IN THE MATTER OF:

IN THE MATTER OF:	)	AN ARBITRATION BETWEEN:
	)
	) ) )	CANADIAN NATIONAL RAILWAYS 935 DE LA Gauchetiere St. W. Bldg 1 Montreal, QC H3B 4G1
	)
	)	*(hereinafter called the “Company”)*
	)
	)	- and -
	)
	) ) )	NATIONAL AUTOMOBILE, AEROSPACE, TRANSPORTATION AND GENERAL WORKERS UNION OF CANADA (CAW-CANADA) (LOCAL 100)
	)
	)	*(hereinafter called the “Union”)*

ARBITRATION AWARD

On November 10, 2003, the Arbitrator Jack M, Chapman, Q.C. was appointed by the Minister of Labour for Canada to arbitrate a dispute under the Canada Labour Code, Part 1 between the parties. The dispute involved two grievances respecting contracting out. In summary form, one grievance involved work allegedly contracted out to the Woodcrest Shop in Homewood, Illinois, and the other related to work allegedly contracted out to the shop in Paducah, Kentucky. The Company or one of its subsidiaries owns both of those shops.

By agreement between the parties, the hearings were originally scheduled to take place on March 9 and 10, 2004 in Winnipeg. In February of 2004, the Arbitrator was advised that the parties were involved in other conflicts and had agreed to postpone the arbitrations sine die. The request of the postponement was granted.

Subsequently, the Arbitrator received advice that the Grievance relating to the work allegedly being contracted out to Homewood, Illinois was to proceed. The parties agreed that the matter would be hearing in Winnipeg on June 10, 2004. The grievance relating to the work being allegedly done in Paducah, Kentucky continues to remain adjourned sine die. The hearing convened in Winnipeg. The company was represented by Mr. André Giroux, Barrister, of the firm Ogilvy Renault. The Union was represented by Mr. Abe Rosner, a National Representative of the Union.

Attending with Mr. Giroux were the following:

Douglas Fisher, Directeur, Labour Relations, Montreal

Bill Ross, Assistant Chief Mechanical Officer, Edmonton

Ross Bateman, Senior Manager Labour Relations, Toronto

Ron Campbell, Manager Labour Relations, Winnipeg

Appearing with Mr. Rosner were the following:

Bryon DeBaets, President, CAW Local 100

Dennis Wray, Vice-President, Local 100

Paul Van Wart, President, Lodge 550

Les Lilley, Local Chair, Lodge 550

Ken Hiatt, Area Rep, Lodge 550

Jim Haughey, Area Rep, Lodge 550

At the commencement of the hearing, the parties confirmed the jurisdiction of the Arbitrator and as well confirmed that there were no preliminary objections to the matter proceeding. Mr. Rosner and Mr. Giroux advised that no witnesses would be called and that there would be written submissions as well as verbal argument.

At all relevant times, the parties were subject to Collective Agreement, identified as Agreement 12 between the Company and the Union. This Agreement was to be effective January 1, 2001 and is referred to as Agreement 12 and governs the rates of pay and rules of service for “Shopcraft” employees in Motive Power and Car Departments.

This Arbitration only concerns the work allegedly contracted out to the Woodcrest shop in Homewood, Illinois and accordingly only that grievance is recited. The Grievance is dated October 12, 2002 and reads:

#110-1376 Grant Ave.

Winnipeg, MB R3M 3Y4

October 12, 2002

Mr. Dave Feeney

Division Mechanical Officer

Symington Locomotive Reliability Centre

Box 1620, 821 Lagimodiére Blvd.

Winnipeg, Manitoba R2J 0T8

Re: Contracting Out Canadian Assigned Units to Woodcrest in Homewood, Illinois

Please accept this as a grievance at Step II of the procedure in accordance with Rule 27 of Wage Agreement #12 in which the Union claims that the Company has violated Rules 51.1, 51.2 and 51.3 of the agreement. If this grievance has been sent to the wrong office, please forward it to the proper authority.

The Union claims that the Company violated Rule 51.1 when they sent General Motors and General Electric locomotives assigned to Canadian locations to Woodcrest Shop in Homewood, Illinois for work which includes but is not limited to scheduled repairs, wreck repairs, modifications and scheduled maintenance work. This is work presently and normally performed by Heavy Duty Mechanics and Electricians in Edmonton, Winnipeg and Toronto who are members of CAW Local 100. This rule states:

Effective March 6, 2001, work presently and normally performed by employees who are subject to the provisions of this collective agreement will not be contracted out except:

a) when technical or managerial skills are not available within the railway; or

b) where sufficient employees, qualified to perform the work, are not available from the active or laid-off employees; or

c) when essential equipment or facilities are not available and cannot be made available at the time and place required (a) from Railway owned property, or (b) which may be bona fide leased from other sources at a reasonable cost with the operator; or

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

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

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

The conditions set forth above will not apply in emergencies, to items normally obtained from manufacturers or suppliers nor to the performance of warranty work.

