Reinstatement following suspension
A recent High Court decision (Bank of Ireland v James Reilly  IEHC 241), where the reinstatement of an employee was ordered after five years out of the business, should ring alarm bells for employers who are considering imposing a 'holding suspension' on employees.
The case concerns an employee who had been suspended pending investigation of misconduct (the circulation of inappropriate material). He was dismissed in 2009. The case was appealed from the EAT to the Circuit Court and ultimately to the High Court where it was held that the decision to dismiss was disproportionate and unreasonable. The principles of 'basic fairness' applied at this early stage of the investigation and the Court found that the employer failed to adhere to them. The High Court ordered that the employee be reinstated after over five years out of the business.
It came to the attention of the employer that inappropriate emails were circulating from a number of employees' accounts including Mr Reilly's. As a result he was placed on paid suspension (or special paid leave as it was also called in the company's policy), pending an investigation. In other words, a 'holding suspension' which was not intended to be a penalty was imposed on him.
What went wrong?
Judge Noonan was particularly critical of what he held to be the unjustified suspension of the employee and that view seems to have been influenced by the following factors:
- First, the Court noted that the employee had an exemplary record prior to these events.
- Second, the employer's investigation involved five employees but only three were suspended including Mr Reilly and there was no clear reason as to why only three were suspended.
- Third, Mr Reilly received virtually no notice by the manager of the meeting at which he was to be suspended.
- Fourth, he was given almost no information as to the reason for the imposition of the holding suspension other than it was 'something to do with emails' (and the case report suggests that the he was 'marched out the door').
- Fifth, there was no evidence to suggest that the investigation or disciplinary procedure would be in any way interfered with by Mr Reilly were he to remain in work rather than being suspended.
When is a holding suspension justified?
The Court noted that suspension is an extremely serious measure which (either paid or unpaid) can cause irreparable damage to an employee’s reputation and standing. It stated that 'it is potentially capable of constituting a significant blemish on the employee’s employment record with consequences for his or her future career'. The Court noted that a holding suspension which is not intended to be punitive can in effect trigger serious consequences for the employee. For these reasons, the Court noted that a holding suspension should not be undertaken lightly and only after full consideration of the necessity for it pending a full investigation of the conduct in question.
The Court helpfully outlined four instances where suspension will normally be justified, if it is necessary:
- To prevent the repetition of the conduct complained of.
- To prevent interference with evidence.
- To protect persons at risk from such conduct.
- To protect the business reputation of the employer where the conduct of the employee is known to those doing business with the employer.
On foot of the evidence before it, the Court did not believe that Mr Reilly's suspension was necessary as the employer had already preserved the evidence in relation to the emails and it was extremely unlikely on the evidence that the employee would re-offend. The Court was particularly critical of what it perceived to be of the employer 'sending a message' to employees that this type of conduct would not be tolerated. The Court decided that the decision to suspend must be one taken on its merits by reference to the employee in question and the investigation. It should not be used as a means of sending a message to employees.
Tips and traps for employers
- In this case the Court rejected the proposition that the employee had no entitlement to natural justice or fair procedures even though the employer was attempting to impose a 'holding suspension'. It was acknowledged that whilst the full range of fair procedures could not be invoked at that point (for example, the right to representation, the right to cross examine witnesses and the right to be fully informed of the charges), the Court decided that basic fairness dictated that 'at least a rudimentary explanation of the reason for the suspension which admitted of the possibility of some exculpatory response' was required.
- Employers should ensure that their disciplinary policy and procedures provide for paid suspension of employees pending the outcome of an investigation and disciplinary procedure, that is, the right should be expressly reserved in the contract/policy documentation.
- Employers should examine whether the employee’s suspension is required for the purposes of carrying out an investigation and, in analysing this, look at the four circumstances outlined above by the Court.
- Employers should give the employee written confirmation of the reason for their suspension, together with a copy of the appropriate extract from the company’s disciplinary policy and procedures, and make clear what the next steps are and when they will happen.
- Employers should conduct the investigation as swiftly as possible (and, if necessary, the ensuing disciplinary process) without delay. Suspensions should be for as short a time as possible. The longer an employee is on suspension the stronger the argument that their reputation is damaged as a result of the suspension.
