FULL RECOMMENDATION
INDUSTRIAL RELATIONS ACTS, 1946 TO 1990 SECTION 26(1), INDUSTRIAL RELATIONS ACT, 1990 PARTIES : SEMPERIT IRELAND LIMITED (REPRESENTED BY THE IRISH BUSINESS AND EMPLOYERS' CONFEDERATION) - AND - SERVICES INDUSTRIAL PROFESSIONAL TECHNICAL UNION TECHNICAL, ENGINEERING AND ELECTRICAL UNION AMALGAMATED ENGINEERING AND ELECTRICAL UNION MANUFACTURING, SCIENCE, FINANCE DIVISION : Chairman: Employer Member: Worker Member: |
1. Improved severance terms.
BACKGROUND:
2. Semperit Ireland Limited is a subsidiary of Continental A.G., a multinational organisation with headquarters in Hanover, Germany. The Irish operation, which is involved in the manufacture of car tyres at its plant in Ballyfermot, Dublin, employs a workforce of 633.
On 18th September, 1996, Continental A.G. announced its intention to close the Irish manufacturing operation on a phased basis up to 6th December, 1996. The Company has offered severance terms of statutory redundancy plus 4 weeks' pay per year of service, based on each worker's salary conditions at the date of leaving. A week's pay will include basic pay, bonus, service pay, various allowances and contractual hours (details supplied) where applicable. Service will be rounded up to the nearest month and will include service in apprenticeship with the Company.
The Unions are seeking a redundancy package of 7 weeks' pay per year of service, plus statutory entitlement. A week's pay is to be clearly defined. They are also seeking pay in lieu of statutory minimum notice and the inclusion of Phase 3 of the PCW (3.5%) in all calculations, which was deferred by agreement in early 1996 to assist the Company's survival.
The issue of severance terms was the subject of a conciliation conference under the auspices of the Labour Relations Commission on 7th October, 1996. The parties were unable to reach agreement and the matter was referred to the Labour Court in accordance with Section 26(1) of the Industrial Relations Act, 1990. A Labour Court hearing took place on 24th October, 1996.
UNIONS' ARGUMENTS:
3. 1. Quality, output and profitability have been greatly enhanced during the past ten years due to the dedication of the workforce and their co-operation with various rationalisation requirements. Management has acknowledged their contribution, yet is unwilling to defer closure until 31st March, 1997, to give greater time to identify a potential buyer.
2. The Company's offer is less than the average available in similar situations and, indeed, is less than has already been paid by the Company in a voluntary redundancy situation. The Company has an even greater obligation to the staff in the context of compulsory redundancy. Profitability is the sole factor behind the decision to close the plant and the Company has both the responsibility and the resources to improve the package currently on offer.
3. It is common practice to include the legal entitlement to minimum notice as pay in lieu. The Company has established a precedent in the past and has maintained the practice of paying money in lieu of notice in all voluntary situations. In June, 1996, four staff in Semperit Sales Limited were offered, in writing, voluntary redundancy which included pay in lieu of notice. Their 600 colleagues should not be offered a lesser package.
4. In early 1996 the parties agreed to defer the payment of 3.5% due under the terms of the PCW until 1st January, 1997. A lump sum payment was made to each employee covering the value in relation to basic pay for 1996, while the Company made savings in respect of shift pay, overtime earnings, etc. The agreement was never intended to impact on redundancy, minimum notice or pensions. The 3.5% should, therefore, be included for all calculations related to redundancy payments.
COMPANY'S ARGUMENTS:
4. 1. The principal reasons which have influenced the closure of the Dublin plant are competition from companies operating in low cost economies, excessive production capacity within established European plants and the need to re-structure the Group, which has too many small plants in Europe which are not sufficiently cost effective.
2. Management fully recognises the commitment given by all employees and, rather than protracting negotiations and adding to the employees' and their families' distress, the Company put forward its first and final offer from day one. It is a fair and reasonable package which has previously applied at the plant and will cost the Company £17,165,931. The Company also proposes to distribute any surplus funds from the three contributory pension schemes among the members, subject to the trustees' agreement, and information seminars will be held to deal with all aspects of redundancy.
3. Other employers may have paid in excess of 4 weeks' pay per year of service, as in the case of Delphi Packard Electric, who paid 5 weeks' per year of service. However, the total cost of paying 900 people in Delphi amounted to £12 million, whereas 633 people will be paid £16.4 million - on average Semperit employees will receive twice the amount received by Delphi employees.
4. Each employee has been on notice since 18th September, 1996, when the plant closure was announced. Payment in lieu of notice would add a further £1.6 million to the cost of the severance package. By agreement with the workers a payment of £400,000 was made earlier this year in relation to Phase 3 of the PCW. A second payment would cost the Company a further £630,000 approximately. The addition of just £1 per week to each individual's salary would cost approximately £39,000 in additional redundancy costs, while the addition of one week's pay per year of service would cost in excess of £4 million.
RECOMMENDATION:
The Court has considered the detailed submissions made by the parties to this dispute.
In all the circumstances of this case the Court recommends that the Company increase its offer of 4 weeks' pay per year of service to 5 weeks' pay per year of service, plus statutory entitlement.
The Court further recommends that in view of past practice, payment in lieu of notice as claimed by the Unions be paid.
The Court also recommends that for the purpose of calculating severance pay the final phase of PCW i.e, 3.5% be included.
Signed on behalf of the Labour Court
Evelyn Owens
4th November, 1996______________________
D.G./D.T.Chairman
NOTE
Enquiries concerning this Recommendation should be addressed to Dympna Greene, Court Secretary.