Patriot Coal is heading for an Aug. 20 hearing at its bankruptcy court on a new agreement with the United Mine Workers of America union on wages and benefits, which Patriot says could help it emerge from Chapter 11 intact.
Patriot filed a motion for approval on Aug. 13 at the U.S. Bankruptcy Court for the Eastern District of Missouri that outlines the terms of the deal. UMWA membership is expected to vote on the package on Aug. 16.
“The Settlements are possibly the most significant development in these chapter 11 cases,” said Patriot. “If approved by the Court, the Settlements will provide the Debtors with labor stability and critically-needed savings that will position the Debtors to emerge from bankruptcy.”
On May 29, the court issued a 102-page ruling granting the so-called “1113/1114 Motion” allowing Patriot to impose cuts under its collective bargaining agreements (CBAs) and UMWA retiree benefit programs. It then imposed those cuts on July 1 after failing to reach a deal with the union on compromise cuts.
Among other things, the 1113/1114 Decision permitted Patriot to:
- eliminate certain wage increases for the UMWA employees and adjust union wage rates to conform more closely with non-union wage rates;
- modify rules relating to overtime, double time, triple time, and premium pay to better align with non-union rules;
- reduce the number of holidays, vacation days, sick days, and personal days to conform more closely with non-union benefits;
- modify health coverage and offer the same coverage presently available to the company’s non-union employees;
- alter work rules, such as the Patriot attendance policy; and
- transition the provision of the retiree benefits to a voluntary employees’ beneficiary association (VEBA), which would administer the retiree benefits.
The new 1113 settlement consensually resolves numerous issues and provides for the implementation of new collective bargaining agreements that the debtor Patriot companies believe balance the needs and concerns of the UMWA employees while providing the debtors with the necessary savings and work rule flexibility that are key to their long-term viability.
“The Debtors are hopeful that the savings and the certainty provided by the Settlements will allow them to secure the outside investment necessary to reorganize as a going concern,” Patriot said. “This will allow the Debtors to avoid liquidation and maintain jobs and benefits for their thousands of employees, retirees and their families.”
Key terms of the settlements include:
Modifications to Wages
- Wage rates for employees working at underground mines, surface mines, and coal preparation plants will be reduced to those wage rates in effect on June 1, 2012. Raises of $0.50 per hour on January 1, 2015, January 1, 2016, January 1, 2017, and January 1, 2018.
- Shift differential payments, which had increased wages for UMWA-represented employees who worked during an afternoon or night shift, will be eliminated.
- Overtime will be paid after 40 hours per week at 1.5 times regular pay, and premium overtime will be eliminated, but all hours worked on holidays will be paid at 1.5 times regular pay.
- The Patriot companies and the UMWA agree to a wage reopener in 2016 to permit wage adjustments for 2017 and 2018. The wage reopener would require good-faith bargaining in light of then current market conditions and would permit a maximum wage increase of ten percent, inclusive of the wage increases scheduled for January 1, 2017 and January 1, 2018.
Active Employee Healthcare Benefits
- The Patriot companies will implement a healthcare plan designed to more closely match the plan currently available to non-union employees, although, among other things, UMWA employees will be subject to lower out-of-pocket maximums than non-union employees and UMWA employees will not be required to pay healthcare premiums.
- The Patriot companies will continue to provide the currently available life and accidental death and dismemberment benefits, vision care, and dental plan. The Obligor Debtors also will provide lifetime healthcare for UMWA edmployees and/or surviving spouses of UMWA employees who become totally disabled or die as a result of a mine accident, subject to (a) the beneficiary becoming eligible for Medicare, or (b) the remarriage of the surviving spouse beneficiary.
- Spouses of UMWA employees who have their own healthcare coverage must use that as their primary coverage as of January 1, 2014.
- Extended healthcare coverage following layoff from employment will be reduced to 90 days from the date of layoff.
- The Obligor Debtors will contribute three percent of gross wages into a 401(k) or similar plan in lieu of retiree healthcare.
