IN THE MATTER OF AN INTEREST ARBITRATION THE SOCIETY OF ENERGY PROFESSIONALS. and INERGI L.P. Sole arbitrator: Norm Jesin

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1 IN THE MATTER OF AN INTEREST ARBITRATION BETWEEN: THE SOCIETY OF ENERGY PROFESSIONALS (the Society) and INERGI L.P. (Inergi) Sole arbitrator: Norm Jesin Hearings held on February 7 and 10, 2012 Appearances: For the Society: Kate Hughes - Cavalluzzo, Hayes For Inergi: Brett Christen - Filion, Wakely, Thorup, Angeletti LLP INTRODUCTION AND BACKGROUND

2 This is an interest arbitration for a renewal collective agreement. The previous collective agreement between these parties was for a three year term and expired on December 31, In 1999 the Ontario government broke up Ontario Hydro and privatized it into a number of different entities. Two of the successor entities relevant to this dispute are Hydro One and Ontario Power Generation. Hydro one acquired the power transmission part of Ontario Hydro s activities whereas Ontario Power Generation (OPG) acquired the power generation responsibility. Inergi provides information technology and business process services to Hydro One. Inergi was established by and is a subsidiary of a company known as Capegemini. Inergi has contracted to provide the services described herein to Hydro One pursuant to a 10 year agreement shortly after the establishment of Hydro One. That deal involved the transfer of 900 employees from Hydro One, including members from the Society as well as members of the Power Workers Union (PWU), to Inergi. At the time, Inergi recognized the bargaining rights held with those unions for Hydro One and his since been party to a series of collective agreements with those unions to the present time. The most recent collective agreement with the Society expired in December 31, 2011.

3 The services provided by Inergi to Hydro One include information technology services, payroll services, supply chain management, revenue management and accounting services. Apart from work done by Inergi, Hydro One also has other information technology work performed in-house, outsourced to Capgemini, or outsourced to competitors of Capgemini and Inergi. Those competitors are generally not covered by any collective agreement. In 2010, Hydro One negotiated a five year extension to its agreement with Inergi expiring in March, All of Inergi s work is performed exclusively for Hydro One. Inergi expects Hydro One to open competition for Inergi s work after the expiration of its contract with Inergi. Toward that end, Inergi expects Hydro One to issue a request for proposals (RFP) for those services in late 2012 or in Capgemini is also the parent company for New Horizon Systems Solutions (NHSS). That company performs consulting and IT functions for Ontario Power Generation. The work that NHSS performs for OPG is similar to the work which Inergi performs for Hydro One. NHSS is party to collective agreements with both the PWU and the Society.

4 Inergi is concerned that more and more work is being outsourced to its competitors and in particular, seeks to position itself in a competitive position if and when Hydro One puts out its RFP for work presently being performed by Inergi. COLLECTIVE AGREEMENT HISTORY AND FRAMEWORK The parties have successfully bargained four previous collective agreements. This is the first time they have resorted to arbitration to settle their agreement. The first agreement was for a one year term expiring in December, The next agreement was for two years and the two most recent agreements were for three years each. The parties agreed to a clause in the previous collective agreement requiring that if they could not reach agreement for a renewal collective agreement, that agreement would have to be settled by a process of mediation/arbitration. It is under that provision, Article 15, that this arbitration has been established. The provision sets out four criteria that I must take into account in making my determination on monetary issues. Those criteria are:

5 a) A balanced assessment of internal relativities, general economic conditions, external relativities; b) Inergi s need to retain, motivate and recruit qualified staff; c) The cost of changes and their impact on total compensation; d) The financial soundness of Inergi and its ability to pay. An identical provision had historically been contained in the collective agreement between the Society and NHSS. The parties have submitted two arbitrations between the Society and NHSS. In the first, New Horizon Systems Solutions, [2005] O.L.A.A. No. 301, (M. G. Picher), arbitrator Picher stated that: the most meaningful comparisons [are with] the settlements already reached between the Company s sister organization, Inergi, and its employees who are also represented by the Society, as well as the settlement between the Company and the Power Workers Union. Arbitrator Kaplan adopted Picher s approach in an unreported decision between the same parties dated March 1, The parties agree that I should accept the converse of the Picher approach and that I should treat NHSS agreement with the Society and Inergi s agreement with the PWU as well as NHSS agreement with the PWU as the appropriate

6 comparators under the relativities criteria in the collective agreement. Of course the parties also urge me to place reliance on the other criteria set out in the collective agreement. THE DISPUTE The Society s proposals still in dispute relate to the following: 1. Term 2. Wages 3. Benefits 4. Vacancy selection provisions 5. Vacation carryover 6. New pool of arbitrators 7. Addition of Family Day 8. Paid Family Care Leave Inergi s proposals still in dispute relate to the following: 9. Term 10. Extension of Mediation/Arbitration

7 11. Deletion of Letter of Understanding re Voluntary Separation 12. Elimination of sick leave re-accumulation 13. Temporary Work Schedule 14. Overtime pay only after five hours of overtime 15. Compensation for assignment to temporary work headquarters 16. Meal expenses amendments 17. Moving expenses amendments 18. Deletion of housing assistance plan 19. Amendments to definition of qualified and qualifiable. 20. Rotations provision amendments 21. Shared service work provision amendment 22. Deletion of Article regarding rightshoring 23. Pensions plan options for new hires 24. Benefit cost limits Much of what drives these disputes is the stated attempt by Inergi to ensure it remains competitive so that it can retain its work should Hydro One seek a request for proposals upon the expiry of the Inergi contract. In any event, Inergi asserts that it would require its proposed amendments to recover work that is presently being outsourced to its competitors. The Union does not accept that

