop, the Section House, the Phone Exchange [formerly in the Freight Shed], the Vehicle Shop and certain offices [formerly in the Work Equipment Building] to what previously was the Stores Building; (3) the consolidation of certain lunchroom/locker room/offices in Railyard Facilities into the Loco Shop; (4) the relocation of other functions undertaken in Railyard Facilities to a tent and to open storage adjacent to the Car Shop; and (5) the consolidation of the Work Equipment Building into the Car Shop [except for the offices that were consolidated into the former Stores Building]. In the result, six buildings were vacated. The employer has leased three of the buildings to third parties, and is attempting to lease a fourth. One of the buildings has been demolished. I am unclear on the employer’s intentions concerning the sixth building (although I gather it will be demolished if a cost-effective use cannot be found).
A decision having been made to re-locate the required Loco Shop inventory into the Loco Shop itself, the next step, necessarily, was to determine the exact location in the Loco Shop where the required inventory would be housed. Ultimately, the employer concluded that the Loco Shop inventories would be housed in the air brake room; that to make way for the inventories to be housed in that room, the rebuilding of air brake components would no longer be done by bargaining unit employees but rather would be contracted out to Red River.
I should pause here to describe more precisely the contracting out arrangement. In the past, the bargaining unit employees have removed air brakes from the locos for rebuilding according to prescribed service intervals or as otherwise required, at the same time installing replacement air brakes with previously rebuilt components; and they have done the component-rebuilding work itself in a shop equipped for that purpose. Under the contracting out arrangement, the removal of the air brake components from the locos for rebuilding, and the installation of rebuilt replacement components, is still done by the bargaining unit. However, the actual rebuilding of the air brake components (disassembly, cleaning, examination, repair and replacement of worn parts, reassembly and testing) is contracted out to Red River by “core exchange”. That is to say, the employer does not purchase new air brake components from Red River, but rather exchanges components requiring rebuilding for ones already rebuilt, the price of the rebuilt components reflecting a trade-in value for the ones handed over for rebuilding.
The employer’s decision-making processes leading to the conclusions aforesaid about using the air brake room for the relocation of Loco Shop inventory storage, and contracting out the air brake rebuild work, included a variety of intersecting considerations (not equal-weighted, as will be reiterated in my discussion of the Rule 62.2 grievance). These included:
1. A global analysis of the cost benefits potentially realized by consolidating and vacating certain Prince George buildings as summarized above. The analysis, which was done and documented by the employer in early 2002, estimated the cost avoidance (energy consumption and maintenance) at $88,000 annually, and a lease income potential of $163,000 annually.
2. An economic analysis of the costs of rebuilding air brake components in-house, versus contracting out either to Red River or another possible contractor. The evidence is unclear precisely when this analysis was initiated. However, the evidence is clear that the exercise was completed and documented on a spreadsheet by the end of February, 2002. An updated analysis was prepared by the employer for purposes of the arbitration hearing which commenced in June, 2003. The analysis done in early February, 2002, included all of 2001 (including the three months of 2001 that the air brake shop was in Squamish). The updated analysis was in three segments: 2001, 2002 and the first four months of 2003. In all three segments, the respective average in-house cost for the rebuilding of the listed components remains unchanged from the initial analysis -- for the reason that by the time the updated analysis was done, the in-house rebuilding had long been discontinued. Thus borrowing from the initial analysis, the updated analysis shows the cost benefits of contracting out for the volumes associated with each of the three periods covered by the analysis, both “with overheads” and “without overheads”. Based on 2001 volumes, the cost benefit “with overheads” is shown by the analysis to be approximately $99,000; and “without overheads”, approximately $31,000. Based on 2002 volumes, the corresponding figures are approximately $118,500 and $43,000. And for the first four months of 2003, the corresponding figures are approximately $23,500 and $8,000.
3. Consideration by senior management during the spring of 2002 of possible alternatives to the air brake room for the storage of Loco Shop inventories within or nearby the Loco Shop. In the end, all such alternatives were rejected in favour of the air brake room.
I wish to be clear that I am not presently commenting on the merits or demerits of the employer’s analyses or thought processes leading to the decision to close the air brake shop and contract out the rebuilding of air brake components. That is beside the present point: which is whether the employer satisfied the obligation of prior consultation with the union as prescribed by Rule 62.3. Rather, the point to be made for present purposes, arising unmistakably on the evidence, is that none of the employer’s economic analyses or other thought processes were shared with the union until some time after the contracting out decision had firmly been made.
As I have said, the employer’s economic analyses were completed and documented early in 2002. From the time of their preparation, those materials were being used by the employer as the underpinning (in part) for a variety of initiatives: including the contracting out of the rebuilding of the air brake components as part of the infrastructure and inventory-management decision to now use the (former) air brake shop as the site for Loco Shop inventory storage. Mr. Sopel testified in cross examination that the contracting out decision was made “some time in April [2002]”. Mr. Younger, who is senior in the management structure to Mr. Sopel, was less specific, but did say in evidence that “a firm decision” to contract out the air brake work had been made at least by June 6, 2002. The evidence of John Lusney, the Director of Facilities and Telecommunications, was to the same effect.
