HomeMy WebLinkAbout1996-1344UNION97_06_09
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ONTARIO EMPlOY~S DE LA COURONNE
CROWN EMPlOYEES DE l'ONrARIO
11_ GRIEVANCE COMMISSION DE
SETTLEMENT REGLEMENT
BOARD DES GRIEFS
180 DUNDAS STREET WEST, SUITE 2100, TORONTO ON MSG 1ZS TELEPHONEITELEPHONE (4ftl) 32tJ-13B
180, RUE DUNDAS OUEST. BUREAU 2100, TORONTO (ON) M5G 1ZS FACSIMILEITELECOPIE (41tJ) 32tJ-13g
GSB # 1344/96
OPSEU # 96U086
IN THE HATTER OF AN ARBITRATION
Under
THE CROWN EMPLOYEES COLLECTIVE BARGAINING ACT
Before
THE GRIEVANCE SETTLEMENT BOARD
BETWEEN
OPSEU (union Grievance)
Grievor
- and -
the Crown in Right of ontario
(Ministry of Transportation)
Employer
BEFORE W Kaplan Vice-Chair
FOR THE G Leeb
GRIEVOR Grievance Officer
ontario Public service Employees Union
FOR THE S Patterson
EMPLOYER Counsel
Legal Services Branch
Management Board Secretariat
FOR THE K Billings
THIRD PARTY Counsel
Miller, Thomson
Barristers & Solicitors
HEARING December 6, 1996
January 3, 1997
March 10, 11, 13, 1997
May 9, 19, 1997
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Introduction
This case first proceeded to a hearing in December 1996 The issue, simply
put, is whether the Ministry of Transportation complied with Appendix 9 of
the Collective Agreement when it called for bids on three Area Maintenance
Contracts (hereafter II AMCs") for approximately 1500 kilo metres of
provincial highways in southwestern Ontario and awarded those contracts
to a company called Integrated Maintenance & Operations ServIces
(hereafter "IMOS") Tendered work included road patrolling, summer
maintenance, minor bridge maintenance, preservation management, winter
snow and ice control, and emergency response This work used to be
performed by Ministry employees
Some of the background to this case was set out in an earlier award dated
January 10,1997 In brief, Requests for Proposals (hereafter "RFPs") were
solicited and six companies, called Proponents, bid for the work. The work
was awarded to IMOS in September 1996 In the meantime, the union had
filed a grievance alleging a violation of Appendix 9
The Government is aware that its restructuring initiatives over the next
two fiscal years (1996/97,1997/98) could have a significant effect on
employees. some of whom have served for a lengthy period. Accordingly,
commencing with the ratification of the collective agreement and ending
on December 31, 1998, the Employer undertakes the following
1 (a) The Employer will make reasonable efforts to ensure that, where
there is a disposition or any other transfer of bargaining unit functions
or jobs to the private or broader public sectors, employees in the
bargaining unit are offered positions with the new employer on terms and
conditions that are as close as possible to the then existing terms and
conditions of employment of the employees in the bargaining unit, and,
where less than the full complement of employees is offered positions, to
ensure that offers are made on the basis of seniority When an employee
has been transferred to a new employer he/she will be deemed to have
resigned and no other provisions of the collective agreement will apply
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except for Article 53 or 81 (Termination Pay)
(b) Where the salary of the job offered by the new employer is less than
85% of the employee's current salary, or if the employee's service or
seniority are not carried over to the new employer, the employee may
decline the offer In such a case, the employee may exercise the rights
prescribed by Article 24 and/or paragraphs 2 to 5 of this letter The
employee must elect whether or not to accept employment with the new
employer within three (3) days of receiving an offer In default of an
election, the employee shall be deemed to have accepted the offer
When the matter came on for a hearing on the merits, in January 1997, the
Ministry took the position that extrinsic evidence was needed to disclose
and then clarify a latent ambiguity in Appendix 9 To that end, evidence
was called by both the employer and the union with respect to discussions
that took place during the negotiation of this provision Having carefully
considered this evidence, not to mention the provision itself at issue, I do
not find that the evidence discloses a latent ambiguity and must therefore
conclude that it is of no use to me in interpreting the provision Finally, by
way of preliminary observations, it should be noted that while the employer
proceeded by calling its evidence first, the parties were agreed that the
union bore the onus
The Facts
As is well-known, the current government is interested in privatizing
certain of its operations, and highway maintenance is one of them Donald
Barnes1 a Ministry of Transportation employee, was involved in developing
and evaluating the RFPs for the AMes at issue in this case and he testified
about the various working groups that were formed, and other activities
that took place, in the aftermath of the 1996 Ontario Public Service strike
as management in his Ministry began to senously conSider and then develop
plans for the outsourcing of work Mr Barnes was given speCific
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responsibility for the Chatham Area AMes which the Ministry wished to
have in private hands by December 1, 1996
According to Mr Barnes, a three-envelope system was developed
Proponents were prequalified financially If found financially capable of
doing the work, the second envelope was examined it contained the details
of how the Proponent planned to do the work and provided for an evaluation
of certain key components Two of them, Winter Maintenance Strategy and
Management and Supervisory Skills and Experience had minimum
requirements If a Proponent failed to meet these minimum requirements,
it was excluded from further consideration Moreover, any Proponent which
failed to meet a threshold score in the overall, was also excluded from
further consideration A Human Resource Factor (hereafter "HRF"), in a
process to be described below, was calculated at the second envelope stage
The third envelope in the process contained the bid price The system did
not, Mr Barnes, explained, provide simply for the lowest bidder to be
chosen, rather, there was a further evaluation of the bids after the third
envelope was opened
Turning first, however, to the HRF The RFP sets out the method for
determining the HRF, a formula established by Management Board
Secretariat and provided to the Ministry
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64 Human Resource Factor (HRF)
Proponents are encouraged to make offers of employment to employees
who are presently employed by the Ministry as set out in Schedule D,
Table 0 1, on terms and conditions that are as close as possible to the
existing terms and conditions of employment with the Ontario
Government. The Proponent shall indicate in his Proposal whether any of
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the Ministry employees shown in Schedule d, Table D-1, will be offered
employment with the Proponent's company If so, the Proponent should
provide the following information
(a) The number of employees to whom the Proponent will make job
offers.
