Legal News

Transfer of work to related U.S. facility: contracting out?
December 7, 2005

Two arbitrators recently came to different conclusions on whether an employer “contracts out” bargaining unit work by sending it to a related facility in the U.S.

Canadian National Railways

In 1998, Canadian National Railways merged with the Illinois Central Railroad. For 80 years prior to the merger, Canadian mechanics and electricians in CN’s shops in Edmonton, Winnipeg and Toronto performed regular repairs and maintenance of CN’s locomotives. After the merger, CN began sending Canadian locomotives to its shop in Illinois for this work.

The union filed a grievance, accusing CN of breaching the collective agreement, which stated that “work presently and normally performed by employees who are subject to the provisions of this collective agreement will not be contracted out”, with certain exceptions.

The arbitrator allowed the grievance, finding that the locomotive repair and maintenance work constituted work “presently and normally performed” by members of CAW-Canada, and so those employees should have done that work. The arbitrator further held that, even though CN owned the Illinois facility, the Illinois employees were “third parties” to whom CN had contracted out the work.

CN has announced plans to seek judicial review of the arbitrator’s decision.

International Forest Products

In contrast, a B.C. arbitrator came to the opposite conclusion on a grievance filed by the United Steelworkers against International Forest Products (“Interfor”). Interfor transferred work from one of its Canadian operations to a wholly-owned subsidiary in the U.S. The union argued that this undermined the purpose of the contracting out provision; i.e., to prevent erosion of the bargaining unit.

The arbitrator ruled that the American operation was not an independent third party, but a fully integrated part of the employer’s operations. As such, the movement of work was more properly characterised as an internal transfer than an inter-corporate transfer to a third party. Therefore, the transfer of work did not constitute contracting out.

CAW-Canada, Local 100 v. Canadian National Railways,[2005] C.L.A.D. No. 309 (QL)

International Forest Products (Hammond Cedar Mill) v. United Steelworkers, Local 1-3567,[2005] B.C.C.A.A.A. No. 210 (Q.L.)