BEFORE THE ARBITRATOR In the matter of the arbitration of a Dispute between the Management of ALUWORKS (Gh) Ltd and Industrial and Commercial Workers Union (ICU) APPEARANCES: Management Mr. A. Poku-Acheampong-Solicitor/Secretary ICU Mr. Morgan Ayawine Principal Industrial Relations Officer (lCU) ARBITRATION AWARD INTRODUCTION The Management (hereinafter Management) of Aluworks and the Industrial and Commercial Workers' Union (ICU) had met 3 times at mediation to resolve a dispute without success with regard to management's intention to withdraw free fuel supply to some junior workers who own vehicles. Mr. Dominic Kwasi Owusu - Afriyie was appointed as the Sole Arbitrator by the NLC on being selected by the disputing parties. MEETINGS The board room of Aluworks was agreed upon by both parties for the hearings. The rules and regulations, secretary and other arrangements were also discussed and agreed upon by the parties. THE ISSUE The withdrawal of fuel supply to junior workers of Aluworks. MANAGEMENT'S SUBMISSION (Exhibit 1) In its submission management argued that since 1986 it had been providing free fuel, maintenance and kilometer allowances to junior workers who owned motor bikes. However with the passage of time, some junior workers started acquiring cars and this facility was extended to them A breakdown of the facility is as follows (a) Fuel allocation - 100 liters per employee with car per month (b) Maintenance allowance -¢ 250,000 per month (this amount is even paid for a vehicle temporarily off the road for repairs for a maximum period of three (3) months
(c) Kilometre Allowance ¢85.00 per kilometer (where the employee uses his/her car to perform official duty outside his/her place of work. Management argued that the grant of the facility was an administrative policy and not enshrined in the Collective Agreement 2 Motor Running: Expense Management argued again that for sometime now the company has consistently been spending over and above the budgeted figure for Motor Running Expenses. In the first half year of 2005 the company budgeted to spend ¢1,476 billion on motor running expense but actually spent ¢2,163 billion. By the end of 2005 the company had spent ¢4.6 billion as against a budgeted figure of ¢3.2 billion. The major component (65%-70%) was in fuel allocation to employees who commute to work in their own cars. It gave the following figures as the rate at which the fuel bill has been rising over the years
Year 2002 2003 2004 2005 3 Reduction Of Fuel Allocation
Total Amount ¢609,919 million ¢ 1, 225 billion ¢ 1, 534 billion ¢2,706 billion
As a means of reducing the motor running expense management decided to reduce the quantity of fuel allocated to all management and senior staff and withdraw completely the facility to some junior workers who enjoy it. Management stated that only 25% of the junior workforce enjoy this facility. Out of a workforce of 280 only 70 of them enjoy it. It further argued that that the provision of fuel to only 70 workers was inequitable and disincentive to the majority because two technicians on the same level and grade receive different remuneration because one has a car and the other does not. Management stated that the Company would save ¢ 1.4 billion annually if it were to reduce its fuel allocation 4 General Cost Reduction Exercise Management explained that the withdrawal of the free fuel to some junior workers and reduction of the allocation to both management and senior staff were all part of measures being taken to cut down costs in order to operate efficiently, remain in business and guarantee jobs to the employees. It further stated that the ever increasing cost of aluminum at London Market Exchange, the closure of Valco in 2003 (LME) and coupled with high cost of oil prices at the world market which are beyond its control have compelled it to take such measures. Again management explained that the general cost reduction exercise covered all aspects of the company's operations. Management disclosed that as a result of global sourcing, equipment, which was being purchased at $350,000.00, is now being acquired for $50,000.00 and similarly electric motors, which were formerly being rewound at 89000 Euro, were now being rewound for 17000.00 euros