(b) The specific salary/hourly wage to be paid to each employee hired by
the Proponent's company and whether or not the Proponent's company
will recognize years of service with the Ontario Government for each
Ministry employee offered a position Proponents who indicate that they
are not willing to recognize years of service for those employees offered
positions, or alternatively, Proponents who do not address the issue of
years of service will receive zero (0) points in this category (b) In
order to score any points in this category (b), all offers must recognize
years of service with the Ontario Government. Provided that the
Proponent's company recognizes years of service for all employees
offered positions, points will be allocated according to the percentage of
salary/wages offered in comparison with the employees' present salaries.
This percentage will be applied to the points available for this category
(b)
(c) Whether or not the Proponent will make all job offers to such
employees on the basis of seniority Points will be allocated to the
number of employees who are offered positions. In order to score any
points in category (c), all offers must be made on the basis of seniority
The scoring for the Human Resource Factor will be applied equally to the
three categories, (a), (b) and (c) above.
The Proponent's accumulated points will be used to reduce his actual bid
price as outlined in Section 6.5 The maximum point score for this
Contract is quoted in Schedule D
6.5 Section of the Successful Proponent
The Successful Proponent will not be determined by price alone
Selection will be based on an evaluated bid price which the Ministry will
determine by adjusting the Actual Bid Price
The Actual Bid Price will be adjusted by
1 A Proposal Factor Adjustment (PFA) based on the Ministry's
evaluation of the Proponent's Work Plan, and
2. A Human Resource Factor Adjustment (HRFA) based on the information
provided by the Proponent as outlined in Section 6 4, Human Resource
Factor (HRF)
The Proposal Factor Adjustment (PFA) is
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PFA = Proponent's Actual Bid Price x 0 1 (A:a)
A
Where A = Highest score of all Work Plan Proposals received, and
B = Score of the Proponent's Work Plan
The Human Resource Factor Adjustment (HRFA) is.
HRFS III (# of points as determined in Section 6 4) x $3400 per point.
The Proponent's Total Evaluated Bid Price will be determined as follows
Total Evaluated Bid Price = Actual Bid Price + PFA -HRFA
In brief, and stated somewhat simplistically, the HRF was, in short, to be
used as part of the Ministry's assessment of the overall bid And, the way
that it worked was that if a Proponent made job offers in accordance with
(a), (b) and (c), it received a credit of $3400 for each of these categories,
and this credit was, in effect, a bid preference In this case, had all
employees been made job offers in accordance (a), (b) and (c), the bid
preference would have had a value of approximately $640,000 which was
equivalent to approximately 2 40/0 of the value of the contract - "the owner's
estimate" - as determined by the Mmistry
The total amount available as a bid preference was arrived at by figuring
out the approximate cost of paying the enhanced severance payment for
affected employees if job offers were not made in accordance with
Appendix 9 If job offers were made that fulfilled the requirements of
Appendix 9, the employees concerned would not be entitled to the enhanced
severance
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Mr Kevin Wilson testified about how Management Board Secretariat
(hereafter "MBS") implemented Appendix 9 and, in particular, how the
decision was made to use the amount of enhanced severance for surplused
employees as a financial incentive to bidders of privatized work. In brief,
various options were considered There was some need to move quickly as
various Ministries, in the aftermath of the OPS strike, had begun to develop
outsourcing plans. For its part, MBS not only wanted a system that allowed
it to avoid enhanced severance costs but one that could be consistent and
flexible in its application and one that was, moreover, directly related to
the labour component of the estimated value of the contract. Early on the
discussion process, the decision was made to use a weighted factor that
provided credits to bidders whose bids contained job offers, job offers
given on the basis of seniority, recognition of service and then, following
an addendum, recognition for offering wages which were equivalent to 85%
of the wages the employees had previously received
This decision was made, as just noted, following the consideration of
various options For example, consideration was given to engaging in
across-the-board negotiations with employers where a disposition or
transfer occurred It was felt that the government could enjoy sortle
success with this approach with transfers of work to the broader public
sector, however, this approach appeared to be problematic in a tendering
situation Given that tendering involved establishing qualifications at
vanous pOints, and imposed upon the bIdding party the obligation to meet
vanous standards, It did not seem too realistic, once the tender had been
awarded, to engage in negotiations It was also deCided, to give another
example on point, not to give bidders credits for offering pension plans as
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few bidders, it was believed, would offer plans equivalent to those found in
the OPS All bidders would score zero in that category, no bid would
therefore turn on it. It was Mr Wilson's view, to follow through with this
example, that there was nothing in Appendix 9 which required the
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government to attempt to obtain this particular benefit for employees
where their jobs were being transferred to the private sector Had the
government wished, however, the offer of a pension plan in a bid could have
been factored in as part of the HRF There would, however, have been some
difficulty in determining the exact value of various benefits should they
have been offered by the different Proponents.