The Union claims that the Company violated Rules 51.2 and 51.3 when they failed to give the Union proper notice of their intention to contract out this work. The Company has not discussed this contracting out with the Union nor provided information on this work that has been contracted out in accordance with these rules. These rules state:

51.2 The Company will advise the Union representatives involved in writing, as far in advance as practicable, but no less than thirty days except in cases of emergency, of its intention to contract out work which would have a material and adverse effect on the employees.

In all instances of contracting out, the Company will hold discussions with the representatives of the Union in advance of the date contracting out is contemplated, except in cases where time constraints and circumstances prevent it.

51.3 The Company will provide the Union with a description of the work to be contracted out; the anticipated duration; the reasons for contracting out, and, if possible, the date the contract is to commence, and any other details as may be pertinent to the Company’s decision to contract out. During such discussions, the Company will give due opportunity and consideration to the Union’s comments on the Company’s plan to contract out and review in good faith such comments or alternatives put forth by the Union. If the Union can demonstrate that the work can be performed internally in a timely fashion as efficiently, as economically, and with the same quality as by contract, the work will be brought back in or will not be contracted out, as the case may be. Where a business case cannot be made to have the work performed by CAW members under existing collective agreement terms and conditions, the parties may, by mutual agreement, modify such terms and conditions in an effort to have the work performed by CAW members.

The Union requests that the Company cease and desist from sending work on Canadian assigned locomotives to locations outside of Canada. The Union also requests that the Company meet with the Union to discuss this work that has been contracted out with the intention of resolving any further instances of contracting out and supplying the Union with all information in regard to this work. The Union appreciates your immediate attention to this matter.

Yours truly,

Dennis Wray

Vice President.

Exhibit 1 contains rules 51.1, 51.2 and 51.3 which the Union alleges were violated. Those rules are recited in the Grievance as above set forth.

In his opening comments, Mr. Rosner referred to Article 28.4 of Agreement 12, which reads:

A Joint Statement of Issue containing the facts of the dispute and reference to the specific provision or provisions of the Collective Agreement allegedly violated shall be jointly submitted to the Arbitrator in advance of the date of the hearing. In the event the parties cannot agree upon such Joint Statement of Issue, each party shall submit a separate statement to the Arbitrator in advance of the date of the hearing and shall at the same time give a copy of such statement to the other party.

He pointed out that a Statement has been prepared and was contained in the Union’s submission, but was not executed by the Employer. The Employer also prepared a Statement of the issue that appears in its submission. Similarly, that was not executed by the Union.

The parties filed a substantial number of “documents”. For the sake of identity, they were all numbered as being filed, but did not necessarily have the formal status of an Exhibit.

These documents were as follows:

1. Agreement 12 between the parties.

2. The Union Submission.

3. The Union’s comments with respect to the dispute.

4. The Union’s Book of Authorities.

5. The Company’s submission with respect to the matters in dispute.

6. The Company’s Book of Documents.

7. A copy of the Annual Report of the Employer for the year 2003.

Subsequent to the hearing, the Union sent the Arbitrator a Decision of Arbitrator Soronow respecting a dispute between the Canadian Pacific Railway Company and the Union in the matter of Rule 53 of the Collective Agreement between those parties. On July 2, 2004, Mr. Giroux wrote the Arbitrator submitting that the Decision of Arbitrator Soronow had no relevance to the case at hand. On July 7, 2004, Mr. Rosner replied to some of the comments in Mr. Giroux’s letter of July 2, 2004.

On September 2, 2004, Mr. Giroux wrote to the Arbitrator submitting a further Decision of the Federal Court of Appeal relating to a dispute between the Canadian Airlines International Ltd. and Husain. On October 20, 2004, Mr. Rosner sent e-mail to the Arbitrator submitting that the Decision of the Federal Court of Appeal was not relevant. Mr. Rosner also advised that the Union would not be making any further submissions.

I do not propose to recite the very thorough submissions of Mr. Rosner and Mr. Giroux, however I will try to distil the more relevant facts from their submissions.

It should be pointed out that there is no real dispute as to the majority of the facts. The Company owns and operates a number of locomotives, each of which is assigned to a “home” base or terminal. I appreciate that I may have simplified that designation.

