Severance benefit conflict pits unions against province

The Newfoundland and Labrador government and its unions are poised for a battle over employee severance benefits valued in the hundreds of millions of dollars.

Neither side is saying much at this point, as contract talks drag on. Some public-sector workers have been out of a contract for more than a year.

But the president of the Newfoundland and Labrador Association of Public and Private Employees (NAPE) posted a bargaining update for members in February confirming that the province is targeting severance.

"Government is proposing the elimination of severance pay for new employees and also for current employees who don't meet the qualifying threshold," Carol Furlong said in the video, which is available on the NAPE website and on YouTube.

She noted that the union is not keen on the proposal.

"NAPE has rejected the notion that younger workers should be denied benefits that their parents and their grandparents fought for and won over the years," Furlong said.

Last fall, the Newfoundland and Labrador Teachers’ Association sent a letter to its members warning about government plans to eliminate severance.

It’s a big battle looming, with high stakes.

According to the Department of Finance, the severance liability for the provincial government was $421.5 million as of March 31, 2012.  That figure includes core government agencies, boards and commissions.

9 years necessary to qualify

Currently, every provincial government employee is eligible for severance pay whenever they leave their jobs, including through retirements and voluntary departures.

There are some requirements to qualify — nine years of continuous service is the trigger point.

Once that milestone is reached, an employee gets one week of pay for every year worked, to a maximum of 20 weeks.

Punch in 10 years of total continuous service, for example, and get 10 weeks of severance pay.

To date, one union has agreed to get rid of the benefit.

So far, the Royal Newfoundland Constabulary Association is the only group to reach a contract deal with the province.

Their severance is gone for new members, and those who haven't qualified yet.

Police officers who have qualified can take a payout now, instead of waiting until they retire.

If they wait, they won’t accrue additional years of service to count towards their severance benefit.

Justice Minister Darin King stressed earlier this month that the deal with police was not a template for other unions.

But according to comments from the leadership of NAPE and the NLTA, ending severance appears to be on the table for all of them.

Federal precedent for move

There is already precedent for getting rid of severance pay.

Last year, Ottawa moved to end severance for tens of thousands of federal civil servants.

The buyout was projected to cost $6 billion.

Workers entitled to severance pay could take their payout right away.

Severance pay no longer exists for federal civil servants who quit or retire. Some severance benefits remain available to those who are laid off.

The one-time payout is expected to save Ottawa $500 million a year going forward.

Different rules for MHAs, political staff

Back in Newfoundland and Labrador, the provincial issue is complicated somewhat by the fact that not all severance plans are equal.

MHAs, for example, have a much more lucrative arrangement, with more lax qualifying requirements.

Members get one month of pay for every year of service, with a minimum payout of three months’ salary — nearly $20,000. The top payment is a year’s salary — about $77,000.

(MHAs actually make more than $95,000 per year, but their severance is based on pre-2007 calculations, which saw a portion of their salary paid tax-free. The Green report raised their gross salary, but made it all taxable, so their take-home pay was the same. Severance payments are now adjusted downward to account for that change.)

And it's not just MHAs who have different severance arrangements — their political staff members do too.

If they are released from their positions, political staffers qualify for the same severance arrangements as MHAs.

Their maximum payment is a year’s salary, and their qualifying provisions mirror MHAs as well.

If political staffers resign, their benefits are less lucrative, and fall more in line with the civil service.

No comment from government, unions

Little is being said publically about the severance issue, or others at the bargaining table.

The NLTA, Newfoundland and Labrador Nurses’ Union, NAPE, and CUPE all either did not respond to CBC interview requests, or declined them.

So did Finance Minister Jerome Kennedy.

Government officials say severance payments for provincial employees have been in effect since before current record keeping began in 1974.