Changing Employee Terms and Conditions of Employment Implementing cost saving measures during a downturn

1. Changing Employee Terms and Conditions of EmploymentImplementing cost saving measures during a downturn Cian Beecher Arthur Cox 19 February 2011

2. Redundancy. Pay Freeze Pay Cut Withholding Bonuses Lay/off/Short Time New Employees, Lesser Terms? Withdrawal of Benefits Change of Benefits. Other Options? Index

3. Redundancy?Five Definitions

4. Employer… ceased…to carry on the business for which the employee was employed… or … ceased… to carry on that business in the place where the employee was employed …requirements of that business for employees to carry out work of a particular kind in the place … have ceased or diminished …employer has decided to carry on the business with fewer or no employees

5. … employer has decided that the work for which the employee had been employed (or had been doing…) should hence forward be done in a different manner for which the employee is not sufficiently qualified or trained 5. … employer has decided that the work for which the employee had been employed (or had been doing…) should henceforward be done by a person who is also capable of doing other work for which the employee is not sufficiently qualified or trained

6. A redundancy dismissal may give the employee an entitlement to a statutory redundancy payment under the Redundancy Payments Acts 2 weeks pay per year of service. Plus one additional week. A week capped at €600. 60% rebate.

7. Redundancy is a defence to a claim under the Unfair Dismissals Acts. • Unfair selection for redundancy constitutes unfair dismissal even if a true redundancy situation exists. • If an employee is to be dismissed on the grounds of redundancy the employee will be entitled to notice in accordance with the contract of employment (express or implied) or the Minimum Notice and Terms of Employment Acts.

8. Protection of Employment Act 1977(as amended) “Collective redundancies” means dismissals effected by an employer for one or more reasons not related to the individual concerned where in any period of 30 consecutive days the number of such dismissals is:

9. at least 5 – in an establishment normally employing more than 20 and less than 50 employees • at least 10 – in an establishment normally employing at least 50 but less than 100 employees • at least 10% – in an establishment normally employing at least 100 but less than 300 employees • at least 30 – in an establishment normally employing 300 or more employees • “establishment” means an employer or company or a subsidiary company or a company within a group of companies which can independently effect redundancies

10. Mandatory consultation process • a trade union, staff association or excepted body with which it has been the practice of the employer to conduct collective bargaining negotiations, or • in the absence of such….a person or persons chosen (under an arrangement put in place by the employer) by such employees from amongst their number to represent them in negotiations with the employer

11. Information to be given to employee representatives • All relevant information relating to the proposed redundancies. • To include the following, which must be given in writing: • the reasons for the proposed redundancies; • the number and description of categories of employees whom it is proposed to make redundant; • the period during which it is proposed to effect the proposed redundancies; • the criteria proposed for the selection of the workers to be made redundant; and • the method of calculating any redundancy payments other than statutory redundancy payments. • A copy of the written information given to the Minister. • Notification to Minister

12. Selection for Redundancy If an employee is dismissed due to redundancy but the circumstances constituting the redundancy applied equally to one or more other employees who have not been dismissed and either: The selection of that employee resulted wholly or mainly from trade union membership/activities, religious or political opinions, family leave (parental, carers, maternity, adoptive), race, colour or sexual orientation, age, membership of the travelling community, pregnancy; or The employee was selected for dismissal in contravention of a procedure that has been agreed or has been established by the custom and practice of the employment concerned and there were no special reasons justifying a departure from that procedure.

13. Redundancy Checklist Is this a redundancy? Compulsory or voluntary? Is this a collective redundancy? On what basis will a person be selected? Address the issues on which information and consultation is necessary What notice must be given/check the contract of employment? Serve the RP50 Forms How much will be paid?

14. Other Options? • Pay freezes. • Pay cuts. • Withholding bonuses. • Recruitment of new employees on different terms and conditions. • Lay-off/short-time • Withdrawal/Changing of benefits. • Others.

15. Pay freezes • Potentially the easiest option in the current climate. • Difficulties arise if: • Employee has a contractual entitlement to increases. • An incremental pay scale applies. • Employer has agreed to national wage agreements (contractual or collective agreement). • Employer is financially successful. • All contracts should explicitly state that pay increases are discretionary/reviews do not imply an increase or confer any such entitlement.