I have mentioned June 6, 2002. On that date, there was a Union/Management Consultation meeting at which the employer gave the union the first indication of the intended new use of the air brake room, and the contracting out of the rebuild work. That topic was not on the formal agenda, but at the outset of the meeting the formal agenda was suspended by agreement to allow the employer to make a presentation to the union on a variety of intended structural changes. The union’s evidence was that the employer’s comments about the brake shop and contracting out were made “in passing”, and without words suggesting anything was imminent. The employer’s witnesses say otherwise: that the words used at the meeting could only have been understood as conveying the content of decisions. The minutes of the meeting (prepared by an employer representative) are more closely aligned to the employer’s viewpoint than to the union’s. However, by oversight, the minutes were not circulated to the union representatives in the ordinary way (and it is unclear precisely when the minutes were prepared). Indeed, the union did not see the minutes until just prior to the commencement of this arbitration in June, 2003, and then only on request. The union representatives said in evidence that had they clearly understood at the June 6 meeting that a contracting-out decision had been made or was imminent, they would then and there have reacted strongly. For his part, Mr. Sopel, who was at the June 6 meeting, acknowledged in cross examination that he and the other employer representatives were surprised at the union’s muted response to what was being said, especially given the union’s usual vigorous response to structural changes perceived as adversely affecting the bargaining unit. But regardless of what precisely was said at the June 6 meeting, these two things are certain: (1) that the employer had indeed made the contracting out decision by that time; and (2) that at the June 6 meeting, the employer did not disclose to the union the economic analyses aforesaid, nor even that they had been undertaken and documented.
Eleven days later, on June 17, 2002, the employer posted an information bulletin on the usual employee notice boards, concurrently e-mailing a copy to the union. The bulletin included the following paragraphs:
The number of facilities and the size of the locomotive workforce relative to the size of our fleet is also being examined. It is expected that the locomotive shops at either North Vancouver or Squamish (and potentially both) will be vacated. That decision is scheduled to be made and publicized by the end of June.
The Prince George facility will not be vacated, but changes are being planned which are intended to improve shop productivity and reduce locomotive dwell times in the shop. As part of this, all locomotive inventory will be relocated from the stores building to the locomotive shop. Room for the inventory will be made by vacating the main office area and the area currently used for airbrake rebuild, and it is our stated intention to the Union that we will not continue to rebuild airbrake components. In addition, a structure for un-heated storage of some inventory will be placed at the north end of the shop. Stores employees will continue managing this inventory under the direction of the General Supervisor of PG loco shop. All PM inspections, with the exception of one annual inspection, will be worked on Track-2. Track-1 will remain as a service track. Appropriate materials will be placed and maintained adjacent to tracks 1 & 2 accordingly.
(Italics Added)
The next day, June 18, 2002, the union filed the first of the grievances presently before me.
On June 27, 2002, the employer sent to the union an “Article 8 Notice of Operational & Organizational Changes”, signed by Mr. Younger. The Notice dealt with a number of changes throughout the system. As regards Prince George, the Notice said this:
At Prince George, locomotive airbrake rebuild will be discontinued. The airbrake rebuild area will be vacated to make room for locomotive inventory within the locomotive shop. This is part of an overall facilities consolidation plan in the Prince George complex, and is expected to improve shop maintenance efforts and reduce overall costs.
On the same day, June 27, Mr. Sopel, on Mr. Younger’s instructions, sent a memo to the Prince George air brake machinists (copy to the local union steward), telling the machinists that effective July 8, 2002 (two weeks hence) the air brake rebuild work would be discontinued and advising them of their reassignments.
On July 17, 2002, Messrs. Younger and Lusney met in North Vancouver with Lance Yearly, the union’s senior official. A variety of topics were discussed, including a reaffirmation of the employer’s intention to contract out the air brake rebuild work. After the meeting, Mr. Lusney inquired of Mr. Younger whether anyone had yet provided the union with the standard “Notice of Intent to Contract Out”. Mr. Younger realized that such had not occurred. And so, the next day, July 18, Mr. Younger instructed Mr. Sopel to send the standard notice, which was promptly done. The Notice contains the following “Description of Work”:
To supply rebuilt locomotive air brake components with core-exchange. BC Rail Mechanical in conjunction with Supply Management sent out a Request for Quotation today for supply of this work. The estimated cost above is pending receipt of the 3rd party quotations.
As I have already explained, the term “core exchange” as used in the above “Description of Work” means the exchange of air brake components requiring rebuilding for those already rebuilt; and where the price reflects a trade-in value of the components sent to the contractor for rebuilding.
The Notice sketches the “Reason for Contracting Out” in the following terms:
There is a consolidation of shop facilities to provide material storage at the Prince George Locomotive Shop which requires the removal of the Air Brake Room. BC Rail is uncompetitive (annual cost $230,000) and rebuilt parts are available at a more economical price through outside vendors; a potential savings of $190,000 annually.