8 Inergi s proposal are necessary to keep its work. The Union seeks to maintain its relative position as compared to the PWU in its agreements with both Inergi and NHSS and as compared to the Society members working under its agreement with NHSS. In argument before me it appeared that the two contentious items in dispute were term and wages. Regarding term, Inergi seeks a one year term, whereas the Society seeks a three year term. It was the position of Inergi that because of the possibility, or even probability, that Hydro One would issue a request for proposals to succeed the Inergi contract, it needed the flexibility of a shorter term to consider and respond to any such request. According to counsel, if Hydro One issues its RFP by the end of this year, Inergi would be at a great disadvantage in attempting to respond if it was saddled with the constraint of a longer term agreement. Counsel further submitted that in any event, where there is dispute over the term, the default position should be for a shorter term. In support of this position counsel points to the one year term awarded by Arbitrator Kaplan in his 2010 NHSS decision. The Society s position is that the norm in this bargaining relationship is for a longer term. In that regard the two most recent collective agreements between

9 these parties were for three year terms. Counsel also submitted the decision involving the Society in Ontario Power Generation, [2011] O.L.A.A. No. 117 (K. Burkett) in which he resolved a dispute over term by awarding a two year term. With regard to wages the Society seeks an annual increase of three per cent, an increase in the so called competency pot (a form of performance pay) from 1% to 1.5% and the reinstitution of a COLA clause. (The prior agreements had a provision providing for COLA increases whenever the agreement was of at least 2 years duration. That provision was suspended in the last agreement.) In support of its position on wages the Society notes that the PWU employees at Inergi will be receiving a 3% wage increase in 2012, which is the last year of their three year agreement. Counsel for Inergi submits that the other comparator agreements do not support 3% wage increases. Counsel asserts that the net increase for the PWU at Inergi is actually 2.66% in 2012 as the PWU had agreed to increased employee pension contributions. Counsel also submitted the Society s increase at NHSS at 2012 was 2.75 less the elimination of 1% performance pay over a three year term. Counsel also pointed to PWU agreement at NHSS under which the 2012 increase is 2.7%, with performance pay having been deleted in Counsel noted that

10 the Unions at both Inergi and NHSS have historically been only been able to achieve wage increases in the 3% wage rate when the have made significant concessions such as increase to employee pension contributions or the elimination of performance pay. Counsel finally pointed out that given the other factors relating to external relativity, such as increased competition from nonunion competition and the overall state of the economy, the Society position could not be sustained. In response, the Society noted that actual the increase received by its members at NHSS was much higher at NHSS as employees at that Employer regularly advanced on a grid and therefore received increases upon advancing up the grid in addition to the general wage increase. That grid was not in existence at Inergi. Counsel also noted that the Society made significant concessions in its last agreement, including increasing the employee portion of pension contributions and should not be expected to make the further concessions requested Inergi in this agreement. I have determined that a one year term is appropriate, given what I find the legitimate concerns raised by Inergi concerning the possible issuance by Hydtro One of RSP s for the work presently performed by Inergi.

11 I have decided not to eliminate the competency pot. The concessions gained by Inergi and NHSS such as increased employee pension contributions and elimination of performance pay have generally been agreed to over the course of three year agreements and I do not think it appropriate to make those reductions during a one year term. For the same reason many of the other Inergi proposals, which are significant should be considered in the context of a longer term. If and when Hydro One does issue RFP s the parties will be in a better position to assess the extent to which the parties might consider the various proposals designed to give Inergi increased flexibility. In reviewing the various comparators described above I have determined that a one year wage increase of 2.75% should be awarded. That award, although less than the 3% awarded to PWU for the same year, is within the range of increases in the other comparator agreements described above, and, together with the shorter term, does take some account of the fact that the other the major concessions requested by the Inergi have not been granted. Apart from the determinations set out above the award reflects some other amendments which are awarded having regard to the criteria set out in the collective agreement. The award is set out below:

12 AWARD 1. Term one year from January 1, 2012 December Wages increase of 2.75 percent effective January 1, 2012, competency pot to be maintained at 1.0%. COLA proposal is denied. Retroactivity is to be paid within thirty days of the date of this award. 3. Extension of Mediation/Arbitration Article 8 is renewed subjects to the dates contained therein being amended to reflect the term of this agreement. 4. Letter of Understanding #4 setting out the Voluntary Separation Program is hereby deleted. 5. Benefits for the following will be increased to the same levels as those in existence between Inergi and the PWU: Vison, Massage, Clinical Psycholgist. 6. The Employer proposal the amend article 63, the Meal Expense Provision, is granted. The new provision will be in the same language agreed to in article 86.1 of the most recent agreement between the Society and NHHS.

13 7. All proposals not specifically granted herein are denied. Wage increases as set out above are retroactive to the dates indicated. All other amendments are effective on the date of the award. The collective agreement wiil therefore consist of the previous agreement, the amendments previously agreed to by the parties and the amendments set out in the award herein. I shall remain seized until a collective agreement is executed by the parties. Dated at Toronto this 21 day of March, 2012 N J Norm Jesin