Labour Court Database __________________________________________________________________________________ File Number: CD94380 Case Number: LCR14506 Section / Act: S26(5) Parties: IRISH STEEL - and - MANDATE;MANUFACTURING SCIENCE FINANCE;SERVICES INDUSTRIAL PROFESSIONAL TECHNICAL UNION;THE CRAFT GROUP OF UNIONS |
Implementation of the Company Survival Plan.
Recommendation:
The Recommendation is contained in the full document.
Division: Mr Heffernan Mr Keogh Mr Rorke
Text of Document__________________________________________________________________
CD94380 RECOMMENDATION NO. LCR14506
INDUSTRIAL RELATIONS ACTS, 1946 TO 1990
SECTION 26(5) INDUSTRIAL RELATIONS ACT, 1990
PARTIES: IRISH STEEL
and
MANDATE
MANUFACTURING SCIENCE FINANCE
SERVICES INDUSTRIAL PROFESSIONAL TECHNICAL UNION
THE CRAFT GROUP OF UNIONS
SUBJECT:
Implementation of the Company Survival Plan.
BACKGROUND:
Irish Steel has been a loss-maker for many years and is currently
incurring losses in the order of #1 million per month. In face of
this untenable situation, the Minister for Enterprise and
Employment commissioned a consultants' report on the operation and
future of the business. As a consequence of the report, the
Minister appointed an Executive Chairman to the Company for the
specific purpose of developing and implementing a survival plan
which would produce a viable cost-base and ensure the long-term
viability of the Company. The Government approved the Survival
Plan which was drawn up and undertook to make some #25m available
to secure the short-term continuance of the Company, provided the
plan was implemented by the 30th of June, 1994. The bulk of cost
savings provided for in the Survival Plan were staff-related and
the negotiation of these elements was a matter for the Company and
the Unions concerned. These elements are contained in The
Implementation Plan dated May, 1994 and the Amendment to The
Implementation Plan dated 8th July, 1994. For convenience, these
documents are referred to as the "Survival Plan" in the rest of
this text.
Negotiations commenced in May and, following intensive discussions
including involvement of the Labour Relations Commission, the
survival plan was put to ballot by all the Unions involved. The
outcome, which was published on the 11th of July, was rejection.
On the 12th of July, the Board of Irish Steel decided to seek the
appointment of a provisional liquidator by the High Court on
Monday the 18th of July.
Having regard to the exceptionally serious consequences that could
flow from both the rejection of the plan by the Unions and the
appointment of a liquidator, and having regard to its own role as
court of last resort in the national industrial relations field,
the Labour Court decided to investigate the dispute under Section
26(5) of the Industrial Relations Act, 1990. The Court heard the
case on Thursday the 14th of July.
Against this background, the Court has examined both the Survival
Plan and the general and detailed arguments put forward by the
parties, not just by comparison with earlier agreements and
practices but as a fresh basis for workable arrangements that will
re-establish Irish Steel as a viable business within a reasonable
period.
GENERAL ISSUES:-
The Court acknowledges that the elements of the Survival Plan are
of a nature and extent that would be regarded as harsh and
unrealistic in a normal industrial relations situation. It is,
however, indicative of the Unions' appreciation of the parlous
state of the business, that they have accepted the need for the
implementation of much of the plan including the most difficult
requirement of 205 redundancies. When the Unions' arguments are
condensed, the main issues between the Unions and the Company
concerning the content of the Plan relate to:-
- the extent of pay-roll retrenchment;
- employment control: the absolute authority of
management and the abolition of seniority in respect of
redundancies, lay-offs and call-back;
- the redundancy package;
- other issues.
