Human Resources Committee on April 26th, 2010

[The Chair, Conservative, Candice Bergen]

We had a few things that we had to discuss as a committee, so it was perfect timing.

I'll just introduce you, Mr. Farrell.

[John Farrell]

Okay. Thank you.

[The Chair, Conservative, Candice Bergen]

For the record, we are continuing our study of Bill C-395. We welcome John Farrell, executive director, Federally Regulated Employers--Transportation and Communications, also known as FETCO.

Mr. Farrell, you'll have 10 minutes to make a presentation, and then we'll begin questions.

Thank you.

[John Farrell]

Good afternoon. I have provided the clerk with a copy of my remarks and I had one given to the person who is doing the translation.

I apologize for being late. I had several family issues I had to deal with today.

In any event, I am John Farrell, executive director of Federally Regulated Employers--Transportation and Communications. I thank you for allowing me to appear before the committee.

FETCO is an organization consisting of a number of major employers and employers associations in the federal jurisdiction in the transportation and communications sectors.

A list of FETCO members appears in appendix A of our document, which you don't have, so for the record, the companies that are represented by FETCO include: Air Canada; the BC Maritime Employers Association; Bell Canada; Canada Post Corporation; Canadian Airports Council; Canadian Association of Broadcasters; Canadian Broadcasting Corporation; Canadian National Railway; Canadian Pacific Railway; Canadian Trucking Alliance; FedEx; Maritime Employers Association; Nav Canada; Purolator; Telus; Western Grain Elevator Association; WestJet; and VIA Rail Canada.

FETCO has approximately 586,000 employees, of which 212,000 are union members.

Bill C-395 proposes to extend the qualifying period for employment insurance benefits by the period of time that a labour dispute, either a strike or lockout, is in progress. Currently, the Employment Insurance Act does not permit employees to count this time, which is indefinite, as part of the qualifying period.

Strikes and lockouts are permitted by the labour laws in all jurisdictions in Canada as a means for parties in collective bargaining to exercise economic leverage to achieve their collective bargaining objectives and determine the terms and conditions of employment. When a strike or lockout occurs, one party or the other is not willing to accept the proposed terms and conditions of employment. The strike is considered a fundamental right by unions.

Strikes are far more prevalent than walkouts. According to data I have secured from HRSDC, 83% of work stoppages over the last 15 years have been strikes and 17% were lockouts. Lockouts are seldom used by employers because, fundamentally, employers are interested in continuing to operate their businesses, not shutting them down.

Employees engaged in a strike do so of their own free will. They withdraw their services in order to inflict economic leverage over their employer to accomplish their collective bargaining objectives. Union members have choices. They vote to provide their union with a strike mandate. They vote to reject or accept a company proposal for a settlement. They vote on whether or not to engage in strike activity.

In a strike situation, union members exercise discretion to remove their services and not to engage in gainful employment with a particular employer. While on strike or lockout, employees are usually entitled to receive strike pay, and this strike pay is not taxable. Contributions as employee union dues are tax deductible, and when employees receive strike pay they're not required to pay tax on that strike pay, so in a sense they are receiving tax-free income while they're receiving strike pay.

In some cases, employees are entitled to receive as much as $400 or $500 a week in strike pay, which, on a tax-free basis, is quite extensive. This doesn't happen in all cases, but with certain unions that have a habit of subsidizing strike activity from one bargaining unit to another, such as the Communications, Energy and Paperworkers Union, sometimes the strike pay can be as high as $400 or $500 per week.

Employees are also free to seek gainful employment with other employers while they're on strike or lockout.

In the case of a lockout, it is clear that the company initiates the action. Usually a lockout occurs because the employer has economic or operating imperatives that must be met for the good of the business, and unions and employees are unwilling to accept the terms and conditions of employment.

In some cases, lockouts are required to counteract disruptive union tactics, such as costly rotating strikes, or threats to the business if a strike is likely to occur at an inopportune time and could cause severe economic harm to the business. In other words, lockouts are generally used by employers in response to potential strike activity as a tactical defence to manage the business in a way that is most appropriate for the company.

Lockouts, like strikes, are also discretionary. There's no doubt about that. Lockouts are part of the process permitted by the labour laws, just as strikes are.

Permitting employees on strike or lockout to extend their entitlement to employment insurance benefits will substantially reduce the incentive for employees to seek a compromise in the case of lengthy strikes.