Somewhat surprisingly, the Notice describes the “Contractor(s)” as “Unknown”. That is surprising because, back in January-February, the employer had asked only two suppliers for budgetary quotes; and one of the figures found in the “Reason for Contracting Out” is based on the budgetary quote from Red River.
On July 29, 2002, the union filed the second of the grievances now before me: the one specifically citing Rule 62.3.
On August 2, 2002, Mr. Younger provided the union with a written response to the July 29 grievance. The letter speaks generally of the “cost reduction benefits” associated with the “consolidation of facilities” and the contracting out of the air brake rebuild work. However, at least as regards the latter, there was no more information than contained in the earlier “Notice of Intent to Contract Out”; and as regards both the former and latter, no supporting economic data were provided.
The omissions just noted were despite the fact that on July 23, 2002, Mr. Sopel had e-mailed Mr. Younger as follows:
Orrin (the local union steward) has requested a breakdown of the costs and the duration of the study used in BC Rail’s determination to contract out air brake reclaim work.
Could you please make this data available as soon as practicable.
Finally, on August 27, 2002, the economic data (which is to say, the analyses and spreadsheets prepared back in January-February, 2002) were transmitted to the union. The covering letter from Mr. Younger to Mr. Yearly closes with this sentence: “Please review the documentation, and contact me when you would like to discuss the airbrake rebuild issue further”. That is reminiscent of the closing sentence of Mr. Younger’s August 2 letter to Mr. Yearly: “I am prepared to discuss any potential alternatives to this decision at your convenience”. I must frankly say that the invitation to discuss and explore potential alternatives rings hollow in the light of the employer’s own evidence that the contracting out decision had firmly been made some time prior to June 6, 2002; and in the light of the closure of the air brake room (or altered use) which had been implemented effective July 8, 2002; and in the light of the unexplained long delay in transmitting to the union the employer’s economic analyses.
I say “unexplained” because the only explanation offered by the employer in evidence for the delay lasting a number of months was that the union had not specifically asked for the data (at least until the request in July leading to the July 23 e-mail from Mr. Sopel to Mr. Younger). But given the clear language of Rule 62.3, that cannot be accepted as an explanation having significance. The employer does not assert an “emergency”; nor the existence of “time constraints” making consultation “unreasonable”. Accordingly, the employer was required by the first sentence of Rule 62.3 to “…consult with the Union in advance of the date contracting out [was] contemplated”. The second sentence of Rule 62.3 gives some definitional substance to the required consultation. Importantly, it is expressed proactively: “The cost effectiveness of proposed contracting out will be documented by the Railway, disclosed to, and discussed in detail with the Union affected”. The third sentence is also important: “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”. (Italics Added)
In my view, there was a complete failure of adherence by the employer with Rule 62.3. I noted earlier that prior to making the contracting-out decision, the employer gave some consideration to alternative sites (i.e., other than the air brake room) for the storage of the Loco Shop inventory slated for relocation from the Stores Building. The details of such consideration were recounted in evidence by Messrs. Younger, Lusney and Sopel. As regards such consideration, I reiterate an earlier observation: that the present point is not the merits of the employer’s unyielding decision that the air brake room was the appropriate space in the Loco Shop for inventory storage, a decision substantially driving the employer’s determination to contract out the rebuilding of the air brake components. Rather, the present point is that, just as with the direct economic analysis, none of this was shared or discussed with the union until long after the space and contracting-out decisions had effectively been made; and in some respects, not until the arbitration hearing itself.
As I read Rule 62.3, the employer is required to ensure that the union is meaningfully engaged, or at least given the clear opportunity for such engagement, in the economic and other considerations leading potentially to a contracting out of bargaining unit work. Rule 62.3 requires the preparation by the employer of supporting documentation; disclosure thereof to the union; and detailed discussion with the union. As interpreted by Mr. Hope in the earlier-cited “lathe” award between these parties, the union is entitled to “…a reasonable opportunity to explore alternatives and, inferentially, to challenge the legitimacy of the contracting out in the context of Rule 62.2” (page 26). And by the last sentence of Rule 62.2, this is to be done prior to the employer making its decision as to whether the work will be contracted out.
The employer documented the cost effectiveness of the proposed contracting out. But as I have said, the employer did not disclose such documentation to the union (or even its existence) until long after the contracting out decision had effectively been made. And generally, the employer failed in its obligation to engage the union in prior meaningful consultation.
