Review of key cases

01 December 2015

Updated December 2015

Reviews key High Court, EAT, Equality Tribunal and Labour Court cases during 2015. Covers reinstatement following suspension, clarification of a payment of wages claim, why claims should be investigated without delay, the effect of a delay in considering reasonable accommodation, how a move can be disability discrimination, compromise agreements and probationary periods.

There have been many developments of note over the last 12 months. Below are some highlights from the High Court, Employment Appeals Tribunal (EAT), Equality Tribunal and Labour Court of key cases of relevance.

Reinstatement following suspension

A recent High Court decision (Bank of Ireland v James Reilly [2015] 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.

Analysis

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 [2015] 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.

Background

Following an obiter dicta (non-binding) comment in the High Court case of McKenzie and Anor v Minister for Finance and Anor [2010] 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.

Current case

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.

Decision

EAT'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'.

Takeaways

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.

Importance of investigating claim without delay

The case of Richard Godsland v Applus Car Testing Limited (UD1422/2013) highlights the importance for employers of investigating any allegation of misconduct without undue delay. Failure to do so may result in the delay being held to amount to an unfair process. The case serves as a reminder of the paramount importance of fair procedures being afforded to employees.

Mr Godsland was a senior manager in the National Car Testing Centre. The employer had a detailed code of ethics/integrity policy. Integrity was central to the values of the company's business. An example of the detail of the code was that it was forbidden for an employee to test their own vehicle or one belonging to family members. In March 2012 Mr Godsland tested his own vehicle. He paid for this test and also alleged that he was never informed that testing his own vehicle would result in dismissal.

In June 2013 (approximately 14 months after the incident) he was called to an investigative meeting. There was no explanation as to why the matter was being investigated over a year after it happened. In the intervening period he continued to work and no further incidents arose. A disciplinary meeting followed in August on foot of which he was suspended with pay pending a final determination. In September he was informed that his employment was terminated.

Decision

The EAT had to determine whether the action of the employee was of a seriousness to justify dismissal and whether the company had acted in a manner that was not arbitrary, unfair or irrational. It acknowledged that the incident had the potential to embarrass the company if it came to light and accordingly it was justified in taking the matter seriously. However, for over a year, it remained either unaware of or overlooked the incident. The EAT was of the view that this delay undermined the decision to dismiss the employee and ultimately amounted to an unfair process. Taking account of the employee's contribution to his dismissal, the EAT awarded €35,000 in compensation.

Takeaway

This case is a clear example of an employer being tripped up by a basic procedural flaw. Often when we refer to the right to fair procedures in the investigation and disciplinary context concepts, such as the right to be informed of the charges against you, the right to be accompanied (as distinct from legally represented) to meetings and the right to respond to any charges put to you, spring to mind. This case reminds employers of a basic component of fair procedures – that any misconduct should be investigated without undue delay. Failure to do so may make it difficult for an employer to remedy its hand in relation to any subsequent substantive action it takes.

Delay in considering reasonable accommodation

A retailer was ordered to pay €14,000 to an employee after the Equality Tribunal held that it had failed to provide reasonable accommodation to him before he went on sick leave due to deteriorating eyesight (Alistair Clews v DSG Retail (DEC-E2014-081)). The case highlights that delay on the part of the company in considering reasonable accommodation can in itself constitute a failure to provide reasonable accommodation.

Mr Clews had been employed as a sales person by the company since around 1997. In 2008 he noticed deterioration in his eyesight. He contacted the National Council for the Blind of Ireland who advised him to have a work assessment carried out and give it to his employer. The employee stated that the company received the assessment (which stated that he could work but that his work environment should be as uncluttered as possible) but did not act. His eyesight deteriorated further and in January 2010 he reported sick due to his eyesight problem.

As of May 2010 his employer was in possession of independent medical advice as to his capacity. In February 2011 it offered him other roles in the organisation.

Decision

The Tribunal did accept that the company gave serious consideration to other roles that he could take within the business however it was particularly critical of the long delay. It accepted that the company acted correctly when it offered the employee alternative employment or roles in February 2011. However, at that point, he had been away from the workplace since his request to return (in May 2010) for nine months and had been without pay for six months. It held that the length of delay in the company making adequate enquiries so as to establish fully the factual position in relation to his capacity and the circumstances of the delay were unacceptable and constituted a failure to provide reasonable accommodation.

Move to different area disability discrimination

In this decision, A Complainant v A Healthcare Company (DEC-E2015-009), the Equality Tribunal found that an employee had been discriminated against on the basis of her disability when she was moved from the 'bio clean area to the 'make spares area'.

The employee had been employed by the company since 1978 and had worked in the bio clean area since 2002. She was diagnosed with Multiple Sclerosis (MS) in 2006 and her employer was aware of her condition. In January 2013, she was called into a meeting with management where she was informed that she would be moved from the bio clean area to the make spares area.

