by me pierre verge a thesis submitted to the faculty of...
TRANSCRIPT
SUBCONTRACTING AT ARBITRATION
by
Me Pierre Verge
A thesis submitted to the Faculty of Graduate Studies and Research in partial fulfilment of the requirements for the degree of Master of Arts.
Department of Economies and Political Science, McGill University, Montreal. August 3, 1962.
M.A.
PIERRE VERGE
Subcontracting at Arbitration
Economies
A comparative study of arbitral decisions
rendered in the United States, the Canadian Common Law
Provinces and Quebec over grievances arising--in the
context of collective agreements that contain no specifie
provision on the subject--out of Management's action of
arranging with an outside firm to have it perform work
hitherto done by members of the bargaining unit. the
possible effects on future Quebec arbitral awards of a
recent amendment to the Labour Relations Act (Sec. 10 A,
Ch. 162 A, R.S.Q. 1941} are also analyzed.
FOREWORD
The occasion tbat led to the present study of arbitral
decisions on subcontraeting was the discussion initiated by
the Canadian Manufacturer's Association and revived, in
particular, at the 1961 Annual Convention of the Canadian
Bar Association, asto the effect of a recent amendmenttD
the Labour Relations Act (Sec. 10 A, Ch. 162 A, R.S.Q. 1941)
extending the terms of an existing Agreement to the new
I
employer in the case of "partial of alienation of an under
taking": was contracting out aimed at by this new provision?
Whatever was to be the answer to this particular question,
subcontracting, of frequent occurrence in our surrounding
industrial world, stood there as an act that could be regarded,
at the same time, as one expression of Management's right to
manage and as an indirect way to avert the terms of an Agreement
bargained collectively with a Union. Subeontracting questioned
the very nature of the Agreement. More specifically it was
asked: how far could Management go in the exercise of its
recognized right to direct the undertaking "in a manner consistent
with the terms of the Agreement"? A first glanee at arbitral
II
dealings with the matter developed into a systematic survey
of arbitral decisions rendered in the United States, the
Common Law Provinces, and Quebec, with a view of discovering
differences in approaching the subcontracting issue that could,
more immediately, help see the local answer, both in terms
of the legislative amendment and of arbitral rulings, in its
proper perspective.
Sources of Part I, dealing mostly with manegerial rights
and the collective agreement in general, are to be found in
the Bibliography. Studies of U.S. Awards by prominent
American arbitrators (Cf. Bibliography) served as a basis
to Part II. These studies were brought up to date through
direct consultation of subsequent reported cases. All relevant
decisions in the 1950-62 Labour Arbitration Cases series were
studied in connection with Part III (Canadian Common Law
Provinces awards). The presence of additional privately rendered
and unreported awards is to be noted, but no practical result
could be obtained in trying to cover them. The legal context
of Part IV, where the recent amendment to the Labour Relations
Act is examined,was discussed with Professor Marie-Louis
Beaulieu of the Faculty of Law, Laval University, and with
Me Gerard Vaillancourt, Secretary of the Quebec Relations Board.
(In particular, Me Vaillancourt expressed his views as to the
origin of the new amendment. (See P. 66 ). Finally, asto
arbitral decisions rendered in the Province of Quebec, a survey
was made--with the cooperation of Mr. Claude Gaudrault, Technical
Adviser, Department of Labour of the Province of Quebec--of
all arbitration awards filed with this Department and listed
in the "General Report of the Minister of Labour of the
Province of Quebec" as related to 11managerial rights" for
III
the period 1949-50 to 1959-60 {incl.). No decisions dealing
with subcontracting as the object of a grievance were found.
There remained the whole field of privately rendered and
unreported decisions. Those collected constitute the substance
of Part v. They were communicated by the following persons:
Hon. Justice André Montpetit (HOpital du Sacré-Coeur de
Cartierville, Dominion Engineering, Sperry Gyroscope awards);
Hon. Justice Antoine Lamarre and Me carrier Fortin, C.R.,
of Sherbrooke, (Combustion Superheater); Yvan Legault,
Executive Secretary, Q.L.F. (Canadien Petrofina); Adrien Plourde,
Président, Syndicat National des Employés de l'Aluminium d'Arvida
(Aluminum cases); Professor Roger Chartier and Me Denis Levesque
{Dissenting notes in Dominion Engineering and Combustion
Superheater cases).
The present search was oriented by Professor H.D. Woods,
of the Department of Economies and Political Science at McGill
University, my tutor, and by Professor J.-Réal Cardin, directeur
adjoint, département des relations industrielles, Université
Laval. My deepest gratitude goes to Professor Woods and Professor
Cardin for their learned views and advice and to all those persona
who cooperated in discussing particular aspects of the study or
communicating arbitral awards.
June 1962 Pierre Verge
Foreword.
TABLE OF CONTENTS
SUBCONTRACTING AT ARBITRATION
Part I: Subcontracting Defined in its Setting.
A Introduction
1. Importance of Subcontracting issue
a) ••••• in general;
b) ••••• particularly in Quebec;
2. Definition
a) Strict def. of "Subcontracting'*;
b) Subcontracting distinguisbed from
1. "the partial operation of an
undertaking by anotber";
2. contract "of services";
3. direct "lay-off";
3. Scope of study
a) Transfer of work to supervisory
personnel studied only incidentally;
IV
b) Study limited to agreements without
specifie provision with respect to
contracting out;
c) At the arbitral level only (except
in Quebec);
d) Comparative study of arbitral decisions:
v
U.S.--Canadian Common Law Provinces--Quebec.
4. Nature of problem:
a) Management's and Union's main
contentions;
b) An application of manegerial prerogatives
in a collective agreement context.
B Management's rights Theories.
C Arbitrability and General Conception of the
Collective Agreement.
Part II: U.S. Awards
A Introduction
1. Importance of specifie criteria in current
awards;
2. Respective place of "reserved rights" and
"implied limitations" theories in U.S.
decisions.
B Study of decision where •••
1. Management's right to contract out retained
with qualification (s) ("Reserved rights"
tendency);
2. Implied limitations to Management' a right
to contract out are dominant;
VI
3. Decisions based upon examination of objective
circumstances;
4. Criteria for judging contracting out cases.
C Conclusion
1. The current place of management's rights
theories:
a) strict "reserved rights" theory abandoned;
b) moderate "implied limitations" theory
almost universally accepted;
2. --"Economy" reconsidered;
--"Good faith" and "efficiency" in U.S. awards.
Part III: Canadian Common Law Provinces Awards
A Introduction
1. Study of arbitral decisions over issues
involving the allotment of work outside unit,
to supervisory personnel.
B Decisions on contracting out "stricto sensu"
1. "Reserved rights" theory:
a) Strict adherence
--simple cases
--cases opposing "master-servantn to
"independent contractor" relationship;
b) Other factors considered (one case).
2. "Implied limitations" theory.
C Summacy
VII
Part IV: Province of Quebec: New Section 10 A of Ch. 162 A,
R.S .Q. 1941
Introduction: Civil Code Setting and Statutory Laws
Sec. 10 A, Ch. 162 A:
A The text of sec. 10 A;
B Possible effects on contracting out issue;
C Its sources
1. Legislative
a) France
b) Other Canadian Provinces
c) Other P.Q. laws
2. Jurisprudence
a) Province of Quebec
1) Cobra case
2) Vachon case
3) Brown case
4) Coll in case
b) France (after 1918 law)
c) B.C. award
D Interpretation
1. Me Pigeon's views;
2. Possible distinction based upon "entreprise"
concept.
Part V: Quebec Arbitral Awards (Right to contract out
retained in all majority awards reviewed)
A Decisions involving particular interpretations
1. ••tay-off";
2. "shortage of work".
VIII
B Decision rendered upon notion of "contrat d'entreprise"
1of/for services) {one case).
C Straight application of'reserved rights'theory
(includins study of union minority views).
D Conclusion
1. Summary of awards;
2. Possible effect of new section 10 A upon
future arbitral decisions;
3. An express prohibition likely to continue
to be required to prelude Management from
contracting out.
General Conclusions
A Summary of trends
1. in the United States;
2. Common Law Provinces;
3. Quebec.
B Proposed aggroach for future Quebec contractin§ out
cases (not covered by Sec. 10 A of Ch. 162 A).
IX
C Reference to theAgreement as a whole and to collective
labour relations.
PART I
SUBCONTRACTING DEFINED IN ITS SETTING
A Introduction
1. Importance of subcontracting issue
Unless the collective Agreement contains a specifie
provision on the subject, Management's action of contracting
out work hitherto performed by members of the bargaining
unit easily lead Management and the Union before an arbitrator
fighting for their vital interests. Management needs a free
band in order to compete efficiently; among the Union's functions,
and not the least in this age of automation, is one of protection
of the work of its members. The Union may also contend that
Management, through its act of contracting out is, in fact,
simply trying to evade wages and labour conditions accepted in
the Agreement. The arbitrator, for his part, may start his
award: "The issue ••• is one of the most controversial and
probably one of the important issues being tested in the arbitra
tion process. Subcontracting bas always been a serious bone of
contention between management and labour. In this case the
Union is challenging the Company's right to use outside help, on a
contractuel basis, to accomplish one of its functions.
The Company is standing squarely upon its fundamental
right to operate its business in the most efficient and most
economical manner possible ••• " (1).
Furthermore, if this particular controversy should now
occur in the Province of Quebec, coping with it would be made
still more delicate by resson of a recent amendment (2) to
the Labour Relations Act which bas been interpreted in certain
quartera as a virtual prohibition of contracting out by
employers, and, in others, as an acceptance by the Legislature
that an employee has "rights in his work" (3).
2. Definition and distinction from related concepts.
More precisely~ this "subcontracting" or "contracting
out" term is intended to mean the arrangement entered into by
an employer with an outside firm, according to which either
production or service work, that was or could bave been done
2
by his own employees and equipment, is to be performed by this
outside firm that makes a specialty of doing the particular type
of work involved.
Contracting out is thus to be differenciated from the
(1) As did E.R. Teple in re: Black Clawson Co., (34 LA 217).
(2) See Sec. 10 A of Ch. 162 A, R.S.Q. 1941.
(3) For examples of such interpretations, see pp. 60 and 69 and ff.
"partial operation of an undertaking" (4) by a new managerial
function, in tbat the subcontracting employer is resorting
to external and already specialized personnel and equipment
that will take the place of his own.
Throughout the course of the study-•particularly with
respect to older Ontario decisions--arbitrators will be found
to distinguish very sharply cases by applying the juridical
criteria of the'master-servant'Telationship. Subcontracting
is deemed to be present only when the power to give orders as
to the manner of performing the work is no longer exercised by
the subcontracting firm but is vested with the outside firm to
which work bas been subcontracted. When su ch is not the case
(and when a so-called "contract of services" is involved), all
employees, including newcomers, are to be considered employees
of the firm whose management gives orders "as to the details
of the work and the manner of its execution." The resulting
situation is to be dealt with by simply applying the general
provisions of the relevant Labour Relations Act, and is not to
be judged as if subcontracting was involved.
In practice, the employment effect of a particular act of
contracting out may well be met througb various interna!
rearrangements and corresponding shifts of workers to other
occupations within the framework of the subcontracting firm.
However, subcontracting is to be differentiated from simple
instances of laying-off, due to shortage of work, in thst it
{4) To use the terminology of new Sec. 10 A, Ch. 162 A.
3
is tantamount to the abolition of relevant job categories.
It also renders it fmpossible for workers to offer services
of the nature of those being contracted out. In simple cases
of laying off, and there lies the difference, the rehiring of
men in the same functions is not to be rejected and a mere
suspending of individual labour contracta is involved.
3. Scoee of Study
4
In a broader view, the transfer to supervisory personnel,
excluded from the bargaining unit by certification, of work
done by unit employees (and, eventually, the allotment of
work to other plants belonging to the same entrepreneur)
can also be said to be a business decision that result in the
removing of work from the bargaining unit. Cases of this latter
nature will be studied only incidentally to illustrate positions
on subcontracting proper.
It is not to be lost from sight, however, that from a
Management standpoint, as a rule, subcontracting is simply
one among countless business decisions just as, for instance,
is the determining of the products to be manufactured. !t is
an alternate means in the quest for greater efficiency. To
the Union, on the other band, it is not a business decision
akin to other business decisions, because it actually resulta
in a shrinkage of occupations under its jurisdiction--even if
employees that were performing subcontracted work are, in the
immediate, being transferred to other occupations within the
plant--and because it renders meaningless, to a considerable
extent, the description of the bargaining unit in terms of
categories of work.
The subcontracting issue may have been solved by the
parties themselves, during the negotiations, with a resulting
categorical statement of the power to contract out or the
prohibition of this act. The bargain may have also resulted,
among many possible variants, in a compromise to the effect
5
that the employer is free to contract out in cases of emergency,
or when regular and properly qualified employees are not avait
able in sufficient numbers. The employer may also have bound
himself to use his own employees ''whenever possible ••• 11
Specifie provisions of this nature are either explicit or
they may merely give rise to an appreciation of facts. Their
limited interest will cause them to be excluded from the scope
of the present study.
The investigation will tben be confined to an analysis of
arbitration decisions rendered over issues involving subcontracting,
stricto sensu, in, roughly speaking, the North American world of
industrial institutions: the United States, the Canadian Common
Law Provinces, and the Province of Quebec. (In this latter case,
the legislative context is also to be examined.)
4. Nature of Problem.
When a specifie provision dealing with subcontracting is
absent from the Management's rights clause of the Agreement,
6
Management usually claims this right by invo~ing its usual
power to manage the plant and its operations, as written out
in the clause under scrutiny. Or, Management, in the absence,
this time, of the whole managerial rights clause, relies upon
its inherent and implicit right to direct the undertaking, of
which, it explains, the right to subcontract is but one
manifestation.
The Union normally claims that this general power bas to
be exercised in a manner compatible with the other provisions
of the Agreement. It argues that contracting out results in
an avoidance of the conditions of work agreed upon, as well
as in a partial destruction of the bargaining unit and
weakening of the co-contracting party. To bolster up its
position, the Union usually invokes its recognized status of
exclusive bargaining agent and points to various substantive
clauses of the Agreement, such as seniority provisions, which
would, in effect, be rendered ineffective if subcontracting
were to be allowed.
Basically, then, the subcontracting issue is a facet
of the wider controversy over Management' s rights in a collective
agreement relationship, be they or they not the object of a
clause of their own in the Agreement. Are these rights left
unaltered and unimpaired by the presence of the Union and dealing
and contracting with it? Is it even possible to speak of
Management's rights alone while ignoring the Union's interests
in the pre-agreement relations and practices? Or, in agreement
terms: quite apart from any immediate meaning, what impact, if
7
any. has the presence of the recognition clause and the various
provisions consecrating rights in favour of the Union upon
Management's freedom generally to direct the undertaking? How
far, in practice, can Management go in managing the plant and
directing the working force "in a manner compatible with the
other terms of the agreement"--be this latter requisite expressed
or implied?
B Management's rights Theories
Two schools and two versions stand at the poles: "One
takes the position that management bas the residual right to
do everything not specifically set out in the agreement and
that labour acquires only auch rights as they acquire by
Contract under the Agreement ••• The other theory is that both
parties, the Union on one aide and Management on the other,
approach the bargaining table without fetters and as equals, and
that there is no such a thing as a residual right in either party,
and the parties by mutual Agreement set out the whole Contract
either by specifie Agreement or by implied Agreement which is
implied by those parts of the Agreement set out and according
to the spirit of the whole Agreement itself" (5).
A clear statement of the first position is to be found in
(5) Judge w.s. Lane, International Union United Automobile, and Agricultural Implement Workers of America, Local 222, in re: Duplate (Canada) Ltd. (5 Lab. Arb. Cas. 1625) (Jan. 7, 1954).
8
James c. Pbelps' (assistant to Vice-President, Bethlehem Steel
Company) now famous confrontation witb Arthur J. Goldberg at
the Nintb Annual Meeting of the National Academy of Arbitrators (6):
'~be more accepted view is tbat, except as management bas agreed
to restrict the exercise of its usual functione, it retains the
same rigbts wbicb it possessed before engaging in collective
bargaining. I submit that this view is correct for it is the
only one tbat gives full recognition to the realities of the
collective bargaining relationship. In general, the process of
collective bargaining involves an attempt by a labor union to
persuade an employer to accept limitations upon the exercise
of certain of its previously unrestricted managerial rights. To
the extent that the union is unsuccessful in persuading an
employer to agree to a particular demand, management'& rights remain
unlimited. It should equally follow tbat management possesses
comparable freedom with respect to rights whicb the union bas
not even sought to limit." Management enjoys absolute prerogatives
except to the extent that these are not expressly curtailed by
the terms of the Agreement. An arbitra tor would even act improp-
erly in trying to read into the Agreement a proviso against
abuses in the exercise of these rights. "It is not for the
arbitrator to correct that deficiency unless the parties jointly
request him to do so" (7). In a milder way: to a management
(6) '~anagement Rigbts and the Arbitration Process"--proceédings of the Ninth Annual Meeting, National Academy of Arbitrators. B.N.A. Oqashington, 1956),at p. 107 and sq.
(7) Op. cit. p. 112
9
attorney (8), the arbitrator must rule only from the result
of the negotiations, that is from the Agreement. Subject to
express limitations, Management enjoys freedom of decision,
although this decision must not proceed from a bad faith intent
to destroy the Union. (However, the effect of a good faith
decision on the Union is irrelevant.) canadian formulations
of the doctrine do not depart much from this stand: "The company
bas the right to manage its business to the best of its ability
in every respect, except to the extent that its rights are eut
dawn by voluntary abrogation of some of these rights through
contract with the union ••• If the board is unable to find any-
thing in the contract between the parties which takes away from
the company's right to conduct its own business, then it cannot
be concerned with the quality of the action taken by the company •••
(9).
The historical grounding of managerial rights is also familiar:
in pre-union days, a manager's power over his employees was absolute
within the law; the situation is the same today with the exceptions
of the growth of statutory enactments and the express concessions
which have been made to the other party that bas since come upon
(8) David Lindau in: Cornell-Off Campus Conference on: "The Arbitration of Two 'MAnagement Rights' Issues"; Work Assignment and Contracting Out, New York, 1960, pp. 85, sq.
