Report in which the committee requests to be kept informed of development - Report No 370, October 2013

Case No 2983 (Canada) - Complaint date: 27-AUG-12 - Closed

Allegations: The complainant alleges that the Protecting Air Service Act violates air transport workers’ freedom of association and collective bargaining rights by mandatorily extending the duration of a collective bargaining agreement, prohibiting strikes, mandating compulsory final offer selection arbitration, ordering that the arbitration must be based on predetermined legislative criteria, forcing the unions to pay for the costs for the compulsory arbitration, and providing punitive sanctions on the IAM (and the Air Canada Pilots Association) and their representatives for non-compliance with the Act

1. 227. The complaint is contained in a communication dated 27 August 2012 from the International Association of Machinists and Aerospace Workers (IAM). By a communication dated 9 August 2012, the Canadian Labour Congress (CLC) associated itself with the complaint.
2. 228. The Government sent its observations in a communication dated 8 May 2013.
3. 229. Canada has ratified the Freedom of Association and Protection of the Right to Organise Convention, 1948 (No. 87) but has not ratified the Right to Organise and Collective Bargaining Convention, 1949 (No. 98).

A. The complainant’s allegations

1. 230. In its communication dated 27 August 2012, the IAM, an affiliate of the CLC, explains that it represents over 40,000 Canadian workers, including over 8,000 employed by Air Canada. The IAM alleges that the Protecting Air Service Act (Bill C-33 entitled “An Act to provide for continuation and resumption of air services operations”) violates air transport workers’ freedom of association and collective bargaining rights. The IAM stresses that by virtue of its ILO membership, Canada is obligated to honour the ILO’s Constitution, which recognizes the principle of freedom of association. Although Canada is yet to ratify Convention No. 98, it is also obligated to honour the principles of the fundamental rights enshrined therein. Canada has ratified Convention No. 87, which in the IAM’s view, protects the right to strike. Referring to Articles 3 and 10 of the Convention, the IAM considers that the prohibition of strikes restricts trade unions from furthering and defending the interests of their members and the right of trade unions to organize their activities.
2. 231. The IAM explains that the Protecting Air Service Act was introduced into Parliament on 12 March 2012 and proceeded through the House of Commons and Senate for proclamation on 15 March 2012. The complainant alleges that the law violates freedom of association and the principles of the right to collective bargaining for two specific groups of Air Canada employees: technical, maintenance and operational support employees represented by the IAM; and pilots, represented by the Air Canada Pilots Association (ACPA). It alleges that the law expressly denies freedom of association and the right to collectively bargain by mandatorily extending the duration of collective bargaining agreements, prohibiting otherwise lawful strikes, mandating compulsory final offer selection arbitration, ordering that the arbitration must be based on predetermined legislative criteria, forcing the unions to pay for the costs for the compulsory arbitration, and providing punitive sanctions on the IAM (and ACPA) and their representatives for violations of the law.
3. 232. The union submits, in particular, that the law unilaterally and mandatorily forces workers to continue “or resume without delay, ... the duties of their employment” (section 6(b) of the Act). It further places the obligation of informing employees to resume work on the union. Section 8 of the law stipulates in this respect:
   • 8.  The union and each officer and representative of the union must
     • (a) without delay on the coming into force of this Act, give notice to the employees that, by reason of that coming into force, air service operations are to be continued or resumed, as the case may be, and that the employees, when so required, are to continue, or resume without delay, as the case may be, the duties of their employment;
     • (b) take all reasonable steps to ensure that employees comply with paragraph 6(b); and
     • (c) refrain from any conduct that may encourage employees not to comply with paragraph 6(b).
4. 233. Moreover, section 9 of the Act extends the collective bargaining agreement in force against the wishes of one of the parties:
   • 9(1)  The term of the collective agreement is extended to include the period beginning on April 1, 2011 and ending on the day on which a new collective agreement between the employer and the union comes into effect.
   • (2)  Despite anything in the collective agreement or in Part I of the Canada Labour Code, the collective agreement, as extended by subsection (1), is effective and binding on the parties to it for the period for which it is extended. However, that Part applies in respect of the collective agreement, as extended, as if that period were the term of the collective agreement.
5. The Act also outlaws the right to strike:
   • 10.  Until the day on which the collective agreement, as extended by subsection 9(1), expires, it is prohibited ...
     • (b) for the union and for any officer or representative of the union to declare or authorize a strike against the employer; and
     • (c) for an employee to participate in a strike against the employer.
6. 234. The IAM points out that the air transport workers that are the subject of the Act do not belong to any category of workers whose right to strike can be restricted: they are not public servants exercising authority in the name of the State, but are private sector workers; nor do they perform services which come within the definition of essential services. Referring to the Committee’s Digest, the IAM indicates that the withholding of labour by these workers would not “endanger the life, personal safety or health of the whole or part of the population” and that transport workers and airline pilots are not included under the narrow definition of essential services. The IAM further points out that the railway services, which are closely analogous to airline services, are also specifically excluded from the definition of essential services. Moreover, according to the complainant, a strike by the workers in question would not create or exacerbate a national emergency. It further considers that despite the Government’s suggestion otherwise, a strike by the workers could not cause the economic turmoil of a scale which would amount to a “national emergency”. Air Canada operates in a competitive airline industry; where its employees exercise their fundamental right to strike, there is a multitude of other airline carriers that can service passengers. The IAM struck and shut down the company most recently for 17 days in 1987 without drastic repercussions to the economy. This was at a time when the company had a much larger role and share of the market in the Canadian air transport industry than it does currently.
7. 235. The IAM further alleges that in violation of freedom of association and the right to collective bargaining, the Act provides for compulsory arbitration, regardless of the wishes of the parties. The complainant refers, in particular to its section 11 which provides for compulsory arbitration requiring each party to submit a final offer package addressing unresolved matters, and requiring the arbitrator to select one package to settle the remaining matters. According to the complainant, section 11 prevents the parties from choosing an arbitrator, vesting the power of appointment with the Minister of Labour. Furthermore, according to the IAM, subsection 14(2) of the Act significantly limits the arbitrator’s discretion by setting out predetermined criteria that the arbitrator must consider in making his or her selection of the package which will become the unilaterally imposed collective bargaining agreement. The parties are then obligated to pay the costs of the compulsory arbitration. The IAM points out that while the Committee’s Digest refers to cases where costs are incurred by the parties, these cases involve “voluntary” arbitration and are therefore distinguishable from the legislation in question, which makes arbitration compulsory and gives the Government the authority to appoint the arbitrator. The IAM is of the opinion that the following excerpts of the Act raise concerns regarding freedom of association and the right to collective bargaining:
   • 11.  The Minister must appoint as arbitrator for final offer selection a person that the Minister considers appropriate.
     • 14(1)  Subject to section 16, within 90 days after being appointed, or within any longer period that may be specified by the Minister, the arbitrator must
       • (a) determine the matters on which the employer and the union were in agreement as of the date specified for the purposes of paragraph 13(l)(a);
       • (b) determine the matters remaining in dispute on that date;
       • (c) select, in order to resolve the matters remaining in dispute, either the final offer submitted by the employer or the final offer submitted by the union; and
       • (d) make a decision in respect of the resolution of the matters referred to in this subsection and forward a copy of the decision to the Minister, the employer and the union.
         • (2)  In making the selection of a final offer, the arbitrator is to take into account the tentative agreement reached by the employer and the union on February 10, 2012 and the report of the conciliation commissioner dated February 22, 2012 that was released to the parties, and is to be guided by the need for terms and conditions of employment that are consistent with those in other airlines and that will provide the necessary degree of flexibility to ensure
       • (a) the short- and long-term economic viability and competitiveness of the employer; and
       • (b) the sustainability of the employer’s pension plan, taking into account any short-term funding pressures on the employer.
         • (3)  If either the employer or the union fails to provide the arbitrator with a final offer in accordance with paragraph 13(l)(c), the arbitrator must select the final offer provided by the other party.
         • (4)  The arbitrator’s decision must be drafted in a manner that constitutes a new collective agreement between the employer and the union and, to the extent that it is possible, incorporate the contractual language that is referred to in paragraph 13(1)(a) and that is in the final offer selected by the arbitrator.
         • 15.  No order is to be made, no process is to be entered into and no proceeding is to be taken in court
       • (a) to question the appointment of the arbitrator; or
       • (b) to review, prohibit or restrain any proceeding or decision of the arbitrator.
         • 17(1)  Despite anything in Part I of the Canada Labour Code, the arbitrator’s decision constitutes a new collective agreement between the employer and the union that is effective and binding on the parties beginning on the day on which it is made. However, that Part applies in respect of the new collective agreement as if it had been entered into under that Part.
         • (2)  The new collective agreement may provide that any of its provisions are effective and binding on a day that is before or after the day on which the new collective agreement becomes effective and binding.
         • (3)  Nothing in this Part is to be construed so as to limit or restrict the rights of the parties to agree to amend any provision of the new collective agreement, other than a provision relating to its term, and to give effect to the amendment.
         • 33.  All costs incurred by Her Majesty in right of Canada relating to the appointment of an arbitrator and the performance of an arbitrator’s duties under this Act are debts due to Her Majesty in right of Canada and may be recovered as such, in any court of competent jurisdiction, in equal parts from, in the case of an appointment under Part 1, the International Association of Machinists and Aerospace Workers and the employer, and in the case of an appointment under Part 2, the Air Canada Pilots Association and the employer.
8. The complainant points out that the arbitrator’s award (enclosed with the complaint) adopted the employer’s position. Commenting on the award in a press release, the IAM stated that “The way the legislation was written ... left the arbitrator with little or no elbow room to come to any other decision ...”
9. 236. Finally, the complainant considers that the penalties for violating the Act discriminate against union representatives and are by themselves a violation of freedom of association and the right to collective bargaining. It explains in this regard that in addition to severe fines, even higher fines are imposed on anyone acting in the capacity of the IAM or the ACPA. Section 34 provides in this respect:
   • 34(1)  An individual who contravenes any provision of this Act is guilty of an offence punishable on summary conviction and is liable, for each day or part of a day during which the offence continues, to a fine of
     • (a) not more than $50,000 if the individual was acting in the capacity of an officer or representative of the employer, the International Association of Machinists and Aerospace Workers or the Air Canada Pilots Association when the offence was committed; or
     • (b) not more than $1,000 in any other case.
   • (2)  If the employer, the International Association of Machinists and Aerospace Workers or the Air Canada Pilots Association contravenes any provision of this Act, it is guilty of an offence punishable on summary conviction and is liable, for each day or part of a day during which the offence continues, to a fine of not more than $100,000.
   • 36.  If a person is convicted of an offence under section 34 and the fine that is imposed is not paid when required, the prosecutor may, by filing the conviction, enter as a judgment the amount of the fine and costs, if any, in a superior court of the province in which the trial was held, and the judgment is enforceable against the person in the same manner as if it were a judgment rendered against the person in that court in civil proceedings.
10. The IAM considers that punishing workers for engaging in an otherwise lawful strike violates the fundamental rights and finds it is disturbing that the law specifically references the IAM and the pilots union and individuals representing the unions and subjects them to much greater fines.