In a related point, Mr Wilson suggested that there would have been little
utility in attributing points to bidders who promised to pay 850/0 of the OPS
salary to a newly hired former OPS employee as the Proponent could attract
all available points by simply agreeing to hire one employee at those rates
And this, Mr Wilson testified, would hardly achieve the objective of finding
jobs for employees whose functions were transferred outside of the OPS
Moreover, to give points, to continue using this example, would hardly
assist the employer in avoiding any enhanced severance obligations
Mr Wilson did not dispute the fact that the value of the HRF would vary
depending, most importantly, on the number of employees whose functions
were being transferred This would, obviously, impact on its value in
particular cases Nevertheless, It was Mr Wilson's view that even if the
HRF was smaller in some cases, it would stili make a difference In
determining which Proponent was successful in the bidding process. Even a
HRF with a small value would and could, Mr Wilson asserted, make the
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difference in highly competitive bids, which is what was expected The
government considered, but did not implement, developing additional
weighting factors where the special expertise of current employees was
seen as a major element in ensuring a smooth transition and continuity of
service In Mr Wilson's view, this objective was accomplished by virtue of
the fact that the RFP's included criteria which would lead bidders to
conclude that in order to be successful with their bids they should hire the
relevant employees The government did not seriously consider imposing
upon Proponents obligations to hire minimum numbers of employees as such
obligations were not, in Mr Wilson's view, mandated by Appendix 9, nor
would such an approach facilitate the overall objective of reducing the size
of government and thereby achieve cost savings through, among other
things, the transfer of work to the private sector
Indeed, Mr Wilson candidly conceded that the HRF did not contain many
elements that the union might have liked to see in it, for example, inclusion
of a notice period Using that example, MBS was of the view that Appendix 9
did not impose any obligations on the employer other than those which he
outlined Moreover, he testified that inclusion of a notice period in the HRF
could lead to the HRF dominating the weighting and, in the result, lead to a
contract being awarded to a vendor who did not score as well in the service
and price areas Put another way, notice savings were not considered in the
calculation of the HRF since doing so would dramatically increase the value
of the HRF in the rating scheme At the end of the day, the HRF became
subsumed In the cost critenon with the Proponent evaluated on the number
of employees to be hired, the salary level offered, the recognition of
service and seniorrty, and the willingness to hire on the basis of senIority
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Basically, Mr Wilson observed, the government focused on the key elements
of Appendix 9 - the elements the parties themselves had identified with the
incentive for the employer of avoiding enhanced severance if these
elements were fully satisfied That, he testified, was, from the employer's
point of view, the whole point of the provision The system was designed,
Mr Wilson asserted, so that job offers were made, that service was
recognized and that employees with the greatest seniority would have the
best shot at getting jobs and that all of this would be true regardless of the
size of any particular contract. According to Mr Wilson, the government did
not want to be subjectively involved in negotiations with a successful
bidder And any such approach, he observed, would have led to additional
delays in the privatization program, and would also have increased
employee uncertainty It was Mr Wilson's belief, and that of the working
group which developed the HRF, that this factor would be a significant one
given the widespread expectation that bids would be extremely competitive
Ultimately, Guidelines on the Transfer of Employees with their Job or
Function & Employee Bidding were prepared and circulated The relevant
portion, to this case, of these Guidelines is as follows'
4 1 Transfers Through a Tendering Process
The tendering process is typically used when the government transfers
operations or services to organizations through a competitive bidding
process. The acquisition or selection of the new service provider is done
by the Ontario government (the employer)
a) Identification of Candidate Operations
· Based on the business case, the employer identifies operations that may
be transferred through external purchase of services.
Note Management Board of Cabinet approval is required for ministry
plans for alternative service delivery (including implementation
strategies) This review does not include the review of specific Request
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For Proposals (RFPs) (see Appendix 1)
b) Human Resources Factor
· After an operation or service has been identified for transfer by means
of the competitive bidding process, a Request For Proposal (RFP) is
prepared to solicit proposals from the vendor community for private
delivery of the service *
Note There may be instances where a Broader Public Sector organization
may submit a bid In a tendering situation
· Deputy Minister sign-off of the RFP for the alternative service
delivery is required as per Management Board of Cabinet direction of June
11, 1996.
· The criteria or factors normally used in the evaluation of a proposal
from a vendor include service, quality and cost..
· In order to ensure reasonable efforts in the transfer of staff through
the tendering process, ministries are directed that (in addition to the
normal evaluation criteria) an additional "Human Resources" factor must
be included in the RFP to evaluate the degree to which vendors are willing
to facilitate the transfer of employees with the function.
* See Management Board Directive 2-1 (Supplies, Services and
Equipment) for further information and advice on procurement practices.
c) Weighting of the Human Resources Factor
· The Human Resources factor will ensure consistency in the application
of "reasonable efforts" across the OPS in tendering situations and will
reflect the relative importance of staff considerations in the tendering of
contracts.
· The weighting of the Human Resources (HR) factor to reflect
reasonable efforts is based on the following calculation
00 HR factor = the aggregate of the weekly salary for each affected
employee times the number of completed years of service divided by the
estimated multi-year cost of the contract.
· This calculation produces the value of the HR factor as a percentage of
the total points in the RFP evaluation scheme
· The weighting of this factor will vary depending on the number of
employees involved, their weekly salary, the length of service of these
employees and the value and duration of the contract.
. In contracting-out situations where the new employer will be
purchasing only a portion of the services that were provided when the
function was performed by the government, the HR factor is based on the
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number of employees that will be needed to meet the reduced service
needs.
Example If an organization is contracting out lab work but plans to
purchase only 40% of the volume of activity it formerly did with the
ministry. the number of employees used to calculate the potential cost
avoidance would be 40% of current affected staff
d) Scoring the Human Resource Factor
· The HR factor is only applicable to OPSEU and AMAPCEO members and
is one of several criteria against which proposals from vendors are
evaluated. While other factors and their components may vary, the HR
factor should always be composed of 3 components, each having equal
value
1) The proportion of the affected OPSEU and AMAPCEO members who will
be offered jobs. (1/3 of the HR points)
Example If the bid proposes job offers to 60% of the affected employees.
that bid would receive 60% of the human resources points assigned to this
component of the HR factor (ie 60% of 1/3 of the HR factor points)
2) The proportion of the wage rate of the employees to be offered jobs
provided that there will be recognition of service of the employees (for
the purpose of determining entitlements for vacation. benefits, etc)
(1/3 of the HR points)
Example If the bid proposes a wage rate of 90% of the employees'
current wage rate, that bid would receive 90% of the points assigned to
this component of the HR factor provided that service is recognized by the
new employer (ie 90% of 1/3 of the HR factor points)
No recognition of service would automatically result in zero (0) points
for this component.
3) The proportion of affected employees who will be offered jobs on the
basis of seniority (1/3 of the HR-points)
Example If a bid proposes the hiring of 75% of affected staff and hiring
on the basis of seniority, that bid would receive 75% of the points
assigned to this component of the HR factor (ie 75% of 1/3 of the HR
factor points)
If the bid proposed hiring 75% of the affected staff but on the basis of
interviews, not on seniority, that proposal would receive zero (0) points
for this component.
