Limerick City Council has "severe financial difficulties" which are forcing it to adopt a policy of not filling vacancies, the Labour Court has been told.
While the council's financial position has improved in recent years, it recorded a deficit of €2.1 million at the end of last year.
Voluntary severance proposals, which would have seen staff numbers reduced by 40 from 550, were rejected by unions at the start of 2004.
Since then the council has adopted a policy of filling vacancies only when it deems it necessary and there are sufficient resources.
The unions involved, Siptu and Impact, told the court that the filling of vacancies on an ad-hoc and case-by-case basis was unacceptable.
They also said there were agreements governing appropriate staffing levels. The council had a responsibility to maintain these levels, and to provide an adequate service to the public.
The unions said they had attempted in discussions to resolve the dispute, but claimed the council had failed to put forward "reasonable proposals".
The council, however, told the Labour Court it was experiencing severe financial difficulties, and it could not sustain the high level of losses being incurred.
It said if it was required to fill all vacancies its financial stability would be seriously undermined.
In a recommendation which has just been published, the court said that while the financial position of Limerick City Council had begun to improve, the "drift" between payroll costs and non-payroll costs was still a problem and had to be addressed.
It said further negotiations should take place between the parties "to ensure that an appropriate balance is achieved in relation to further savings and to ensure that savings are shared equally and the provision of services maintained".
The council has recorded deficits of €10.7 million and €7.2 million respectively in 2002 and 2003.