Labour Court Recommendation
Irish Continental Group PLC
14 November 2005
IRISH CONTINENTAL GROUP
STOCK EXCHANGE ANNOUNCEMENT
Irish Continental Group Plc confirms that its subsidiary Irish Ferries has
today received the Recommendations of the Irish Labour Court in relation to the
cost reduction programme announced to staff on its Irish Sea vessels on
September 16th . This cost reduction programme envisages the outsourcing of
crewing on the three Irish Sea vessels at international terms and conditions.
90% of staff elected to accept the voluntary severance package on offer. The
background to this cost reduction programme is set out in a media statement
dated 3rd November 2005 a copy of which is set out in Appendix 1.
There are two separate Labour Court Recommendations, one in respect of each of
the unions involved, SIPTU ( approximately 220 members ) , and The Seamen's
Union of Ireland. ( 'SUI' , approximately 323 members). :
In relation to SIPTU the Recommendation is as follows ' the Court recommends
that the company continue to honour the Agreement of 2004 and that the parties
resume negotiations on such modifications in its terms as are necessary in order
to address the changes in circumstances which have occurred since its conclusion
' . ( The Agreement of 2004 expires in mid 2007. The full text is at Appendix
2.)
In relation to the SUI the court recommended that 'the claim (of the SUI ) .. (
that those of its members who wish to remain with the company retain their
existing rates of pay and conditions ) be conceded' The full text is at
Appendix 3.
Irish Ferries considers that these Recommendations are incapable of acceptance
and implementation given that the Company cannot incur the substantial cost of
accommodating the overwhelming majority ( 90% ) of staff seeking to avail of
the voluntary severance package on offer without clear prior knowledge of an
acceptable cost of replacement staff.
Irish Ferries is facing unprecedented adverse trading conditions. At current
rates, fuel costs will increase by 85% from Euro 13 million in 2004 to more
than Euro 24 million in 2006. The car tourism market is in decline ( Irish
Ferries car carryings on the Irish Sea were down 12 % in October versus October
2004 while foot and coach passengers were down 21%). Freight , which represents
one third of Irish Ferries revenue, was up 5% in the same period but this is
materially outweighed by the decline in tourism . Our labour costs are
substantially higher than those of our competitors who use outsourced agency
crew. Unless the company takes action to reduce its labour costs via a
substantial voluntary severance and outsourcing programme the outlook for
Irish Ferries in 2006 and beyond is for a material reduction in earnings.
14 November 2005
Appendix 1 Media Statement of 3rd November 2005
Appendix 2 Labour Court Recommendation 18389
Appendix 3 Labour Court Recommendation 18390
APPENDIX 1
MEDIA STATEMENT
Irish Ferries responds to SIPTU march -
'We have no choice - changes must be made'
Irish Ferries understands the concerns being expressed by Unions at today's
march to Dail Eireann, in particular as they relate to the economy as a whole
and to developments taking place at EU level. However the Irish Ferries case is
one that is unique in the Irish context and should be viewed as such.
Irish Ferries is a company struggling to compete with a domestic cost base which
is wholly out of line with its international competitors in the shipping sector.
Rather than accepting that this cost base is impossible to sustain, the Unions
have spent years using every possible means to block, stall and prevent
necessary change.
Time has now run out for Irish Ferries. Change is needed now to bring the
company's cost base into line with its sea competitors, allow it to compete with
low-cost airlines and ensure a future for the company.
The following are the facts relating to Irish Ferries' market, the environment
in which the company is competing and the efforts which it has made with the
Unions in its attempts to become competitive :
The market for Car Ferries is in decline
• The number of people using ferries is down by over 10% in the last 2 years.
Increased competition from low-cost airlines is the main reason for this
decline.
• Many ferry routes have closed in the last year including :
- Irish Sea Express ( Dublin / Liverpool ) closed last month with the
loss of 150 jobs.
- P&O Ferries closed 5 routes with 1,200 redundancies. Routes closed
included Dublin / Mostyn, Dublin / Cherbourg and Rosslare / Cherbourg.
- Seacat closed Dublin / Liverpool and Belfast / Troon.