Paid Time Off
- As of January 1, 2014, the Obligor Debtors will reduce paid vacations days from twelve to ten and will schedule three one-week vacation outage periods to coincide with July 4, Thanksgiving, and Christmas.
- Floating vacation days will be reduced from four to two for 2013 through 2015 and one additional floating vacation day will be provided beginning in 2016.
- The graduated vacation schedule will not be altered, but the Obligor Debtors will be permitted to limit the number of graduated vacation days used in 2014 through 2016 to five, provided that all unused days will be paid in full by January 31 of the following year. The maximum number of graduated vacation days that can be used will increase to six on January 1, 2017 and to seven on January 1, 2018.
- Personal and sick leave days will be reduced from six, or five where applicable, to three for 2013 through 2015. The number of available personal and sick leave days will increase to four in 2016 and to five in 2017.
- Holidays will be reduced from eleven to eight for 2013 through 2015 by eliminating April 1, Veterans’ Day, and the Employee Birthday holiday. The Employee Birthday holiday will be restored beginning in 2016.
Job Opportunities and Job Security
- The Obligor Debtors will continue current successorship requirements and will agree to have Pine Ridge Coal Co. LLC, Colony Bay Coal, Mountain View Coal Co. LLC and Rivers Edge Mining sign the applicable new CBA.
- The Obligor Debtors and the UMWA will retain current provisions concerning job offers.
- The Memorandum of Understanding Regarding Job Opportunities will remain in force.
- The applicable new CBA will be implemented at newly organized mines, and the Obligor Debtors will facilitate union representation at the Huff Creek Surface Mine, Buck Fork Surface Mine, Flying Eagle Underground Mine, Buffalo Mountain Surface Mine and Stanley Fork Mine.
- Contributions to the UMWA-BCOA Training and Education Fund, the UMWA-BCOA Labor Management Positive Change Process Fund, and the UMWA-BCOA Resolution of Disputes Trust, and other related requirements will be eliminated.
- The Obligor Debtors may implement their revised attendance control policy, subject to the development of mutually agreeable language providing for counseling and/or warning following the first violation.
- Supervisors will be permitted to work up to one hour per supervisor per shift.
- The requirement to provide helpers on underground face equipment will be eliminated, subject to the Obligor Debtors’ assurance that current personnel in those positions would be reassigned to other positions and not terminated as a result of eliminating helper positions.
- The changing of crews at the location of the work will be permitted.
- The use of contractors will be allowed, subject to the clarification that contractor usage at idle operations will not include coal production or coal processing, and that contractor usage at active operations will not include direct production of coal. The use of contractors at active operations will not cause the layoff of employees, nor will contractors hold full-time, permanent positions that could be filled with panel members.
- Alternate seven day a week work schedules may be implemented for operations at Highland, Hobet surface mine, Apogee’s Guyan surface mine and all Gateway operations no earlier than September 15, 2013 and only upon completion of employee communications of the proposed changes. Alternate work schedules may be implemented at other operations following appropriate communication to the UMWA and 30 days’ notice to affected UMWA employees.
Multi-Employer Plan Contributions
- The Obligor Debtors will continue their current obligation to participate in and contribute to the UMWA 1974 Pension Plan. In connection therewith, the UMWA has made certain representations to the Debtors as set forth in a separate confidential side letter.
- The Obligor Debtors will withdraw from the United Mine Workers of America 1993 Benefit Plan and the UMWA 2012 Retiree Bonus Account Trust and Plan, and the Obligor Debtors will cease their 20-Year Service Payments to the UMWA Cash Deferred Savings Plan.
- The Obligor Debtors will make a three percent contribution to a 401(k) or similar plan in lieu of the 2012 New Inexperienced Miner pension contributions and a three percent contribution to a 401(k) or similar plan in lieu of the 2007 and 2012 New Inexperienced Miners retiree healthcare contributions.
Patriot, in bankruptcy protection since July 2012, is a major producer of coal in western Kentucky and in West Virginia.