(9) D.C. Thomas, C.C.J., in Ltd. (7 Lab. Arb. cas. 333)
re: U.A.W. and Electric Auto-Lite (Oct. 31, 1957).
10
the stage (10). The mere presence of an Agent does not, by
itself, take away any of the original Common Law rights
enjoyed either by the employees or by the employer.
According to the other school heralded by Arthur J.
Goldberg (11), pre-union history is totally irrelevant to
the determination of the respective rights of the parties under
a collective agreement regime: '~e cannot now assume that
somehow one party to the deal brings into it a backlog of rights
and powers it enjoyed in dealing with individual employees."
Practices that must be considered belong to a different order
and are only those that have grown up during the period when
the collective bargaining relationship was in existence. These
practices are to be seen as as many circumstances surrounding the
actual signing of the Collective Contract and underlying it, in
the very intent of the parties. Accordingly, each of the latter
has the right to assume that these practices cannot be unilaterally
changed and that they subsist to the extent that they are not
expressly revised in the written Agreement. In a 11Goldbergian"
sense, Management's rights are implicitely limited by the co-existing
rights of the Union, and the contract simply representa the basis
on which both parties agree togo forward ••• (12). Therefore •••
{10) See: United Rubber Workers, Local 446 and w.c. Hardesty Co. of Canada Ltd. (W. Little & Al) (10 l.ab. Arb. Cas. 162 at p. 167) (Nov. 16, 1959); also H. Lande's decision in re: United Automobile Workers & B.O.A.C. (10 Lab. A.rb. Cas. 288,at p. 291) (July 21, 1960).
(11) Arthur J. Goldberg, ''Management's Reserved Rights: A tabor View." , in: Proceedings of the Ninth Annual Meeting, N .A .A., op. cit., pp. 118, sq.
(12) Op. cit., p. 120.
11
"In examining the meaning of an agreement, it is proper to
inquire about the conditions under which the bargain took
place with a presomption that the normal practices which did
exist are expected to continue except as the agreement would
require or justify alteration and except as conditions make
such past circumstances no longer feasible or appropriate.
Both parties have rights to stability and protection from unbargained
changes in wages, hours, and working conditions" (13).
Professor Bora Laskin also separated in an irreductible
manner employer's pre-union dealings with his individual workers
and the new set of relations evolved under collective bargaining
with the Union (14): "In this Board's view, it is very
superficial generalization to contend that a Collective Agreement
must be read as limiting an employer's pre-collective bargaining
prerogatives only to the extent expressly stipulated. Such a
generalization ignores completely the climate of employer-employee
relations under a Collective Agreement. The change from individual
to Collective Bargaining is a change of kind and not merely a
difference in degree. The introduction of a Collective Bargaining
regime involves the acceptance by the parties of assumptions which
are entirely alien to an era of individual bargaining. Renee, any
attempt to measure rights and duties in employer-employee relations
by reference to pre-collective bargaining standards is an attempt
(~3) Op. cit., p. 120
(14) United Electrical, Radio and Machine Workers of America, Local 527, in re: Peterboro Lock Mfg. Co. Ltd. (4 Lab. Arb. Cas. at p. 1502) (Oct. 16, 1953).
12
to re-enter a world which bas ceased to exist. Just as the
period of individual bargaining bad its own "common law"
worked out empirically over many years, so does a Collective
Bargaining regime have a common law to be invoked to give
consistency and meaning to the Collective Agreement on which it
is based ••• " The individual contract of labour consecrated the
employer's prerogatives derived from ownership, as ltmited by
public order; the collective labour agreement sets out a number
of conditions of work agreed upon by two parties, the participation
of each of which is necessary to the operation of the enterprise.
Bence, both are to be regarded as having vested rights in the
working conditions tberein.
To others, the mere.confronting of the "reserved rightstt
doctrine with its ''implied limitations" counterpart is not of
great help, by itself, towards the solution of any particular
problem related to managerial rights. "The (former) doctrine
merely (states) that management bas retained those rights wbich
it bas not given up by agreement. The doctrine does not answer
the question of what riahts should management be held to have
given up in the agreement. That is the question which arbitrators
are faced with" (15). With respect to the latter: "An arbitrator
must distinguish between the rights and kinds of discretion wbich
management exercises every day in the week--and which the union
wants and expects it to exercise--and those rights and kinds of
discretion which the agreement should be held to prohibit. And
(15) Ralph Seward, Cornell of Campus ••• Op. cit., page 108.
in the absence of express language, he must draw such
distinctions by drawing implications from the agreement •••
But neither theory bas a universal validity. Whether or not
13
an agreement should be held to preserve a certain statue quo or
to leave management free to change that status quo depends on
the facts of each case--the language of the agreement, its
history, the nature of the problem, etc. Our job as arbitrators
is not to choose between theories but properly to assess such
factstt (16).
C Arbitrability and General Concegtion of the Collective
Açreement.
The same wide divergences of opinion are being encountered
when one questions, in a more general manner, the authority
of an arbitrator to interpret the terms of the Agreement. The
arbitrator, acts as an agent of both parties and commonly finds
himself prohibited from "adding to, subtracting from, or modifying
the terms of the Agreement. One position is that ••• "The Board
should interpret the contract in a rational and literal way and
not attempt to justify its decision by reference to past practices
or the reasonableness or otherwise of the position taken by
either party or to introduce alien philosophical theories into
its analysis of the Collective Bargaining agreement. By such
approach a Board of arbitration is in effect attempting to re-write
(16) Ibid. p. 110.
14
the collective agreement by inserting terms and conditions
therein which the board on grounds of equity and good
conscience believe should be read into the agreement ••• " (17).
An answer would be that a disposition of this nature is not
to be read as an absolute limitation to the arbitrator's
interpretation of the Agreement, except insofar as its provisions
are explicit and unambiguous, and that the arbitrator is precisely
trying to solve the ambiguity arising, say, on the one band, from
the stating of an exclusive managerial prerogative, and, on the
other, by the necessity, express,or implicit~-as in any contract--
for the Company to exercise that function in a manner not
inconsistent with the other terms of the Agreement (18). The
conciliatory statement could be that the arbitrator may find
only those implied conditions to Management's action as "may
reasonably be inferred from some term of the agreement" (19).
These views on the extent of the arbitrator's latitude in
interpretation are orthodox or not, according to one's even more
fundamental conception of the whole Collective Agreement itself.
Of course, the Collective Agreement is unanimously seen
as distinct from the individual labour contract. The Agreement
sets standards, rights, and obligations wbich underly all individual
(17) A.A. Robinette, in the Canadian Personnel & Industrial Relations Journal Vol. 6, No. 1, (Jan. 1959) p. 19. See also: United 'Brewery Workers, Local 358 "Brewers' Warebousing Co. Ltd. (7 Lab. Arb. Cas. 293, at p. 297) (April 11, 1957)
(18) See Arbitrator Hren' s dissent in 9 Lab. A rb. Cas. at p. 28.
(19) Harry Shulman: Reason, Contract, and Law in Labor Relations, in: Ninth Annual Meeting, N.A.A. op. cit. at p. 184.
15
contracts entered into while it is in force, but the specifications
of work it contains, for instance, with respect to duration of
work, are not tantamount to guarantees of employment (20). "It
is fundamental that a collective bargaining agreement is not an
employment contract assuring continuity of employment for any
specifie length of time. It is only an agreement specifying the
terms and conditions of employment so long as there is employ-
ment within the contract terms" (21).
This Agreement governing individual oontracts is itself
regarded by a certain school as strictly contractual for purposes
of interpretation. The terms therein sealed by the bargaining
parties are to be interpreted in the strictest literal manner.
"Considered in this light, the common rules become more or less
rigid commandments. The settlement of a grievance is governed
not by the circumstances peculiar to an individual's situation •••
Settlement depends exclusively upon the rule as spelled out in
the agreement ••• The occasional injustice which may result is felt
to be more than compensated for by assurance of performance ••• " (22).
Grievances are to be decided according to strict adherence to
the wording of the clauses by the parties, since they embody all
(20) See: United Automobile Workers, Local 458 and Cockshutt Farm Equipment Ltd., (B. Laskin) (9 Lab. Arb. Cas. 325) (Sept. 30, 1959)
(21) Sidney A. Wolff in: Proceedings of Ninth Annual Meeting N.A.A., op. cit., at p. 136.
(22) Neil W. Chamberlain--"Collective Bargain1ng11 (McGraw-Hill--1957) Ch. 7: The Nature of the Collective Agreement, p. 140, sq. at p. 146.
16
their obligations. To others, however, including Neil w.
Chamberlain: 11The relationship as well as the agreement creates
obligations" (23). The Agreement becomes the "law of the plant,"
and, as such, must be placed concretely in its surrounding of
past and current practices and linked with the necessity of a
lasting day•to-day industrial coexistence. Then, strict adherence
to the terms of the Agreement ceases to be the best possible
solution to all cases. "Deviations are permissible and at times
desirable. There is more empbasis upon reasonable conduct and
less upon logical consistency, at the same time without belittling
tbat virtue" (24). The same necessity is felt when one considera
tbat all future contingencies cannot be met by the Agreement:
these are left to be dealt with by a circumstanciated application
of the general administrative standards expressed in the Agreement.
Under these latter two "jurisprudential" and administrative
standard" approaches, as they are called by Chamberlain: "The
parties in the grievance procedure are free to modify the terms
if the occasion warrants, though with due care not to destroy the
(23) Proceedings of the Ninth Annual Meeting of N.A.A., op. cit.,
at p. 143.
(24) Op. cit., at p. 152.
17
intent of the agreement and the standards it provides" (25) (26).
Arbitrators, even Chamberlain's own fellow-countrymenare
reluctant~ on the whole~ to depart officially from the ter:ms of
a written Agreement. Nevertheless, stricter and more literal
tendencies are both perceivable in awards, as will now be
realized from a study of those rendered on the specifie issue
of subcontracting.
(25) Op. cit., at p. 158.
(26) Bearing in mind both the importance of the Agreement and the fact that practices may constitute real obligations to the parties, Arbitrator Roger Chartier (See Relations Industrielles, (Laval), Janvier 1959, at p. 97) arrived at tbe following synthetical rules of interpretation of the Agreement:
"-If the Agreement is silent or ambiguous over an issue which is, on the other band, the abject of a clearly established practice, this practice must prevail.
"-The Agreement prevails, be it itself very or not very clear over a practice that is not clearly established or of a sporadic occurrence.
, "-The text also prevails when it is ambiguous, but the practice is not well established."
A Introduction
PART II
UNITED STATES
In the absence of any specifie reference to the subject
in the Agreement, the majority of American arbitrators would
18
now be inclined to decide a contracting out issue by reverting
to the study of the material elements of the case at band
rather than by applying a more universal, but preconceived
reasoning on the retention or implied limitation of managerial
prerogatives. Good faith on the part of the employer, past
practice, the nature of the economies achieved through contracting
out, the degree of emergency involved, would now be, among other
factors, at the core of the arbitrator•s decision. A contract
given to an outside firm would tbus be condemned, as a rule,
even by an arbitrator inclined to profess tbat Management retains
all rights not expressly surrendered in the Agreement, if the
employer, in so doing, was trying to escape the pay and working
conditions set out in this same Agreement. On the other band,
implied limitations to unilateral managerial action in the
subcontracting field lead one to consider--in order to see
precisely where these limits stand--for instance, possibly,
the emergency confronting the subcontracting employer, the
comparative cost as between an employer's carrying out of work
through his own men or through an independent firm, in the last
analysis, the employer's good faith. Those represent as many
specifie criteria that now occupy a prominent place in current
U.S. awards.
Nevertheless, this insistence upon the factual elements
of individual situations does not preclude arbitrators from
taking occasion of a subcontracting case to revert to the
already familiar dilemma over managerial rights. This is
particularly true of earlier awards.
"There are two schools of thoughts on this right, or let
us say subject of management'& subcontracting of work.
One group follows along the theory that management may
as one of its inherent rights as such, let work to outside
contractors in the absence of a contract promise specifically
restricting subcontracting, providing only that it is not
discriminating and therefore done in good faith. I need not
discuss the theory, except to state that in our instant case
your arbitrator finds, as a fact, that the action of the company
was in good faith and was not discriminating.
19
I like better the theory, and so predicate the award, that
there is an implied condition in a recognition clause that an
employer will not arbitrarily contract out work normally performed
within the unit, and that in the absence of a specifie clause
20
governing subcontracting ••• the true test of management's
right to subcontract is whether it acted reasonably in view
of the particular existing condition and in good faith" (27).
A recent review by arbitrator Alan Dash, Jr. of u.s.
subcontracting decisions (28) may illustrate, at least
quantitatively, the positions of American arbitrators on the
subject. Out of the sixty-four published decisions compiled
by Dash (29),all dealing with subcontracting, nineteen seemed
·to sustain the ttreserved rights" theory; in all but one of the
nineteen, however, the application of the theory was limited
either by the "good faith'' or "reasonableness" elements the
company bad to meet, "none of which," he adds, "is consistent
with the "reserved rights" theory." In more than two-thirds of
this first group of sixty-four decisions, justifications bad
been found, in addition to "good faith": subcontracting bad
been either "in conformance with past prsctice not previously
objected to by the union" or 11dictated by the requirements of
the business for efficiency, for economy, or for expedious
(27) (22 LA 124) (as quoted in "Management's Right to Manage," by George w. Torrence, B.N.A., Washington (1959), at p. 17.
(28) '*Cornell-Off Campus Conference." Sponsored by the New York State School of Industrial and Lsbor Relations: the arbitration of two 'Management Rights' issues; Work Assignments and Contracting Out. (February 1960, New York City), pp. 70, sq. (After a paper presented by Donald A. Crawford to the Thirteenth Annual Meeting of the N.A.A. See: "Challenges to Arbitration"--Proceedings of the Thirteenth Annual.Meeting, National Academy of Arbitrators, washington, 1960. (B.N.A. Inc. Ed,). Pp. 51, sq: "'l'he Arbitration of Disputes over Subcontracting by Donald A. Crawford, and consequent discussion. Arbitrator Crawford, in turn, inspired himself from an earlier award by asme arbitrator Dash, in re: Celanese Corp. (33 LA 925).)
(29) Op. cit., p. 74, sq. and see: Table I and II.
21
performance" or ndid not cause substantial number of employees
to be deprived of their work". The same conclusion is drawn
that "even the decisions which advanced the 'reserved rights'
doctrine embrace the 'implied limitation' concept to some extent,"
and that, consequently, 11there is no true adherence by arbitrators
to the reserved rights of management concept in the field of
contracting out.u
In the larger group of decisions {forty-five in all), where
the "reserved rights11 theory is not being invoked, it was recorded
that the act of subcontracting, to be upheld, had to be, either
alternatively or jointly, without substantial intended or actual
effect on bargaining unit work, in conformance with past practice
not previously objected to by the Utnion, in good faith and not
an attempt to evade provisions.of the Agreement, or to violate
its spirit or purpose, dictated by the requirements of the
business for efficiency, and economy, or dictated by the emergency
of the situation. More specifically, in sixteen cases, the vnion 1 s
claim that the act of subcontracting had violated the recognition
provisions of the Agreement was sustained.
B Studz of decisions
Illustrative decisions may now be examined individually.
These may be considered under three classifications: (1) decisions
where Management' a right to subcontract is retained, provided,
in practice, certain qualifications are met; (2) case where
22
implied limitations derived from the nature of the Agreement,
or from substantive provisions in it, are clearly set out and
finally, (3) decisions where the specifie reasons to contract
out in a given situation, e.g., emergency, efficiency ••• , are
decisive in that they demonstrate, basically, that no evasion
from the Agreement is being sought by the employer.
l. Management•s right to contract out retained with qualification ~s)
("Reserved rights•• tendency)
The basic reasoning whereby Management retains all rights
it has not expressly surrendered was thus clearly set out (30):
"In summary, ••• the arbitrator must find that a clear under-
standing exists in the field of labour-management relations
that where the parties intend to prevent subcontracting such a
specifie provision is incorporated in contracta to limit
management'& rights in this matter."
However, even a strict adherence to the terms of the
contract by the arbitrator still requires, as is the rule in
contractual matters in general, that be satisfied himself tbat
the act of subcontracting is not a maneuver to circumvent the
obligations set out in the Agreement, if this latter is to
exist at all. The requirement of good faith is of a contractual
nature. "In other words, the duty of the arbitrator in a
subcontracting case becomes one of interpreting the intent of
the employer in his exercise of the right to contract out. If
(30) In re: Minneapolis-Moline (33 LA 893) (as quoted in Monthly Labor Review, (June 1961) Vol.84, No. 6, at p. 580).
23
the intent of the subcontract is one of seriously reducing the
scope of coverage and thereby to avoid its collective bargaining
requirement, then the arbitrator is within his rights in striking
down the arrangement.
This action of the arbitrator would be based, not upon the
recognition clause, the seniority clause, or the list of job
classifications, but upon the inherent requirement that is
basic to effective collective bargaining and to any labour
agreement. This requirement is that the employer's action be one
of "good faith." This; of course, means that in arbitration
cases, where there is no contracting out provisions, it is the
duty of the arbitrator to examine the evidence of the case and
the whole relationship between the parties in order to determine
the intent behind the action taken" (31).
To this first category of arbitrators, then, with the good
faith proviso, subcontracting, unless it is expressly barred by
a written provision, remains a management prerogative and its
exercise does not constitute a violation of either recognition
or seniority clauses. It is a "residual right" (32). The usual
recognition clause simply means that the Union has been selected
as the representative of the unit. It must not be viewed as a
guaranty that jobs within the unit are not to vary. Likewise,
seniority provisions and the listing of rates of pay are not to
(31) Olin Mathieson Chemical Corp., (36 LA 1147) (Arb; T.J. Mcdermott)
(32) Snyder Mining Co., (36 LA 861) (Arb. M.O. Graff)
24
be read as guaranties of employment (33). "There is nothing
to indicate that any particular number of jobs or that all
work described in any particular classification will be done
exclusively by employees of the Company" (34).