B. The Government’s reply

1. 237. By its communication dated 8 May 2013, the Government provides contextual information on the legislative regime for collective bargaining in Canada, presents a profile of Air Canada and its position in the air service industry in the country and an overview of the recent history of collective bargaining at the company, including the 2011–12 labour disputes. It further describes the economic context at the time of the dispute and discusses the impact of a work stoppage and the necessity of introducing the Protecting Air Service Act as an exceptional measure to protect the economy and public.

The legislative regime for collective bargaining in Canada

1. 238. In Canada, the responsibility for labour matters is constitutionally divided between the federal, provincial and territorial governments. The majority of the Canadian labour force, currently around 19 million, is subject to the various provincial labour statutes which govern such intra-provincial activities as manufacturing, commerce, and municipal and provincial employment. Although only 6 per cent of the labour force is under federal jurisdiction, the key nature of the infrastructure and other industries falling within federal jurisdiction are of considerable importance to the economy. Industries that are subject to the federal private sector industrial relations legislation include: international and interprovincial transportation by land and sea, including railways, shipping, truck and bus operations; airports and airlines; communications and broadcasting, including telecommunications and radio and television broadcasting; federally chartered banks; port operations and long-shoring; federal Crown corporations and industries declared by Parliament to be for the general advantage of Canada such as grain handling and uranium mining. Part I of the Labour Code is the statute that covers employees engaged in these industries. Currently, approximately 800,000 employees are subject to Part I of the Code. The Minister of Labour is responsible to Parliament for the administration of the Code.
2. 239. The Federal Mediation and Conciliation Service (FMCS) of the Labour Program of Human Resources and Skills Development Canada (HRSDC) administers the dispute settlement provisions of the Code. The procedures include all statutory conciliation and mediation functions. A conciliation officer’s role is to foster harmonious relations between trade unions and employers by assisting them in the negotiation of collective agreements and their renewal as well as the management of the relations resulting from the implementation of the agreements. In addition, FMCS carries out non-statutory preventive mediation and grievance mediation programmes. The Industrial Relations Board is responsible for the quasi judicial aspects of the application of the Code’s provisions.
3. 240. Part I of the Code sets the following general framework for collective bargaining in the federally regulated private sector:
   • (1)  Exclusive bargaining rights are granted to bargaining agents representing employees in a given bargaining unit, generally on the basis of majority support. The Canada Industrial Relations Board determines the certification of bargaining agents and questions of membership support. The Board also decides matters such as the appropriateness and structure of the bargaining unit, and may determine questions of employee status or exclusions. Voluntary recognition of bargaining agents and the units they represent is also permitted.
     • (a) Union status: To be certified, an applicant trade union must establish its status as a trade union. The Board generally requires that an applicant employee association establish that it is an organization founded for the purpose of collective bargaining and that it has adopted statutes and by-laws providing for the election of officers. The association must also be free from employer interference or dominance. Once recognized by the Board, a trade union does not have to re-establish its status in subsequent applications, although its recognition may be revoked if there is proof of employer dominance.
     • (b) Certification: Once its status is established, the applicant trade union must prove that it represents the majority of employees in the bargaining unit that the Board determines to be appropriate for collective bargaining.
     • (c) Revocation and Raids: During established periods, the certification may be revoked, on application to the Board by the majority of employees in the bargaining unit, or a rival union may displace the bargaining agent by applying to the Board and establishing that it represents the majority of the employees in the unit.
     • (d) Bargaining units: The Board has exclusive jurisdiction to determine the unit appropriate for collective bargaining. The nature of the industry, the organization of the company, and the skills and occupational groups of the employees are factors that are taken into consideration. Geographically, the resulting bargaining unit may encompass a single location of an employer, multiple locations of an employer in a municipal, provincial or regional area, or all locations of the employer across the country.
   • (2)  Bargaining agents and employers have a duty to meet and bargain in good faith and to make every reasonable effort to conclude a collective agreement. The Board may decide on allegations of failure to bargain in good faith.
   • (3)  Agreements must be of a fixed term of at least a year.
   • (4)  Strikes and lockouts are not permitted during the term of an agreement. Where a strike or lockout does occur during the term of an agreement, the union or employer may apply to the Board for an order declaring the work stoppage illegal and requiring that normal activities be resumed immediately.
   • (5)  Notice to bargain for renewal and revision of an existing collective agreement may be given by either party within the period of four months immediately preceding the date of expiration of the term of the collective agreement.
   • (6)  If the parties fail to enter into or renew their collective agreement, either party may inform the Minister by sending a notice of dispute. The Minister can then appoint a conciliation officer, commissioner or Board. The Minister may also notify the parties in writing of her intention not to appoint any of the foregoing.
   • (7)  The Minister may at any time appoint a mediator to assist the parties in settling a dispute. Such an appointment does not affect the parties’ acquisition of strike or lockout rights.
   • (8)  During a strike or lockout, the trade union and employees in the bargaining unit must continue the supply of services, operation of facilities and production of goods necessary to prevent an immediate and serious danger to the safety or health of the public. The Code outlines provisions related to negotiation of this maintenance of services agreement and for the resolution of issues related to its content.
4. 241. The Government indicates that in 2011, where a notice of dispute was received by the Minister of Labour and the FMCS was involved in assisting the parties, nearly 94 per cent of the collective bargaining disputes were resolved without a work stoppage.

