Case Name: Timberwest Forest Co. v. United Steelworkers, Local (Woodlands Letter Grievance)

Transcription

1 Page 1 Case Name: Timberwest Forest Co. v. United Steelworkers, Local (Woodlands Letter Grievance) IN THE MATTER OF an Arbitration under the British Columbia Labour Relations Code, R.S.B.C c. 244 Between Timberwest Forest Company ("Timberwest") and Klaus Posselt Logging Ltd. ("KPL"), and United Steelworkers, Local (the "Union") (Re: Woodlands Letter Grievance) [2013] B.C.C.A.A.A. No. 7 No. A-004/13 British Columbia Collective Agreement Arbitration Vancouver, British Columbia Panel: Stan Lanyon, Q.C. (Arbitrator) Heard: November 8, Award: January 8, (42 paras.) Labour arbitration -- The collective agreement -- Interpretation. Labour arbitration -- Employee rights and benefits -- Remuneration -- Wage rates. The employer entered into a five-year contract with a third party to harvest timberlands. The first year of the contract established specific rates for the required logging and road building work. Rates for all subsequent years were to be negotiated. In 2011, a new rate was negotiated for the period ending December 31, In early 2012, the employer and third party began negotiations for the 2012 rates. By March 2012, the employer had laid off all of its employees and they remained on layoff until May 2012, when the new rates were agreed to. The union sought damages for wages employees lost during the rate dispute

2 Page 2 between the employer and the third party. It stated the annual renegotiation of rates violated the five-year requirement in the collective agreement. HELD: Grievance dismissed. The collective agreement provided the contract between the employer and the third party would be for a term of not less than five years. A provision in a commercial contract that required a review of rates paid on an annual basis was not in conflict with that provision. The requirement in the collective agreement of a five-year contract did not entitle an arbitrator to declare that terms and conditions normally found within a collective agreement, or a labour relations statute, must be mandatory elements of commercial contracts, or otherwise they were not legally enforceable. Statutes, Regulations and Rules Cited: Coastal Forest Industry Dispute Settlement Act, 2003, s. 7 Labour Relations Code, RSBC 1996, CHAPTER 244, s. 35 Appearances: Gregory J. Heywood, for the Employer. Sandra I. Banister, Q.C., for the Union. AWARD I. Introduction 1 Timberwest Forest Company (Timberwest) contracted with Klaus Posselt Logging Ltd. (KPL) to harvest its timberlands in its Oyster River Division. This commercial contract (KPL Agreement) has a five year term (January 1, December 31, 2014). The first year of the contract establishes specific rates for the required logging and road building work. However, rates for all subsequent years are to be negotiated. In 2011 a new rate was negotiated for the period March 1, 2011 to December 31, In early 2012 KPL and Timberwest began negotiations for the rates of By March 9, 2012 KPL had laid off all of its employees and they remained on layoff until May 7, 2012, when the new rates were agreed to. 2 The Union seeks damages for several months of wages lost by employees during the rate dispute between KPL and Timberwest. It states that the annual renegotiation of rates violates the five year requirement set out in Article 4.7. The interpretation of Article 4.7 is therefore central to this dispute.

3 Page 3 II. Facts 3 The Agreed Statement of Facts is set out below: ISSUE JURISDICTION FACTS Background The parties are disputing whether there has been a breach of Article 4 -- Woodlands Letter of Understanding ("WLOU"). TimberWest and the Union agree that Arbitrator Lanyon has jurisdiction to hear the Grievance and determine whether there has been a breach of Article 4 -- Woodlands Letter. 1. TimberWest and the Union are parties to a Collective Agreement with a term from (the "Collective Agreement"), Article 4 of which is the WLOU. A copy is attached as Appendix "A" to this Agreed Statement of Facts. 2. The WLOU was imposed into the Coast Master Agreement by Don Munroe acting as Commissioner under the Coastal Industry Dispute Settlement Act, SBC 2003 c A copy of his report is attached as Appendix "B". 3. Subsequently, TimberWest contracted out all of its Woodlands operations within the portions of their private lands under USW certification on a stump to dump basis. All company crews were transferred to the contractors as the deemed successors under the WLOU. 4. In the result TimberWest is a timberland management company and the Company's future focus will be on core timberland management functions including timber inventory, strategic silviculture investments, harvest planning and the marketing of timber products and real estate. TimberWest does not employ any bargaining unit personnel nor own any logging equipment. 5. As of 2012 Oyster River Division was subdivided into four and

