In two recent labour relations rulings, municipal transit authorities faced legal challenges in connection with the partial outsourcing of their public transit operations. These cases highlight some of the additional risks that should be considered when institutions plan on contracting out services that intersect with work that is currently performed by unionized employees.
The August 2023 arbitration ruling in the matter of Toronto Transit Commission v. The Amalgamated Transit Union, Local 113 dealt with a complex dispute between the Toronto Transit Commission (TTC) and the union representing fare collection workers. The case involved the implementation of PRESTO, a regional fare collection system. By way of background, Ontario’s regional transit agency, Metrolinx, implemented the PRESTO system under the direction of the provincial government and with the assistance of an external service provider. PRESTO replaced the fare collection functions previously performed by multiple municipal transit authorities in the Greater Toronto Area, including the TTC. As the decision detailed, while the TTC initially considered implementing its own alternative fare collection system, and even issued a request for proposals to receive bids based on that alternative, the costs of implementing a parallel system, together with the risks of losing provincial funding if it did not adopt PRESTO, led to the TTC’s decision to abandon its own fare collection system.
After the implementation of PRESTO, the union representing the TTC’s now-redundant fare collection workers brought a legal challenge alleging that the TTC had violated the applicable collective bargaining agreement. After determining that the TTC had no control over the new system and had little choice but to adopt it as part of a broader regional initiative, and after ruling that the union waited too long to bring its legal challenge, the arbitrator dismissed the case.
Similarly, the April 2024 Alberta Labour Relation Board ruling in the matter of Amalgamated Transit Union, Local 569 v. City of Edmonton dealt with the City’s decision to contract out new on-demand transit services in remote and sparsely populated areas within the municipality. The union brought a legal challenge arguing that the new operator’s employees should fall under the same collective bargaining agreement that applied to the City’s internal municipal transit workers.
The Board concluded that the new work did not fall within the scope of the existing collective bargaining agreement since the City did not exercise “common control and direction” over the operations of the new contractor. For example, while the City appointed an internal employee as contract manager to administer the new contract, the day-to-day operations of the new services were controlled by the external operator. Further, while the on-demand transit services included some operational integration with the core transit services provided by the City’s bargaining unit staff, particularly where the two systems intersected for passenger transfers, the Board ruled that this did not justify recognizing the new operator’s employees as falling under the City’s collective bargaining agreement. The ruling also determined that the new on-demand service did not result in any reduction to the number of existing City staff who operated the City’s core transit system. The Board therefore concluded that there was no basis to extend the City’s collective bargaining agreement to the external operator’s new on-demand drivers.
While both cases were ultimately dismissed, these rulings highlight how new outsourcing arrangements remain subject to potential labour relations challenges. This underscores the importance of carefully considering existing collective bargaining agreements during the procurement planning process before contracting out services that may overlap with work that is currently being performed by unionized employees.
To the extent that they anticipate that new contract awards could impact existing collective bargaining rights, the overall feasibility of the outsourcing should be carefully considered. Further, public institutions should be careful to properly disclose any flow-through impact that collective bargaining arrangements, or employment commitments more generally, could have on newly awarded contractors who bid to take over work that was previously performed internally by the public institution or was previously performed by a prior external service provider for that public institution.
In addition to potentially leading to labour relations disputes, the failure to warn bidders of known contract risks during a bidding process can, and often does, lead to significant contract performance disputes after the tendered contract is awarded. Project teams should therefore add labour and employment considerations to their expanding list of due diligence areas that they need to consider as part of their contract scoping decisions and material disclosure duties when they plan for new complex procurements.
