Natural Resources Committee on Nov. 18th, 2014

[Dr. Robert Walker]

Thank you, Mr. Chair.

I am joined by Jonathan Lundy, Chief Transition Officer for AECL.

As noted in the previous session, Canada's nuclear labs have a new name. On 3 November, we proudly launched a wholly-owned subsidiary of AECL called Canadian Nuclear Laboratories, or CNL for short.

As discussed by NRCan colleagues, ownership of CNL will be transferred to a private-sector company next year. AECL will retain ownership of site facilities, intellectual property and liabilities on behalf of the government.

Now it's important to note that this government-owned, contractor-operated approach, or GOCO, has proven to be a success. It has enabled national nuclear laboratories in other countries to provide excellent careers for their employees to excel in science and technology and to grow their business lines.

The new CNL, with private sector management, operation, and approaches, will be better able to seize market opportunities in order to strengthen Canada's nuclear sector worldwide.

In the decades ahead, the employees of CNL will focus on three main missions. The first is to safely and effectively manage Canada's radioactive waste and decommissioning responsibilities. The second is to ensure that nuclear science and technology capabilities support the government in health protection, public safety and security, and environmental protection. And third, CNL will provide access to industry on a commercial basis to provide innovative nuclear science and technology expertise.

The government is our customer for the first two missions and industry for the third. These critical missions obviously require a sizable and highly skilled workforce. I believe personally that restructuring is a good thing for our employees, for our industry, and for our communities. For example, when leaders from local municipalities visited vibrant GOCO-run labs in the United States, they liked what they saw. The elected officials in our surrounding communities are excited about the synergies inherent in the GOCO approach.

At CNL, we've been working diligently on restructuring with our federal government colleagues. We have been working side by side, supporting the government with all our resources to achieve a smooth and successful transition for our employees. Within CNL, we are ready for GOCO. We've been improving our performance. Increased operational efficiency has allowed us to decrease our funding ask of government while increasing our commercial revenues and margins.

While these are exciting times for CNL with much future promise, we also realize that organizational change can introduce stress and uncertainty in our workforce. Our aim is to try to make the transition to GOCO as seamless as possible for our 3,400 employees while respectfully listening to concerns and addressing them as best we can. We are sensitive to, and have been diligent in addressing, the needs of our employees to help answer their most important questions. Naturally employees want to know what restructuring means to their jobs and career plans. They want to know how working for a private sector company will affect their pensions and benefits. We're providing comprehensive information to our employees through many internal communication initiatives, frequent face-to-face staff engagements, online restructuring, frequently asked questions, and regular CEO meetings with our union leaders. We've rolled out human resources programs to support our people. We continue to be sensitive to the essential need to maintain trust in our organization at all levels through open, honest, and timely two-way communications. One of the most frequent employee questions has to do with pensions. That is why we welcome BillC-43 because if implemented it will provide clarity and certainty to our employees regarding transitional pension coverage.

When the shares of CNL are acquired by the private sector GOCO company, CNL will become a private sector entity. As a consequence, employees at CNL will no longer be eligible to participate in the public service pension plan, or PSPP. Bill C-43 provides for the grant of transitional coverage to employees of CNL so they may continue to participate in the PSPP for a period of three years following the date when CNL ceases to be a crown corporation. This will provide sufficient time for the new private sector management of CNL to set up its own pension plan.

The proposed measures in the bill have the effect of treating CNL employees in the same way as former AECL employees who were transferred to the private sector during the first phase of restructuring, but this news comes much earlier in the process. Although employees of CNL will eventually cease contributing to the PSPP and will begin contributing to a new plan, they will retain the benefits accrued over their years of pensionable service under the PSPP, including eligibility for the public service health care plan. Future access to the options of an annuity, a transfer value, or a return of contributions will be protected.

In conclusion, we're confident that a GOCO-managed CNL will enjoy the same success as it has in other jurisdictions: exciting work for employees, modern facilities, and competitive compensation. These essential ingredients attract and retain the highly skilled educated workforce that we will need for decades ahead. With the new GOCO organization, our focused missions, and the ongoing capital investment by the government we will successfully project our experience and capabilities to a broader array of customers at home and abroad.

Thank you.

John and I would be pleased to take your questions.

