Changing collective agreements on the fly

‘Reopener’ clauses in collective agreements are on the rise
By Lorna Harris
|Canadian HR Reporter|Last Updated: 09/17/2006

Struggling with financial difficulties and facing a likelihood it would have to close its doors, Gestion Jacques Champagne, a Montreal grocery store that is a licensee of Provigo, approached its unionized employees to ask for their co-operation. The store needed to open the collective agreement and reduce wages by 10 per cent.

The union refused and, soon after, the employees’ worst fears were realized. The store closed, putting 26 employees out of work. In hindsight, the union may have erred in rejecting the employer’s attempt to open the collective agreement. But its reluctance is not surprising.

Changing the terms of a collective agreement mid-term is not something either unions or managers do readily. This is chiefly due to the instability it could introduce into the workplace and labour relations.

“Reopeners are rare and generally not recommended,” said Jamie Knight, a management-side labour lawyer and a partner at Filion Wakely Thorup Angeletti in Toronto. “The problem is you limit the overall scope of bargaining, which means that it is difficult to build momentum or create an opportunity for trade-offs.”

However, there are times when reopening the collective agreement cannot be avoided — often when the business is at its most unstable such as during a bankruptcy, a sale or a merger. When Air Canada merged with Canadian Airlines in 2000, several unions renegotiated contracts on behalf of thousands of employees.

As a general rule, a collective agreement cannot usually be changed without the specific inclusion of a reopener clause in the agreement, special dispensation from the appropriate labour relations board or agreement by the parties in a letter of understanding in response to an unforeseeable calamity during the agreement’s term.

Averting disaster

In the case of Air Canada, collective agreements were reopened again in 2003 and 2004 in an attempt to avert disaster. As a result of competition from discount airlines and the effects of the Sept. 11 terrorist attack, Air Canada was facing bankruptcy.

In response, the unions representing pilots, customer service and sales employees, maintenance employees and flight attendants agreed to new agreements with wage cuts ranging from 2.5 per cent to 15 per cent in the first year. All of the agreements contained a wage reopener clause taking effect in June of this year.

Similarly facing bankruptcy, Hamilton-based steelmaker Stelco Inc. hammered out a restructuring agreement in 2005 with the United Steelworkers union under the terms of the Companies’ Creditors Arrangement Act (CCAA). In June 2005, the federal Liberal government introduced Bill C-55, which will provide for the reopening of collective agreements during the restructuring of a business facing bankruptcy. (The bill, which received royal assent last November, has not yet come into force.)

Sometimes a reopener occurs as a result of a conflict between workers within a single workplace. In 2000, union and management at dairy company William Neilson Ltd. in Georgetown, Ont., jointly agreed to reopen their collective agreement. At the time of the original negotiations, a generous severance package had been put in place. But by 2003 the remaining employees felt they had unduly sacrificed the wage increases they felt they deserved. The agreement was reopened to provide for wage increases and bring down severance to the minimums provided by the Employment Standards Act.

No reopener clauses

On rare occasions, a contract can be opened without either a wage reopener clause or looming financial crisis. At Invar Manufacturing, a Batawa, Ont.-based manufacturer of precision machined products, wages for mechanics and electricians were set at $21.28 for 2005, the final year of the contract. However, market competition made it necessary for their wages to be re-negotiated upwards to $25.40.

Although there was no formal wage reopener, “the employer came to us in a panic,” said IAMAW representative Bill Shipman said. “He was under threat of losing all his skilled tradespeople.”

But it’s rare to see parties renegotiate a contract without a reopener clause. Wage reopener clauses are now common because many collective agreements run for much longer now than in the past, said Allan Foster, a retired union representative of the National Association of Broadcast Employees and Technicians and later of the Communication, Energy and Paperworkers Union.

“It is not uncommon to have an agreement last four to five years, and concerns about what inflation may do to wages that far down the road can result in a wage reopener for the final year or two,” he said.

Typically, only wages may be discussed during these wage reopener discussions. Another way of handling the threat of inflation is through a cost-of-living-allowance clause. Such clauses typically do not require parties to return to negotiation.

Some variations

A variation of a reopener is a “me too” clause, which is frequently seen in public-service agreements, and do not require renegotiation. With this clause, wage rates for one union will change in relation to changes in the wages for other bargaining units.

At the British Columbia Institute of Technology, an agreement with the faculty and staff association includes a me-too clause based on the outcome of the B.C. government’s negotiations with the British Columbia Government and Service Employees’ Union (BCGEU). Salary increases greater than 1.5 per cent compared to the BCGEU master agreement would result in equal increases for the faculty and staff association.

Competitive needs

Often parties will write a reopener into the contract when there is unusual competition for workers with special talents or skills. In the broadcasting agreements Foster negotiated, there was often an “artistic ability or talent” clause under which the employer could hire a “crackerjack” employee and pay them above the negotiated fair rate in the collective agreement. However, the union objected if the employer also tried to provide other benefits, like vacation, said Foster.

University faculty associations also have a minimum fair rate written into agreements with universities, the proviso being that the university may hire talented academics with salaries above what is in the collective agreement. However, the clause must appear in the agreement for this to be legal. Such clauses are designed to take into account “external marketability.”

The need to stay competitive is also why J.M Schneider, a Kitchener, Ont.-based meat packing firm, and its employees’ association signed a letter of understanding in 2000. The letter permits wages to be reopened if the average wage of Schneider’s competitors exceeded its average wage. This type of situation often involves increasing wages to attract the skilled trades, which are often in short supply.

Most collective agreements set out provisions for situations involving potential job loss as a result of technological change or contracting out. Occasionally this may involve a reopener. In the agreement between the City of Toronto Civic Employees’ Union and the City of Toronto, for example, if attempts to solve a dispute over job redeployment fail, the parties will request arbitration with respect to reopening the job security article to make “possible changes to the language” of that particular clause of the agreement.

Finally, in a “good solid working relationship” with an employer, informal reopeners can occur when something unpredictable comes up, Foster said. For example, in collective agreements in broadcasting, there are definite rules about hiring part-time or casual employees. However, when unexpected production needs or a sudden illness in a legitimate need to hire a casual employee, employers could seek a “temporary waiver so that hiring a temporary worker was done legit.”

Lorna Harris is the assistant editor of Canadian HR Reporter’s sister publication CLV Reports, newsletters that report on collective bargaining and other issues in labour relations. She can be reached at (416) 298-5141 ext. 2617 or lorna.harris@thomson.com.

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