- Suspension is a serious step. An employer should start by checking their facts and their policy. They should then seek advice to make sure that the business is not exposed to an unfair dismissals claim or the risk of the employee seeking the intervention of the High Court to interrupt the suspension and restore the employee to their active employment.
Payment of wages claim clarified
The High Court recently delivered an important decision (Earagail Eisc Teoranta v Doherty and ors  IEHC 347) which brings some much needed clarity to the law in relation to claims under the Payment of Wages Act 1991. The High Court held that there is no reason why the Act cannot apply to reductions in wages as opposed to deductions. The decision has finally put to bed the confusion surrounding the wage reduction versus deduction dichotomy which had emerged over the last number of years.
Following an obiter dicta (non-binding) comment in the High Court case of McKenzie and Anor v Minister for Finance and Anor  IEHC 461, a view emerged that a reduction in wages was not a deduction for the purposes of the Act and accordingly fell outside of the scope of the Act. The case concerned a reduction in a motor and travel allowance. This allowance was in the form of an 'expense' which fell outside the definition of 'wages' as defined under the Act. Therefore a reduction in expenses or in an allowance that covers expenses could not have formed the basis of a valid claim under the Act in any event.
The employer decided to implement a 10% pay cut in May 2011. The company sought the agreement of the employees and, when this wasn’t obtained, they proceeded to introduce the pay cut on the basis of a contractual provision which reserved the right to vary the contract. The employees successfully brought a claim before the Rights Commissioners which was subsequently appealed by the employer to the EAT. The EAT held that the Act requires the prior written consent of the employee and, as this was not obtained, the pay cut comprised an unlawful deduction.
The employer appealed further to the High Court arguing that the matter should be remitted to the EAT for fresh consideration on the following grounds:
- The EAT lacked jurisdiction to decide the matter under the 1991 Act because:
- the dispute was contractual and
- the wage reduction was not an unlawful deduction.
- The EAT incorrectly construed the exceptions to the prohibition on wage reductions conjunctively (that is, by interpreting that prior written consent was needed) and failed to interpret the company handbook properly.
- The EAT should have used its discretion regarding non-payment of compensation.
- The EAT had not discharged its obligation to provide reasons for its decisions.
In response the employees argued:
- That the High Court is bound to have regard to the doctrine of curial deference.
- That the employer had erroneously contrived a wage 'reduction'/wage 'deduction' dichotomy.
- That the employer's actions contradicted their claim that authority to reduce wages derived from the company handbook and further that the payment rules and procedure section of the handbook did not permit such reductions.
- The EAT was correct not to use its discretion regarding non-payment of compensation as the employer had not provided evidence of its alleged financial difficulties.
- The EAT was only required to provide broad reasons for reaching its decision.
DecisionEAT's jurisdiction to hear complaint and interpretation issues
Judge Kearns was satisfied that the EAT's independence and expertise ensured that it was the correct forum for hearing the complaint and referred to the above mentioned McKenzie case. He distinguished it from the case at hand as the expenses payments (which were the payments at issue in that case) were specifically excluded from the scope of the Act. The Court held that there was no reason why the Act could not apply to pay reductions as well as pay deductions.
The next point which the Court considered was whether the EAT had erred in considering conjunctively the exceptions to the prohibitions on deductions as set out in sections 5(1)(a) to (c) of the 1991 Act. It said that it should have considered each subsection as a separate and potential ground giving rise to the exceptions to the rule that the employer shall not make a deduction from the wages of an employee. The EAT also failed to interpret the company handbook properly and incorrectly read it alongside section 5(1)(a) of the 1991 Act.Obligation on the EAT to provide reasons for its decision
Judge Kearns criticised the EAT's short decision as wholly inadequate. He noted that previous decisions of the Court have established that, while the duty to give reasons doesn’t require extensive analysis of every aspect of each complaint, some level of detail as to how a decision is arrived at is required. He held that the brief determination of the EAT in this case was 'wholly inadequate to meet even this low threshold'.
The case is useful for employers as it finally ends the wage reduction versus deduction debate. It also highlights the need for the EAT to give detailed reasons for its determinations. This should be useful for employers and advisors going forward as it should help in providing some level of consistency and precedent value in the issuing of determinations.
Another issue which it raises but doesn’t determine is whether a variation clause in a contract can be relied upon by an employer in effecting a reduction. This is an interesting point which the EAT will undoubtedly have to consider when it looks at the issue afresh as a result of the High Court ruling.