95% of competitors already do what Irish Ferries is proposing
• 95 % of all ships using Republic of Ireland ports are manned by outsourced
crews.
• In February 2005, the Labour Court stated 'the type of arrangements
proposed by the company are now commonplace within the shipping industry
internationally'.
For years, Irish Ferries has been trying to negotiate change
• Irish Ferries' crewing costs have been out of line with all of its
competitors for many years. In July, a Government agency, the Irish
Maritime Development Office, stated 'Irish seafarers ... are between 50-60%
more expensive on a positional basis than other seafarers'.
• Over the last 3 years, Irish Ferries has attended 40 meetings at the Labour
Relations Commission, the Labour Court and the National Implementation
Body in efforts to agree change.
• Projections confirm that, without change, Irish Ferries will be loss making
by the end of 2007. These projections have been independently audited.
Outsourcing is the only realistic option
• Despite having all of this information presented to them, the Unions have
refused to accept the seriousness of the situation.
• Both SIPTU and the Seamen's Union of Ireland have argued that the necessary
savings being sought were unacceptable yet neither produced any workable
solution.
• Having failed to find any realistic alternative through negotiations with
the Unions, Irish Ferries sees outsourcing as the only way to achieve the
level of savings that the company requires.
Irish Ferries crew are being offered a very generous package
• Recognising the scale of the change that would be required, and the long
service of the staff involved, a generous voluntary redundancy package has
been offered. For those who wish to stay, compensation for change will also
be paid.
• Over 90% of the crew concerned have already applied for this redundancy
package. Significant numbers will leave with payments of over €100,000 and
some up to €300,000.
Outsourcing arrangements
• Like their competitors, Irish Ferries proposes to contract with a reputable
international agency to provide services for its ships'operations. All
services will be provided by EU citizens only.
• Pay and conditions will be at, or above, published International Transport
Federation (of which SIPTU is an affiliate union) rates.
• Given that all will live on-board with accommodation, food, travel and
other living expenses paid for, coupled with favourable income tax
treatment, even the lowest paid will be financially better off than those
working and living in Ireland for the minimum wage.
'Only by making these changes can we compete with low cost carriers, protect
the jobs of our remaining 250 employees and ensure a future for the company.'
Eamonn Rothwell, Chief Executive.
END
3rd November 2005 : 15.00 hrs
APPENDIX 2
THE LABOUR COURT AN CHUIRT OIBREACHAIS
TOM JOHNSON HOUSE TEACH THOMAS MAC SEAIN
HADDINGTON ROAD BOTHAIR HADDINGTON
DUBLIN 4 BAILE ATHA CLIATH 4
TEL : (01) 613 6666 E-MAIL: INFO@LABOURCOURT.IE
FAX : (01) 613 6667 WEBSITE : WWW.LABOURCOURT.IE
CD/05/1015 RECOMMENDATION NO. LCR 18389
INDUSTRIAL RELATIONS ACTS, 1946 TO 2004
SECTION 26(1) INDUSTRIAL RELATIONS ACT, 1990
PARTIES: IRISH FERRIES
-AND-
SERVICES INDUSTRIAL PROFESSIONAL TECHNICAL UNION
DIVISION:
Chairman.: Mr Duffy
Employer Member: Mr Doherty
Worker Member : Mr Nash
SUBJECT:
1. Company's Irish Sea Review.
BACKGROUND:
2. The dispute before the Court arises from Company's
proposals, (Irish Sea Review) to outsource labour on its Irish sea vessels. In
2004 an agreement was concluded between the Company and the Union in relation to
the pay and terms and conditions of its members who are employed as Officers and
Ratings on the ships. This agreement, which would give the Company large savings
per annum, is due to expire in 2007. The Company subsequently put forward
proposals to staff, which would involve the manning of its vessels with
agency-supplied crew. Staff could remain as Company employees on varied
(reduced) pay and conditions, which the Union contends is in breach of the
agreement. The Company contends that Clause 19 of the agreement allows it to
make amendments to the original agreement: 'The Company retains the right,
subject to economic competitive threats, to seek to amend the Agreement when
appropriate, in accordance with relent provisions of the Collective Agreement'.