4 Page 4 TimberWest had contracted out the Woodlands Operations under the WLOU to four contractors: KPL, Fall River Logging, Wolf Lake Logging, and Dennis Thibault Logging. 6. The Commercial Contract between TimberWest and KPL has a term from January 1, December 31, 2014 (the "Commercial Contract"). A redacted copy of the relevant provisions of the Commercial Contract is attached as Appendix "C" to this Agreed Statement of Facts. 7. Part 11 of the Commercial Contract deals with the rates payable by TimberWest to KPL. 8. Per Part 3 of the Commercial Contract, KPL is bound by the terms of the Collective Agreement and the Union is certified bargaining agent for KPL's employees. KPL hires its own employees and assumes responsibility for the management, operation, direction, and control of the Work in its Operation Rate Negotiation between TimberWest and KPL 9. The Commercial Contract only established rates until December 31, 2010: 11.1 and Schedule C Thereafter, Article 11.2 provides: Rates After December 31, For each year of the Term after December 31, 2010, the Parties will negotiate in good faith to agree upon Rates payable by the Company for Work under this Agreement. Unless and until the Parties have agreed upon Rates for a contract year and subject to paragraph 11.3, the Contractor may continue to work and the Company will continue to pay the Rates in effect for the previous contract year. 11. Article 11.3 provides: Termination For Failure to Agree Upon Rates. Where the Parties have been unable to agree upon Rates for a contract year, either Party may terminate this Agreement upon 90 days notice to the other Party which notice may first be given 90 days prior to the date

5 Page 5 set out in paragraph Article 19, which provides for both structured mediation and arbitration, may at the discretion and by agreement of both parties, be used for rate arbitration. 13. In some cases rates are negotiated between KPL and TimberWest on a block by block basis. A block is an area that is mapped out so it can be felled and yarded. For example, once KPL walks the block, it may go to TimberWest to negotiate a different rate depending on the type of timber, terrain, etc. Also, new rates are negotiated if KPL is assigned a block by TimberWest which was not in the yearly plan. 14. Attached as Appendix "D" is an amendment referenced as June 6, 2011 for the period of March 1, 2011 until December 31, In or about early 2012, KPL and TimberWest began negotiating the rates for the work to be performed by KPL under the Commercial Contract in In or about late February 2012, KPL notified TimberWest that it would curtail its operation until 2012's rates were agreed upon. 17. Accordingly, the KPL employees were laid off; commencing in late February KPL gradually slowed its operations and by March 9, 2012, all employees were laid off. However, all other contractors at Oyster River continued to work. 18. On or about May 7, 2012, TimberWest and KPL reached an agreement on rates for A redacted copy of the Amendment to the Commercial Agreement regarding 2012's rates is attached as Appendix "E" to this Agreed Statement of Fact. 19. TimberWest asserts that at no time did either party exercise its right to cancel the Commercial Contract pursuant to Article Shortly thereafter, KPL's operation gradually restarted and most of KPL crew was recalled by May 22, 2012 pursuant to the

6 Page 6 Commercial Contract. Damages and General State of the Industry in The parties are in agreement that if the grievance is upheld Arbitrator Lanyon will retain jurisdiction on the issue of damages. The Grievance 22. TimberWest's position is that the state of the industry will have a bearing on any damages awarded as there was a significant downturn in the coastal forest industry in the first half of 2012 due to China's soft log market, that by April 2012, many of the logging contractors working on TimberWest's private lands were curtailed for market related reasons, and it instituted a 20% across the board volume curtailment for market related reasons in May On April 3, 2012, the Union filed a grievance against TimberWest with respect to the curtailment of KPL's operation (the "Grievance"). A copy of the Grievance is attached as Appendix "F" to this Agreed Statement of Fact. III. Analysis and Decision 4 Article 4 of the collective agreement, better known as the Woodlands Letter of Understanding, was first introduced into the Coast Master Collective Agreement between Forest Industrial Relations and the IWA Canada (the predecessor Union to the United Steelworkers) as a result of the report of Commissioner Don Munroe, dated May 27, 2004, pursuant to the Coastal Forest Industry Dispute Settlement Act After the parties had failed to reach a collective agreement, and a lengthy work stoppage had ensued, the provincial government intervened and appointed Commissioner Munroe to mediate/arbitrate a new collective agreement. Included in his report is the Woodlands Letter of Understanding (WLOU). It is not in dispute that the original language of the Woodlands Letter of Understanding, as drafted by Commissioner Munroe, has not changed in subsequent rounds of collective bargaining between these parties. The relevant portions of Article 4 - Woodlands Contractors, in the current collective agreement, reads as follows: Article 4 -- Woodlands Contractors 4.1 Except as provided herein, the existing rights and obligations of the Company and the Union under Article XXV of the Coast Master Agreement are not affected.