The Union, in its submission, stated that its members were primarily skilled tradespersons whose principal occupation were the inspection, maintenance and repair of the Employer’s fleet of locomotives and railway cars. The Union had become the bargaining agent for those workers in 1994 following a consolidation by the Canada Labour Relations Board of the six pre-existing “shopcraft” bargaining units. He submitted that for some 80 years, the “shopcraft” employees were responsible for keeping the locomotives and freight cars in good, safe operating condition. There had been a national railway strike in 1973 which was ended by Parliament. Mr. Justice Emmett Hall of the Supreme Court of Canada had been appointed by Parliament to resolve the issues outstanding between the parties. He conducted hearings and ultimately had ordered the inclusion of a contracting out “letter” in the Collective Agreement of those employees. Mr. Rosner submitted that the Hall letter was substantially incorporated in Rule 51 of Agreement 12 and that it has remained largely unchanged.

He noted that the Employer had been privatized in 1995. In January 1998 it entered into an agreement with the Illinois Central Railroad to effect a merger of that railroad with itself. It obtained the necessary regulatory approval in the United States, and the Employer then bought up the shares of the Illinois Central Railroad. Mr. Rosner noted that ultimately, the Employer, in its annual reports, referred to the “former Illinois Central”.

He argued that although the umbrella of ownership showed them to be the same; from a labour and employment standpoint, the 2 operations remained and still remained entirely separate. He submitted that it could not be otherwise due to the separate and exclusive statutory regimes prevailing on both sides of the international border dividing Canada and the United States. The Employer’s Canadian operations were a “railway”, which was a federal work within the meaning of Section 2 of the Canada Labour Code and that CN and Canada and its employees in Canada were Employer and Employee within the meaning of the Code,

However, employees in the United States were not subject to the same laws. The United States operation simply did not fall within the jurisdiction of the Canadian Parliament or within the scope of the Canada Labour Code. As well, the Canadian employees are represented by the Union, and certified under the Code, while the employees on the former Illinois Central Railway have Unions certified under a different regime, that being the Railway Labour Act of the United States. They have separate and distinct Collective Agreements and the issues of seniority, promotion, layoff and all other matters are different on each side of the International Border and matters were handled in a separate and non-overlapping way. There is no similar bargaining unit in the United States operation of the same nature as the Union in Canada. Generally there are a number of what may be called single craft bargaining units. He submitted that there was no intermingling or exchange of labour between the operations in Canada and those in the United States. He also noted that the merger required no amendment to any Articles of the Collective Agreements, nor did it require any proceedings before, what was then known as the Canada Labour Relations Board.

In 2002, it came to the attention of the Union, for the first time, that a number of locomotives assigned to Canada and Canadian shops were being sent to Woodcrest Shop in Homewood, Illinois and that scheduled inspections, maintenance and repair were being performed in that shop. He submitted that those categories of work were not only normally and presently being performed by members of the Canadian Bargaining Unit, but as far as the Union was aware, it was to be done exclusively by the Canadian employees, and the outsourcing of such work was done without any advance notice to or consultation with the Union. The matter was brought to the attention of the Employer who disputed that the Employer was “contracting out” work and in effect said that the work being done at Woodcrest was composed of work required to “make locomotives reliable, safe and fully compliance with regulatory requirements”. He submitted that the Employer also made reference to failed locomotives arriving at Woodcrest that had to be repaired as it was not effective to move the locomotive “dead back” to the Canadian home terminal.

Obviously, the negotiations between the parties were unsuccessful, and ultimately, the Grievance was filed.

Mr. Rosner submitted that the Union did have the responsibility to prove its case, and said that it would have to demonstrate the following:

1. That the work in question is work “presently and normally performed by employees who are subject to the provisions of this Collective Agreement”.

2. That the work in question has been “contracted out”.

3. That the general prohibition on contracting out is not relieved against by any one of the “exceptions” listed in Rule 51.1.

4. That the company has failed to provide notice and information and to allow development of a business case as per 51.2 and 51.3.

With respect to the first contention, he submitted that he did not feel there was any dispute as to the truth of the assertion that members of the Bargaining Unit “presently and normally’ performed the full range of inspection, maintenance and repair or the Employer’s locomotives. He listed a partial list of the scheduled inspections, maintenance and modifications normally performed by members of the Union, and stated that these were major jobs, some valued at over $100,000.00 of labour costs. That work was being done in the Woodcrest Shop on numerous occasions on Canadian based CN locomotives sent to Woodcrest.

With respect to the second contention, he stated there was no question that the Employer was “contracting out” when it sent Union shopcraft work to Homewood. He agreed “ contracting out” was not specifically defined in the Collective Agreement. He referred to a large number of arbitral precedents that, in his view, established the principles of “contracting out”. Mr. Rosner submitted that the usage of the parties themselves over the years established that it was contracting out. Further reference will be made to some of those cases.