The employer adduced evidence seeking to show an accepted practice of not strictly complying with Rule 62.3. The effect of the employer’s argument was that a general waiver exists in relation to the clear requirements of Rule 62.3. I was not provided with any specifics of past contracting out situations: either as to the bare facts thereof; or as to the significance or potential significance to the bargaining unit of the contracting out; or as to the extent of information passed or not passed by the employer to the union and the timing thereof; or as to the prior discussion (if any) occurring between the employer and the union. Here, the work being contracted out had for many years been done exclusively by the bargaining unit, and is by no means insignificant or peripheral. As I have sought to emphasize, what occurred here was not just a technical or minor breach of Rule 62; neither was the breach one which still allowed Rule 62.3 to operate according to its purpose. Rather, what occurred here was a wholesale failure of compliance by the employer with Rule 62.3 -- both its language and purpose. Were I to accede to the employer’s “practice” argument, I would effectively be holding that the union, by its past conduct, had altogether abandoned the rights conferred on it by Rule 62.3. Simply put, the employer’s evidence of “practice” does not rise to the level required for such holding. I refer as well to Mr. Hope’s comment at page 24 of the “lathe” award that, “…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 observation is the concluding sentence of a paragraph (at pages 24-25) reading in full as follows:
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.
On the evidence and for the reasons given, I find and declare that the employer violated Rule 62.3 in relation to the contracting out of the air brake rebuilding work theretofore done by employees in the bargaining unit.
V
I come now to the union’s allegation of a breach by the employer of Rule 62.2. The employer drew my attention as well to Rule 62.1; in particular, the phrase “…competitive in terms of cost”. Rule 62.1, as a whole, comprises a general expression of employer intention. It provides context and some interpretive guidance for what follows: see BC Rail (the “brake valve award”), December 10, 1992 (Ready); and BC Rail (the “butt-welding” award), August 6, 2002 (Hope). But ultimately, where the employer seeks to contract out work “presently and normally performed” by the bargaining unit, it must bring itself within one of the exceptions enumerated in Rule 62.2. That is to say, by the clear and specific terms of Rule 62.2, a piece of work “presently and normally performed” by the bargaining unit cannot be contracted out unless the employer proves the existence of one of the enumerated exceptions in relation to such work: see again the “lathe” award at page 25; see also Canadian Pacific Railway, CROA Case No. 3041 (M. Picher); and see especially the following extract from the award in BC Rail -and- Council of Trade Unions, [1999] B.C.C.A.A.A. No. 411 (Hope):
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.
As I have noted more than once, Rule 62.2 applies to work “presently and normally performed” by the bargaining unit. It does not apply to “new work” (see the above-cited “brake valve” award): which is to say, it does not apply to work being contracted out, or about to be contracted out, which is not “normally performed” by the bargaining unit, but which, if done in-house, would fall within the scope of the unit. In relation to work which is covered by Rule 62.2, the arbitral jurisprudence has long been to the effect that the employer does not bring the case within the fourth enumerated exception (being the exception upon which the employer relies in this case) simply by showing that contracting out the work in question is or would be less expensive than continuing to have the work done by the bargaining unit. That is not to say that cost comparisons are irrelevant to determining the existence or otherwise of the fourth exception. Neither the language of the fourth section (especially read in context of Rule 62.1), nor the established arbitral jurisprudence, would permit such a raw conclusion. But where, as here, the work in question has for a number of years been done in-house, the expectation arising from the authorities is that a decision by the employer to now contract out the work will be accompanied by a showing of a change of circumstances from which the conclusion arises that continuing to do the work in-house imposes an unreasonable cost burden.
As I have intimated, there is a body of arbitral jurisprudence interpreting and applying the language of Rule 62.2 (or its equivalent in other railway collective agreements). Some useful extracts:
…In his award, Mr. Justice Hall indicated that the right of management to contract out work was not absolute, and that long-service employees also have rights which must be respected….
In the Crane Wheels case between the same parties (February 8, 1982), it was said that it was apparent that exception (4) to the general rule against contracting-out did not contemplate a simple cost comparison. Indeed, it may be said that a provision prohibiting the employer from contracting out except where it could save money by doing so would not generally be regarded as a very meaningful provision.
In the instant case, the “nature or volume” of the work at the locations in question would appear to have justified the operational expenditure involved for many years. There were no new or special considerations involved beyond the realization that persons other than the company’s own employees could be arranged for to do the work more cheaply. Such is not, in my view, a case coming within the contemplation of exception (4) to the general prohibition of contracting-out set out in the letter of understanding.
(Canadian Pacific Limited, SHP 156 [Weatherill])
...The issue then becomes whether the Company can succeed on the alternative basis that its decision to contract out is justified by the exception found in rule 52.1(d), namely that the nature or volume of the work is such that it does not justify the capital or operating expenditure involved in maintaining the oil testing program. In this regard, and setting aside the question of whether rule 52.1(d) was intended to apply to a “new or occasional venture”, the Arbitrator is not persuaded that it can have any application in the case at hand. It is not disputed that the closure of the service facilities at Moncton and Montreal, and the related transfer of work from those locations to MacMillan Yard at Toronto has or will occasion expenditure to the Company in relation to the oil testing work. It is estimated that the Company may be required to spend as much as $125,000.00 to expand and relocate off-site the oil testing lab at MacMillan Yard. Further, there may also be some expense in relocating the lab in Edmonton, as it is believed that seismic vibrations from passing train movements over tracks which are adjacent to the lab in that location may affect test results.
