CN, unions clash over pension payouts
Published: February 25, 2008
Source: Globe & Mail - Brent Jang
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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with CN's unions arguing that management effectively rescinded a rule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
"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
"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."
CANADIAN NATIONAL (CNR)
Friday close: $52.75, up 18 cents