Profile of air transportation and Air Canada

1. 242. Canada’s land mass is the second largest in the world and spans six time zones. The airline industry is defined by the unique characteristics of the Canadian market: multiple hubs, long distances between scattered populations, harsh winters that encourage people to vacation in the south, the importance of an air transportation network in the north, the seasonal nature of travel, climate and proximity to one of the world’s largest markets, the United States. Canada has a number of international air carriers, including Air Canada, as well as smaller regional earners and freighter operators. Canada’s air sector depends on its 1,889 aerodromes, including 26 airports that are part of the National Airports System (NAS); 570 certified airports, heliports and waterdromes that support scheduled and non scheduled flights; and 1,297 registered aerodromes and 22 other aerodromes. Canada’s 26 NAS airports handle roughly 90 of all scheduled passengers and cargo volumes in Canada, are particularly important to Canada’s trade and tourism industries, and contribute to national prosperity and international competitiveness. Canada also has smaller registered and certified airports and certified heliports, some of which serve communities without highway access – places where aviation is the only year-round transportation option.
2. 243. The Government reports that in 2011, passenger traffic at Canadian airports increased by 2.5 per cent compared to 2010, to a total of 78.4 million travellers. Year after year, domestic, Canada–US and other international traffic increased by 2.4, 1.6 and 0.4 per cents, respectively. The air cargo trade in 2011 grew 9.2 per cent from 2010 to reach $110 billion (Canadian dollars here and throughout the text), with the volume of revenue cargo coming into and being sent from Canadian airports totalling 739 million tons, a 9.1 per cent decrease from the previous year. In terms of carrier-specific performance, the company and its regional affiliates transported almost 34 million passengers and posted a load factor of 81.6 per cent. Major scheduled carriers and charters reported an overall load factor of about 73 per cent in 2011 compared to 74.1 per cent in 2010.
3. 244. Air Canada is by far the national largest provider of scheduled passenger services in the Canadian market, the Canada–U.S. trans-border market and in the international market to and from Canada. In terms of passenger volume, the company is the world’s 15th largest passenger airline (2010 figures) and has a mainline fleet of 205 aircraft, augmented by 157 aircraft flying under the Air Canada Express banner. In 2011, it carried almost 34 million passengers and provided passenger service to 180 direct destinations on five continents. On average, over 100,000 people travel with this company or one of its regional partners every day. In 2011, the company, together with other regional airlines operating flights on behalf of and under commercial agreements with Air Canada (which operate under the name “Air Canada Express”), operated, on average, 1,506 daily scheduled flights to 60 destinations in Canada, 57 destinations in the United States and 63 destinations in the Europe, Pacific, Caribbean/Central America and South America markets. Domestic, U.S. trans-border and international departures accounted for approximately 67 per cent, 25 per cent and 8 per cent, respectively, of the 1,506 average daily departures. In addition, the company provides passenger charter services.
4. 245. The company also has a freight division, Air Canada Cargo, that provides direct cargo services to over 150 Canadian, U.S. trans-border and international destinations and has sales representation in over 50 countries. It is Canada’s largest provider of air cargo services as measured by cargo capacity. Air cargo services are provided on domestic and U.S. trans-border flights and on international flights on routes between Canada and major markets in Europe, Asia, South America and Australia.
5. 246. From a financial standpoint, in 2011, the company reported a net loss of $249 million on revenues of $11.6 billion. Its Earnings Before Interest, Taxes, Depreciation, Amortization and Rent (EBITDAR) was $1.2 billion and its operating profit was $179 million. In contrast, Chorus Aviation, the parent company of Jazz Aviation, reported a net profit of $68.1 million on revenues of $1.7 billion. Its EBITDAR was $38 million and its operating profit was $102 million.
6. 247. Moreover, the company is subject to operating requirements under the Air Canada Public Participation Act that are not imposed on other Canadian earners. As such, this Act includes provisions for the location of operational and overhaul maintenance bases and a duty to ensure that any member of the travelling public can communicate and obtain services in either official language of Canada.

