Unifor accepts mediator’s recommendations around Co-op pension changes

The nearly four-month lockout at the Federated Co-operatives Ltd. refinery in Regina over pension changes could be nearing an end.

However, while Unifor has accepted recommendations from an independent mediator, the Co-op Refinery Complex said in a statement it’s unable to accept the recommendations in full and will have to make modifications out of its responsibility to its employees, co-op owners and customers.

Due to “stark world developments,” said the statement, referring to the impact of the coronavirus, global circumstances have changed. “We have seen a drastic decline in the consumer consumption of fuel and rapidly declining oil prices that have put the CRC in a more difficult financial position than when negotiations began.

Read: Co-op Refinery employees locked out over protracted pension dispute

“Like all businesses, the refinery is now reassessing how to manage through the financial turmoil. As a company, we must consider how to reduce costs, delay capital spending, protect jobs and make decisions around cancelling projects that are no longer viable. As negotiations proceed, the CRC will ultimately need to make decisions that are responsible and responsive not only to its employees but also to our local co-op owners, customers and the broader communities across Western Canada.”

The Co-op employees’ defined benefit pension plan was central to the stalled contract negotiations. Historically, the DB plan was fully funded by Co-op, but the company said it wanted employees to begin paying 11 per cent of total contributions. It also wanted to reduce the benefit multiplier from two to 1.75 per cent and cut the indexing maximum for retirees from five to three per cent.

On March 19, independent mediator Vince Ready presented several comprehensive recommendations, noting “the most contentious issue in this dispute is the employer’s proposal on pensions.”

At present, the Co-op is paying about 23 per cent of each bargaining unit employees’ gross annual earnings to meet its obligation to fund the DB plan, noted the mediator’s report. In the previous round of collective bargaining, the parties agreed that new employees would join and jointly fund a defined contribution plan. Under the new plan, the employer would make a six per cent contribution for each employee and they would contribute up to four per cent of their earnings. In addition, the Co-op would be required to match employee contributions for a total combined contribution of up to 14 per cent of employees’ annual earnings.

Read: Head to head: Is Canada’s pension future DB or DC?

Also in the last round of negotiations, the parties agreed current members of the bargaining unit would move from a DB to a DC plan. As an incentive to do so, the Co-op offered to pay a retirement allowance to employees who made the switch. According to the employer, the retirement allowance was meant to compensate employees transitioning into the DC plan for loss of the bridging benefit available under the DB plan.

“During the meetings with the special mediators, the union tabled a proposal that would largely preserve the DB plan for members who are currently enrolled in this plan and which it believes addresses the employer’s concerns regarding uncertainty and magnitude of future costs arising from the DB plan,” said the report. “. . . The union’s proposal is to merge the current DB plan into an established plan within the pulp and paper industry. The Pulp and Paper Industry Plan is administered by a board of trustees comprised of six union representatives and three employer representatives selected from among those covered by the PPIP.”

The details of Unifor’s proposal includes:

  • the immediate transfer of bargaining unit employees presently enrolled in both the DC and DB plans into the PPIP;
  • Employer contributions of 10 per cent for employees presently in the DC plan and employee contributions of eight per cent for these employees;
  • Employer contribution of 20 per cent for employees presently enrolled in the DB plan and employee contributions of four per cent for these employees; and
  • The employer is no longer responsible for any pension liabilities beyond employer contributions.

Read: Unifor blockade continues at Co-op refinery after pension talks break down

According to the report, the employer rejected the union’s proposal to merge the DB plan with the existing PPIP for reasons set out in its submission, including that it objects to the 20 per cent contributions proposed for employees who are currently in the DB plan.

“Further, the employer states the union’s proposal leaves ‘great uncertainty’ around the pension merger and posits that to ‘kick the can down the road’ in this manner leaves open the prospect of a near future labour dispute,” said the report. “The employer also objects to the fact that the union’s proposal would take the pension outside of its control and leave future retirement benefits and the amount of employee contributions ‘uncertain.’”

Finally, the independent mediator recommended the following changes to the DB plan:

  • Effective on ratification, employees enrolled in the DB plan will commence contributing four per cent of final average earnings as employee contributions into the DB plan;
  • As of Feb. 1, 2022, members of the DB plan will commence contributing eight per cent of final average earnings as employee contributions into the DB plan;
  • The accrual rate will be maintained at two per cent of final average earnings with no Canada Pension Plan-related reduction applied at age 65 as presently exists in the DB plan; and
  • No indexation on service post June 30, 2020 and consumer price index capped at a maximum of two per cent for pre-July 1, 2020 service.

Read: Unifor head arrested in union blockade over pension dispute

“In addition to the above, we also recommend that employees who choose to move from the DB plan to the DC plan over the term of the renewed collective agreement be eligible for the employer’s early retirement allowance as proposed in bargaining,” noted the report.

On Sunday, Unifor said its Local 594 bargaining committee has accepted the recommendations and will be encouraging their members to accept the deal. Members will vote electronically on March 23.

“To be clear, our committee is not thrilled with the final report and the significant changes that are recommended,” said Jerry Dias, the union’s national president, in a press release. “We have been trying to find a solution since we were locked out on Dec. 5, 2019. It is time to end this dispute and have our members running the refinery in these unprecedented times.”