FULL RECOMMENDATION
INDUSTRIAL RELATIONS ACTS, 1946 TO 1990 SECTION 26(1), INDUSTRIAL RELATIONS ACT, 1990 PARTIES : KLOPMAN INTERNATIONAL LIMITED (REPRESENTED BY THE IRISH BUSINESS AND EMPLOYERS' CONFEDERATION) - AND - SERVICES INDUSTRIAL PROFESSIONAL TECHNICAL UNION DIVISION : Chairman: Ms Owens Employer Member: Mr McHenry Worker Member: Ms Ni Mhurchu |
1. Severance terms arising from the Company's closure.
BACKGROUND:
2. In 1989, the Company acquired Burlington, which had operated in Tralee from 1976. The Company, which is part of the Dominion Textiles Group, employs 141 and manufactures basic raw material fabric for dying and finishing at its sister plant in Italy. On the 18th of August, 1997, the Company announced its decision to close its plant in Tralee and to rationalise its plant in Italy. The closure will take effect on the 31st of October, 1997. The first group of employees are scheduled for redundancy on the 20th of September, 1997.
The Company offered a redundancy package, as follows:-
(i) 3 weeks' pay per year of reckonable service, plus statutory entitlement;
(ii) 1 extra notional year's service for each employee for the purposes of the ex-gratia payment;
(iii) A £500 lump sum per employee for an orderly wind-down and closure of operations;
(iv) 18-month insurance cover for death-in-service.
The package was rejected by the Union. The matter was the subject of a conciliation conference under the auspices of the Labour Relations Commission following which the Company's stated final position was that it would increase its offer to 4 weeks' pay per year of service, with the £500 lump sum for an orderly wind-down being maintained.
The Union is seeking the following:-
(1) 6 weeks' pay per year of service, plus statutory entitlement;
(2) 2 notional years of service to be added to the actual years of service for calculation of service pay. These notional years will not apply to statutory redundancy payment;
(3) An additional lump sum of £1,000 per person;
(4) Full recognition and payment of year-end bonus (Christmas bonus);
(5) Re-grading of 12 employees in the carding department from Slot-3 to Slot-4 for the purpose of calculation of redundancy in keeping with the Company's commitment in July, 1997.
Agreement was not reached, subsequently, and the dispute was referred to the Labour Court, on the 11th of September, 1997, in accordance with Section 26(1) of the Industrial Relations Act, 1990. The Court carried out its investigation on the 18th of September, 1997.
COMPANY'S ARGUMENTS:
Closure:
3. 1. The closure of the Tralee plant is absolutely inevitable and follows many years of enormous losses and repeated efforts to secure viability. In such a situation, where the Company is exiting from Ireland, there is no payback achievable for a future efficient Tralee operation to fund a redundancy programme. However, rather than liquidate, the Company is prepared to honour and exceed its obligations.
Financial Circumstances:
2. The critical position of Dominion must be recognised. Having supported losses of £12.7 million in Tralee and a price subsidy of £25 million, as well as capital investment of £12.1 million, it could be argued that the Corporation has more than discharged its responsibilities. The Corporation itself is in extremely difficult trading circumstances with losses of $50 million in 1996 and is not in a position to fund exorbitant claims from a plant that has had a negative impact on the bottom line for many years. Current efforts at a hostile take-over by a competitor could alter the situation drastically and, as such, it is essential that the matter be resolved quickly.
Redundancy Offer:
3. The severance terms being offered are exceptionally generous in the circumstances and represent a cost of £3,336,000 for all 141 employees. Indeed, the enhancement of the terms to 4 weeks' per year of service represents an additional subvention of £568,000 from Dominion and is the absolute bottom line redundancy cost for the Corporation. The Corporation will not approve of, or make available, additional payments over and above the generous offer tabled.
Need for Agreement:
4. The Company is most anxious that the unfortunate circumstances in Tralee be resolved as amicably as possible. The enhanced offer was a genuine effort to achieve this in the interests of the employees and the town of Tralee. The Company is currently involved with the IDA in trying to secure much-needed investment for this area.
UNION'S ARGUMENTS:
4. 1. The 1996 Redundancy Agreement offered 4 weeks' pay plus statutory entitlement for voluntary redundancy. On this occasion, however, the workers are faced with a compulsory redundancy situation. It is their belief that the Company is moving its operation to the far East with enormous savings accruing. The workers also believe that the Tralee operation is performing profitably and that the balance sheet losses are on the basis of comparison with the Company's prospective performance had it been operating in the far East. Where similar circumstances have obtained in other companies (details supplied) the redundancy offer amounted to 6 weeks' per year of service, plus statutory.
Notional Service:
2. In the Redundancy Agreement of May, 1996, agreement was reached between the parties that, in the event of compulsory redundancy applying, all employees employed prior to February 1990 would receive 2 notional years of service. It is unacceptable for the Company to renege on the previous agreement where all staff are faced with compulsory redundancy.
Lump Sum:
3. In the agreement of May, 1996, the situation was that all those being made redundant, both voluntarily and compulsorily, would receive a lump sum payment of £1,000.
End-of-year Bonus:
4. The end-of-year bonus is the subject of an agreement between the parties which provides for a percentage of income in a 12-month period to be paid at the end of November of each year. These percentage payments are linked to each individual's length of service in the Company and are calculated on gross income from the 1st of December to end of November and have always been viewed as an integral part of pay. In this respect, the Company, on many occasions has argued before the Labour Court, that basic pay is higher within the Company by virtue of the fact that this bonus is paid. The conditions of the Bonus are that each individual employee must remain in the Company at the time of payment, which is normally in the first week of December. Due to the fact that the Company is to close and cease operations on the 31st October, it has argued that it is not obliged to pay. This is unreasonable and unacceptable.
Upgrading from Slot-3 to Slot-4:
5. In early 1997, the Union served a claim on the Company for an upgrading in the carding department from Slot-3 to Slot-4. Negotiations had been on-going with the Company and in July, 1997, the Company agreed to concede to the Union's claim and to regrade 5 persons in the Card Room immediately , effective from 16th June, 1997, and to arrange cross-training for a further 7 persons, thereby entitling them to Slot-4 within a reasonable time-frame. In a letter dated the 9th of July, 1997, this was further confirmed by the Company. Accordingly, the redundancy terms of the 7 workers concerned should reflect the higher rate of pay.
RECOMMENDATION:
The Court has given careful consideration to the submissions from the parties and the additional points made at the hearing. The Court also received details of the financial position of the Company and an assessment of the value of the machinery.
The Court is satisfied that, on the basis of this information, the Union's claim in its totality cannot be met.
In the circumstances, the Court recommends that both parties accept the following:-
1. The Company pay redundancy at the rate of 4 weeks per year of service, plus statutory entitlement; overtime not to be included for the purpose of the calculation for shift workers.
2. One year's notional service to be added to actual years of service for calculation of severance pay (not to apply to statutory payments).
3. End of year bonus for 1997 to be paid.
4. Five employees in the carding room to be upgraded as previously agreed.
5. An additional lump sum of £1,000 to be paid.
6. Continuation of Life Assurance Death in Service Benefit to 30th of April, 1999.
The Court urges the parties to accept the above package in order to facilitate an orderly closedown of the plant.
Signed on behalf of the Labour Court
Evelyn Owens
24th of September, 1997______________________
M.K./S.G.Chairman
NOTE
Enquiries concerning this Recommendation should be addressed to Michael Keegan, Court Secretary.