Monday, 1 October 2018

Court upholds damages award for contracting in

The matter in Agrium Vanscoy Potash Operations v United Steel Workers Local 7552, 2018 SKCA 50 (CanLII) came to the Court by way of an arbitration decision finding employer liability and awarding damages to the union. The employer contested and applied for judicial review. When the court dismissed the employer’s application, the employer appealed.

The union had been completing rehabilitation work at a mining site. The employer then assigned the union workers to other parts of the operation and entered into a contract with non-bargaining unit workers to do the work. The union grieved, alleging the employer had “contracted in” workers in violation of the Collective Agreement (“CA”).

The Employer’s Position

The employer argued the management rights clause allowed it to operate and manage the business as it saw fit, subject only to express restrictions in the CA. As the CA permitted the hiring of independent contractors if the employer deemed it necessary, the employer argued that since these were independent contractors it deemed necessary, it was not in breach of the CA.

The Union’s Position

The Union conceded that the CA allowed for independent contractors, but argued that the workers brought in by the employer were not treated as independent contractors. The union argued nonbargaining unit personnel had been brought in to the workplace to work alongside bargaining unit employees. The union asserted that the work had not been “contracted out” because the employer never relinquished control of, or alienated, the work to workers it brought in. In essence, the workers had been contracted in.  


To reach its decision, the arbitrator (and later the courts) cited with approval the decision in Hydro Ottawa Ltd. v International Brotherhood of Electrical Workers, Local 636, 2007 ONCA 292 (CanLII), [Hydro Ottawa], where the Ontario Court of Appeal defined contracting out, at para 36, saying it involves:

a situation where “an integral function or a whole operation of the business of the employer is assigned to an independent contractor”; the work is done off site and, where done at the same location as the bargaining unit employees, usually involves work of a different nature even though it is bargaining unit work; the independent contractor controls the work, and the employer has “effectively abdicated” the work to the outside contractor.

Contracting in differs in that it occurs when non‑bargaining unit personnel are brought into the workplace to perform work that is the same or of a similar nature to that work being performed by bargaining unit employees. In Hydro Ottawa the Court offered the following definition:
“Contracting in”, on the other hand, involves a situation where non‑bargaining unit personnel are brought into the workplace to work alongside bargaining unit employees, performing the same work as those employees, under the same supervision and utilizing the same material and equipment provided by the employer; the way in which the bargaining unit and non‑bargaining unit employees work is virtually indistinguishable”.[1]
The Court also recognized the negative effects of contracting in:
These and other arbitral decisions all emphasize that contracting in is “inherently destructive to the bargaining relationship” and generally contrary to the obligations undertaken by the employer in the collective agreement.
After surveying the law, the Arbitrator concluded that the management rights clause could not be exercised in a manner inconsistent with other provisions in the CA. The accepted approach to the issue of contracting out is that unless the collective agreement states otherwise, an employer is entitled to do so. In this case, however, the CA did provide against contracting out. Though the CA allowed for the hiring of independent contractors, the employer’s right did not extend to hiring a contractor to actually do bargaining unit work and the employer was found liable for breach of the CA.

Having found that the employer was liable, the question of remedy remained. The union sought damages for loss of overtime opportunities and lost union dues calculated at 1.45 percent of the amount paid to the non-bargaining unit workers. The employer argued that damages for overtime were too speculative and that the union dues ought to be calculated on the basis of the employer hiring eight employees at the minimum hourly wage pursuant to the CBA.

The Arbitrator agreed that a damages award for lost overtime was too speculative. The Arbitrator instead ordered the Employer to pay the assessment rate for union dues based on the monies paid to the workers who had been contracted in. The Court of Appeal upheld the arbitrator’s award.


As noted in the Hydro Ottawa decision, contracting in is inherently destructive to good labour relations. Workers have long fought against employers who would bring in others to do bargaining unit work. And for good reason: if contracting in were allowed to go unchecked, it would chip away at union bargaining power. The bargaining unit as a counterbalance to employer  power would be undermined and workers would be subject to the whim of employers. Union’s must continue to grieve against such destructive employer practices and strive to maintain the balance. We’re happy to report that, in this case, the Court not only accepted the importance of protecting union’s from contracting in, it upheld the damages awarded against the employer.

[1] Hydro Ottawa, at para 36.

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