History of collective bargaining at the company

1. 248. In 2011, the company’s workforce was comprised of some 26,000 employees (23,000 full-time, full-year equivalents) across Canada. The vast majority of employees are unionized and are represented by the following unions:
   • ■ Air Canada Pilots Association (ACPA);
   • ■ Canadian Air Line Dispatchers Association (CALDA);
   • ■ Canadian Auto Workers (CAW) representing flight operations crew scheduling personnel and in-flight schedulers;
   • ■ National Automobile, Aerospace, Transportation and General Workers Union of Canada (CAW-Canada) representing customer sales and service agents;
   • ■ Canadian Union of Public Employees (CUPE) representing flight attendants;
   • ■ the International Association of Machinists and Aerospace Workers (IAM) representing technical maintenance and operational support employees (TMOS); and,
   • ■ IAM representing clerical and office (financial officers) employees.
2. 249. Since 1984, there have been 35 work stoppages in the airline industry, six of which involved Air Canada. In respect of the latter, the most recent, in June 2011, involved a three-day strike by the customer sales and service agents. Previously, the last work stoppage at the company was in 1998, when its pilots were on strike for 13 days. According to financial industry analysts, the company was forced to cancel flights and lost approximately $300 million because of the work stoppage. However, in 1998, Canada had two large domestic airlines, Air Canada and Canadian Airlines International Limited, so there was a lesser impact of the work stoppage on the economy and the travelling public. Canadian Airlines International Limited ceased operation in 2001.
3. 250. In 2003, the company entered bankruptcy protection. The company sought relief from its contractual obligations and laid off approximately 6,500 employees. Collective agreements for the period 1 June 2003–30 June 2009, were renegotiated under the supervision of a court-appointed facilitator and labour costs were reduced by over $1.3 billion. Key issues during this round of negotiations included pension plan provisions and benefits. The collective agreements that expired in June 2009 contained a clause allowing for the reopening of the agreements in 2006 to negotiate wage increases. The parties agreed to refer the matter to binding arbitration if an agreement could not be reached. On 24 August 2006, an arbitrator issued a decision granting wage increases of 1 per cent effective July 2006, 1.75 per cent effective July 2007 and 1.75 per cent effective July 2008 for the IAM TMOS employees.
4. 251. In 2009, the company reported significant financial difficulties and appeared close to requiring bankruptcy protection for the second time in six years. Collective bargaining negotiations were fast tracked and the company sought a 12–21 month extension of the existing collective agreements. This was a precondition for the company’s access to financing that would allow it to continue its operations and avoid bankruptcy proceedings. Pension plan provisions and benefits were key issues for both parties. The company proposed removing the pension issue from the bargaining table and a moratorium on its pension payments to help it maintain defined benefit pension plans. The company’s unions were looking to recuperate some of the wage and benefits concessions they made during the bankruptcy restructuring initiated in 2003. The value of the concessions was estimated at over $1 billion.
5. 252. On 4 June 2009, the Minister of Finance announced that the Honourable James Farley had been asked to provide mediation assistance to the company, its unions and its retiree associations in devising a sustainable path for the pension plan. On 17 June 2009, the Minister of Labour appointed a mediator to assist Justice Farley in his efforts to extend the collective agreements. With the assistance of the mediators, the collective agreements for all bargaining units at the company, including the technical maintenance and operational support employees were renewed for 21 months and a short-term pension funding moratorium was initiated.
6. 253. In 2011, the company reached collective agreements with the majority of the unions representing its employees with the exception of three bargaining agents. This included the IAM TMOS employees whose collective agreement covering a unit of 8,193 employees expired on 31 March 2011. The IAM’s TMOS group is the largest group of unionized employees at the company. They are responsible for the servicing and overhaul of all of the company’s aircraft at bases in Vancouver, Winnipeg, Montreal and Toronto. They include line and heavy maintenance mechanics, auto mechanics, millwrights, electricians, inspectors and technical writers. The IAM’s TMOS bargaining unit also include cabin groomers, aircraft cleaners, baggage and cargo handlers, baggage and cargo agents, weight and balance agents, instructors and planners. TMOS members are also responsible for all purchases made on behalf of the airline as well as the distribution of parts and supplies.
7. 254. On 21 March 2011, the union served the employer with a notice to bargain for the purpose of renewing the collective agreement. The parties held direct negotiations from 6 April to 19 August 2011 and during the week of 31 October 2011. Key issues for the union were wages, paid lunch breaks, vacation, flexibility in scheduling and hours of work. Pension changes and wages were the key issues for the employer. After several months of direct negotiations, the parties reached an impasse.
8. 255. On 6 December 2011, a notice of dispute was received by the FMCS. On 21 December 2011, former Justice Louise Otis was appointed Conciliation Commissioner by the Minister of Labour to assist the parties in their negotiations. On 3, 4, 9–13, 16–21 January and from 30 January to 8 February 2012, the Conciliation Commissioner met with the parties. On 10 February 2012, the parties reached a tentative agreement with the assistance of the Conciliation Commissioner. The agreement was subject to a ratification vote by the union membership. On 19 February 2012, the parties were released from the conciliation process. According to the Conciliation Commissioner, although the process was tense and arduous, the tentative agreement was the result of a fair and productive negotiation process by competent negotiators.
9. 256. On 22 February 2012, the union announced that its membership had voted 65.6 per cent to reject the tentative agreement and 78 per cent in favour of strike action. On the same day, the Conciliation Commissioner filed her final report with the Minister of Labour and a copy of the report was sent to the parties the following day. Following the union’s rejection of the tentative agreement, the Conciliation Commissioner stated: “Taking into consideration the situation of the parties, the tentative agreement is reasonable and fair. The negotiation process, which was carried out diligently and competently, has been exhausted ... Under the full circumstances, I consider that a reasonable agreement had been reached”. The parties had the opportunity until noon 28 February 2012 to review the report and provide their comments.
10. 257. On 5 and 6 March 2012, negotiation meetings were held with the assistance of the FMCS. On 6 March 2012, the union served a strike notice indicating that its members would begin a legal strike on 12 March 2012 at 00.01. On 8 March 2012, the Minister of Labour referred the matter of the maintenance of activities agreement to the Industrial Relations Board for determination, to ensure that the safety and health of the public were protected in the event of a work stoppage.
11. 258. On 9 March 2012, the Minister of Labour placed Bill C-33 entitled “An Act to provide for continuation and resumption of air service operations” on the Parliamentary Order Paper. On 12 March 2012, the Bill was introduced in the House of Commons. The Bill was passed by the House of Commons on 14 March, by the Senate on 15 March and received Royal Assent the same day. The Protecting Air Service Act came into force on 16 March 2012. Bill C-33 provided for final offer selection as the dispute resolution mechanism. Under the provisions of the Bill, the Minister of Labour would appoint an arbitrator for the purpose of reaching a collective agreement. Within 90 days, or a longer period specified by the Minister, the arbitrator was responsible for determining the matters on which the employer and the union were in agreement and those remaining in dispute, select, in order to resolve the matters, either the final offer submitted by the employer or the final offer submitted by the union and make a decision in respect of the resolution of the matters referred. Bill C-33 also contained a clause indicating that nothing precluded the employer and the union from entering into a negotiated new collective agreement at any time before the arbitrator made a decision, and, if they did so, the arbitrator’s duties under the Bill would cease as of the day on which the new collective agreement is entered into (section 16).
12. 259. On 22 and 23 March 2012, a number of baggage handlers at Toronto Pearson International Airport and Montreal Trudeau International Airport walked off the job. The company asked the grievance arbitrator for the parties, Arbitrator Teplitsky, to issue an emergency cease and desist order to address the alleged illegal work stoppage. On 23 March 2012, all employees returned to work after Arbitrator Teplitsky issued the cease and desist order. The same day, the Industrial Relations Board issued an order in which it found that the actions of the members of the IAM of 22 and 23 March 2012 constituted an unlawful strike. On 2 April 2012, the union filed an application to the Ontario Superior Court of Justice to have Bill C-33 declared unconstitutional. The matter is still pending before the court.
13. 260. As part of the negotiation process and in anticipation of the appointment by the Minister of Labour of an arbitrator pursuant to Bill C-33, the parties concluded a Memorandum of Agreement dated 1 May 2012 which provided for ten days of negotiations after the appointment of an arbitrator. The Minister of Labour appointed Mr Michel G. Picher as arbitrator under section 11 of the Protecting Air Service Act on 1 May 2012 and the parties negotiated from 8 to 22 May with his assistance acting as a mediator. On 22 May 2012, the parties announced that they were moving to arbitration after they had failed to reach an agreement. As per section 14(2)(a) and (b) of the Act, in making the selection of a final offer, the arbitrator was to take into account the tentative agreement reached by the employer and the union on 10 February 2012 and the report of the Conciliation Commissioner dated 22 February 2012, the conditions of employment in other airlines, the economic viability and competitiveness of the employer and the sustainability of the employer’s pension plan. On 17 June 2012, the arbitrator rendered his final and binding decision. While the employer’s final offer was selected, the arbitrator indicated in his decision that the union’s members had gained not only pension security, but also benefits beyond those which had been negotiated in the original unratified tentative agreement. The collective agreement was extended for five years and will expire on 31 March 2016.