The underlying principles have been clearly formulated:
"1) Management is free to discontinue part of its operation,
or to change its method of doing business, or to subcontract,
unless such action contravenes some provisions of the Collective
Bargaining Agreement.
2) The rights of Management are curtailed only to the
extent that they are given up in the contract; ••• subcontracting
of work~ made in good faith and in the exercise of sound business
judgment is not violative of the recognition clause, in the
absence of a specifie ban on subcontracting.
3) An employer does not breach a labor agreement by
contracting for the performance of work previously performed
by the bargaining unit, and such restriction may not be implied
from the fact that the contract stipulates terms and conditions
of employment, designates classification and sets forth corresponding
wage rates" (35).
Decisions of this type are now, however, c>f a less frequent
occurrence. In addition, it is to be noticed that in their search
(33) Black-Clawson Co. (34 LA 217) (Arb. E.R. Teple).
(34) Columbus Bolt & Forging Co. (35 LA 397) (Vernon L. Stouffer).
(35) Holub Iron & Steel Co. (36 LA 106) (Harry J. Dworkin). To the same effect: West Virginie Pulp & Paper Co. (36 LA 137) (B.C. Roberts); Allegheny Lundlum Steel Corp. (36 LA 912) (M.S. Ryder).
25
for the"good faith" element, their authors are led to consider
the motives that may have prompted the employer to subcontract.
In so doing, arbitrators are, in fact, qua1ifying
Management's right to contract out. However, the consequence
from the nature of the Agreement and from the recognition
clause it contains, in particular, is not drawn explicitely,
as in the next group of decisions to be considered.
2. Implied limitations to M!na&ement's ri&ht to contract out
are dominant.
To Arbitrator Wallen, the seniority provision of the
contract is given preference over the management rights clause: •••
"the transfer of work customarily performed by employees in
the bargaining unit must, therefore, be regarded as an attack
on the job security of the employees whom the agreement covers
and, therefore, on one of the contract's basic purposes" (36).
Economy alone cannot prevail over the stability of the
bargaining group "which is the foundation of the bargaining
relationsbip between the parties" (37). Economy, moreover,
must never be understood as an evasion from payments required
under the contract: "the Management Rights clause does not justify
actions that would nullify other sections of the Agreement" (38).
(36) New Britain Machine Co. (8 LA 720) (Saul Wallen) (as quoted in: "How Arbitration works," by F. and E.A. Elkouri, B.N.A. Washington, at p. 349).
(37) (15 LA 111) (16 LA 644) (as quoted in G.W. Torrence, Management's Right to Manage, B.N.A., at pp. 23, sq.).
(38) (27 LA 671) (as quoted in Torrence, op. cit. p. 27).
26
In an instance involving janitorial work, arbitrator Mcintosh
clearly stated that: "When the parties ••• have agreed that
the bargaining unit shall consist of certain jobs and that
these shall be paid in a certain manner, there is a presumption
that these jobs shall continue unless the processes of the
Company change so radically that different types of jobs must
be set up ••• Consequently, the unilateral action of the Company
to let a job classification become unfilled, as a result of an
arrangement with an outside firm specializing in janitorial work •••
is not only a violation of the contract, but an act which virtually
strikes at the very basis of the contract and if continued could
completely destroy the bargaining unit and thus render the contracting
process null" (39).
More specifically, when it is not expressly provided for in
the Agreement, unilateral contracting was held to violate the
recognition clause it contains, which confera upon the Union the
statua of "exclusive representative of all incumbents of a given
group of jobs ••• and, consequently, ••• plainly obliges the Company
to refrain from arbitrarily or unreasonably reducing the scope of
the bargaining unit" (40). In a more concrete manner, the Arbitrator
adds: '~hat is arbitrary or unreasonable in this regard is a
practical question which cannot be determined in a vacuum. The
(39) Socony Mobil Oil Co. (36 LA 63) (R.F. Mclntosh).
(40) National Tube Co. (17 LA 790) (Sylverster Garrett), as quoted in "Challenges to Arbitration, tt Thirteenth Annual Meeting, N.A.A., Washington, 1960, at p. 62.
27
group of jobs which constitute a bargaining unit is not static
and cannot be. Certain expansions, contractions, modifications
of the total number of jobs within the defined bargaining unit
are normal, expectable, and essential to proper conduct of the
enterprise. Recognition of the Union for purposes of bargaining
does not imply of itself any deviation from this generally
recognized principle. The question in this case, then, is simply
whether the Company's action ••• can be justified on the basis
of all relevant evidence as a normal and reasonable management
action in arranging for the conduct of the work at the plant."
3. Decisions based upon examination of objective circumstances.
Necessity in thus also felt by tenants of the "implied
limitations" position to consider the peculiarities of the
individual cases confronting them. An employer was found to have
violated the contractual recognition and jobs classification
provisions by subcontracting janitorial work: "In this case,
there was no emergency nor the need for any work that had to be
done which could not be performed by employees of the bargaining
unit or the janitress specifically. This action of the Company,
though de minimis, tends to lessen the strength of the bargaining
unit and is not considered proper" (41). The Union recognition
clause bars the Company from contracting out its production work
while regular employees are on lay off: '~on-bargaining-unit
(41) Container Corp. of America, (37 LA 252) (Harold T. Dworet)
28
workers should not be allowed to perform work of laid off
bargaining unit employees; to allow them to do so on regular,
non emergency production work would be to allow the Company to
so reduce the work opportunities of bargaining unit members as to
erode and render meaningless their contract rights" (42). The
same arbitrator, R.R. Williams, upheld the same reasoning in its
entirety with respect to the limitations brought about to an
employer's right to contract out by the Agreement as an entity
and the recognition clause in particular. However, he found the
employer's action of farming out repair work, consistent with
the terms of the Agreement since:
''1. No bargaining unit employees were laid off.
2. No regular employee suffered loss of time or pay.
3. The Union was consulted •••
4. No employees were discriminated against.
5. '.Che work contracted was not routine work; it was
temporary, one time, "emergency" or repair work of limited
duration.
. ............ . 9. The Company exercised good business judgment.
10. The subcontracting was not an unreasonable exercise of
the Company's right to manage the plant" (43).
ln the present state of decisions, implied limitations
resulting from the signing of the contract or, more specifically,
(42) Vulcan Rivet & Bolt Corp. (36 LA 871) (R.R. Williams).
(43) Riegel Paper Corp. (36 LA 714) (R.R. Williams)
29
from the recognition clause are not indeed tantamount to an
absolute prohibition to contract out. In other words: "Signed
agreements and recognition provisions thereof do not establish
categorically that all the jobs then performed, or all future
production and maintenance work will be performed by members of
the bargaining unit" (44). The implied limitations are tho1=1e
of good faith and of business justifications on the part of the
employer contemplating contracting out. Conversely, the kind
of contracting out that is being adversely ruled upon is the
one which presents a threat to the integrity of the bargaining
unit, whereby a permanent advantage of wages lower than those
bargained for is sought by the employer. Such a position cannot
but lead to a search for the objective reasons underlying
individual acts of contracting out.
4. Criteria for judging contracting out cases.
Awards representative of the current American trend, while
implicitely advocating that Management does not retain full ri~ht
to subcontracting, are centered on the circumstances of each
case. Factors that thus serve as guiding posts in determining
the admissibility of subcontracting in a given set of circumstances
include (45):
1. In a aeneral way: The decision must bave been made
(44) Dash, op. cit. p. 79.
(45) For listings of relevant factors, see: F. and E.A. Elkouri, "llowArbitrationWorks," pp. 343, sq. Also, award by J.F. Caraway, (37 LA 599) in re: Reynolds Metal s Co.; "Subcontracting under the Labor Management Agreement: an article by Carl R. Scbedler, in The Arbitration Journal, Vol. 10, N.S. (1955) No. 3, p. 131; Dash, op. cit. p. 76, sq.
30
in good faith by the employer and not as an effort to avert
the terms of the Agreement. "In the case before us it does
not appear tbat the employer subcontracted the salvage operation
as a stratagem to deprive its employees of work, but did so in
the good faith exercise of its business judgment for improved
efficiency and economy of operation." (46).
2. More specificallx: In determining whether or not the
decision was made "in good faith," consideration is given to:
a) The effect of contracting out on the Union: Is it
being used as a metbod of discriminating against theUnion and
substantially prejudicing the status and integrity of the
bargaining unit? (47)
b) The effect on unit emploxees: Are members of the U'nion
discriminated against, displaced, laid off, or deprived of jobs
previously available to them, or lose regular or overtime earnings,
by reason of the subcontract? (48). However, the employment
effect,quite apart from any element of discrimination, is often
found to be irrelevant, with reason, by arbitrators, t<lhen other
factors tend to justify the subcontract.
c) The type of work involved: Permanent work is more likely
to involve modifications to employee and union status than does
work that is of an "incidental" or 11temporary" nature. Consideration
may also be given as to whether work of a given type is often
contracted out in the industry. ·~eld that employer bad right to
(46) Los Angeles Standard Rubber Co. (37 LA 784, at p. 786) (H.F. Le Baron).
(47) Elkouri, op. cit. p. 344, 3°.
(48) Elkouri, op. cit. p. 344, 4°.
31
contract for one day rental and use of portable crane and to
use rental company's crane operator, as required by rentai
agreement, in order to dispose rapidly of excess stock pile •••
in the absence of any improper motivation" (49).
d) The emergencx of the situation: In the absence of such
exceptional circumstances, an employer was found to have violated
a contract's recognition and job classifications provisions in
re: Container Corp. of America (50).
e) The inavailabiliti of properlx gualified emploxees,
of suited equipment and managerial know how: The farming out
of a business experiment that required special skills and
equipment was upheld in re: Reynold Metals Co. (51).
f) The past practice of subcontracting an operation without
protest on the part of the Union: It may impede any successful
grieving against a subsequent act of a similar nature (52). The
same result is to be expected from Union's unsuccessful attempt,
during contract negotiations, to have subcontractin& expressli
forbidden by the terms of the Agreement.
3. Fundamentallx: The comparative cost advantage obtained
or simply sought in farming out work hitherto done by unit
employees. This efficiency of a real nature, as opposed to savings
achieved by not living up to the Agreement, is often found to be
(49) American Radiator & Standard Sanitary Corp. (36 LA 1304) (P.H. Sanders).
(50) Container Corp. of America (37 LA 252) (Harold T. Dworet).
(51) Reynold Metals Co. (36 LA 134) (H. Wyckoll).
(52) Snyder Mining Co. (36 LA 861) (M.O. Graff).
the decisive element in an arbitrator's decision upholding
subcontracting in a particular case (53).
32
(Needless to say that besides one award based upon anyone
of the preceding factors, another can be found presenting the
interplay of a good number of them.)
(53) Electric Autolite Co. (35 LA 415) (B.F. Willcox).
C Conclusion
This tendency of recent U.S. decisions concerning the
subcontracting issue to place an emphasis upon the factors
just considered may apparently relegate managerial rights
theories somewhat in the shadow. In reality, it means that,
to American arbitrators, Management's right to subcontract is
implicitely limited to the extent they are ready to consider
these factors before upholding a given act of contracting out.
33
(Be it, in rare instances, the sole "good faith" requirement.)
Indeed, the "reserved rights" theory, in the strict sense that
only a written prohibition may preclude Management from exercising
its "prerogative" of contracting out, has virtually disappeared
from the American arbitral stage. It has made place for a
widely accepted moderate form of the "implied limitations" theory.
The signing of an agreement by an employer, or the recognition
or seniority provisions it contains cannot be held to act as an
absolute prohibition to subcontract, for the sake of preserving
the integrity of the bargaining unit, and give the Union the
certainty that all listed work will ever be performed by unit
members. They rather act as a bar to any subcontracting having
the effect of undermining the Bargaining Agent through an
avoidance of the pay and work standards agreed upon by the
parties to the Agreement.
To express this positively, the consensus is to the
effect that subcontracting must be dictated by "compelling
logic or economies of operation" (54). The distinction over
the economy aspect underlying most subcontracting cases would
follow the lines drawn by arbitrator Wilcox: "··· that in my
opinion, is the true meaning of decisions which say that
34
economy does not justify a subcontract. These deal with efforts
to subvert a union's contractual scale of wages by hiring another
Company to do the work, and to do it with non-union workers. But
surely ••• where the work is unusual, where it can be done by
experts more efficiently than by persons who do not do it every
day, economy is and should be a major factor of justification'' (55).
The employer is required by American arbitrators to live
up to the Agreement in all good faith, but arbitrators are anxious
to allow him all the flexibility he needs in his quest for
efficiency.
(54) Crawford, op. cit., p. 72.
(55) B.F. Wilcox in re: Electric Autolite Co. (see p. 32 ).
35
PART III
CANADIAN COMMON LA.W PROVINCES AWARDS
The majority of arbitrators in the Canadian Common
Law Provinces tend to resolve disputes over subcontracting
according to on.e of two preconceptions regarding a Collective
Agreement. These preconceptions are {1) that managerial
prerogatives remain intact, except for an express provision to
the contrary; and {2) that they are implicitely limited by the
recognition of the Bargaining Agent.
Decisions on transfer of work to supervisory personnel
This trend of arbitrators to adhere, in their solution of
the contracting out issue, to either a "reserved rights" or an
"implied limitations" theory {56) is also seen, by analogy, in
(56) Headings that are, here too, being adopted to facilitate exposition and without intention of reducing all decisions to either theory, r~gardless of the qualifications and shades found in certain of them.
36
a group of early decisions rendered on the parent issue involving
the transfer of work performed by employees of the bargaining unit
to supervisory personnel excluded from the unit.
By the end of 1953, Magistrate J.A. Hanrahan (57) had
decided that, failing a provision to the contrary in the
Agreement, a company had the right to assign work that had been
performed by employees within the bargaining unit to persons
excluded from it.
A few days earlier~ Judge E.W. Cross had reached a similar
conclusion but only with respect to overtime work that had
previously been offered to all specification clerks (58).
The majority of the board, in re: John Bertram & Sons Co.
Ltd. (59), ruled likewise, when finding no provision in the
Agreement preventing foremen from doing work normally performed
by members of the bargaining unit.
Judge W.S. Lane had, however, provided us with a more
discriminating view of the problem in ruling over a grievance
protesting the performance by a foreman of hourly-rated work (60).
(57) International Union United Automobile, Aircraft and Agricultural Implement Workers of America (U .A.W.-C.I.O.) Local 240,in re: Canadian Industries Limited. (5 Lab. Arb. Cas., p. 1605) (Dec. 4, 1953).
(58) International Union, United Automobile, Aircraft and Agricultural Implement Workers of America, Local 240, in re: Ford Motor Company of Canada Limited (5 Lab. Arb. Cas. 1609) (Nov. 11, 1953).
(59) International Machinists Association, Local 1740. Re: John Bertram & Sons Co. Ltd. (5 Lab. Arb. Cas. 2117) (Dec. 9, 1954).
{60) International Union, United Automobile, Aircraft and Agricultural Implement Workers of America, Local 222, in re: Duplate (Canada) Ltd. (5 Lab. Arb. Cas. 1625) (Jan. 7, 1954).
37
The grievance was finally dismissed on the grounds that the
contract did not"··· even by implication, restrain the company
from scheduling work toits foreman ••• " (and that) on the
merits, it would seem ridiculous that a foreman who has super-
vision over two workers should be required to do no work
himself."
Under the usual Management's rights clause, that is,
without a specifie prohibition concerning the assigning of
work to non-unit personnel, Management was declared, more recently
(61), to have the right of so doing notwithstanding seniority
provisions, provided such an assignment does not result in
bringing into the unit outside personnel. More specifically,
it was found that when, as a result of the eliminated jobs
content being distributed, employees outside the unit are performing
20% of this former job, they cannot be said to have been brought
in fact within the scope of the unit.
Professor Laskin approached a similar situation differently.
To him the assignment of bargaining unit work to excluded persans
was a violation of the Agreement:.~ ••• If is were not so, it is
arguable at the extreme that the Company could evade all its
Collective Agreement obligations simply by assigning work covered
by the Agreement to its office staff or to supervisory personnel
or by recruiting an entirely new working force" (62).
(61) United Steelworkers, Local 3589, and American Standard Products (Canada) Ltd. (11 Lab. Arb. Cas. 283) (Jan. 1, 1961).
(62) Local 278 C, International Union of Brewery, Flour, Cereal, Malt, Soft Drink and Distillery Workers of America in re: Brewers' Warehousing Co. Ltd. (5 Lab. Arb. Cas. 1797) (June 28, 1954).
38
An unanimous board headed by Justice W.D. Roach also adopted
a similar conception of the Agreement (63) by not admitting the
replacement of an incentive production worker by an employee on
salary, when salaried employees were excluded from the bargaining
unit: "If the Company could change this particular job to a
salaried job then it seems to me that it would necessarily follow
that it could change all the hourly or piece-work employees to
salaried employees doing the same work and thus completely destroy
the effect of the Agreement. The Union would then be the Collective
Bargaining Agent with no employees for whom to bargain.
In my opinion neither the good faith of the Company nor the
element of necessity, if it existed, permits the Company to do
something that is contrary to the Collective Agreement."
Grievances of a similar nature were sustained in two more recent
decisions {64). One is of interest in that it relies upon the
recognition clause to maintain the grievance; the other simply
enunciates a specifie prohibition.
Decisions on contracting out, "stricto sensu"
(63) United Steelworkers of America, Local 3694, in re: Standard Sanitary and Dominion Radiator Limited, (5 Lab. Arb. Cas. 1684) (March 11, 1954).
{64) United Brewery Workers and Brewers' Warehousing Co. Ltd. (7 Lab. Arb. Cas. 286) Lang C.C.J., Pres.; (Nov. 22, 1956). and: United Automobile Horkers, Local 458 & Cockshutt Farm Equipment Ltd. (8 Lab. Arb. Cas. 249) Lane C.C.J., Pres.; (March 1, 1958).
39
Subcontracting, more strictly defined, confronta the
arbitrator with the same basic dilemma as does transferring
works to supervisory personnel. He must consider the effect on
the respective rights of the parties of the employer's recognition
of the Bargaining Agent and his entering into negotiations with it.
