FULL RECOMMENDATION
INDUSTRIAL RELATIONS ACTS, 1946 TO 1990 SECTION 26(1), INDUSTRIAL RELATIONS ACT, 1990 PARTIES : ABS PRODUCTION WEXFORD LIMITED (REPRESENTED BY IRISH BUSINESS AND EMPLOYERS' CONFEDERATION) - AND - SERVICES INDUSTRIAL PROFESSIONAL TECHNICAL UNION DIVISION : Chairman: Ms Jenkinson Employer Member: Mr Murphy Worker Member: Mr O'Neill |
1. Discontinuance of funding of 1.3% long-term disability insurance scheme
BACKGROUND:
2. The Company operates two pension schemes - one for monthly paid (staff) members, which is the subject of the current dispute, and one for hourly-paid employees. The Union's claim concerns the Company's decision to discontinue funding of a 1.3 % long-term disability insurance scheme (the 1.3% scheme). Its claim is that the Company should continue to pay the 1.3% scheme. The Union denies that an agreement, dated 22nd November, 2005, was reached with the Company to cease funding the 1.3 % scheme going forward and thus facilitate the Company to utilise the 1.3% element as part of its funding contribution into addressing a shortfall in the staff defined benefit scheme. The Union maintains that the "agreement" of 22nd November, 2005, was a"working document without prejudice".
The staff pension scheme has been in operation since 1979. Initially the scheme was funded on a 50-50 basis of 3% each from the Company and the members. Subsequently the members agreed to forgo a 2.2% pay increase and instead divert it into the pension scheme where it would be paid by the employer, giving a total funding of 8.2%. Following an actuarial evaluation by Mercers it was advised that the funding of that scheme needed to be increased to 15.6% (exclusive of the 1.3% scheme) thus requiring another 7.4%. Following discussions in late 2005 it was decided that the employer's contribution would increase from 5.2% to 9.2%, and the members' contribution from 3% to 6.4%. The Company's case is that at this stage it was agreed that it would cease paying the 1.3% scheme but the Union's understanding is that, even if this happened, the 1.3 % should have been utilised as per the"options list to be developed for members to consider"in the 22nd November, 2005, agreement.
The dispute was referred to the Labour Relations Commission and a conciliation conference took place. As the parties did not reach agreement the dispute was referred to the Labour Court on the 15th August, 2007, in accordance with Section 26(1) of the Industrial Relations Act, 1990. A Labour Court hearing took place on the 24th June, 2008.
UNION'S ARGUMENTS:
3. 1. Notwithstanding management's efforts to portray the funding shortfall as 8.7% in late 2005 (or a total funding of 16.9%) including the 1.3% scheme, it is clear that the 1.3% scheme was completely separate and had always been paid by the employer. Mercers clearly highlighted the recommended contribution rate as 15.6%.
2. The 22nd November, 2005, document refers to"the value for money issue regarding the disability insurance to be fully investigated and an options list to be developed for members to consider".This did not happen. There were no options put to the members and the Company unilaterally decided to cease paying the 1.3% scheme.
COMPANY'S ARGUMENTS:
4. 1. The Union's claim for further pension enhancements is, in fact, a cost increasing claim and is precluded under the terms of the National Wage Agreement.
2. The two pension schemes - staff and hourly-paid - have always operated on a parity basis. If the claim for a change to the staff scheme were conceded it would be followed by a further cost-increasing claim for the hourly-paid members.
RECOMMENDATION:
The matter before the Court concerns the cessation of the Long Term Disability Insurance scheme which the employer had been providing and paying contributions to at a rate of 1.3%.
The Court notes that the difficulties arose in the context of a review of the Defined Benefit Pension Scheme, when both the employer and employee contributions needed to be increased when the scheme was identified as being under-funded.
The Company stated that the revised contributions rates, agreed with the Union on 22nd November, 2005, absorbed the contribution it previously made to the Long Term Disability Insurance scheme, thereby ceasing that scheme.
The Union, however, held the view that the 22nd November, 2005, Working Document was agreed without prejudice to its position on the Long Term Disability Insurance scheme and stated that it was prepared to enter into discussions on examining value-for-money alternatives to the disability scheme within the context of the Company continuing with its contributions (1.3%).
Having considered the matter, the Court recommends that both parties should accept the new funding arrangements for the Defined Benefit Pension Scheme as agreed on 22nd November, 2005, and as currently exists. However, having regard to that part of the agreement dealing with the exploration of options on how monies can be effectively used, the Court is satisfied that this aspect has not been fully considered and, accordingly, recommends that the parties should re-engage to complete the examination of options, to include the restoration of the 1.3% contribution previously paid by the employer.
The Court so recommends.
Signed on behalf of the Labour Court
Caroline Jenkinson
5th August, 2008______________________
CONDeputy Chairman
NOTE
Enquiries concerning this Recommendation should be addressed to Ciaran O'Neill, Court Secretary.