While the Arbitrator is not unsympathetic to the fact that the Company is faced with certain additional expense, principally in the form of expanding its facility at MacMillan Yard, that is a consequence which flows from its own decision, obviously motivated to realize other permanent monetary savings, in closing the facilities in Moncton and Montreal. It is also significant, in my view, that there are virtually no capital expenditures to incur in respect of equipment. Indeed, it is not disputed that the contractor to whom the work has been outsourced has obtained and is using the very equipment previously owned and operated by the Company. On what basis can it be said that the ownership and operation of such equipment, whether in five locations or three, is an expenditure not justified by the nature or volume of the work involved? Firstly, there has been no substantial change or decline in the amount of work, in the sense that the same number of locomotives require the same degree of regular testing now, just as they did previously. This is not a case, therefore, where it can be said that the amount of work performed has dwindled to a degree of insignificance, so as to render the continued capital and operating expenditures non-justifiable…
…I am also satisfied that the rationalizing of the Company’s operations, including the closing of the service facilities at Moncton and Montreal, with the redistribution of certain work to MacMillan Yard in Toronto does not bring the circumstances of this case within the exception of rule 52.1(d) of the collective agreement. The work in question is work which the Company has performed for many years, on the basis of an obviously justified capital and operating expenditure, in respect of which there has been little material change save for the possible expansion of its facilities at MacMillan Yard, and the still speculative possibility of a physical move of the laboratory in Edmonton….
(Canadian National Railway, SHP-409 [M. Picher])
...Since the seminal decision of Arbitrator Arthurs in Russelsteel Ltd. (1966) 17 L.A.C. 253, arbitrators in Canada have recognized that absent collective agreement language to the contrary, management retains the discretion to contract out work. As the jurisprudence indicates, such prohibitions must be expressed in relatively clear and unequivocal language. In my view the language of section 31 of the collective agreement here under consideration is clear and unequivocal. Titled “Contracting Out”, the article specifically states that work “presently and normally” performed by bargaining unit employees “…will not be contracted out” save in certain clearly enunciated exceptions. The six exceptions provided within clause 31.1 do not expressly provide or implicitly suggest that the contracting out by sale of an entire segment of the Company’s operation constitutes a permissible contracting out. On the contrary, the six enumerated exceptions narrowly define closely circumscribed circumstances generally tied to the proven inability of the Company to be able to perform the work in question by the use of its own managerial skills, manpower and equipment. The only two variants on that theme are found in sub-paragraph 4, which relates to extraordinary capital or operating expenditures and sub-paragraph 6 which deals with work which would require the management of an unstable or fluctuating work force. In my view, for the reasons related below, none of the exceptions can fairly be said to apply to the facts of the instant case.
(Canadian Pacific Railway, CROA No. 3041 [M. Picher])
…On the whole of the evidence, I am satisfied that, by reason of the nature of the work, relating as it did to a service that had become no longer worthwhile, the continuance of the work within the Company’s operations did not justify the operating expenditures which were being incurred. It is important, I think, to emphasize that I am satisfied that this is not a matter of mere profitability, but of the fundamental viability of the Company’s contract with Domtar. I am satisfied, on the balance of probabilities, that because of the excessive cost in repairing an average of two roofless box cars per week at Chapleau, the Company would have been obligated to terminate its service to Domtar in 1986. In that circumstance, the conditions for the exception provided in subparagraph 4 of the Letter of Understanding are made out.
The issue of the “nature and volume” of work being such as to no longer justify the continuation of the work within the bargaining unit was addressed by Arbitrator Weatherill in the award between CP Ltd. and Canadian Council of Shopcraft Employees and Allied Workers, a grievance concerning the contracting out of certain machinist’s work at Angus Shops, dated February 8, 1982. At p. 8 of that award, Arbitrator Weatherill makes the following comment in rejecting the Company’s argument as to the application of the exception:
The work in question was of a sort conducted only on rare occasions. It was, however, work of a sort which was normally performed by members of the bargaining unit. Its “nature and volume” would clearly have “justified” the expense of performing the work “in house”: the company did consider that possibility and would certainly have done the work had a cheaper source of supply not been found.
The case before me is to be distinguished from that considered by Arbitrator Weatherill. I am satisfied, on the balance of probabilities, that the Company would not have continued to perform freight transportation work for Domtar if it had been compelled to continue to perform the repairs on the wood chip cars itself, as previously had been done. If a cheaper arrangement could not have been found, the overall expense incurred by the Company would not have justified the continuation of the service to Domtar or, by extension, the repair work in question.
…I am compelled to the conclusion that these circumstances were such that, due to the nature and volume of the work, the operating expenditure required to continue it within the Company was not justified, because the work itself, and indeed the freight contract with Domtar, would no longer have been viable.
I agree with Arbitrator Ready that the exception in subparagraph 4 cannot be invoked to simply find a cheaper way of having work done, so as to increase profit margins. The facts of the instant case, however, go well beyond that, relating as they do to the very existence of the freight contract with Domtar.
