In this era of economic turmoil, worker rights have moved to the forefront of the public's consciousness. Formal insolvency proceedings are no exception where collectively bargained entitlements often clash with a company's ability to successfully restructure.
The Quebec Superior Court issued two recent and controversial decisions in the AbitibiBowater CCAA proceedings which affect worker rights. The first case involved a union motion seeking a reversal of the company's unilateral decision to modify its collective agreement by suspending its early retirement program and reducing its pension contributions The second case involved a company motion for an order allowing it to suspend its special "top-up" pension payments which were being applied to reduce a pre-filing pension deficiency.
In the first case, the company argued that it could not afford its early retirement program or its increased pension contributions given its insolvency. The Court took issue with this, both on the basis of established case law and also due to the unfairness of the company's decision. Specifically, the Court determined that the company had no right to unilaterally alter the terms of a valid collective agreement - saying instead that it required the consent of the union to do so. Furthermore, the Court held that pension entitlements are satisfied by separate plan assets and not by company assets, and that while the company intended to reduce its own contributions to the plan, it did not intend to cut its employees' portion. The Court believed this was grossly unfair and represented a double-standard which assumed that the company could not afford the enhanced contribution level while the employees of the insolvent company could.
In the second case, the union argued that the special deficiency contributions were aimed at satisfying obligations of the company which were incurred in exchange for employee services after the CCAA filing date. The Court rejected this argument on the basis that the actuarial valuations that determined the amount of the pension deficit and the corresponding special payments had been identified prior to the CCAA filing and consequently did not comprise obligations for post-filing services.
The Court emphasized that the special pension deficiencies payments were clearly jeopardizing the company's survival and ability to restructure. Thus, on the basis that the special payments originated from the pre-filing period, and that the continuation of such payments would prevent a successful restructuring, the Court agreed that the company could suspend them.
The main distinction between the two cases is that, in the first, the company was seeking to modify the terms of its collectively bargained obligations while in the second, it was merely trying to suspend a part of its financing obligations that pertained to obligations that accrued prior to its CCAA filing. It would seem however, that employee relations issues will continue to dominate the headlines and be important factors in a company's restructuring as the parties continue to battle over these issues. It is also clear that these fights are only intensifying given the complexity of the issues raised by collective agreements and pension obligations and the often colossal amounts at issue for both the unions and companies involved.