Algoma Steel Inc. violated its collective agreement with the United Steelworkers of America, Local 2251, when it contracted out general labourer work while simultaneously laying off or terminating unestablished employees in early 2025, an arbitrator has ruled.
The decision centred on two key disputes: the company’s use of external contractors for labourer duties that could have been performed by bargaining unit members, and the adequacy of a contracting out template (SAP 177) used to document urgent repair work.
Contracting out while workers terminated
The first dispute arose after the union presented evidence showing that in 2024 and 2025, Algoma had contracted out labourer work that could have been performed by its employees. The union argued that under Article 1.02.10 of the collective agreement, this work should have gone to bargaining unit members, particularly the 28 recently terminated employees who were not yet “established” in the unit.
The company maintained that those workers were not laid off but dismissed for unsuitability during their probationary period and had no seniority rights. The arbitrator, however, found that this distinction did not remove them from the scope of Article 1.02.10.
That article states: “Work normally performed by employees within the bargaining unit or similar work … shall continue to be performed by employees within the bargaining unit, except when employees with the necessary skills are not available for such work. No employee will be displaced from his job or be laid off or continue to be laid off as a result of the Company contracting out such work.”
The arbitrator ruled that this clause protects all employees in the bargaining unit — not just those with established status. “In the absence of explicit language to the contrary, it would be absurd to find that such an extensive and broad restriction on management rights would not include all bargaining unit employees,” the decision stated.
Labourer duties at Algoma are generally low-skilled tasks that “can be performed by most Union members,” the arbitrator noted. The contracting out of such work while simultaneously laying off or terminating bargaining unit members for lack of available work was found to be in breach of the agreement.
While no individual remedies were ordered due to the absence of grievances specifically challenging the terminations, the arbitrator invited the parties to bring forward any relevant contracting out grievances not yet resolved.
Dispute over SAP 177 template
The second part of the ruling dealt with SAP 177 — a template used by Algoma to track the contracting out of urgent repair work, specifically crane breakdowns. The union argued that the form was too vague and did not meet the procedural standards outlined in Article 1.02.11 of the agreement.
The article sets out strict requirements when the company is considering contracting out work. It mandates that the company complete a “template” providing details including the nature and location of the work, the occupations involved, timelines, and rationale for using contractors.
While acknowledging that SAP 177 did not specify each breakdown in advance, the arbitrator found that the form generally complied with the agreement’s intent. “SAP 177 clearly has been created to capture work that the Company is considering to contract out during the month in question,” the ruling said. The company had supplied multiple revisions of the template and described the work, duration, and occupations involved.
However, the arbitrator ordered the company to enhance the information provided, including estimates for the cost of external contractors and clearer canvassing for available internal labour before outsourcing. This canvassing must occur “each and every time before the work is actually contracted out,” and the information must be shared promptly with the union and verified at the end of each month.
The arbitrator emphasized that while SAP 177 was acceptable for tracking crane breakdown work, it could not be used as a blanket template for broader categories of work. “These types of templates must be focused on a particular type of work,” the decision stated. “A template for a broader scope of work may not comply with the Collective Agreement.”
The arbitrator concluded that SAP 177 did not violate the agreement, provided the company complies with the directives outlined in the award and continues to use the template in good faith for urgent crane repairs only.
For more information, see Algoma Steel Inc. v United Steelworkers of America, Local 2251, 2025 CanLII 61639 (ON LA).
