(the “Company”)







(the “Union”)







Sole Arbitrator:                      Michel G. Picher




Appearing For The Union:

            John Gouveia                 – Vice-President, Great Lakes Region

            Drew Ratajewski            – Local Chairperson



Appearing For The Company:

            F. O’Neill                         – Manager, Labour Relations

            R. Bowden                      – Manager, Labour Relations

            G. Yeaden                       – Assistant Superintendent, Mechanical





A hearing in this matter were held in Toronto on January 30, 2008 and a supplementary conference call was held on February 11, 2008.




            This arbitration concerns a grievance of the Union against an alleged improper contracting out of bargaining unit work. Specifically, the Union challenges the Company’s decision to contract wreck repair on diesel unit CN 7241 in circumstances it maintains should have allowed the work to be performed by bargaining unit members.


            The nature of the dispute is reflected in the joint statement of issue, filed at the hearing, which reads as follows:




The Union contends the Company has violated the provisions of Rule 51 of Agreement 12 when it contracted out the work of repairing the wreck damage on diesel unit CN 7241 to National Rail Equipment in Capreol, Ontario.


The Union contends the Company violated Rule 51.1 when it contracted out this work to NRE. The Union further contends the conditions enumerated in Rule 51.1 of Agreement 12 are not applicable in this particular case. The Union also submits that the Company’s failure to give prior notice to the Union of their intent to contract out this work violated the provisions of Rule 51.2, which identifies the Company must provide not less than 30 days notice of its entitled to contract out this type of work.


The Union contends that this failing to provide the requisite particulars associated with the work contracted out, denied the Union the opportunity to present a business case, at its option, and in the alternative to any claim(s) advanced pursuant to Rule 51.1, that the Company also violated the provisions of Rule 51.3.


The Union also contends that the Company failed to provide specific detailed evidence to support its reliance on the exceptions contained in Rule 51.1(b) and (e).


The Company disagrees with the Union’s contentions and has declined the Union’s grievance.


            It does not appear disputed that on September 17, 2007 diesel unit CN 7241, a belt pack locomotive, and its booster unit, were struck during the course of a side-swipe in Macmillan Yard, Concord, Ontario. The accident occasioned considerable damage to portions of the locomotive’s car body and trucks. Upon the locomotive unit being examined at the repair shop facility in Macmillan Yard, the Company decided to contract out the repair of the locomotive to National Rail Equipment of Capreol, Ontario. More precisely, it was the fabrication and repair work to the body of Locomotive 7241 which was contracted out, it being necessary to first complete repairs to the locomotive’s trucks and air brake cylinders at the Locomotive Reliability Centre (LRC) at Macmillan Yard. It does not appear disputed that those repairs were necessary to be able to physically transfer the unit to Capreol. The evidence indicates that it returned in a full state of repair from National Rail Equipment on or about December 31, 2007. The position of the Union is that the welding and fabrication work completed by the contractor is work which is presently and normally performed by bargaining unit employees, and which cannot normally be contracted out. It alleges that the Company’s decision to contract out the work was in violation of rule 51.1. Additionally, to the extent that the Union maintains that the contracting out, and the related loss of work to members of the bargaining unit, constituted an adverse effect on employees, it also alleges a violation of rule 51.2 which deals with the Company’s obligation to give notice to the Union.


            The provisions in question read as follows:


Rule 51 – Contracting Out


51.1     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 technological 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 without 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.


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 representative of the Union in advance of the date contracting out is contemplated, except in cases where time constraints and circumstances prevent it.


            The position of the Company is that the circumstances created by the damage to locomotive CN 7241 did bring into play the exceptions which would allow the contracting out, more particularly as provided in sub-paragraphs (b) and (e) of rule 51.1 of the collective agreement. In essence, it maintains that it did not have sufficient qualified employees to perform the work and that the urgency with respect to the time of the completion of the work justified the contracting out.


            With respect to the issue of urgency the Company notes to the Arbitrator’s attention that belt pack or remote control locomotives are an important and relatively scarce resource and that keeping them in operating condition is a high priority within the low horse power fleet. Normally, at the Macmillan Yard facility fabrication and welding work is performed by heavy duty mechanics or heavy duty mechanic apprentices in the LRC. The Company’s evidence indicates that at the time of the decision to contract the repairs to locomotive CN 7241 the LRC shop was “over target” as to the service count to be performed and its staff had been working overtime on a regular basis to attempt to reduce the workload. The “out of service count” is a figure relating to the optimal number of locomotives out of service at any given time, so as to permit the regularly scheduled maintenance and repairs of locomotives without unduly interfering with operations. The position of the Company is that the heavy work load already burdening the bargaining unit employees of the LRC did not allow for the diversion of employees from their regular tasks to perform the repair work on locomotive 7241, as a result of which it became necessary to contract out its repair. In that regard the Company stresses that there were then no qualified employees laid off and that there was not a sufficient number of qualified employees available at the LRC to perform the work, estimated to be in excess of 600 man-hours. In support of its position the Company tabled in evidence a record of overtime hours worked by qualified welders at the LRC in the period between September 2 and December 30, 2007.


