Labour Court issues recommendation under amended industrial relations legislation

The Labour Court recently issued its first recommendation under the Industrial Relations (Amendment) Act 2015 (the Act). The recommendation, which can become legally binding on the employer, will undoubtedly be scrutinised closely by unions and employers given the far reaching powers of the Act. The Labour Court has the power under the Act to intervene in the employer/employee relationship by imposing binding terms and conditions of employment in circumstances where the pre-conditions are met, principally where it can be shown that employers do not engage in collective bargaining with a recognised trade union.

Speed Read - Key features of the Act
Please refer to our alerter dated 1 September 2015 for full details on the Act but by way of summary, it is a condition precedent to the ability of the Labour Court to exercise its jurisdiction under the Act that it is not the practice of the employer to engage in "collective bargaining". If an employer wishes to oust the Labour's Court's jurisdiction, then it must be able to show that it does engage in "collective bargaining" with an "excepted body" or trade union. First, a court will look at whether an "excepted body" exists within the employer organisation. If not, any process subsequently engaged in with that employee group or body cannot constitute "collective bargaining".

The Act introduces a new definition of "collective bargaining" which states that it comprises of "voluntary engagements or negotiations between any employer or employers' organisations on the one hand and a trade union of workers or excepted body to which this Act applies on the other with the object of reaching agreement regarding working conditions or terms of employment, or non-employment of workers." If negotiations between an employer and either a trade union or an "excepted body" fail to meet this legal bar then the engagement does not constitute "collective bargaining".

This is the first occasion that the Court has had the opportunity to consider the new legislative definitions.

The Issues

Did the parties collectively bargain?
In the Freshways case, the Court first considered whether it had jurisdiction to hear the dispute. The employers' evidence was that there was a staff representative group (SRG) in the company. This comprised of a group with representatives of management and employees. This group previously negotiated a pay increase and the employer submitted that the SRG was an "excepted body" within the meaning of the definition above and that the practice engaged in by the SRG constituted "collective bargaining". The court looked at two aspects of the new "collective bargaining" definition. It considered:

• Whether the SRG constituted an "excepted body"; and
   
• Whether the negotiations that took place within the SRG had the object of reaching agreement regarding the terms and conditions of employment.

"Excepted body"
The Court looked at the definition of "excepted body" and noted that for the purposes of the Act it means "a body which is independent and not under the domination and control of an employer or trade union of employers, all the members of which body are employed by the same employer and which carries on engagements or negotiations with the object of reaching agreement regarding the wages or other conditions of employment of its own members (but of no other employees)."
The definition above comprises a number of constituent elements:

• It must be independent and not under the control of the employer;
   
• The members of the employee body must be employed by the same employer; and
   
• It must carry on negotiations with a view to reaching agreement on the wages and conditions of employment of the members of the body representing their grade/category of workers and for no other person.

On the last point the Court found that the SRG does not conduct negotiations solely in respect of its own members alone, since the employer readily accepted that it purported to do so in respect of the generality of those employed by the employer. On those grounds alone it found that the SRG could not be an "excepted body".

The above was sufficient evidence to demonstrate that there was no "excepted body" in existence and to invoke the Labour Court's jurisdiction, however the Court did briefly consider whether there was any evidence to support the employer's proposition that it engaged in negotiation. It referenced the previous pay increase agreed within the SRG. However, the Court noted that the Act requires that an employer demonstrate that it is the "practice" to engage in "collective bargaining". A once off occurrence cannot amount to a practice. The use of the noun "practice" suggests something that is customary or the norm and therefore a once of or even ad hoc examples of engagement are unlikely to suffice to demonstrate the requisite level of negotiation as a "practice".

The dispute over terms and conditions of employment 
The union contented that the terms and conditions of employment of its members in respect of a number of matters (pay, rostered overtime, sick pay, annual leave, etc.) were less favourable in relation to comparable workers in similar employments. The recommendation is interesting because the concept of an appropriate comparator business or group of workers was examined by the Court.

To recap, the new Act allows the Court to consider the "totality of remuneration and conditions of employment" in both unionised and non-unionised employment. It limits the freedom of the Court to ignore the wider economic context. The new and wider definition encompasses non contractual matters such as security of employment, training opportunities and fringe benefits.

The Court noted that the guidance in the Act in relation to choosing an appropriate comparator for the business is somewhat limited. It is confined to identifying similarities in the type of work performed by the groups of workers. The Court clarified this somewhat by noting that regard should be had to such matters as the "general line of business pursued by the employer in dispute vis a vis those relied upon as comparators, the size of the undertakings and whether they are in competition with each other in the broad sense." The Court asked the question as to whether there is "elasticity of demand" for the goods produced or services provided by the enterprises concerned. It accepted the comparators cited here were appropriate as all comparators were part of the "Prepared Foods Sector".

The Court found on the facts that the totality of remuneration and conditions of employment of the workers concerned provided a lesser benefit than the totality of remuneration and conditions of employment of comparable workers in similar employment. The Court recommended increases to basic pay levels which will deliver a 21% pay increase over a three year period.

In making its recommendation the Court took into account the employer's financial and commercial circumstances. It sought to provide reasonable improvements in the totality of pay and conditions, which do not undermine the viability of the employer's business and the sustainability of the employment it maintains.

Takeaways

• Employers need to be able to show that it is the "practice" to engage in "collective bargaining" – the recommendation provides guidance that a one-off occurrence will not amount to a "practice" – there needs to be a repeated pattern to what constitutes "collective bargaining".
   
• Employers need to examine the make-up of any internal staff bodies to see if they will qualify as "excepted bodies". The narrow definition of "excepted bodies" means that many employee forums/staff representative bodies will not come within this definition. Employers may need to consider whether to place these bodies on a more formal footing such that they would meet the "excepted body" test.
   
• "Collective bargaining" must involve more than mere consultation – there has to be some form of negotiation or process with a view to reaching agreement on terms and conditions of employment.
   
• Where an employer does find itself the subject of a referral the new criteria broadening the comparator net to remuneration in both unionised and non-unionised and limiting the ability of a court to ignore the wider economic circumstance should provide some comfort to employers.
   
• The employer will have to give careful consideration however to the appropriate comparator business and ensure that the benchmarking data used is up to date, reliable and drawn from the appropriate comparator pool.

For more information please contact Sinead Grace or your usual contact on the employment team in A&L Goodbody Solicitors.

Date published: 28 June 2016