Economic context

1. 261. The Government explains that since the financial crisis of 2007–08, the world economy has experienced a period of turbulence characterized by a major recession and a subsequent unbalanced recovery which has been affecting the entire global economy to various degrees of severity. The Government refers to an ILO publication which finds that the global financial crisis had also profoundly affected civil aviation and that its impact on the industry has eclipsed that of 9/11 (International Labour Office (2009), Sectoral coverage of the global economic crisis: The impact of the financial crisis on labour in the civil aviation industry). Governments and central banks responded to the downturn with unprecedented fiscal and monetary stimulus. Canada’s Economic Action Plan, tabled on 27 January 2009, was the Government’s response to the crisis which aimed at protecting jobs and incomes by delivering a $62 billion stimulus to the economy. By 2010–11, signs of a modest global recovery were becoming apparent. When in March 2011, the IAM served the employer with a notice to bargain, an uncertain and fragile global economic recovery was under way. In April 2011, an International Monetary Fund (IMF) report indicated that the recovery was gaining strength but unemployment remained high in advanced economies and new macroeconomic risks were building in emerging market economies. Financial conditions continued to improve although they remained unusually fragile. However, only six months later, the IMF warned that the global economy had entered a dangerous new phase; there were fears of a double-dip recession.
2. 262. In its November 2011 economic and fiscal projections, the Department of Finance highlighted that while Canada weathered the global recession better than most other industrialized countries, the global economy had slowed and uncertainty surrounding the short-term outlook had risen considerably and Canada was not immune to international developments. Private sector economists had revised downward their outlook for Canadian economic growth since the 2011 Budget, particularly for 2011 and 2012. Real gross domestic product (GDP) was expected to grow by 2.2 per cent in 2011 and 2.1 per cent in 2012. In addition, the deterioration of the global economic situation had also begun to be felt in Canadian employment, which has remained almost unchanged at 7.3 per cent since July 2011.
3. 263. In November 2011, the Government announced that it would continue to implement the Next Phase of its Economic Action Plan to support jobs and growth. In addition, it announced measures to reduce the maximum potential increase in employment insurance premium rates in 2012 and temporarily extend the enhancement to the Work-Sharing Program. The Government was prepared to respond in a flexible and measured manner to support jobs and growth while, at the same time, it was following through on its deficit reduction action plan in order to achieve at least $4 billion in ongoing annual savings by 2014–15.

Impacts of a work stoppage

1. 264. Given the uncertain global and Canadian economic context, the consequences of a work stoppage would have been acute not only for the company’s operations and long-term viability but also for the national economy, company’s partners, travellers and Canadians in remote communities. The scope of the work provided by IAM employees, more specifically the mechanics, extends across all of the company’s operations. In the absence of a contingency plan, a work stoppage involving the IAM would have shut down the company. It was not known whether the company had a contingency plan in place. According to Transport Canada, for safety and insurance reasons it was expected that the company could have begun shutdown protocols within 24 hours of a work stoppage. This would have ensured that aircrafts already in transit would return to base as soon as possible, which could have left travellers and cargo stranded. Third-party air earners operating as Air Canada Express could have also been subject to the company’s shutdown protocol since their aircraft are serviced by bargaining unit members of the IAM. In the absence of the company’s IAM baggage handlers and cargo agents, the efficient movement of baggage and air cargo would have ground to a slow pace for both shippers and customers. The company’s IAM members also provide services to Star Alliance partner air carriers, thus, their operations could have also have been affected. Other impacts of a work stoppage at the company would have included temporary layoffs for some of their other employees, such as pilots, flight attendants, crew schedulers, dispatchers and customer sales and service agents, and possible indirect job losses for third-party service providers, such as caterers, fuel suppliers and travel agents.
2. 265. The Government further indicates that according to the abovementioned ILO publication, the civil aviation industry is a social and economic pillar of the world economy. For every one job lost in an airline, between four and ten jobs will be lost inside the perimeter of the airport and a minimum of a further three jobs per airline lost outside the perimeter. The Government further points out, referring to paragraph 621 of the Committee’s Digest, that the Committee itself has acknowledged that the transportation of passengers and commercial goods is a public service of primary or fundamental importance.
3. 266. The Government considers that the IAM work stoppage would have had significant financial implications for the economy (estimated cost of between $1 to $22.4 million for each week of a work stoppage). Financial estimates varied depending on the value of the trips (passengers) and shipments (cargo) that could have been cancelled, postponed or placed on an alternative carrier. Based on Government’s estimates, if there were no trip or cargo shipment cancellations because of the work stoppage, GDP would have declined by 0.003 per cent ($1 million) for each week of the work stoppage. If 10 per cent of the value of Air Canada and Air Canada Express’ sales in equivalent demand had not been assumed by other carriers (Canadian, US or other foreign), other modes of transportation (e.g. rail), and were not postponed, Canada’s GDP would have fallen by 0.025 per cent ($8 million). Similarly, if 20 per cent of the value had been lost, GDP would have decreased by 0.048 per cent ($15.3 million); if 30 per cent is lost, GDP would have decreased by 0.07 per cent ($22.4 million). In addition to short-term losses, a work stoppage could have further weakened the company’s reputation among the travelling public and shaken the confidence of suppliers, as well as credit markets and potential investors with respect to its long-term prospects. Any scenario of reduced operations would have also adversely impacted Canadian airports as over 50 per cent of all airport revenues are attributable to the company’s related activity. Airports have made significant infrastructure investments and incurred debt, based on forecasted revenues from airlines. If airports did not receive these forecasted revenues, this would have had negative financial implications on their operations.
