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Arbitrator rules on Air Canada pension spat

Sept. 19, 2011, Toronto - An arbitrator has delivered a ruling in a pension spat that was a driving force behind a strike by Air Canada customer service staff last June.

September 19, 2011  By The Canadian Press

A federal arbitrator decided that a hybrid pension scheme consisting of both defined contributions and defined benefits will apply to new hires, the airline and the union representing the workers said in separate news releases.

During contract negotiations the airline had demanded that new hires go on a defined contribution plan instead of a defined benefit plan.

Defined benefit plans provide retirees with a predictable income, but they expose employers to additional costs if their pension funds can't pay promised benefits.

With defined contribution plans, the company's contribution is limited to a set, negotiated amount, generally a cheaper option for employers.


The issue put the two sides at loggerheads when customer service agents went on strike for three days in June. They quickly reached a deal after the federal government indicated it would bring in back-to-work legislation.

However the pension issue remained unresolved and the parties referred it to an arbitrator to decide on.

The Canadian Auto Workers Union, which represents the 3,800 workers, said the arbitrator sided with the workers.

"This is an extremely important ruling and demonstrates that no employer, regardless of how large or small, should believe they have the unmitigated right to destroy a worker's retirement security,'' said CAW President Ken Lewenza in a statement.

"We ultimately won on the merit of our argument for fairness,'' he said.

The new plan will see new hires receive part of their benefit from the existing defined benefit plan under a reduced formula, and part from a defined contribution plan, contributed to by both workers and the employer.

In a terse statement Air Canada merely acknowledged the ruling but didn't elaborate.

The airline was spending Sunday mulling over a proposal from its flight attendants, who are threatening to go on strike as early as Wednesday to back their contract demands.


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