The Implementation of The LEEF Report by Government in 2024 could Herald the End of Voluntarism in the Private Sector
In 2024, private sector employers are likely to see the most profound changes to our Industrial Relations System since the foundation of the State. The prospect of compulsory ‘Good Faith Engagement’ as an employment right, where collective bargaining does not already exist and the removal of the Employer discretion in participating in Joint Labour Committees or agreeing Employment Regulation Orders (ERO’s) will signal the end of the valued tradition of voluntarism for private sector employers in Ireland.
These two changes were among the four key recommendations for change set out by the High-level (LEEF) Working Group on Collective Bargaining & Industrial Relations which reported in 2022. Both reform proposals are being considered by the Attorney General for consideration if the changes may require a constitutional amendment ahead of the framing of enabling legislation which is expected in 2024.
Ironically, ‘voluntarism’ will remain available to unions in both the private and public sectors with unions largely free to decide whether to utilise or exhaust procedures prior to initiating a ballot for industrial action or proceeding with a campaign of Industrial Action.
There is no effective regulation of industrial action in Ireland other than the requirements to conduct a secret ballot of members who will be called upon to engage in industrial action, serve 7 days’ notice in writing on the Employer(s) and ensure that picketing is lawful /peaceful and at a place where the employer works or carries on business. This largely unregulated position will continue despite the most significant changes being imposed on employers.
Much of this change is attributed to the innocently labelled EU Directive on Adequate Minimum Wages. In pursuit of the policy objective of ensuring adequate minimum wages across the EU, the Directive will require all Member States to take measures to further increase the coverage of collective bargaining, and where such coverage is below 80%, provide for a framework of enabling conditions for collective bargaining, and establish an action plan to promote collective bargaining. The Directive has to be implemented by November 2024.
This is the culmination of a decade of successful campaigning by the European trade union movement though ETUC and the Irish Trade Union movement through its Congress who saw the solution to the challenge of the Irish constitutional protection of ‘freedom of association’ as requiring an EU level commitment that would ultimately trump our constitution.
Continued Investment by MNE’s Must be Protected
The report by the Irish Fiscal Advisory Council (Ifac) in June 2023 should serve as a stark reminder to politicians and policy makers that changes to our Employment Relations (ER) model need to be carefully framed so as not to undermine the attractiveness of Ireland as a location for continued investment by MNE’s. In 1984, corporation tax receipts comprised just 4% of tax revenue. However, by 2022, they accounted for a quarter of receipts, having overtaken VAT receipts in terms of their importance. Corporate tax receipts generated more than €15 billion for the Irish exchequer in 2021 and a record €22.6 billion last year. Revenue Commissioner data for 2022 shows 60% of receipts are paid by just 10 organisations. Ifac estimated that two sectors – ICT and pharma-chem – accounted for more than 90% of the tax paid by these 10 firms.
While there are many factors that inform decisions to locate or choose to further invest in Ireland, our key selling points include a strong track record of delivery, security and certainty of supply, and an engaged workforce that are willing to be fully flexible and agile once they are receiving an overall remuneration package that is fair and benchmarked against comparable employers in the market.
The changes to our ER system arising from the implementation of the LEEF Working Group Report, depending on how they are addressed in legislation, will undoubtedly impact decisions on future investment at existing facilities as there will be an elevated risk to certainty of supply and the potential to undermine confidence in a site.
Thresholds Must Be More Than ‘Meaningful’ and The Wider Organisation Should Have a Voice
The LEEF Group Report did not propose a strict percentage or numerical threshold for the level of membership required to trigger a Good Faith Engagement obligation but suggested the level of membership required, could be one that is ‘meaningful’ (leaving it to the Labour Court to develop, through any recommendations it might issue, guidance on this term).
By way of example, the LEEF Report cited the Employees (Provision of Information and Consultation) Act 2006 which contains a provision where the minimum requirement of 10 per cent of employees agree to the undertaking, to activate a request for a representative approach to information and consultation. Interestingly this is also "subject to the approval of the majority of employees to whom the direct involvement system applies."
The 2006 legislation provides that “a request to change from a system of direct involvement to a system of representation through employees’ representatives shall be regarded as having been approved by the employees, for whom the direct involvement system operates, where a majority of those employees who cast a preference are in favour of the change.” Any ballots would have to be confidential and capable of independent verification and accessible by all employees.
This clearly recognises that introducing a collective form of representation in one part of an organisation could have implications for the rest of the workforce and as such they were also entitled to have their views taken into account on the matter.