In the following analysis, in order to facilitate exposition,
decisions over subcontracting are grouped according to their
relation to either one of the two main conceptions of Management's
rights. Of course, this classification is not to be understood
to disregard the particularities of individual situations, which
are carefully taken into account in more recent U.S. awards, nor
to be regarded as favoring a resolving of the contracting out issue
by a quasi-automatic application of a theoritical standpoint.
1. "Reserved rights" theory
A board (65) presided over by H.D. Lang in a "reserved rightest"
manner, found no violation of the Agreement in the Company's action
of contracting with an outside firm, even though seventeen
janitressess had been laid off as a result. Yet the board was faced
both with an ordinary Management's right clause (Cl. 4), providing,
inter alia, that "the Company agrees that these functions will be
exercised in a manner not inconsistent with the terms of this agreement ••• "
(65) United Electrical, Radio & Machine Horkers of America, Local 504, in re: Canadian Westinghouse Company Limited (4 Lab. Arb. Cas. 1536) (Dec. 13, 1953).
40
and with a clause stating that 11 ••• no job which is presently
hourly rated shall be, during the terms of this Agreement removed
from the bargaining unit ••• " A contrary position was taken by
E.W. Cross, in his well-known Studebaker-Packard award (66), when
he stated, obiter, that under b.im the Westinghouse. case would have
been resolved differently. "It is obvious if management were to
pursue a policy of contracting all work within a plant to outside
contractors, the contract would be nullified and it seems to me
such a policy, being inconsistent with the terms of the agreement,
is expressly forbidden by Cl. 4. Cana distinction be made between
an inconsistency which nullified only part of the contract as in
the case before me and one which nullified the whole? I am of the
opinion that no such distinction cau be supported.n
The majority of another board. in elaborating its decision
over a grievance involving the reclassification of a pipe-fitter
as a result of a subcontract of plumbing work, enunciated incidentally
the ordinary 11reserved rightstt theory: "There is no provision in the
Agreement restricting the company's right to manage, operate, extend,
and curtail its business. If the Company wishes to contract the
manufacture of part of its requirements to an outside firm and
discontinue production in its own factory it has that right ••• " (67).
(66) U.A.W., Local 525 and Studebaker-Packard Ltd. (7 Lab. Arb. Cas. 310) (August 12, 1957) See PPa 50,51).
(67) Textile Workers Union of America, Local 741, in re: Guelph Yarns. (5 Lab. A rb. Cas. 1657) (April 21, 1954).
41
In re: John Bertram & Sons, Co. Ltd. (68), under a management's
rights clause which stated that "the Company reserves the exclusive
rights to manage the enterprise, the majority of the board headed
by Judge H.E. Fuller, ruled likewise that the Company was "not
precluded from contracting complete office maintenance services
in a division of its plant." The resulting lay off of employees,
as in the Westinghouse decision, was found irrelevant.
The "Empress" case representa a more recent unequivocal
acceptance of "reserved rights" principle. The board of arbitrators
held (69) that subcontracting is a normal and customary function
of Management and that a specifie limitation must be provided for
in the Agreement if the Union wishes to limit this right. The award
also contains an extensive review of subcontracting decisions:
The opposite Studebaker-Packard award, which bad found subcontracting
inconsistent with the Agreement at law, is discarded as an exception
to the "reserved rightsn shield as being based on a particular
provision of the contract. However, no mention is made of two
important decisions that bad been rendered by that time: the
"Falconbridge" (70), and ncanadian Car" (71) instances, both of which
belong to the same family as does the Studebaker-Packard award.
(68) International Machinists Association, Local 1740, in re: John Bertram & Sons Co. Ltd. (5 Lab. Arb. Cas. 2114) (Jan. 22, 1955).
(69) Canadian Brotherhood of Railway Employees, "Empress" Division No. 276 & C.P.R. (9 Lab. Arb. Cas. 151) (April 21, 1959).
(70) See p. 48 and p. 54
(71) See pp. 53.
42
The farming out of janitorial work in re: w.c. Hardesty
Co. of Canada Ltd. (72) was the occasion for Chairman W. Little,
D.C.J., togo to the roots of '~mpress"-type views on managerial A
rights: "Prior to the days of collective bargaining an employer's
power over his employees in the course of their employment was
absolute, provided he observed the law then in existence. The
situation is the same today except that there is more law regulating
his actions and his powers are limited by the terms of any collective
agreement to which he is a party.n A modernistic flavour is then
given to this view of labour relations by referring to automation:
'~hat then is the difference, if any, between those affected by
automation, and those affected by contracting out? Both of these
methods of improving efficiency are exclusive functions of management.
The only possible difference is that in contracting out, people are
replacing people. It could have the result in theory of destroying
the bargaining unit. But unless the contract specifically forbids
such action on the employer's part, he is free to act in this manner.
That is what was done here. Actually, however, in this case, no
one bas been affected, ( ••• )but this fact bas no bearing on our
decision."
Other decisions too adhere as firmly to the "reserved rights"
principles as the w.c. Hardesty award. They have only the additional
characteristic of having recourse to the juridical "master and
servant" relationship--which is coexistent with the power to give
(72) w.c. Hardesty Co. of Canada Ltmited (10 Lab. Arb. Cas. 162) (Nov. 16, 1959).
orders as to the manner of performing the work--in order to
establish whether or not the outside firm or its employees are
subject to the provisions of the Agreement as employees of the
contracting out firm. Every time, in these decisions, 'the
arbitrator has satisfied himself that the outside firm bas the
responsibility for its work, that it alone directs its employees
as to the manner of performing the job, or is itself free from
any control as to details of execution of the work on the part
43
of the contracting out firm, in other words, when the arbitrator
has found that the relationship of "master and servant" bas vanished
to be replaced by that of independant contracter, he then usually
goes on to proclaim that such a subcontract may be entered into
by Management in the absence of an express prohibition to the
contrary in the Agreement. In the opposite case, i.e., when Management
in fact does retain the power to give orders as to the manner to
execute the job, then, workers doing this work are to be viewed as
the subcontracting firm's own employees, and, as such, are simply
covered by the Agreement. Such a distinction, based upon the master
servant relationship, is no longer current among recent decisions.
A version of it was the difference made between a "contract for
services" i.e., "··· contracting out to a bona fide outside firm
which would carry out the function in question through its own
employees ••• " (73) and under its own direction and responsibility,
and a "contract of service," whereby the contracting out firm is
being supplied with outside employees whom it directs itself.
(73) B. Laskin, in re: "Falconbridge," (8 Lab. Arb. Cas., at p. 280).
44
The distinction between a ••contract of service• as opposed
to a •contract for services• was clearly made in a case (74)
involving an employer•s contracting out with the Canadian Corps
of Commissionaires and obtaining a man who did work formerly done
by a member of the unit. This contract whereby the Corps was to
supply a man •to do auch services as the Company directed" was
entirely different from say"··· a contract for snow removal where
the contractor uses his own judgment as how he shall go about the
job ••• " and, accordingly, was found violative of the recognition clause
of the Agreement~ This case thus clearly sets the distinction between
the two types of contract, but does not make explicit the board's
attitude had it been confronted with an •tndependent contractor"
relationship, as in cases to follow.
A close shop agreement to the effect that "only persona in
good standing ••• shall be employed in the departmenta of the
Company ••• "was invoked unsuccessfully by the Union against the
engagement by the Company of a contractor to do a painting job while
painters formed a classification covered by the Agreement. The Union
contended that to assign anyone that was not a union member to a job
covered by the Agreement resulted in a violation of the union-shop
provision. The board decided. however, that since the Union bad not
proved that the subcontractor's men were in fact employees of the Company,
tt (master-servant"relationship) they were not "employed11 within the
meaning of the union-shop clause, and, consequently, denied the
(74) United Steelworkers of America, C.I.O., Local 3696, in re: Norton Company of Canada, Ltd. Hamilton (4 Lsb. Arb. Cas. 1451) (July 23, 1953).
45
grievance (75).
As a complete rejection of the Studebaker-Packard award
rendered two months earlier by E.W. Cross C.C.J. (76), and
among the strongest statements of the "reserved right's" theory,
stands D.C. Thomas: C.C.J., decision in the Electric Auto-Lite
case (77). A good part of the office equipment had been moved
to a newly-constructed section of the plant. Janitor services in
this new office space were farmed out while the older part was still
being cleaned by members of the bargaining unit and while 150
employees of the bargaining unit were on lay-off. The arbitrator
explained that the Ontario Labour Relations Act is limited to
relations between employer and employee and that "··· it does not
regulate the manner in which an employer shall conduct his business ••• "
In order to constitute the relationship of employer and employee,
the employer has not only the right to direct what work is to be done,
but he must also have a measure of control over the manner of doing
the work. Where these factors do not exist, the relationship of
independent contractor cornes into being and such a relationship is
"beyond the realm of relationship between employer and employee in
voluntarily contracting with each other." Judge Thomas went on to
note the presence in the Agreement of a clause limiting the authority
(75) Brewery Workers, Local 365, in re: Bradings Breweries (Ottawa) Limited. (5 Lab. Arb. Cas. 2039) (Nov. 25, 1954).
(76) See p. 50.
(77) U.A.W. Local 456 & E1ectric Auto-Lite Ltd. (17 Lab. Arb. Cas. 331) (Oct. 31, 1957) A1so quoted at p. 9.
46
of the arbitrator to "interpreting the express term of the
agreement and preventing him by implication or otherwise, from
adding to or subtracting from the agreement ••• " It is then stated that:
"'.Che company has the right to manage its business to the best of its
ability in every respect, except to the extent that its rights are
eut down by voluntary abrogation of some of these rights to contract
with the union. The Reservations (not Restrictions) to management
clause which appear in most contract is nothing but a gratuitous acknowledg-
ment by the union of this fundamental right. If the board is unable to
find anything in the contract between the parties which takes away from
the company's rights to conduct its own business, then it cannat be
concerned with the quality of the action taken by the company, nor
whether it results in loss of jobs for employees of the company,
nor whether the action which produced such results was exercised within
the four walls of the plant or elsewhere."
An earlier British Columbia award (78), incidentally of particular
interest in that it deals with a section of the "The lndustrial
Conciliation and Arbitration Act" that was of a content similar to that
of a new sec. 10 of the Quebec Labour Relations Act, also based itself
upon this absence of a "master and servant" relationship between the
Company and the subcontractor to find that the Collective Agreement
had no application since the contracting out firm was no longer
having employees of its own "carrying on the operation covered by the
Agreement."
(78) Marine Workers and Boilermakers, Local 1, Re: Western Bridge and Steel Fabricator Limited. (5 Lab. Arb. Cas. 2035) (Aug. 24, 1954).
47
A reasoning of a similar nature can also be found in a
decision of a board presided over by H.E. Fuller, c.c.J. (79).
The grievance was over the Company's contracting out major alterations
to buildings, heating installations, etc. After deciding that an
express limitation to contracting out must be found in the Agreement,
in order to limit this customary Management function, the board said:
"In the collective agreement before this board, it is to be noted
that under Art. 1, the company recognizes the union as the sole
collective bargaining agent for all the hourly rated employees in the
various works of the company ••• If the company contracts work out,
those doing the work are not employees of the company and are, therefore,
not covered by this agreement which, the parties agree only covers
employees of the company ••• "
A particular expression of the reasoning involving the basic
conception of the unit bas been given by H.D. Lang c.c.J. in his
Ford decision (80): "One of the grievor's contention was that it is
the job that is in the bargaining unit. With respect I do not think
so. The bargaining unit is not the jobs but employees of the company
who do the jobs enumerated. The company in this agreement has
recognized the union as the exclusive bargaining agent on behalf of
employees of the company in the bargaining unit, and the bargaining
unit is described as all employees •••
(79) United Electrical Workers, Local 524, and Canadian General Electric Co. Ltd. (9 Lab. Arb. Cas. p. 21) (Sept. 22, 1958).
(80) United Automobile Workers, Local 240, and Ford Motor Co. (8 Lab. Arb. Cas. 84) (Dec. 11, 1957).
48
The company by laying off these 11 (restaurant) employees
bas not restricted nor limited their rights under this agreement •••
The company has not changed the bargaining unit. It bas eliminated
these restaurant jobs. If at any time the company decides to operate
the cafeteria itself and engage its own employees those employees
immediately come within the bargaining unit." "··· if the union
wishes the fundamental right of a company to contract out to be
restricted or limited or prevented then a clause to that effect has
to be negotiated and inserted in the contract."
The reasoning--in accordance with the wording of the recognition
clause--involves, per se, the rejection of any implicitely acquired
rights to the Union with respect toits own security (81).
(81) "To argue as the board did in the Brading's case, or as did the board in the B.C. award of Re: ••• Western Bridge ••• that a collective agreement applies only when persona are employed and not where there is a contracting out to a supplier of labour is to treat the collective agreement, as having force only when a company first establishes an employer-employee relationship to which it can apply. The truth of the matter is that a cardinal purpose of a collective agreement is to anticipate an employer-employee relationship and to compel it within the agreement terms." (Prof. Laskin in:Sudbury M~.ne, Mill and Smelter workers, Local 598 & Falconbridge Nickel Mines Ltd. (8 Lab. Arb. Cas. 276) (March 17, 1958),at p. 282). To "construe" •• ••• the recognition clause (or the bargaining unit clause) as referable to particular personnel ••• ", during the life of the agreement, according to Prof. Laskin,"gives a static meaning to the collective agreement which, on the contrary, contemplates a shifting working force, variously and from time to time assigned to jobs or work classifications within the collective agreement and thus governed by its terms in initial employment as well in subsequent continuation or tennination of employment." (ibidem).
49
The last grievance to be presented, in the present study,
as having been decided in a context of "reserved right" involves
janitorial work at the Champion Spark Plug plant (82). This, by
itself, does not sound innovating and the award would add nothing
to the picture had not the usual statements--that "···the right
to contract out work is an inherent traditional right of management •• !'
and that the recognition clause ••• " does not bind the employer to
continue unchanged his mode of doing business ••• '!.-been tempered
by references to objective circumstances of the case under analysis.
Namely, the Company bad acted "with the utmost good faith"; no employee
bad suffered by reason of this action. The consideration given to
these factors may lead one to reason that managerial prerogatives
may have tacitely undergone corresponding limitations in the process
of Collective Bargaining.
2. "Implied Limitations" Theory
A few early awards have already been found where it is stated
that an employer, whatever may be the elements of good faith and of
necessity involved, cannot indirectly destroy the effect of the
Agreement by replacing unit members by persons excluded from it (83).
(82) United Automobile Workers, Local 195 & Champion Spark Plug Co. Ltd. (10 Lab. Arb. Cas. 67) (June 1, 1959).
(83) See, for instance, the award rendered by a board chaired by Honourab1e Justice H.D. Roach in re: Standard Sanitary and Dominion Radiator Limited (5 Lab. Arb. cas. 1684) (March 11, 1954) at p.JS.
50
The strictly defined issue of contracting out was itself treated
in a comparatively new manner by E.W. Cross, C.C.J., in the famous
"Studebaker-Packard Ltd. award (84). Janitorial work was then
involved. Upon Union's stand to the effect that the Company was
required under the Agreement "to have the work done by employees of
the bargaining unit in the plant and to pay them the rate bargained
for such work," it is commented:
"This is a formidable argument because it must be conceded a
fundamental objective of collective bargaining is to insure that the
work done by employees of the bargaining unit within a plant shall
be done under the conditions set out in the bargain as to wages and
hours of work. The recognition clause makes it clear that the
Company recognizes the union for the purpose of collective bargaining
with respect to rates of pay, hours of work, and other conditions of
employment •••
If the Company's contention were accepted, it could have the
right to contract any job performed within the plant to a private
contractor ••• "
The grievance was finally sustained and the contract with the
industrial cleaning firm found in violation of the Agreement. The
particular wording of the Management's rights clause, however,
may possibly reduce the significance of the decision. The clause,
indeed, stated that "except as otherwise expressly provided in this
agreement, nothing ••• shall be deemed to limit the company in any
(84) U.A.W., Local 525 & Studebaker-Packard Ltd. (7 Lab. Arb. Cas. 310) (August 12, 1957).
51
way in the exercise of the regular and customary functions of
management ••• " As an application of the wording of the clause,
the bringing of outside contractors "into the plant to do work
ordinarily done by members of the bargaining unit" was not found
to be such a "nomal function" of Management at the time of the
signing of the Agreement (85). Nevertheless, the previously-quoted
statements of principles were breaking new grounds and it must also
be remarked that Judge Cross, in this award, expressed disagreement
with the decision rendered by H.D. Lang in the Westinghouse affair (86).
(85) To Professor H.D. Woods, this award occupies a prominent place in the history of the "implied limitations" theory. He notes that the Management's rights clause refera to "the regular and customary functions of management" and not to "the regular and customary functions of the management of this firm." It is to be noted, however, that at the end of his award, Judge Cross specifically states: "Apart from the Westinghouse decision, I must decide in any event what this particular management•s rights clause means. In short, the question arises, is it a nomal and regular function of management to bring outside contractors into the plant to do work ordinarily done by members of the bargaining unit at the time the collective bargaining agreement was signed.
It was admitted by the company it was not a normal function of management in this plant ••• "
In his later General Motors award, Judge Cross thus explains the Studebaker-Packard award: "··· the arbitrator held that the onus was on management of proving that the practice of employing outside contractors to do work done by members of the bargaining unit in the plant was a regular and customary function of management and found on the facts that this onus bad not been met and allowed the grievance. Furthermore, as the arbitrator pointed out in that decision, the company bad admitted the contracting out in question was not a regular function of management and bad failed to prove that it was a customary function in that particular plant." (8 Lab. Arb. Cas., at p. 93).
Whatever may be the issue on this particular point, it remains that Judge Cross in his "Studebaker" decision had expressed the view, with respect to the Westinghouse award, that ..... if management were to pursue a policy of contracting all work within a plant to outside contractors, the contract would be nullified ••• " Judge Cross had gone as far as saying that sucb a result was "inconsistent witb the terms of the Westinghouse agreement," and was expressly forbidden by the term.s of the tben broader Management's rights clause.
