Question Period Note: BETTER PROTECTING EMPLOYEES AFFECTED BY CONTRACT RETENDERING

Why is the Government amending the Canada Labour Code to extend the equal remuneration protection to a greater number of employees in the air transportation sector?

• The Government of Canada recognizes the vital role played by Canadians working at airports across the country.

• Many employees in the air transportation sector have continued to work through the COVID-19 pandemic – deep cleaning aircraft, safely handling baggage, and performing other critical services that have allowed necessary air travel to continue.

• Many of these services are contracted out by airports and airlines. When a service contract changes hands between contractors, these employees are at risk of earning less money for the same job. This practice is known as contract retendering.

• To better protect these employees, the Government announced in Budget 2021, that it will extend equal remuneration protection to more employees in the federally regulated air transportation sector working at airports.

• This will ensure that employees affected by contract retendering are not paid less than what was provided for under the previous collective agreement if they undertake the same or substantially similar work.

Contract Retendering

• Contracting occurs when an organization hires, under a service contract, a contractor to perform certain services. Contract retendering is the practice of a service contract changing hands.

• Many employers, including those in the air transportation sector, hire contractors to per-form certain services. Upon the termination of such a ser¬vice contract, either through its scheduled end or because it is severed, an organization may award a new contract for the same service to the previous contractor or may select a new contractor through a process called contract retendering.

• Contract retendering is a valid business practice. It is commonly used in the air transportation industry, particularly in airports where many services, such as baggage handling and aircraft cleaning, are outsourced from the airport authority or airlines to contractors. However, contract retendering is associated with some problems for employees.

Equal Remuneration Protection

• The equal remuneration protection in section 47.3 of Part I of the Code ensures that, after a case of contract retendering, the new contractor cannot remunerate pre-board security screeners at a rate lower than that provided by the previous contractor under the terms of a collective agreement. The provision also provides that regulations can be made to extend this protection to other services in any other federally regulated private-sector industry.

• This protection for pre-board security screeners was introduced in 1998 in response to transportation officials’ concerns regarding the high level of turnover amongst these employees following the deregulation and commercialization of the majority of Canadian airports in the early 1990s, and the impacts such turnover could have on the continuity and security of the domestic aviation industry.

Extending the Application of the Equal Remuneration Protection

• The extended protection will apply to all employees covered by a collective agreement in the federally regulated air transportation sector working at airports. This will ensure that, when a service contract changes hands, affected employees are not paid less than employees of the previous contractor who provided the same or substantially similar services.

• There is evidence that contract retendering can have negative impacts for affected employees, including wage decline, high turnover and safety risks.

o Wages: In some cases of contract retendering, workers are rehired to work at the same location and perform the same tasks, but at a lower wage than that provided under the previous contract. For example, Canadian media reports about a series of retendered contracts at Toronto Pearson International Airport between 2004 and 2017 documented wage declines of up to $8 per hour among baggage handlers during that period.

o Turnover: The same media reports documented a 160% turnover rate among baggage handlers affected by contract retendering at Toronto Pearson International Airport between 2004 and 2017.

o Safety risks: A 2007 report by the U.S. General Accounting Office indicated that contract retendering can cause safety risks and found that low wages and high turnover for ramp and fuel workers at American airports are major factors in ramp accidents.

• In February 2019, a Notice to Interested Parties was published in the Canada Gazette, Part I. The notice asked stakeholders to provide their views on a proposal to extend the equal remuneration protection to a greater number of occupations in the air transportation sector.