16. National Wage Agreements • Towards 2016 • 10% over 27 months. • June 2006. • Towards 2016 – Transitional Agreement • 6% over 18 months, with initial 3/12 month pay pauses. • September 2008 • IBEC/ICTU Protocol • March 2010

17. National Wage Agreements • Protocol • Private Sector • “…maximisation of sustainable employment is the most important objective…” • “The parties recognise that they are operating in a new context without a formal agreement on pay determination” • “This protocol is effective for 2010…”

18. Pay Cuts • Agree changes/consent • Unilateral imposition of change. • Terminate contract and simultaneously offer re-engagement on revised terms.

19. Consent • Notify employees (and trade unions, if applicable) of plan. • Engage with employees, consider reasonable proposals. • Present redundancies as inevitable if suitable alternative cannot be agreed? • Obtaining written consents? • Negotiate with trade union.

20. Negotiating changes with a Trade Union • May be obliged by collective agreement to consult/agree pay cuts or changes to employee terms. • Even if change is agreed with Union may not bind all employees need to consider: • Terms of employees contracts. • Rules of trade union. • Individual employee decision.

21. Unions - Case Law • Goulding Chemicals v Bolger • Agreement reached with Trade Unions did not bind employees who had consistently objected to the terms and made that objection abundantly clear to employees. (Supreme Court, 1976) • Reilly v Drogheda BC • Reduction in normal retirement age agreed with Trade Union. The Court held the higher retirement age which prevailed on recruitment was a term of the employee’s contract and not the subsequent change. No evidence presented that the employee was bound under the union’s rules by the agreed change or that he acquiesced in it. (High Court, 2008)

22. Impose change • Begrudging tolerance/acquiescence (over time). • OR employee can: • Accept the repudiatory breach of the employer, bring his or her employment to an end and sue for constructive unfair dismissal. • Remain in employment “under protest”and sue: • Payment of Wages Act – unlawful deduction/non-payment. • Civil courts for breach of contract (damages/debt).

23. Imposed Change - Cases • Burdett-Coutts v Herfordshire Co. Co. • Unilateral reduction of employees’ pay. • Union clearly objected and made it clear members would not accept revised terms. • Employees were entitled to damages in the form of the arrears and a declaration that the employer was not entitled in law to vary the employment contracts unilaterally. (High Court, UK, 1984)

24. Rigby v Ferodo • 5% pay cut proposed to trade union. • Trade union warned rejection would mean imposition. • Employer duly imposed the change. • House of Lords (UK, 1988): • Continuing to work under protest while receiving reduced pay was not acceptance. • Employee entitled to recover the difference either as damages or debt.

25. Dismiss and re-engage • Used in the UK, less so in Ireland. • Even then, UK lawyers do not consider it an automatic solution – treated with caution. • Hollister v National Farmer’s Union • Dismissal and re-engagement • EAT (UK, 1979): • Employer has acted reasonably, had demonstrated genuine business needs and had consulted. • Dismissal was not unfair on the basis of “other substantial grounds”. • Requirement to have genuine and substantial reasons to avoid unfair dismissal risk.

26. Withholding Bonuses • Depends on nature of bonus scheme. • Does employee have a contractual right to the bonus? • Minimum bonus guarantee or guaranteed bonus? • Award determined by performance matrix/sales targets, results for current bonus year preordained? Scope to amend for subsequent bonus years? • Is withholding another unilateral variation of contract? • If bonus is discretionary, no obligation on employer to pay.

27. Recruitment on New/Lesser terms • Legally permissible. • Industrial relations/employee relations issues? Pay increase/IR complaints. • Risk of (indirect) discrimination? • Risk of less favourable treatment if recruiting fixed-term or part-time employees? • Exceptional collective redundancy risk if dismissing longer service staff simultaneously.

28. Lay-off and Short-time • Lay-off: Section 11(1) of Redundancy Payments Acts 1967 to 2007 • “Where an employee’s employment ceases by reason of his employer’s being unable to provide the work for which the employee was employed to do and • (a) it is reasonable in the circumstances for that employer to believe that the cessation of employment will not be permanent, and • (b) the employer gives notice to that effect to the employee prior to the cessation, • That cessation of employment shall be regarded for the purposes of this Act as lay-off”.