The vendor score will be based on the vendor's intent (as declared in the
bid) to meet these requirements
(See appendix 4 and 5 for the standard wording for this provision in the
Request for Proposal)
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· Considerations relating to the importance of continuity of service and
special expertise required should be reflected in the weighting of separate
service factors rather than under the human resource factor It is
important to do this to provide vendors with flexibility in devising
strategies to ensure continuity of service and expertise One such strategy
may be the continued employment of existing staff Other strategies could
also be considered.
f) Disclosure of Human Resources Information to Bidders
· In order to obtain informed proposals from bidders, information
relating to current employees must be made available
· The Freedom of Information and Protection of Privacy Act does not
apply to the disclosure of personal information that facilitates the
transfer of employees with their jobs or function in situations of external
purchase of service or transfer The FOI Act has been amended to exempt
the application of the Act from records collected, prepared, maintained or
used in relation to certain labour relations and employment-related
activities.
· The following information may be contained in the RFP package that is
made available to bidders.
a) Where there is a collective agreement and it deals with "reasonable
efforts" the following information on employees may be disclosed'
- position and title
- job description
- seniority
- specific salary/hourly wage
- years of service
- types of benefits and costs
As a matter of practice do not disclose the names of the individuals to
whom the information relates in the initial RFP
In small workplaces, where the identities of individuals may be discerned
based on the information disclosed, the information should nevertheless
be released since it will be necessary for the development of proposals.
. If further information other than that described above is required to be
disclosed, personal information concerning employees should be disclosed
only as necessary and reasonable in the circumstances In this regard,
the Freedom of Information and Protection of Privacy Act can be used to
provide guidance as to what may be considered necessary and reasonable
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Accordingly, sensitive personal information such as medical information,
performance appraisals or information concerning violation of law should
not be disclosed.
· Prospective vendors may interview affected employees provided it does
not interfere with Ministry operations. Ministries should determine the
appropriate process for such interviews ensuring that all vendors are
dealt with in an equal and fair manner
g) Pre-Condition to Award
· As a pre-condition to the award of the contract, the successful vendor
must provide a letter confirming offers of employment having been made
as per the vendor's proposal. Advice that this will be required should be
included in the RFP {see Appendix 4 - Letter}
In terms of this case, the Ministry believed, Mr Barnes testified, that the
240/0 bid preference would be extremely significant given its expectation
that the bidding would be extremely competitive Mr Barnes testified that
in his experience - some twenty-five years in the field - differences of
less than 50/0 among bids for construction contracts were not uncommon
And it was expected that the construction companies would form the pool
of potential bidders tor the maintenance work. In many cases, the
differences might be as little as 10/0. Accordingly, a 2 4% bid advantage
could swing a contract from the lowest qualified bidder Mr Barnes
expressed the view that in these circumstances a bidder would be unwise to
ignore the potential benefits of the HRF
As part of the process, the Ministry provided Proponents with lists of
affected employees, mcluding individual service dates, and also gave them
details about the benefit package and Its cost. approximately 22% of
employee salary This information, Mr Barnes testified, was intended to
assist Proponents in makmg offers to employees that compiled with
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Appendix 9 Proponents could also, if they wished, obtain detailed job
descriptions which were available at the District Office Potential
Proponents were also invited to an information meeting on July 23, 1996 at
which time representatives from the Ministry answered questions
In this case, three bidders made it to the final envelope Bidder A
submitted a bid of $48,965,000 and received a HRF of $40,800 Bidder 0
submitted a bid of $34,976,702 and received a HRF of zero And IMOS
submitted a bid of $27,814,922 and received a HRF of $132,600 As part of
this process, the PFA was added in and the HRF was taken out to give an
Evaluated Bid Price IMOS's evaluated bid price was the closest to the
owner's estimate - it was extremely close - and Mr Barnes recommended
that it be awarded the contract. This recommendation was accepted
Mr Barnes testIfied that he was quite surprised by the range in the bids,
and he expressed the view that this was attributable to the fact that this
was the first time AMes had been let and the bidders were not necessarily
experienced in bidding on maintenance work. He predicted that the numbers
would, for future RFPs, tighten up With respect to the calculation of the
HRF for IMOS, that company, Mr Barnes explained, received thirty-nine
points for it indicated in its proposal that it would hire thirty-nine
employees For each of these employees, it received a bId preference of
$3400 equaling $132,600
IMOS had made the following proposal with respect to wages, benefits and
the treatment of seniority
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6.4 (b) Treatment of Seniority
Offers of employment will be on the basis of seniority in the operations
and/or maintenance function in which the individual will be engaged. The
offer of employment will involve a probationary period of six (6)
months Continued employment will be contingent upon satisfactory
performance in the duties assigned. All employees will be reviewed and
evaluated regularly following the IMOS Performance Review System.
IMOS assumes that all MTO employees offered employment will terminate
their employment with the Ministry of Transportation and the Ontario
Public Service IMOS further assumes that these employees will receive
those termination or severance payments to which they are entitled
legally or contractually
Individuals accepting employment with IMOS will be treated as, and
considered to be, new employees. However, in recognition of their years
of experience, and In order to facilitate their transition to private sector
employment, IMOS is prepared to offer the following special provisions:
(1) IMOS is prepared to waive the normal waiting period for benefit
eligibility, including life insurance, long-term disability, and extended
health care and dental benefits, and
(2) IMOS is prepared to recognize previous years of experience when
calculating vacation entitlements, and to apply that service, year for
year, to the IMOS Vacation Plan The details of that plan are outlined
below'
Experience Vacation Entitlement
1-5 years 2 weeks
5-15 years 3 weeks
15-25 years 4 weeks
over 25 years 5 weeks
Copies of the IMOS Benefits Package and Vacation Plan are available upon
request.
IMOS will thus recognize seniority in all offers of employment made to
MTO staff Specifically, it will recognize the years of experience of those
individuals accepting employment with IMOS by waiving the normal
eligibility period of new employees for benefits, and enhancing its normal
vacation leave entitlements for new employees.