5. Fleet of buses In its submission management said it has put in place a fleet of buses which convey the majority of the workers (75%) to and from work at a cost of ¢100 million per month and therefore the minority of the workforce (25%) should avail themselves of such services. 6 Labour costs Management further argued that it had become imperative to introduce these cost reduction exercise because of the declining fortunes of the company. While labour costs have been increasing the company's Profit After Tax and Dividends to shareholders have been decreasing. Continuing, management stated that while the Company registered a net interest expense of about ¢ 11,000.000.00 in 2002 the figure jumped to ¢7,970 billion in 2003 when Valco was shut down. 7 Saving jobs Management reiterated that the cost reduction exercise was to ensure the company's survival and job security for the employees. It emphasised that since the incorporation of Aluworks in 1985 it had kept faith and maintained its workforce of over 400 to date and outsourcing its canteen services in 2004 was the only exception when employees had to be laid off. Management decided to develop other strategies and synergies to be more efficient to better the lot of both employees and shareholders THE UNION'S SUBMISSION/DEFENCE AGAINST THE PROPOSED WITHDRAWAL OF FUEL AND MAINTENANCE ALLOWANCE EXHIBIT 2 The Union argued that the facility was negotiated upon and referred to minutes of The Standing Joint Negotiating Committee on 26th January, 1999 Brief Background This facility was negotiated during the lifetime of the Collective Agreement and both parties agreed as indicated in section (c) of Article 55 of the Collective Agreement whiles aspects of the facility (Fuel/ Maintenance Allowance) was to remain in the policy as mutually agreed upon by the Standing Negotiating Committee on 26th January, 1999. 1 Objective of the facility (a) The Union gave the following 4 reasons why the facility should be maintained The objective was to facilitate employees' punctual attendance to work as well as quick responses to emergency calls to work at odd times and the fact that such employees could by their own means of transport return home safely and conveniently when they close late.
(b) Apart from that, the employees feel a sense of dignity and motivation, which increases job satisfaction, and more importantly to ensure efficiency, effectiveness in the employees’ performance towards increased productivity.
(c) Third, to ensure equity amongst the three categories of staff (management, Senior and Junior staff) in the allocation of benefits drived from the collective efforts of the staff.
(d) And lastly, to enhance the corporate image of Aluworks as a company just as other companies practice in the country as part of modern management techniques. 2 REASONS FOR OBJECTION TO WITHDRAWAL OF THE FACILITY The Union advanced the following reasons and figures for its objection to the withdrawal of the facility - It was unfair to the junior staff since it violated Article 8 of the Collective Agreement and discriminatory in the worse form. - The total expenditure made on junior staff fuel/maintenance allowance was about 19% (¢ 412,470,000.00) of the total expenditure of 100% (¢2,163,000,000) which could not constitute a major factor in management's cost reduction exercise considering the quantum of amount that went to the junior staff. The union then submitted the following cost-benefit analysis
Cost benefit Analysis Total cost of fuel I car maint. Allow. 1st half year 2005 Cost of fuel junior staff (100 Its. @ ¢6,666 x 6mth) 75 Maintenance allowance (¢ 250,000 x 6mth) 75 Total Total expenditure on the junior staff I month =
= ¢ 2,163,000,000 = ¢ 299,970,000 = ¢ 112,500,000 = ¢ 412,470,000 for 6 month = ¢ 68,745,000 per month
Cost for hiring of AGATE TRANSPORT SERVICE (2005) Annual total cost of 4 buses - ¢ 1,192,920,000.00 Average cost of 1 bus I year - ¢ 298,230,000.00 A average cost 1 bus / month - ¢ 24,852,500.00 Average # of buses to convey 75 workers (22 seated) - 3.41 buses Average cost of hiring additional 3.41 buses I month - (3.41 buses x ¢ 24,852,500.00 - ¢ 84,747,025.00 x 6 months = ¢ 508, 482.15m)
Cost of hiring additional buses for the 75 workers -Cost of fuel / car Maint. Allow. For 75 workers -Different per month - Different for 6 months -
¢84,747,025.00 per month ¢ 68,745,000.00 per month ¢ 116,002,025.00 per month x 6 96,012,150.00
It further argued that economically the hiring of additional buses will cost more and therefore not advisable
3 Sacrifice The Union agued that monthly production levels which served as a monthly incentive to workers when achieved had been arbitrarily raised from 1667 MT. to 1875 MT. which makes it almost impossible for workers to achieve to earn the production incentives (reward). By so doing the workers are therefore sacrificing these production motivational incentives. a. Union further agued that it picked out and compromised on 10 articles during the recent negotiations to reach the current level of agreement, due to Management's argument of high cost of imported raw materials when Valco closed down. Affordability a. The Union stated that when Valco closed down, workers were enjoying the facility and fortunately, Valco is back fully, supplying metal at a relatively lower cost to Aluworks, and therefore the situation was being ameliorated. b. Production levels were going up thus impacting positively on profit margins. c. The Union disclosed despite management's claim that the company was in financial crises and that workers should sacrifice their existing benefits, new cars were being purchased to replace managers' cars, which were still fairly new gave the following car registration numbers and figures to support their argument Car reg. # GR3673X Honda civic Saloon costing - $20,000 Car reg. # GW885W Honda civic Saloon costing - $ 23,500 Car reg. # GR4731X Honda CVR 4 x 4 costing - $ 29,200 Car reg. # GR5214X Honda CVR 4 x 4 costing - $ 29,000 d. The Union provided the following figures and argued that dividends declared annually, since 2002 are quiet handsome considering the levels of figures and the percentage indicated below: -