7 Page Subject to paragraph 4 below, the Company may contract out a woodlands operation to an USW Certified Woodlands Contractor on a stump-to-dump basis. The Company will consult with the Union prior to selecting a Woodlands Contractor. By agreement between the Company and the Local Union, the operation may be sub-divided into two stump-to-dump contracts. 4.3 The Union and the Company agree, and the Woodlands Contractor must also agree, that the Woodlands Contractor will be deemed to be the successor employer under the Labour Relations Code including recognition of the seniority rights of all employees on the seniority list of the Company; and generally, that Sections 35(1) -- (5) of the Labour Relations Code apply. 4.4 Notice under Section 54 of the Labour Relations Code will be provided to the Union prior to any Woodlands operations being contracted out under this Article. Discussions under Section 54 must include the Contractor(s). 4.5 In the event there is a surplus of employees created as the result of moving the woodlands operation or subdivision thereof to a Woodlands Contractor, the Company will offer severance pay (calculated in a manner consistent with Article XXXIII) to the surplus employees. By agreement between the Company and the Union, the severance pay opportunities may be directed towards facilitating the severance of older workers who may volunteer for such severance. 4.6 In the event a surplus employee accepts the severance pay offered, the surplus employee will lose all seniority rights including preferential hiring rights under the Coast Master Agreement and this Collective Agreement. 4.7 The commercial contract between the Company and the Woodlands Contractor(s) will be for a period of not less than five years. In the event a contract is discontinued for any reason prior to its end date (e.g., insolvency of the Woodlands Contractor or performance issues), a replacement Woodlands Contractor must be an USW Certified Woodlands Contractor. The Union and the Company agree, and the replacement Woodlands Con-

8 Page 8 tractor must agree, that the replacement Woodlands Contractor will be deemed to be the successor employer under the Labour Relations Code, including recognition of the seniority rights of all employees on the seniority list, for the remainder of the period of the contract; and generally, that Sections 35(1) -- (5) of the Labour Relations Code apply. 4.8 If a Woodlands Contractor is replaced after the initial 5-year period or any extension thereof, the commercial contract between the Company and the replacement Woodlands Contractor must be for a period of not less than five years. The replacement Contractor must be an USW Certified Woodlands Contractor. The Union and the Company agree, and the replacement Woodlands Contractor must agree, that the replacement Woodlands Contractor will be deemed to be a successor employer to the initial Contractor under the Labour Relations Code, including recognition of seniority rights of employees on the then-existing seniority list; and generally, that Sections 35(1) -- (5) of the Labour Relations Code apply. 4.9 Paragraphs 4.7 and 4.8 shall apply to all succeeding replacement Woodlands Contractors In the event the operational responsibility for a woodlands operation or subdivision thereof is taken back by the Company, the Company will acknowledge and assume full successorship obligations under the Labour Relations Code, including recognition of seniority rights of employees on the then-existing seniority list If the Company sells or otherwise transfers its woodlands operations or Licences it will ensure that the purchaser or transferee agrees to assume the obligations of the Company set out in Article Under Article XXV of the Coast Master Agreement, the Employer is restricted from contracting out the work of the bargaining unit if it results in the loss of full time positions held by regular employees (there are exceptions such as "special circumstances"). This provision, therefore, bars the contracting out contemplated by the Woodlands Letter of Understanding (WLOU). However, with the new WLOU Timberwest is now able to contract out its logging operation on a "stump to dump basis". The phrase "stump to dump" includes all the phases of a logging operation - from the falling of trees to the hauling of the

9 Page 9 logs to a dumpsite. 6 As a result of the incorporation of the Woodlands Letter of Understanding into the Collective Agreement, Timberwest decided to contract out all of its Woodland's Operations within its private lands. Consequently its bargaining unit crews were transferred to successor companies under the WLOU. Therefore, Timberwest currently operates only as a timberland management company -- silviculture investments, harvest planning, the marketing of timber products and real estate. Timberwest does not employ any harvesting bargaining unit personnel nor does it own any logging equipment. 7 Article 4.2 of the WLOU establishes the right of the Company to contract out its Woodlands operations on a "stump to dump basis" to a union certified contractor. The Union, the Company and the Woodlands Contractor, all must agree that the Woodlands Contractor is a successor to Timberwest under the B.C. Labour Relations Code (Article 4.3). Any surplus employees must receive severance (Article 4.5 and 4.6). A WLOU contract must not be for less than five years (Article 4.7). Any subsequent Woodlands Contractors must also agree to be a successor under the B.C. Labour Relations Code (Articles ). As well, if Timberwest resumes its own logging operations it is bound by the Collective Agreement and the bargaining unit remains intact. This is also the case should Timberwest lease or otherwise transfer its Woodlands operations to any purchaser or transferee (Article 4.10 and 4.11). 8 While significant rights are granted to the Employer to contract out the entire bargaining unit, Commissioner Munroe also ensured significant protections for both the employees and the Union in respect to successorship rights, indeed, these successorship rights go beyond those rights provided in the B.C. Labour Relations Code. This is best captured by the B.C. Labour Relations Board decision in Timberwest Forest Corp, (Re), BCLRB No. B233/2007 (Saunders): 23 The Commissioner identified the quid pro quo underlying the LOU as a balance between two competing interests. On the one hand, the Employer had a good business case to improve its competitiveness by contracting out. On the other hand, the Commissioner saw the potential negative impact of contracting out "on the affected employees' interests and by the dilution of the union's ability to maintain cohesive woodlands bargaining units": Report, p As noted above, the LOU reconciles those interests by melding provisions that do not ordinarily coexist when work is contracted out. Specifically, the LOU confers the right to contract out a woodlands operation. However, that right goes with significant, ongoing obligations to the Woodlands Employees whose jobs have been contracted out. For instance, the woodlands operation must be contracted out to Union certified companies on a stump-to-dump basis, as opposed to phases and for minimum five-year terms. Under Article 10, the Employer is required to assume full successorship obligations if it resumes operational

