Struggling employer must honour new collective agreement: Court

Forestry company AbitibiBowater must honour pension improvements in new collective agreement despite being under bankruptcy protection, court says
|employmentlawtoday.com|Last Updated: 05/13/2009

A Quebec company’s financial troubles are no excuse to renege on a new collective agreement provision for early pension, the Quebec Superior Court has ruled.

Montreal-based forestry and newsprint company AbitibiBowater negotiated a new collective agreement with its union that changed the company’s retirement policy and pension plan. Under the old agreement, employees were allowed to retire with full benefits at age 58. Under the new plan, employees had the option of retiring with a full company pension at 57 if they had 20 years of service with Abitibi. The new collective agreement also required workers to increase their contributions to the pension plan by another 0.5 per cent of their salary. It was set to come into effect on May 1, 2009.

However, Abitibi experienced financial problems after the signing of the new collective agreement and is currently under bankruptcy protection in both Canada and the United States. When almost 200 workers told the company they wanted to take the early retirement option shortly after it came into effect, Abitibi told the union it was going to suspend the new pension provision because it couldn’t afford the $68 million the early retirements would cost while the company restructured. It gave the workers the option of returning to work.

The court, however, said Abitibi didn’t have the right to unilaterally rescind the new pension benefits it had negotiated as part of the collective bargaining process. It also found the company was operating under a “double standard,” as it had already begun taking the increased pension deductions from its employees under the new agreement.

“This ruling sends a clear message to all the companies operating under (bankruptcy protection) that they have to respect their current collective agreements,” said Gaetan Menard, an executive with the Communications, Energy and Paperworkers Union, after the court handed down its decision.

Abitibi said it does not plan to appeal the court’s decision.

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