1. EXTENT OF PAY-ROLL RETRENCHMENT
Basic pay remains unchanged following the offsetting of reductions
initially proposed by the Company against revised down-manning and
new work-practices. Various supplementary payments are eliminated
or reduced in the Survival Plan. All Unions accept the abolition
of the attendance bonus and the incentive bonus, together with a
reduction in the levels of overtime. There is also agreement to
the payment of the Ferry charge and, with the exception of the
Craft Unions, to the non-application of the 3rd phase of the
Programme for Economic and Social Progress (3.75%). There was
partial acceptance of a reduction in the sick-pay scheme, although
MANDATE expressed opposition because of the enhanced conditions
that apply to its members, and the Craft Unions sought to barter
their full sick-pay benefits in return for the retention of
existing overtime rates.
All Unions expressed strong, though not always the same,
opposition to the Plan's reduction in shift-premia and in overtime
rates. On the matter of the three-year pay-freeze, the Unions
sought to have this requirement dealt with separately, in the
context of the Programme for Competitiveness and Work. Some of
the Unions argued that the alternative arrangements offered would
only reduce the savings by some #300,000, while others argued that
the arrangements agreed in 1993 had delivered savings and were
inviolable.
The Company, for its part, argued that, having regard to the
financial situation of the business, all possible savings had to
be achieved in order to establish a cost-base that would form a
foundation for future development. It acknowledged the hardship
involved for staff but stated that any diminution now of the
savings sought in the Survival Plan could only be at the expense
of the future.
The Court has considered the submissions presented at the hearing
and the content of subsequent discussions with the parties. In
assessing the situation, the Court must firstly take cognisance of
the context in which the positions of the parties must be set.
The business is losing some #12m per annum and the savings
estimated in the Survival Plan are in the region of #8m p.a.
overall. In other words, the Company will still not be viable in
the normal commercial sense. Its longer-term outlook depends on
the achievement of new business and the establishment of a
partnership arrangement. To achieve these objectives demands the
most effective cost-base achievable and it is counter-productive
to erode any possible savings.
COURT RECOMMENDATION:
The Court understands the difficulty involved for workers
abandoning established arrangements, some agreed as recently as
1993, and recognises the extent to which they have expressed
readiness to grasp this nettle. Nevertheless, for the purpose of
providing the best longer-term prospect for the business, of
ensuring the short-term investment necessary to continue
operations and to protect the maximum number of jobs, the Court
recommends that the Unions and workers accept all the
payroll-related proposals contained in the Survival Plan.
2. EMPLOYMENT CONTROL
All the Unions expressed strong opposition to the third paragraph
of Section 3.1 of the "Amendment to Implementation Plan" dated 8th
July, 1994.
The paragraph reads:-
"To operate the plant with the further reduced numbers will
require agreement to total flexibility, having the right
people in the right place involving, if necessary, selective
compulsory redundancy and selective voluntary redundancy,
cross-fertilisation of skills, the removal of seniority
rights regarding transfers, lay-off, recall following
lay-off and movement in and out of shift."
The paragraph is regarded by the Unions as vesting unbridled
authority in management regarding all aspects of employment and
disemployment and as eliminating the safeguards for workers that
previously existed under agreed "seniority" arrangements The
Unions argued that the workforce did not have confidence in
management to exercise such authority in a reasonable and
equitable fashion and that workers would not accept that the most
important aspects of their employment should be subject to the
whim or caprice of individual managers.
Specifically, the Unions stated that they would not agree to
selective redundancies or to the elimination of seniority rights.
The Company for its part argued that, because of the reduction in
the work-force, and particularly the additional reduction reached
as a compromise for the elimination of pay-cuts from the Survival
Plan, a new working environment would exist. Requirements from
workers would include greater individual and group productivity,
and greater adaptability to cope with changed work-practices.
Above all, the availability of the right mix of skills in the
work-force would be essential to the survival of the business.
The Company was firmly of the view that the freedoms sought in the
paragraph quoted above were essential to ensure that the most
effective work-force is in place at all times.
COURT RECOMMENDATION:
The Court has considered the positions of the parties and
appreciates the concerns and objectives expressed by both sides.
In effect, the Survival Plan seeks to transfer totally to
Management the employment controls which previously rested largely
with the workforce through the operation of the "Seniority"
system. These controls relate to redundancy, lay-off and
call-back.
