Contracting out? It pays to read the fine print

Collective agreement language at Ontario hospitals complicates out-sourcing deal

When it comes to contracting out the work of unionized employees, most employers can turn to the collective agreement for a roadmap on how to proceed.

Some agreements reject outright the option of contracting out. Others set out conditions employers and contractors would have to meet before any work can be contracted out.

But in a recent and unusual case involving two hospitals in Mississauga, Ont., the roadmaps used — the collective agreements — led both the employers and the contractor into a very tight spot.

It was a position where the hospitals would have to ensure workers displaced by a contracting out deal not only got full-time, unionized work with the contractor but also received a severance package from the hospitals.

And the contractor, which agreed to hire the people already doing the work to be contracted out, ended up facing the prospect it would have to hire untrained, inexperienced people for the job — people from other parts of the hospitals who would be bumped out of their positions as part of the deal.

“We were quite stunned by the decision,” says Brian Smeenk, a lawyer with Fasken Martineau DuMoulin LLP who represented the contractor, SteriPro Canada.

“This is quite unusual. It’s fairly unique,” says Robert Little, a lawyer with Hicks Morley who represented Trillium Health Centre, one of the two hospitals affected by the arbitration decisions. “We thought this was not the result that the language was intended to achieve.”

But this is the same situation many other employers in the hospital sector find themselves in, Little says. There are dozens of other hospitals involved in central bargaining that have the same language in their collective agreements. They too will have to look at contracting out with greater care in light of these decisions, he adds.

In the collective agreements in place at Trillium and Credit Valley Hospital, the contracting language dates back to the 1970s and 1980s.

The collective agreements say the hospitals shall not contract out any work usually performed by members of the bargaining unit if it results in a layoff of any employees. But the hospitals are exempt from this rule if they can ensure, in their agreement with a contractor, that the contractor both hires the displaced employees and honours the existing collective agreement with the union.

“Fundamentally, what that clause does is it says a hospital contractor should operate as if it’s a sale of business,” says Smeenk. “That’s because if you have a sale of business, union successor rights would have the same effect.”

In the contracting out deal both hospitals fleshed out with SteriPro, the latter agreed to take over the sterilization services and hire the sterile processing technicians who were working at those units. In the hospitals’ view, that deal didn’t trigger a layoff because “the work was there — same work, same pay, same benefits. They were needed by SteriPro,” Smeenk says.

But from the unions’ point of view, what the hospitals should have done was issue layoff notices to the affected employees. That’s so they would — at a minimum — be able to exercise other rights within the collective agreements, such as notice of layoff, early retirement, severance and bumping rights.

“The hospitals and SteriPro fought that tooth and nail,” says Mark Wright, a lawyer with Sack Goldblatt Mitchell who represented both the Canadian Union of Public Employees (CUPE) locals involved in the cases. “They somehow envisioned that the sterilization techs would flow through seamlessly with the work — like chattel.”

He suspects it wasn’t just the cost of exit packages that influenced the decision not to issue layoff notices.

“Really, what SteriPro wanted to do was buy this part of the business, with the workforce intact. If the people could opt out of it, that would harm the business case,” says Wright.

The unions won in arbitration, victories that were upheld on appeal at the Ontario Divisional Court.

At arbitration, chair Owen Shime agreed with the union that seniority rights are important when it comes to promotion, vacancies and layoffs and “it requires specific language to remove those rights from the employees.”

He also added that employees are entitled to choose their own employers.

“As a practical matter, employees may choose a specific employer because of geographic location, friendships or opportunities for experience, learning and promotions. In this case, a larger bargaining unit with many different kinds of jobs may provide greater opportunities for employees than a job with only limited opportunities for learning and advancement,” wrote Shime.

“Extinguishing an employee’s right to choose his/her employer should not be inferred unless there is no other reasonable construction of the collective agreement.”

Arbitrator William Kaplan, while agreeing with Shime’s decision, also noted that the result of his decision may very well be a business deal that no longer makes sense for SteriPro.

That’s especially if, once all the sterilization techs who want to remain with the hospitals have bumped others out of their jobs, the workers who end up being displaced are not even trained in sterilization.

But his job is simply to interpret the collective agreement language. Amending this language is something the parties need to address in collective bargaining, he added.

In the meantime, one impact of these decisions is contracting out has become a much more expensive endeavour for the hospitals that are governed by a similar collective agreement, says Little.

“It would also mean the contractor doesn’t know whether it’s getting a skilled workforce or workforce that it has to train. So it will make contracting out in the hospital sector a little more challenging than what the hospitals already thought.”

Uyen Vu is a Toronto-based freelance writer, specializing in employment and labour issues.

Latest stories