[The Chair, Conservative, Leon Benoit]

Thank you very much for sticking to the seven minutes and for a good concise presentation.

We go now to the Professional Institute of the Public Service of Canada, to Jonathan Fitzpatrick, president, Chalk River Professional Employees Group.

Welcome again, sir, and please go ahead with your presentation for up to seven minutes.

[Jonathan Fitzpatrick, President, Chalk River Professional Employees Group, Professional Institute of the Public Service of Canada]

Thank you, Mr. Chair. I am joined today by Mr. Vince Frisina, vice-president of the Chalk River Professional Employees Group, and Mr. Steve Hindle, vice-president of PIPSC.

Our union represents almost 900 engineers, scientists, and technicians at the Chalk River and Whiteshell sites of Canadian Nuclear Laboratories, formerly known as AECL. These professionals are at the very heart of the Canadian nuclear industry. Collectively we are the bearers of a tremendous amount of knowledge and experience. Together we have endured the ups and downs of the nuclear industry's eventful history. Nuclear energy supplies a big part of our country's energy needs. It is also an important contributor to our medical, industrial, and innovation requirements.

Our members are a key part of Canada's science and technology knowledge infrastructure, and they collaborate with advanced nuclear research institutions worldwide. We provide the research that the Canadian Nuclear Safety Commission, the industry's regulator, requires to keep this industry safe and online.

Nuclear contributes $5 billion to our economy and tens of thousands of direct and indirect jobs in this country as a result of domestic needs and international trade. Canada's long history as a nuclear nation has been built on this research and expertise.

Division 29 of Bill C-43 includes measures related to the implementation of a new model for the laboratories of Atomic Energy of Canada Limited, an entity now known as Canadian Nuclear Laboratories. These measures include the provision of transitional pension coverage to CNL employees following the share transfer, after which CNL will become a GOCO, a government-owned and contractor-operated facility.

Ensuring that this new management model works means ensuring that CNL can continue to retain and attract the best and brightest nuclear scientists and engineers. These scientists and engineers are needed to maintain Canada's status as a tier one nuclear nation and to meet the federal government's long-term obligations to public safety and scientific innovation both nationally and internationally.

We are here today to voice our deep concern that the pension measures in this bill do not meet this requirement and would put this capacity at risk. Let me explain.

BillC-43 would allow existing employees to continue to participate in the public service pension plan for a transitional period of three years. The public service plan, however, would not be extended to any new employees of CNL, and there would be no requirement to maintain a similar standard of defined benefit pension as provided under the Public Service Superannuation Act once the transition is complete. In fact, the RFP prepared for prospective new operators requires them to have an alternative pension plan in place at the time of share transfer. By excluding new hires from the transitional coverage, the message to industry workers is that the next pension plan will not be equivalent, comparable, or for that matter, negotiable.

As a result, the Canadian industry and, more specifically, the new corporate entity will be at serious risk of failing to attract and retain the best and brightest nuclear expertise. To be clear, we agree that transitional pension coverage under the PSSA should provide certainty and stability for both employees and the bidders in the procurement process. Unfortunately, by not extending the same treatment to new hires, Bill C-43 undermines the objective of a seamless transfer from AECL to CNL.

In fact, putting in place a two tier pension system for the first three years of the new entity would be divisive in the workplace and would have an impact on collective agreement negotiations. Once the new plan had been imposed on new hires and eventually on all employees of CNL, it would be very complex to successfully negotiate a different plan at a later date, so that would be highly unlikely.

This, in our view, would place the labs at risk of being programmed to fail rather than set up for success. It sends a clear message to highly skilled professionals at CNL to start looking elsewhere in a very competitive industry.

I should note that, while our union represents 900 employees at CNL, all 3,400 employees would be affected by these pension measures. The future prospects of Canada's premier nuclear labs depend on a fair, stable, and predictable pension plan being put in place for all employees. We believe the best, the easiest, and the most cost-effective avenue to achieve this goal is to have the three-year PSSA transitional coverage applied to both existing employees and new hires at CNL following share transfer.

Transitional pension coverage should give the new employer and its employees three years to negotiate a deal that pleases everyone. But this will only be possible if participation in the PSSA is extended to new hires following the share transfer.