(86) See pp. 39 and 40.
52
Managerial rights then were not being limited to "the regular and
customary functions of management," as in the Studebaker-Packard
Agreement Judge Cross had to consider.
A few months later, Judge Cross, this time confronted with
the broader Management's rights clause in the General Motors master
agreement (87), took a different stand. The clause then enunciated
that "··· it (was) the right of the Company to operate and manage
its business in all respect ••• tt including " ••• the schedul ing of
its production and its methods, processes and means of manufacturing."
The arbitrator was satisfied with the proof of the Company·-due to
consideration being given to past practice in the interpretation of
the clause··to the effect that the disposal of waste material was
a "method, process or means of manufacturing.u Be declared that
'*in the pursuit of efficiency, the company had the right to change
this method by arranging for such waste material to be disposed of
by an outside contractor." Other factors considered were: (1)
the fact thst the contractor was doing the important part of his work
outside the plant; (2) good faith of Management in effecting the change;
(3) the previous unsuccessful attempt by the Union to impose such a
limitation upon Management's rights. The award, by entering into such
such considerations, is akin to the one rendered in re: Champion
Spark Plug (88). As recalled, the "reserved right" principle was
(87) United Automobile Workers, Local 222 & General Motors Ltd. (8 Lab. Arb. Cas., p. 90) (Jan. 6, 1956).
(88) See p. 49.
53
tempered by references to the "good faith" element that was present
in the situation tben under scrutiny and to the fact tbat no employee
had been adversely affected by Management's act of contracting out.
When such factors are taking into consideration at the arbitral level,
they must be regarded as as many conditions to Management'& initiative.
The general enunciatioa found in the Studebaker-Packard case
was sLmply adopted by J.M. Cooper, C.C.J., in a Canadian Car Co. case
(89). The Company had farmed out the night cleaning of the plant and
channeled its charwomen into other work that was more advantageous
in terms of pay. The Management'& rights clause was of the usual
type, first recognizing "management's authority to manage the affaira
of the company, to direct its working force, including the right •••
to close ••• " then providing that these rights would not be exercised
"in a manner inconsistant with the terms of the agreement. 11 The ~pire,
having read Thomas' Auto-Lite award, nevertheless found the case
"more on all fours" with the Studebaker-Packard case, and adopted "in
its entirety the reasoning of Cross C.C.J. in this last case." "The
present agreement provided that its purpose is to maintain mutually
sstisfactory working conditions and all other conditions of employment
for all employees who are subject to the provisions of the agreement.
The charwomen are employees who vere subject to the provisions of
the agreement and the company could only eradicate this classification
from the agreement by negotiation or agreement."
(89) United Automobile Workers, Local 1075 and Canadian Car Co. (8 Lab. Arb. Cas. 333) (Aug. 1, 1958).
54
Drummond Wren's many dissentions belons to the same school
of thought: the Agreement to exercise Management functions "in
a manner not inconsistent with the terms of the agreement" involves
their limitation (90).
Reference is also made to the Studebaker-Packard award in the
extensive review of arbitral positions on subcontracting to be found
in Prof. Laskin's "Falconbridae" decision (91). However, this discussion
of rendered awards seem.s to bave been made for its own value, since
the decision to disœiss the grievance confronting the arbitrator was
made more iœmediately from a clause of the Agreement which allowed
subcontractina, with the proviso that ••no regular employee of the
company shall have his employment with the company terminated as a
direct result of any work beina contracted out." This condition bad
been met. In addition to the simple syllogism from which the award
is derived, statements of interest are to be found: "Since a
collective agreement is not in itself a contract of employment, it
cannot, for this among other ressons, be interpreted as a barrier to
a complete elimination of work. But what a company engaaes by resson
of the agreement ia that if it bas work of the kind specified therein,
it will be subjected to the terms thereof, whether in relation to
existing employees or tbose wbich the company may have to engage to
have the work performed. In this respect, this board finds no distinction
---~--- _" ____ _ -------------- --~---
(90) See, for example: Canadian General Electric (9 Lab. Arb. Cas. at p. 29).
(91) Sudbury Mine, Mill and Smelter Workers, Local 598 and Falconbridge Nickel Mines Ltd. (8 Lab. Arb. Cas. 276) (March 17, 1958).
55
of substance between contracta for services aue! contracta of service'*
(92). It hacl beeu saicl: "at the outset the board woulcl remark
that whatever the proper conclusion uncler the collective agreement,
it cannot be basee! ou any claim of urgency or neceaaity. The collective
agreement cloes not efface or qualify itaelf in the light of these
factors ••• 1'
The same Prof. Laskin, hacl, a few months earlier (93), dismissecl
a grievance over the subcontracting of work coverecl by the Agreement.
Repaira to a ship tbat hacl been clamaged at the Company•s dock were the
object of the subcontract. The decision waa grouncled on the merita
of the case: no men were on lay off at the time of the contract;
iron-workera were even working overtime in orclinary plant operations;
the Company hacl actecl in goocl faith; "no existiug employee's seniority
was affectee!"; an emergency situation was involvecl ancl this "pressing
matter" was an isolatecl one. In other words: "management's recourse
to a contracting out was not "a means of circumventing the terms of
the collective agreement." Professor Laskin's acceptance of the
"impliecl limitations" theory may be saicl to bave been unclerlying the
awarcl and it woulcl bave operatecl to clisapprove Management's action, bad
'~ork falling within the bargaining unit ••• (been) ••• regularly contractee!
out to the clisadvantage of existing employees or by reasou of an
inadequate work force which the company unreaaonably was unwilling to
enlarge."
(92) See p. 284 •
(93) United Steelworkers, Local 2251 ancl Algoma Steel Corp. (8 Lab. Arb. Cas. 273) (Dec. 1957).
56
summarx
During the past decade, subcontracting issues in Common
Law Provinces have been decided along the lines of the basic,
but rather theoretical controversy over the retention of--or the
implied limitations to--managerial prerogatives in a Collective Agree
ment context.
The "reserved rights" theory found application in the strictest
manner in at least eight of the cases that were reviewed with respect
to contracting out proper. Among these, the absence of the'baster
servant' relationship was appealed to in three cases. To these strict
"reserved rights" cases, must be added two other ones where the same
doctrine was prevalent, but tempered by subsidiary criteria (good
faith, no adverse effect on employment ••• ). The "Canadian car"
case can be labeled "implied limitations theory". This latter theory
also constituted the prevailing climate in another case that was dealt
with more tmmediately by a specifie provision. It also underlay the
"Algoma" case, that was resolved more immediately from an analysis of
the factual elements of the individual case. Finally, "implied
limitations" principles were professed in many dissentions.The relatively
57
small number of decisions on subcontracting reported each year
rendera difficult to perceive any change in trend over the period
of time this study purported to considera. The strong majority of
awards upholding the ttreserved rights" position appears constantly.
The exceptional references to the "implied limitations theory" or
considerations of factual elements are not clustered in any particular
part of the period studied.
In the near future, contracting out of a production nature may
well come and make a lasting appearance beaides the now dominant
"maintenance" type. This could help center the issue upon the nature
of the aavings sought in contracting out: wages and conditions of
work inferior to those bargained for, or logical economies resulting
from a more apecialized use of machinery and skills.
For the time being, however, it may only be affirmed that there
is a very strong majority of decisions in Common Law Provinces to
the effect that an express provision in the Agreement is needed if
Management is to be denied the right to contract out. This is the
first difference with u.s. awards, taken as a whole, the other being
the comparatively little consideration given to the factual elements
of individual situations. The legal training of most Canadian
arbitrators may provide a clue to this state of facts. It may also
have one expect the same influence with respect to Quebec decisions •••
58
PART IV
PROVINCE OF QUEBEC
Civil Code Setting and Statutory Laws
Freedom of contract~ the concept underlying the Civil
Code is invoked with regularity in Quebec awards to justify
Management's action of contracting out. The countervailing
obligation to respect the Agreement, to refrain from doing anything
that may, directly or indirectly, nullify it is also appealed to
by the opposing party.
This whole private law context, which is governing in the
absence of specifie provisions of relevant statutory laws (94h is
being supplemented by specifie labour laws, which to use Professor
Paul Durand' s word (95), have the ir own "particularisme. tt A recent
amendment to the Labour Relations Act (96) that may affect the
practice of subcontracting in the Province thus needs to be
(94) To illustrate this "suppletive .. character of the private law system: an absolute engagement from the part of an employer to abstain from subcontracting would cast doubt as to its own validity.
(95) Paul Durand et R. Jaussaud, Traité de Droit du Travail, T.I., p. 254, sq. (Paris, Dalloz, 1947).
(96) R.S.Q. 1941, Ch. 162 A.
59
examined before turning to the awards themselves.
On June 10, 1961, this Labour Relations Act went through
substantial alterations, among which the following insertion:
Sec. 10 A
"The alienation of an undertaking otherwise than by judicial
sale or its operation by another, in whole or in part, shall not
invalidate any certificate issued by the Board, any collective
agreement or any proceeding for the securing of a certificate or
for the making or carrying out of a collective agreement.
The new employer, notwithstanding the division, amalgamation
or changed legal structure of the undertaking, shall be bound by
the certificate or collective agreement as if he were named therein
and shall become ipso facto a party to any proceeding relating
thereto, in the place and stead of the former employer.
The Board may make any order deemed necessary to record the
transfer of rights and obligations provided for in this section
and settle any difficulty arising out of the application thereof" (97).
"The alienation of an undertaking •.. in part" could be seen
at first glanee, at least, as intended to cover subcontracting
(97) Explanatory notes in Bill 78, 26th Quebec Legislature, simply states: "Section 1 (now 10 A of Ch. 162 A) of this bill proposes that the purchases of an undertaking or the person by whom it is operated shall be bound by the certificate of union recognition or the collective agreement relating thereto."
60
cases, It is the possibility of an interpretation to the effect
that Management was thereby precluded from subcontracting that
prompted the Quebec division of the Canadian Manufacturera'
Association to seek clarification from the governmental authorities
in the weeks during which the new section was being enacted, as is
to be exposed later on. The scope of the amendment, which ties
up both the Certificate and the Agreement to the undertaking, may
be felt, before any forma! decision is rendered on the subject,
through the examination of its various sources.
Sources of Sec. 10 A
a) France
The new amendment is not without similarity to the French Law
of July 19, 1928, integrated in the ttcode du Travail" as alinéa 7,
livre premie~ titre deuxième, article 23, which reads as follows:
"S'il survient une modification dans la situation juridique
de l'employeur, notamment par succession, vente, fusion, transfor
mation du fonds, mise en société, tous les contrats de travail en
cours au jour de la modification subsistent entre le nouvel entre
preneur et le personnel de l'entreprise."
Whatever may have been the part played by this influence upon
10 A, this latter section bas to cover, in addition to the individual
and collective contracta, the process of certification as well as
certification itself.
Nevertheless, French influence on the new amendment is not to
be discarded if one considera the principles of civil law involved
61
in new section 10 A and the similarity of situations prevailing
in France and in the Province of Quebec, before the respective
specifie provisions were enacted.
b) Other Canadian Provinces
On the other band, the existence of similar provisions in the
labour 1aws of British Columbia (98), Alberta (99), Saskatchewan (100),
(98) Labour Relations Act (R.S.B.C., 1960, Ch. 205) (as amended 1961) (Sec. 12 and 11).
'~otwithstanding the provisions of subsection (10), where a business or part thereof is sold, leased, or transferred, the purchaser, lessee, or transferee is bound by all the proceedings under this Act before the date of the sale, 1ease, or transfer, and the proceedings sha11 continue as if no change bad occurred; and if a collective agreement was in force, that agreement continues to bind the purchaser, lessee or transferee to the same extent as if it bad been signed by him."
(99) The Alberta Labour Act (Ch. 167, R.S.A. 1955) (as amended 1960) Sec. 74 (origin: 1950, Ch. 34, s. 21).
'~here a business or part thereof is sold, leased, or transferred, the purchaser, lessee, or transferee is bound by all the proceedings under this part before the date of sale, lease, or transfer, and the proceedings continue as if no sucb change bad occurred, and
a) if a bargaining agent was certified the certification remains in effect and
b) if a collective agreement was in force that agreement continues to bind the purcbaser, lessee, or transferee to the same extent as if it bad been signed by him and no changes sba11 be made in the agreement during its term without approva1 of the Board.''
(lOO) Trade Union Act, Ch. 259, R.S.S. (as amended 1961) Sec. 28 (origin: 1955, Ch. 65, Sec. 3).
"Where a business or part thereof is sold, leased,transferred or otherwise disposed of, the person acquiring the business or part thereof shall be bound by all orders of the board and all proceedings bad and taken before the board before the acquisition, and the orders and proceedings shall continue as if the business or part thereof bad not been disposed of, and, without restricting the generality of the foregoing, if before the disposai any trade union was determined by an order of the board as representing, for the purpose of bargaining collectively, any of the employees affected by the disposal or any collective bargaining agree-ment affecting any of such employees was in force the terms Qf such order
62
Manitoba (101, Ontario (102), Newfoundland (103), is to be noted,
(lOO) or agreement, as the case may be, shal1, unless the board otherwise orders, be deemed to apply to the person acquiring the business or part thereof to the same extent as if the order had original1y applied to him or the agreement had been signed by him."
(101) The Labour Relations Act (C. 132, R.S.M. 1954) (as amended 1959) s. 18.
(1) "A collective agreement entered into by a certified bargaining agent is ••• binding upon.
(c) Any new employer to whom passes the ownership of the business of an employer who has entered into the agreement or on whose behalf the agreement has been entered into.n
(102) Labour Relations Act (C. 202, R.S.O. 1960) (as amended 1962) Sec. 47 A.
"When an employer who is or was a party to or is or was bound by a collective agreement with a trade union, or on behalf of whose employees in an appropriate bargaining unit a trade union has been certified as bargaining agent, ceases to be the employer of the employees in the bargaining unit by reason of a sale, lease, transfer or other disposition of his business or part thereof, the Board, on the application of any person or trade union concerned may declare,
a) that the person to whom the business or part thereof has been sold, leased, transferred or otherwise disposed of, is bound by the collective agreement as if he had been a party thereto; or
b) whether or not a collective agreement is in operation binding upon the predeèessor employer, that the trade union is the bargaining agent for the employees in the appropriate bargaining unit of the person to whom the business or part thereof has been sold, leased, transferred or otherwise disposed of, and is entitled to give to that person a notice that shall have the same force and effect as a notice under section 11 or 40, as the Board may direct; or
c) when in the opinion of the Board the person to whom the business or part thereof has been sold, leased, transferred or otherwise disposed of changes its character so that it is substantially different from the business of the predecessor employer, that the trade union is not the bargaining agent of his employees."
(103) Labour Relations Act. (R.S.N. Ch. 258) (as amended 1960) Sec. 21 A (Origin: 1960 Ch. 58, S. 16).
"(1) If the ownership of a business is transferred and a bargaining agent has been certified in respect of the employees employed in that business before the transfer the certification of the bargaining agent is, subject to this Act, binding on the person to whom ownership of the business is transferred."
63
specially since they deal both witb the certification process and
the Agreement. (The Federal Act is silent on the matter).
c) Other P. of Q. laws
Other pieces of Quebec labour legislation express the same
idea of continuity between the original employer and the sub
contractor. The Workmea's Compensation Act considera (104) the
employer, under certain circumstances and for assessœent purpose,
"to be the ~ediate eœployer of any workman of a contractor or
subcontractor executing any work for such an industry." S~ilarly,
the Min~ Wage Act (105) and the Collective Agreement Act (106)
provide respectively that "every professional employer contracting
with a sub-entrepreneur or a sub-contractor or through an intermediary,
or sub-contractor shall be jointly and severally responsible with
such sub-entrepreneur and any intermediary for the payment of the
wage fixed by the ordinance and for levies due to the Comaission (or,
if such is the case: for the payment of the wage fixed by the decree.)"
Jurisprudence
a) Quebec
Also in Quebec instances that, without the slightest doubt,
would now come within the scope of Section 10 A, bad been reported
in the years that preceded it and may even be said to bave, on the
whole, rendered necessary for the Legislature to enact such a
(104) R.S.Q., 1941, Ch. 160, S. 10.
(105) R.S.Q., 1941, Ch. 164, S. 26.
(106) R.S.Q., 1941, Ch. 163, S. 14.
64
disposition.
A concern cannot through the mere changing of its corporate
name free itself from the obligations it has assumed by signing
a collective agreement (107). The Honourable Judge Dion in
rendering his judgment considered that it was the same undertaking
that was perpetuating itself under the new name.
An arbitral decision rendered by the majority of a board between
Le Syndicat National Catholique du Bâtiment de St-Joseph de Beauce
et J.L. Vachon & Fils Ltée covers the analoguous case of the effect
(108) of a sale of an undertaking by an individual (Madame Vachon)
to a corporate body (J.L. Vachon & Fils Ltée).
"Il est indubitable que la compagnie J.L. Vachon & Fils Ltée
est une personne juridique entièrement distincte de celle qui faisait
antérieurement affaires sous la raison sociale de "J.L. vachon &
Fils." Cependant, ceci ne signifie pas nécessairement qu'elle n'est
pas liée par la·convention collective conclue par l'ancienne proprié-
taire de l'entreprise. Elle s'en est portée acquéreur, non pas par
une vente ordinaire, mais par une vente en bloc de toute l'entreprise
comme entreprise en exploitation (as a going concern). Aussi elle
s'est chargée de toutes les dettes. A notre avis, cette obligation
doit s'étendre ••• à tous les engagements relatifs à l'entreprise."
(107) Cobra Industries Inc. vs Gagné. (1953, c.s. 289).
(108) Me Louis-Philippe Pigeon, whose opinion on Sec. 10 A is later to be referred to was a member of this ~oard. The award is reported in the factum of Pratte, Tremblay & Dechene in re: "Syndicat National des Travailleurs de la pulpe et du papier de La Tuque Inc." Queen's Bench, District of Quebec. Vo. 5261, pp. 32 and 33.
