Questions on offer to refinery employees
April 7, 2020
NOTE: An earlier version of this page was posted on Dec. 3, 2019. The information that follows has been updated to reflect the Best and Final Offer from the Co-op Refinery Complex (CRC).
What wage increases are being offered?
An 11.75 per cent wage increase is being offered across the board to all unionized workers for the first four years followed by the greater of Unifor national negotiated wage pattern or 1.0 per cent for years 5, 6 and 7. On average, this is a $12,000 wage increase for the first four years of the contract and an additional $3,500 wage increase over the last three years of the contract, at a minimum, based on the 1.0 per cent minimum increase.
What is the “National Pattern”?
Unifor Canada negotiates as part of their Energy and Chemical National Bargaining Program (“National Pattern”) wage increases with one of the oil majors in the Canadian refining sector (Suncor, Shell, Imperial Oil) and then presumes that other refineries will follow suit so the first negotiated deal sets the industry average increase in the refining sector in Canada.
Refineries are not obligated to follow National Pattern by providing these wage increases.
As part of our offer we have agreed to include these substantial wage increases in the first four years of the renewed agreement and to extend our commitment to follow National Pattern, when it is determined, in years 5, 6 and 7. If National Pattern is less than one per cent annually in years 5, 6 and/or 7, CRC employees would receive a minimum increase of one per cent in those years.
What does choice between the Savings Plan and Performance Plan mean?
Our offer provides employees with their individual choice between the Savings Plan or the Performance Plan. Employees will be required to make their selection between the two plans by Oct. 30, 2020. New employees hired after ratification will automatically be enrolled in the Performance Plan.
- The modified Savings Plan offers a guaranteed four per cent return for any employee who contributes four per cent
- The Performance Plan is the same plan recently introduced to out-of-scope employees. Unlike the Savings Plan, employees do not contribute anything to the Performance Plan. It has a target return of six per cent, however, the return is based on the overall performance of the refinery during the entire year in a number of key operating metrics (safety, reliability, environmental, financial and others). The target is based on metrics established at the start of the year. If the refinery performs well in all key operating metrics, the return can be as high as nine per cent. If the refinery does not perform well in these metrics, the return can be below the target six per cent and could be as low as zero if performance does not meet the minimum threshold.
- The CRC’s offer provides all employees the choice between these two options; a guaranteed return of four per cent on a four per cent employee contribution or a potential return of up to nine per cent with no employee contribution. Over time, with good, consistent operating performance, the performance plan returns are expected to exceed four per cent, but they are not guaranteed.
Why does the Union indicate that you are asking for a -17.5 per cent rollback?
The Company has not proposed a -17.5 per cent “rollback” or pay cut. That is simply untrue. As an example, asking an employee to contribute to their own pension is not a wage rollback—it’s still their money and they receive it as part of their retirement income in the future. Likewise, the Company did not eliminate the employee savings plan but is offering employees a choice between the modified Savings Plan and the Performance Plan. We have already offered an 11.75 per cent wage increase over the first four years and a minimum increase of one per cent in each of years 5, 6 and 7 or National Pattern wages in those years, whichever is higher.
Why are we proposing changes to the pension plan?
These changes are about the long-term sustainability of the refinery. We realize that the low-carbon economy of the future is coming. To survive long-term, we must change our business and significantly invest to guarantee that the CRC remains competitive.
Currently, unionized employees pay zero per cent into their pension.
As outlined in the table below, total cash contributions made by the Company over a five-year period were $226 million, this represents an average cost of over $45 million per year, or approximately $50,000 per year per employee over the past five years, with no contribution from employees.
We know that when we project our financial situation five to 10 years from now, we simply can’t continue to make those significant payments and, at the same time, fund investments required to transition to a low-carbon economy and provide a strong return on investment to our local co-op owners so they can create a market for our products.
Like the vast majority of Canadians who are lucky enough to have a pension, we are asking unionized employees to contribute toward their pension and accept plan design changes in order to ensure the long-term viability of their future careers. We must make changes to protect our current and future employees while we can afford to do it.
What are the current service costs of the Defined Benefit (DB) Pension Plan?
Pension plan service costs are the total annual contributions required, not including special payments, to the DB Pension Plan. Employees currently contribute zero dollars toward current service costs and zero dollars towards special payments.
What is changing in the DB Pension Plan?
The CRC’s offer allows for the DB Pension Plan itself to be more sustainable and less exposed to market volatility. There are two main changes to the DB Pension plan: (1) shared contributions to current service costs, and (2) removal of indexing for future service only - the Company’s offer preserves indexing for service prior to Dec.31, 2020. The existing two per cent accrual rate for service does not change and remains “as is” in the current DB Pension Plan.
As mentioned, indexing is preserved for past service. The removal of indexing for service on Jan. 1, 2021, and afterwards impacts service costs by bringing them down. Using the current data as an example:
- The current service cost of the DB Pension Plan before the removal of indexing is 23.4 per cent for 2020. The current service cost of the DB Pension Plan after the removal of indexing is 19.5 per cent for 2020.