29. Lay-off and Short-time • Short-time: Section 11(2) of Redundancy Payments Acts 1967 to 2007 “Where • (a) for any week an employee’s remuneration is less than one-half of his normal weekly remuneration or his hours of work are reduced to less than one-half of his normal weekly hours • (b) the reduction in remuneration or hours of work is caused by a diminution either in the work provided for the employee by his employer or another work of a kind which under his contract the employee is employed to do • (c) it is reasonable in the circumstances for the employer to believe that the diminution in work will not be permanent and he gives notice to that effect to the employee prior to the reduction in remuneration or hours of work • the employee shall, for the purposes of this Part be taken to be kept on short-time for that week”

30. Right to Redundancy • Section 12 of Redundancy Payments Acts 1967 to 2007 • “An employee shall not be entitled to a redundancy payment by reason for reason of having been laid off or kept on short-time unless • (a) he has been laid off or kept on short-time for four or more consecutive weeks or, within a period of thirteen weeks, for a series of six or more weeks of which not more than three were consecutive, and • (b) after the expiry of the relevant period of lay-off or short-time mentioned in paragraph (a) and not later than four weeks after the cessation of the lay-off or short-time, he gives to his employer notice in writing of his intention to claim redundancy payment in respect of lay-off or short-time”

31. Lay off and Short-time • No inherent power at common law to suspend payment to employees in the absence of a contractual provision or agreement with employees. • Prudent to include an appropriate clause in standard contracts.

32. Lay off and Short-time - Cases • Miller v Hamworthy Engineering Limited • Reduction in business and employer sought a 3-day week. • Some unions agreed, the Plaintiff’s union rejected. • Plaintiff’s contract of employment stated • “there may be a situation in which a temporary reduction in business may be accommodated by a system of work sharing and this will be explored in consultation with the employee representatives” • This clause required the express agreement of the union or the employee, as there was no such agreement in this case the employer’s failure to pay in full was in fundamental breach of the company’s contractual obligations. The employee was awarded arrears in wages. (Court of Appeal, UK, 1986)

33. Lay off and Short-time - Cases • Lawe v Irish Country Meats • Employer introduced lay-offs and employee brought Circuit Court proceedings to recover wages • Held: • An employer’s fundamental obligation is to pay agreed remuneration for the times of work during which the employee is prepared to work. • There is no general right at common law to lay-off without pay. • Such a right may, however, be established in very limited circumstances. • An employer’s right to lay-off without pay may be established through custom or general usage. • Such a custom must be “reasonable, certain and notorious”.

34. Withdraw/Change Benefits • Terms of contracts (again) or applicable policies/benefit statements • Prudent to reserve maximum variation, substitution or withdrawal rights. • Change of suppliers – cost saving? • Change scope of benefits - cost saving? • Pensions?

35. Pensions • Need for consultation. • Scope/authority within Trust Deed and Rules • typically entitle employer to cease contributions to the scheme on notice to trustees? • Prior notice v. deficit demand/funding rights of trustees? • Content of … contracts but also explanatory booklets. • Do they notify employees of the power to amend, replace or terminate a scheme? • Specific difficulties with • Older contracts • Varied contracts across organisations.

36. Pensions • Impose/increase employee contributions. • Close defined benefit schemes to new entrants. • Close defined benefit scheme to future accrual i.e. cease contributions for existing staff for future service. • Close/Replace defined benefit scheme with “hybrid” schemes, defined contribution scheme or PRSA, change nature of scheme benefits – CARE, etc.

37. Outsourcing TUPE. Natural wastage/attrition recruitment moratorium no backfilling. Non-renewal of fixed term contracts. Early retirement programmes. Termination/renegotiation of contracts for services. Over-time bans Career breaks Paid/partially funded. Unpaid additional leave. Shut-downs. “Time banking”. Retraining. Redeployment. Other options

38. Thank you. Arthur Cox Earlsfort Centre Earlsfort Terrace Dublin 2