10 Page 10 responsibility, regardless of whether those obligations arise under the Code. I will address the Employer's argument about Article 10 below. 25 The point of these examples is to show that the Woodlands Employees presently enjoy subsisting rights, enforceable against the Employer under the LOU. The Commissioner imposed those obligations on the Employer because the employees demonstrated a legitimate interest in preserving certain employment rights and the configuration of a viable woodlands bargaining unit. These provisions are not the direct equivalent of seniority rights. They do not depend on present-day active employment with the Employer or a reasonable expectation of such. Instead, they originate in active employment performed under the Collective Agreement before the work was contracted out. These obligations were imposed as a trade-off for the right to contract out the woodlands operations. 26 For these reasons, I reject the Employer's submission that the LOU merely imposes an obligation to engage a suitable contractor for Woodlands Employees. That represents only on part of the equation In summary, the LOU contemplates that the Woodlands Employees become employees of the contractor once the work is contracted out, while simultaneously retaining rights against the Employer under the LOU. The LOU goes beyond an obligation to ensure that the Woodlands Employees have a suitable successor employer. As the Commissioner noted in the Report, the LOU is also intended to protect the employees' legitimate interest in maintaining the integrity of the woodlands bargaining unit - an interest that continues regardless of whether the Employer intends to resume the woodlands operation. That protection is achieved by imposing continuing restrictions on the Employer's right to contract out the woodlands operation. Those rights are actionable by the Union on behalf of the Woodlands Employees... 9 The commercial contract between Timberwest and KPL is entitled "Non- Replaceable Timber Harvesting and Road Construction Services Agreement, Contract B -- Mechanical (North) Oyster River". This agreement was concluded in December Article 2.1 sets out the term of the agreement - January 1, 2010 to December 31, 2014, which is "subject to renewal, extension or earlier termination as provided in this agreement". The opening paragraphs of this Commercial Agreement, entitled "Background", set out its purpose: BACKGROUND A. The Company owns private forest lands near Oyster River and as

11 Page 11 described in the attached Schedule D (the "Operating Area"). B. The Company wishes to restructure its operations at the Oyster River Operation by contracting out its timber harvesting and road construction operations and retaining the Contractor to manage a portion of those operations as described in the attached Schedule D. C. The Contractor is a stump to dump logging contractor, and wishes to enter into this Agreement for the provision of timber harvesting and (road construction) services by the Contractor to the Company in the specified portion of the Company's Oyster River Operation as described in the attached Schedule D. 10 Part Rates and Payment, specifically 11.1, 11.2 and 11.3, state that rates are agreed upon for the first year of the Agreement, January 1 -- December 31, 2010; however, rates are to be negotiated for each of the subsequent four years: PART RATES AND PAYMENT 11.1 Rates Until December 31, The Company will pay the Contractor for all Work provided under this Agreement at the Rates set forth in Schedule C until December 31, Rates After December 31, For each year of the Term after December 31, 2010, the Parties will negotiate in good faith to agree upon Rates payable by the Company for Work under this Agreement. Unless and until the Parties have agreed upon Rates for a contract year and subject to paragraph 11.3, the Contractor may continue to work and the Company will continue to pay the Rates in effect for the previous contract year Termination for Failure to Agree Upon Rates. Where the Parties have been unable to agree upon Rates for a contract year, either Party may terminate this Agreement on 90 days notice to the other Party which notice may first be given 90 days prior to date set out in paragraph As 11.3 states, where the parties fail to agree upon rates this commercial contract can be terminated on 90 days notice. By agreement of the parties a dispute resolution mechanism is outlined in Part 19. It employs mediation and arbitration. It is a voluntary dispute resolution process -- both sides must agree to undertake either mediation and/or arbitration. Part 19 does not set out any factors which would guide the parties, and/or a mediator/arbitrator, in the settlement of any such rate dispute. (See Hayes Forest Services

