Labour Court Database __________________________________________________________________________________ File Number: CD91421 Case Number: LCR13396 Section / Act: S26(1) Parties: AER LINGUS - and - SERVICES INDUSTRIAL PROFESSIONAL TECHNICAL UNION |
Dispute concerning the implementation of the Programme for Economic and Social Progress (PESP) in the Company.
Recommendation:
5. The Court has considered the submissions of the parties in the
context of the difficulties being experienced in the air-transport
business and the co-operative efforts being made to cope with
them. The extent to which information concerning the financial
and commercial situation of the Company is shared and the positive
approach adopted by the workers to difficult circumstances is
impressive and the Court notes the commitment of both sides to the
full implementation of the Recovery Plan which has critical
importance for all.
Having regard to all the prevailing circumstances, it is the
Court's view that the settlement proposals put forward previously
in respect of this dispute were, in general, well-founded.
Accordingly the Court considers that the proposals should stand
but with the following modifications:-
1. The 1st phase payment of 2% to be paid with effect from
1st April, 1992.
2. The 2nd phase payment from 1st July, 1992 to be 3½%.
3. The 3rd phase payment from 1st July, 1993 to be 5.25%.
The Court recommends that both the Company and the Union workers
accept the proposals so revised.
Division: CHAIRMAN Mr Brennan Mr Walsh
Text of Document__________________________________________________________________
CD91421 RECOMMENDATION NO. LCR13396
THE LABOUR COURT
INDUSTRIAL RELATIONS ACTS, 1946 TO 1990
SECTION 26(1) INDUSTRIAL RELATIONS ACT, 1990
PARTIES: AER LINGUS
and
SERVICES INDUSTRIAL PROFESSIONAL TECHNICAL UNION
SUBJECT:
1. Dispute concerning the implementation of the Programme for
Economic and Social Progress (PESP) in the Company.
BACKGROUND:
2. 1. The Company is in dispute with the Union on the
implementation of the first phase of the Programme for
Economic and Social Progress (P.E.S.P.). The Company claimed
an inability to pay the terms of P.E.S.P. because of the
state of the finances of the airline. From mid-1990, the
Company has experienced operating difficulties arising from
recession in major markets and the impact of Gulf war
tensions. In response to the difficulties, the Company
embarked on a Recovery Plan, designed to protect it's size
and employment levels. Cost savings of £20m from the
Recovery Plan would be made by the deferment of April, 1991
increments, deferment of P.E.S.P. terms and efficiency
improvements. The terms of the Recovery Plan were accepted
by the Union. The P.E.S.P. had not, however, been ratified
at the time and the Union agreed to consider this aspect of
the proposal, when ratified, in the light of the prevailing
circumstances of the Company.
2. On 6th May, 1991 the Union served a claim on the Company
for the application of pay increases due under the terms of
P.E.S.P. The Company responded to the claim by requesting
Union agreement that the first phase should not be paid. The
Union rejected the Company proposal and the dispute was
referred to the Labour Relations Commission. Conciliation
Conferences were held on 12th, 13th, 15th, 16th and 17th
July, 1991. At conciliation it was agreed that the proposals
set out below would be put to ballot with a recommendation
for acceptance:-
Phase 1 2% with effect from 1st May, 1992
Phase 2 3% with effect from 1st July, 1992
Phase 3 5.75% with effect from 1st July, 1993
3. The retrospection element of phase 1 would fall due for
payment on 30th June, 1994 and the agreement would terminate
on 30th June, 1994. The proposals were rejected by the
workers after a ballot.
4. The Company was not prepared to consider an improved
offer and the dispute was referred to the Labour Court for
investigation and recommendation on 9th August, 1991. A
Labour Court investigation took place on 26th August, 1991.