There are situations covered by the Employment Insurance Act where the current qualifying period may be extended. They include, as you probably know: illness; injury; quarantine; pregnancy; confinement to a prison or jail; and when someone is receiving certain assistance under employment benefits programs or is receiving benefits under provincial law on the basis of having to cease working because continuing to work would result in danger to a person, unborn child, or a child that is breastfeeding.

These situations are not discretionary, unlike the situation with respect to strikes, and it makes sense for the legislature to extend the qualifying period in these non-discretionary circumstances.

Furthermore, employment insurance is a program supported by employers and employees, both union and non-union. Employers pay 58% of the premiums. EI provides benefits to employees who are temporarily unemployed through no fault of their own, not because they are engaged in a labour dispute over the terms and conditions of employment. This is unfair to employers and non-union employees, both of whom are contributing premiums to the employment insurance fund.

It is appropriate for the qualifying period to be 52 weeks and it is appropriate to have reasonable proximity in timing between gainful employment and the receipt of benefits. Striking or locked-out employees are out of the labour market because of a labour dispute, not because they are unemployed and actively seeking employment. Furthermore, employees on strike or lockout are free to seek alternate employment and are also entitled to receive tax-free strike pay while on strike or lockout.

Extending the qualifying period indefinitely for the period of a strike or lockout is unfair to employers. It is contrary to the long-standing principle that employment insurance should remain neutral when it comes to labour disputes.

Madam Chair, that is the extent of my remarks to the committee.

[The Chair, Conservative, Candice Bergen]

Thank you very much, Mr. Farrell.

We will begin our round of questions for members of the committee. The first round consists of seven minutes for each member.

I'll begin with Madam Minna, please.

[Maria Minna, Liberal, Beaches—East York, ON]

Thank you, Madam Chair.

Welcome to our meeting this afternoon.

I just want to check a couple of things. This bill applies only to those people who would lose their jobs after a strike is over; it would not apply to everyone en masse. If for any reason people are laid off after going back to work following a strike, that's when it would apply. I suspect the number laid off probably wouldn't be very large unless the company was shutting down one way or another.

I understand that you say these strikers have a vote, but you and I know what the difficulties of negotiations are. Sometimes it's not a matter of choice; you get to impasses. It's not as if the workers always have a choice. I've seen it on both sides. But can you tell me why you object to their receiving assistance? That's one question. This bill only covers them after they become unemployed.

The other question deals with your point that they can get employment elsewhere. However, that employment would be considered in any case in the EI process, so that if they were to earn a full-time salary, that period wouldn't be counted. It would be considered in the equation and would cancel itself out. It's not an issue for this bill in that sense, I don't think.

I have another question for you, but could you just touch base with me on what your major issue is with people who have actually been on strike and then go back to work but lose their jobs? Then, of course, depending on how long they've been off work, they also lose that period.

[John Farrell]

Fundamentally, the issue is that employees are exercising their discretionary right to exercise a strike or lockout. They engage in a strike for a period of time, which is entirely of their own volition. When the strike is over, hopefully many employees will return to work, but it is not always the case.

When a strike ends, we find that in several instances employers have lost customers. They've lost part of their order book. In some very unfortunate cases, employers may end up going out of business. These are consequences of a strike. The parties that engage in strike activity must recognize that this is the case and go into a strike situation with their eyes open.

Fundamentally, if we continue to provide an open-ended arrangement whereby employees are entitled to extend the strike activity for a period of time, and not have any regard whatsoever to whether they'll be entitled to receive employment insurance benefits at the end of the strike, whereas other employees are not entitled to such extensions--that is, non-union employees in particular--then we face a situation where the companies themselves are prejudiced in situations where they're engaging in an unfortunate long work stoppage. They're getting toward the end of the long work stoppage, and there's no counterbalancing incentive for employees to fundamentally end the strike, knowing that as soon as the strike is over, they'll be entitled to full employment insurance benefits--

[Maria Minna, Liberal, Beaches—East York, ON]

But only if they've lost their jobs.

[John Farrell]

Or if they're laid off.

