1/ COASTAL CROPS LTD. (CCL) CASE Coastal Crops Ltd. (CCL) has been unionized since it was founded in 1968. It has always operated out in the west end of St. John's, Newfoundland. While the firm originally farmed the land, in the 1980s the firm built a number of large greenhouses. The addi- tion of greenhouses allowed CCL to expand its product offerings and grow produce all year long. To better meet the needs of its customers outside of Newfoundland, the firm purchased a (non-union) location in 1997, which is located in Phippsburg, Maine. The relationship between the management group of CCL and the United Agricul- tural Workers of Canada (UAW) has generally been strong. Wages, benefits, and working conditions have usually been on par with or better than those of the competition. In particular, the firm has tried to pay slightly above the going market rate. To date, there facility in 2017, it did not buy new equipment. Rather, it repurposed existing equipment reliable; it is also much less energy-efficient than the equipment currently available. from when the cannabis facility was first built in 2003. This equipment is older and less well take over the contrast. Premium Cannabis's management team is under increased Second, CCL's labour costs are higher than those of some of its competitors, which could pressure to minimize expenses in all areas, including supplier contracts, to retain profit- ability. There is a rumour that a new firm may get the contract (Firm 2 in the attached comparison). This firm has the advantage of brand-new, energy-efficient equipment and lower labour costs. It currently runs 24 hours a day, 7 days a week. Hence, it is in a better position to meet the needs of the cannabis industry. has been only one strike. It took place in 1997 and was largely centred on the issue of job security, given the poor economic conditions of that period and the concern that the acquisition of the Maine location would result in job losses in Canada. At that time, the Newfoundland economy was performing very poorly, in part due to the collapse of the cod fishery. Given the dramatic decrease in demand for its products, and the need for capital to purchase the new location, the company laid off about 30 percent of its staff and froze all wages for three years. The early 2000s gave rise to new opportunities for CCL. With the legalization of medical cannabis, the firm built a production facility on the property in 2003. In 2017, anticipating of legalization of recreational cannabis, the firm doubled the size of its can- nabis production facility. Currently, approximately 65 percent of CCL's yearly revenues come from cannabis production. The cannabis market has resulted in the firm hiring about 200 new employees over the past five years. As the parties prepare to enter a new and round of bargaining, several key events are taking place For the union, the last contract (signed in 2016) was ratified by only 54 percent of the membership. Given the 1997 job cuts and wage freezes, many members felt that the revenues associated with the medical cannabis should have resulted in greater gains at the bargaining table. In fact, the membership has voted in a whole new slate of union leaders to form this year's collective bargaining team. Rumour has it that the membership wanted a more militant negotiations team that would take a firm stand on increased wages, improved vacations and pensions, and job security. It is also clear the union faces a challenge meeting the needs of a diverse membership. The average union member is 38 and has around 14 years of service. However, given the downsizing in 1997, and the influx of cannabis work, the St. John's location almost has two different age groups. There are approximately 200 employees with fewer than five years of service (most of them are in their twenties); yet there are about 300 employees with more than 15 years of service (most of whom are over 40). The current negotiations team will need to balance the needs of its newer members with those of the old guard." Management has just received notice that it is at risk of losing its contract with Premium Cannabis. Premium Cannabis is CCL's largest contract and represents about 40 percent of its annual revenue stream. There are two reasons why Premium Cannabis may not renew its contract. First, CCL is having problems meeting the production quotas specified in the contract. This is largely due to reliability issues related to CCL's aging production equipment. When the firm expanded the cannabis production Before 1. ac that you as a/ Onginalle The addi 401 APPENDIX A Collective Bargaining Simulation: Coastal Crops Ltd. (CCL) CCL management is currently examining the possibility of a substantial reorga- nization to better meet the needs of the cannabis industry. This could include raising production quotas and