- Our offer includes a 50/50 cost share of these current service costs after Feb. 1, 2022. Based on the current service costs of 19.5 per cent, the employee contribution would be half of 19.5 per cent, which is 9.75 per cent.
- The Company will continue to pay for all of the special payments required for the plan. These payments are significant and are paid 100 per cent by the Company. Of the $226 million in cash contributions paid by the Company into the pension plan from 2015 to 2019, $137 million (or over 60 per cent) were special payments, or an average of $27.4 million per year.
What is the CRC’s offer around Pension Choice?
We have offered employees a choice between staying in their current DB Pension Plan subject to modifications or moving to our Defined Contribution (DC) Pension Plan. Both meet or exceed industry-averages.
If employees remain in the DB plan, they will start contributing toward current service costs. The employee contribution schedule in the Best and Final Offer features four per cent at ratification, eight per cent contribution starting February 2021, followed by funding 50 per cent of the serving cost in February 2022. The current service costs of the DB Pension Plan are 19.5 per cent when you factor in the changes to indexing proposed by the Company. Based on the service cost of 19.5 per cent, the employee contribution would be half of 19.5 per cent, which is 9.75 per cent.
If employees move to the DC Pension Plan, they have the option to contribute zero per cent, and the Company will contribute six per cent. If they choose to contribute up to another four per cent, the Company will match it for a total Company contribution of 10 per cent. This makes the value of the DC 14 per cent (based on a maximum of four per cent from the employee and 10 per cent from the Company). If employees choose to transition from the DB Pension Plan, they would also receive a Retirement Allowance when they reach their retirement date.
Employees who are active members in the DB Pension Plan and who elect to transition to the DC Pension Plan are being offered a Retiring Allowance calculated based on their individual circumstances.
What is a Retiring Allowance (RA)?
The RA is how we ensure our employees who choose to move from the DB Pension Plan to the DC Pension Plan are assured a great retirement. Upon moving to the DC plan, all employees will be given an option of moving the dollar amount of their pension benefit (known as their commuted value) to a financial institution of their choice or they can select an immediate/deferred annuity (age dependent) that will be paid from a Canadian life insurance company. The RA is an additional payment (the majority are six-figure payments) that they will get when they retire. This will ensure that we capture the future value of their money and compensate employees for making the transition. Our entire management team made this transition at the end of 2019.
Our employees will continue to have a great retirement with greater income certainty based on the Company’s offer.
Why did you build a work camp?
We built the work camp for three reasons. First, to protect the refinery in the event of a labour disruption. We simply can’t have the refinery left vulnerable if the Union 594 Executive takes the workforce out. Second, under the same theme, we have to protect our people, our community and our asset by being prepared for our highly-skilled management team to assume control of the refinery. Third, we have to protect the Western Canadian fuel supply. Our economy is driven by transportation and agriculture. Our job is to fuel Western Canada, and we have to continue to do that regardless of the circumstances. We owe that to our owners, our customers and all Western Canadians.
Is the refinery and work camp safe relative to COVID-19?
Occupational Health and Safety (OH&S) visits our site regularly to conduct inspections, and we work closely with them to ensure compliance. On the April 1, 2020, visit, we also welcomed representatives from the Saskatchewan Health Authority (SHA) to ensure that our response to the COVID-19 pandemic is meeting or exceeding the SHA’s requirements. The visit by the SHA involved a review of our facilities and pandemic protocols and also an inspection of the work camp currently on site at the refinery.
Both the SHA and OH&S were satisfied with the steps we have taken to protect our employees. They believe we have provided a safe working/operating environment for our workers and that our pandemic plan for the on-site work camp meets their high standards. The SHA provided some minor recommendations for further enhancements and those recommendations will be implemented. It’s believed our current utilization of the camp provides us with the safest options for executing our overall response to the pandemic. We understand that other companies with critical, essential operations are also beginning to look at onsite sequestration of critical staff to ensure business continuity during these difficult times.
Why is the Return to Work Agreement included in the Best and Final offer and not negotiated with the Union?
The rules applied by the Saskatchewan Labour Relations Board specify that the employer’s last offer must not include any aspects that are unclear or yet to be determined. Therefore, it was necessary that the Company include as part of our BEST and FINAL offer terms that included how employees will make a safe return to work.
Does the entire workforce need to pass the alcohol and substance test before anyone can return to work?
No. This statement is simply not true. Individual employees in safety-sensitive positions will need to pass a pre-assignment alcohol and substance test to affirm their own, individual ability to be fit for duty and carry out a safe return to work. If one employee fails or refuses to take their test, it does not affect other employees’ ability to return to work or their timing.
Why is the phrase “Locked Out Employees” used near the beginning of the Return to Work Agreement?
The Union has suggested this phrase could be used to hurt bargaining unit employees in some way. That is not true. The real reason this phrase was used is that if any employees had resumed work during the labour dispute, they would not be subject to the return to work agreement because they are already working.