2002 Profit after Tax Dividends declared % of Profit declared as Dividends Actual Dividends paid 2003 Profit after Tax Dividends declared % Profits declared as Dividends Actual Dividends paid 2004 Profit after Tax Dividends declared % of Profit declared as dividends Actual Dividends paid
¢ 2.9.353bn ¢ 25.006bn ¢85.19%* ¢ 31.258bn ¢ 18.456bn ¢ 16.669bn ¢ 90.32%* ¢ 20.836bn ¢ 20.532bn ¢ 18.755bn 91.34 % * ¢ 16.669bn
ISSUES
1) Administrative Policy - Management's defence that the provision of fuel/maintenance allowance was only an administrative policy and is not enshrined in the collective agreement is not tenable. Industrial relations thrives on past practices, custom, usage, conventions, laws, traditions, norms etc If the Company has been paying for facilities over the years to the junior workers, then it is deemed to be part of their conditions of the work. Again the payment of car maintenance and fuel allowance to employees is of general application on the industrial scene in Ghana and Aluworks cannot be exempted. However, the propriety of such payments to a fraction of the junior workers will be discussed later in this report. 2) Objective Of The Facility (1) both management and union agree that the objective is to ensure punctuality. There have been accusations and counteraccusations as regards punctuality. Management insists that some junior workers who own cars sometimes report to work late .On the other hand the union says that it is rather the company buses which sometimes report late to work. In view 'of the fact that neither party could produce any documentary evidence to support its claim I cannot make a fair judgment on the issue. 3) (ii) Dignity of the workers - The union's defence that the junior employees have a sense of dignity by owing cars is true. However their sense of dignity would not be compromised because they can still drive their cars at weekends, vacation days and off duty days. They will be the bona fide owners of the cars. 4) (iii) Equity- The union's defence that the payment of such allowance would ensure equity at the workplace is not tenable because the conditions of service for management staff, senior staff and junior workers differ in scope and character. The assignments, responsibilities and authority of these categories of employees differ. All junior workers aspire to get promotion to senior staff and eventually to the managerial grade. 5) Cost Of Hiring Agate Transport The union argued that hiring of bigger buses from Agate would not reduce costs as perceived by management. In its first submission the union presented figures (Exhibit 2) to support its claim. I find it difficult to understand why in its second submission it did not produce figures but dwelt on the so-called 'expensive' cars bought by management to replace old cars. Toyota, Honda and generally Japanese cars are quite standard vehicles, are both durable and economical to run as compared to Mercedes benz, BMW and other top of the range cars. In the absence of any documentary proof that management inflated the purchase prices of these cars I cannot uphold the union's position that they are expensive. Comparing and contrasting the prices of these cars with those bought by parliamentarians is flawed. Parliament bought nearly 200 vehicles and could have obtained favourable discounts as against only 4 vehicles purchased by Aluworks. 6) General Performance Of Aluworks - The union argued that the general performance of the company could afford it to maintain the facility (i)
However a newspaper clipping attached to the union's own final submission supports management position that the company is not in the best of times. The mixed operational and financial performance of the company has impacted negatively on dividends. Indeed dividend per share has dropped from ¢800,00 in 2000 to ¢500 per share for the 2005 financial year. (ii) Stock Market: though the company's stock has been described "as the best performing stock during the first half of 2006" it must be noted that the ¢ 10,000 per share in 2003 has dropped to the current 2006 trading at ¢6,740.00 per share. In keeping with prudent managerial principles and practices any decision by management to reduce cost and increase revenue to satisfy its publics:- (employees, shareholders, raw materials, machines and equipment, market etc) is in the right direction. Granted that the company had enough reserves to fund this facility, would it be proper to satisfy only 25% of the junior workforce to the exclusion of the remaining 75%? 