6.4 Salaries/Hourly Rates
Offers of employment will be at a salary level of no less than 85% of the
employee's current salary, exclusive of benefits. Specifically, the
maximum salary for the comparable position with IMOS is as follows
Patrol Supervisor $37,071 05 per annum
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Patrol Foreman $30,124.00 per annum
Patrol Worker $27,870.65 per annum
Individuals who accept employment with IMOS will also be eligible for
incentives based on performance
Benefits to employees accepting employment with IMOS will be in
accordance with the Miller Group Benefits Package which is widely
acknowledged as the leader in the Road Construction Industry
According to Mr Barnes, IMOS got no credit for recognition of seniority for
even though it recognized seniority for some purposes, it forfeited
entitlement to credit by virtue of its imposition of a probationary period
For this reason, IMOS received a zero for (b) and (c) of the HRF However, as
it turned out, given its bid as compared to the others, the HRF did not make
a difference in this competition IMOS, Mr Barnes pointed out, would not
have been aware of its relative position and the fact that it did not need to
agree to hire any employees when it submitted its bid.
As the foregoing makes clear, the RFP established minimum requirements
for Winter Maintenance Strategy and Management and Supervisory Skills and
Experience Proponents who failed to meet these thresholds were, at the
second envelope stage, excluded from further consideration The Ministry
did not, however, establish minimum requirements for the HRF because, Mr
Barnes explained, there was no mandatory requirement that bidders make
job offers In any event, Mr Barnes reiterated that the HRF was provided to
the Ministry and it simply applied it as directed Mr Barnes expressed the
vIew that the various Proponents would be interested in hiring Ministry
employees because of their skills and experience, not to mention the
continuity they would bring to the Job Indeed, Mr Barnes testified that the
OPS employees would be in demand because the only other place that
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employees with similar skills could be recruited was from the
municipalities It was, therefore, likely in his view, bid preferences aside,
that the surplus employees would be hired by the new private sector
employer He nevertheless agreed that had the RFP contained minimum
hiring levels for about-to-be surplused employees that would not have
caused any practical or administrative difficulties in evaluating the bids
He also agreed that had there been more time allocated for the preparation
of bids, that might have produced better bids However, in this case, the
work was to be transferred to the private sector by December 1, 1996, and
if any more time had been allocated to bid preparation, it would have been
at the expense of bid evaluation The timelines for the transfer of the work
were, needless to say, established by the Minister not by the working group
in charge of this project. Mr Barnes expressed the opinion that the bid
preference that was provided met the reasonable efforts requirement of the
collective agreement.
While IMOS had, in its bid, agreed to hire thirty-nine employees, as it
turned out, fifty-nine of the the sixty-one affected Ministry employees
ended up working with IMOS. Mr Brian Riddell, the President of IMOS,
identified the principals of his company - private sector firms involved in
the transportation busmess - and explained the process by which it
prepared its bid and hired these employees To make a long story short, Mr
Riddell testified that he became aware of the opportunity in this case from
an article in the Globe & Mall. He obtained copies of the AMes and hIs
company directed considerable energy to the preparation of ItS bids - a
process whIch had to be completed wlthm five weeks
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In studying the AMC, it became immediately apparent to Mr Riddell and his
colleagues that the Ministry had statutory obligations with respect to
highway maintenance, and this led him to conclude that any bid would have
to ensure that this obligation was met. Indeed, the need to do so was
reinforced, Mr Riddell testified, by an examination of the key components
and the fact that two of them had minimum requirements winter
maintenance strategy and management and supervisory skills and
experience Mr Riddell concluded that it was imperative that IMOS have
human resources in place who understood the local geography, the highway,
and seasonal road conditions And this meant, Mr Riddell testified, hiring
Ministry of Transportation employees. They would be available, they knew
the work, they knew the area, and they could do the job as set out in the
AMC
Considerable attention was given, Mr Riddell testified, to the HRF To
ensure achieving a competitive advantage, IMOS wanted to do well with this
factor And it developed the proposal set out above While IMOS eventually
concluded that all employees would be treated as new employees, it
decided, given the years of service of many of the OPS employees who
would be given job offers, that it would waive normal waiting periods for
benefits such as life insurance, and it would recognize servIce in the
calculation of vacation entitlement. Salaries, meanwhile, were set at no
less than 85% of the OPS rates IMOS knew that the HRF had been set at
$3400 per point Mr Riddell believed that the biddIng would be tIght and
that any competitive advantage would make the dIfference
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As it turns out, IMOS, as the foregoing makes clear, won the competition
Mr Riddell was quite surprised and disappointed that IMOS did not receive
any HRF points under (b) and (c) Mr Riddell later learned that it was the
imposition of a probationary period that led to the loss of pOints It also
became clear, when the competing bid prices were announced, that IMOS's
HRF score was irrelevant to its ultimate success given the wide disparity
in bids and the fact that the IMOS bid was the only one that even came close
to the owner's estimate
In any event, after winning the bid, arrangements were made to meet with
affected employees Various events and opportunities were organized In
brief, a number of employees, with factor 80, decided to leave the OPS A
few others took jobs in the BPS And of the remaining group of employees,
fifty-four were offered jobs. Everyone declined the Job offer According to
Mr Riddell, virtually all of these individuals advised IMOS during the
interview process that since the IMOS job offer did not fully meet the
requirements of Appendix 9, that they were entitled to decline it and thus
be eligible for enhanced severance At the same time, all of these
individuals advised IMOS that they would be available for work on December
1, 1996, the implementation date And on that date, virtually all of the
former OPS members began work for IMOS
Union Argument
In the union's view, the evidence established that the employer had not, as
It was requIred to do, made reasonable efforts to secure employment for
public seNants who lost their jobs as a result of the transfernng of theIr
work to the private sector The fact of the matter, Mr Leeb argued, was
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that the reasonable efforts obligation can be operationalized in a variety of
different ways and there was no reason to conclude that giving a bid
preference was the only way, or even an appropriate way, to give effect to
the collective agreement. It was quite clear, in the union's submission, that
the employer could best assist its employees in finding jobs with the new
employer by making use of the tremendous bargaining power It had both
before, during, and after the completion of the tendering process What the
evidence established in this case, was that the employer rejected out of
hand making use of this power and negotiating with the successful
Proponent after the tendering process was completed and this, the union
argued, was hardly reasonable.