With respect to the third contention, he submitted that for contracting out to be allowed without it being as violation of the Collective Agreement one of the 6 listed exceptions under Rule 51.1 had to apply. As well, he acknowledged that if the work in question was warranty work, or including items normally received from manufacturers or suppliers, the exception would apply. Additionally, an exception would apply in emergency situations. However, he emphasised that it did not apply for scheduled maintenance and/or inspections. He maintained that the case law established that once the Union showed that the work was “presently and normally performed” by its members, the onus shifted to the Employer to plead and demonstrate one or more of the exceptions. With respect to the fourth contention, he stated that the Employer had not complied with the information and notice requirements specified in Articles 51.2 and 51.3 of Agreement 12.

Under Tab 3 of the Union’s submission (document 2) was a list of the various locomotives, and a listing of their “home base”. As well, there was a listing of work performed over a period of time, much of which was identified by code as maintenance and/or inspection. Mr. Rosner did not dispute that emergency work would be done at the repair facility closest to where the locomotive might have become disabled.

Not surprisingly, Mr. Giroux did not agree with the submissions of Mr. Rosner. In the Statement of Issue prepared by the Employer (document 5), it listed some 26 locomotives that had been repaired or serviced at the Woodcrest shop in Homewood, Illinois. The Union had claimed that the employer violated Rules 51.2 and 51.3 when it failed to give the Union proper notice of that work. Mr. Giroux denied the Employer violated any of those rules, and submitted the work in question did not fall within the ambit of Rule 51 as it was not work “presently and normally” performed by employees or subject to provisions of Agreement 12, nor did it constitute” contracting out”.

He stated that the Employer operated a number of repair facilities throughout the system that had international operations, at least between Canada and the United States. There were 3 major repair facilities in Canada, being Edmonton, Winnipeg and Toronto. There were 2 in the United States; one of which was in Homewood, Illinois and the other was in Paducah, Kentucky. There were 2 basic types of locomotives, one being low horsepower, and the other high horsepower. The low horsepower engines very rarely went outside of the division to which they were assigned, but high horsepower engines travelled throughout the system. For example, a high horsepower engine assigned to Edmonton could very well find itself on a train in Halifax, Nova Scotia or Memphis, Tennessee. Similarly, a high horsepower engine assigned to a US location could be found on trains in Ontario or Manitoba or elsewhere in Canada. He submitted that the history of the Employer established that whenever a locomotive failed away from its assigned location, it was repaired or serviced at the shop located in the area of the failure. It was very rare for locomotives to be moved “dead back” to their assigned location. Similarly, the practice had always been that when a locomotive failed while away from its assigned location and required immediate repairs, any scheduled maintenance or inspection which was due to be done at that time, would be done at the same time and location as the emergency repair. Since the merger of the 2 railways, Canadian locomotives have been repaired and serviced on a continued basis at the Woodcrest shop as well as other US shops. However, he stated that even prior to the merger work had been done in the United States. Canadian locomotives failing in the United States might be brought to the Battle Creek shop in Michigan a part of the Grand Truck Railway Division owned by the Employer.

After the merger, the Union expressed concern that its “work” would be moved across the border and sought assurances that its members’ work would not jeopardized. He stated that in 1998 a letter had been sent from the Employer to the Union and that letter was filed as Tab 1 in its submission (document 6). That letter reads:

August 22, 1998

Mr. Gary Fane

National Director of Transportation

National Automobile, Aerospace,

Transportation and General Workers

Union of Canada (CAW-Canada)

205 Placer Court

Willowdale, Ontario

M2H 3H9

Dear Mr. Fane:

During this round of negotiations, you have highlighted the concerns of your membership that with the acquisition of the Illinois Central Railroad, some work may be rationalized on a cross-border basis.

Specifically, in your letter to Mr. Tellier dated February 26, 1998, you served notice that you would seek clear commitments at the negotiating table, in regard to the following two questions, and I quote:

1. “Will work performed in Canada flow to the U.S. (as an example, will the combined railway maintain two customer service centres, or can we expect to see a single future one in Chicago, etc.)?”

2. “Will job numbers be reduced in Canada as a result of the merger?”

Mr. Tellier replied the very next day, inviting you to work together with CN as a team to provide “high quality, reliable service, without unnecessary disruptions” to our customers and to “continue to ensure the competitiveness of Canadian National”.

He went on to say:

“On the basis of this commitment to work together, I can respond to your two specific issues emphatically. I see no reason why this transaction will lead to work performed in Canada flowing to the United States. Nor do I see any reason why it will reduce employment levels in Canada – on the contrary, as I have said, it should increase jobs on both sides of the border.”

Therefore, for the term of this Collective Agreement, the Company agrees that there will be no net reduction of your work and/or jobs as a result of any cross-border rationalization.

In the particular situation of the Customer Service Centres, please be advised that there has been some discussion about moving U.S. related work back to the U.S. so that it could be in closer proximity to the business. These plans were only in a study stage and they will not be acted upon during the term of the Agreement.