Thank you for your time. We look forward to your questions.

[The Chair, Conservative, Leon Benoit]

Thank you very much, Mr. Fitzpatrick.

We'll go directly to questions and comments now. I think we'll go with all five-minute rounds starting with Mr. Trost.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

Thank you, Mr. Chair.

Mr. Fitzpatrick, you were arguing that there needs to be an equal playing field for both new hires and current employees. As you were talking, you were suggesting that the public service pension plan be extended for new hires as well. But the alternative, if it has to be absolutely fair, is that we just not do this three-year extension in the first place.

Now, if fairness is the underlying issue, that's another option. If the concern is that the next pension plan will have less than the current one, it would be hurting current employees relative to the future. Do you understand where I'm going with what I'm saying there?

So let me then pose this question: Is the underlying issue a concern about compensation going down in the form of a weaker pension plan or is it fundamentally about fairness? If we had a situation in which a new pension plan was better than the old one, I suspect current employees would want the right to transition over to it as soon as possible. Would that not be correct?

So isn't the fundamental question based on nervousness about the level of compensation rather than on the issue of fairness?

[Jonathan Fitzpatrick]

I would agree with you. If the replacement pension plan were to be of greater benefit, obviously there would be no concern. The concern is that the new pension plan will be imposed on employees, and the union-represented groups will not have the opportunity to negotiate with the new employer. Those are our concerns, besides recruitment and retention issues, going forward. Faced with the loss of their pension plan, some people might seek other employment in the government in other departments.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

I completely understand that. As members of Parliament, basically as of next election, we have dramatically cut our pension plan going forward. No one was particularly wildly thrilled about it even though we thought it was the right thing to do, so I can understand that.

Would you also say the value of your organization is in the people? We have the machinery; we have the equipment; we have everything.

What I don't understand about this is that if they start to lose people, the value of the organization goes down. Why wouldn't the new owners or operators of this want to have a compensation package that is competitive with that of the rest of industry?

I'll throw this out to both Mr. Walker and Mr. Fitzpatrick. Basically whoever is operating this is stuck. They have to give the market rates. Otherwise the talent and the value of the organization, which is almost exclusively in its people and not so much in its equipment, will up and go. The only way to keep this organization valuable is to pay the market rate. If the market tightens up in other places, the value of compensation will go above what it currently is. If the market loosens up because all of a sudden there is no longer a need for this, it will drop. So, more than anything else, are we trying to guess what the market is rather than dictating what the salary and pension benefit levels are?

[The Chair, Conservative, Leon Benoit]

We'll hear from Mr. Fitzpatrick followed by Mr. Walker.

You have less than a minute each for your answer. Please go ahead.

[Jonathan Fitzpatrick]

Thank you.

Again the concern is with the perception by employees. As Dr. Walker mentioned, the top concern among current employees is pensions. We expect the new employees to have the same concerns. Again, as you mentioned, the concern is what the market will bear. Once the three-year transitional coverage measures have elapsed, that will be our concern as well.

[Dr. Robert Walker]

The contractor must attract and retain Canada's best. That is the future, and for the contractor to succeed, that's what must be accomplished. The contractor, I expect, will approach this through three lenses collectively. The first is to make sure that there is attractive and interesting work to be done. The three missions, given the labs, secure that. The second is that we have modern facilities. The government has started to recapitalize labs, and with the GOCO model, it intends to accelerate that process. Finally, the compensation package as a whole—salaries, benefits, and pensions—needs to be competitive.

[The Chair, Conservative, Leon Benoit]

Thank you very much, Mr. Trost.

We go now to the official opposition and Mr. Ravignat.

Go ahead, please, for up to five minutes.

[Mathieu Ravignat, NDP, Pontiac, QC]

The word “competitive” can mean a few things. Competitive can mean “compared to other industries”. Competitive could mean to make sure that you attract the right people.

In the context here, there was a certain level of pension that was negotiated with the various employees, so I think it's pretty natural that the employees would want to ensure that what was negotiated in the past, during the transition period, remains at that level. That's the nature of the bargaining process.

Mr. Walker, is there any guarantee that pensions will remain at that level as this transition moves forward?

[Dr. Robert Walker]

It would be entirely speculative on my part.

