Labour Law

Fresh insight into contracting out language and statements of intention in collective agreements

On February 19, 2021, Arbitrator Hall delivered a judgment in the matter of Canfor Pulp Ltd. v Pulp and Private Workers of Canada, Local 9 (Feb 19, 2021) (“Canfor Pulp”). The issue related to an article of the collective agreement between Canfor and the local union, first negotiated in 1988 between the Canadian Paperworkers’ Union and the Pulp and Paper Industrial Relations Bureau:

a) The Company will notify the Union of work to be performed by contractors in the mill, and will, emergencies excepted, afford the Union the opportunity to review it with the Company prior to the work being commenced.

b) The Company will not bring a contractor into the mill:

  • Which directly results in the layoff of employees, or
  • To do the job of employees on layoff, or
  • To do the job of a displaced tradesman or apprentice working in a category outside his trade.

c) It is not the intent of the Company to replace its regular maintenance work force through the use of contract maintenance firms in the mill.

The language of this article has been tested many times in British Columbia arbitration prior to Canfor Pulp, but Arbitrator Hall’s judgement represents a new development in the law.

In the decades since this language was negotiated, employers have argued that the language of clause (c) above creates no substantive rights or obligations. Arbitrators have ruled otherwise. They have found that this provision requires employers to directly employ maintenance tradespersons in “viable numbers”. This does not mean that employers must “staff up” for peak periods, or increase the size of the workforce per se. It means that  employers must have sufficient numbers of tradespeople to maintain the regular operation of the business.

Arbitrators have also ruled that for unions to prove a breach by an employer, they must establish: (1) a reduction in the regular workforce, (2) an increase in contracting out, and (3) a causal nexus between (1) and (2). It is the causal nexus between (1) and (2) that establishes that an employer has failed to employ tradespeople in “viable numbers”.

Enter Canfor Pulp. The argument advanced by the Union in this case is that the Employer engaged in a “deliberate and systemic failure […] to meet the targets for maintenance employees which have been established to sustain regular operating levels”, and in this way had failed to maintain tradesmen in “viable numbers”.

The Employer adduced evidence to explain the amount of contracting performed at the mill, and to show that the Employer was making significant good faith efforts to maintain its regular workforce. Further, on the evidence, it was not clear that over the period in question there had been a significant increase in contracting out or a significant decrease in the workforce.

In Canfor Pulp, however, a further piece of evidence was adduced by the Union (having been obtained from the Employer in the disclosure process) and was given significant weight by Arbitrator Hall: the Employer’s internal planning, manning, and budgeting documents. In those documents were target staffing levels set by the Employer, showing the number of tradespeople the Employer sought to employ at the mill every year.

Arbitrator Hall noted that there was no dispute about how the Employer established its annual manning targets:

Every year, each of the Employer’s General Managers sits down with the Employer’s Controller to review the manning levels for the upcoming year. During this meeting, the General Managers and Controller determine what changes, if any, need to be made to the manning levels to maintain normal or market sustainable operating levels.

On the evidence, it was clear that the Employer was consistently below the manning levels it set for itself, and which the Employer had conceded were required to “maintain normal or market sustainable operating levels.”  On this basis, Arbitrator Hall concluded that:

“…the evidence as a whole leads to the unavoidable conclusion that the Employer has by attrition and “through not hiring” allowed its maintenance workforce to chronically fall below baseline manning numbers.”

Arbitrator Hall found in favour of the Union on this basis alone, and did not resort to the three-step test identified above. Despite the fact that the Employer could demonstrate that it had kept manning relatively consistent over the period in question, had attempted to meet its manning targets, and there were many factors that explained its consistent inability to meet its manning targets, Arbitrator Hall found in favour of the Union.

While the specific article at issue in Canfor Pulp and the related case-law is used primarily in collective agreements in the British Columbia pulp and paper industry, similar clauses have been negotiated in other industries where contracting out is commonplace.  For example, the clause considered in Atomic Energy of Canada Limited., [1996] C.L.A.D. No. 1141 (Szazlak) stated that “it is the intent of the Company that contracting out will not adversely affect employees in the bargaining unit.”

As a result, all British Columbia employers, including but not limited to pulp and paper employers, can take two main lessons from Canfor Pulp, and the decisions that preceded it:

  1. An “intent” clause with respect to contracting out, can create a real and enforceable obligation upon the employer to limit contracting out.
  2. Internal planning documents of manning requirements created for the purposes of budgeting can be used by Arbitrators for purposes employers never intended: namely to establish the minimum manning levels.

Harris & Company LLP is aware of similar matters proceeding to arbitration in the coming months. Employers that are interested in this aspect of labour law should continue to monitor for further updates.

If you have any questions about this decision or its implications for employers, please contact your Harris lawyer.