The Union rejects the Company's contention.
The dispute could not be resolved at local level and was the subject of a
Conciliation Conference under the auspices of the Labour Relations Commission.
As agreement was not reached, the dispute was referred to the Labour Court on
the 21st October, 2005, in accordance with Section 26(1) of the Industrial
Relations Act, 1990. A Labour Court hearing took place on the 7th November,
2005, the earliest date suitable to the parties.
UNION'S ARGUMENTS
3. 1. The parties are currently less than halfway through a three
year agreement.
This agreement should continue and any variation of that agreement should be the
subject of discussions and must be mutually agreed between the parties. The
Union has always been willing to engage with the Company for further cost
reductions if required.
2. The Union showed its willingness to co-operate by agreeing to the
appointment of independent assessors to deal with the issue. Normally it would
be expected that the parties would be willing to accept the advice of the
assessors and work to resolve the issues. In this case the Company has embarked
on its plan to replace Irish seafarers before assessors had issued their final
report.
3. The Union is requesting the Court to rule on the interpretation of the
final clause of the Registered Employment Agreement and that the Company
complies with the terms of the Benchmarking Agreement and use the procedures set
out in the Comprehensive agreement to agree further change if required.
COMPANY'S ARGUMENTS
4. 1. The economic and competitive case is compelling for the
changes the Company
requires to make if it is to continue to run vessels successfully on both the
Irish Sea and Continental Routes, especially as the Unions cannot provide the
necessary cost reductions of €l5 Million per annum by means other than those
proposed by the Company.
2. The Company must be allowed to compete on a level playing field with
its indigenous and other competitor companies, all of which have lesser pay
costs, ratios and leave than Irish Ferries have. The Unions threats of
Industrial Action actually worsen the situation for both the Company and the
Seafarers, its own members.
3. There is nothing illegal in the Company's proposals. The proposals
represent the norm in the maritime industry e.g 95% of vessels into and out of
Dublin Port are outsourced. The only real choices available are those presented
by the Company. A fudge or a half-way house outcome will not work and cannot be
acceptable given the fiduciary responsibilities which must be discharged by the
Board of the Company.
RECOMMENDATION
Both parties made detailed and lengthy submissions to the Court in which they
provided comprehensive information on all aspects of their respective positions.
The Court has fully considered all of the information with which it was provided
and has carefully evaluated the submissions made by the parties in formulating
this recommendation.
In June, 2004, the parties concluded a collective agreement dealing with the pay
and conditions of employment of the categories of employees associated with the
present claims. That agreement was for three years duration and is due to expire
in June 2007. The net issue for consideration in this referral is whether,
having regard to all of the circumstances relied upon by the Company, that
Agreement should now be terminated or whether the parties should continue to be
bound by its terms for the remaining part of its duration.
Clause 19 of the Agreement did leave open the possibility of a review. This
clause provides as follows:
'The Company retains the right, subject to economic and competitive threats, to
seek to amend the Agreement when appropriate, in accordance with relent
provisions of the Collective Agreement'.
Moreover, in LCR18116 the Court recommended that the parties conduct a joint
review of the Irish Sea service, involving independent consultants. That review
has since been undertaken but has not resulted in agreement between the parties.
However, the proposals now put forward by the Company go significantly further
than merely seeking to amend or review the Agreement and if implemented would
amount to its complete abrogation.
During the currency of any collective agreement circumstances may change which
makes its terms more or less attractive, to one or other of the parties, than
was originally anticipated. Nevertheless this could not relieve either party
from the obligation to honour the agreement for its duration or until it is
voluntarily renegotiated. Were it otherwise the conduct of orderly industrial
relations would be made significantly more difficult.
Having regard to all the circumstances of this case the Court is not convinced
that the Company has made out a sufficiently compelling case to justify a
unilateral termination of its agreement with the Union. Nor is the Court
satisfied that all possibilities of renegotiating aspects of the Agreement to
address the issues of current concern to the Company have been exhausted.
