FULL RECOMMENDATION
INDUSTRIAL RELATIONS ACTS, 1946 TO 1990 SECTION 26(1), INDUSTRIAL RELATIONS ACT, 1990 PARTIES : TEAM AER LINGUS - AND - CRAFT GROUP OF UNIONS SERVICES INDUSTRIAL PROFESSIONAL TECHNICAL UNION AUTOMOBILE, GENERAL ENGINEERING AND MECHANICAL OPERATIVES UNION DIVISION : Chairman: Ms Owens Employer Member: Mr Keogh Worker Member: Mr Rorke |
1. Claim for 2.5% pay increase due under Programme for Competitiveness and Work (PCW) from 1st July, 1996.
BACKGROUND:
2. The dispute before the Court concerns the Union's claim for an increase of 2.5% under the terms of the PCW with effect from 1st July, 1996.
The Company rejected the claim on the following grounds:-
(i) Inability to pay in accordance with Clause 3 of the PCW.
(ii) Inability to pay in accordance with the Company/Union five year viability plan 1995-1999.
In August, 1994 the Labour Court investigated a dispute between the parties in relation to the Company's Restructuring Plan (designed to meet the objectives in the Cahill Plan). Following the investigation the Court issued LCR14552. As part of its findings the Court recommended a pay freeze until July, 1996.
In May, 1995, following the acceptance of the five year Strategic Plan for Team by the Minister for Transport, Energy and Communications, the content of the plan was distributed by Team to all its staff.
Discussions took place following which on 27th June, 1995 the following joint statement on the plan was agreed:-
- "The Company and Unions agree to jointly achieve the target of £8m savings required by the Plan approved by the Board and accepted by the Minister.
To this end the Company and Unions agreed that the implementation of this will be negotiated and agreed in a forum under an Independent Chairman (The Terms of Reference are to be agreed within this Forum).
The targets in the Plan on yield and effectivity are aggressive and in Management's view are unlikely to be bettered. However, in the event that the Profit and Loss projections in the Plan over the five years being bettered this eventuality will also be addressed at the Forum".
£4m from reduction in the number employed.
£1m from efficiencies in materials/purchasing.
£3m from payroll containment.
The Chairman issued his report and recommendations arising from the Forum in October, 1995 and this provided for an inability to pay clause (details supplied to the Court).
The Unions argue that the Company's position is unacceptable. The workers concerned have made the same sacrifices as other workers in Aer Lingus who have received the PCW.
The dispute was referred to the Labour Relations Commission. Conciliation conferences took place on 24th September, 1996 and 13th October, 1996. As agreement could not be reached the dispute was referred to the Labour Court on 21st October, 1996 under Section 26(1) of the Industrial Relations Act, 1990. A Labour Court hearing took place on 10th December, 1996.
UNION ARGUMENTS:
3. 1. The PCW was agreed on a tripartite basis nationally and its implementation in Aer Lingus was agreed with the Unions. The agreement provides for basic cost of living increases. The Aer Lingus workers in Air Transport received the 2.5% increase from 1st July, 1996 and will receive a further 1% from 1st January, 1997. Failure by Team to implement the PCW from 1st July, 1996 would seriously affect the morale of the workforce.
2. In the year ending 31st December, 1995, the Aer Lingus Group recorded profits of £45m and substantial profits are forecast for the current year. The commitment of the workforce to the Cahill Plan and to LCR14552 has made a considerable contribution to this success.
3. The only commitment given by the Union at the Forum was the commitment to the joint statement. This secured the equity payment paid over to Aer Lingus in December, 1995.
4. The workers in Team have made the same sacrifices as their fellow workers in the Airline. It was the workers understanding in accepting LCR14552 that they were securing their pay and conditions of employment into the future.
5. During the period of these negotiations another category of employees within the Aer Lingus Group were seeking a 17% increase on top of the PCW. The Group was not adverse to serving strike notice to achieve their aims even though some of the best paid people in Aer Lingus belong to that category of worker.