12 Page 12 Ltd., v. Timberwest Forest Ltd., [1998] B.C.J. No (B.C.S.C.) where the Court quotes the statutory criteria to be applied to rate disputes under Section 25 of the Timber Harvesting Contract and Subcontract Regulation, B.C. Reg. 22/96.) Part (Article) 19 reads as follows: Part DISPUTE RESOLUTION 19.1 Informal. The Parties shall endeavour to resolve any disputes in respect of the interpretation or performance of the Contract B-Mechanical (North) Agreements and as between them. If the Parties are unable to resolve the dispute informally, they agree to attempt to resolve the dispute by participating in a structured negotiation conference using a mediator as follows: (a) either Party may provide the other with written notice that mediation of the dispute is required after such Party has pursued all commercially reasonable good faith attempts to resolve such dispute informally for a period of at least 7 days; (b) if the Parties cannot agree upon the identity of a mediator within 5 days after the notice is given under paragraph (a), either Party may cause the matter to be resolved by arbitration under paragraph 19.2; (c) where a mediator is agreed upon, the dispute must be mediated and an agreement reached within 15 days after the identity of a mediator has been agreed to pursuant to paragraph (b), otherwise it will be deemed that a mediated agreement cannot be reached, in which case either Party may cause the matter to be resolved by arbitration under paragraph 19.2; and (d) the mediator may, in the mediator's sole discretion, engage appropriate professional advisors to assist in a mediation process Arbitration. If a Party causes a matter to be arbitrated pursuant to paragraph 19.1, the matter will be resolved as follows: (a) the dispute will be arbitrated before a single arbitrator under the Commercial Arbitration Act (British Columbia) and the decision of the arbitrator will be final and binding on the Parties;

13 Page 13 (b) if the Parties cannot agree upon an arbitrator within 5 days of the notice of arbitration being provided by one Party to the other, then the dispute shall be referred to a board of 3 arbitrators, one to be appointed by each of the Parties and a third arbitrator to be appointed in writing by the first two named arbitrators; (c) if either Party refuses or neglects to appoint an arbitrator within 10 days after the other Party has appointed an arbitrator pursuant to subparagraph (b) and has served a written notice upon the Party refusing or neglecting to appoint an arbitrator requiring such Party to make an appointment, then the arbitrator first appointed shall, at the request of the Party appointing the arbitrator, proceed as a single arbitrator appointed by both Parties for that Purpose; (d) if two arbitrators are named within the time prescribed in subparagraph (c) and they do not agree upon the appointment of a third arbitrator within 10 days from the appointment of the second appointed arbitrator then, upon the application of either Party, the third arbitrator shall be appointed by a Judge of the Supreme Court of British Columbia; (e) the arbitrator or arbitrators, as the case may be, may determine the rules of procedure to suit the particular suit being determined; (f) any matter referred to arbitration hereunder will be dealt with on an expeditious basis with both Parties using all commercially reasonable efforts to obtain and implement a timely decisions of the arbitrator or arbitrators, as the case may be, who may make decisions as to costs and have the authority to award up to triple costs of the arbitration proceedings against any Party which does not, in the judgement of the arbitrator or arbitrators, act in accordance with this section 19.2; (g) the determination which shall be made by the sole arbitrator, or the majority of arbitrators, as the case may be, shall be final and binding upon the Parties; (h) the place of arbitration shall be Vancouver, British Columbia; and (i) the arbitrator or arbitrators, as the case may be, shall render a

14 Page 14 decision within 30 days of being appointed. 12 For the year 2011 the parties executed an "Amendment" to the KPL Agreement on June 6, 2011, revising the rate structure effective March 1, 2011 to December 31, The KPL Agreement was further amended on May 7, 2012, modifying the rates, effective January 1, 2012 to December 31, However, during the negotiations for the new 2012 rates, KPL had laid off all of its employees by March 9, These employees were not recalled until May 22, Thus, the employees were laid off for a period of approximately 2 months. As a result, the Union seeks these lost wages. 14 The Union argues that because the KPL Commercial Agreement does not provide for a binding dispute resolution mechanism, nor provides a set of criteria that would guide an arbitrator in resolving the determination of these rates, nor finally, prevent work stoppages during any such rate disputes, I should declare this commercial agreement void for uncertainty. It relies upon the common law rule that if a contract is void for uncertainty then no enforceable legal obligation arises: Hayes Forest Services Ltd. v. Timberwest Forest Ltd., [1998] B.C.J. No (S.C.); Empress Towers Ltd., [1990] B.C.J. No (C.A.); Neumann Ventures v. Smith, [2007] B.C.J. No. 2488; Rana v. Nagra, [2011] B.C.J. No (C.A.). 15 The Union understands that there is no privity of contract between itself and Timberwest and KPL in respect to the commercial contract between them. However, it states that I can employ the same doctrine of vagueness to issue a declaration that the KPL contract does not comply with Article 4.7 of the Collective Agreement, specifically the five year term set out in Article 4.7. It is instructive to reproduce Article 4.7 again: 4.7 The commercial contract between the Company and the Woodlands Contractor(s) will be for a period of not less than five years. In the event a contract is discontinued for any reason prior to its end date (e.g., insolvency of the Woodlands Contractor or performance issues), a replacement Woodlands Contractor must be an USW Certified Woodlands Contractor. The Union and the Company agree, and the replacement Woodlands Contractor must agree, that the replacement Woodlands Contractor will be deemed to be the successor, employer under the Labour Relations Code, including recognition of the seniority rights of all employees on the seniority list, for the remainder of the period of the contract; and generally, that Sections 35(1) -- (5) of the Labour Relations Code apply. (emphasis added) 16 The principles of interpretation are not in dispute. They are set out in Pacific Press and Graphic Communications International Union, Local 25-C, [1995] BCCAAA No. 637 (Bird). The object of these principles is to ascertain the mutual intention of the parties. They are as follows:

