Arbitrators can face an especially invidious task in deciding on an equitable outcome when blending seniority lists, especially after the merger of giant organizations. Air Canada’s purchase of Canadian Airlines is a recent example of this challenge. In a policy manual devoted to merger issues, one of the pilots’ unions notes that there may be “no consensus of what is fair and equitable” in seniority merger cases. As the arbitrator in the case noted, “I can safely attest to that.”
In fact, what may seem a workable solution at the time can be torpedoed by subsequent events. The arbitrator mentioned an “extraordinary letter of regret” another arbitrator wrote after his attempts to balance equities unexpectedly failed and left a group of pilots without prospects for the work he had tried to guarantee for them. In that situation, after CP Air purchased Eastern Provincial Airways, the arbitrator tried to balance length of service with several other factors “peculiar to the merger.” He discounted the full service of Eastern Provincial pilots but granted them a “fence” around their positions in Halifax. Unfortunately, “within months, the new, merged airline decided to close the base at Halifax, and the intended balance…was gone.”
The takeover of Canadian Airlines by Air Canada meant that several seniority lists had to be merged, the most contentious were the lists of pilots. In fact, as the arbitrator in the case involving the pilots’ associations observed, “the historic rivalry between Canada’s two mainline air carriers runs particularly deep on the pilot side.” The underlying reason is that seniority ranking governs the life of pilots. Seniority determines the type of aircraft they fly, the salary they earn and their “domicile” rights, through which they can bid on routes and exercise their rights for vacation and time-off.
Complicating the issue were two other factors. One was the circumstance of the merger: By Christmas of 1999, Canadian Airlines was only two days away from bankruptcy and unable to meet the payroll of 16,000 people. Because of this, “the die was…dramatically cast against Canadian with respect to it own independent prospects for survival,” said the arbitrator.
Using a strict date of hire method to determine seniority would have meant that most of the pilots of the successful purchasing airline would have lost their seniority to the group from the stagnating airline. Not only that, but a large number of pilots on the Air Canada roster were older pilots with many years of service — just not many years with Air Canada (pilots lose seniority when they move from one airline to another).
“This is simply one of those cases where ‘date of hire’ cannot be made to fit,” said the arbitrator.
The other fact was “the disparity in hiring patterns and thus current seniority lists.” Canadian Airlines’ hiring to all intents and purposes ended in 1990. The recession of the early ’90s vitiated Canadian Airline’s efforts to re-structure financially. Even when the economy improved, Canadian Airlines “was too cash-strapped to plumb the opportunities.” As the arbitrator notes, “the result was a huge imbalance” in the current demography: with the majority of pilots in a stagnant airline bearing dates of hire of 1990 or earlier and a “fast-growing, increasingly prospering airline” with almost half its employees hired after 1995.
In the face of these circumstances, the challenge to be fair and equitable is daunting indeed.
The arbitrator drew attention to the decisions of several other arbitrators who dealt with similar issues in the airline industry both in Canada and in the United States. Some solutions he cited included dovetailing the lists, discounting service, using a ratio or applying a “fence” to protect the interests of one group for a limited duration of time. He concluded that “there is no established principle that points to ‘date of hire’ as the model of choice.”
Knowing that despite an arbitrator’s best efforts, things may go awry, the arbitrator in this case noted the principles on which he based his decision. In the first place, he realistically observed that the “matter falls to be determined on the basis of what happened; not what might have been.” The employees of the failing organization also had to admit that realistically they could not win everything they wanted. Although the place to start was with the dates of hire, it was not the only criterion. The arbitrator had to look at all criteria especially the equities at the time when the merger occurred.
His goal was two-fold: to try to “neutralize the disparities in the dates of hire” and to “fairly evaluate the contributions made by each of the groups to the ongoing enterprise.” In addition, he had to take into account the no-layoff policy in the collective agreement, which extended on the Canadian Airlines side until 2005, but he also warned that pre-existing Air Canada employees should not be laid off as a result of the Canadian Airlines-rescuing merger. “It is necessary for me to build into this award a protection against that for some time in the future,” he wrote.
His solution was a ratio based on the number of Air Canada pilots compared with the number of Canadian Airlines pilots — but with a few wrinkles that would build in what he termed an appropriate balance between the two groups.
In the first place, the arbitrator gave a premium to the Air Canada pilots by making the ratio 1.92:1 rather than the straight ratio of 1.73:1 called for by the strict application of the math — 2,180 pilots on the Air Canada side divided by 1,258 on the Canadian side. For all intents and purposes, this would mean on the seniority list there would be two Air Canada pilots, followed by one Canadian Airline pilot, until the list was exhausted.
He further massaged the ratio by creating four categories of employees based on decreasing seniority levels. First, he integrated the two lists of pilots flying wide-bodied jets in a ratio of three Air Canada pilots to one Canadian Airlines pilot. This is the most senior group of pilots, some — from Air Canada in particular — with dates of hire extending back to 1976. Then, he put the next groups of pilots from the two airlines into a category with a ratio of 1.55 to 1, a decision by which he intended to enhance the position of the Canadian Airlines pilots.
The third category encompassed the next 400 pilots (300 from Air Canada to 100 from Canadian Airlines). This three to one ratio favoured the Air Canada group. Finally, noting the break in the hiring dates at Canadian Airlines occurring from the end of the ’80s to early 1997, he created the fourth category consisting of all “pilots from Canadian who were not on the property at Canadian until 1997 or later.”
He added two more protections for the Air Canada pilots. Those that could fly wide-bodied planes would continue to have sole bidding rights for positions until Jan. 1, 2006, according to the ratioed list. Not only that, but no former Air Canada staff were to be laid off until 442 former Canadian Airlines pilots were let go.
In trying to avoid the blunt stick of end-tailing, which would have given the Canadian Airline pilots an overwhelming advantage due to their years of seniority, the arbitrator constructed a formula which he hoped would balance the equities and lead to a fairly seamless integration of the two workforces. The long-term outcome remains to be seen, but as with almost every other seniority merger of this type, immediate reactions from the associations representing the pilots and from individual pilots themselves have been decidedly mixed, with Canadian Airlines pilots unhappy with the ruling.
This arbitration occurred before the events of Sept. 11. For more information: Air Canada Pilots’ Association and the Airline Pilots’ Association, Canada Labour Code Arbitration, M. G. Mitchnik — Sole Arbitrator, March 31, 2001.
Lorna Harris is the assistant editor of CHRR’s companion publication CLV Reports, a newsletter that reports on collective bargaining and other issues in labour relations. She can be reached at (416) 298-5141 ext. 2617 or email@example.com. For CLV Reports subscription information, contact 1-800-387-5164.