FULL RECOMMENDATION
INDUSTRIAL RELATIONS ACTS, 1946 TO 2001 SECTION 26(1), INDUSTRIAL RELATIONS ACT, 1990 PARTIES : BAYER DIAGNOSTICS MANUFACTURING LIMITED (REPRESENTED BY THE IRISH BUSINESS AND EMPLOYERS' CONFEDERATION) - AND - AMALGAMATED ENGINEERING AND ELECTRICAL UNION DIVISION : Chairman: Ms Jenkinson Employer Member: Mr Keogh Worker Member: Mr. Somers |
1. Pension calculation.
BACKGROUND:
2. The Company was established in 1966 and is engaged in the manufacture of laboratory instruments. It currently employs approximately 240 people. In November, 2000, the Company announced a voluntary redundancy program to be implemented from January, 2001. Forty six people volunteered, of whom 23 were also eligible for early retirement.
The dispute before the Court concerns the Union's claim on behalf of one worker who retired on the 6th of April, 2001. His pension was calculated based on his salary on the 1st of January, 2001. The Union is claiming that his pension should have been based on his salary at his retirement date, as indicated on page 5 of the Company's explanatory handbook. He would then have benefited from a 5.5% increase and a 2% supplementary increase under the Programme for Prosperity and Fairness (P.P.F.). The Company rejected the claim on the grounds that the Trust Deed and Rules of the pension scheme state that pensionable salary will be based on salary recorded on the 1st of January, prior to the retirement date. The issue was the subject of a conciliation conference under the auspices of the Labour Relations
Commission on the 5th of September, 2001. As agreement was not possible, the Union requested referral to the Labour Court in accordance with Section 26(1) of the Industrial Relations Act, 1990. The Company agreed and the dispute was referred on the 11th of February, 2002. The Court investigated the dispute on the 10th of April, 2002.
UNION'S ARGUMENTS:
3. 1. No discussions took place with the Union regarding the redundancy and early retirement package. The Company has refused to apply the 7.5% increases due in April, 2001, under the terms of the P.P.F. to the final pensionable salary of the employees.
2. The pension handbook that each employee received from the Company clearly states that "Final Pensionable Salary and Pensionable Service are calculated at the date you retire". Employees believed that this was the case and were not notified otherwise by Management.
3. The Trust Deed and Rules gives the Principal Employer and the Trustees the latitude to approve the inclusion in final pensionable salary special or above normal pay increases. The 7.5% increase under the P.P.F. would be an above normal increase. Although this issue was discussed at conciliation, the Company did not offer any compromise position.
4. The pension fund can comfortably afford to apply the Union's claim to its 17 members, 9 of whom went on early retirement and 8 who took redundancy. This situation will not re-occur as the Company's handbook has now been changed. The Company should apply the scope it has to address the Union's claim.
COMPANY'S ARGUMENTS:
4. 1. Coyle Hamilton administers the Company's pension plan according to the Trust Deed and Rules. It has consistently used the January 1st date as the pensionable salary date. The Company has 137 pensioners to whom this date would have applied.
2. The Company agrees that the language on page 5 of the handbook could be improved upon, but the disclaimer in the front of the handbook prevails. It states that nothing in the booklet can override the terms of the Trust Deed and Rules, which clearly state that Final Pensionable Salary is computed at the previous 1st January.
3. The redundancy process was open and transparent. The Company provided pension and financial counselling to assist people prior to having their applications accepted. All pension calculations were based on employees' salaries as of 1st January, as is specified in the pension Trust Deed.
4. All employees who were eligible for early retirement, including the claimant, received pension information from Coyle Hamilton, with the calculation based on the 1st January, prior to making the decision to take the package. The claimant accepted the terms and conditions offered in writing.
RECOMMENDATION:
The Court has considered the position of both sides to this dispute.
The statement in the company's pension explanatory booklet where it refers to a member retiring before the age of 65:-
"For the purposes of this calculation Final Pensionable Salary and Pensionable Service are calculated at the date you retire"has given rise to a certain understanding which, in the Court's view, is reasonably interpreted as meaning that increases in salary since January will be taken into account when calculating pension benefits in such circumstances where a person retires post January.
Equally, the Court is satisfied that the explanatory booklet is clear where it states that where a member retires at Normal Retirement age, Final Pensionable Salary is as per the definition in the booklet which refers to the pensionable salary on the review date (1st January or other such date as the Employers shall agree with the Trustees) immediately before Normal Retirement Date.
Having examined the Trust Deed and Rules of the Scheme, the Court is satisfied that the rules are silent on the applicable date of the Final Pensionable Salary in the case of Retirement before Normal Pension Age.
The definition of Review Date allows for the discretion of the employer and the trustees to appoint a date other than 1st January. The Court recommends that, due to the confusion which has arisen in this case, the trustees should, in accordance with Section 15 of the Trust Deed and Rules, consider augmenting pension benefits to reflect the provision in the explanatory booklet which has given rise to an understanding that Final Pensionable Salary at date of retirement would be used to calculate pension benefits.
The Court notes the company's intention to issue a new explanatory booklet to clear up any confusion caused.
Signed on behalf of the Labour Court
Caroline Jenkinson
15th April, 2002______________________
D.G. / B.R.Deputy Chairman
NOTE
Enquiries concerning this Recommendation should be addressed to Dympna Greene, Court Secretary.