Industrial Relations 2016 - 22.5% Wage Increase

The Labour Court ruled recently on the first Industrial Relations dispute before them after the new Industrial Relations (Amendment) Act, 2015. The dispute was between Freshways Food Company (employer) and SIPTU (LRC21242) and it was about pay and conditions. The company employs 250 workers of whom 170 are general operatives, the company makes sandwiches. SIPTU represented 63 workers at the company. SIPTU had tried through collective bargaining to improve the pay and conditions of its members, but the company didn’t engage with the union as it was engaged in collective bargaining through a Staff Representative Group (SRG). The company saw that the Staff Representative Group was an accepted body within the statutory meaning of that expression and that the practice engaged in by the SRG constituted collective bargaining. The SRG negotiated a pay increase of 2.5% which was implemented in February 2016. However the Labour Court concluded that the SRG was not the collective bargaining partner as a once off occurrence cannot amount to practice. Meaning as they had only negotiated once this was not enough to get recognition of the SRG as a bargaining partner.

The court was furnished with detailed information on the terms and conditions applicable in other named employments in the Prepared Foods Sector. The Court sought agreement and obtained agreement from both parties that it should take this analysis into account without reconvening the hearing. All of this information has been fully considered by the Court in formulating its recommendation. In this case, all the comparator enterprises relied upon the Union are in what is classified as the Prepared Foods Sector. While the employer produces sandwiches others relied upon different types of prepared or convenience food for immediate consumption. Overall the Court was satisfied that the comparators cited are appropriate for the purpose of the exercise in which the court is engaged.

Recommendation of the Labour Court: The workers involved are paid now €9.38 per hour. The Court recommends that they will receive an increase as of 1^st September 2016 of 70 cent per hour, a further increase as of 1^st June 2017 of 70 cent per hour and finally an increase of 72 cent per hour as of 1^st January 2018. This is a total increase of €2.12 to €11.50 over 16 months which is an increase of 22.5%! The Court also recommended a sick pay scheme providing for 10 days sick leave on full pay less social welfare entitlements.

It is important that employers take note of these recommendations of the Labour Court and they are warned that if unions want to get bargaining rights they will go to the Labour Court, where their grievances regarding pay are taken very seriously!

Taking all of this into consideration I have to make a number of observations: -

The first observation is regarding not allowing the Staff Representative Group to negotiate on behalf of the employees as only one bargaining had happened and the law was plural, meaning that more than one bargaining had to have happened to get recognition. You need to consider that the SRG was elected by all employees and the union only represented 63 employees, which was 25% of the total workforce or 37% of the general operators. One also needs to take into consideration that in the last eight years, since 2008, hardly any wage negotiations took place and if they took place it was more about wage reductions than wage increases. The owner had acquired the business in 2013 by way of management buyout. Now if they had negotiated a wage reduction with the SRG then according to the Labour Court all would be well, as they then had negotiated twice and then the SRG would be recognised. I would consider the Labour Court recommendation harsh for quoting the law to rule out the SRG, but missing the meaning of the law.  

Second issue is that the Labour Court went for comparators, which in itself is good practice. However, as the comparators were brought forward only by the union, they knew well which comparators to use and which not. It was naive of the company to agree with this. You could argue that the employees (sandwich makers) were mostly unskilled labour, which some of the comparators weren’t. I would say the wrong comparator was used. A couple of years ago you could use the Catering JLC as the comparator. I would find that this would be a better comparator. However as that comparator was found to be unconstitutional you then might use a similar, reinstated ERO, which is Contract Cleaning, with a similar skill set. The wages for Contract Cleaning were set in October 2015 at €9.75 per hour €1.75 less than what the Labour Court recommended. The recommendation of the Labour Court is the same as the proposed Living Wage which is €11.50 per hour. Is that a coincidence or a statement of intent of the Labour Court? And should the Labour Court act on this before the Government makes a decision on the Living Wage? Furthermore what I understand from the case, as written down by the Labour Court, the company didn’t involve employers’ organisations or IR specialists to guide them through the process of the Labour Court with the result they didn’t present their case as well as could be possible

Thirdly the use of the Labour Court in bringing in individual companies to negotiate pay and conditions is basically unfair. If you are unlucky to be brought forward to the Labour Court to negotiate pay and conditions you could, as in this case, be unlucky, resulting in a considerable increase in the wage bill, which will affect your competitiveness. Or you could be lucky and be missed by the unions and not brought before the Labour Court and be very competitive! The only way to resolve this is by sectorial agreements which set pay and conditions for an industrial sector. All employers and Unions have to come to an acceptable agreement and if they can’t then there might be a role for the Labour Court. But at least the outcome is fair and the same for everybody in the industry, such an approach is successfully used in other EU countries.

The new Industrial Relations (Amendment) Act, 2015 is going to be an interesting exercise in Industrial Relations for the coming years and especially with the Labour Court interpreting it in an employee ‘friendly’ manner.

In all one can only say: Employers be aware!