COASTAL CROPS LTD. (CCL)1 Below you will find all the information that will be used for assignment #2 and the collective bargaining simulation. This includes: • the background of the organization (CCL); • the current collective agreement; • a comparison of CCL’s employment package with those of its competitors; and • a memorandum of agreement to record your final settlement. Coastal Crops Ltd. (CCL) has been unionized since it was founded in 1968. It has always operated out in the west end of St. John’s, Newfoundland. While the firm originally farmed the land, in the 1980s the firm built a number of large greenhouses. The addition of greenhouses allowed CCL to expand its product offerings and grow produce all year long. To better meet the needs of its customers outside of Newfoundland, the firm purchased a (non-union) location in 1997, which is located in Phippsburg, Maine. The relationship between the management group of CCL and the United Agricultural Workers of Canada (UAW) has generally been strong. Wages, benefits, and working conditions have usually been on par with or better than those of the competition. In particular, the firm has tried to pay slightly above the going market rate. To date, there has been only one strike. It took place in 1997 and was largely centred on the issue of job security, given the poor economic conditions of that period and the concern that the acquisition of the Maine location would result in job losses in Canada. At that time, the Newfoundland economy was performing very poorly, in part due to the collapse of the cod fishery. Given the dramatic decrease in demand for its products, and the need for capital to purchase the new location, the company laid off about 30 percent of its staff and froze all wages for three years. pg. 1 The early 2000s gave rise to new opportunities for CCL. With the legalization of medical cannabis, the firm built a production facility on the property in 2003. In 2017, anticipating of legalization of recreational cannabis, the firm doubled the size of its cannabis production facility. Currently, approximately 65 percent of CCL’s yearly revenues come from cannabis production. The cannabis market has resulted in the firm hiring about 200 new employees over the past five years. As the parties prepare to enter a new round of bargaining, several key events are taking place. For the union, the last contract (signed in 2016) was ratified by only 54 percent of the membership. Given the 1997 job cuts and wage freezes, many members felt that the revenues associated with the medical cannabis should have resulted in greater gains at the bargaining table. In fact, the membership has voted in a whole new slate of union leaders to form this year’s collective bargaining team. Rumour has it that the membership wanted a more militant negotiations team that would take a firm stand on increased wages, improved vacations and pensions, and job security. It is also clear the union faces a challenge meeting the needs of a diverse membership. The average union member is 38 and has around 14 years of service. However, given the downsizing in 1997, and the influx of cannabis work, the St. John’s location almost has two different age groups. There are approximately 200 employees with fewer than five years of service (most of them are in their twenties); yet there are about 300 employees with more than 15 years of service (most of whom are over 40). The current negotiations team will need to balance the needs of its newer members with those of the “old guard.” Management has just received notice that it is at risk of losing its contract with Premium Cannabis. Premium Cannabis is CCL’s largest contract and represents about 40 percent of its annual revenue stream. There are two reasons why Premium Cannabis may not renew its contract. First, CCL is having problems meeting the production quotas specified in the contract. This is largely due to reliability issues related to CCL’s now aging production equipment. When the firm expanded the cannabis production facility in 2017, pg. 2 it did not buy new equipment. Rather, it repurposed existing equipment from when the cannabis facility was first built in 2003. This equipment is older and less reliable; it is also much less energy-efficient than the equipment currently available. Second, CCL’s labour costs are higher than those of some of its competitors, which could well take over the contrast. Premium Cannabis’s management team is under increased pressure to minimize expenses in all areas, including supplier contracts, to retain profitability. There is a rumour that a new firm may get the contract (Firm 2 in the attached comparison). This firm has the advantage of brand-new, energy-efficient equipment and lower labour costs. It currently runs 24 hours a day, 7 days a week. Hence, it is in a better position to meet the needs of the cannabis industry. CCL management is currently examining the possibility of a substantial reorganization to better meet the needs of the cannabis industry. This could include raising production quotas and replacing the present equipment with new, energy-efficient, labour-saving machines in the St. John’s facility (cost = = $2 million). Assuming the current two-shift cycle remains, the new machinery would result in layoffs of about one quarter of the staff as well as the contracting out to cheaper labour sources in times of high product demand. Two alternative strategies have been openly discussed. First, purchase the new equipment (cost == $2 million) and begin operating three 8-hour shifts (i.e., 24 hours per day, 7 days per week). This option would not entail hiring new employees or laying off any current staff; however, the firm would have to find sufficient savings in the first year of the collective agreement to absorb the full cost of the new equipment, and the total annual labour costs could not increase. Second, close the St. John’s facility and move all production to the second facility (Firm 4 in the attached comparison), located in Phippsburg, Maine, a cheaper location. This location would still permit shipping of the products to all North American customers, including those in Newfoundland. Closing the St. John’s operation would mean that all management and