            The evidence appears uncontroverted that in the each and every one of the weeks in questions substantial hours of overtime were worked in both the heavy duty mechanic and heavy duty mechanic apprentice classifications. More particularly, the Company identified twenty-four individuals said to be qualified welders at the LRC, and the specific hours of overtime which each of them worked in the period between September 1, and December 31, 2007. On average, each of that group of employees worked some seventy-four hours of overtime during that period. That represents slightly more than four hours of overtime weekly for each of the qualified employees identified by the Company. To put the matter in a different perspective, the six hundred man-hours of work necessary for the repairs to diesel unit CN 7241 would have involved a 33% increase in the amount of overtime among that group of employees for the period between September 1 and December 31, 2007.


            Central to the Company’s position is the fact that the LRC, while working substantial hours of overtime and also calling upon the fill-in help of three additional heavy duty mechanics normally assigned to the Wheel Shop, the Company was not able to overcome the problem of the out of service count which it was then experiencing. It was against that reality that the decision was made to contract out the work.


            In addition to the foregoing background, the Company also notes that it was particularly sensitive to the amount of overtime work assigned to its employees at the LRC, apparently following a complaint made to HRSDC by the Union concerning the alleged excessive assignment of overtime. As a result of that complaint and a subsequent investigation the Company maintains that the Mechanical Department controls overtime allotments strictly, being careful to adhere to the overtime rules mandated by the Canada Labour Code.


            In light of the material produced, the Arbitrator has considerable difficulty with the position of the Union in the instant case. While the Union’s representative challenges the reliability of the Company’s data with respect to employees qualified to perform welding and fabricating work, it adduced no evidence of substance to contradict the data placed before the Arbitrator by the Company, nor did it seek the production of documents or the issuing of any subpoenas to effectively challenge the Company’s position. Additionally, while the Union generally questions whether the work could not have been performed at the Company’s facility in Transcona, said to be considerably larger than the LRC, again no data was sought or obtained by the Union with respect to work levels at that location.


            The fundamental position of the Company is that the manpower available at the LRC simply did not allow the freeing up of enough available qualified persons, whether active or laid off, and that the urgency of completing the repair work to the locomotive did not allow the completion of that work to be done in a timely manner at the LRC.


            The arbitral jurisprudence affirms that work may not be contracted out if it can be demonstrated that it could be handled by bargaining unit employees performing a reasonable amount of overtime. On the other hand, it is also recognized that an excessive overtime burden would justify an employer having resort to contracting out, under the exceptions provided for within rule 51 of the instant collective agreement. In SHP 440, which also concerned an allegation of improper contracting out, the following comments appear:


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


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


            As the instant case has been placed before the Arbitrator, the Company has demonstrated that those employees qualified to perform the welding and fabricating work necessary for the repair of the locomotive were in fact heavily involved in overtime work during the period in question. To have assigned the repaid of CN 7241 to the same employees would, in fact, have increased the Company’s overtime burden during that period by approximately one third. This is clearly not a case where the Union can claim that the employees in question were without overtime work and were effectively deprived of that opportunity by the Company’s decision to contract out. Moreover, to the extent that the employees in question did have substantial overtime work, the Arbitrator has some difficulty accepting the submission of the Union that the decision of the Company to contract out had a material and adverse effect on the employees. I cannot find that it did or that the Company was obliged to give to the Union the notice contemplated in rule 51.2 of the collective agreement.


            For the reasons reviewed above, the Arbitrator is satisfied that the Company did not violate rule 51, as it did not have sufficient qualified employees to perform the work at the time. Moreover, the urgency of having the work completed did not permit the employer to await its completion at the LRC. Additionally, the Company was under no obligation to provide the notice contemplated in rule 51.2, as the Company’s decision did not have an adverse effect on the employees qualified to perform the work in question.


            For all of the foregoing reasons the grievance must be dismissed.


Dated at Ottawa this 15th day of February 2008.




(original signed by)MICHEL G. PICHER