The View from Stratis – The LEEF Report and the prospect of ‘Good Faith Engagement’
Organisations who apply a market based approach to remuneration and progressive HR practices should be exempted from ‘good faith engagement’ obligations.
The latest report by the Irish Fiscal Advisory Council (Ifac) 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 per cent 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 per cent of receipts are paid by just 10 organisations. Ifac estimated that two sectors – ICT and pharma-chem – accounted for more than 90 per cent 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.
There are impending changes to our ER system arising from the proposed approach to implementation of the EU Directive on Adequate Minimum Wages based on the Labour Employer Economic Forum (LEEF) Working Group Report which addressed the subject of collective bargaining. How these are addressed 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.
The LEEF Group Report avoided proposing 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 of 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 c 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.
Safeguards are Needed
There are a number of other significant concerns that Stratis considers will need to be addressed in drafting the legislation that will underpin 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 e.g., 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, and who has no intention of entering into a collective bargaining relationship, 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 confirms that in its promotion of good faith ‘engagement’ between parties, this is not to compel collective bargaining on the employer or 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 you are good for another 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 of a recent ICTU seminar on the LEEF proposals and the implementation of the EU Adequate Minimum Wages Directive indicate that unions intend to seek enhancements to any legislative framework to include pressing for access for unions 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 are fully exhausted in the first instance.
Ireland Must Support a Diversity of Engagement Models
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.
If you would like to talk about any of the above issues, please get in touch with any of our Partners.
‘Strategic Employment Relations’
T: +353 (0) 1 2936748
Disclaimer: The information in this article is for general guidance only and does not constitute legal or specific case 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.