7) Equity: - The union argued that the withdrawal of the facility would rather deepen the inequity in the system. Management stated that the payment of the facility was inequitable and a disincentive to the workers. The union does not seem to see anything fundamentally wrong or inequitable where two employees on the same level and grade receive different pay by virtue of Mr. A owning a car and Mr. B not owning one. What would have happened if the majority had decided to pressurize management to grant them loans to purchase their own cars? Or if they had privately acquired their own cars and boycotted the company's fleet of buses? I agree that the policy is discriminatory, inequitable, obnoxious, demotivating and counter productive. It contravenes Sections 10(b) and 68 of the Labour Act 2003, Act 651. Under part III Protection of Employment as regards the rights of a worker is it stated inter alia: 10 (b) ‘The rights of a worker include the right to receive equal pay for equal work without distinction of any kind’ while section 68 also states "every worker shall receive equal pay for equal work without distinction of any kind’. Do we allow a policy which is discriminating, inequitable and a contravention to the Labour law to operate? 8) 2.5% Salary Increase To Junior Workers: Though management has good intentions by offering 2.5% salary increase to mitigate the" loss" to be suffered by the minority if the work force, I agree with the union that the Standing Joint Negotiating Committee is the appropriate forum for such discussions. 9) Heat Allowance. Motorway Toll Etc should also be discussed by the Standing Joint Negotiating Committee. 10) Company's Buses: Management explained that the conditions of the company's buses were uneconomical to repair and run them and had therefore decided to auction them. OBSERVATIONS: article 35 on Transport of the Collective Agreement gives the express authority to the Company to provide transport to convey workers to and from work.
Indeed the wording is unambiguous: "In the interest of punctuality, maximum efficiency and productivity, the company shall provide transport to convey workers living within Accra/Tema Metropolis to and from work". It must be noted that management has kept faith with the majority of the workers who commute to and from work by providing buses. ARTICLE 55: on Loans gives the company discretionary powers to grant loans to employees who have served the company for three (3) years. The wording is also unambiguous "An employee who has served the company for three (3) years and above shall be eligible to apply for and mav (italics mine) be granted a loan in accordance with the existing loans policy. The following are types of loans that mav (italics mine) be granted a) Consumer Durables: Household Appliances: electrically, electronically or gas powered/operated b) Education loan: Applications should be supported with official bills for fees, books etc. c) Means of Transport: Employees to apply when needed with relevant pro-forma invoice for consideration. d) Paymer1t for Rent Advance The company is not compelled to give loans to the majority (75%) is the employees who will never enjoy car maintenance, fuel and kilometer allowance being enjoyed by the minority (25%) ARTICLE 8: The major argument advanced by the union is that the withdrawal of the facility will worsen the conditions of some of the junior workers Article 8, which is also unambiguous, is reproduced below RESPNSIBILITIES OF PARTIES TO THE CONTRACT: Both parties recognize that this Agreement imposes serious duties and responsibilities on the union as well as on the company. All disputes, difficulties and grievances arising between the parties concerning the terms of this agreement shall be resolved in accordance with the Grievance Procedure. Nothing in this agreement shall worsen any existing terms and conditions as agreed between two parties. Indeed this Article is supposed to cover all the junior workers and not a section of the workforce. Management has been alive to its responsibilities by providing buses for all the workers (cross-reference Article 35). It stands to reason that with management complying fully with Article 35 to commute the junior workers, their demands have been fully met and their conditions have not been worsened. The company can formulate policies, execute plans and programmes to set targets and modify, extend or cease operations. (Reference Part III. Section 8 on Protection of employment of the labour Act 2003, Act 651) Therefore any policy, plan or programme that seeks in good faith to increase efficiency, growth and profitability to ensure continuous operations is a step in the right direction. Management has argued that since the incorporation of Aluworks the only time it reduced staff was when the canteen was outsourced and these measures were being taken to save jobs and satisfy its publics.