4. 267. The Government further refers to the financial implications for the company and its viability and, in this respect, indicates that the airline industry has high fixed costs and a low profit margin even in periods of economic growth. The company has faced significant financial difficulties in the past decade and its financial position is not secure today. In April 2003, the financial pressures on the company became so severe that the corporation applied for bankruptcy protection. It emerged from that protection in September 2004 under a court approved plan which saw it stripped of its assets and restructured under the name, ACE Aviation Holdings Incorporated. After the 2008 global financial collapse, companies which provided defined benefit pension plans suddenly faced much higher funding obligations. The combined effect of the recession, less air travel, and the company’s contractual obligations led to further financial challenges. In 2008, in order to avoid the threat of bankruptcy again, it secured additional loans to continue its operations. On a number of occasions in recent years, the company has restructured and made cuts to its human and financial resources in order to maintain its viability.
5. 268. Following the IAM strike notice on 6 March 2012, the company indicated that the effects of the labour uncertainty had led to cancellation of flights on a daily basis and that cargo shipments were suppressed. It also indicated that it was operating close to a basic level of viability. A prolonged work stoppage could have had a significant impact on the company’s return to profitability and there were bankruptcy concerns for the airline –26,000 direct jobs would have been at risk and another 250,000 workers indirectly linked to the company would have been affected by a work stoppage. This would have inflicted significant damage to the economy.
6. 269. The company continues to face increasing competition from domestic airlines and it also faces competition internationally, especially for the movement of cargo. Other financial pressures include little control over items such as high fuel prices, which can constitute as much as a third of total operating costs, and foreign exchange rates. These price increases, coupled with a sluggish economy and increased domestic competition, resulted in a loss for the airline in 2011, including $80 million in the fourth quarter alone. According to the company’s annual report 2011, results of operations for 2011 compared to 2010 included operating income of $179 million which decreased $53 million from 2010 while EBITDAR of $1,242 million declined $144 million, both before a favourable adjustment of $46 million to a provision for cargo investigations in 2010. Operating expenses increased $879 million or 8 per cent from 2010, of which $723 million was due to higher fuel expenses. A net loss of $249 million or $0.92 per diluted share was a deterioration of $225 million from the net loss of $24 million or $0.12 per diluted share recorded in 2010. Free cash flow of $366 million decreased $380 million from $746 million in 2010, largely due to a decline in net cash from operations of $210 million and higher pension payments of $129 million.
7. 270. As to the impact on passengers, the Government states that work stoppage involving IAM members could have effectively grounded Air Canada and Air Canada Express at a time when the airline was heading into a peak period of holiday travel. In Canada, during the month of March numerous educational institutions schedule week-long holiday breaks during which many people travel by air to reach their destinations. Over one million passengers were scheduled to travel with the company over the course of the week of 12 March 2012. The sheer size of Canada means that Canadians depend on air service more than citizens of most other nations. Given limited spare capacity among the company’s competitors and the possible absence of a contingency plan, a large number of travellers would have been left stranded. Competitors might have considered adding extra flights to accommodate passengers, however, according to Transport Canada, the ability of other airlines to add additional capacity in the event of a work stoppage would have been limited, especially in the short term. Work rules and duty hour limits for flight crews (pilots and flight attendants) would have also precluded other airlines from significantly increasing services. Any additional service by other earners would have been limited to routes already served, routes that serve large population areas, and those which are operated by the company mainline (e.g., Toronto–Vancouver). In urban areas, travellers often have access to other modes of transportation (car, bus, train, and different airlines from other hubs). However, even with these various alternatives, in the event of a work stoppage, travellers would likely have incurred extra expenses or delays in reaching their destinations.
8. 271. A work stoppage could have seriously disrupted the company’s regional and trans-border air services, especially Air Canada Express which would have been grounded. Air Canada Express operates flights on behalf of Air Canada as a contract earner. About 43 out of 145 domestic routes and 19 out of 41 trans-border routes are only served by Air Canada Express. Although alternate air carriers are available and could have served at least some of the passengers affected by a work stoppage, some communities would have been disproportionately affected because of a lack of alternative airlines and limited seat capacity (including Sault Ste Marie, Kamloops, Quebec City, Sydney, Timmins, Fort St. John, North Bay, Mont Joli, Baie Comeau, Moncton, Gander, Saint John, Cranbrook, Whitehorse, Charlottetown and Val-d’Or). In addition, Air Canada Express is the only air carrier for 12 communities; seven in British Columbia (Castlegar, Nanaimo, Penticton, Prince Rupert, Sandspit, Smithers, Terrace); three in Quebec (Gaspé, Iles de la Madeleine, Rouyn–Noranda); and two in New Brunswick (Bathurst, Fredericton). A work stoppage could have left some passengers (especially those in remote communities) stranded. Third party air carriers operating as Air Canada Express and other Star Alliance members could have been significantly affected since their aircraft are also serviced by Air Canada’s IAM members.
9. 272. With regard to the impact on air cargo, the Government indicates that air transportation is a key component of global supply chains, especially for perishable items and pharmaceutical products. The company is Canada’s main air cargo carrier providing 22 per cent of domestic capacity, 4 per cent of trans-border capacity, and 49 per cent of international capacity. At Toronto (Pearson Airport), Canada’s largest air cargo hub, the company provides approximately 68 per cent and 40 per cent of domestic and international air cargo lift, respectively. The company transports about $466 million worth of freight each year. This provides a critical business service for many key industries, including the aerospace, pharmaceutical, and precious metal sectors. The efficient movement of air cargo is vital to a trading nation like Canada. A disruption of the company’s service would have had an important impact on the supply chains and, thus, on Canadian manufacturers and retailers because there are limited options to substitute for air transportation when it comes to the movement of critical time-sensitive goods. In the event of a work stoppage, air cargo movements could have shifted to a very slow if not intolerable pace for shippers and customers. Cargo could have been left stranded which would have had negative financial implications for industries relying on just-in-time delivery or whose products are perishable. In a just-in-time world suppliers can ill afford an unnecessary tie-up of capital in inventory.

