by Me Pierre Verge A thesis submitted to the Faculty of ...· Me Pierre Verge A thesis submitted to

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 Andr Montpetit (HOpital du Sacr-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,

Prsident, Syndicat National des Employs 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.-Ral Cardin, directeur-

adjoint, dpartement des relations industrielles, Universit

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 trend