Air Canada appeals arbitrator’s pension ruling

Air Canada (AC.A-T1.36----%) is trying to overturn an arbitrator’s decision that backs a union plan to create a novel pension system for new sales and service agents.

The Canadian Auto Workers union, which represents 3,800 employees stationed at airport counters and call-in centres, said it is “astonished” by Air Canada’s notice that it will appeal the arbitrator’s pension ruling made last month. The fight over pension reform led to a three-day strike in June, but the two sides had agreed to let arbitrator Kevin Burkett resolve the impasse.

Mr. Burkett sided with the CAW’s proposal to launch a hybrid system for new hires that blends the company’s traditional defined-benefit pension with a less costly defined-contribution plan. Air Canada wants to stop new hires from entering the defined-benefit system and instead place them entirely into defined-contribution pensions.

Ken Lewenza, the CAW’s national president, said he is “disgusted” by management’s legal manoeuvring, describing it as “harmful and destructive to a collective bargaining relationship.”

He said it shouldn’t matter who won or lost in the pension case because the two sides agreed in advance that any decision by the neutral arbitrator would be binding.

Air Canada filed its application for judicial review with the Federal Court of Canada and Ontario Superior Court of Justice.

Montreal-based Air Canada believes that there were flaws in the arbitration process and the three-person board chaired by Mr. Burkett didn’t properly address the issue of the long-term sustainability of the airline’s pension system.

“The board acted without jurisdiction or acted beyond its jurisdiction,” Air Canada said in its legal filings. “The board erred in failing to consider, misapprehending and ignoring the actuarial evidence.”

The filings say a new arbitration review is required and also accuse the CAW of unfairly amending its final offer on pension reform.

“This move to judicial review by Air Canada violates our agreement and should be rescinded forthwith,” Mr. Lewenza wrote in a letter to Air Canada chief executive officer Calin Rovinescu. “The company’s current legal action is unprecedented in character and should be withdrawn.”

Management’s move against the CAW will place further strain on labour relations at the airline, which has been embroiled in a bitter dispute with its 6,800 flight attendants over wages, working conditions and a proposal to start a low-cost carrier.

Mr. Lewenza and other CAW leaders said in a memo to members that talks have been cancelled between the union and Air Canada actuaries, halting the implementation of the hybrid pension for new hires.

“This is absolutely unconscionable and reflects the arrogance and lack of respect for the process and our members,” the CAW said.

Air Canada is striving to control its retirement-related costs as it grapples with a $2.1-billion pension solvency deficit. The airline averted a financial crisis in 2009 with the help of its unions, which supported measures to provide pension funding relief.

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Source: Globe&Mail