65
The sale by the Brown Corporatioa of ita La Tuque mill to
the Canadian International Paper (109), toaether vith the aaaign-
œent of the labour agreement to the purchaser, with the assent
of the Syndicate, brought to the Court of Appeal, aœong other
probleaa, that of the effect of an arœ's lensth transaction upon
the recognition certificate and the Agreement. The strict œajority
of the Court of Appeal, it is true, confirœed the judsaent of Dion
J. by decidiD& that the Quebec Labour Relations Board bad acted
within its jurisdiction in reviaing ita former decision--the
replacement of the seller'a name by that of the purchaaer on the
certificate--and in annulling the certificate of the National
Syndicate. As to the precise effect of the sale upon the certificate,
St-Jacquea, J. declared that it autoœatically ceaaed to be in force,
although the specifie agreement between the parties to œaintain the
Agreement was valid. Hyde, Rinfret, and Choquette J.J. disagree with
hiœ as far as the effect on the certificate is concerned. Choquette J.,
in an elaborate œanner, and for want of a text a~ilar to that of
the rrench 1928 law, reasons that the agreement to extend to the
purchaaer the individual as well as the collective labour contracta
had the saœe bindins affect in the case then at band, as the seneral
provisions of the 1928 law bad in all rrench cases, provided there vas
reciprocal fulfillœent by the parties of their obligations under the
respective coatracta. The Collective Contract waa not affected by
"fluctuations" aœong the individual onea. As to the recognition of the
(109) Rapporta judiciaires, (1958 B.R.,p. 1).
66
Syndicate, as the bargaining agent, Choquette J. found it, according
to the text of the law, to be a right belonging, not to the employer,
but to the association comprising the absolute majority of his
employees. The ''La Tuque" case prepared the way for sec. 10 A,
but this latter was brought about, in a more immediate manner,
according to Me Gerard Vaillancourt, Secretary of The Quebec Labour
Relations Board~ by the situation stemming from the contract between
two individuels and "Collin Lumber Limited" of Montmagny, whereby
the former undertook to operate the latter's mill. The Board decided,
on the 15th of June 1959, (confirmed Dec. 19, 1959) that a new
petition was required to represent the employees of what were new
employers (110).
Uncertainty as to the effect of a change of employer--be it
merely nominal through incorporation process, or of a real nature
through an arm's length transaction--on the recognition certificate
and the labour agreement, thus prevailed here before the enactment
of Section 10 A of the Labour Relations Act, which is, as far as
the Agreement is concerned, of a nature similar to that of the already
quoted French law of the 19th of July 1928.
b) France
This law provided for the continuation of all labour contracts
notwithstanding a change of employer, whether be cause of (succession,
vente, fusion, transformation du fonds ou mise en société). In other
(110) Unreported decision of the Q.L.R.B. From Me Gerard Vaillancourt, Secretary, Q.L.R.B., Quebec.
67
words, it aimed at stabilizing employment by generalizing the
solution already given by the French Code in cases of death trans-
missions or of the retirement of the employer. A part from such
instances and before the 1928 law, there were indeed no legally
binding relations between the new employer and salaried personnel,
unless a specifie agreement had met the situation. French tribunats
recognized the intended wide application (111) of the 1928 law,
the only criteria being that, from an economie point of view, it
is the same undertaking that is being continued, whatever be the
legal circumstances that may have brought about the change of
employer. Art. 23 would find no application "que si le successeur
exploite une entreprise nouvelle, entièrement distincte de la
précédente." The new French law eradicates only the automatic
extinction o( contracta through the mere changing of the employer.
It is not intended to interfere with the latterts right to reorganize
the newly-acquired concern, even if this means the laying off of
employees. Such a distinction is rendered easier by looking at the
underlying concept of "entreprise":
"Ces constructions, tirées des règles traditionnelles sont
battues en brèches par le concept de l'entreprise, qui rend bien
mieux compte de la persistance des rapports de travail. Le salarié
est lié à l'entreprise, envisagé comme une entité distincte, comme
une sorte de personne morale: il est normal, dès lors, que les
{lll)c fA. Brun--a. Galland: Droit du Travail, Sirey, 1958, pp. 523, sq., and Paul Durand et R. Jussaud, Traité de Droit du Travail, Paris, Dalloz, 1947. Tome II, pp. 790, 791.
68
fluctuations qui interviennent dans la direction ou l' aaénageaaent
juridique de l'entreprise n'aient aucune répercussion sur le statut
du salarié. Telle est la position que la Cour de Cassation adopte
t.plicitement lorsqu'elle déclare que "l'article 23 est destiné à
donner aux salariés des emplois plus stables et qu'il doit recevoir
application dans tous les cas où, sous une direction nouvelle, la
aêllle entreprise continue à fonctionner." (C. Soc. , 22 décembre,
1950, s. 1951, L 148) (112).
c) B.C. award
Here in Canada, a British Columbia -oard of arbitration decision
(113) is to be found rejecting incidentally an application sought
by the Union of subsec. 8 of section 12 of the then "The Industria1
Conciliation and Arbitration Act," which waa, in substance, to the
aaae effect as Sec. 10 A of Q.L.R. Act. The case waa one over the
comaon issue of subcontracting janitorial services in the plant. The
Union saw in the subsection a duty for the Company to see "that any
transfer of the whole or any part of its business is bound by covenant
to give affect to the existing Collective agreement." To this the
board declared: "While the Board is doubtful that the section bas
any application to a situation auch as contemplated, that is, where
an operation or certain operations of the Company are contracted out
rather thau where there is a sale or a transfer of the business itself,
(112) Brun-Galland, op. cit., p. 527.
(113) Marine Workera & Boilermakers, Local 1, re: Western Bridge & Steel Fabricators L~ited. (5 Lab. Arb. Cas. 2035) (Aug. 24, 1954) (Dea1t with under another angle at p. 46).
69
it is clearly of the opinion that the effect of the subsection
is to make applicable the existing collective agreement to the
transferee as a matter of law and that is not the duty of the
transfer company to see its application. The Union's remedy would
be against the transferee rather than the transferor."
Interpretation
To summarize the present interpretation of the new Quebec
amendment, both the certification process and the Agreement are
left unaffected in the case of a sale, in whole or in part, of
an undertaking. This is a clear consequence of Section 10 A.
Also, cases involving, as in "Collin Lumber, 11 the operation of the
same physical undertaking by a new Management are met by the wording
of the new amendment. Uncertainty only comes in when subcontracting
strictly defined, i.e., to a firm already specializing itself in
doing work of a certain type and making use of its own equipment
and personnel, is considered (114).
Of course, as a result of the sole working of Section 10 A,
no employer is prohibited from entering into a subcontracting
agreement, whatever the type. The question rather is: are certifi·
cation procedures and the Agreement with the subcontracting employer
being extended to the outside firm?
1. Me Pigeon's views
Me Louis-Philippe Pigeon (115) in two consecutive opinions
(114) See definition p. 2
(115) Cf. letters dated respective1y June 2 and 29, 1961, as published in: "Proceedings of the Canadian Bar Association," 1961 Congress, Winnipeg.
70
requested by Premier Jean Lesage after the already alluded to
inquiries of the Canadian Manufacturera' Association provides
authoritative views. In a first letter, after making it clear
that the employer is in no way being deprived of its freedom
to entrust a third party with the execution of certain types of
work related to his undertaking, Me Pigeon adds, however (116):
'~'employeur conserve donc toujours sa libert~ d'action.
Toutefois, il (art. 10 A) apporte une restriction n~cessaire
pour pr~venir les abus. La certification, de même que la convention
collective est d~sormais considérée comme s'attachant non plus à
la personne de l'employeur, mais au cadre de l'entreprise. Par
conséquent, celui qui p~nètre dans ce cadre s'y trouve lié."
Me Pigeon then goes on to remark that Section 10 A endows
the Labour Relations Board with the power "to settle any difficulty arising
out of the application thereof." The second letter is more explicit:
'~ème dans le cas où l'employeur n'est mO que par des consi-
dérations admissibles, il reste que l'on ne doit pas ignorer les
répercussions de pareilles opérations à !'~gard de la main d'oeuvre.
On doit considérer comme absolument périmée la disposition du
Code civil d'après laquelle le salarié n'a pas de droit à son emploi,
sauf celui que l'employeur veut bien lui concéder. Il y a plus de
70 ans qu'en France, un amendement a été apport~ au Code Napoléon
pour reconnattre le droit du travailleur à son emploi (loi du
27 décembre 1890 (117)). Il est bien temps que notre législature
(116) See first letter, page 1.
(117) Law providing for damages in the case of abusive unilateral lease and hire of services contract (C.N. 1780). (Cf. Planiol & Ripert, Droit civil français, Tome XI, 2ième ed. Paris~ 1954).
71
fasse un premier pas dans cette voie.
C'est d'ailleurs quelque chose que le régime de la convention
collective implique naturellement sous une forme ou sous une autre:
clause d'ancienneté, préférence syndicale, arbitrage de griefs, etc •••
Prenons le cas proposé. L'employeur a un personnel chargé
de servir les repas à ses employés. Par motif d'économie, il
veut avoir recours à un traiteur. Est-il juste qu'il puisse tout
simplement congédier son personnel sans se préoccuper du fait qu'il
peut s'agir de vieux employés qui perdent leur ancienneté, leurs
avantages sociaux et qui sont susceptibles d'éprouver les plus grandes
difficultés à trouver un autre emploi. Je ne le crois pas.
Il me semble que la décision rendue par le tribunal d'arbitrage
dans l'affaire des chauffeurs de locomotives Diesel, implique la
reconnaissance de l'obligation pour l'employeur de tenir compte du
droit de ses employés à leur emploi dans tout ré-aménagement de son
entreprise. Cela ne veut pas dire que l'employeur doit etre condamné
à maintenir des emplois inutiles ••• mais cela veut dire que cette
supression ne doit pas se faire d'une façon qui méconnaisse les
droits légitimes des travailleurs. Et c'est une autre raison pour
laquelle l'article 10 A ne fait aucune distinction."
2. Possible distinction based upon "entreprise" concept
Decisions undoubtedly to be rendered on new Section 10 A may,
in seeking what the Legislature exactly intended to mean, elaborate
a distinction which would be based upon the notion of "entreprise" (118),
(118) As "entreprise" is understood in the French doctrine over the 1928 Law, and, of course, not merely baséd, as in private civil law upon the criteria as to who retains the power to give orders as to the manner of performing the work.
72
i.e., of this same undertaking which is intended to be preserved
on account of the vested rights employees are now declared to have
in their work.
Provisions found in Section 10 A would then receive an
application in all cases where the same physical exploitation
(same employees, same equipment ••• ) is being carried on under a
new Management function, as a result of a contract between the first
employer and a third person. Then, the same "entreprise" goes on,
and the sole result is a possible evasion of the certification
process and of the Agreement. On the contrary, when the subcontractor
is found to be an organization which, before the taking place of
the contract, was concentrating upon doing work of the type being
contracted out and using its own employees, equipment and technique
of work in performing its operations--in other words, when subcontracting
as defined is involved--Section 10 A would not be applied. The new
arrangement would be left over to arbitrators to be decided upon,
according to their criteria and in the context of the particular
Agreement involved, just as was done in the awards which are next to
be examined.
Even in this field that would be reserved to arbitrators, an
indirect possible effect of the new amendment could be to have
Quebec arbitrators scrutinize with more unanimity, each new arrange
ment at band in order to find realized the ttgood faith" requirement,
as is currently done in the U.S. The intent of Section 10 A is
indeed to prevent employer's circumventing of his obligations stemming
both from the certificate and the Agreement.
73
QUEBEC AWARDS
A Decisions involving garticular intergretations
An illustration of what could now be considered a
"partial operation of an undertaking by anothertt under the
new Section 10 A of the Quebec Labour Relations Act, is provided
by the following case (119): the employer, a hospital served
its five maintenance painters sufficient notice that their
functions were to be abolished and that, consequently, their
services being no longer required, the individual contracta of
employment were to be terminated. The. Hospital then offered to
the five painters jobs affording wages actually higher thau the
ones they previously had, but, this time, as employees of its
painting subcontractor. Under the new amendment. it is contended,
the certificate and the Agreement, as far as painters are concerned,
(119) HOpital du SacréwCoeur de Cartierville et le Syndicat des Employés d'HOpitaux de Montréal Inc; arbitral decision of a board created under the Quebec Trades Disputes Act (1941 R.S.Q., Ch. 167) and the Public Services Employees Disputes Act (1941 R.S.Q., Ch. 169) and presided over by Mr. Justice Antoine Lamarre,wwApril 1957--Not reported. From Justice Lamarre.
74
would automatically apply to tbia aubcontractor under wboae
direction, in fact, the fi~ paiatera ûaBediately went back
to work.
At the tt.e, (April 13, 1956) a grievance waa brought up
by the Syndieate on the grounda that a clause of the Agreement
which atipulated a particular order (baaed upon profeaaional
qualifications, length of service, etc.,) to be followed in cases
of laying off had been violated. The Hospital, for ita part,
argued that the aaid clause had no application in the instance,
aince no lay offa were involved; but,rather~that what had actually
taken place waa an abolition of the jobs of •maintenance painter,•
and a permanent rupture of the individual contracta of employœent,
aa oppoaed to the temporary affecta of a lay off. The board agreed
with this latter view with the consequence that the aeniority clause
waa not applied. The right of Maaagement--under a uaually worded
clause recognizing Manageœent•a right to manage and direct the
Hospital in a manner co-patible with the other clauses of the Agree-
ment--was declared to be •abaolute,• since there waa no clause in
the Agreement limiting ita exerciae. There remained simply the
usual notice requirement, which, in fact, had been complied vith.
Another aubcontractins issue revolved around the ter. "lay
off• (120) • The question waa as to whether the Cœpany had the
(120) Da.taion Jngineering Worka Ltd. and International Association of Mechiniata, Local 1660--a deciaiou renclere4 by a b~oard of arbitratioa presided over by Mr. Justice Andr4 Montpetit, of the Superior Court on ·May 29, 1961. Unreported. J'roa Justice Kontpetit.
75
right to contract out work which ita aix janitora haà been
perforaing up to that tiae. The Agreeaaent containeà no "Manageaaent' a
righta" clause. The Union àià not contend that the absence of
an explicit reference to aubcontracting in the Agre .. ent was to be
interpreteà as a direct renunciation by the Company to the exercise
of contracting out; rather the Union reaaoned that the Company had
iaplicitely agreeà not to contract out any work perforaed at the
plant by reatricting the use of the tera "lay off" to the single
case of "a reduction in staff due to a shortaae of work", and not
extenàing the term to other possible situations auch a~ for instance,
severance of ~loyaent for disciplinary reasona. The Union contended
that a shortage of work--the sole reason for a lay off, according
to the teraa agreed upon--"cannot be atudied in relation to the men
but only in relation to the ecope of work to be doue." In the
presence instance, the acope of work bad not beau reduced and there
waa no shortage of work of the type contracted out. Consequent! y,
no lay off could be peraitted. The bpard did not aubscribe to the
reaaoning of the Union: "From the mere fact that the parties h.ereto
agreed to reatrict the use of the lay off to the single case of
shortage of work," it does not follow that auch ahortaae of work
cannot be attributed to the Company'a decision to hand over to an
outaide firm the execution of any specifie work (including janitorial
work) which, in the paat, bad been carried on by one or more of ita
~loyeea. The ahortaae of work bad to be studied "both in relation
to the men and in relation to the acope of work and not only in
relation to the latter,aa the Union contended. Accordinaly, the
76
grievance was denied (121).
B Decision on notioa of •contrat d'entreprise•
Stail arly, a su'bcontract given to aa iDdependent construction
COIIlpany by the Aluain1a C0111pany of Canada, Liaiteà., and involving
the construction of cement aolèings brought forth the Syndicate's
conteation that this action amounted to a "resumption of operations~"
within the aeaniaa of the Aareeaeat, as far as earpeaters' work
was concerned.• Accorètas1y, a carpenter who bad beea 1owered to
the rank of helper-blaekaaith was entitled to be reinstated to his
former jobs now that work of this latter type was availa'ble. A
clause of the Asreem.eat indeed provided that an -.ployee whose raak
had been lowered fol1owtns a curtai1ment of operations bad the
right to be reia.atateà. to his foraer job in the adveat of "resum.ption
of operations ••• " "provided work beeaae availa'ble withia a year frOIIl
the date of the lowering." The Syndicate affirmed that the Company
could not be recognized as possessins the riabt to render the
Agreement aeaningless througb contracting out work that would bave
otherwise been performed by unit mambers. The Syndicate, in addition
to the already aentioned specifie clause, sought collaterally in the
recognition, statem.ent of intentions clauses, tap1ied liaitations to
IIUlnagerial rights. These were defined in a clause of the usual type
beginning with the worda "Subject to the restrictions contained in
(121) Union noainee's dissenting notes in the present case are atudied jointly with tbose related to the "Superheater- case, at p. 86.
77
this Agreement ••• " It also contended that it had baraained not
only with respect to employees, but also with respect to the
jobs theœselves. The Company answered that the parties' silence
over subcontracting had s~ply consecrated past practice. Arbitrator
Emile Gosselin'a thirty-page and heavily documented decision (122)
representa the Quebec expression of the distinction between a
contract "for services" and a contract "of service". Goaselin took
the position that, interpreted as a whole, there is nothing in the
Aareement which, either expressly or implicitely prevents the
Company from awarding aubcontracts whereby the outside firm actually
haa a free hand in the conduct of the faraed out operations and acta
as an independant contractor, in the legal sense of the tera, that
is, is obligated solely to deliver the work which haa been perforaed
according to its own ways. Wben auch a situation is found to exiat,
the Agreement ceaaea to have any application, aince it only covers
eaployees and, thus, presupposes the "maater-aervant" relationship
as between individual employees and the Company. On the contrary,
when the subcontract is not one "d'entreprise" (for services) the
Syndicate is entitled to ela~ the rights it may derive in its favour
from the Agreement. In the instance at hand, it was ruled that the
Company bad entered an ordinary contract of labour with the outside
firm, as oppoaed to one "d'entreprise," and that, throuah the
aubcontracting firm, it continued to direct operations. Accordingly,
(122) Aluainum Company of Canada, L~ited (Arvida) and "Le Syndicat National Inc. Grief: A. Brisson (sous-contrats). Award rendered by Emile Goaaelin, Oct. 8, 1959. Not reported. From Adrien Plourde, C .S.N., Arvida.