The HRF developed and applied by the employer also failed, the union argued,
to meet the reasonable efforts obligation for it did not attribute enough
significance to the hiring of Ministry employees. The eVIdence established
that there were wide and hard to understand and justify discrepancies in
the HRF, in its weighting and in its ability to make a difference in a
divestment case How was it reasonable, the union asked, that one
employee in one Ministry, .as a result of the HRF, could have a greater
chance at getting a private sector job than another employee in another
Ministry? Why should an employee's chance at getting a job depend on the
size of a particular contract and the percentage value of the bid
preference? On what rational basis was it determined that the value of the
savings of enhanced severance as a percentage of a contract would make a
difference and would result in the offer to publiC servants of private sector
jobs? If anything, the unron argued, what could have been predicted was not
competitIve bIds but wide vanances In bIds The post-grievance eVIdence of
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other bid results confirmed this conclusion Accordingly, using the value of
the contract to determine the percentage amount attributed to the HRF
could not and would not result in job offers It would make no difference
whatsoever thus demonstrating, the union suggested, the complete failure
of the approach
There were other questions as well Why was only the enhanced severance
component included? Why not include other savings and why not amortize
those savings over a longer period of time? Why, the union asked pointing
to the evidence with respect to its development, was the HRF constituted in
such a way so as to ensure the weighting was down and the scores low?
Why was the HRF not developed in a way so as to allow for finer
distinctions to be made among competing bids? For example, on what basis
could it be said that the HRF was reasonable if it gave no credit to a
Proponent who offered a pension plan or some other supenor term and
condition of employment? Was this reasonable? Was it reasonable to give
one-third of the points for hiring on the basis of seniority when it was
widely expected that few Proponents would be willing to do so? Why not
separate, for assessment purposes, wage rates and recognition of service?
The employer was obligated to make reasonable efforts to get its
employees' jobs on terms as close as possible to those in the public service
Yet it devised an HRF that did not include a mechanism for evaluating all
the terms and conditions of employment a Proponent was offering Did this,
the union asked, make sense? Was thiS, the union continued, consistent
with the employer's obligations? Why not, the union suggested, devise an
envelope system, Similar to that used for the tendenng and not allow a
Proponent's bid to proceed unless certain minimum terms were offered to
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government employees?
The many questions about the HRF, and the answers to those questions, the
unIon argued, left no doubt whatsoever but that the HRF had been developed
in haste, and was conceived in such a way so as to ensure that it made no
real difference Very simply, the union argued, the bid preference approach,
as presently constituted, resulted in disparate outcomes for government
employees There was no reason to conclude that the HRF met the
employer's obligations or that it was or should be the only method for doing
so For all of these reasons, and others, the union argued that the HRF
failed to meet the reasonableness test. The employer's reasonable efforts
obligations must, the union submitted, be applied in a way that achieved
results, and so as to ensure, in both process and outcome, that public
servants, no matter which Ministry employed them, got equal benefit from
and under the prOVision
The union made a number of submissions with respect to what exactly was
required under the obligation to make reasonable efforts And following the
review of a number of authorities, all of which have been carefully
considered in the preparation of this award, took the position that Appendix
9 of the collective agreement imposed on management a very high
obligation indeed Reasonable efforts, Mr Leeb argued, did not mean "some
efforts" What it meant was that the employer should do everything that it
could to assist public servants in finding pnvate sector jobs Making
reasonable efforts meant taking real specIfic substantive steps to
accomplish the objective placing public servants in pnvate sector Jobs
These steps must be taken in a good faith way, and in a manner
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demonstrating management's overall commitment to this overriding goal It
meant spending money, and the amount of money, in the union's view, was
not limited, as the employer was suggesting, to savings in enhanced
severance costs That amount was a floor not a ceiling
Turning to this particular case, the union took the position that even
assuming for the sake of argument that the bid preference system that the
employer devised had some value, it completely failed, when actually
applied, to achieve its stated objective The evidence established that it
made no difference whatsoever in that there was an extraordinarily wide
range of bids It might be correct, as Mr Barnes testified, that over time
bids would tighten up However, the union submitted that the employer's
reasonable efforts obligations must be presently applied and that meant
applied In a way that made a difference now, not in a manner that might
make a difference over time This was yet another reason, the union argued
for finding in this case a collective agreement breach In all of this, it was
quite interesting, Mr Leeb observed, that none of the Proponents really paid
much attention to the HRF, they obviously did not think it mattered or that
it would affect their bids in any material way
In conclusion, the union took the position that it had more than established
a collective agreement breach The only issue, in the union's view, was the
appropriate remedy for that breach And in that regard, the union took the
position that the employer and IMOS should be directed to meet with the
union In order to negotiate appropriate terms and conditions of employment
for the former public servants Moreover, the unIon argued that employees
who were adversely affected by this divestment, both those who were hired
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by IMOS and those who were not, should be compensated for their losses
arising from the employer's failure to make reasonable efforts The union
asked that I remain seized with respect to the implementation of my award
Employer Argument
In the employer's submission, the provision at issue had to be properly
contextualized and appropriately interpreted Reasonable efforts, counsel
argued, did not mean "no efforts." Also, it did not mean successor rights
Nor did it mean "all efforts" What it meant was "reasonable efforts," and
that meant what was reasonable in the circumstances Had the parties
wished, counsel noted, they could have provided for "all efforts." They could
have provided for "best efforts." They could have also, to borrow an
example advanced by the union, provided for efforts to the point of "undue
hardship" What was significant, in management's view, was that they did
none of these things What they provided for were reasonable efforts, and
those efforts had to be determined based on the facts of particular
circumstances and individual cases
In this case, one of the significant facts, counsel argued, was that the
process of making reasonable efforts had to take place within established
tendering guidelines and legal requirements. Indeed, after referring to a
number of cases, most particularly, R v Ron Engineering & ConstructIOn
(Eastern) Ltd 13 B L.R 72, a decision of the Supreme Court of Canada,
counsel took the position that the employer was bound by the RFPs it sent
out and the bids which were returned The union knew that government
work was gOing to be privatized, and it also knew, counsel submitted, that
It would be privatized in this type of tendering process What was
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necessary, in management's submission, when considering whether the
employer had met its reasonable efforts obligations, was to place those
obligations in this established tendering framework and that led, counsel
argued, to a conclusion that the obligations had been met. The tendering
process did not envisage the tenderer approaching the successful Proponent
after its winning bid had been announced to negotiate further terms and
conditions That was not the way in which tendering worked Once the bid
had been announced, counsel submitted, the employer lost its negotiating
power
Indeed, one of the reasons why the HRF made sense, as developed and as
applied, was because the employer only had the power to make reasonable
efforts as part of the tendering process Quite clearly, counsel continued,
it made sense for the employer to use a financial incentive in making its
reasonable efforts, and the amount of that incentive was the savings
realized by the employer by avoiding enhanced severance costs.