the said Article (Article 55 c) does not include fuel and maintenance allowance (11). Again management defended its position by referring to the minutes of the Standing Joint Negotiation Committee (SJNC) meeting held on Tuesday, 26th January 1999 during which the union sought to include car maintenance allowance in the Collective Agreement but was rejected. Management felt that the administrative policy covering the issue was adequate and satisfactory and argued that allocation of fuel was never part of the proposal of car maintenance allowance at negotiations. B. Objective Of The Facility -: Management stated that the objective of the facility was to ensure punctuality to work and had even hired some buses to complement its own fleet of buses C. It disclosed that whilst the company's buses adhered to a strict regime and arrived on time, some workers who own vehicles sometimes reported late to work. D. Touching on dignity and motivation, management stated that the employees would not be denied of their dignified status since they could drive their cars at week ends, off duty and vacation periods .Management again stressed that the facility which benefited only 75 employees was inequitable as against the majority of 193 E. Cost Of Hirin2; Agate Transport Services -: Management debunked the Union's figures of hiring buses. It stated that in the 15t half year of 2005 while the monthly cost of workers with vehicles was ¢916,600.00, the cost of an employee using a hired bus was ¢753,106.00 totalling ¢163,494 for the 75 employees or ¢12,262,000.00 per month for the 75 employees. With the current prices, the savings will be ¢23,285,475 per month for the 75 employees. F. Sacrifice -: Management admitted the union's claim that it sacrificed 10 items during negotiations. However these sacrifices were a response to several compromises made by both parties Management also cooperated by shortening the life span of the collective agreement from 3 years to 2 years. G. Metal Supply From Valco At Relatively Lower Cost: Management rebutted the union's assertion that the company purchase metal from Valco at lower cost and stated that the purchase price was based on the London Market Exchange (LME) and the company benefited from only lower and handling cost. H. Replacement Of Manager's Cars -: Management admitted purchasing those vehicles at the prices quoted by the union. It however defended itself that some managers had used their cars for over 10 years and the company policy which allowed managers to change their vehicles after every 5 years had been overlooked Again Company policy allowed a manager to purchase the car he / she was using after 5 years but one of the cars has been allocated to a newly promoted manager while the other was to be auctioned to staff. Management stressed that these were all part of the cost reduction exercise
1. Dividend Payout Management provided the following figures for the past 5 years. It stated that while production had averaged 18,000 MT per annum, profit after tax has decreased from ¢38.6b in 2001 to ¢22.6b in 2005. Labour costs have however increased from ¢22.6b in 2001 to almost ¢40b in 2005 an increase of 82%. Dividends have averaged ¢20.4b per annum. Management concluded that dividends paid out could not be described as handsome by the Union It further explained the actual dividends paid is the total sum of the final dividend of the previous year's and the interim dividend for the current year. UNION'S SECOND AND FINAL REACTION TO MANAGEMENT'S RESPONSE (EXHIBIT 2C ) A. Brief Background: The union stated that the two parties agreed that certain benefits, which were not written in the collective agreement, would be implemented as though they were written in the collective agreement. The union maintained fuel/maintenance allowance, Best worker award and Mid/End of year package, Retirement and Resignation as some of the benefits, which both parties mutually agreed to leave out of the collective agreement. The union still maintained that, management's proposed action will violate Article 8 of the collective agreement. B. Objective Of The Facility the union rebutted the claim of management that some vehicle owners reported late to work. In its rebuttal, the union requested management to provide documentary evidence to prove its claim. The union rather accused the