Sustainable pensions key bargaining issue in 2012

Pensions the single issue over which unions are prepared to ‘fall on their swords’: report
By Danielle Harder
|Canadian Labour Reporter|Last Updated: 01/03/2012

There will be many challenges to collective bargaining in the coming year, not the least of which is the economy. But there are other significant issues that will also have to be addressed at the bargaining table, according to the Conference Board of Canada’s Industrial Relations Outlook 2012.

The annual report is based on input from employers and trade unions across the country. It suggests in addition to wages, a number of other complex issues — including pensions, the aging workforce and a shortage of skilled labour — will also put pressure on negotiators.

Pensions, the report observes, have become the single issue over which unions will “fall on their swords.”

While defined benefits (DB) are still the most common, it’s mainly due to their dominance in the public sector. In the private sector, DB plans have fallen sharply while defined-contribution (DC) plans nearly doubled between 1991 and 2006.

The highly publicized dispute with flight attendants at Air Canada earlier this year has put a renewed focus on a hybrid model which blends the two.

Although arbitrator Kevin Burkett favoured the hybrid solution proposed by the CAW, the Conference Board questions whether it will become a “universal” solution given the two parties were forced to arbitration by federal government intervention.

However, the decision is still a cautionary warning for employers, suggests the CAW’s Jo-Ann Hannah.

“Employers are going to think twice before they start demanding DC for new hires,” she writes.

For private-sector employers facing substantial legacy costs, this compromise may still not be enough to ensure the sustainability of existing DB plans, says the report.

CEP members know this first hand. Many of the union's employers have faced bankruptcy, including at Nortel, leaving workers without pensions. The report says the promise of pensions in the private sector is “illusory.”

This is in part why the CEP has been increasingly focusing on developing hybrid plans managed under joint trusteeship.

CEP president David Coles says unless both sides are prepared to take a long-term view and adopt a more pragmatic approach, the pension issue will become increasingly divisive.

“On a deeper level, this is about relationships,” he says, “and unless both parties make an effort to find solutions there will be ongoing conflict at the bargaining table.

“The challenge is to develop pension plans that do not place undue and onerous risk on the employers while providing workers with reasonable pension benefits that can be delivered.”

Even in the public sector, where pensions are more robust, there are challenges.

In Newfoundland and Labrador, for example, the government recently chipped in $2 billion to the teachers' pension plan and another $1 billion to the public sector's plan.

Claude Tremblay, director general of workplace relations and compensation directorate at the Canada Revenue Agency, says all levels of government will have to address public-sector pensions — especially given the fact roughly two-thirds of Canadian workers (mostly in the private sector) do not have access to employer-funded pension plans.

The report notes while many public-sector pension plans are funded through equal contributions from employers and employees; in many plans those contributions now equal about eight per cent of payroll for each party.

David Vipond, director of negotiations and human resources with the BCGEU, says the pension issue will deepen as more baby boomers take advantage of early retirement provisions.

However, he says there's no immediate motivation to deal with the issue because pension benefits are not directly negotiated in collective bargaining in many jurisdictions.

“Everybody understands that these issues must be discussed now, but inertia takes over and it is easier to do nothing rather than something,” he writes.

While it’s been on the horizon for decades, the report suggests the impending labour shortage will arrive in the coming year.

The challenge, according to Geoff Williams, assistant deputy minister of labour relations in Newfoundland and Labrador, is retaining workers within the existing union model.

One suggestion is a mechanism to allow retirees to work part-time while still receiving pension benefits. Another is to remove the barrier created by collective agreements that place emphasis on seniority, making it difficult for new graduates to be hired.