FULL RECOMMENDATION
INDUSTRIAL RELATIONS ACTS, 1946 TO 1990 SECTION 26(1), INDUSTRIAL RELATIONS ACT, 1990 PARTIES : C.P. OMADA SECURITY LTD (REPRESENTED BY IRISH BUSINESS AND EMPLOYERS' CONFEDERATION) - AND - SERVICES INDUSTRIAL PROFESSIONAL TECHNICAL UNION DIVISION : Chairman: Ms Jenkinson Employer Member: Mr Murphy Worker Member: Mr Shanahan |
1. Proposed pay cut
BACKGROUND:
2. The case before the Court concerns a dispute between the Company and the Union in relation to a proposed cut in the pay of approximately 34 employees. The Company contends that there is an urgent need to implement the proposed 15% pay cut in order to offset the imminent threat of liquidation and to assist the Company in returning to profitability as soon as possible. The Union on behalf of its members is rejecting the Company's proposal and has put forward alternative proposals to the Company. The dispute could not be resolved at local level and was the subject of a Conciliation Conference under the auspices of the Labour Relations Commision. At Conciliation both parties agreed to engage in an independent third party review of the Company's finances. The review concluded with a report recommending that an estimated 9.7% immediate reduction in the Company's labour costs would be necessary for the Company to return to a breakeven point early next year. The Union did not accept the findings of the report and would not agree to the pay cut. A second Conciliation Conference was held, where the Union proposed the possibilities of a share option scheme or equity swap in return for a reduction in pay. The Company for a number of reasons rejected the Union's proposals and agreement was not reached.
The dispute was referred to the Labour Court on the 21st April, 2011 in accordance with Section 26(1) of the Industrial Relations Act, 1990. A Labour Court hearing took place on the 5th May, 2011.
UNION'S ARGUMENTS:
3. 1. The Union on behalf of its members maintains that every effort has been made to assist the Company in returning to a profitable state including the agreement to a pay deferral scheme where employees endured a 13.5% reduction in pay which was then repaid at a later stage.
2. Employees have already faced financial hardship as the pay deferral scheme forced a number of employees to borrow from financial institutions to cover any losses incurred while waiting to be reimbursed by the Company. A reduction in pay would have further financial implications for employees and their families.
3.The Union contends that the Company have rejectedoutright the proposal of a share option scheme or equity swap in return for a pay reduction without having explored or offered any other option other than to reduce pay.
COMPANY'S ARGUMENTS:
4. 1. The Company is in a critical financial position and a reduction in labour costs is required in order to remain viable in the immediate future.
2. The reduction in pay sought by the Company would greatly assist it in returning to profitability as well as increasing the possibility of attracting future investment.
3. The Company contends that the recommended pay reduction of 9.7%, if implemented, would allow the Company to return to a breakeven point, however, the Company is seeking a 15% pay cut to allow them to return to profitability.
RECOMMENDATION:
The issue before the Court concerns the Company’s proposal to reduce pay rates by 15% in order to avoid liquidation and to bring the Company back to profitability. In an attempt to address the Company’s difficulties the Union outlined for the Court the measures it has already taken to meet these difficulties which included a 13.5% pay deferral agreed in October up to December 2010 which was then paid back by the Company. The Union agreed to a further 13.5% pay deferral from February 2011 until 1st April 2011, and another pay deferral is currently ongoing.
The Company outlined its urgent serious financial circumstances to the Court and submitted that the survival of the Company was at stake. At an emergency Labour Relations Commission Conciliation Conference on 4th April 2011, it was agreed by both parties that an assessment of the Company’s financial position would be carried out by an independent assessor. That exercise found that the Company had a compelling and demonstrable need to reduce its labour costs by 9.7% in order to return to a breakeven situation. Accordingly, the Company sought a 15% reduction in pay rates in order to turn it around and return it to a position of some degree of profitability.
The Union, in accepting that the Company’s position was critical, and being mindful of the security of its members' future employment position, made a suggestion that the Company would introduce a share option or equity swap in exchange for a reduction in pay. However, the Company rejected this as an unworkable solution due to the necessity to attract investment.
The IBEC and ICTU Protocol for the Orderly Conduct of Industrial Relations and Local Bargaining in the Private Sector, agreed in 2010, makes it clear that the maximisation of sustainable employment is the most important objective to be secured in the economic downturn. The Company expressed its intention to ensure as far as possible the protection of employment of its workers and to that end sought to implement cost saving measures.
Having considered the position of both sides, the Court is of the view that the necessity for serious cost cutting measures has been independently verified and accordingly recommends that both sides should accept the findings of the report carried out by the independent assessor and the reductions in labour costs should be implemented with immediate effect. Furthermore, the Court recommends that the situation should be reviewed 12 months from the date of such payroll adjustments and, in the event of a return to profitability the Court recommends that the Company should engage with the Union with a view to assuring employees that it will rectify the conceded reductions in pay over a period of time as profitability improves.
Secondly, the Court recommends that the parties should enter into immediate discussions with a view to examining how other cost saving measures/efficiencies can be achieved to reduce the Company’s overall costs further. This matter should be treated as an urgent matter and should be completed within a period of three weeks from the date of this Recommendation.
The Court so recommends.
Signed on behalf of the Labour Court
Caroline Jenkinson
6th May 2011______________________
SCDeputy Chairman
NOTE
Enquiries concerning this Recommendation should be addressed to Sharon Cahill, Court Secretary.