INDUSTRIAL RELATIONS ACTS, 1946 TO 1990
SECTION 26(1), INDUSTRIAL RELATIONS ACT, 1990
(REPRESENTED BY IRISH BUSINESS AND EMPLOYERS' CONFEDERATION)
- AND -
AMALGAMATED TRANSPORT AND GENERAL WORKERS' UNION/
1. (1) Redundancy terms of 6 weeks' pay per year of service plus statutory entitlements
(2) Reduction in proposed number of redundancies (316).
2. The Company is part of the KeyTronic Corporation which has its headquarters in Spokane, Washington State, and which has 3 manufacturing facilities, one each in New Mexico, Mexico and Dundalk, Ireland. The Dundalk site, which opened in 1985, manufactures computer keyboards for the European market, employing a staff of 391. In mid-May, 1996, the Company announced that it was to transfer the manufacturing part of its Dundalk operation to Mexico whilst retaining a sales/marketing/distribution facility in Dundalk, to service the European market. The staff would, accordingly, be reduced to 75, resulting in the redundancy of 280 full-time and 36 part-time workers. Unprofitability due to price erosion, technology advancement elsewhere, and high labour costs are cited as the reasons for the rationalisation of the Dundalk plant.
The Company has offered compensation comprising 1.25 weeks' per year of service, plus statutory entitlements, with a lump sum for employees with less than 2 years' service. The Union side is seeking compensation of 6 weeks' pay per year of service, plus statutory entitlements. The Company claims that it is not in a position to provide funding for the compensation being sought.
Although the Company has sold its assembly shop and some machinery, raising £1.2m, £.5m had to be repaid to the IDA and a further £.4m will be spent in transporting machinery to the Mexican facility and in adapting the existing plant for the new operation. Should the cost of the redundancy package be too high, the American parent-company might move its operation to mainland Europe where virtually all its European customers are based. Such a move would generate considerable savings on transport costs, although, by withdrawing entirely from Dundalk, the Company would incur substantial further fines from the IDA. Additionally, the dispute regarding redundancy terms could jeopardise the Company's plans to move machinery to Mexico and to put in place machinery for the new operation, operations which have to take place as a matter of urgency.
The Union side was dissatisfied with the Company's handling of the rationalisation and with the degree of consultation with worker representatives, e.g., that deadlines had been set without prior consultation. A more realistic approach was sought from the Company, given the problems that would face redundant staff seeking employment elsewhere, and the area's high unemployment profile.
The dispute was the subject of a conciliation conference under the auspices of the Labour Relations Commission, at which agreement was not reached. The dispute was referred to the Labour Court, on the 5th of June, 1996, in accordance with Section 26(1) of the Industrial Relations Act, 1990. The Court investigated the dispute on the 12th of June, 1996.
3. 1. Competition and technological advances in a price-driven market were the critical factors forcing the Corporation's decision to close its manufacturing operation in Dundalk. This decision was only taken when it had been proven that, despite everyone's best efforts within the Company, manufacturing in Ireland was no longer competitive.
2. Alternatives to closure were considered and aside from the immediate cost of redundancies, the Corporation has also spent a large amount of money supporting its Dundalk operation while its options were being explored. The Company has also absorbed the costs of selling buildings and machinery below their true value to assist the IDA locate and start-up a replacement industry (EPC). While this has affected the amount of money available to fund a redundancy settlement, it has also assisted in the introduction of a company that can replace jobs in the area.
3. It is the Company's intention to maintain approximately 75 jobs in the new localisation facility. This will be influenced and affected by the need to move smoothly into the refurbished moulding plant building on its existing site. This move and the operation of EPC will be dependant upon the moving of moulding machines out of this building in mid-June. The future work in Dundalk will be dependant upon keyboards being supplied from Mexico, using these moulding machines, which will have to be shipped and commissioned quickly to ensure supply to the Dundalk operation.
4. The Company acknowledges that there is a fine balance to be found, amongst the complex issues surrounding this closure, to ensure long term success. This extends beyond the obvious difficulties in negotiating an acceptable redundancy package.
These difficulties are being compounded by the fact that, currently, productivity has dropped significantly within the plant, and this is an issue which must also be addressed.
5. The size of the redundancy package that is available from the Company, unfortunately, has to be governed by harsh and fixed economic parameters.
The Company has only the funds available to it, arising from the sale of assets (details supplied). Borrowing will have to be used to fund any further increase in this offer and the Company's ability to borrow is externally limited: the Corporation is small, it has considerable debts and it is not making profits. It will not and cannot, borrow extensively as this may jeopardise the entire Corporation.
6. The new localisation facility proposed will have a size and structure dictated by the business and customer demand. It is estimated that this operation will support 75 people in total. An outline of this has already been given to staff. While the Company is willing to review this, it has to be re-stated that the number of jobs retained will be determined by customer demand and competitive considerations and that the facility is already at a geographical disadvantage.
UNION/WORKS COUNCIL'S ARGUMENTS.
4. 1. The transfer is being implemented by the Company as a means of enhancing its profit-margins, at the expense of the workforce, on the pretext of so-called commercial realities.
2. It is of little comfort to those being made redundant that the Company and the IDA had been in discussions over a long period prior to the formal announcement by the Company of its intention to address its commercial needs and to accommodate new commercial activity, without any consultation with the workforce or its representatives.
3. The prospect of new jobs on the site, where staff once derived their livelihoods, gives no guarantee from Company or State that they will obtain further employment, especially in an area which is recognised as an unemployment blackspot.
4. Long-service employees who will have the option of remaining in employment with the Company will be faced with a changed work environment, with implications for future terms and conditions. Those staff also face the future uncertainty of the Company's future intentions, in view of its approach to current difficulties.
5. This is not an enterprise that has failed. It is a company that has every intention of recovering depleted margins and, accordingly, it must accept its obligations to its staff, some of whom have heavy financial commitments to lending agencies or who have contracts, some of which were secured with the assistance of management who verified their permanent employment status.
6. The Company has advised that it has financial covenants with lending agencies in the United States which, therefore, cannot be approached to finance redundancies in Ireland. Additionally, the Company has indicated that the new jobs in the area will be jeopardised should the Company's plans, as proposed, not be accepted. None of these reasons are sufficient to excuse the Company from its obligations to its workforce.
7. Reassurance will be required by the workforce who retain their employment that any agreed package will apply as a minimum benchmark for any redundancy negotiations that may have to take place in the future.
The evidence presented to the Court indicated that, despite the best efforts of the Company and the employees, competitive pressures have resulted in ongoing losses in the operation, resulting in the proposed restructured operation.
The Financial Structure and performance of the Company, combined with the basis of its commitment to continue to operate a business in Dundalk, adds to the difficulties in finding an acceptable position in this case.
Based on all the above factors, the Court makes the following recommendation:
(A) The Company to pay 3 weeks' pay per year of service, exclusive of the statutory entitlements.
(B) The Company to review the number of employees to be retained, as outlined in its Court submission.
This package to be subject to agreement from the employees to facilitate the smooth transition of plant and premises and the restoration of output levels.
Signed on behalf of the Labour Court
18th June, 1996______________________
Enquiries concerning this Recommendation should be addressed to Michael Keegan, Court Secretary.