(Canadian Pacific Railway (1996) 57 L.A.C. 1 [M. Picher])
...I do not support the view that all the Company has to do when it wishes to contract out work presently done by bargaining unit members is to demonstrate that to do so would be less expensive to the Company. Rather, I believe that the fourth exception relates to tooling-up costs the Company would be required to assume if the work was done in-house; in order to meet the “economic” element of the fourth exception under Clause 55.2, the Company must be able to demonstrate that it would encounter meaningful capital or operating expenditures in tooling-up to do the work involved. Referring to the wording in the fourth exception, the Company must successfully argue that the tooling-up costs are such that they cannot be justified for the nature, volume, or duration of the work.
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 a simple cost test; rather, it involves demonstrating that to do the existing work in-house would require the Company assuming meaningful capital or operating expenditures. I believe my interpretation of this fourth exception under Clause [62.2] is supported by the basic principle set out in Clause [62.1].
(The “Brake Valve” Award [Ready])
…I agree with the Railway that the decision of Arbitrator Ready does not support the conclusion that cost is not a factor to take into account when considering whether a contracting out falls within the exceptions set out in the agreement. Cost is a factor in various of the exceptions set out in Article [62.2], including the “nature, volume and duration” exception relied on by the Railway in this dispute. I note in that context that the Union’s interpretation is contrary to the language itself. Article [62.1], for example, limits the prohibition against contracting out to circumstances where:
[T]he necessary facilities, licenses, equipment and qualified personnel are available; and that the work can be done in a manner that is competitive in terms of cost and quality and within the projected time limits. (emphasis added)
That language introduces the requirement that the work in question be capable of being performed competitively with respect to costs, quality and within the required time. That language has been interpreted as being subject to a balancing of interests in which the cost factor will only excuse a contracting out where it can be seen as unreasonable to require that the work remain in house…
...Based on the reasoning, implicit in the various authorities, I repeat my conclusion that the fundamental test to be applied with respect to cost factors is one of reasonableness. It is not sufficient for the Railway to simply establish a disparity between the cost of continuing to have particular work performed in house as compared with the cost of contracting it out. Where work has been done in house over a lengthy period of time, as is the case here, a presumption arises that the cost of performing the work is acceptable and the fact that a reduction in costs is possible through contracting it out will only suffice where facts exist indicating a change in the relevant circumstances from which it can be concluded that continuing to perform the work in house would create an unreasonable cost burden.
(The “Butt-Welding” Award [Hope])
As I have said more than once, the rebuilding of air brake components has for many years been done by the bargaining unit. Until early 2001, the locale of the work was the Squamish yard. The locale was then changed to the Prince George yard; more particularly, to a room in the Prince George Loco Shop. The relocation of the work from Squamish to Prince George was at a cost of approximately $50,000 (including the dismantling of the air brake room at Squamish; the transportation of equipment from Squamish to Prince George; and the preparation of the room in the Prince George Loco Shop for the rebuild work). That was considered by the employer to be an appropriate expenditure in the context of the economic benefits achieved by the consolidation and rationalizing of facilities at Squamish. In the period preceding the contracting out, the air brake rebuilding work occupied 2-3 designated FTE machinists on a regular schedule.
Let us look closely at the language of the fourth exception to the presumptive ban in Rule 62.2 on the contracting out of work presently and normally done by the bargaining unit. The exception is cast in terms of “…the nature, the volume, or the duration of the work…not justify[ing] the capital or operating expenditure involved….” In evidence and argument, the employer did not point to anything in particular about the “nature” of the work (which clearly is integral as distinct from peripheral to railway operations, as well as being continuing and not intermittent); nor to anything in particular about the “volume” of air brake rebuild work (which remains substantially unchanged); nor to anything in particular about the “duration” of the work (which remains indeterminate) -- i.e., as not having warranted over the years and to the point of the contracting out, the capital or operating expenditures occasioned by such work. Neither is there any suggestion in the evidence that by continuing to do the air brake rebuild work in-house, the employer would be faced (as the matter was put in CROA No. 3041) with “extraordinary” capital or operating expenditures -- i.e., beyond what would routinely be expected in relation to the in-house performance of such work. Indeed, if the focus is the air brake rebuild work itself, one could not identify “…a change in the relevant circumstances from which it can be concluded that continuing to perform the work in-house would create an unreasonable cost burden” (see the last sentence of the concluding paragraph of the above-quoted extract from the “butt-welding” award).
The point just made is reinforced by evidence in cross examination of Messrs. Sopel and Younger. As earlier recounted, Mr. Sopel did some cost comparisons in 2001, at about the time the air brake rebuild function was being transferred from Squamish to Prince George. As I understand the evidence, the cost comparisons done by Mr. Sopel at that time were not as comprehensive (in terms of the variety of components examined) as the cost comparisons done in early 2002. However, Mr. Sopel’s 2001 examination of the situation was sufficiently representative that he was able to volunteer in evidence that, “…there were no surprises in 2002”. And as Mr. Sopel acknowledged in his evidence, “The cost related to brake rebuild only wasn’t considered sufficient cause to contract out in 2001”; and further, “…what was new in 2002 was the savings associated with closing and consolidating buildings [at Prince George]”. In Mr. Sopel’s words: “Buildings were closing, and we needed the space” -- i.e., for the re-located Loco Shop inventory.
