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).