Wings Magazine

Labour peace at Air Canada tentative at best

Oct. 25, 2011, Toronto - The fragile labour peace between Air Canada and the union representing its customer service workers could be in jeopardy after the airline challenged an arbitrator's ruling on pensions, the union's head said Monday.

October 25, 2011  By The Canadian Press

In federal court filings, Air Canada takes issue with the decision to create a dual-structure pension plan for new hires and wants a federal court to review how the arbitrator reached his binding decision in June.

CAW national president Ken Lewenza said Air Canada's request amounts to a violation of the collective agreement, which was reached this summer after a three-day strike.

"These guys think they're bigger than the law, they think they're bigger than collective bargaining and obviously I think it impedes the kind of relationship moving forward,'' Lewenza said.

The arbitrator sided with the union's proposal for a hybrid pension plan.


Newly hired customer service agents were to have a mixed defined benefit and defined contribution pension formula while current employees remain in a defined benefit plan.

But the company says arbitrator+ Kevin Burkett unfairly accepted a last-minute CAW offer that amended the pension terms it was seeking. It said the offer was made after each side submitted what
were supposed to be their final offers.

"The board's jurisdiction was expressly limited to selecting one of two final offers and it exceeded that jurisdiction when it selected a third offer which was not a final offer,'' the company said in its application filed last week to both federal and Ontario courts.

The company concludes the arbitrator's decision was illegal and denied Monday that its efforts to obtain a judicial review violates terms of the collective agreement.

"Judicial reviews of arbitration awards are an established option and in this particular case we have concerns that Mr. Burkett may have acted beyond his jurisdiction,'' the airline said in an email.

The carrier said the arbitrator seems to have answered a question other than the one put to him.

"Given the uncertainties regarding the outcome of this similar matter with the other labour groups and the impact this decision will have, this was judged to be the prudent and responsible thing to do.''

But Lewenza said the company agreed to allow the union to replace its final offer and also amended its own offer.

He asserted Air Canada's move means the union is also in a position to violate the agreement, with the possibility of direct job action, including protests, work to rule actions or even a strike.

"This may require direct action from our members again,'' Lewenza said.

"I know that's terrible and it's inconvenient for our customers, but the fact of the matter is the labour relations environment at Air Canada has to be addressed.''

The two sides finally reached a deal this summer after a months-long dispute, a three-day strike by CAW members and the threat of federal back-to-work legislation.

George Smith, former Air Canada director of employee relations and now a professor at Queen's University, said he doesn't think this will lead to a strike situation but said it could open the door
to  huge industrial relations problems for the airline.

"It's new territory,'' he said, adding that the issues are complex and could take some time for the courts to work out.

"The courts won't touch this unless (they find) a major error in law. Otherwise our arbitration system would be in a shambles because people would always be challenging it.''

Ian Lee of Carleton University said Air Canada's challenges shows that it is in a desperate financial position because it has an unfunded pension liability of more than $2 billion and a cost structure that makes it harder to compete with low cost rivals such as WestJet.

Chris Murray, an analyst at PI Financial, said Air Canada's priority is how to mitigate some of the volatility associated with a defined benefit pension plan. That will be more difficult as the population ages and there are fewer employees making contributions and more retirees expecting a payout.

"The sheer magnitude of the pension plan, both the assets and the liabilities, makes it essentially almost impossible for the company to manage,'' he said.

"The value and the assets of the plan almost does dwarf the assets of the entire corporation.''

If the arbitrator's decision stands, Air Canada would likely not feel the impact for several years, when there is a noticeable turnover in the existing employee base, he said.

But reaching favourable terms in the agreement is of utmost importance to the company because other unions are taking cues from the CAW. For example, a tentative agreement with the CUPE unit
representing flight attendants in an upcoming arbitration process references the CAW agreement, he said.

The latest impasse could set a "dangerous precedent'' said Charlotte Yates, Dean of Social Sciences and professor of Labour Studies at McMaster University.

"It will make unions very nervous about any deal they enter into with Air Canada because basically Air Canada is saying they can enter into a deal but that doesn't necessarily mean they will live up to it.''

Lewenza said the company made it clear to CAW that the deal reached with that union — especially on the pension issue, which has been central in negotiations with all unions — would set a precedent
for potential agreements with others.

"They've got multiple bargaining unit problems that are still outstanding — with the pilots, with the flight attendants — yet they want to continue to increase the labour relations problems that they have,'' Lewenza said.

An arbitrator will issue a binding agreement in about two weeks on the contract with flight attendants under federal labour laws that prevent a strike or lockout during that period.

The 6,800 Air Canada flight attendants rejected two tentative agreements that the union negotiated this year. They had threatened a strike last month and complained loudly that the airline had forced them to swallow too many concessions over the years.

A spokesman for CUPE said the flight attendants union is watching the situation between Air Canada and CAW, but would not comment further.

The agreement reached during the summer with CAW still stands for now, Lewenza said, but the implementation of the new pension scheme is on hold.

Lewenza has sent a letter to Air Canada president and CEO Calin Rovinescu asking him to withdraw the company's request for review.

"I must say that in my many years as an elected CAW-Canada trade union representative there are few other employer decisions which I can identify as being as harmful and destructive to a collective
bargaining relationship as this decision,'' he wrote.


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