78
the lowered carpenter vas entitled to be reatored to hia previoua
rank.
C Strai§ht application of •reaerved rights" theory
The complexity of the facts iavolved does not prevent the
inclusion of the following decision (123) rendered by a board
presided over by Mr. Justice AD.drf Montpetit, among awards from.
which eaerges the present standard treatment of subcontracting
disputes in Quebec.
Dock pumping operations at an oil company bad been contracted
out as a result of vhat the Coapauy contended vas strictly a œatter
of •staffing of the dock." The Union saw this aa a uarrowing down
of the larger pumping Department of vhich the dock section vas an
integral part, and wboae personnel it bad been certified to represent.
The Company stated that the act of contracting out bad been carried
out within the scope of Mauageœent's rights and responaibilities and
that it vas its absolute right to proceed as it did. The majority
of the board fully agreed vith the Company: "We believe that an
employer, whoever he may be, ia eatitled to make a change auch as
the one which occurred here, namely, to band over to a sub-contractor
the operation of a portion of its industrial enterprise. We also
believe that the eaployer when he adopta auch a change is not obliged
(123) Canadian Petrofina L~ited and Oil, Chemical and Atoaic Workers International Union (A.F.L.-C.l.O.-C.L.C.) Local 16-618. Decision rendered privately by a board under Justice Andrf Montpetit (Feb. 18, 1959) and communicated by latter. Minority notes froa Union noainee YVan A. Legault (April 24, 1959).
to juatify it. Whetber be be right or wrong is not "per se" a
matter of grievauce or dispute falling within the jurisdiction
of an arbitration Board.
79
Of course, we also agree that an employer may either renounce
auch a right or limit the exercise thereof in a collective agreement,
in which cases the issue involved may thea very wall becoae the
subject matter of an arbitrstion decision if the agreement so
provides." To the majority of the board, then, the text of a clause
first enumerating Kanageœent•a exclusive functions (without referring
to subcontracting) and then stating tàat "it was further agreed that
the Company retains all rights and privilegea not specifically relin·
quished or œodified therein," was "broad enough" to lead tt to
conclude that the Company"··· never intended to renounce its fundaaental
right of managing and organizing its industrial enterprise as it
saw fit except in cases specifically provided for." The fact that
the Company had discussed the "dock issue" at the aeetings that preceded
the Agreement could not be interpreted as a renunciation of its rights
to contract out. The Union had not satiafied the board that there w-. "a clause in the aareement in which the Company renounces, directly
or indirectly~ its œanageaent right of aubcontractiag part of the work
it bas carried so far." Consequently, the arievance was denied.
The Union nominee took the stand that, with the a4vent of
Collective Bargaintna, there cannot be any of these so-called
'~nageœent's vested rights" and that beyond the specifie terme of ~
Agreement, "anything remaina in principle subject to neaotiations." The
Union could not be aaid to have so relinquiahed to the Company the riaht
to contract out: the Union's jurisdiction over dock work bad not been exclu.d:
80
in the Q.L.R.B. certificate and, at the ttœe of the sianing
of the Aareeaent, employees of the laraer department vere "defacto"
perforaina the work at the dock. The recognition of these
juriadictional rights "vas ratified by the signature of the agreement.•
The Union could not have signed its own dissolution and a corresponding
l~itation was thus imposed upon the manaaerial rights clause. •tt
waa (Coœpany's) to prove aatisfactorily that subcontracting was its
right and prerogative.• The aajority award led to "a serious
challenge of the very a~s and purpoees of the collective labour
aareement c9nceived as an institution."
Justice Montpetit's approach to the contracting out issue is
more clearly stated in a relatively siœpler case involvina the
cleaning of the office areas of a Sperry Gyroscope (124) establishment.
This job, before Manageaent•s initiative, had been doue by four of its
employees. As a consequence of the contract with the outside fira,
two of these employees were given other jobs by the Company, with one
"incurring a teœporary decrease of pay.• The reaaining two were laid
off. To the majority of the board, the only issue that had relevancy
was as to wbether or not the Company had the rigat to contract out
the cleaniag of its offices. The majority affiraed: •• ~edo not
believe that the Union'• grievance can be maintained since the two
lay offs and the teœporary losa in pay wbich fDllowed should only
(124) Sperry Gyroscope Company of Caaaêa Ltd. an4 International Union of Jlectrical, Radio and Machine Workers (I.U.B.-A.F.L.-C.I.O.). Unreported decision of a board presided over by Justice André Kontpetit (Aug. 16, 1960). Froœ Justice MOntpetit.
81
be considered as the consequences of the exercise of a contractual
right by a party to an aareeœent •••• tt is adœitted by all concerned
that there is no specifie clause in the collective aareeœent prohibiting
or liaitiag or even referring to the right to contract out as auch"
(125). Accordingly, in the majority'a opinion: "the riaht to
contract out ia part of the riaht to "aenerally manaae" an induatrial
enterpriae. And since it is quite evident that the enumeration
fouad in (the Manageaent•s right clause) is not liaitative, we fail
to see how it cau be aaid that the Union haa not tacitely recoauized
in (that) article that the Company had the right to contract out."
The Union•a contention that jobs and wagea listing were tantamouat to
a coutractual obligation towarda the Union and the labourera was
diamissed, and so was any "alleged violation of the spirit and latter
of the collective aareeaent.•
The uaual araument against subcontracting is that it is an
indirect vay to render meaninglesa the contract enterecl into by
the employer and that, at the extreme, it could lead to a complete
destruction of the baraaining unit. This reaaoning "in extreœis"
becaœe reality in the B.O.A.C. case (126) where the Company bad
contracted out the work doue by its whole workiug force of eigàteen
(125) The Kanaaemeut' s 1."ights clause acknowleclged the Company • s exclusive function of "aenerally managina the enterprin and,· without restricting the generality of the forego~.~there then followeo aa enumeration of functions, including: "to let suh•contracts for the manufacture and/o1." repair of any products or parts thereof ••• ) ••• except to the extent liaited in this Agreemeat ••• • The award does not seem to refer to this provision relatai to the contracting out of work of a manufacturing or repair aature.
(126) Re: Uaited Auto.obile Workera and B.O.A.C.,(lO Lab. Atb. caa. 288) (B. Lande, Q.C.) (July 21, 1960).
82
employees of its engineering and stores deparbaent at Dorval Airport.
It vas remarked by Union's counsel that it vas.,the first instance
in Canadian labour history that all of the employees covered by the
contract vere being disaissed so that the contract vas rendered
negatory and of no affect ••• • It vas unfeasible for Manageaent, it
was contended, "to lay off all of the œen vithin the bargaining
unit," for, then, "the contract would no longer exist ••• and •••
would thus be cancelled unilaterally before its date of expiration." To
the Union, the Agreeœent was "a coœplete contract" between two equal
parties, both of vhich "had to live by it.• The eœployer pointed
out that no guaranty of employaent could be derived froœ the Collective
Agreement, that ••• "it (bad) the right to reduce its staff and lay
off mea during the contract ••• (and that) ••• • if it (bad) the right
to lay off soœe of the aen, it alao (bad) the right to lay off all of
the œen.• The Coapaay saw ~plied in any Collective Agreeœent
"the right of manageaent to deterœine its beat policy of operation":
this"··· could conceivably require laying off part or all of the
œeu." To it, of course, contracting out was one of these inherent
rights which Maaageœent muet be preau.ed to retain unless it expressly
aurrenders it. Arbitrator B. Lande, Q.C., took the position that
both the individual employee, as wall as the employer, with the advent
of collective bargaining, retain all of their original pre-union
powera, except as theae may have been expressly taken avay in tke
Agreeœent. flJor exemple, tke individual employee may quit his job
before the expiry of the contract, ••• • and so they may all do"···
leaving no recourse to the employer and the union." Correlatively: "The
83
employer who signa a collective agree.ent sets out the conditions
under wbich the eaployees shall work for hia when there is work.
Be is not boua.d to provide work. Be only gives up auch of bis powers as
he expressly assigna in the contract, retainiag all of his inherent,
pristine rights." Vbence the necessity of an express prohibition
to remove from the employer the right to contract out. This radical
doctrine is tempered by the proviso that "the employer must be in
good faith and be actuated by sound business principles." In the
instance it bad been shawn by evidence that the employer'• decision
"was based on a saving of 50% in costa and a conaequent aubstantial
iœprovemeut in efficiency." Consideration was also given to the
common practice of major world airliues of fa~ing out vork of the
type involved and to tD.e "very fair" notice of di811tisaal, severance
pay, and assistance given by the e.ployer to the laid off employees.
The essence of the award, however, is a strict adherenceto a "reserved
rights" position with reapect to both parties •••
A .ore recent subcontracting case at the Arvida plant of the
' Aluœinua Coœpany of Canada Ltmited (127) was treated by Judge Ren'
Lipp' more or lees along the linea of the B.O.A.c. case to which it
expresaly refera. Four maintenance pluabera bad been posted to a
lower rank following the Coœpany's move of having work of the type
they bad currently doue performed by au outside fira. Judge Lippé
(127) Re: Le Syndicat national des employés de l'Aluminium d'Arvida, tnc. et L'AluminwD. Coœpany of Cauada, Ltaited (Arvida). Award rendered by Judge René Lippé. (Nov. 16, 1960) (Unreported). Froa: Adrien Plourde, C.S.N., Arvida.
84
refera to the usuel two extreme achoola on aubcontracting; the
viewa expreased by Professor Laakin in his "Falconbridge" award (128)
are opposed to those of Me Lande, as fouad in the I.O.A.C. decision
(129). Judge Lippé expresses his agreeaent with arbitrator Lande.
To htm, the right to contract out is "inherent" in the right to manage
the plants, as defined in the Management clause (usual type clause
whereby the Syndicate recognizes that the aanagertal functions belongs
to the Company, these functions being thea enumerated non ltmitatively
in the relevant clause). An express limitation to the right to
contract out is imperative if the Company is to be denied this fora
of action. It is remarked, however, that a decision confirming the
C~pany•s right to contract out, in the absence of an express
prohibition, might not have been rendered had it been revealed that
the Company had acted in bad faith. But auch was not the case, and,
moreover, in the past, the Company bad, at various occurrences, awarded
subcontracta without the Syndicate's grieving about it. The distinction
that the Syndicate wanted to mske as between work of a apecialized
construction nature that could not be performed by employees covered
by the Agreement (this type of work, the Syndicate conceded, could
possibly be farmed out) and maintenance work (as involved in the present
case) was also rejected.
The legally-framed award in the "Combustion Engineering Superheater
case involving the contracting out of janitorial work performed
by Monsieur and Madame Poulin also maintains firmly
(128) See p. 48 and p. 54.
(129) See p. 81.
85
the "reaerved righta" position (130). A Collective Agreeaent
regulatea individual contracta of lease and hire of services:
these may be terainated by either party in the naae of freedoœ
of contract. The Asreeaent, unless it is specifically stipulated
otherwiae therain, does not act as a guaranty ot emplo~ent for
uniea aembers taken collectively or as iadividuals: -.ployees
may stop workiag for their employer~ and the latter, in tura,
enjoys a free hand in closins down his plant duriag the t~e the
Aareement is in force (lock out case excluded). Contractins out
is merely an expression of this general risht. To take the words
from the avard "···la lé&ialstion ouvrilre n'abolit pat le droit
et la liberté des parties de contracter en vertu du Code Civil et
celles-ci peuvent convenir entre elles d'autres conditions pourvu
qu'elles ne soient pas contraires l la Loi ou l la convention
collective particulilre. Il faut donc rechercher, dana une convention
collective, les clauses qui l~itent la liberté de contracter stipulée
par le Code Civil." No clause of this nature beins fouad in the
Agreement with respect to contractin& out, Manageaent is free to
exercise a risht given by Law and not contractually l~ited by the
Agreement. This latter only regulates the individual contracta.
and the employer-eaployee relationahip doea not exiat between the
Company and the outside firm.
(130) Re: · Elesco workera Association, I.A.M. et Combustion Engineering Superheater Lillited. (Grief Poulin). Decision rendered in May 1961 by a board presided over by Justice Antoine Laœarre. From Judse L..arre and Company nominee, Me Carrier Fortin, C.R. (Alao reported in: Bulletin d'information du Kiniat~re du Travail (20 juin, 1961) numéro 976, 1961).
86
The documented union memorandwa that anteceded the award
bringa other viewa on the matter. In substance this memorandum
boila down to the diasentiag aotea of the board Union nomiaee,
Mr. Louis Gagnoa, in the Dominion Enaineering case (131). An
atteœpt is made to uproot the habituai position that an express
provision·ia needed to tske off from Management its right to contract
out by demonatrating the precairious "hiatorical, juridical and
economical" argumenta on which it stands. Reminiscent of Professor
Laakin's "Peterborough" case (132), it ia obaerved that the right
historical perspective ia tbat, with the advent of collective negotiations,
a new world haa been entered into, where "the concept of collective
agreement bas evolved so auch that it aupersedes the individual
contracta of work." The broad "reaiduary" management clause would
be reatrained, according to the ordinary interpretation rules of
contracta, by the other substantive clauses of the Agreement and by
the concept of "job ownerahip." To avoid paying a job at the rate
collectively determined by contracting out ia merely to do indirectly
what the Law and the contract forbid to do directly. "Economical
motivation, ••• especially in Quebec, where too auch stresa is atill
placed on individualism in contracting ••• only bas value as long as
it respecta the juridical provisions and concepts. For exaaple, a
person having rented a flat at $100 a month cannot reailiate aaid
(131) See p. 74 and ff. (Both documents coaœunicated by Profeaaor Roger Chartier (Laval) arul Me Denia Lévesque, Lapointe & Lévesque, Montréal.)
(132) See pp. 11 and 12.
87
rental contract by pretending tbat she could pay less by renting
a s~ilar apartment from a neighbour at $50 and thus aaving money
be justified in so doing legally. Yet, it would be sound business
principle to do so ••• "
88
D CONCLUSION
These latter dissenting union views do not break the
unanimity of the Quebec awards that have been examined:
contracting out is but one expression of Management'& inherent
right to direct the undertaking, and its exercise cannot be
curtailed unless Management bas relinquished it through an
express prohibition in the Agreement. This was found to be
the rule prevailing in all cases at hand: in the first two,
which were decided more immediately upon the specifie meaning
of ''lay off" and of "shortage of work," in Professor Gosselin' s
"Aluminum" award, grounded upon the notion of "contrat d'entreprise,"
as well as in the last five more universal instances. "Good faith"
was proclaimed in one case and hinted at in another. "Unobjected
to past practice," "cOIIIIIlon tracle practice", the soundness of the
business principles involved, each came to light once.
All the arbitration awards that were examined (133) were
rendered before the enactment of the new amendment to the Quebec
(133) This is not to exclude other decisions that may also possibly have been rendered privately on the issue.
89
Labour aelations Act extending the conditions of the Agreement
in the case of "partial exploitation of au undertaking by another."
As previously explained (134), this amendment will possibly be
applied at leaat in all cases where the subcontract ia not awarded
to a "bona fide" subcontracting firm but is simply a ..ans of
artificially altering the power of Management. To that extent, it
will play the role "good faith" playa in American decisions. It
may alao have the indirect effect of baving more Quebec arbitrators
insist more uniformly upon factual criteria ("good faith," "sound
business principlea" involved ••• ) in all other ordinary cases of
contracting out. Neverthelesa, the tendency of legally-trained
arbitrators (in this respect, Quebec ia not disaimilar to Ontario)
to emphasize freedom of contract ia an indication that an express
prohibition in the terma of the Agreement will continue to be
necesaary if it is desired to preclude Management from contracting
out.
(134) See p. 71 and 72.
90
CONCLUSIONS
This aurvey of u.s. and Canadian arbitration awards
rendered during the past decade over the contracting out
issue--arising under agreements not dealing specifically
with the subject--has tended to show a difference of approach
not as much between Quebec, on the one hand, and the Common
Law Provinces and the United States,on the other. Rather, the
cleavage followed the border liae between the two countries.
' South of the border, recent awards, as recalled, departing from
theoretical discussions on aanagerial rights, showed unaniaity
in arriving at lt.iting the exerciae of contracting out to
"good faith" decisions, dictated by "compellina loaic or economies
of operation" and thua discarting any attempt by Manageaent to
avoid, through contracting out, contractual wages and conditions
of work and to uader.ine the bargaining unit. In Canada, however,
the majority of awards rendered in the Comœon Law Provinces, and
all the Quebec ones that were reviewed, reasoned rather theoretically
that an express prohibition is needed in the Agreeaent if Management
91
is to be denied this particular form of generally directing the
undertaking. The objective ressons that may, in a given set of
circuœstances, have dictated Management'• course of action are
given due consideration in but a fev isolated Ontario decisions.
If Manag•ent bas then happened to be denied the right to contract
out, it was also because the arbitrator bad accepted the reasoning
tbat the recognition clause or, say, the seniority provision,
acted tmplicitely as a bar that prevented Manageœent fraœ doing
so.