union employees would lose their jobs, for transferring staff to the American location is not feasible given immigration requirements and so on. The firm is also concerned about the negative community and pg. 3 government reaction associated with closing the operation, as they previously secured government funding to assist with 2017 expansion. The management negotiations team has been given a clear mandate: (1) the collective agreement must facilitate the renewal of the Premium Cannabis contract; and (2) over the life of the new collective agreement, the firm’s total annual labour costs cannot increase from the current amount. Other Information As is shown in Table 1, CCL provides a competitive compensation and benefits package. The average wage at CCL is $20.25 per hour. This compares to an average current wage of $19.71 for the other firms. The benefits are co-paid (70% company, 30% employee). The benefits include dental plan, vision plan, life insurance coverage of two times base salary, medical insurance for hospitalization and prescription drugs, and a sick benefit plan (coverage up to 66.67% percent of earnings for any absence due to illness, maximum 52 weeks). Current cost of the benefit plan to the employee is $750 per year; the company share is $1,750 per employee per year. In addition, CCL contributes an amount equivalent to 4 percent of each employee’s earnings into a retirement fund that can be used by the employee in retirement. pg. 4 pg. 5 Costing Information for Any Proposed Changes • • • • Overtime. Each employee currently works an average of 4.25 hours of overtime per week. Overtime cost is time and a half. At present, employees must volunteer for overtime. Currently 80 percent of overtime is worked after midnight to address production issues. Wages. Present average is $20.25. Vacation. The current entitlement to vacation is as set out below. Any changes to the vacation plan would be costed using the following formula: Average hourly wage \times× 40 hours a week \times× Number of employees impacted. Shift premiums. Most employees (i.e., 60%) workday shift (8 a.m. to 4 p.m.). Forty percent of employees are permanently assigned to evening (i.e., second) shift (4 p.m. to midnight). The shift premium is currently $1.50 per hour. There is no night (i.e., third) shift (midnight to 8 a.m.). If pg. 6 • production is needed after midnight, it is voluntary, paid at overtime rates, and no shift premium is paid. If the company implements a three, 8-hourshift (i.e., 24 hours per day, 7 days per week) operation, they anticipate that 50 percent of workers will permanently work first shift, 30 percent will permanently work second shift, and 20 percent will permanently work third shift. Retirement fund. Currently an amount equivalent to 4 percent of regular wages is placed by CCL into a retirement fund for the employee. Any changes should be calculated as follows: Average hourly wage \times× 40 hours per week \times× 52 weeks \times× % invested by the company. Collective Bargaining Agreement Between Coastal Crops Ltd. (Hereinafter Referred to as the Company) and the United Agricultural Workers of Canada, Local 101 (Hereinafter Referred to as the Union) Article I. Recognition Section 1.1 The Company recognizes the Union as the sole and exclusive bargaining agent for all employees of Coastal Corps Ltd. employed at, and in connection with, its operations on 1968 West Avenue, St. John’s, save and except office employees, human resources management staff, security guards, supervisors and managers. Section 1.2 The Company agrees to deduct union dues from each pay cheque for all employees covered by this agreement and remit them to the union on the last day of each month. Article II. Management Rights Section 2.1 The Union recognizes that the Company has the exclusive right to manage the business and to exercise such right without restriction, save and except such prerogatives of management as may be specifically modified by the terms and conditions of this Agreement. Section 2.2 The Union recognizes that the Company has the right to discipline and discharge employees for just cause. pg. 7 Article III. Hours of Work Section 3.1 The normal work hours for all employees shall be eight (8) hours per day and forty (40) hours per week, Monday to Friday. Section 3.2 All time worked by an employee in excess of eight (8) hours per day or forty (40) hours per week, and all time worked on weekends, shall be paid for at an overtime rate of one and one-half times the normal hourly rate. All overtime is voluntary. Section 3.3 Employees who work the second shift will receive a shift premium of $1.50 per hour worked. Article IV. Seniority, Layoffs, Etc. Section 4.1 An employee’s seniority rights shall be measured on a locationwide basis, starting from the first day or hour worked. Section 4.2 In the event of a layoff, employees with the least seniority will be laid off first, and employees with the most seniority will be retained, subject to their ability to perform the available work without being trained. Section 4.3 In the event of layoff, the Company will provide a severance payment equal to three (3) weeks’ base pay plus an additional one (1) week’s pay per year of service. Article V. Vacancies, New Jobs, Promotions, Etc. Section 5.1 The Company shall post vacancies or new job openings on designated bulletin boards. Such postings shall include a statement of the required job qualifications, wage rate, and any other pertinent information. Interested applicants shall submit written bids to the Company’s Human Resources Department. The job shall be awarded to the most senior applicant provided that he or she meets the qualifications on the job posting. Article VI. Committees Section 6.1 The parties agree to the establishment of a Joint Labour/Management Committee composed of an equal number of pg. 8 representatives of the Company and the Union. The purpose of this Committee will be to provide a means of communication over any matter affecting the interests of either party to this Agreement. The Company may follow the recommendations of the Joint Committee. However, the final decision rests with management. Section 6.2 The parties agree to the establishment of an Occupational Health and Safety