Yours truly,

Richard J. Dixon

Assistant Vice-President

Labour Relations and Employment Legislation

He submitted that, in fact, the workers in Canada had been beneficiaries of the merger because a substantial amount of work on locomotives based in the United States had moved across the border to Canadian shops. He also stated that the United States Federal Railway Administration Regulations required, that a locomotive had to be fully compliant with the regulations to move on US lines. Similarly Canadian regulations required that locomotives had to be fully compliant to run on Canadian lines. That could involve extensive repairs to allow locomotives to operate legally and that when locomotives came to Woodcrest for repairs they were made reliable, safe and fully compliant. Additionally, locomotives were to be inspected after 92 days in service and if that time limit was reached or was imminent while a Canadian locomotive was outside of Canada but within the system, it would repaired, serviced and inspected and brought to compliance state and not be brought “dead back” to its assigned location. He stated that the 26locomotives previously referred to were repaired at Woodcrest in Illinois because they failed or were up for inspection while in the United States away from their assigned locations. The Employer, in accordance with its previous practice, had directed that the locomotives be taken to the closest shop in this case the Woodcrest Shop where they were repaired and in some cases inspected for compliance. Mr. Giroux noted that during the same time period some 43 US assigned locomotives were repaired or inspected at Canadian shops.

In essence, the Employer submitted that there was no violation of Rule 51 because the work grieved was not “presently or normally” performed by the employees subject to Agreement 12, and additionally, that work was not contracted out. He stressed that the Collective Agreement did not prevent the company from having the disputed work performed in the United States. He submitted that company employees in the United States had always performed the type of work in question. This had gone on for decades and it had always been the company’s policy not to move a locomotive “dead back” to its assigned location.

He also referred to a number of Arbitral Decisions, some of which will be commented on further in this Award. He also submitted that work was not contracted out as, in the Employer’s opinion in order to constitute “contracting out” the requirement was that the work was to be performed by a third party or employees of a third party. In the instant case, work was performed by employees of the same Company on Company owned premises. The Woodcrest Shop belonged to the Employer and the employees of Woodcrest were employees of the Employer. He also stressed that it was important to remember that a “no contracting out” clause was not the same thing as a “bargaining unit work clause’. Their purpose and effect were different. He stressed that no third party contractor was involved in performing any of the disputed work.

I have carefully reviewed and considered each of the authorities submitted by both Mr. Rosner and Mr. Giroux. I have also done certain researches in the various texts and other reported Decisions. I specifically asked both Mr. Rosner and Mr. Giroux if they had any experience in, or knowledge of, cases with any fact situation similar to the instant one i.e. where a Canadian company had subsidiaries or affiliates in a foreign jurisdiction. Presumably, they were not successful in their researches as no such case was filed.

Although all of the cases submitted for my consideration contain excellent digests and summaries of the jurisprudence relating to “contracting out” and/or “work assignments”, only one deals with a “vaguely” similar fact situation. That is the decision of Arbitrator MacIntyre in the case of Wieser Inc. v. Canadian Auto Workers Local 3020 [1994] B.C.C.A.A.A. No. 347. The similarity with respect to that case is that it concerned a United States parent company which owned 2 subsidiaries, one in Arizona, and one in Canada. The American parent directed that certain work previously done in its Canadian plant be assigned to its plant in Arizona. Arbitrator MacIntyre noted that the Collective Agreement between the Canadian subsidiary and the Union referred to bargaining unit work. The Union and its predecessors had tried to obtain a “no contracting out” clause but were not successful. The definition of bargaining unit work which the Union relied on was, in part, the following “persons whose regular jobs are not in the bargaining unit shall not work on any jobs which are included in the bargaining unit except for purposes of instruction, experimentation, or in the case of emergency”. Arbitrator MacIntyre held that that clause did not support the Union’s position that the Employer was contracting out. Arbitrator MacIntyre dismissed the grievance on a number of grounds, but at paragraph 89, he made the following comments that I find of some significance and of assistance in the instant case:

89 However, to say that the layoffs were not really the Canadian company’s decision, but resulted from a joint decision by the senior executives of an interlocking parent-subsidiary group is not equivalent to saying that the employees of the two plants are fellow-employees. In a general sense they were all employees of a group of companies; that has a useful meaning, but is not sufficient for analysis of a specific collective agreement, which requires a more precise definition. The hiring and firing, the paying and on-the-floor directing of the Canadian employees in Burnaby, B.C. was legally completely separate from the equivalent processes in Tucson. The two companies operated under separate corporate and labour law regimes. Their parent, Masco Building Materials Ltd. was under yet a third corporate and labour law regime.