As the government clarified in the earlier session, it intends to incentivize the contractor to find the solutions that will work best for the labs going forward. In that, it must also respect the collective bargaining process, existing agreements, and, as has been identified, put in place a pension plan, together with other elements of compensation to make this package attractive, to not only retain but also to attract future Canadians to this employment.

[Mathieu Ravignat, NDP, Pontiac, QC]

Mr. Fitzpatrick, in the advent of bankruptcy of one of these companies going forward, there is nothing in the legislation that protects employees as creditors for their pensions. You know that. In other natural resource industries, this has happened consistently. A company goes bankrupt, transfers assets to another company, usually a dummy company, and basically betrays the agreement that is in place with the employees with regard to their pensions.

Is this a worry that you have?

[Jonathan Fitzpatrick]

Our concern, in general, is that the pension benefit we currently enjoy will be subsequently diminished with the new employer. That is our main concern.

What we would like to see with the three-year transitional coverage is that we have the opportunity to negotiate a new and fair and reasonable pension that both parties agree to. That's the reason for our request to include the new hires of CNL, so that we're all treated similarly and fairly under the three-year transitional period and that we have that opportunity to negotiate with the new employer.

[Mathieu Ravignat, NDP, Pontiac, QC]

Mr. Fitzpatrick, how would you amend this current piece of legislation in order to ensure that going forward?

[Jonathan Fitzpatrick]

As I stated in my opening remarks, our request for the new hires, the ones hired post share transfer, is that that they be allowed to participate under the public service pension plan for the same three-year transitional period.

[Mathieu Ravignat, NDP, Pontiac, QC]

Okay. So, basically, the idea of attracting the best and the brightest to this industry is a fundamental principle. I think it's in the best interest of both the employees and the employers; there's no doubt about that. However, we see that in the case of the public sector, when you do touch pensions it has a direct impact on the type of people you can attract. Equipment is not going to do it necessarily; compensation is a fundamental issue.

Going forward, what other industries are you going to compare this compensation package with, or what other industries do you think this should be compared with, to ensure that we do in fact attract the best and brightest in our country?

Both of you can answer. You would both have ideas on that.

[Dr. Robert Walker]

The reality is that when young Canadians are considering career opportunities, they look across many sectors to see where those opportunities exist. We come back to what young Canadians are looking for by way of career employment. What's important to note is that the Canadian Nuclear Laboratories, based on past records, have a proven record of attracting people for careers. People come in at a young age.

What keeps them working with us? Compensation is an enormously important part of it. However, for science and technology workers, the notion of the quality of our facilities and the equipment is actually a premium, as well as the interest in the breadth and complexity of the tasks at hand. That is actually an entirety here.

I believe that when the contractor looks at it, he will be looking across broad science and technology manufacturing industries, including the nuclear industry, because that is what the young Canadians will be looking at for their career opportunities.

[The Chair, Conservative, Leon Benoit]

Mr. Fitzpatrick.

[Jonathan Fitzpatrick]

Thank you.

I would agree with Dr. Walker on the recruitment aspects, the facilities and the job opportunities that are presented, but once employees are at Chalk River or the other sites, they stay for the pension, the other benefits, and the continued salary. These are important factors to consider for the retention aspect. Our concern is that while pension may not be such an important factor for recruitment, it certainly is for retention once you're here for 5, 10, 15 years, and you want to stay and make this your community and your home.

[The Chair, Conservative, Leon Benoit]

Thank you very much.

We will go now to Mr. McCallum for up to five minutes.

[John McCallum, Liberal, Markham—Unionville, ON]

Thank you, Mr. Chair.

Mr. Fitzpatrick, I think I heard you twice say that the pension would be imposed on the workers. Is that correct? Is it not a question of bargaining?

[Jonathan Fitzpatrick]

My understanding from the information that has been provided to date is that there is a requirement on the new employer to establish a new pension plan on day one for the new hires. The issue is that once that new pension plan has been imposed, it makes it that much more difficult for the bargaining representatives to negotiate over that three-year transitional period.

[John McCallum, Liberal, Markham—Unionville, ON]

Okay, I understand.

Mr. Walker, do you agree that the new pension plan would be imposed on day one, that it would not be negotiated, it would be imposed?