Accordingly, the Court recommends that the Company continue to honour the
Agreement of 2004 and that the parties resume negotiations on such modifications
in its terms as are necessary in order to address the changes in circumstances
which have occurred since its conclusion.
Finally, reference was made in the course of the hearing to the Registered
Employment Agreement for Ships Officers. The terms of that Agreement are clear
and are binding on both sides. The Court would strongly urge both parties to
adhere strictly to the terms of that agreement in all their dealings with each
other in the future.
Signed on behalf of the Labour Court
Kevin Duffy
11th November, 2005 ______________________
JO'C Chairman
NOTE
Enquiries concerning this Recommendation should be addressed to Joanne O'Connor,
Court Secretary.
APPENDIX 3
THE LABOUR COURT AN CHUIRT OIBREACHAIS
TOM JOHNSON HOUSE TEACH THOMAS MAC SEAIN
HADDINGTON ROAD BOTHAIR HADDINGTON
DUBLIN 4 BAILE ATHA CLIATH 4
TEL : (01) 613 6666 E-MAIL: INFO@LABOURCOURT.IE
FAX : (01) 613 6667 WEBSITE : WWW.LABOURCOURT.IE
CD/05/1016 RECOMMENDATION NO. LCR 18390
INDUSTRIAL RELATIONS ACTS, 1946 TO 2004
SECTION 26(1). INDUSTRIAL RELATIONS ACT, 1990
PARTIES:
IRISH FERRIES
-AND-
SEAMEN'S UNION OF IRELAND
DIVISION:
Chairman : Mr Duffy
Employer Member : Mr Doherty
Worker Member : Mr Nash
SUBJECT:
1. Company's Irish Sea Review
BACKGROUND:
2. The dispute before the Court arises from the Company's proposals,
(Irish Sea Review) to outsource labour on its Irish sea vessels The Union is
seeking that the small number of members who wish to remain in their positions
with the Company, be entitled to do so on a Red-Circled basis. The Company
contends that the current business model and cost base on the Irish sea, if
continued, will see the Company making losses by the end of 2007.
The dispute could not be resolved at local level and was the subject of a
Conciliation Conference under the auspices of the Labour Relations Commission.
As agreement was not reached, the dispute was referred to the Labour Court on
the 21st October,2005, in accordance with Section 26(1) of the Industrial
Relations Act, 1990. A Labour Court hearing took place on the 7th November,
2005, the earliest date suitable to the parties.
UNION'S ARGUMENTS
3. 1. The Company is not being asked to keep all its staff but to allow the
small number who wish to remain with the Company to do so while retaining their
current pay and terms and conditions of employment.
COMPANY' S ARGUMENTS
4. 1. Profits and RoCE (Return on Capital Employed) based on the
current business
model are trending downwards from 7.4% in 2003 to 5% in 2005, and to 1.2% at end
of season 2007. The current and future negative returns do not meet the cost of
capital. The rate of profitability necessary to allow the business to recover
and renew its assets (ships) is 15% RoCE per annum. Corrective action must be
taken immediately to reduce the seafaring cost base to match and beat the
Company's major competitors and to use the savings to compensate staff who wish
to leave voluntarily. Enabling price reductions to be made to attract and
recover business, thus boosting profitability and saving the business.
RECOMMENDATION
It is noted that the only matter on which the Union wish the Court to recommend
is its claim that those of its members who wish to remain with the Company
retain their existing rates of pay and conditions of employment. In its
presentation the Union assured the Court that the numbers likely to be affected
by its claim is minimal in overall terms.
In these circumstances the Court recommends that this claim be conceded.
Signed on behalf of the Labour Court
Kevin Duffy
11th November, 2005 ______________________
JO'C Chairman
NOTE
Enquiries concerning this Recommendation should be addressed to Joanne O'Connor,
Court Secretary.
This information is provided by RNS
The company news service from the London Stock Exchange
Latest directors dealings
- 1 day ago Savannah Energy
- 1 day ago Buccaneer Energy PLC
- 1 day ago Savannah Energy
- 1 day ago Carclo
- 1 day ago Schroder Japan Growth Fund