90 It is of course true and trite that corporate veils can be pierced; but that does not mean they do not exist. Labour boards in Canadian provinces have been given specific jurisdiction to “associate” two companies in the same jurisdiction, for some purposes and with some results leading to some remedies. But in Canada even these labour boards, armed with statutory powers, stumble when trying to reach across provincial or federal lines; and a British Columbia arbitrator certainly cannot link a Canadian federally-incorporated company (provincially registered) with a California corporation registered in Arizona, for labour relations purposes. Of course an local arbitrator can find a violation of a collective agreement here, even arising from an act in a different jurisdiction, such as contracting out with a foreign third party, and can impose at least some remedies on the local employer. But that is because contracting out is a violation by transfer to third parties, and their location or nationality is irrelevant. What I am asked to do here is to say, as a matter of interpretation, either that the Canadian and American plants are one “employer”, or that Masco is the “employer”. And while some of the levers (and very important levers) are in the Masco boardrooms, that does not mean that fiasco is the “employer” as that must be understood in a collective agreement setting up the rights and obligations of an employer as one signing party and a union or union local, for certain employees, as the other signing party.

It is undisputed that the Employer owns or controls the facility in Homewood, Illinois. Even if may not own it directly, it either owns or controls the shares of the Illinois Central Railway which in turn owned or owns that facility. I hasten to add that I make no finding as to legal title to the Woodcraft facility. I simply say that the undisputed evidence is that the Company controls it.

Of particular significance to this Arbitrator is that the Canadian National Railway is a federal undertaking, and any labour relations respecting its operations in Canada is in the exclusive jurisdiction of the Canadian Parliament and in all matters relating to labour relations it is subject to the Canada Labour Code. Its operations in the United States are not subject to that same regulatory regime and, in fact, the Canada Labour Code has no force or power in the United States. Similarly, the American legislation relating to labour relations has no force or power in Canada. I fully appreciate that by regulation or by treaty some of the operating rules of each jurisdiction may be recognised and accepted by the other jurisdiction, That may well apply, not only to railways, but to airlines, trucking firms and other similar enterprises but I am not aware of any legislation, regulation or treaty which extends the jurisdiction in labour relations matters.

Of at least equal importance and significance is that the employees at the Woodcrest Shop are represented by a completely different group of bargaining agents as opposed to the employees in Canada. The laws and regime relating to any of the usual employee matters are completely different. This distinction and difference is commented on at some length in the 2003 Annual Report filed by the Employer. At page 90, under the heading of Management’s Discussion and Analysis, reference is made to Labour Negotiations as well as to Regulation. A clear distinction is shown between the Canadian workforce and the US workforce. This reads:

Labour negotiations

Canadian workforce

Labor agreements covering approximately 97% of the Company’s Canadian unionized workforce expired on December 31, 2003. As of January 2004, the Company has successfully negotiated three tentative collective agreements with the Canadian Auto Workers (CAW) union covering the Company’s shopcraft forces, clerical workers and intermodal yard employees. The agreements are retroactive to January 1, 2004 and are subject to ratification by approximately 5,000 CAW members. The Company is currently undergoing discussions with all its remaining trade unions whose agreements also expired on December 31, 2003. Under the terms of the Canada Labour Code (the governing legislation), no legal strikes or lockouts are possible before a union obtains a majority by secret ballot and proper notification of at least seventy-two hours notice is given to the other party.

The Company is optimistic that it will be able to have all its collective agreements renewed and ratified without any major disruptions. However, there can be no assurance that there will not be any strikes or lockouts or that the resolution of these collective bargaining negotiations will not have a material adverse effect on the Company’s financial position or results of operations.

U.S. workforce

The general approach to labor negotiations by U.S. Class 1 railroads is to bargain on a collective national basis. Grand Trunk Western (GTW), Duluth, Winnipeg and Pacific (DWP), ICRR, CCP Holdings, Inc. (CCP) and WC, have bargained on a local basis rather than holding national, industry wide negotiations because it results in agreements that better address both the employees’ concerns and preferences, and the railways’ actual operating environment. However, local negotiations may not generate federal intervention in a strike or lockout situation, since a dispute may be localized. The Company believes the potential mutual benefits of local bargaining outweigh the risks.

As of January 2004, the Company had in place agreements with bargaining units representing the entire unionized workforce at ICRR, GTW, DWP, and CCP, and over 60% of the unionized workforce at WC. These agreements have various moratorium provisions, ranging from the end of 2001 to the end of 2005, which preserve the status quo in respect of given areas during the terms of such moratoriums. Several of these agreements are currently under renegotiation and several will open for negotiation in 2004.