15 Page The object of interpretation is to discover the mutual intention of the parties. 2. The primary resource for an interpretation is the collective agreement. 3. Extrinsic evidence (evidence outside the official record of agreement, being the written collective agreement itself) is only helpful when it reveals the mutual intention. 4. Extrinsic evidence may clarify but not contradict a collective agreement. 5. A very important promise is likely to be clearly and unequivocally expressed. 6. In construing two provisions a harmonious interpretation is preferred rather than one which places them in conflict. 7. All clauses and words in a collective agreement should be given meaning, if possible. 8. Where an agreement uses different words one presumes that the parties intended different meanings. 9. Ordinarily words in a collective agreement should be given their plain meaning. 10. Parties are presumed to know about relevant jurisprudence. 17 In the interpretation of collective agreements the use of extrinsic evidence is common; that is, the use of negotiation evidence and past practice. However, in this case the Woodlands Letter of Understanding was imposed by Commissioner Munroe under the Coastal Forest Industry Dispute Settlement Act, supra. The WLOU has remained unchanged since Commissioner Munroe imposed it. Therefore, negotiation evidence is not an issue between these parties in respect to the WLOU. Second, past practice does not arise in this matter. Both parties agree this is a case of first instance. I therefore turn to Commissioner Munroe's report of May 27, 2004.

16 Page First, Section 7 of the Act sets out the factors that Commissioner Munroe had to consider in respect to the settlement of the terms and conditions of the Coast Master Collective Agreement: 7. In performing duties and exercising powers under Section 6, the commissioner must consider the following: (a) the need for terms and conditions of employment that are consistent with the economic viability and competitiveness of the coastal forest industry in both the short and long term; (b) the importance of good labour management relations in the coastal forest industry; (c) the interests of the employees and trade unions. 19 Commissioner Munroe made the following remarks in respect to these Section 7 factors: The factors listed in section 7 as requiring consideration recognize both the conflicts of interest and the interdependence which concurrently and inherently exist between employers, on the one hand, and their employees and certified bargaining agents, on the other hand. It is clear that the coastal forest industry is presently in tough financial shape; that the industry faces serious competitive challenges; that the industry's problems cannot be characterized as ordinary cyclical problems which will resolve themselves in due course. Broadly speaking, a healthy and competitive industry is in the interests of the employees. Steps must be taken toward that end. As the IWA rightly states, a good many of the industry's challenges are external to the collective agreement. But within the frame of the collective agreement, certain flexibilities and cost adjustments must be accepted as inevitable. Some of these will be hard for the employees to accept, but their acceptance is required for the rejuvenation of an industry which, despite its present malaise, remains a predominant (and potentially even more important) employment provider and economic engine for coastal British Columbia. At the same time, a healthy and competitive industry requires workplaces where the proper value is placed on good labour-management relations, with a high-morale work force whose interests are genuinely taken into account. The legislation also requires that I consider the institutional interests of the IWA as the workers' representative. I will further comment on the operation of Section 7 of the Act while addressing certain of the revisions I am making to the parties' collective agreement.

