That must mean something else where you're from, although I lived in Vancouver for a couple of years and never heard that expression.
Lol! Seriously? I've been hearing that term on just about every job site I've ever worked, from bush work to factory, mill work and even office work, by many people directed at many people, myself included at times. It must be a Canadian thing then because I've heard it in the east and the west...........if you're fucking the dog it means you're not working when you should be, or you're dragging your ass like a lazy fucking dog fucker!!!
I've never really put too much thought into the saying, but it is a strange one that I'm not even sure I want to hear the back story for.