Employers can ask unions to re-open collective agreements mid-term to reflect market reality — but there are hurdles (such as getting unions to agree)
Scarcely a week into 2009, Canadians learned the economy was in recession. We have now endured a full six months of pain and suffering, and although there are rare success stories and the Bank of Canada expects the country to exit the recession in the next quarter, the economic streetscape is littered with bankrupt companies and job losses.
Against this backdrop, the majority of unionized Canadian companies are bound by collective agreements providing wage rates and benefits reflective of much healthier economic times. Simply stated, collective agreements negotiated over the past three years may challenge some companies wishing to remain economically viable in the current business climate. Is now the time to reconsider your collective agreement?
Many people believe wages and benefits provided in a collective agreement must remain fixed to the terms previously negotiated. However, there is a silver lining in every economic cloud and this may be the time for companies to consider re-opening collective agreements to negotiate wages and benefits that reflect market reality.
In times of economic growth, it is extremely difficult to re-open a collective agreement to reduce wages and benefits. Moreover, laying off workers or closing facilities is fraught with difficulty and subject to significant challenge by the unions. Beyond the obvious “share the wealth” worker perception in a positive growth economy, there are a number of legal hurdles that management is frequently forced to clear.
For example, if management wishes to re-open a collective agreement to reduce wages and benefits, and supports such a request by layoffs or closures, the law requires the company to establish its decisions are bona fide business decisions, without any taint of anti-union animus. Even if a collective agreement grants the company an absolute right to lay off employees, to determine workforce needs or close facilities, such decisions are always subject to arbitral scrutiny based upon the “bona fide business decision” analysis.
Naturally, unions will expect management to provide backup for its decision. The onus is generally upon the union to establish the company has exercised its management rights in a manner that is arbitrary, discriminatory or in bad faith. Practically speaking, however, the onus is easily shifted and companies often must defend decisions to lay off employees or close facilities before arbitrators and labour relations boards.
It is illegal for an employer to lay off or close down operations if its decision is not completely free of a desire to avoid a union certification or obligations under a collective agreement. While the effect of the layoff or closure may be the defeat of union certification or collective agreement obligations, provided such action was fully supported as a bona fide business decision and free of any anti-union animus, decision-makers are likely to support the company’s actions. But in tough economic times, layoffs or the closure of unprofitable facilities (whether temporary or permanent) are far easier to justify and less likely to be interfered with by unions or decision-makers.
Although some collective agreements allow either party to seek, of the other, an amendment or variation of the collective agreement during its term, such wording is not necessary for the company to go to the union and formally request the re-opening of a collective bargaining agreement. This is usually undertaken by virtue of a letter addressed to the union outlining the request and the necessity of same in order to avoid layoffs.
Provided this can be supported as a bona fide business decision in the face of economic performance or market pressure, it is unlikely to be attacked. Moreover, it has been held the legislated “duty to bargain in good faith” does not apply to the varying or amendment of a collective agreement during its term. Hence, companies generally enjoy far greater latitude in negotiating a change to the terms of a collective agreement during its operation outside of the normal collective bargaining.
Unions are not obliged to agree to a request to re-open a collective agreement and seldom give in to any proposal that includes a reduction of wages or benefits. Faced, however, with significant layoffs of their members, many unions eventually recognize the necessity of co-operating with employers to meet economic challenges.
Although many employees will undoubtedly take issue with any agreement to reduce wages or benefits, it has been held a collective agreement is a contract made between the employer and the union, rather than individual employees, and, therefore, a decision by a union to re-open a collective agreement in the face of an employer request is not easily subject to challenge.
Clearly, it is worthwhile to consider re-opening an agreement mid-term to seek amendments that reflect economic realities. In July, Ford Motor Company did just that, advising the Canadian Auto Workers union its collective agreement needed to be re-opened to remain competitive. Scores of other companies have quietly been doing exactly the same thing.
The corollary to “share the wealth” is “share the pain” and many progressive unions (and their leadership) are realizing this. Inevitably, many unions understand that saving their members’ jobs requires a new kind of partnership with employers, which includes an openness to finding innovative solutions inside and outside of collective bargaining.
However, provincially regulated companies may wish to consider employment standards regulations that state employees who are terminated as a result of the economic consequences of a strike or lockout may not be entitled to termination pay or severance pay. Unless the collective agreement provides for a specific entitlement to termination pay or severance pay, there is ample motivation for a union to support changes to a collective agreement that will keep members employed, particularly to avoid a strike or lockout situation.
Regrettably, reality has not yet set in for some unions, particularly in the public sector. Many workers are forced out of their jobs because their unions remain intransigent, seeking to believe the public purse will eventually open up. Fortunately for public sector workers (and unionized employees everywhere), unions can no longer penalize members with heavy fines when they wish to cross the picket line and go back to work.
Undoubtedly, the current economic climate provides all parties with an opportunity to seriously rethink their current collective agreements and, particularly, their negotiation strategy. As we weather this storm, companies, unions and workers will have to realize remaining in business will require collaboration, not confrontation.
John-Edward C. Hyde is a past HR manager and currently a partner in the labour and employment group with the law firm Blaney McMurtry in Toronto. He can be reached at (416) 596- 2884 or [email protected].