company's buses for arriving late to work due to the numerous routes they ply, traffic jams and breakdowns. C. Cost Of Hiring Agate Transport Services The Union argued that hiring of bigger buses from Agate transport Services would not reduce cost as perceived by management. It argued further that the focus should rather be on the purchase of expensive cars which were far and over above the prices of the cars bought Members of Parliament. The union stated that in times of financial crises it was not economically prudent to buy expensive cars to replace old ones. D. The union indicted management for not maintaining the company's 4 buses (2 Ashok Leyland buses, 1 blue bird and 1 Coaster bus) for the past 3 years. The union argued that the proper maintenance of these buses would have reduced the high cost of hiring Agate buses. E. Performance Of Aluworks: The union insisted that Aluworks was performing well and supported this assertion with figures and a newspaper clipping (Stock Pick for the week) F. Staff Cost: The union stated that it was incumbent upon management to give detailed analysis on the ¢40b Labour cost in 2005. It argued that one may misconstrue that the whole amount of ¢40b was spent on junior staff to justify the withdrawal of the facility.
2006 Profit after Tax Dividends declare % of Profit declared as dividends Actual dividends paid
¢ 22.580bn ¢ 20.839bn 92.29%* ¢15.765bn
Equity The Union further argued that management's proposal to withdraw the facility would rather deepen the existing inequity in the system since two categories of the staff out of the three would enjoy the facility to the deprivation of the other. It stated that it was "disequilibrium". An example of such unacceptable situation was HEAT ALLOWANCE: - Though it has been generally accepted that heat is no respecter of persons, payment of heat allowance in the plant had a different ideological basis. The unionized junior staff whose jobs were concentrated in the shop floor were paid a flat rate of between ¢ 3000 and ¢ 4000 per day of work whereas the supervisory staff, some of whom occasionally went to the shop floor, were paid 7.5% of their monthly basic salary. A proposal by the union to management on the current Collective Agreement concerning the issue of paying heat allowance based on a percentage of the salary could not be agreed upon by management. The union stressed that it was a clear demonstration of discrimination and inequity. The union disclosed that, there has been a prepayment (one year) for usage of motorway tolls for some managers even though their residential location did not warrant such payment. In view of the fact that they do not use the motorway on daily basis, they could purchase the toll as and when they use it. This would help to reduce motor running expenses (cost) and justify managements' commitment to financial prudence. Conclusion The union advised for the company to remain competitive in this era of fierce competitive, it was incumbent for management to motivate the employees. Therefore the facility should be maintained and not withdrawn. The union further advised that management must service the machinery and remove waste in the system so that the company could increase in production and profit levels. MANAGEMENT'S RESPONSE AND FINAL SUBMISSION TO UNION'S DEFENCE AGAINST PROPOSED WITHDRAWAL OF FUEL/MAINTENANCE ALLOWANCE TO JUNIOR STAFF (EXHIBIT IB) Management responded to the Union's defence against the withdrawal of the fuel and maintenance allowance to junior workers with the following submission; A. Response To Brief Background -: Management said it agreed to grant loans to the Unionized members to acquire means of transport as captured in Article 55 c However
RULING: In view of the fact that 1. The company has already provided buses which commute the workers (Article 35) 2. The company is experiencing mixed fortunes in its operations 3. The facility is discriminatory, demotivating and counter productive 4. The facility infringes on the rights of the majority. 5. Management cannot be compelled to grant car loans to the majority who do not own vehicles. Management must withdraw the fuel, maintenance and kilometer allowances to the junior workers on 31st August, 2006. Dominic Kwasi Owusu-Afriyie (ARBITRATOR) 30TH AUGUST, 2006
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