Labour Court Database __________________________________________________________________________________ File Number: CD91228 Case Number: LCR13343 Section / Act: S67 Parties: IRISH CEMENT LIMITED - and - IRISH CEMENT GROUP OF UNIONS |
Dispute concerning the review of a rationalisation savings scheme ("Pot" Agreement).
Recommendation:
5. The Court has considered the submissions made by the parties.
Nothing it has heard on this occasion would appear to warrant a
change in the view it expressed on the question of the "Pot" in
Recommendation 12206 with regard to its elimination.
The Court therefore recommends that the parties meet without delay
to discuss terms for the immediate elimination of the "Pot"
Agreement.
Division: Mr O'Connell Mr Brennan Mr Walsh
Text of Document__________________________________________________________________
CD91228 RECOMMENDATION NO. LCR13343
THE LABOUR COURT
INDUSTRIAL RELATIONS ACTS 1946 TO 1990
SECTION 67, INDUSTRIAL RELATIONS ACT 1946
PARTIES: IRISH CEMENT LIMITED
AND
IRISH CEMENT GROUP OF UNIONS
SUBJECT:
1. Dispute concerning the review of a rationalisation savings
scheme ("Pot" Agreement).
BACKGROUND:
2. In 1984, the Company launched a major rationalisation scheme
which reduced staffing levels at the Company's plants at Drogheda,
Limerick and Dublin. Following discussions between the parties,
it was agreed that the savings, after certain costs had been
offset, would be shared three ways by customers, workers and the
Company. This arrangement became known as the "Pot" Agreement.
Under the Agreement, the workers remaining in the Company would
receive a payment relating to the number of redundancies. The
payment agreed was #4.85 per worker leaving under the redundancy
scheme and was linked to the consumer price index (C.P.I.). As a
result of indexation, this equates to a current payment of #5.69
per worker per annum per redundancy. The original payment was
limited to 210 redundancies but, following a Labour Court
Recommendation in 1989, was extended to a further 70 jobs lost
under the Company's survival plan of 1987 (LCR12206 refers). This
brought the total number of redundancies to 280, resulting in an
annual bonus payment of #1,593 per worker. The parties agreed to
review the "Pot" Agreement in July 1989 and at a subsequent
meeting the Union submitted a claim for an upward revision of the
payment of #2.53 per worker. This would involve an increased
bonus payment of just over #700 per year per worker. Management
rejected the claim. The issue was referred to the conciliation
service of the Labour Court on the 25th July, 1990. Conciliation
conferences were held on the 12th October, 23rd November, 1990 and
11th April, 1991 but no agreement was reached. The dispute was
referred to the Labour Court on the 22nd April, 1991. A Court
hearing was held on the 11th June, 1991.
GROUP'S ARGUMENTS:
3. 1. In the original costings the gross savings resulting
from the redundancies amounted to #3.315 million and
offsetting costs amounted to #1.81 million, resulting in a
net saving to the Company of #1.5 million. Two of the items
listed under "offsetting costs" involved capital expenditure
which was amortized over five years. These were redundancy
costs and technical investment. The rest were associated
with costs that were ongoing. It was clearly recognised at
the commencement of the plan that capital costs associated
with redundancy and investment would only apply for the first
five years and that consequently the bonus should be reviewed
after that period. While the Company did not commit itself
to an approved adjustment of the bonus, the logic of such a
review would be to take account of the diminished offsetting
costs in establishing a revised level of "Pot" bonus.
2. The Company's contention that, because of a relative
reduction in sales price, it is the customer, not the
Company, who has benefited from the scheme, is not a valid
argument. The basis for the bonus scheme made no mention of
a split between the consumer and the employer. The only
divisor mentioned was the one-third share to the workers.
What the Company did with its two-thirds share of the savings
was entirely a matter for the Company.
3. The Company is part of the Cement Road Holdings Group,
which is the second most profitable non-banking Irish public
company. Growth in profits has been extremely impressive
over the years (Details supplied to the Court).
4. As a result of job reductions from voluntary
redundancies, the permanent workforce in the Company has
fallen from 735 in 1984 to 455 in 1990. This equates to a
38% reduction in the permanent labour pool. During the same
period, production has expanded. The reduction in the labour
force, combined with the increase in output, means that
labour productivity has doubled during the period. In other
words, production per worker was twice as high in 1990
compared with 1984.
