Bank’s ongoing pension dispute has serious repercussions

A major dispute over a new pension scheme at the Bank of Ireland has raised serious issues for the recently negotiated national agreement, Towards 2016, as well as highlighting the role of the Labour Court, Ireland’s main dispute resolution body.

The pensions dispute between the Bank of Ireland and the Irish Bank Officials Association (IBOA) has seriously divided the National Implementation Body (NIB), a key edifice of Ireland’s social partnership system.

Under the current national agreement, [Towards 2016 – Ten-year framework social partnership agreement 2006–2015 (2.86Mb PDF)](http://www.taoiseach.gov.ie/attached_files/Pdf files/Towards2016PartnershipAgreement.pdf), the NIB has been given an enhanced role in dealing with pension disputes. This was one of the main selling points of Towards 2016 for the trade union side (IE0606019I).

The NIB, which currently has a number of pension disputes on its books (IE0610059I), referred the Bank of Ireland dispute to the Labour Court in November 2006, leaving the court with the difficult task of finding an acceptable compromise between the two sides (IE0611019I).

New ‘hybrid’ scheme

The dispute was triggered by Bank of Ireland’s decision to introduce a new ‘hybrid’ pension scheme for new employees from 1 October 2006. While this meant the retention of the longstanding defined benefit (DB) scheme for existing employees, the new scheme combines the DB system with elements of what is known as a defined contribution (DC) scheme. In DB schemes, as traditionally operated in Ireland, the employer carries the long-term financial risk, whereas in DC schemes this risk is carried by the employee.

In mid October 2006, the Labour Court asked both sides to maintain the status quo and desist from doing anything that would exacerbate the dispute while it was carrying out its investigation. As a result, the IBOA postponed its plan to hold a strike ballot. However, Bank of Ireland stated that, while it respected the court’s request, for contractual reasons it could do nothing to alter the fact that it had already implemented the new scheme from 1 October 2006. The bank explained that it had entered into a contractual legally binding agreement with those individuals who had been placed on the new hybrid scheme from that date.

Reactions of the social partners

IBOA claimed that the bank’s argument was untenable as no one would object to a new and better scheme, while the Irish Congress of Trade Unions (ICTU) declared that the bank had breached the Towards 2016 agreement.

The Irish Business and Employers Confederation (IBEC) supported Bank of Ireland’s need to alter its scheme and agreed with its interpretation of the court’s request not to alter the status quo. IBEC pointed to the current trend of DB schemes being closed to new entrants, and new arrangements being put in place to manage future liabilities.

The Prime Minister (Taoiseach), Bertie Ahern, also entered the fray. Speaking at a Labour Relations Commission (LRC) conference in October 2006, Mr Ahern noted that the ‘practice of some companies of reducing pension benefits is a tension point for workers’. Although careful not to mention any particular company by name, the Taoiseach commented that he did not think that ‘very profitable companies’ could argue that pension issues were affecting their viability.

Task of Labour Court

The Labour Court was being asked not only to address a highly complex pension problem, but to do so in a way that reconciled the different perspectives of the Bank of Ireland and IBOA, as well as the ICTU and IBEC at national level.

Although Labour Court recommendations are not binding, the vast majority of IBEC members usually abide by them. Trade union members, on the other hand, often reject these voluntary recommendations. That said, both sides respect the overall authority of the court in moral terms.

Recently, however, a number of high profile cases have involved major companies who have refused to attend the Labour Court, or who have rejected its recommendations. The Bank of Ireland, given its status as one of Ireland’s two largest banks – the other is Allied Irish Banks (AIB) – has a history of agreeing to Labour Court recommendations. Nonetheless, the management is determined to continue its plan, and could reject a recommendation involving any fundamental change in its new hybrid pension scheme. If this were to happen, it would represent another break with tradition, one that could undermine the long-term authority of the Labour Court.

The Labour Court, therefore, has to decide whether the bank and IBOA might be prepared to enter a process that could lead to an acceptable compromise. This process could involve both sides agreeing in advance that they would be willing to accept the outcome of the negotiations.

Brian Sheehan, IRN Publishing