Irrespective of where authority and decision in these matters
lies, the Court holds the unambiguous view, that the procedures
must ensure the availability to the business at all times of the
skills required to do the job as effectively as possible and at
the most economical cost.
Within this context, the Court considers that arrangements
covering these matters should be such as will ensure reasonable
and equitable application to workers, should not afford absolute
control to the Company and should not impose a rigidity
detrimental to working arrangements or cost considerations.
Accordingly, the Court recommends as follows:-
REDUNDANCY SELECTION:
(a) Voluntary :
Both parties are of the view that a substantial number of the
required 205 redundancies will be met by voluntary redundancy
applications which match the Company requirements. The Union
view is based, however, on an enhanced redundancy package.
The Court is of the view that as many as possible of the 205
redundancies should be achieved by voluntary redundancies but
recognises that there may be a category imbalance in the
applications which would lead to a skill-deficiency in the
plant if all the applications were accepted. In such cases,
the Company must retain the right to reject applications
which are above its requirements. The Company should decide
such rejections on the basis of plant seniority within the
category concerned, unless, in unusual circumstances, there
are compelling reasons to do otherwise.
(b) L.I.F.O. :
In the event that the full complement of redundancies are not
achieved through the voluntary redundancy scheme, the balance
to make up the agreed 205 should be on the basis of 'last in,
first out". The Company should deviate from this principle
only where its strict application would give rise to a skill
deficiency in the plant or in unusual circumstances where
there are compelling reasons to do so.
NOTE:
The Court considers that the number of cases of "compelling
reasons" to deviate from the general principles laid down in
this section should be minimal and should be resolved at
local level. However, because of the perceptions generated
by such cases, the Court recommends that any not so resolved
should be referred to the Court for final adjudication.
LAYOFFS
Traditionally, layoffs in the Company have been on a plant-wide
seniority basis which could involve ripple disruption in various
areas. The Survival Plan proposes that the Company have the right
to selective layoff in all circumstances.
Having examined the considerations and arguments put forward by
the parties, the Court is of the view that disruption arising from
layoffs should be reasonably limited but that seniority should not
be totally abandoned as a factor.
Accordingly, the Court recommends that the selection for layoff
should be on the basis of plant seniority within the work category
affected. The work categories are as set out in detail under the
general employment classifications in the Survival Plan. Where
categories are clearly interchangeable, they may be grouped
together for the purposes of this Section.
RECALL
Recall from layoff has traditionally been on a plant seniority
basis without reference to job category or required skill. Under
this arrangement, if a specific skill was needed in the plant, it
was obligatory on the Company to recall all staff who had superior
seniority whether or not their services were wanted, before the
worker who had the required skill could return. This situation
was patently wasteful. To minimise loss, in certain circumstances
management frequently used employed staff at overtime rates. The
result was damaging in two ways - it left workers unnecessarily on
layoff and it increased the Company's costs through overtime
rates.
To change the situation, the Company has sought, through the
Survival Plan, the right to the selection of workers for recall
from layoff without any reference to seniority.
Having considered the above situation, the arguments of the
parties and the reality that layoffs at the plant are often of
significant duration, the Court considers that procedures for
recall must be rationalised to avoid unnecessary cost but should
not totally ignore seniority.
Accordingly, the Court recommends that recall from layoff should
be on the basis of seniority within the work-category required.
In this context, work-categories are the same as referred to under
the heading 'LAYOFFS'.
3. REDUNDANCY PACKAGE:
The Unions have argued that the redundancy payment package is
inadequate, having regard to the many unique skills involved in
the steel industry and the absence of opportunity for their use in
any other employment. As a result, many of those becoming
redundant would have only minimal prospects of future employment.
In addition, the Unions argue that the terms on offer are the same
as applied some four years ago and, therefore, should be enhanced
to take account of national pay-rises that applied in the interim.
