Canadian Payroll Reporter

Published 12 times a year by Thomson Reuters Canada Ltd. Subscription rate: $179 per year Customer Service Tel: (416) 609-3800 (Toronto) (800) 387-5164 (outside Toronto) Fax: (416) 298-5106 E-mail: carswell.customerrelations @thomsonreuters.com Website: www.carswell.com One Corporate Plaza 2075 Kennedy Road Toronto, Ontario, Canada M1T 3V4 Director, Carswell Media Karen Lorimer Publisher John Hobel Managing Editor Todd Humber Editor Sheila Brawn sbrawn@rogers.com Marketing Manager Mohammad Ali mm.ali@thomsonreuters.com (416) 609-5866 Circulation Co-ordinator Travis Chan travis.chan@thomsonreuters.com (416) 609-5872 Payroll Reporter Can R adian a www.payrollreporter.com ©2014 Thomson Reuters Canada Ltd ISBN/ISSN: 978-0-7798-2810-4 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic, photocopying, recording or otherwise without the written permission of the publisher (Carswell, a Thomson Reuters business). Return Mail Registration # 1522825 | Return Postage Guaranteed Paid News Revenue Toronto Canadian Payroll Reporter is part of the Canadian HR Reporter group of publications: • Canadian HR Reporter — www.hrreporter.com • Canadian Occupational Safety magazine — www.cos-mag.com • Canadian Payroll Reporter — www.payroll-reporter.com • Canadian Employment Law Today — www.employmentlawtoday.com • Canadian Labour Reporter — www.labour-reporter.com See carswell.com for information June 2014 | CPR News Chrysler CEO vows Chrysler CEO vows to throw out 2-tier wages to throw out 2-tier wages BY LIZ FOSTER UNION LEADERS have waged wars over the two-tier wage sys- tem, which keeps entry-level workers on a permanent, lower pay grid. So why — now that Chrysler Group CEO Sergio Marchionne wants to end the two-tier wage structure at the Detroit Three auto plants in the United States — are they so wor- ried? "A two-tier wage system is completely destructive to the workplace," said Unifor's national president Jerry Dias. "A two-tier wage system creates all kinds of dissension on the shop floor. While Marchionne is right in identifying the system as a prob- lem, I don't agree with his solu- tion." Marchionne made mention of his intention at the Fiat Chrysler Automobiles five-year product plan unveiling in Auburn Hills, Mich., on May 6. Touching on the issue of the 2015 contract ne- gotiations with the United Auto- mobile Workers (UAW), Mar- chionne reiterated his long-held opposition to two-tier wages. "I always have been of the view that the two-tier wage struc- ture is unsustainable in the long term," he said, advocating the phasing out of the older, higher tier and tying the new, lower tier to company performance through annual wage hikes. "We have to replace the (two- tier) wage structure with some- thing that reflects the sharing of the economics of running this enterprise," Marchionne said. "I object violently to the notion of entitlement in the wage struc- ture. That is something that is incredibly unwise." Canadian union leaders fear Marchionne's plan to eliminate the two-tier wage system in the U.S. will result in the top-tier earners losing ground to meet the bottom-tier workers in the middle. It's a proposal that could have major implications for Chrysler's Canadian plants as Unifor gears up for 2016 con- tract talks. During the 2012 contract talks, the union avoided two- tier wages and profit sharing. In- stead, it agreed to raise its grow- in period to 10 years from six. Unifor argues its current deal puts Canada's labour costs on par with the U.S. — particularly when the lower loonie is con- sidered — but the two-tier wage system in the U.S. continues to create pressure for cost-cutting here. "What Marchionne is think- ing about is not to bring the low- er wage up," said Liam Rideout, president of Unifor Local 1285 representing workers at Chrys- ler's Brampton, Ont. assembly plant. "He wants them to meet in the middle. That's his idea of get- ting rid of two-tier wages. And whatever they do in the UAW is going to have an impact on us, because they're our direct com- petition." The company's uncertain fu- ture in Canada is contributing to the concern. In March 2014 the automaker announced its inten- tion to withdraw all requests for financial assistance in the devel- opment of assembly plants in Windsor and Brampton, Ont. Chrysler still plans to develop and build its next minivan in the Windsor location, and the Brampton facility benefitted from recent investments and redesigns of the Chrysler 300, Dodge Charger and Dodge Chal- lenger it currently produces — but the decision to take a step back from further investment has many worried. Mexico and the United States — both lower-cost jurisdictions — offer automakers millions of dollars in incentives, said Pete Mateja. Mateja, co-director of the Office of Automotive and Ve- hicle Research at the University of Windsor's Odette School of Business and an assistant profes- sor at the institution, argued the federal government must make changes to attract investment. "It could be a very difficult time in Canada based on what transpires" with the UAW in 2015, he said. UAW workers in the U.S. have been without a wage increase for close to a decade, Mateja estimated, and a move to phase out the top-tier earning capacity could result in labour action. "You approach anybody and ask them to take a pay cut, it's not going to go over well," he said. "Remember, these workers have not had wage increases in eight, 10 years. The companies are profitable… and you want people to take a cut? Are you out of your mind? The union would be cutting their own throats." It's not only the inequity in wages, Mateja continued, but also the difference in benefits, holiday time and the ability to make contributions to a defined benefit (DB) pension plan. The inequity is simply unsustainable in the long term. And while the decisions made by Chrysler and the UAW in 2015 could potentially have a significant impact on the Cana- dian economy, Unifor does have an advantage in coming to the table in 2016. "Canada is in a very fortu- nate position because of the fact that the UAW is going ahead of them," Mateja said. "They're go- ing to be able to watch what hap- pens south of the border. They also have the advantage of the U.S. economy getting stronger, so it could be a greater shift as far as the devaluation of the Canadi- an dollar against U.S. currency." This positive perspective is shared by Dias. While UAW's adopting a two-tier wage system made sense at the time given both the company and the coun- try's dire financial situation, the decision to bring its starting wage down as low as US$13 per hour kicked off a race to the bot- tom, something Dias said "un- dercut the entire auto sector." The elimination of the two-ti- er system can only benefit those workers, Dias said, and critics shouldn't count Canada out. "We have a highly skilled, so- phisticated, educated workforce. We have the infrastructure, we have the access to markets, we have all these wonderful things that make Canada an attractive place to do business."

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