[Maria Minna, Liberal, Beaches—East York, ON]

Or if they're laid off. Well, that's what I meant. Because it seems to me that you're saying they should be penalized for going on strike, in a way, because by choosing to go on strike or whatever—

[John Farrell]

I'm not saying that they should be penalized. I'm saying that they are engaging in a discretionary activity. They are—

[Maria Minna, Liberal, Beaches—East York, ON]

Which is their right to do, though--

[John Farrell]

Yes. It is their right to do so, but they're engaging in an activity where they're not accepting the terms and conditions of employment that have been offered by their employer, and there are consequences.

[Maria Minna, Liberal, Beaches—East York, ON]

I've had this discussion before with other witnesses.

Go back a little bit and expand a bit more for us and for me on the neutrality issue. You're saying that it would cause an imbalance in the neutrality of negotiations between labour and employers if this measure were to go through. How would that actually happen?

[John Farrell]

The provision of unemployment insurance benefits has traditionally been treated as a neutral arrangement where employers are not prejudiced nor will employees gain in a labour dispute. If we extend the qualifying period for the full period of a labour dispute, then we're providing extra benefits to employees who are engaging in a discretionary activity, a strike.

That activity is designed to exert economic pressure on the employer to cause the employer to otherwise settle for an amount that is normally higher, in terms of compensation or operating conditions, than they feel they can afford to pay. Therefore, the extension goes beyond the neutral treatment of employment insurance provisions.

[Maria Minna, Liberal, Beaches—East York, ON]

I'm trying to picture clearly people who are... Because not everybody gets a good amount of money when they're on strike. The amounts you mentioned earlier are probably on the high end. Not everyone gets that kind of strike pay. I don't see the benefit in anyone on strike wanting to continue the strike just in case they get fired, that they don't lose... I'm having a hard time understanding that mentality, that the larger group would not support negotiations or an arrangement or an agreement if it was acceptable overall because they have the ability--some of them anyway, who may not get their jobs back--to be able to then cover. I don't see how that necessarily would be the deciding factor in maintaining the neutrality.

[John Farrell]

It is 100% a deciding factor? No, it may not be, but it does influence the decision-making of the person who is on strike and considering what the consequences are of prosecuting a lengthy strike.

[Maria Minna, Liberal, Beaches—East York, ON]

In your view--

[The Chair, Conservative, Candice Bergen]

I'm sorry, Madam Minna. Your time is up.

Thank you, Mr. Farrell.

We'll go to Madame Beaudin, please.

[Josée Beaudin, Bloc, Saint-Lambert, QC]

Thank you, Madam Chair.

Good afternoon, Mr. Farrell.

I want to be sure I understand what you said correctly, particularly given the translation. You say an employer locks employees out when unions engage in disruptive tactics, but in the case of a strike, it's the employees' desire to call a strike. Have I understood correctly?

[John Farrell]

Not entirely. The decision to go on strike is a discretionary decision that is made by the employees and their unions together, and they have various processes to do that.

With respect to the decision to lock out employees in a labour dispute, it is a discretionary activity that is the responsibility and the call of the company. It is at their discretion that they would engage in a lockout, but--

[Josée Beaudin, Bloc, Saint-Lambert, QC]

Right. I don't want to go into the description of the two things any further, but it seemed odd to me to think that employees go on strike without good reason, for example. I think that employees do have good reason to go on strike to exercise their rights.

You know that Bill C-395 aims to do one very simple thing: make it possible for workers who lose their job because they are laid off after a labour dispute to receive the employment insurance benefits that they are entitled to and that they have paid into their whole lives. That is essentially what Bill C-395 is.

Do you not think it is unfair that workers are deprived of insurance they are entitled to and to which they have contributed for 25 years of their lives, because they are laid off after a labour dispute? Do you not think that is unfair?

[John Farrell]

No, frankly, I don't, because they exercise their discretion to engage in a labour dispute, and this bill is proposing to extend the qualifying period for employees who are exercising their discretion. In my view, the exercise of this discretion is up to them, and in my view, exercising that discretion can have a detrimental effect on the length of the strike and on employers.

[Josée Beaudin, Bloc, Saint-Lambert, QC]

Right, thank you.

The issue is extending the qualifying period, not the benefits. Earlier, you said there were around 83% strikes and 17% lockouts. Are there a lot of these situations that ended in a layoff or that became labour disputes where there were layoffs and plant closings?

[John Farrell]

Yes. An unfortunate consequence of a labour dispute can be layoffs and, in extreme cases, closures of operations.