Ottawa's back-to-work interventions worry both firms and workers

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Ottawa's move to halt a strike at Canadian Pacific Railway Ltd. will get the trains rolling again soon, but back-to-work legislation is being flagged as part of a worrying pattern of government intervention that could devalue collective bargaining at a cost to employers.

Federal Labour Minister Lisa Raitt's decision on Monday to send the dispute to binding arbitration came as the economic impact mounted from the walkout by 4,800 CP employees, who went on strike last Wednesday over management proposals to slash pension costs.

Calgary-based CP recently lost a fight for control of its future to a U.S. hedge fund, which wants to hire Canadian National Railway Co.'s former boss to head CP and transform it into an industry leader.

The tabling of the back-to-work bill clears the way to end the Teamsters Canada Rail Conference strike by Thursday. It's the fifth time in the past year the federal government has moved decisively to end labour disputes that would have caused major disruption.

Ottawa's repeated measures to force striking employees to return to their jobs, however, are raising concerns that such moves are short-term fixes that prevent companies and unions from reaching negotiated deals that work for both sides.

Knowing in advance that the federal government will stop a strike is a disincentive for unions and employers to make breakthroughs and agree on long-term solutions at the bargaining table, industry experts say.

Ian Lee, a professor at Carleton University's Sprott School of Business, said Ms. Raitt has been properly exercising her prerogative as Labour Minister amid political pressure to end contract disputes, including conflicts at federally regulated companies such as Canada Post and Air Canada.

But CP and other federal employers are worried that they are losing control of the bargaining agenda and will suffer financial pain in the long term. The companies "aren't jumping for joy" at Ottawa's intervention because they want to negotiate collective agreements with labour leaders and sign contracts, Prof. Lee said.

CP has suspended freight deliveries across the country, and more than $50-million worth of grain is stuck in elevators on the Prairies. Dozens of factories may have to shut down temporarily or scale back production.

"Our government is really concerned that a disruption at Canadian Pacific will damage Canada's fragile economic recovery," Ms. Raitt said. CP customers welcomed Ottawa's back-to-work bill because they depend on the railway to move everything from coal and lumber to cars and propane.

The labour dispute came after U.S. hedge fund Pershing Square Capital Management LP scored a major victory on May 17 in its proxy fight against the railway, resulting in the resignation of CP chief executive officer Fred Green.

New York-based Pershing Square, CP's largest shareholder, wants former CN boss Hunter Harrison to replace Mr. Green.

CP has been seeking extensive cost savings in its pensions as it attempts to become more competitive with CN and other North American rivals.

"CP's pension has consumed over $1.9-billion in payments over the past three years. Our total pension liability is unreasonable when compared to the company's total share value," Peter Edwards, CP's vice-president of human resources, said in an internal memo to staff on Monday.

The legislation to order CP employees back to work requires the government to appoint an arbitrator to resolve outstanding disputes between management and the Teamsters, which represents engineers, conductors and rail traffic controllers. The bill also gives the arbitrator 90 days to report, or longer if required.

Industrial relations expert George Smith, a fellow in the School of Policy Studies at Queen's University, cautioned that binding arbitration will handcuff CP during its executive shuffle. "Unless the arbitrator is prepared to give the company everything it's asking for, big improvements from pension changes simply aren't going to happen," Mr. Smith said.

Teamsters Canada vice-president Doug Finnson said he's upset that CP negotiators are striving to chop pension expenses after employees worked for years to accumulate their retirement benefits. "If they took their pension demand off the table, they would probably get a deal," Mr. Finnson said.

Ms. Raitt said MPs would sit until the legislation is passed and that CP employees could be back on the job by Thursday. That likely means MPs will sit late on Tuesday evening – possibly into early Wednesday – to pass the bill and send it to the Senate.