Bill C-33: An Act to provide for the resumption and continuation of air services (Protecting Air Service Act)

1. 273. It is in this serious economic context that in March 2012, when it became evident that there was no reasonable prospect for the conclusion of a collective agreement in the labour dispute in question, the Government took action to ensure continued air services. To protect the Canadian economy and Canadian families the Minister of Labour introduced emergency legislation to provide for the resumption and continuation of air service operations and provide for the settlement of the labour dispute through binding arbitration. The Minister stressed that:
   • Economic recovery remains our government’s top priority and grounded flights translate into lost opportunities for Canadian businesses and frustration for stranded travellers. A work stoppage at Air Canada will take a toll on our fragile economy and that we simply can’t afford. Moving forward with legislation is always the last resort.
2. The legislation was also aimed at protecting other employees who would have been affected by the work stoppage. While the company employs 26,000 people, its operations have an indirect impact on an additional 250,000 employees and their families.
3. 274. The Protecting Air Service Act provided for the continuation and resumption of air service operations for the technical, maintenance and operational support employees at the company. On the coming into force of the legislation both the employer and the unions were required to resume or continue their duties without delay. It further provided for the settlement of the dispute by binding arbitration (final offer selection) and contained guiding principles including the need for terms and conditions of employment that were consistent with other airlines and that would provide the necessary degree of flexibility to ensure the short and long-term economic viability and competitiveness of the company, as well as the sustainability of its pension plan, taking into account any short term funding pressures on the employer. The arbitrator was to take into account the tentative agreement reached by the parties on 10 February 2012 and the report of the Conciliation Commissioner dated 22 February 2012.
4. 275. The arbitration process was chosen as the preferred alternative as this process is commonly used for resolving impasses in collective bargaining and is a process that has proven successful in the past. The Act provided that the arbitration process would be based on final offer selection whereby the arbitrator would choose the proposal of either the employer or the union to resolve the dispute. Final offer selection encourages the parties to be reasonable in their submissions before an arbitrator and ensures a final and binding settlement of a dispute. As stated by Mr Douglas Stanley, a prominent labour arbitrator in Canada, in a 2012 decision involving the company and the Air Canada Pilots Association:
   • My understanding of the theory of final offer selection is that it compels both parties to compromise. It requires both parties to evaluate the others’ position and to modify their own proposals in such a way as to incorporate the concerns and recognize the legitimate interests of the other party.
5. 276. In the Act, the Government also provided the parties with a further opportunity to resume their collective bargaining and reach a mutually acceptable collective agreement. The Act provided that should the parties arrive at a negotiated agreement before the arbitrator renders a decision, the negotiated collective agreement would govern. The fines for non compliance with the legislation set out in the Act have been provided for in federal private sector back-to-work legislation since 1991. They are significantly high to discourage contravention with the legislation. However, no term of imprisonment would be imposed should a person fail to pay a fine.
6. 277. According to the Government, a process of free collective bargaining is the preferred manner for employers and bargaining agents to arrive at collective agreements. In Canada, this is supported by a comprehensive industrial relations framework underpinned by third party dispute resolution mechanisms to assist federal private sector employers and unions to resolve their collective bargaining disputes. However, when the parties are unable to resolve their differences and engage in strike or lockout activities that have a very detrimental impact on the national economy or the public, it is sometimes necessary for the Government to intervene to protect the public interest.
7. 278. In the dispute at case, the legislative intervention was necessary in view of the difficult economic situation and potential negative consequences for Canadians. The Protecting Air Service Act was introduced in Parliament only after all other avenues to resolve the dispute through third party assistance were exhausted. To help to resolve the collective bargaining dispute, the parties had received the assistance of a Conciliation Commissioner appointed by the Minister of Labour as well as extensive assistance from the Government’s mediators. Before taking the step of introducing emergency legislation, the Government carefully balanced the statutory right of the parties to engage in a legal work stoppage against the fragile economic state of the country and the impacts on the Canadian public. The legislative intervention by the Government was time limited to the 2011–12 round of collective bargaining and addressed the specific circumstances which led to an impasse.
8. 279. As stated in the preamble to the Labour Code, “there is a long tradition in Canada of labour legislation and policy designed for the promotion of the common well-being through the encouragement of free collective bargaining and the constructive settlement of disputes”. Freedom of association and free collective bargaining are the bases for sound industrial relations. The Preamble to Part I of the Code confirms that “the Parliament desires to continue and extend its support to labour and management in their cooperative efforts to develop good relations and constructive collective bargaining practices.” It is for this reason that the introduction of emergency legislation is only rarely contemplated by the Government. The decision to introduce emergency legislation is not taken lightly and is only done in cases where a work stoppage would have had acute negative impacts, as was the situation in this case where the consequences would have extended far beyond the parties.
9. 280. The Government concludes by stressing that, within the strong legislative framework of Part I of the Labour Code, it provided extensive dispute resolution assistance to the company and the union during negotiations to renew the collective agreement. This included the appointment by the Minister of Labour of a Conciliation Commissioner who worked intensively with the parties, support from officials of the FMCS and personal interventions of the Minister of Labour. The Government remains firmly committed to the process of free collective bargaining as the best method for employers and bargaining agents to arrive at a collective agreement. In 2011, 407 collective bargaining negotiations took place in the federal private sector and in the vast majority of these cases, the parties were able to reach an agreement without a work stoppage. Over the past five years, 94 per cent of labour disputes were settled without a work stoppage when the FMCS was involved. The Government strongly advocates that all parties involved in collective bargaining must and should take responsibility for and have the opportunity to settle their disputes in a consensual way. The Government underscores that it does not take the decision to introduce emergency legislation lightly. This is only done in exceptional circumstances when the public and economic interest is at stake. In the last 12 years, the Government has only enacted such legislation four times. Over the same time period (2000–12), 37 legal lockouts and 124 legal strikes occurred in the federal jurisdiction.
10. 281. The Government has renewed its commitment to support strong employer–union relationships by providing, through Budget 2011, an additional $1 million over two years to expand the delivery of non-statutory preventive mediation services. This is achieved by training workshops on moving from adversarial to collaborative relationships, collective bargaining and joint conflict resolution. All preventive mediation services are delivered jointly to employers and unions by mediators with extensive experience in both traditional and alternative approaches to labour relations. These services are free and can be customized to meet the specific needs of a particular workplace. This option is available to Air Canada and the IAM should both parties wish to participate in preventive mediation activities.