COMPANY'S ARGUMENTS:
4. 1. Taking account of the agreement of all the constituents to the five year plan and the report and recommendation of the Forum, Team's budget for 1996 was prepared so that the targets contained in the plan would be realised. The continuation of the pay freeze is essential if the targets of a return to viability in 1999 are to be met.
2. The five year plan is essential for Team going forward and importantly allowed the EU to sanction the final tranche of equity due to Aer Lingus which allowed the Group to invest £65m in an interest free loan to restructure Team's finances. The plan contains amongst other things the need for £8m cost reduction of which £3m is from payroll containment.
3. Team is not in a position to pay the 2.5% because of the economic and commercial circumstances existing in the Company. It respectfully seeks a recommendation from the Court supporting its inability to pay under the terms of the PCW and also the report and recommendation of the agreed negotiating Forum.
4. The absolute need for the Company to meet its targets of viability/profit in 1999 cannot be put at risk. Payment of the 2.5% from July, 1996 would add approximately £1.2m of cost annually which is not a tenable position.
RECOMMENDATION:
In considering this dispute and before arriving at any conclusions the Court examined the events which led to the referral to the Court. The following points are of particular relevance:-
(a) The parties agreement to a five year viability plan which included savings amounting to £8m over the life of the plan. These are detailed as:-
£4m from reduction in numbers employed.
£1m from efficiencies in materials/purchasing.
£3m from pay roll containment.
It was also agreed that the implementation of the plan would be negotiated and agreed in a forum under an Independent Chairman.
The adoption of the plan was accepted by the Minister for Transport, Energy and Communications and subsequently allowed the EU to sanction the final tranche of equity due to Aer Lingus which allowed the Group to restructure TEAM’s finances.
(b) The forum was set up under an agreed Independent Chairman. The terms of reference for the chairman included inter alia -
“In the chairman’s view where no further progress can be made on matters discussed at the forum he can make a recommendation”.
The issue of cost savings was considered in the agreed forum and the Chairman issued his report and recommendation. The following is the relevant extract:-
- “Accordingly, it is recommended that the exercising of an inability to pay option will have to be put in place at the appropriate time if the required savings are not materialising. Given the consensus which already exists on the fact that the £8m savings must accrue to safeguard the future of jobs in a viable TEAM Aer Lingus operation, there can be no equivocation or misunderstanding by the parties on this recommendation -if the £8m savings set out in the plan are not emerging through reductions in numbers and materials then some orall of the assumed pay trends over the coming four years will have to be set aside on an inability to pay basis regardless of the existence or otherwise of national pay consensus”.
The 2nd Phase of PCW was due to the employees on 1st July, 1996. The Company are claiming inability to pay.
It must be noted that a pay freeze has been in operation in TEAM since July, 1993.
One Union wished to include the payment of increments in the claim but as this was not part of the referral to the Court that matter will not be addressed in this recommendation.
Having taken the background outlined above and the submissions written and oral into account, the Court has concluded that in view of the following:-
(a) Substantial savings have been achieved under two headings-
materials and numbers.
(b) The ongoing effect of the reduction of numbers on pay roll costs
has not yet been quantified.
- (c) The existence of the PCW which gives an expectancy of an increase
to the claimants.
The Court considers that an equitable and prudent way of dealing with the claim is as follows:-
1. The Company agree to pay the 2.5% due on the PCW from 1st July, 1996 on an off scale basis.
2. The Union agree to the proposals at (1).
3. At the end of year 1997 the Company incorporate the 2.5% off scale into the scale. In the light of the financial circumstances of the Company also agree to pay any moneys outstanding from July, 1996 to December, 1997.
4. Should any dispute arise from (3) above the matter can be referred back directly to the Court.
The Court so recommends.
Signed on behalf of the Labour Court
Evelyn Owens
30th December, 1996______________________
F.B./D.T.Chairman
NOTE
Enquiries concerning this Recommendation should be addressed to Fran Brennan, Court Secretary.