In this case, the employer deVIsed a formula to provide this incentive and
avoid the penalty provided for in Appendix 9 This was not only reasonable,
counsel suggested, but relatively equitable to employees across the public
service The employer's approach was logical, it was workable, and it was,
counsel argued, fully in compliance with the collective agreement. There
was simply no way, counsel suggested referring to the facts of this case,
that it could be fairly said that offering new employers more than ten
thousand dollars for each public servant they hIred was not making a
reasonable effort as per AppendIx 9
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It was true enough, counsel argued, that the amount offered in different
cases would vary But there was, he continued, an explanation for that. The
amount of enhanced severance depended on the profile of the employees in
the group Quite obviously, employees with greater seniority would end up
with larger amounts In all of this, the employer suggested, union concerns
about the amounts of particular contracts was something of a red herring
What mattered was whether the employer was making reasonable efforts
The fact that it was offering private sector employers sums up to the
enhanced severance costs that the employer was going to save indicated
that it was While the union had taken issue with the employer's decision
to offer multi~year contracts, that was, counsel argued, clearly a decision
that fell within the purview of management's rights and, obviously, the
employer had to tender in a way that made economic sense In all of this,
counsel submitted, the employer was under no obligation whatsoever to
draft the RFPs in such a way so as to guarantee jobs for former public
servants,
Turning to the instant case, counsel took the position that it too had to be
placed in context. It was the first case Moreover, it was, from
management's perspective, an expensive case Not only did IMOS get a
significant bid preference, the employer was required to pay all the
enhanced severance costs In the meantime, virtually everyone of the
affected employees got a jOb While the union was arguing that the
employer had breached the collective agreement, it was hardly clearly to
management what difference further efforts might have made on the
ultimate resolution Accordingly, and assuming for the sake of argument
that some breach was found - a conclusion the employer urged me to reject
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- counsel took the position that it was up to the union to demonstrate with
evidence that it and its members had suffered some damages And, there
was, counsel noted, absolutely no evidence to that effect.
IMOS Argument
In IMOS's submission, the union had the obligation to prove, on the balance
of probabilities, that the employer had failed to make reasonable efforts in
this case Put another way, the employer was not obligated to prove that it
had made reasonable efforts And when the evidence was assessed, it was
clear, to IMOS, that the union had failed to discharge the evidentiary burden
before it. Moreover, even if some different approach might have been
preferable, that, IMOS argued, was not what mattered. What was important
was whether the union had proved Its case, and IMOS took the position that
it had not. It also took the position that the evidence disclosed that there
had been no violation of any provision of the collective agreement.
The evidence demonstrated that efforts were made IMOS spent a great of
time considering the HRF, and in its bid it attempted to address it in a way
that would help it win the contract. This, counsel suggested, indicated that
the HRF was important. That is why IMOS offered the number of jobs it did
That is why IMOS recognized service for vacations entitlements to give
another example While it did not make a difference in this case, the value
of the bid preference was potentially hugely significant, and possibly,
determinative in this industry where often it is only a percentage or two
that separates competmg bids IMOS, counsel argued, obviously believed
that the bid preference could make a difference and It governed Itself
accordingly It was hard, therefore, for IMOS to see how It could now be
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said that the HRF was inconsistent with the employer's reasonable efforts
obligations
It was also hard for IMOS to see what possible purpose could be achieved,
assuming that the union was successful and obtained its desired relief, in
directing the employer, IMOS and the union to meet. The collective
agreement, counsel pointed out, was not between IMOS and the union, and
three was simply no basis or jurisdiction to direct such a meeting Counsel
also observed that there was absolutely no evidence of any damages,
suffered by the union or by its members Accordingly, the best the union
could achieve in this case - and IMOS argued against it for the reasons just
given - was a declaration of breach
Decision
Having carefully considered the evidence and arguments of the parties, I
have concluded that the union has established a breach of the collective
agreement, in particular of Appendix 9 of that agreement.
Appendix 9 imposes on the employer the obligation to make reasonable
efforts as it goes about assisting public servants, many of whom have
served for a lengthy period, who are losing their jobs as a result of the
transfer or divestment of their functions to the broader public sector or the
pnvate sector This obligation is an extremely important one, and it is one
that cannot be taken lightly
While counsel for the union and the employer provided me with numerous
authontles with respect to the Interpretation of the word "reasonable,"
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none of the cases or definitions which they advanced are applicable to this
case, they are all distinguishable However, and having said that, I am in
complete agreement with employer counsel that reasonable efforts does not
mean "all efforts" It does not mean "efforts to the point of undue
hardship" It does not mean "every effort." What it means is efforts that
are reasonable in the circumstances all things considered What is
reasonable in the circumstances will, obviously, depend on the facts of
particular cases In another award, Union Grievance 0141/97, I have set out
some of the general principles which I believe apply as the employer goes
about making reasonable efforts in divestment cases
In this case, I have concluded that the employer breached its obligation, and
I reach that conclusion for a number of reasons First of all, the fact is
that the bid preference MBS devised did not help anyone get a job It made
no difference whatsoever Surely, one way of judging whether efforts are
reasonable is to consider their results.
