Aer Lingus ‘insourcing’ deal includes ‘leave and return’ clause

An agreement between Aer Lingus and the Services, Industrial, Professional and Technical Union, brokered by the Labour Relations Commission in late November 2008, averted potential industrial action and may herald a new trend in industrial relations in Ireland. A key feature of the deal was an innovative ‘leave and return’ option, under which some 850 workers have chosen to take a lump sum and leave the company before returning on reduced pay and conditions.

Cost-cutting agreements reached

At the former national airline, Aer Lingus, trade union members of the Services, Industrial, Professional and Technical Union (SIPTU) have backed a cost reduction agreement – by an 80% majority – that includes a novel ‘leave and return’ option. This proposal will see a substantial number of workers departing on an attractive severance package, and returning in newly defined roles on lower pay and conditions.

The Aer Lingus/SIPTU agreement, which is to be registered with the Labour Court as a legally binding agreement, was brokered by the Labour Relations Commission (LRC) in late November 2008 and is based on the trade union’s own alternative to an earlier outsourcing plan proposed by the airline (IE0810039I). This initial management outsourcing plan would have involved 1,300 ground-based jobs ‘migrating’ to an alternative unionised service provider. The company guaranteed that the chosen provider would operate collective bargaining arrangements. However, the new ‘insourcing’ deal means that this option – and the ensuing trade union threat of strike action – has been averted.

The staff categories involved include baggage handlers, as well as clerical and catering staff; all of these workers are members of SIPTU. The agreement is part of an overall cost reduction plan that envisages total savings of €74 million, of which €50 million will be taken from labour costs.

Meanwhile, about 1,200 cabin crew – who are members of the Irish Municipal Public and Civil Trade Union (IMPACT) – reached a separate agreement, which includes new lower entry rates, 96 voluntary redundancies and changes in working conditions.

Reduced pay and conditions

Under the terms of the SIPTU deal, pay and conditions will be diminished for the majority of the employees concerned, although they will initially be cushioned by a once-off lump sum payment. They will also retain their current defined benefit pension entitlements; defined benefit pensions grant a guaranteed sum on retirement – unlike defined contribution schemes, which do not offer this security.

The agreement was conditional on a sufficient number of SIPTU members opting for the ‘leave and return’ option, rather than two alternative choices. The first of these was voluntary redundancy, while the second alternative choice was known as the ‘stay as you are’ option, which simply means that those involved would remain on their existing terms and conditions but would not receive lump sum payments. The volunteers for redundancy have been offered attractive payments of between €30,000 (minimum) and up to a maximum of three years of salary, which could reach as high as €140,000.

According to the specialist magazine, Industrial Relations News (IRN), Aer Lingus needed a minimum of 50% of the 1,300 workers to opt for the ‘leave and return’ option in order for the company to secure its planned level of cost savings. This target was easily achieved, according to IRN, which revealed that the following choices were exercised by the 1,300 SIPTU members:

• 850 workers chose ‘leave and return’;

• 200 workers chose voluntary redundancy or early retirement;

• 230 chose ‘stay as your are’;

• 85 persons had less than the 18 months of service needed to benefit from the terms of the agreement.

Sufficient take-up required

In an introduction to the agreement, Aer Lingus had made it clear that the entire deal was ‘founded on the concept that ... a significant number of people will opt to leave the company on the basis of a return ... on the agreed new terms and conditions ...’ In other words, as noted, the agreement could only have worked for the company if enough people volunteered for the ‘leave and return’ option.

The pay terms of workers on new ‘leave and return’ rates will not be much different than those that would have prevailed at any alternative unionised service provider. By averting outsourcing the work to a service provider, however, SIPTU may be in a position to negotiate improvements in future years, if the airline returns to healthy profitability. It is conceivable that, at some stage, workers on the former terms and conditions will find themselves working beside a majority of colleagues who are on the new diminished terms and conditions. Trade union sources believe that this situation is certain to create pressure for parity of pay and conditions.

Brian Sheehan, IRN Publishing