Redundancy & Unfair Dismissal

No one in the private sector is immune from the sudden and severe contraction of the Celtic tiger. High level private sector employees who would have considered themselves in secure positions are suddenly finding themselves the focus of extreme cost cutting exercises. While undoubtedly the majority of these cuts are genuine redundancies with no other option open to employers, employees should not take all such pronouncements at face value. Employees need to be aware of the requirements employers have to meet to justify redundancies and the options open to employees where these requirements are not met.

It’s not you, it’s the job

In order for an employer to be able to claim a redundancy situation exists certain circumstances must have arisen such as the employer ceasing to carry on business or ceasing to carry on business in the location where the employee worked, the employer’s requirements for employees in a specific category has diminished or the employer has decided to let work be done in a different manner in future and the employee is not sufficiently qualified to work in the different manner.

The emphasis therefore is on the job and not the person. An employer must be able to show that a genuine redundancy situation exists. A dismissal will only be considered a redundancy where it is related to one or more of the permitted redundancy circumstances and not related to the employee concerned. In essence, it is the job which is redundant, not the employee.

An employer must also be able to point to objective and fair criteria on which the selection of employees for redundancy was based. It is important to ensure that the criteria chosen do not have an indirectly discriminatory effect e.g. criteria which effect women more than men. Furthermore, prior to making any redundancies the employer must consult with employees and consider any alternatives.

As employees must have worked continuously for their employer for at least two years in order to be entitled to a redundancy payment, questions can often arise as to whether the continuity of service has been broken. There are several instances where a break in service occurs but the law deems otherwise, such as maternity leave, strike and transfer of business to a new owner. In these protected situations the employee’s continuity of service remains unaffected and so too his/her entitlement to a redundancy payment.

The redundancy payment is calculated on the basis of the employee’s years of service. An employee is entitled to two week’s pay for each year of continuous employment over the age of 16 years and an additional one week’s normal earnings. The payment is capped at €600 gross per week and may or may not be taxed depending on certain circumstances. An employer can choose to pay over the statutory amount and may have done so in a previous redundancy situation, perhaps as a result of negotiations with trade unions. While there is no legal obligation on employers to match a previous redundancy package in a new redundancy situation, nevertheless a precedent may have been set which should be highlighted by the current employees with a view to having it adhered to in the present redundancy.

Employees should also be aware when agreeing redundancy terms with the employer that an employer who has paid employees the correct statutory redundancy lump sum can apply to the Department of Enterprise, Trade and Employment for a 60% rebate. The rebate is limited to 60% of the statutory sum and does not apply to any supra-statuary amount paid by the employer.

It’s not redundancy, it’s unfair dismissal

When an employer attempts to make an employee “redundant” but none of the required redundancy circumstances exist, the employee is entitled to take a claim of unfair dismissal. As long as the employee has one years continuous service with the same employer, is aged over 16 years and under the age of normal retirement for their profession he/she is protected by the unfair dismissal laws.

The burden of proof falls on the employer in an unfair dismissal claim; it is the employer who must be able to show that there were substantial grounds justifying the dismissal. The most common justifications used by employers are an inability to do the job, misconduct or redundancy. If an employer is relying on redundancy as a defence to a claim of unfair dismissal, the employer must be able to show that one or more of the valid redundancy triggers exists. Take the following example; an employee is made redundant because the employer claims it has decided to do the work in a different manner and the employee is does not have the correct training. Soon after the employee is replaced and the new employee continues to carry out the same job function as the previous employee at a reduced salary. It is obvious that a valid redundancy situation did not exist and the employer was merely attempting to reduce costs.

There are also a number of grounds for which a dismissal is automatically deemed unfair, including religious or political opinions, age or pregnancy.

It’s not resignation, it’s constructive dismissal

There is no entitlement to redundancy payments where an employee resigns from their employment. However where an employee has been forced to resign as a result of the conduct of the employer, an employee can bring a claim of constructive dismissal. This time the burden of proof shifts to the employee to show that the conduct of the employer was sufficiently serious so that it was reasonable for the employee to resign.

The EAT have upheld claims of constructive dismissal in situations where an employer unilaterally reduced salary, changed job function, changed location of employment, changed working hours and in cases of sexual harassment and bullying. However it is important that an employee’s contract of employment be reviewed prior to taking a claim for constructive dismissal as the employer may have certain unilateral rights embedded in the terms of employment.

As most employees do not have a contractual right to a pay increase the introduction of a pay freeze may not be a cause for grievance, however if an employer promised an increase or indicated an increase would be forthcoming if certain targets were met, the employee should not accept the pay freeze and should pursue the employer for the full increase. Furthermore where an employer goes so far as to actually reduce salary, it is open the employee to resign and claim constructive dismissal on the basis that such action constitutes a fundamental repudiation of his/her contract of employment. An employee need not, however, have resigned in order to seek redress in cases where salary has been cut without his/her consent. In such situations the employee can (subject to his/her contract terms) make a claim for non-payment of wages. Likewise if employers try to reduce or scrap bonus payments where targets have already been met employees have cause to bring a similar claim. Changes in bonuses and salary should be carefully documented, communicated clearly to and have written consent of the employees

An employee should be aware that his or her conduct towards the employer will be examined in any claim of constructive dismissal. Therefore if the employer has a detailed grievance procedure in place, it is advisable for employees to follow this procedure prior to initiating any legal proceedings.

If an employee believes that they have been unfairly/constructively dismissed, they may submit a claim to a Rights Commissioner or to the Employment Appeals Tribunal (EAT). Written notice of a claim must be submitted within six months of the date of dismissal. The employee may seek one of three significant remedies; (i) re-instatement to the position held before the dismissal, (ii) re-engagement in previous position or in an alternative suitable position, or (iii) compensation up to a maximum of two year’s remuneration.

When the employer can’t pay, who does?

What happens to an employee in the increasingly common scenario where the employer is insolvent, the employee is made redundant and is owed wages or holiday pay? Legislation was introduced to provide protection to employees in this situation with the establishment of the Insolvency Payments Scheme (IPS). Under the IPS employees can claim arrears of wages, holiday pay, deductions which have not been paid over by the employer e.g. health insurance (all subject to a maximum of 8 weeks), pay in lieu of notice and compensation awarded by the EAT. In the case of redundancy entitlements the full amount is paid from the Social Insurance Fund. In determining the amount of the above payments, the calculation of a weeks pay is subject to a ceiling of €600. The Department of Enterprise, Trade and Employment makes the payment to the employee and the Minister then steps into the shoes of the employee and becomes a creditor of the employer.

Conclusion

Redundancy announcements have now become a daily occurrence. The EAT has said that claims have jumped by 50% in less than a year and awards given to staff who have been unfairly dismissed have doubled in less than three years. In these turbulent times it is imperative that employees are treated fairly and if not, that they know their rights and entitlements and seek the appropriate redress.