As a related issue, the Unions assert that an improved package
would facilitate the achievement of the maximum number of
voluntary redundancies and so help the stabilisation of the new
arrangements in the shortest time.
The Company emphasised the dire financial position of the
business, the accumulated losses and the fact that whatever
financial injection it received would have to sustain it until
such time as it achieved full viability.
In addressing the redundancy package, the Court is conscious that
should the appointment of a Liquidator take place, the only
redundancy payments likely to be made are the statutory
entitlements. However, having regard to the arguments put forward
by the parties and to the fact that the redundancy payment is
once-off and not an ongoing imposition on the cost-base, the Court
recommends that the redundancy payments be increased to #1,200 per
year of service with a maximum payment of #36,000 and pro-rata
increases for workers aged 60 and over.
4. OTHER ISSUES:
COMPENSATION:
The Unions claimed that in view of the very substantial reduction
in income which would affect all workers remaining in the plant,
the Court should address the question of compensation for their
losses. The Company on the other hand totally opposed any such
payment because of the financial position of the business.
The Court is satisfied that the normal industrial relations
approach to compensation cannot be justified in the circumstances
of this case. However, the Court, having regard to the impact
which the Survival Plan will have on the income of workers in the
initial year, recommends that a payment of #250 be made to each
worker employed in the Company in December 1994 provided the
workers have co-operated fully with the introduction and
implementation of the Plan.
TRAINING:
In the context of the reduction of the workforce and the
introduction of the teamwork approach, the Unions sought
undertakings that adequate ongoing training would take place to
ensure the necessary up-skilling and cross-skilling of workers.
The Company fully accepted the need for such raining and the Court
incorporates the following undertakings given by the Company as
part of this recommendation:
(a) The Company will develop structured training programmes
so that the skills of general operatives may be
enhanced, thereby enabling them to become more fully
integrated in the production process. Such agencies as
FAS and Co-Steel Sheerness will assist in this process.
(b) Standard job-procedures will be produced particularly
where job-sharing as between general operatives and
craftsmen is anticipated. Training of general
operatives will be undertaken either on the job, or off,
in performing such tasks as for example:-
Mould Changing
Spray Nozzle/Ring/Hader Changes
Pod Bolt removal and replacement
Basic Welding/reflector plates, troughs, finders
Basic Fitting
Connect/Disconnect Hydraulic Hoses/Water pipes etc.
Removal/cleaning of Oxy Fuel Burners,
(c) Additionally, the craftsmen will have access to
production duties such as operating the 100 tonne
cranes and taking temperature measurement of steel
during refining.
(d) This teamwork approach will develop an integrated
workforce along the lines of that operating for many
years at Badische Stahlwerke in Germany.
INDUSTRIAL PEACE
The Unions took exception to what they termed the "no strike"
clause in the Survival Plan having regard to the absence of any
reference in the text to the use of procedures or to the fact that
there had been no strike in the Company for many years.
In examining this matter, the Court believes that both parties
recognise that the maintenance of Industrial Peace and a stable
industrial relations climate in the Company is absolutely
essential to the survival of the business. Accordingly, the Court
recommends that as a reasonable and prudent step, both parties
commit themselves not to engage in any form of industrial action
for a period of five years. Furthermore, the Court recommends
that as far as possible, the parties resolve issues at local level
and in any event without interference or cost to the business of
the Company.
In view of the range and nature of the changes involved in the
Survival Plan, the Court recommends that, in the unlikely event of
a matter of interpretation or implementation not being resolved at
local level, it should be referred to the Court by the parties for
a final decision.
5. SURVIVAL PLAN:
Finally, the Court recommends that the Unions accept all the
provisions of the Survival Plan other than as amended by this
document.
RECOMMENDATION
The Recommendation is contained in the full document.
~
Signed on behalf of the Labour Court
16th July, 1994 Kevin Heffernan
M.K./U.S. ----------------
Chairman
NOTE:
Enquiries concerning this Recommendation should be addressed to
Mr Michael Keegan, Court Secretary.