Under S.2(2) of the Industrial Relations (Amendment) Act 2001-2015 the Labour Court, in assessing the admissibility of a dispute, has typically interpreted the words ‘not insignificant’ when having regard to the total number of workers employed by the employer concerned in the grade, group or category to which the trade dispute concerned refers, as meaning circa. 25% of the grade, group or category.
It remains unclear which approach will be adopted in relation to the introduction of Good Faith Engagement requests in an organisation. However, if a low bar is set to activate a statutory ‘good faith’ engagement request, this will be a real concern to employers.
Such a fundamental change should not be the preserve of a minority within a specific grade, group or category.
Additional Safeguards are Needed
There are a number of other significant concerns that Stratis considers will need to be addressed in drafting the legislation to give effect to the changes proposed in the LEEF report:
1. Prior to activating a request for a GFE a trade union should have to provide prima facie evidence in support of their request and where these relate to concerns about remuneration, there should be an obligation on the union to show that overall remuneration is out of line with a basket of comparable organisations. Essentially this is the mechanism already available under the Industrial Relations (Amendment) Act 2001-2015 but a similar mechanism could be deployed as part of dealing with any contested admissibility.
2. Indeed, where the validity of a request is contested by the employer, the Labour Court could have a role in assessing this as part of any decision on the admissibility of the request. Ultimately, an organisation that applies a market competitive remuneration policy and progressive HR practices should be permitted to apply for an exemption from GFE obligations. This would be consistent with the general approach of the LEEF Report which helpfully confirmed that in the promotion of good faith ‘engagement’ between parties, this is not to compel collective bargaining on the employer or would require the parties to reach any outcomes or agreement.
3. Some have speculated that GFE only amounts to an obligation to have 1 meeting and the employer does not have to worry about another request for 3 years. This is hardly credible (unless it is expressly precluded in the Legislation) and assumes that a Union will not press for access to engage with those who they claim are union members for preparation and consultation purposes connected with the GFE request or make multiple GFE requests simultaneously and/or sequentially against the same employer. In fact, media reports indicate that unions intend to seek enhancements to any legislative framework to include pressing for access with a view to boosting member recruitment. Efforts to introduce compulsory measures on access, would be fiercely resisted by employers and especially so, where it is not their practice to engage in voluntary collective bargaining.
Therefore, in practical terms, where a Trade Union makes a GFE request on an Employer, the legislation should provide for a minimum 3 year window before any further GFE request can be submitted by any Trade Union against that Employer.
4. In our view, the legislation must also provide that existing internal dispute resolution or problem solving procedures normally used in the organisation for resolving issues of concern of the type being cited in pursuit of a GFE request, are fully exhausted in the first instance.
Direct Engagement is also Legitimate
Certain groups of workers may feel they are better served by the collective protection of a Trade Union in particular circumstances. Indeed, the important role and function of trade unions in society and at enterprise level is fully acknowledged where this operates through voluntary collective bargaining. However, our workplace relations system also needs to acknowledge that where employers are implementing progressive HR practices with market based and competitive remuneration, they should not face any obligation to engage in a collective model of representation.
There is a real and growing concern amongst multinational employers that unless there are proper safeguards for employers, the introduction of ‘good faith’ engagement as a new procedural option for trade unions could be seriously abused and risk leading to a significant dislocation of businesses with sophisticated direct engagement models including many in the FDI sector. These have been a cornerstone of enabling investment in Ireland, building confidence, and creating certainty in a sites ability to deliver on its commitments to customers.
An engaged workforce is a source of competitive advantage for any organisation. Most employees expect high levels of engagement and will not be motivated to work in an environment where this is a passing commitment. This can be achieved through a variety of different models, and only one of which involves unionised voluntary collective bargaining.
Too often our regulatory system ignores the legitimacy of the direct engagement model which is practised by most private sector employers. As Government considers its response to the LEEF Report it would be well advised to give serious consideration to the potential impact of poorly drafted legislation and its unintended consequences that does not address the genuine concerns of employers including those in key sectors that are critical to our continued economic success and capacity to fund the provision of Public Services and general infrastructure.
Stratis will be continuing to assess the key issues arising from the implementation of the High Level (LEEF) Working Group recommendations. If you would like to talk to us about any of these issues, or about engaging your people through the period ahead, please get in touch with any of our Partners.
Disclaimer: The information in this article is for practical guidance only and does not constitute legal or case specific advice. The answers to specific situations will vary depending on the circumstances of each case. This is not a substitute for specific professional advice relevant to individual circumstances facing your business.