UNION ARGUMENTS:
3. 1. Under the terms of the Recovery Plan the Union is
required to negotiate the P.E.S.P. in the light of the
prevailing circumstances of the Company. The terms of the
P.E.S.P., negotiated at national level place an obligation on
the Company to pay the phased increases as per the terms set
out in the Agreement. Although the Company made a loss of
£19.6m on air transport for the year 1990/1991, the group as
a whole made a profit of £7.9m for the year. The Company is
therefore in a position to pay the first phase increase of 4%
from the due date.
2. Pay increases to workers from 1978 to date have been
confined to basic terms of nationally negotiated agreements
(there were some productivity related payments in 1981/82).
In the same period, workers have co-operated with a number of
recovery type programmes. From 1986 to 1990, worker numbers
increased by 12% while the payroll as a percentage of total
revenue declined from 37% to 34.7%. The payroll is 33.5% of
total costs for the year 1990/91. In addition, the workers
have made a substantial contribution to the recovery plan
through the deferral of annual salary increments and
increased productivity.
3. The workers have given much in recent years but have seen
little in return. Under pressure of Government, the Board
recently paid a dividend of £0.5m. The Minister for Finance
is quoted as saying that this could be paid from turnover or
reserves. The workers expect that the Company could fulfill
their P.E.S.P. obligations from the same source. The Company
has made healthy profits throughout much of the 1980's
including £7.9m in 1990/1991. The workers feel that when
other companies who are in a more serious financial position
(details supplied) can pay P.E.S.P. terms, the airline should
fulfill its obligations. The problems facing the Company
will not be solved by pay deferrals or cost cutting measures
but by the active involvement and co-operation of management,
staff and Government working together.
COMPANY'S ARGUMENTS:
4. 1. The airline industry, particularly in Europe is
undergoing considerable change. The Company is at high risk
of being seriously affected by changes in the regulatory and
competitive environment.
2. The Company has serious financial difficulties (details
supplied) and as a response to these difficulties, a Recovery
Plan was devised and agreed with the Union. A critical
component of the Recovery Plan is the deferment of the
P.E.S.P. The proposals put at the conciliation conference
for payment of the increases that are due within the period
concerned were recommended for acceptance by the Union. The
fact that they were rejected represents a serious blow to the
Recovery Plan. The negotiation of the Recovery Plan allowed
the Company to commence the financial year without major
reductions in the scale of operations and without consequent
reductions in employment levels.
3. The deferment agreement worked out by the parties at
conciliation meets the objectives of paying all of the
increases due within the time frame applicable. It also
makes provision for arrears due to be paid in the financial
year 1994/1995. Current financial circumstances (details
supplied) make the features of the deferment agreement
reasonable. The projections upon which the Recovery Plan was
based now show a deterioration of £15m. Despite this
deterioration it was decided to honour the commitments made
in the Plan.
3. The Company's business plan (even though it is not yet
finalised) indicates that improvements can be achieved in the
future. The business plan is built on the platform provided
by the Recovery Plan agreement. Without the P.E.S.P. element
(and the efficiency improvements) the Recovery Plan will be
incomplete and the premise upon which the business plan is
built will be false.
RECOMMENDATION:
5. The Court has considered the submissions of the parties in the
context of the difficulties being experienced in the air-transport
business and the co-operative efforts being made to cope with
them. The extent to which information concerning the financial
and commercial situation of the Company is shared and the positive
approach adopted by the workers to difficult circumstances is
impressive and the Court notes the commitment of both sides to the
full implementation of the Recovery Plan which has critical
importance for all.
Having regard to all the prevailing circumstances, it is the
Court's view that the settlement proposals put forward previously
in respect of this dispute were, in general, well-founded.
Accordingly the Court considers that the proposals should stand
but with the following modifications:-
1. The 1st phase payment of 2% to be paid with effect from
1st April, 1992.
2. The 2nd phase payment from 1st July, 1992 to be 3½%.
3. The 3rd phase payment from 1st July, 1993 to be 5.25%.
The Court recommends that both the Company and the Union workers
accept the proposals so revised.
~
Signed on behalf of the Labour Court
Kevin Heffernan
12th September, 1991 ---------------
J.F./J.C. Chairman.