17 Page And in respect to the balancing of interests that Arbitrator Munroe specifically considered in addressing the Woodlands Letter of Understanding he stated the following: The discussion of the contracting out of a woodlands operation on a stump-to-dump basis arises in the context of Article XXV of the collective agreement. In the course of negotiations, the IWA offered the industry the right to contract out a woodlands operation on a stump-to-dump basis (as distinct from a phase), as an exception to Article XXV, provided the contractors are IWA certified; and provided further that the "1986 snapshot" is not undermined and that the initial and succeeding contractors are deemed to be successor employers. The IWA also said that such contracting out must be on a "long term" basis, to provide reasonable stability to the affected employees. The industry welcomed the union's offer to allow stump-to-dump contracting out as an exception to Article XXV, but sought certain things which the IWA finds unacceptable. The industry agrees that the initial and succeeding contractors must be IWA certified, but would seek by its proposed conditions to effectively undermine the "1986 snapshot" and to avoid automatic successorships for the second generation, etc., of contractors. There is also some disagreement between the parties about what ought to be the minimum duration of a stump-to-dump contract: the IWA arguing for ten years; the industry suggesting five years (and then only for the first generation of contractors). Here again, the benefit of being able to contract out woodlands operations on a stump-to-dump basis will be unevenly felt as between companies. But from an industry perspective, the benefit can be significant. In my view, an acceptance of the major conditions that the industry wants to attach to the union's willingness to go down the stump-to-dump path are unjustified in the balance of considerations under Section 7 of the Act. Whatever might be the long term advantages to the industry of its proposed conditions concerning the "1986 snapshot" and no successorship, they are overwhelmed by the negative impact on the affected employees' interests and by the dilution of the union's ability to maintain cohesive woodlands bargaining units. As will be seen, I have prepared a Woodlands Letter of Understanding, which shall be appended to the new or revised collective agreement, and which I regard as the proper outcome to this issue. 21 The primary resources in respect to the interpretation of the WLOU are therefore Commissioner Munroe's report, and the plain and ordinary meaning of the language employed in Article I will examine both Article 4 and the KPL Commercial Contract. First, I will begin with

18 Page 18 the actual language of the Collective Agreement in Article 4.7 to determine if the commercial contract between KPL and Timberwest was terminated or "discontinued" as that word is employed in Article 4.7. This addresses the Union's specific issue of employees having been laid off as a result of KPL curtailing its operations during the rate dispute. 23 The second sentence of Article 4.7 reads as follows: In the event a contract is discontinued for any reason prior to its end date (e.g. insolvency of the Woodlands Contractor or performance Issues), The Canadian Oxford Dictionary, Oxford University Press, Canada 2001 defines "discontinue" as follows:...1. cease or cause to cease to exist or be made give up, cease from 25 I conclude that the plain and ordinary meaning of the words that a "contract is discontinued" is that the termination or cessation of a contract is one that has been be permanently terminated. Thus a temporary suspension of operations, such as a layoff, does not fall within the conduct intended to be captured by the term "discontinued" as it is used in Article Second, although the KPL Commercial Contract in Article 11.3 does provide for termination in respect to a rate dispute upon 90 days notice, it is not in dispute that such a notice was never given by either Timberwest or KPL; rather, at all times material to this grievance the commercial contract between KPL and Timberwest has been in full force and effect. Indeed, in respect to both the rate dispute in 2012, and the rate negotiation of 2011, Timberwest and KPL executed "Amendments" to the existing KPL Commercial Contract. In 2011 an amendment was executed on June 6, 2011 for the period March 1, 2011 until December 31, 2011; and on May 7, 2012 Timberwest and KPL amended the rates effective January 1, 2012 to December 31, Both amendments are specifically written as attachments to the main contract. 27 Third, within the context of Article 4.7 the word "discontinued" is used to ensure that if Timberwest employs a replacement contractor, it must be one that is certified to the Union. The focus of Article 4.7, therefore, is on ensuring the Union's successorship rights. No such successor contractor has replaced KPL, and as stated, the current commercial contract between KPL and Timberwest remains in force. Thus, I conclude that the commercial contract between KPL and Timberwest has not been "discontinued" as that term has used in Article 4.7 of the Collective Agreement. 28 However, notwithstanding that the KPL Commercial Agreement has not been discontinued, and remains in force, and that the employees in the bargaining unit continue to work under it, the Union argues that I should nevertheless declare the KPL Commercial Agreement void for uncertainty. Once again it reiterates that the rate dispute provisions