One of the telling facts in this case is that one of the three finalists did not
consider it necessary in preparing its bid to agree to hire any employees
One of the others agreed to hire twelve employees, while IMOS agreed to
hire thirty-nine However, even if had not done so, it would have still been
awarded the contract. Furthermore the evidence establishes, and Mr Barnes
agreed as much, that the job offers which were made would not have been
sufficient, in any possible scenario given the various bids, to have tipped
the scales At the end of the day, the conclusion IS inescapable that the HRF
made no difference, and something that makes no difference can hardly be
said to be consistent with the employer's proactive obligation under the
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collective agreement to make reasonable efforts to help public servants,
many of whom have served for a lengthy period of time, find jobs in the
broader public and private sector with terms and conditions of employment
meeting the threshold set out in Appendix 9
Assessing the HRF on the basis of whether it made a difference, is not,
obviously, the only way of determining if the collective agreement has been
complied with It must be noted that in this case, the successful Proponent
obviously attempted to respond to the HRF There is, nevertheless, another
and even more important basis for concluding in this case that the employer
is in breach. The very method that it choose to evaluate the HRF can hardly
be described as consistent with the reasonable efforts obligation IMOS
submitted a bid that contained some terms and conditions of employment
that met some of the requirements of Appendix 9 but received no credit for
having done so
IMOS received nothing for categories (b) and (c) However, its bid can
hardly be called completely lacking in those two respects. Employees were
to receive at least 85% of their wages Vacation entitlement was based on
years of service in the OPS Some benefits were provided Yet IMOS got no
credit for any of this, it was treated in exactly the same way as another
Proponent which offered nothing in these categories Any formulation
which fails to distinguish between the quality of bids on important matters
such as these, any formulation which, in effect, penalizes a bidder for
offering OPS employees better vacations, salaries and benefits, is not
reasonable and can hardly be found to demonstrate reasonable efforts as
required by Appendix 9
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Without attempting to be exhaustive insofar as how this process should be
or could be improved, it seems to me that the formula must be refined so as
to give credit for all benefits, either considered singularly or in a group, to
give credit for wages meeting the 85% OPS rate, to give credit for
vacations offered on the basis of OPS service, to give credit if some jobs,
although not all, are offered on the basis of seniority; to give credit for
terms and conditions of employment offered by a Proponent but not required
by Appendix 9 Surely human ingenuity can come up with a method to finely
tune the HRF so that it can be applied in a meaningful and fully
comprehensive way Put another way, to meet the obligations in Appendix 9,
the HRF must be recast. The HRF must, forthwith, be redesigned so as to
take into account nuances and differences between bids
There is, needless to say, some reason to question the very utility of a HRF
(and the reliance on it as part of the employer's reasonable efforts
obligations), although on the basis of this one case It is probably too early
to definitively do so It may be that in the future the range between bids
will tighten and that the HRF, as modified as directed by this award, will
truly be extremely influential in determining a Proponent's success That
remains to be seen and, undoubtedly, the HRF will be tested in other cases
In the meantime, however, the fact of the matter is that the HRF did not in
this case, problems in calculation aside, make a difference and this must,
at a very minimum, lead to the active reconsideration of the overall
approach While the employer asserted that it was Impractical, if not
Impossible, for legal and other reasons, to engage in negotiations with a
Proponent after a bid was successful, thiS IS not a conclUSion that the
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33
eVidence or the authonties leads me to accept.
Quite clearly, there is nothing stopping the emp~oyer from including in its
RFPs the possibility of negotiating with successful Proponents In some
circumstances, such as where, for example, the entire amount of the
enhanced severance savings were not attributed as a bid preference, there
would be room, taking the employer's case at its highest, to provide further
inducements and still avoid the penalty part of the provision Put another
way, assuming for the sake of argument, and accepting only for the sake of
argument, that the employer's obligatton to provide a financial incentive is
limited to the savings on enhanced severance that it could realize, there
may be cases where only a part of the enhanced severance savings were
given as a bid preference and a successful Proponent identified What, one
must ask, would stop the employer from negotiating with the Proponent
after the competition was closed using the balance of the amount to help
its employees find jobs and/or to improve the terms and conditions of jobs
which were offered? The answer to this question, it seems to me, is
nothing In this case, an opportunity to help employees get even better jobs
was lost by the employer's self-imposed restriction on negotiating with the
successful Proponent. This is yet another reason for finding for the UnIon
There was evidence led in this case with respect to the negotiating history
of Appendix 9 Having concluded that the provision is not ambiguous, and
that the eVidence of negotiating history does not disclose an ambiguity, I
have not considered it in this case What can and must be said about
Appendix 9, however, is that It clearly is an incentive/penalty provIsion
There is nothing, however, in that provision which discloses, at least to me,
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any cap on the amount, or agreement between the parties that the amount
will be limited to enhanced severance cost savings Here again, what
matters are the circumstances of individual cases and what, given those
circumstances, constitutes reasonable efforts
With respect to this case, the union has established to my satisfaction
based on the evidence before me, because of the flaws in the HRF, and the
employer's failure to make full use of the enhanced severance savings in
securing for its employees private sector jobs, that the employer is in
breach of its reasonable efforts obligations. The question of remedy now
arises. Obviously, the union is entitled to and receives a declaration to that
effect. The employer is directed to refine the HRF so as to properly take
into account differences between bids in a way that appropriately
recognizes important distinctions and to modify its practices so as to
ensure that it can make full use of savings on enhanced severance costs in
finding private sector jobs for public servants, and to do so both as part of
and after a bidding process
While the union is entitled to this declaration, no evidence has been led
with respect to particular damages suffered by either the union or its
members That matter may be set for hearing by application to the
Registrar at a time convenient to the parties I remain seized with respect
to that issue and to implementation of the directions set out above
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DATED at Toronto this 9th day of June 1997
f/~
William Kaplan
Vice-Chai rperso n