replacing the present equipment with new, energy-efficient, labour-saving machines in the St. John's facility (cost = $2 million). Assuming the current two-shift cycle remains, the new machinery would result in layoffs of about one quarter of the staff as well as the contracting out to cheaper labour sources in times of high product demand. Two alternative strategies have been openly discussed. First, purchase the new equipment (cost = $2 million) and begin operating three 8-hour shifts (i.e., 24 hours per day, 7 days per week). This option would not entail hiring new employees or laying off any current staff; however, the firm would have to find sufficient savings in the first year of the collective agreement to absorb the full cost of the new equipment, and the total annual labour costs could not increase. Second, close the St. John's facility and move all production to the second facility (Firm 4 in the attached comparison), located in Phippsburg, Mainc, a cheaper location. This location would still permit shipping of the products to all North American customers, including those in Newfoundland. Closing the St. John's operation would mean that all management and union employees would lose their jobs, for transferring staff to the American location is not feasible given immigration requirements and so on. The firm is also concerned about the negative community and government reaction associated with closing the operation, as they previously secured government funding to assist with 2017 expansion. The management negotiations team has been given a clear man- date: (1) the collective agreement must facilitate the renewal of the Premium Cannabis contract; and (2) over the life of the new collective agreement, the firm's total annual labour costs cannot increase from the current amount. OTHER INFORMATION As is shown in Table 1, CCL provides a competitive compensation and benefits package. The average wage at CCL is $20.25 per hour. This compares to an average current wage of $19.71 for the other firms. The benefits are co-paid (70% company, 30% employee). The benefits include dental plan, vision plan, life insurance coverage of two times base salary, medical insurance for hospitalization and prescription drugs, and a sick benefit plan (coverage up to 66.67% percent of earnings for any absence due to illness, maximum 52 weeks). Current cost of the benefit plan to the employee is $750 per year, the company share is $1,750 per employee per year. In addition, CCL contributes an amount equivalent to 4 percent of each employee's earnings into a retirement fund that can be used by the employee in retirement COSTING INFORMATION FOR ANY PROPOSED CHANGES Overtime. Each employee currently works an average of 4.25 hours of overtime per week. Overtime cost is time and a half. At present, employees must volunteer for overtime. Currently 80 percent of overtime is worked after midnight to address production Wages. Present average is $20.25. sues. 402 APPENDIX A Collective Bargaining Simulation: Coastal Crops Ltd. (CCL) TABLE 1 COMPARISON OF WORKING TERMS AND CONDITIONS OF SIMILAR FIRMS FIRM 4 FIRM 5 FIRM 6 AVERAGE FIRM 3 FIRM 2 FIRM 1 (CCL) 475 500 400 533 625 550 650 No. of employees Unionized? Yes Yes No Yes No Yes N/A 3 years 4 years 4 years 3.5 years N/A Contract duration 3 years $19.00 $19.71 $19.50 $18.00 $19.75 $21.75 $20.25 Average wage Year 1 wage increase 1.00% 1.00% 0% Signing bonus $500 Signing bonus $1000 Signing bonus $750 .67% or $750 signing bonus 1.17% 1.00% 1.00% 1.00% 2.00% 1.00% 1.00% Year 2 wage increase 2.00% 1.50% 1.42% 1.00% 1.00% 1.00% 2.00% Year 3 wage increase OVERTIME APPENDIX A Collective Bargaining Simulation: Coastal Crops Ltd. (CCL) No. Management can assign Overtime voluntary? No. Management Yes can assign Yes Yes. But will assign in reverse order of seniority if insufficient volunteers Yes. But will assign in reverse order of seniority if insufficient volunteers 1.63 1.5 1.75 1.5 1.5 2 Overtime rate 1.5 VACATION 1 1 1 1 1 1 2 weeks at years 1 3.83 3 4 5 3 3 years 5 10.83 3 weeks at IT 10 10 10 15 10 16.67 years 4 weeks at 10 15 20 15 15 15 21.67 5 weeks at years 20 20 (continued) 6 weeks at 20 years 25 403 TABLE 1 COMPARISON OF WORKING TERMS AND CONDITIONS OF SIMILAR FIRMS (CONTINUED) FIRM 1 (CCL) FIRM 2 FIRM 3 FIRM 4 FIRM 5 FIRM 6 AVERAGE SHIFT Yes Yes Regular 2nd shift Regular 3rd shift Yes Yes Yes Yes No Yes Yes No Yes Yes SHIFT PREMIUM $1.50 $1.50 1.75 $1.00 $1.50 $1.00 $1.38 $2.00 $2.00 $1.75 $1.50 $1.81 APPENDIX A Collective Bargaining Simulation: Coastal Crops Ltd. (CCL) Regular 2nd shift Regular 3rd shift Retirement/pension as % of wage rate Contracting out 4.00% 4.00% 6.00% 0.00% 5,00% 5.00% 4.00% No language No restrictions Only if no one on layoff can perform the work Only if no one on layoff can perform the work No restrictions Yes. But only for jobs of