19 Page 19 entitle either party to terminate the agreement upon 90 days notice; further, there is no binding arbitral provision should the parties prove unable to conclude an agreement in respect to rates; and that there is no guidance provided to a third party neutral in the determination of any such rate dispute. Finally, there is no bar to a work stoppage pending such a wage dispute. The absence of such provisions it says produced the layoffs of employees during the rate dispute of 2012, resulting in lost wages. This rate dispute therefore demonstrates that there is, in fact, no five year agreement as is contemplated by Article The effect of the Union argument is that I should read into the words of Article 4.7 the requirements that Article 19 of the KPL Commercial Contract incorporate a binding mediation/arbitration process; further, that Article 19 ought to contain a list of factors or principles that a mediator or arbitrator would consider in resolving a rate dispute; and finally, that during a rate dispute there would be no stoppage of work. 30 What the Union seeks to incorporate into the KPL Commercial Agreement are terms normally found in a collective agreement pursuant to statutory requirements set out in the B.C. Labour Relations Code (Part 4, 5 and 8). In effect, it seeks a binding grievance/arbitration dispute resolution system that would prevent the stoppage of work during the resolution of rate disputes under the KPL Commercial Agreement. It makes such provisions a primary requirement for the contractual viability of the commercial arrangements between Timberwest and KPL, or any other Woodlands contractor. 31 First, as the Employer argues, even under the Coast Master Agreement there is no guarantee of work for any employees (Coast Master Agreement, Article V -- Hours of Work Section 11: no work guarantee). It reads as follows: The foregoing provisions of this Article should not be construed as a guarantee to any employee any number of hours worked per day or per week. 32 Second, it is not in dispute that layoffs are not uncommon in the forest industry for a wide variety of reasons -- from weather to market changes. Indeed, this is implicitly recognized in the no guarantee of work for employees. 33 Third, I return to the balancing of interests set out by Commissioner Munroe in his report, specifically that required by Section 7 of the Coast Forest Industry Dispute Settlement Act: 7. In performing duties and exercising powers under Section 6, the commissioner must consider the following: (a) the need for terms and conditions of employment that are consistent with the economic viability and competitiveness of the coastal forest industry in both the short and long term;

20 Page 20 (b) the importance of good labour management relations in the coastal forest industry; (c) the interests of the employees and trade unions. 34 Section 7 required Commissioner Munroe to balance economic viability and competitiveness, both short term and long term, with good labour relations and the interests of employees and trade unions. The employer was given the right to contract out the entire bargaining unit, however, the Union and the employees were provided with significant successor rights; indeed successor rights that went beyond those set out in the Labour Relations Code (Section 35). This balancing of interests was to ensure that the Union's bargaining rights were preserved, whilst the Employer was provided the opportunity to increase its competitiveness, given the economic realities that existed at the time Commissioner Munroe issued his report. 35 In the circumstances before this Board there is no dispute that the Union's bargaining unit in respect to KPL has been preserved; second, that its certification has not been undermined; third, that the terms and conditions of the Coast Master Agreement remain in full force and effect and have been complied with; and fourth, that the successorship provisions of the WLOU have been honoured. Further, the Commercial Agreement is in force and the employees are working under it. I conclude, therefore, that the Union's interests, as set out by Commissioner Munroe, have been safeguarded. 36 I further conclude that a provision in a commercial contract that requires a review of the rates paid on an annual basis, such as that under the KPL Commercial Agreement, is not in conflict with Article 4.7. Indeed, in terms of a balancing of interests, this provision seems consistent with Section 7 of the Coast Forest Industry Dispute Settlement Act, specifically the words in Section 7(a): (a) the need for terms and conditions of employment that are consistent with the economic viability and competitiveness of the coastal forest industry in both the short and long term; 37 In general, I am hesitant to review the differing terms and conditions of commercial contracts concluded under the WLOU in respect to issues such as vagueness or uncertainty in order to determine their legal enforceability. The simple term set out in Article 4.7, the requirement of a 5 year contract, does not entitle an arbitrator to declare that terms and conditions normally found within a collective agreement, or a labour relations statute, must be mandatory elements of commercial contracts, or otherwise they are not legally enforceable. In essence I am to employ Article 4.7 of the Collective Agreement to compel KPL and Timberwest to amend Article 19 of their commercial contract to ensure its legal enforceability. The purpose of this is to compensate the employees for the layoffs due to the rate dispute in March -- May These are commercial contracts which have to do with the business of KPL and Timberwest. There is no privity of contract between the Union and these commercial

21 Page 21 partners. I am therefore reluctant, under the guise of Article 4.7, to impute normative labour relations terms into the commercial dealings of these two parties, unless the terms and conditions of a collective agreement expressly mandate it. 39 The exception to such deference would be for example, if the effect of this commercial contract were to undermine, either directly or indirectly, the bargaining unit's successorship rights, or the terms and conditions of the Coast Master Collective Agreement. As well, there may be circumstances where it is clear from either the conduct of one or both of the commercial partners, or the terms of the contract itself, an intention to specifically undermine the five year term (i.e. repeated cancellations under the 90 day provision); in other words, evidence of bad faith on behalf of one or both of these commercial partners. However, there is no such evidence of either bad faith, or the undermining of the Union's rights of successorship as set out by Commissioner Munroe, in the circumstances before this Board. 40 The grievance is therefore dismissed. 41 It is so Awarded. 42 Dated at the City of New Westminster in the Province of British Columbia this 8th day of January, Stan Lanyon, Q.C. Arbitrator qp/e/qlspi/qlacx