Negotiations are ongoing with the bargaining units with which the Company does not have agreements or settlements. Until new agreements are reached or the processes of the Railway Labor Act have been exhausted, the terms and conditions of existing agreements or policies continue to apply. Although the Company does not anticipate work action related to these negotiations while they are ongoing, there can be no assurance that there will not be any such work action and that the resolution of these negotiations will not have a material adverse effect on the Company’s financial position or results of operations.

Also note that recognition is given on pages 90 and 91 to the distinction in the regulation of the railways. Without reciting the entire statement, it sets out that the Company’s rail operations in Canada are subject to regulation by the Canadian Transportation Agency under the Canada Transportation Act and other Canadian statutes. The Company’s U.S. rail operations are subject to regulation by the Surface Transportation Board.

The above comments are quoted from pages 90 and 91 which form part of Management’ Discussion and Analysis relating to the Canadian financial section. Essentially the same comments appear on pages 46 and 47 relating to the U.S. financial section.

There are a multitude of distinctions between the labour forces in Canada and those in the Woodcrest Shop in Homewood Illinois. Those distinctions and differences include, inter alia, different regulatory matters and supervision, different Labour relations legislation that does not cross international borders, the multitude of different bargaining units in the Woodcrest Shop as distinct from a single and completely different Union in Canada, the fact that the Union does not represent any of the Woodcrest employees and the fact that aside from perhaps management, there is no interchange of “shopcraft” employees across the international border. In view of all of those distinctions and differences and notwithstanding that the Employer “owns” the Homewood facility, I do not conclude that they are the “same” Employer for the purposes of this Grievance.

Article 51.1 provides that work presently and normally performed by employees who are subject to the provisions of this collective agreement will not be contracted out except”…

The employees in Homewood are certainly not subject to the provisions of Agreement 12.

The parties have specified the exceptions that do not constitute contracting out. and have included exceptions for items such as work by manufacturers or suppliers, the performance of warranty work and in emergency situations.

The fact situation in the Decision of Arbitrator Soronow in the arbitration between the Canadian Pacific Railway Company and the Union, SHP – 515 was slightly different in that it dealt with Rule 53 of the Canadian Pacific Railway agreement with the Union, Local 101 and in particular with Rule 53 of their agreement which rule is substantially the same as Rule 51 in the instant case. It considered the situation with Labourers and not ”shopcraft” employees. Notwithstanding the differences in the fact situations, some of the comments of Arbitrator Soronow are of significance and helpful. Parenthetically I note that there was no cross-border work involved in that case.

Arbitrator Soronow on page 6 of his decision said:

“The Company asserts that the cleaning or maintenance of washrooms, lunchrooms, locker rooms, etc. does not fall under the exclusive work jurisdiction for labourers and that several facilities, including the Winnipeg Diesel Shop and the Winnipeg Car Departments “H” Yard Office have used maintenance forces for a number of years to perform maintenance work”.

…

“There can be little doubt that the work performed by Mr. T”s is the type of work presently performed by labourers, albeit in different facilities. Indeed, this type of custodial work appears to be a core function of the labourers group covered by the provisions of the Collective Agreement.

“Can it however be said that this type of work is “normally performed by employees who are subject to the provisions of this collective agreement”. The word normally is not synonymous with the work “always” or “invariably”.

“It is clear that the labourers formerly performed the custodial work in the same physical facility when it was operated for heavy equipment repairs. Likewise, the labourers were responsible for cleaning and maintenance functions in the facility referred to as the “One Stop”. Some of these same repair functions that were performed in the “One Stop” were moved into the south end of the Weston Car Shop.”

“ In reaching my decision, I have had the benefit of reviewing the case law referred to by each of the parties. It is clear that whether any particular work is “presently and normally performed by employees” is a question to be decided on a case by case basis. In this particular situation, having regard to the evidence and presentations of these parties, I am satisfied that notwithstanding other examples of custodial work being contracted out, this work being performed by Mr.T”s in the facility in question is, in fact, work “presently and normally performed by employees “within the meaning contemplated by the provisions of the Collective Agreement. Indeed the nature, scope and character of the custodial activities being performed is the very type of work activity or function performed by those who hold the labourers classification”.

I have concluded that the work done in the Homewood facility on Canadian based locomotives with respect to scheduled or mandated inspections is work that is “presently and normally” done by members of the Union. That work is contrary to the provisions of the Collective Agreement and in particular Rule 51. Work done in the Homewood facility on Canadian based locomotives respecting such items as emergencies, unscheduled but necessary repairs or maintenance/ or the routine service matters which may be required when any locomotive arrives at a facility is not contrary to the provisions of Rule 51.