For his part, Mr. Younger, who in 2001 had told Mr. Sopel that the cost comparisons done at that time were not sufficient cause on their own for contracting out, identified the “need for the space” as being the “chief reason” for the decision in 2002 to contract out the air brake rebuild work. More fully, Mr. Younger’s statement in cross examination was that, “The chief reason for getting out of the air brake rebuild was because we needed their space; that was the chief reason but not the only one; it was the chief reason at the time; we needed that space”. In context, Mr. Younger, in the just-quoted statement, was acknowledging the primacy of the “need for the space” as the ultimate deciding consideration, while at the same time reserving contributing significance for the cost comparisons done in early 2002. Later in cross examination, Mr. Younger was asked this question: “If you’d found another place for the [Loco Shop] inventory [being re-located from the Stores Building], would you still have contracted out the air brake work?” Mr. Younger’s reply was that, “The in-house comparative cost was a factor, but I truthfully don’t know if we didn’t have the other part of it influencing the decision”.
Repeating myself, the “other part of it” was the “need for the space”, which in turn was driven by the 2004 Strategic Plan calling for a substantial reduction of infrastructure, coupled with the operational advantages of bringing the required inventories closer to the user departments’ fingertips. The reduction of infrastructure at Prince George (as elsewhere in the system) was quite aggressively undertaken. I earlier briefly summarized its major elements. On Mr. Lusney’s evidence, the “…net reduction at Prince George is about 62,000 square feet [of building space] of a prior total of 160,000 square feet”.
Putting the present matter in some context, the air brake room at Prince George (that is, the room where the air brake rebuild work was done until contracted out to make way for inventory storage) is approximately 780 square feet.
As the evidence clearly indicates, the consideration ultimately driving the decision to contract out the air brake rebuilding work was the employer’s conclusion that the space was needed as part of a general restructuring. The cost comparisons, while nicely dovetailing as a consideration with the space pressures, were not, themselves, what moved the employer to the contracting-out decision. That being so, I have not to this stage commented on the data comprising the cost comparisons. It should not be presumed, however, that the union accepts the data at face value. One of the criticisms leveled by the union is that the employer failed to take account of the obvious need for a “learning curve” upon the work being transferred from Squamish to Prince George, and various start-up problems recounted in evidence. This failure, says the union, resulted in an artificially-high (in the medium to longer term) calculation of in-house labour costs. There is some legitimacy to that criticism, although not to the degree suggested by the union.
Another of the employer’s faulty assumptions, says the union, is that the “bar code” system for “swiping in” and “swiping out” of particular jobs is sufficiently reliable for purposes of the cost comparisons undertaken. It would be a serious overstatement to say that the “bar code” system is honoured in the breach. But on the evidence, one must conclude that there has not been perfect adherence to the system. It cannot be presumed to give an entirely accurate picture of what it purports to record.
A larger point of contention is the employer’s inclusion of air-brake room non-labour “overheads” in the cost comparisons. In argument, that was justified by the employer because of the general restructuring of which the disputed contracting out became a feature. Such justification was necessary because those exact same “overheads” (more-or-less) exist today; they simply support another function (inventory storage). It is true, as the employer says, that other non-labour “overheads” are being avoided by the closure and consolidation of other buildings at the Prince George yard. But in global terms, the number of employees in Prince George (being one part of the disputed “overheads” calculation) has not diminished; and in cross examination, Mr. Younger responded “That’s fair” to the following question: “If the brake shop work stayed in the brake shop, and you put the inventory somewhere else, you’d still save the [non-labour] costs associated with the closure of other buildings and consolidations generally?” On this score, the most that can be said for the employer is that non-labour “overheads” formerly experienced somewhere else at the Prince George yard are being avoided by the decision to contract out the air brake work, and to use the former air brake room for another purpose. In the context of the Prince George restructuring as a whole, I would describe the non-labour “overhead” savings directly associated with the employer’s decision as to the optimum use of the (former) air brake room as modest.
I must observe, too, that the employer’s case as it relates to the physical restructuring at Prince George is dependent on its assertion that the (former) air brake room was the logical place for the relocation of the Loco Shop inventory; that reasonable alternative space(s) in the Loco Shop did not and do not exist. On the evidence, including a view of the Loco Shop, that assertion is highly debatable (a debate which may usefully have been undertaken between the employer and the union had the employer complied with Rule 62.3). However, I do not consider it necessary to decide the point. That is because, regardless of the outcome of such debate, the judgment I have reached is that the employer’s decision to contract out the air brake rebuild work cannot be justified by reference to the fourth exception found in Rule 62.2; put another way, that there was a failure of proof by the employer in that regard.