A recent a.endment to the Quebec Labour Relations Act was
seen to extend to the new employer duties arising both from
certification and the Agreeœent whenever an undertaking "is
partially operated by another," and was interpreted to cover all
cases involving the carrying on of the saœe physical concern under
a new Management. To that extent, then, the "good faith" minimua
requireaent of American decisions would appesr, as a practical
result, to have been sanctioned by the Legislature and the certificats
and the Agreement cannot be evaded. Left to arbitrators in Quebec
to decide, thea, would be all other cases involving the awarding
of a contract to an outside firm which carries on the work free
of interference from the part of the contracting out firm, and uses
ita own personnel, equipaent, and methode in performing farmed out
work. The arbitrator confronted with a case of this nature must
not depart from the will of the parties as expressed in the text
of the Agreeaent nor add to it (135), a fortiori, if he is expressly
(135) For a standard of interpretation, see Profesaor Chartier's observation at p. 17.
forbidden to do so. He must, however, in so doing. read auch
a text as a whole and in a aanner that is not destructive of any
of its provisions, among which are the recognition, seniority,
92
and wage clauses. As a judsœent of value, this could be translated
here, as it is done currently by Aaerican arbitrators, not into
prohibiting any forM of contractins out--since the involved typical
Asreement, ex hypothesis, recognizes Maaagement's right generally
to direct the firm and nothing is there to exclude contracting out
as a means--but into limiting its exercise to cases not inconsistant
with the Asreeaent or any of its terms. Contractins out would be
adaitted, and the grievance denied, whenever the analyste of the
case at band would have shown that it bas been entered into in
"good faith," either under coapelling unavailability of adequate
.an-power, equipaent or know-how, or in the quest of efficiency and
of accompanying econoay derived from a logical, aore specialized
use of resources. In this respect, a consideration of industry
wide, as well as past practice,unobjected to by the Union,could be
helpful. The grievance, on the other band, would be adœitted when
objective motives of this nature are absent, i.e., when the sole
result is the taking out of the bargaining unit of workers coming
within its ecope and the undermining of the Agent. Contracting out
is then incompatible witb the entering into an Agreement and vith
the substantive clausea this Agreeaent contains.
Sucb ·a factual u.s.-type approacb to contracting out at the
arbitral level seaas to approximate witb greater accuracy the
respective rights and oblisations of both parties as written in
the A&reeœent thau does the iœmediate--and commonly accepted
in Quebec--reasonina, under the auise of freedom of contract,
93
to the affect that Management reteins all rights it bas aot expresaly
surrendered,for Manageaent haa ~plicitely agreed to have certain
of these righta curtailed by entering into an Agreaaent and by
aasenting to ita various provisions. The saae ia true, on the other
band, with respect to the conclusion tbat the entering into the
Agreement with the Union and the recognition provision act as
absolute bar to Manageaent to contract out, aince Manageaent reteins
basically the right to determine the extent and methode of operations
of the undertaking and of generally directing it, be this written
or not. Of course, the case for auch au approach becomea atronger
when Management•s right and duty to aeek utaoat efficiency ia paired
with the concept, newly expreased in Quebec, of a worker'a righta
in hia work (cf. recent Section 10 A of Quebec Labour Relations Act),
when the Agreement ia viewed lesa as a contract and more as a living
institution with ita past and future, and when sound and lasting
collective relations are sought.
BIBLIOGRAPBY
I Generally, on manaaerial rights: (Part I)
National Acadeœy of Arbitrators;
"Management Rights and the Arbitration Process",
Proceedings of the Ninth Annual Meeting,
Cleveland Ohio, Jan. 26-28, 1956.
Edited by Jean T. McKel vey.
B.N.A. lac. Washington, D.C.
Frank Elkouri and Edna Asper Elkouri;
"How Arbitration Works",
Revised Edition, B.N.A. Inc., washington, D.C.
Spec. ch. 13, p. 284, sq.
A.E. R.obinette;
"Some Recent Arbitration Decisions on Management'& Rights".
In: The Canadian Personnel & Industrial Relations Journal,
94
Vol. 6, no. 1. Jan. 1959.
B. Laskin (Chairœan):
United Blectrical, Radio & Machine Workers of America,
Local 527, in re: Peterboro Lock Mfg. Co. Ltd.
(4 Lab. Arb. Cas. 1497).
R.S. Clark, C.C.J. (Chairman):
United Brewery Workers, Local 358 & Brewers' warehousing
(7 Lab. Arb. Cas. 293, at p. 297).
B • Laskin (Cbairœan}:
95
United Autoaobile Workera, Local 458 & Cockabutt Farm Bquipment
Ltd.
(9 Lab. Arb. cas. 325).
(Otber awarda dealing apecifically with contracting out are to
be found under this heading.)
Neil w. Chamberlain:
"Collective Bargaining",
McGraw-Bill,
Spec. ch. 6, 7, 13, 18.
1951.
96
Roger Chartier & al:
"On Interpretation of Collective Agreement"
--award reported in Relatione Industrielles, Jan. 1959, at p. 92.
Preases Universitaires Laval, Quebec.
Il On Contractin& Out
A) United States
--troceedings of the Thirteenth Annual Meeting, National
Acadeay of Arbitratora:
"Challenges to Arbitration"
Washington, D.C.,
!di ted by Jean T. McKel vey,
Spec. ch. IV, p. 51, sq.
Cornell·Off-Caœpus Conference.
Jan. 27-29, 1960.
B.N.A. lac.
Sponaored by New York State School of Induatrial & tabor Relations.
Conference on: The Arbitration of Two "Management Rights" Issues;
Work Assignœent and Contracting Out.
February 4, 1960. New York City.
George w. Torrence:
"Maaag•ent 1 s Right to Manage"
Part 4--What hss happened in specifie areas: p. 17, sq.
Subcontracting. B.N.A., washington (1959).
Carl R. Schedler:
"Subcoutracting Under the Labor-Management Agreement".
ln: "The Arbitration Journal",
Vol. 10 N.S. (1955) No. 3, p. 131.
Th011aa A. KD.owlton:
97
"Soœe aspect of aubcontracting in: "Labor-Manag ... nt Arbitration".
In: "the Arbitration Journal",
Vol. 16, No. 2, 1961, pp. 87, sq.
"Subcontracting Clauses in Major Agreements" by
Leon E. Linden
la: Monthly Labor Review,
June 1961, Vol. 84, No. 6, p. 579.
July 1961, Vol. 84, No. 7, p. 715.
the following arbitration awarda, as reportee! in
"Labor Arbitration Reporta"
(34, 35, 36, 37, LA,) OM&rch 2, 1960 to Jan. 22, 1962, i.e.
froœ the end of the period covered by the cornell conference to
latter date).
Bureau of National Affaira, Washington.
34 LA 215
35 LA 397
35 LA 415
36 LA 106
36 LA 137
36 LA 631
36 LA 714
36 LA 861
36 LA 871
36 LA 912
36 LA 1147
)6 LA 1304
36 LA 1341
37 LA 252
37 LA 599
37 LA 784
98
Black•Clawaon Co. (E.R. Teple).
Co1uabua Bolt & Forging Co. (V.L. Stouffer).
Electric Autolite Co. (B.F. Willcox).
H.olub Iron & Steel Co. (Harry J. Dworkin).
West Virginia Pulp & Paper Co. (B.C. Roberts).
Socony Mobil Oil Co. (R.F. Mclntosh).
Riegel Paper Corp. (R.R. Williaœs).
Sayder Miaing Co. (M.O. Graff).
Vulcan Rivet & Bolt Corp. (R.R. Williau).
Alleghany Ludlua Steel Corp. (M.S. Ryder).
Olin Mathieaon Chelllical Corp. (T .J. McDermott).
Aœerican Radiator & Standard Sanitary Corp. (P.H. Sandera).
Reynolds Metal a Co. (H.. Wyckoff) •
Coatainer Corp. of Aaerica (H.T. Dworet).
Reynolds Metals Co. (J.T. Caraway).
Los Angeles Standard Rubber Co. (H.F. Le Baron).
B) Canadian Common Law Provincea (Part Ill)
(Awarda as reported in "Labour Arbitration caaea",
Canada Law Books Publishers, Toronto).
1) On the aaaigDIIlent of work to aupervisory personnel:
lnternatioaal Union, United Automobile, Aircraft and Agricultural
Iaplelllent Workera of America.
(U.A.W.-C.I.O.) Local 240, in re: Canadian Industries Ltaited
(5 Lab. Arb. Cas. 1605) (J.A. Hanrahan).
99
International Union, United Autoaobile, Aircraft and Agricultural
Impleaent Workers of America,
Local 240, in re: Ford Kotor Coœpany of Canada L~ited
(5 Lab. Arb. Cas. 1609) (B.w. Croas).
International Union, United Automobile, Aircraft and Agricultural
Implement Workers of America,
Local 22, in re: Duplate (Canada) Ltd.
(5 Lab. Arb. cas. 1625) (W.s. Lane).
International Union of Brewery, Flour, Cereal, Malt, Yeast,
Soft Drink, and Distillery workera of America, in re: Brewers'
warebousing Co. Ltd.,
(5 Lab. Arb. Cas. 1797) (B. Laskin, Chairman).
United Steelworkera of America,
Local 3684, in re: Standard Sanitary and Doainion Radiator Liœited
(5 Lab. Arb. Cas. 1684) (W.D. Roach, Cbairœan).
International Machiniste Association
Local 1740, in re: John Bertram & Sons Co. Ltd.
(5 Lab. Arb. Cas. 2114) (H.E. Fuller, Chairman).
United Brewery Workers & Brewers' Warehousing Co. Ltd.
(7 Lab. Arb. Cas. 285) (H.D. Lang, Chairœan).
100
U.A.W., Local 458 & Cockshutt Far. Equipœeat Ltd.
(8 Lab. Arb. Cas. 249) (w.s. Laue, Pres.).
u.s.w., Local 3589 aad Aaerican Standard Products (Canada) Ltd.
(11 Lab. Arb. Cas. 283) (C.E. Bennett, Chair.an).
2) On contracting out, strictly defined:
United Steelworkers of America, C.I.O.,
Local 3696, in re: Norton Coapany of Canada, Ltd. Hamilton.
(4 Lab. Arb. Cas. 1451) (B.E. Fuller, Chairman).
United Electrical, aadio & Machine workera of Aaerica,
Local 504, in re: Canadian Westinghouse Coapany Limited
(4 Lab. Arb. Cas. 1536) (B.D. Lang, Chairman).
Textile Workers Union of America,
Local 741, in re: Guelph Yarna
(S Lab. Arb. Cas. 1657) (H..D. Lang, Cha iman).
Marine Workers & Boilermakera, Local 1 , &
Western Bridge and Steel rabricators L~ited
(5 Lab. Arb. Cas. 2035) (Colin D. McQuarrie, Chairman).
101
Brewery Workers, Local 365, in re: Braôiaga Breweriea (Ottawa)
Limited
(5 Lab. Arb. Cas. 2039) (C.H. Curtis, Chairaan).
International Machiniste Association,
Local 1740, in re: John Bertraa & Sons Co. Ltd.
(5 Lab. Arb. cas. 2117) (A.B. Young, Chairman).
U.A.W. Local 525 & Studebaker-Peckard Ltd.
(7 Lab. Arb. Cas. 310) (E.w. Croas).
U.A.W. Local 456 & Electric Auto-Lite Ltd.
(7 Lab. Arb. Caa. 33)
U.A.W. Local 240 & Ford Kotor Co.
(8 Lab. Arb. cas. 84)
U.A.W. Local 222 & G.M.
(8 Lab. Arb. cas. 90)
(D .c . Thomas) •
(H.D. Lang).
(E .w. Croas).
United Steelworkers, Local 2251 & Algoma Steel Corp.
(8 Lab. Arb. Cas. 273) (B. Laskin, Chairman).
Sudbury Mine, Mill and Sœelter Workers,
Local 598 & Falconbridge Nickel Mines Ltd.
(8 Lab. Arb. Cas. 276) (B. Laskin,Chairman).
U.A.W., Local 1075 & Canadiau Car Co.
(8 Lab. Arb. Cas. 333) (J.H. Cooper).
United Electrical Workers,
Local 524 & Canadian General Electric Co. Ltd.
102
(9 Lab. A rb. Cas. 21) (H .E. Fuller, Chairman).
cauadian Brotherhood of Railway Employees "Eœpress" Division
No. 276 & C.P.R.
(9 Lab. Arb. Cas. 151)
U .A.W. & Champion Spark Plug
(10 Lab. Arb. Cas. 67)
United Rubber Workers,
(B .M. Ismau, Chairman).
(D .c. Cowan) •
Local 446 & w.c. Bardesty Co. of Canada Ltd.
(10 Lab. Arb. Cas. 162) ~- Little. Chair.an).
C) Quebee Award (Part V)
103
"Contraeting Out". A panel discussion. Feb. 5, 1959.
Sponsore4 by The Montreal Board of Trade (Employee Relations
Section)
(Tranaeript of Proeeedings)
(Prof. Cardin's addresa alao published in: the Canadian Personnel
and Industrial Relations Journal, Vol. VIII, No. 2, April 1960).
Rapport &énéral du ainiatre du travail de la Province de Québec,
Iœpriaeur de la Reine, Québec.
Re: Aetivities of Couneils of Arbitration durin& fiscal yeara
1949-50 to 1959-60.
(Rea. Awards therain quoted as pertaining to "aanaseria1 rights"
were exaained froœ April 1, 1949 to March 31, 1960, as well as
were awards rendered at the occasion of negotiationa of whole
collective agreements for the period 1956-57 to 1959-60, but without
reault as far as the issue of contracting out is concerned.)
(For the period extending from Mareh 31, 1960 to August 1961, the
private index of Hr. Claude Gaudrault, teehnical adviser, Quebec
Dept. of Labour, vas used.)
Awarda:
BOpital du Sacré-Coeur de Cartierville et le Syndicat dea Employés
d'hopitaux de Montréal Inc. April 1957. (Arbitral decision of a
board ereated under the Quebee Trades Disputes Act (1941 R.S.Q.
Ch. 167) and the Publie Services Employees Disputes Act (1941 R.S.Q.
Ch. 168) and presided over by Mr. Justice Antoine Laa&rre. (Court
Bouse, Montreal). (Unreporte4).
104
Caoadian Petrofina L~ited and Oil, Chemical and Atoœic Workera
International Union (A.F.L.-C.I.O.·C.L.C.). Local 16-28. Decision
of a board preaideà over by Justice André Montpetit of the
Quebec Superior Court (Court Houae, Montreal). Feb. 18, 1959.
(Unreported) •
Minority notes: Yvan A. Legault. (April 24, 1959).
AluainUIIl COIDpany of Canada L~ited (Arvida) and "Le Syndicat
National dea laployéa de l'Aluminium d'Arvida Inc.
Grief: A. Brisson (sous-contrats). Award rendered by Prof.
!aile Gosselin, Laval, Oct. 8, 1959. (Unreported).
Re: United Automobile Workera & B.O.A.C. (July 21, 1960)
(10 Lab. Arb. Cas.) (H. Lande, Q.C.).
Sherry Gyroscope Company of Canada Ltd. and International Union
of Electrical, Radio and Machine Workera (I.U.B.-A.F.L.-C.I.O.).
Board preaided over by Mr·. Justice A. Montpetit. (Aus. 16, 1960).
(Unreported).
Le Syndicat national dea eaployéa de l'Aluainiua d'Arvida Inc.
et "L'AlWilinua Coœpany of Canada, L~ited" (Arvida). Avard
rendered by Justice René Lippé. (Court Houae, Montreal) (Nov. 16, 1960)
(Unreported).
105
D0111inion Eqineering Works Ltd. and International Association
of Machiniste, Local 1660. Award of a board presided over by
Mr. Justice A. Montpetit. May 29, 1961. (Unreported.)
Hinority notes by union nOIIlinee, Mr. Louis Gagnoa.
!1esco Workera Association, I.A.M. et Combustion Engineering
Superheater L~ited (Grief Poulin). Decision rendered in May
1961 by a board preaided over by Justice Antoine Lamarre. Reported
in: Bulletin d'information, service des publications, ministêre
du Travail, Quebec. Bulletin du 20 juin, 1961, No. 1576, 1961.
(Union notes by Me Denis Lévesque, Lapointe et L'veaque, Montreal).
III OD. New Section 10 A of R..S.Q. 1941 2 Ch. 162 A (Part IV)
Paul Durand & R.. Durand,
Traité de droit du travail, T.I.
p. 254, aq.
Quebec Labour Relations Act:
Paria, Dalloz, 1947.
--R..S.Q. 1941, Ch. 162 A, (as amended 1961)
--Bill 78 of the 26th Quebec Legislature.
Correspondiag French law:
Code du Travail (France), Alin'a 7, livre premier, titre deuxi~e,
article 23.
Sections in other provinces' labour laws:
(B.C.) British Columbia Labour Relations Act~
R.S.B.C. 1960, Ch. 205, s. 12 & 11.
(Alb.) The Alberta Labour Act,
Ch. 167, R.S.A. 1955 (as amended 1960), s. 74.
(Sas~) Trade Union Act,
Ch. 259, R.s.s. 1953 (as amended 1961), s. 28.
(Man.) The Labour Relations Act,
Ch. 137, R.S.M. 1954 (as amended 1959).
(Ont.) Labour Relations Act,
1960, Ch. 202, (as amended 1962), s. 47 A.
(Nfld.) Labour Relations Act,
R.S.H. Ch. 258, (as amended 1960), s. 21 A.
S~ilar Qu81>ec Legislation:
Workaen's Compensation Act,
R.S.Q., 1941, Ch. 160 {as amended), s. 10.
Minilwm Wage Act,
R.S.Q., 1941, Ch. 164 {as amended), s. 26.
Collective Agreement Act,
R.S.Q., 1941, Ch. 163 (as amended), s. 14.
Jurisprudence:
106
Cobra Iadustries Inc. vs Gagné. (Rapports Judiciaires de Québec)
1953, c.s., 289.
Syndicat National de la Pulpe et du Papier de La Tuque Inc.,
(Rapports Judiciaires de Québec) 1958, B.&., 1.
107
(See also file No. 5261, Queen's Bench Archives, District of Quebec).
Collin Lumber Limited: an unreported decision of the Q.L.R.B.
as of the lSth of June, 1959.
Marine Workers & Boilermakers
(S Lab. Arb. Cas. 2035).
Doctrine:
A. Brun--B. Galland
Droit du Travail, Sirey, (1958)
pp. 523, sq.
P. Durand et R. Jus saud
Trait4 de Droit du Travail, Paris, Dalloz, (1947)
T. II, pp. 790,791.
Proceedings of the Canadian Bar Association.
1961 Congress, Winnipeg. (Labour Law Section).
Planiol et Ripert
Droit civil français
T. XI, 2i'-e ed., Paris 1954, (on C.N.S. 1780).