C. The Committee’s conclusions

1. 282. The Committee notes that the allegations in this case relate to the adoption of the Protecting Air Service Act. It further notes that there is no disagreement as to the facts and events in this case, which can be summarized as follows. On 21 March 2011, the complainant trade union served the employer with notice to bargain for the purpose of renewing the collective agreement. The parties held direct negotiations from 6 April to 19 August 2011 and during the week of 31 October 2011. Key issues for the union were wages, paid lunch breaks, vacation and flexibility in scheduling, and hours of work; pension changes and wages were the key issues for the employer. After several months of direct negotiations, the parties reached an impasse. On 6 December 2011, a notice of dispute from the company was received by the FMCS. On 21 December 2011, the Minister of Labour appointed a Conciliation Commissioner to assist the parties in their negotiations. On 10 February 2012, the parties reached a tentative agreement with her assistance. The agreement was subject to a ratification vote by the union membership. On 22 February 2012, the union announced that its membership had voted 65.6 per cent to reject the tentative agreement and 78 per cent in favour of strike action. On 5 and 6 March 2012, negotiation meetings were held with the assistance of the FMCS. On 6 March 2012, the union served a strike notice indicating that its members would begin a legal strike on 12 March 2012 at 00.01. On 8 March 2012, the Minister of Labour referred the matter of the maintenance of activities agreement to the Industrial Relations Board for determination, to ensure that the safety and health of the public were protected in the event of a work stoppage. On 9 March 2012, the Minister of Labour placed Bill C-33 entitled “An Act to provide for continuation and resumption of air service operations” on the Parliamentary Order Paper. On 12 March 2012, the Bill was introduced in the House of Commons; was passed by the House of Commons on 14 March, by the Senate on 15 March and received Royal Assent the same day. The Protecting Air Service Act came into force on 16 March 2012 and provided for final offer selection as the dispute resolution mechanism. As part of the negotiation process and in anticipation of the appointment by the Minister of Labour of an arbitrator pursuant to Bill C-33, the parties concluded a Memorandum of Agreement dated 1 May 2012 which provided for ten days of negotiations after the appointment of an arbitrator. The Minister of Labour appointed an arbitrator under section 11 of the Act on 1 May 2012 and the parties negotiated from 8 to 22 May with his assistance acting as a mediator. On 22 May 2012, the parties announced that they were moving to arbitration after they had failed to reach an agreement. On 17 June 2012, the arbitrator rendered his final and binding decision by selecting the offer of the company. The collective agreement was extended for five years to expire on 31 March 2016.
2. 283. The Committee notes that the IAM considers that the Act violates air transport workers’ freedom of association and collective bargaining rights because the services performed by workers covered by the Act do not fall within any of the exceptions envisaged by the Committee’s principles. In particular, the complainant considers that the workers concerned are not public servants exercising authority in the name of the State nor do they perform essential services in the strict since of the term. It further considers that the work stoppage would not result in an acute national emergency. The Government, on the other hand, explains that the legislation constituted an exceptional measure and was adopted in the public interest in the context of a fragile domestic economy. The Committee notes very detailed information provided by the Government on the economic context and the impact of a work stoppage on the Canadian economy, for the company, on passengers and air cargo.
3. 284. At the outset, the Committee wishes to recall that the voluntary negotiation of collective agreements, and therefore the autonomy of the bargaining partners, is a fundamental aspect of the principles of freedom of association and that collective bargaining, if it is to be effective, must assume a voluntary character and not entail recourse to measures of compulsion which would alter the voluntary nature of such bargaining [see Digest of decisions and principles of the Freedom of Association Committee, fifth (revised) edition, 2006, paras 925 and 926]. Other than in cases involving essential services, the Committee recalls that compulsory arbitration to end a collective labour dispute and a strike is only acceptable if it is at the request of both parties involved in a dispute, or if the strike in question may be restricted, even banned, that is, in the case of disputes in the public service involving public servants exercising authority in the name of the State or in essential services in the strict sense of the term that is, services, the interruption of which, would endanger the life, personal safety or health of the whole or part of the population. It considers that a system of compulsory arbitration through the labour authorities, if a dispute is not settled by other means, can result in a considerable restriction of the right of workers’ organizations to organize their activities and may even involve an absolute prohibition of strikes, contrary to the principles of freedom of association. Moreover, the Committee stresses that provisions which establish that, failing agreement between the parties, the points at issue in collective bargaining must be settled by the arbitration of the authority are not in conformity with the principle of voluntary negotiation [see Digest, op. cit., paras 564, 568 and 993].
4. 285. The Committee notes that, in the present case, the complainant trade union represents two groups of employees under a single collective agreement: the mechanical maintenance services employees and the airport services employees in the company’s operations across Canada. They include line and heavy maintenance mechanics, auto mechanics, millwrights, electricians, inspectors and technical writers, cabin groomers, aircraft cleaners, baggage and cargo handlers, baggage and cargo agents, weight and balance agents, instructors and planners. The Committee has consistently considered that these categories of workers do not constitute essential services in the strict sense of the term. While it appreciates the Government’s concerns set out above, the Committee considers that by linking restrictions on strike action to interference with trade and commerce, a broad range of legitimate strike action could be impeded. While the economic impact of industrial action and its effect on trade and commerce may be regrettable, such consequences in and of themselves do not render a service “essential”, and thus the right to strike should be maintained [see Digest, op. cit., para. 592]. Furthermore, the Committee has previously pointed out that economic considerations should not be invoked as a justification for restrictions on the right to strike; however, when a service that is not essential in the strict sense of the term but is part of a very important sector in the country is brought to a standstill, measures to guarantee a minimum service may be justified [see Case No. 2841, 362nd Report, para. 1041]. In light of the above, the Committee requests the Government to make every effort in the future to avoid having recourse to back-to-work legislation in a non-essential service and to limit its interventions to ensuring the observance of a minimum service, consistent with the principles of freedom of association.
5. 286. The Committee notes the complainants’ allegation that section 11 of the Act, pursuant to which “the Minister must appoint as arbitrator for final offer selection a person that the Minister considers appropriate”, prevents the parties from choosing an arbitrator. While noting the clear text of the provision and recalling that, in mediation and arbitration proceedings, it is essential that all the members of the bodies entrusted with such functions should not only be strictly impartial but, if the confidence of both sides, on which the successful outcome even of compulsory arbitration really depends, is to be gained and maintained, they should also appear to be impartial both to the employers and to the workers concerned [see Digest, op. cit., para. 598], the Committee understands from the award itself that in the present case, the arbitrator was appointed following consultation by the Ministry with the parties and by their mutual agreement:
   • Following consultation by the Minister with the parties, on May 1, 2012, by mutual agreement I was appointed as Arbitrator pursuant to section 11 of An Act to provide for the continuation and resumption of air services operations, with the authority and the duty to decide the outstanding issues in dispute.
6. 287. The Committee also notes that, according to the complainant, the criteria provided for in section 14(2) of the Act left the arbitrator “with little or no elbow room to come to any other decision” than to select the company’s offer. Pursuant to this provision, in making the selection of a final offer, the arbitrator is to be guided by “the need for terms and conditions of employment that are consistent with those in other airlines and that will provide the necessary degree of flexibility to ensure: (a) the short-and long-term economic viability and competitiveness of the employer; and (b) the sustainability of the employer’s pension plan, taking into account any short-term funding pressures on the employer”. The Committee notes the following extracts from the arbitration award, which would appear to support the complainant’s view:
   • It must be noted that the instant arbitration is unique, to the extent that it is governed by the terms of Bill C-33, a law which places certain clearly defined obligations on the Arbitrator. … As a matter of general practice, Canadian arbitrators called upon to resolve interest arbitration disputes have effectively given little or no weight to “ability to pay” arguments submitted to them by employers. While I consider that approach to be valid and appropriate generally in interest arbitrations in both the public and private sectors, I am compelled to recognize that the legislation which defines this process, and my corresponding jurisdiction, is clearly more constraining. This is particularly so as relates to my obligation to take cognizance of the Company’s pension plan burden ...
   • And further:
   • In my view it is the Company’s final offer which best responds to the constraints which I am compelled to respect in accordance with section 14(2) of the Bill … . By comparison, while made in the best of good faith, the Union’s final offer would place on the Company a burden in respect of employee compensation and productivity that in my view are beyond what is realistic and in keeping with the constraints enunciated in section 14(2) of the Act.
7. The Committee recalls, in this respect, that in order to gain and retain the parties’ confidence, any arbitration system should be truly independent and the outcomes of arbitration should not be predetermined by legislative criteria [see Digest, op. cit., para. 995].
8. 288. With regard to the penalties provided for non-compliance with the Act, the Committee notes that according to section 34 of the Act:
   • An individual who contravenes any provision of this Act is guilty of an offence punishable on summary conviction and is liable, for each day or part of a day during which the offence continues, to a fine of no more than $50,000 if the individual was acting in the capacity of an officer or representative of the employer, the International Association of Machinists and Aerospace Workers or the Air Canada Pilots Association when the offence was committed in the legislation.
   • If the employer, the International Association of Machinists and Aerospace Workers or the Air Canada Pilots Association contravenes any provision of this Act, it is guilty of an offence punishable on summary conviction and is liable, for each day or part of a day during which the offence continues, to a fine of not more than $100,000.
9. The Committee notes that while the Government acknowledges that these penalties are significantly high, it indicates that they discourage contravention with the legislation. The Committee recalls that although holders of trade union office do not, by virtue of their position, have the right to transgress legal provisions in force, these provisions should not infringe the basic guarantees of freedom of association, nor should they sanction activities which, in accordance with the principles of freedom of association, should be considered as legitimate trade union activities [see Digest, op. cit., para. 40]. The Committee expresses its concern over the high penalties provided for in the legislation, which could place a heavy financial burden on the unions and their representatives.
10. 289. While acknowledging the efforts made by the Government to support and assist the parties in the settlement of the dispute, including the appointment of a Conciliation Commissioner and through the FMCS, the Committee urges the Government, in the future, to give priority to collective bargaining for the regulation of employment conditions and in a non-essential service.
11. 290. Furthermore, noting the Government’s indication that on 2 April 2012, the union filed an application to the Ontario Superior Court of Justice to have Bill C-33 declared unconstitutional and that the matter is still pending before the court, the Committee requests the Government to keep it informed of the outcome.
12. 291. More generally, the Committee welcomes the indication that the Government has renewed its commitment to support strong employer–union relationships by providing, through Budget 2011, an additional $1 million over two years to expand the delivery of non-statutory preventive mediation services.

The Committee’s recommendations

1. 292. In the light of its foregoing conclusions, the Committee invites the Governing Body to approve the following recommendations:
   • (a) The Committee urges the Government, in the future, to give priority to collective bargaining for the regulation of employment conditions in a non-essential service.
   • (b) Noting the Government’s indication that on 2 April 2012, the union filed an application to the Ontario Superior Court of Justice to have Bill C-33 declared unconstitutional and that the matter is still pending before the court, the Committee requests the Government to keep it informed of the outcome of the court proceedings.