If the contracting out decision can be justified, it can only be as one of a collection of decisions comprising the restructuring initiatives at Prince George. On its own, the air brake rebuild work was a longstanding and viable employer operation. No doubt, the financial considerations leading to the system-wide examination of work practices and infrastructure usage were (and are) powerful indeed. In the circumstances, some latitude must be given the employer on the question of whether “…the cost factor [is such that] it can be seen as unreasonable to require that the work remain in-house”; put differently but to the same effect, the question of “unreasonable cost burden” (the quoted phrases being drawn from the above-reproduced passages from the “butt-welding” award). But the situation confronting the employer did not effectively suspend the restraints and protections set up by the collective agreement. As I read the fourth exception created by Rule 62.2, considered in the light of prior awards, the need to consolidate and reduce infrastructure on economic grounds (even compelling economic grounds) is not a per se justification for the contracting out of a bargaining unit function which for a good many years has been seen to be a viable railway operation. Depending on the circumstances, the need for such restructuring may or may not provide the required justification. In my view, if the language of the fourth exception (“where the nature, the volume, or duration of the work is such that it does not justify the capital or operating expenditure”) is to have real meaning, the employer must show that continuing to do the particular work in-house either stands in the way of the restructuring necessarily undertaken, or renders the required restructuring substantially or materially ineffective. The decision about whether to contract out the work in question cannot simply get caught up and pushed along in pursuit of a global objective. While the decision will of course be made in context, it must be treated as something requiring separate close attention within the frame of Rule 62.2: the presumptive ban on the contracting out of work presently and normally done by the bargaining unit, and the carefully-crafted exceptions to the general prohibition.
In the present case, the economic benefits of the infrastructure changes at Prince George, including the closer-at-hand required inventory storage, were not substantially dependent on the contracting out of the air brake rebuild function resulting in the release for another use of the 780 square feet comprising the air brake rebuild room. To the contrary, those economic benefits would largely have been realized (and continue to be realized) had the contracting out not occurred. If, as the employer says, there is nowhere else in the Loco Shop -- i.e., other than the air brake room -- to put the required Loco Shop inventory (an assertion I have described as debatable), then other options, such as an immediately-adjacent heated boxcar, do exist. I was told in evidence by the employer that although a heated boxcar may be an option in the abstract, it was not mandated by the 2004 Strategic Plan because it would amount to new heated space. But of course, the Strategic Plan cannot override the collective agreement. Even assuming (which I do not) that a heated boxcar is the only rational alternative to the air brake room for the storage of the re-located Loco Shop inventory, such would not seriously prejudice the main thrust and purpose of the overall restructuring.
In the final analysis, a judgment must be made in total context about whether a direction prohibiting the contracting out of the air brake rebuild work would necessarily result in an unreasonable cost burden for the employer, within the meaning of the fourth exception to Rule 62.2. In my judgment, the employer has not established such to be the case. I therefore find and declare that the employer violated Rule 62.2 by contracting out the air brake rebuild work as it did.
VI
I have found and declared violations by the employer of Rule 62.3 (see part IV of this award) and Rule 62.2 (see part V).
As regards Rule 62.2, the union sought a twofold remedial order: (1) an order that the employer cease and desist from contracting out the air brake rebuild work; and (2) an order that the employer “reinstate” the air brake room. In my view, the second of those two orders would be overreaching. As an arbitrator, I am not empowered to direct the employer precisely how to comply with a contracting-out constraint established by the collective agreement (a breach thereof having been found); only that it must do so. In the present case, the appropriate order (which is hereby made) is that not later than 45 calendar days from the date of this award (which period is subject to the jurisdiction retained in the next following paragraph), the employer shall cease and desist from contracting out the rebuilding of air brake components.
I attach this commentary to the 45-day period being allowed for compliance. Very simply, the 45-day period creates an outer deadline while at the same time allowing a reasonable period for the avoidance of potentially serious operational disruptions. In the circumstances, including the absence of job loss directly attributable to the contracting out (see part II of this award), the union’s interests (in common with the employer’s) are not advanced by an overly-tight compliance deadline. I should say, however, that it would be entirely inconsistent with the purpose of my allowing a 45-day compliance period for the employer to place unusual or rush orders with Red River in order to create, in effect, an extension to the period for compliance. I have no reason to think that the employer will do otherwise than observe this award in good faith. But the foregoing cautionary words seem appropriate. And for purposes of the implementation of this award according to its intent, I retain jurisdiction to shorten the 45-day compliance period if circumstances warrant.
Turning to Rule 62.3, the union informed me that damages are sought pursuant to Rule 62.4, but suggested that were I to find a breach of Rule 62.3, the quantum of damages be referred back to the parties for agreement (while of course retaining jurisdiction to resolve disputes in that regard). That was the path taken by Mr. Hope in the “lathe” award. The employer did not object to the union’s suggestion, and I therefore accede to it. I will say however that on its face, Rule 62.4 appears simply to be a contractual codification of a remedial authority long possessed by arbitrators. An award of damages is not automatic, but rather must be grounded in the circumstances. It will be a matter of argument, if necessary, whether the cease-and-desist order made above is or is not sufficiently responsive to the employer’s breach of Rule 62.3, as well as to the breach of Rule 62.2.
Donald R. Munroe, Q.C.
Arbitrator