CN, unions clash over pension payouts
Published: February 25, 2008
Source: Globe & Mail - Brent Jang
Canadian National Railway Co. and its unions are clashing over
the right of employees to retire with a lump-sum payout from the company
pension plan before they turn 55, shedding light on the carrier's
struggles to retain aging baby boomers who would rather call it quits
The case is slated to be presented to arbitrator Michel Picher in April, with CN's unions arguing that management effectively rescinded a rule that allowed long-time workers to cash out, typically at age 53 or 54.
For workers who started at CN in their late teens or early 20s, the pension payout would often surpass $500,000 or even $700,000 in some cases for conductors and engineers who put in long hours away from home, the unions say.
In complaining about scaled-back pension benefits, the unions plan to point to an internal memo from mid-2006, when CN senior vice-president of human resources Les Dakens expressed concern about a flurry of early retirements.
"We have recently seen an increase in the number of employees resigning from the company and requesting the lump-sum option," Mr. Dakens wrote, explaining CN's decision to clamp down on early retirements. "The growing practice of withdrawing the lump sum from the Pension Trust Fund prior to reaching the earliest retirement date, age 55, can be detrimental to the financial health of the plan."
The Canadian Auto Workers union is filing the pension grievance, backed by others such as the Teamsters Canada Rail Conference, United Transportation Union and International Brotherhood of Electrical Workers.
"With the large number of baby boomers becoming eligible for retirement in the coming years, CN has a strong interest to retain qualified and experienced employees," Mr. Dakens said.
The CAW is asking the arbitrator to review whether Montreal-based CN was entitled to reduce the "deferred pension or commuted value" of a pension by 60 per cent, if employees quit or are fired before age 55.
Last year, CN chief executive officer Hunter Harrison estimated that half of CN's unionized work force of 12,200 people could retire within the next decade.
Mr. Harrison added that a 15-day strike in February, 2007, could be traced to a clash between a pension-focused, aging work force and management's desire to recruit young employees willing to tackle flexible hours and work weekends.
"As our employees retire, we are recruiting new employees who have values based on today's society. Our new employees are less interested in pensions than they are in knowing they have schedules," wrote Mr. Harrison in an internal memo to employees.
His comments upset union leaders, but CN officials later said that the CEO's remarks were misunderstood, emphasizing that the railway is keen to keep veteran employees on its payroll.
A CN spokesman declined comment Friday, noting the pension dispute is scheduled to go to arbitration. In a statement last year, CN assistant vice-president of public affairs Mark Wallace stressed that "we have increased the incentive to work longer to reach retirement age. We have removed the mandatory retirement age of 65. We are also developing a retiree-coach program, to hire retired railroaders to coach new staff."
Mr. Wallace defended the railway, saying that "CN has one of the best pension plans in Canada, and the company is proud of that."
Union officials also fear that CN is poised to effectively penalize employees who retire between the age of 55 and 65.
The CAW asserts that "CN has refused to guarantee in writing that it will honour its statement of intent" to grant crucial "consents" to workers who opt for early retirement even after they turn 55.
"CN has advised that it will challenge the arbitrator's jurisdiction to hear any matter related to the pension plan," the CAW said. "The union replies that pensions have always been the subject of collective bargaining, therefore disputes can go to arbitration."
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