However the question must still be answered as to whether contracting out can be considered to have taken place when the individuals doing the work in a different location, are all employees of the same employer. I need not again repeat my comments about the different regulations, statutes and regimes affecting the operations of the Employer on each side of the international boundary. In my opinion, it is undisputed that the applicable labour laws of Canada or the Collective Agreement in force in Canada would have no application to employees in the Homewood facility nor would the labour law or Collective Agreements in force or applicable in that jurisdiction be of force or effect in Canada. .I am satisfied, and conclude that the employer has breached the agreement with respect to certain of the work, as above set forth, which was being done on “Canadian” locomotives in Homewood by the same Employer or one of its subsidiaries.

. Obviously, the parties, and in particular the Union, must and I believe it does, take a reasonable view of certain circumstances which may necessitate work being done in the United States. In particular, this could arise as a result of a breakdown, an emergency or parts replacement or warranty work and other work which might be routinely performed when a locomotive enters another facility in a different division. The problem is that the Employer appears to have scheduled certain major items of work to be done while the locomotives were in the vicinity of the Homewood facility. It seems to me, (and admittedly I speak with very little knowledge), that if a locomotive is rapidly approaching a time for inspections or major work to be done, then that locomotive should not be sent into jurisdictions outside of where the work could be done by members of the Union.

As well, it only makes sense that certain other minor types of work might be done. A review of the work performed as shown in Tab 3 of the submission of the Union (document 2) shows a multitude of repairs of less than $10,000.00, some as low as just a couple of hundred dollars. I certainly am not capable of determining what may be called minor matters. The parties acting reasonably could easily determine that. I sincerely recommend that they address that matter. However, reference was made, in the schedule of work performed in the Homewood facility, to locomotives based in Canada to programs involving costs well in excess of $ 10,000.00 and some in approximate amounts of $30,000, $ 40,000, $50,000 and over $ 100,000. It is items of that magnitude that to this layman appear to be about a major program that would be anticipated. Obviously there may be certain circumstances where repairs of that magnitude might have to be done suddenly and/or on an emergency basis. It is the scheduled or anticipated maintenance or service requirements that can lead to a violation of the Collective Agreement if the locomotive happens to be sent into the “foreign” jurisdiction in close proximity to the time when that work has to be done. The parties are aware of what is work that might be excluded from the protection negotiated by the Union. It is very difficult for a lay person to determine the exact categories of such types of work, but certainly, the parties should be able to make that distinction and I again urge them to do so.

The protection of work done by members of any bargaining unit has always been a desire and one paramount objectives of collective bargaining. Without any restrictions, the Employer is, of course, free to operate its enterprise in any manner it seeks to so long as it does not violate the statutory requirements of the legislation. However the parties to this arbitration have negotiated a clause restricting the Employers right to have that work performed by non-members of the bargaining unit. The Union and its members are entitled to the protection.

As stated, I have concluded that the Employer breached Agreement 12 by permitting regularly scheduled maintenance and inspection work to be done to its locomotives at its facility in Homewood. Members of the bargaining unit who normally did that type of work as their primary occupation should have done that work. There may have been some economic advantage to the Employer in having that work done while the locomotive was in the Homewood facility but the economic savings are not the significant criteria in matters of this nature.

The Union has said that the matter of remedy should be left to negotiation by the parties, and that the Arbitrator remain seized in the event that the parties required his assistance. I believe that my declaration in finding that the Agreement had been breached may well be sufficient for the purposes of the Union. In my view, this may not be a case for any compensation to be ordered. However, that is not a matter which is before me. I simply make the declaration that there has been a breach of Rule 51 and am prepared to order that a committee of knowledgeable individuals be struck to formulate specific guidelines as to permissible work that can be done in locations outside of Canada. I hasten to add that I am not making any finding of any kind or nature respecting work that may be done in facilities in Canada which may not be in the home “base” of a Canadian locomotive.

In summary am allowing the grievance to the extent mentioned above. I have concluded that employees who are members of the Union “presently and normally” performed the disputed work. As well I am of the opinion that the employees in the Homewood for the purposes of this arbitration are a “third” party, notwithstanding that the employees in Homewood, Illinois are nominally employees of the same Company.

I wish to thank Mr. Rosner and Mr. Giroux for their very full and comprehensive arguments which were of great assistance to me.

There has been some delay in the publication of this Award, however, there was a large amount of material filed, and, as mentioned, a large amount of research.

In accordance with the terms of the Collective Agreement, each of the parties will be responsible for one half of my costs.

DATED at Winnipeg this 22nd day of June, 2005

JACK M. CHAPMAN, Q.C., ARBITRATOR

BOARD OF ARBITRATION:	Jack M. Chapman, Q.C., Sole Arbitrator

DATE OF HEARING:	June 10, 2004

LOCATION OF HEARING:	Winnipeg, Manitoba

APPEARANCES:	Mr. André Giroux, counsel for the Company Mr. Abe Rosner, a National Representative, for the Union

SHP596

ARBITRATION AWARD

ARBITRATION AWARD