5. As a result of reduced offsetting costs the bonus needs
to be adjusted upwards if the one-third share is to be
maintained. The Group's calculation of the upward revision
of the "Pot" bonus is #2.53 per worker per redundancy. The
basis for this calculation is that prescribed by the Company
itself and, even if the Company's calculation of additional
capital investment is to be accepted, an upward revision of
#2.53 per worker is justified.
COMPANY'S ARGUMENTS:
4. 1. The Unions have stated consistently that it was the
Company which introduced the "Pot" Agreement. The basis of
this was outlined in the Company document of 7th August,
1984, which clearly states:
"What the Company would consider, however, would be a scheme
whereby savings resulting from rationalisation would be
shared evenly 3 ways between customers, employees and
Company. Funding the scheme would come from net payroll
savings, i.e. the wages saved less the costs associated with
rationalisation. These would include redundancy costs, costs
of investment in new technology, the cost of alternative
labour and extra overtime. Should it be necessary, in order
to protect our markets, to further adjust our prices or
forego price increases when due, then these costs also would
be included".
2. The impact of price increases foregone was detailed in
the Company letter of 12 June, 1990. The letter outlined
that the Company had only two price increase from 1984: one
of 5% in 1985 and one of 5% in 1989. In the same period,
inflation increased by over 20%. In all, the Company had to
forego price increases of between 10% and 16%, i.e., #8 - #13
million. If applied to the "Pot" equation, this eliminates
all savings and should mean the abolition of the "Pot"
agreement.
3. In the same period, salaries have escalated dramatically
while prices have decreased substantially against the
C.P.I. In an increasingly competitive market, the Company's
labour costs are completely out of line with its competitors.
In Ireland, the Company's costs to employ are more than
double those of one competitor and more than 50% higher than
those of another. In Europe, the Company is now
substantially above Germany and is on top of the European pay
league. At the same time, work practices and manning levels,
despite the "Pot" Agreement, are far behind our European
counterparts. The Company's market share has dropped from
almost 95% in 1988 to 80% in 1991.
4. Manning levels in the Company have become increasingly
out of line with competitors in the home market and on the
continent.
5. Despite paying "Pot", and its extension to the Survival
Plan by the Labour Court, the Unions continue to resist
achieving the Survival Plan targets and the Company's work
practices continue to lag behind its competitors.
6. The Company believes that Labour Court Recommendation
12206 terminated any further additions to "Pot" and implied
that the work practice changes and numbers in the Survival
Plan should be achieved. This is being resisted by the
Unions.
7. Details of correspondence in relation to the review have
been supplied to the Court. The final letter of January 23,
1991 from ICTU was rejected at a meeting on the same day
because agreement could not be reached on offsetting costs.
The Company's view is that the costs associated with
acquiring market share, capital costs in relation to the
works, additional pension costs, costs associated with
covering for absenteeism by overtime ("Pot" is paid
irrespective of absence), etc. should be taken into
consideration, in which case there would be no further
additions to "Pot". It would be commercial suicide for the
Company to increase its basic pay in the light of all the
factors listed above. The Company cannot continue to pay
over the odds for its industry and expect to survive.
8. The agreement to review the "Pot" Agreement was without
commitment on both sides. Appendix 1 clearly states:
"No Commitment can be entered into at this time as to what
changes, if any, might be warranted at the end of the 5-year
amortization period. It would be a matter for those
concerned to raise at that time."
9. In the long term interests of the Company and its
employees, the best possible resolution of this problem would
be a "buy out" of the "Pot" Agreement. The Company has
indicated that this would be generous and structured in a tax
efficient manner. It also believes that the return to the
employees would be greater than the present "Pot" payment
produces.
10. The Company also contends that this claim is in breach
of the Programme for Economic and Social Progress.
RECOMMENDATION:
5. The Court has considered the submissions made by the parties.
Nothing it has heard on this occasion would appear to warrant a
change in the view it expressed on the question of the "Pot" in
Recommendation 12206 with regard to its elimination.
The Court therefore recommends that the parties meet without delay
to discuss terms for the immediate elimination of the "Pot"
Agreement.
~
Signed on behalf of the Labour Court
John O'Connell
____________________
9th July, 1991
T.O'D / M.O'C. Deputy Chairman