Few employers using binding 'inability to pay' procedures

As of late November 2003, over 60 'inability to pay' cases had been notified to the Labour Relations Commission under the terms of Ireland's current national wage agreement, Sustaining Progress. Employers which claim that they are unable to pay the wage increases due under the agreement may bring a case under a procedure laid down in Sustaining Progress. Only seven of these cases have so far gone as far as the formal LRC-approved assessor stage of the process, which ultimately leads to a binding decision.

The current national agreement, Sustaining Progress (IE0304201N and IE0301209F) contains an 'inability to pay' clause, allowing employers not to pay all or some of the pay increases due under the agreement in circumstances where this would result in serious loss of competitiveness and employment. If an employer wishes to claim inability to pay, the first step is at local level, where a company that claims to be in competitive/financial difficulty is obliged to open its books to employee representatives. If this does not convince the trade union(s), then the matter can be referred to normal Labour Relations Commission (LRC) conciliation, and should this fail to resolve the dispute, then the LRC can call in an agreed independent assessor(s). These independent assessors, chosen from a panel of 12, examine the financial background of employers claiming inability to pay, under the auspices of the LRC. More controversially and innovatively, the procedure allows for referral of such cases to the Labour Court for a binding decision on whether or not the Sustaining Progress increases should be paid.

Trade unions had difficulties in 'selling' this binding process to their constituency, as it was seen as removing a traditional freedom to reject a Labour Court recommendation if necessary. However, employers also have reason to be wary of the procedures. Apart from removing their ultimate legal right to pay or not to pay, it also creates the prospect of leaving their financial affairs open to scrutiny from outsiders, such as assessors and trade unions. It is no accident that the clause was designed in a manner to encourage local agreement between the parties wherever possible.

Cases so far

Few inability to pay cases have yet tested the later stages of the new binding process under Sustaining Progress, with seven cases at the assessor stage in late November 2003. However, it is understood that there are over 60 cases waiting in the pipeline. This is significantly more employers than claimed inability to pay under previous two national agreements, which might be expected given the more difficult economic circumstances now obtaining. However, there had been speculation that many more employers would be using the new binding procedures, which has so far proved to be unfounded.

The large number of cases currently in the early stages of the process could indicate that in many companies both management and unions are not in a hurry to process a claim, preferring to wait and see how the new binding decision and assessment provisions in Sustaining Progress work out in practice, before committing themselves to what is unknown territory for the traditionally voluntarist Irish industrial relations scene. Most of the unionised private sector has 'start dates' for the award of pay increases in the first 12 months of a national agreement, with over 70% on the 'official' national start date or in the first six months. Therefore, the current figure of 60 companies bringing inability to pay claims, 10 months into Sustaining Progress, is unlikely to go above 100 over the course of the first year of the national pay deal. In a number of cases, a rephasing of the 7% Sustaining Progress pay increases has been agreed. In three of these - at NEC Semiconductors, Ericsson and Micam- the union involved is likely to seek the retention of the original start date for whatever increases come after the next 18 months of Sustaining Progress, even though some of the 7% may be awarded after this original start date.

Benchmark case

To date, no cases have gone all the way to the Labour Court for a binding decision. The first case to be referred for a Court hearing, under Section 1.10(iii) of the Sustaining Progress procedures was that of Wellman International Ltd, based in County Cavan. In late November 2003, the Court's decision had not yet been published. The case has attracted significant attention, as it represents a test or benchmark case for other inability to pay disputes. The parties in dispute have also been engaging in local talks, and it is understood that progress is being made.

Wellman International has been pleading inability to pay the terms of Sustaining Progress until such time as four trade unions agree to accept cost-offsetting measures, encompassing a survival plan involving productivity improvements and up to 67 voluntary redundancies. The company has maintained that its financial position is weak. For their part, the unions were unwilling to commence negotiations on the survival plan unless management agreed to pay the Sustaining Progress increases first. The parties were unable to reach agreement locally, and the dispute was referred to the LRC, and an independent assessor was appointed to compile a report on behalf of the LRC. A LRC conciliation hearing took place to discuss the assessor’s report on 17 September 2003, but no agreement was possible. The referral to the Court occurred following discord between the parties over the contents of the assessor’s report.


Few cases have been referred to the latter - and ultimately legally binding - stages of the 'inability to pay' procedures under Ireland’s current national wage agreement, Sustaining Progress. The controversy surrounding the Wellman International assessment report, the first to be made and therefore a benchmark case, may have served to discourage other employers from going down the same road. It is understood that in a number of other assessment cases, much shorter and less detailed reports are expected, possibly as a result of these difficulties. However, this may bring its own problems, as the party that comes out worse from a minimal assessor’s report may call for more transparency as to how the conclusions were reached. In some cases, employers have opened their books to the unions in direct talks, in preference to submitting them to an outside assessor. Further, a set of protocols has recently been established by the LRC in relation to assessors’ reports, to minimise the possibility of controversy in the future. (Tony Dobbins, IRN)

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