Committee consistent with the requirements of provincial legislation. Article VII. Wages Section 7.1 The following rates of pay will be operative for the duration of this agreement: Section 7.2 All employees shall receive pay increases of $0.25 per hour six months after employment in their job grade, and every six months thereafter, until they reach the maximum rate of pay for their job grade. Article VIII. Health Plan Section 8.1 The parties agree to the creation of a Health Plan covering absence due to illness, dental care, eye care, life insurance, and supplementary healthcare needs (i.e., hospitalization and prescription drugs). pg. 9 Section 8.2 The Company agrees to reimburse employees seventy percent (70%) of all costs incurred in respect of Section 8.1 above. Article IX. Retirement Fund Section 9.1 The Company agrees to place 4 percent of each employee’s base annual salary, excluding any overtime or shift premiums, into a retirement fund for that employee. This cost is incurred solely by the Company. Employees can opt to match this contribution by investing up to 4 percent of base annual salary in their fund. Section 9.2 When the employees retire, they will receive the entire amount invested per Section 9.1 on their behalf. Article X. Vacation Section 10.1 Each employee who has been with the Company for a full year will receive paid vacation as follows: Section 10.2 Employees with less than one (1) year of service will receive one (1) day of vacation per month of service, to a maximum of ten (10) days. Article XI. Grievance Section 11.1 It is understood that employees (with or without the assistance of the shop steward) may bring a complaint to their immediate supervisor in an attempt to settle the issue at any time without filing a formal grievance. Section 11.2 The formal grievance process will be as follows: pg. 10 Step 1: The employee will (with a shop steward) present a written grievance to his/her supervisor. The supervisor will have ten (10) workdays to investigate the situation and respond. If the grievance is not satisfactorily resolved, it moves to Step 2. Step 2: The grievance is presented to the department manager by the chief shop steward. The department manager will have ten (10) workdays to respond to the grievance. If the grievance is not satisfactorily resolved, it moves to Step 3. Step 3: The grievance is presented to the General Manager and Union Local President. The General Manager will have ten (10) workdays to respond to the grievance. If the grievance is not satisfactorily resolved, it moves to Step 4. Step 4: The grievance is presented to the Vice-President of Employment Relations by the President of the National Union (or delegate). The Vice-President will have ten (10) workdays to respond to the grievance. If the grievance is not satisfactorily resolved, it moves to arbitration and follows the current process outlined by the provincial labour relations act. Article XII. Progressive Discipline Section 12.1 The Company and the Union believe in the practice of progressive discipline. Prior to formal progressive disciplinary action taking place, the employee may receive a verbal counselling from his/her supervisor. The employee has the right to union representation during this counselling. The only documentation of this meeting will be the time, date, and nature of the discussion. This will be placed in the supervisor’s file and will be moved to the employee’s human resources file only if progressive discipline steps are taken within twenty-four (24) months of this counselling. Section 12.2 The normal progression of progressive discipline shall be as follows: Step 1: Written Warning Step 2: Suspension Step 3: Discharge Section 12.3 It is understood that certain offences will result in a faster progression through the progressive discipline process outlined in Section 12.2. pg. 11 Section 12.4 Copies of all written warnings, suspensions, and discharges must be given to the employee (in the presence of a union representative). Copies will also be placed in the employee’s human resources file. All documentation concerning progressive discipline must be removed from the employee’s file after a period of twenty-four (24) months if no other disciplinary action occurs. Article XIII. Duration Section 13.1 This agreement shall be effective May 31, 2016, and will remain in force until May 31, 2019; thereafter, it shall be automatically renewed from time to time for further periods of one year unless either party, at least sixty (60) days prior to May 31, 2019, or any subsequent expiration date, serves on the other party written notice of its desire to terminate or amend the Agreement. IN WITNESS THEREOF, the parties have caused this Agreement to be executed by their duly authorized representatives on this 31 day of May 2016. For the Company Byrne_____________________________________________ Kumar ________________________________________ Ryan Samantha Paul O’Kane _____________________________________________ Alexandra Scott __________________________________________ For the Union Megan ___________________________________________ Nina Gonzalez __________________________________________ Mark McCracken ________________________________________ Adam Smith ____________________________________________ Memorandum of Settlement pg. 12 Collis Between Coastal Crops Ltd. & United Agricultural Workers of Canada (Local 101) The parties agree as follows (use additional pages if necessary): ARTICLE I. Recognition ARTICLE II. Management Rights ARTICLE III. Hours of Work ARTICLE IV. Seniority, Layoffs, Etc. ARTICLE V. Vacancies, New Jobs, Promotions, Etc. ARTICLE VI. Committees ARTICLE VII. Wages ARTICLE VIII. Health Plan ARTICLE IX. Retirement ARTICLE X. Vacation ARTICLE XI. Grievance ARTICLE XII. Progressive Discipline ARTICLE XIII. Duration Signatures: COMPANY UNION __________________________ _______________________ __________________________ _______________________ __________________________ _______________________ __________________________ _______________________ Endnotes 1. This case was created solely for educational purposes by Travor C. Brown. It is not based on any true company, union, or event. pg. 13
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