Decision

The Tribunal noted that instead of carrying out a risk assessment of the job and duties based on her illness, management made a decision to move her to a completely different area. The Tribunal noted that this decision was made on the basis of an alleged concern that the employee would suffer fatigue caused by her MS and that this contention appears to have been made in the absence of any medical evidence.

The Tribunal found that the company did not carry out a thorough assessment in relation to the needs of the employee and accordingly had discriminated against her on the basis of her disability. The Tribunal ordered that she be reinstated into the bio clean area and also awarded her €20,000 in compensation for the effects of the discrimination.

Two recent Labour Court decisions have reiterated the need for employers to apply their disciplinary procedures where an employee on probation is being dismissed. A common and mistaken belief among employers is that there is no requirement to apply fair procedures if an employer decides to dismiss an employee on probation.

Disciplinary procedure apply

In Glenpatrick Water Coolers Limited v A Worker (LCR21028), the Labour Court awarded €6,500 to an employee who was unfairly dismissed after being summarily dismissed whilst on probation. The employee was called to a disciplinary meeting after the employer became aware of some issues with the employee’s performance. The meeting was called without advance notice and representation and the employee was subsequently dismissed without any further meetings or disciplinary procedure.

The Court noted that the employee’s contract purported to provide that normal disciplinary procedures do not apply during the probationary period. The Court stated that it had consistently held that an employer is not relieved of the obligation to act fairly during a probationary period. In particular, it noted that the employer failed to adhere to the Code of Practice on Grievance and Disciplinary Procedures (SI 146 of 2000) which should apply whenever an employee is in danger of losing their job for alleged misconduct.

In the second case Embankment Plastics Limited v A Worker (LCR 21066), an engineer won his claim for unfair dismissal at the Labour Court and was awarded €33,400 after it was found that the company committed egregious breaches of fair procedures.

The employee was two months into his probationary period before being dismissed. As he didn’t have the requisite service under the Unfair Dismissals Acts 1977 to 2015 the case was heard under the Industrial Relations Act 1969 (as amended).

The Court held that, notwithstanding the fact that the company’s disciplinary procedure stated that it would not apply to any dismissal during the probationary period (or an extension thereof), the Code of Practice on Grievance and Disciplinary Procedures (referred to above) is still relevant and should be adhered to in such circumstances. In particular, the Court emphasised that the employer’s decision not to adhere to its own disciplinary procedures or to deem itself bound by the aforesaid because the worker was on probation was 'misconceived'.

Commentary

The misconception generally arises from an employee’s contract and where it purports to exclude the application of a company's usual disciplinary procedure while an employee is on probation. Generally the wording of probationary clauses in an employee's contract provides that employers may terminate the employee’s employment if performance is not satisfactory or for any reason during probation. In such circumstances, an employee may be dismissed at any time during the probationary period. If the contract is silent on whether an employer can immediately dismiss then the safest option is for the company to provide an abridged version of the disciplinary procedure. Probationary periods should not extend over a year and employees on probation are generally not entitled to bring claims under the Unfair Dismissals Acts 1977 to 2015.

Despite the inapplicability of the above Act, employees on probation with less than 12 months service are still entitled to fair procedures and natural justice and employers should, at a minimum, provide the employee with an abridged/scaled back form of disciplinary process. Employees on probation may also bring claims under the Industrial Relations Act 1969 (as amended) with regard to the procedural fairness of a dismissal. These rulings are, however, not binding on an employer. An employer should also bear in mind other potential remedies which may be available to an employee.

The employer may also be exposed to a claim for civil proceedings based on the dismissal for breach of contract or wrongful dismissal, but these are relatively rare. There is also the possibility that an employee dismissed on probation may argue that they were dismissed on a discriminatory ground, such as age, race or religion, and may pursue a claim under the Employment Equality Acts 1998 to 2011.

Takeaways

These determinations demonstrate the level of protection which the courts are willing to afford to employees on probation. It also highlights the need to apply some form of disciplinary process when considering dismissing an employee on probation. This process should ensure at a minimum that employee's rights to fair procedures and natural justice are respected.

The issue of compromise agreements in the employment context has been in the spotlight over the last 12 months with two cases with differing outcomes. These cases reiterate the importance of informed consent and independent legal advice as key to ensuring that any such agreement executed may be upheld.

Independent legal advice

The case of Eoin Kerrigan v Smurfit Kappa Limited c/o Smurfit Kappa (UD1921/2011), demonstrates the pitfalls of the failure to obtain independent legal advice. Here the employee was awarded €10,000 by the EAT notwithstanding the fact that he had already accepted the sum of €25,280 in full and final settlement of all claims arising out of his employment with the company. The substantive issue in the case concerned selection for redundancy.

The employer, however, raised a preliminary issue concerning jurisdiction to hear the claim as the employee had already signed a waiver form. The EAT noted that the employee had not been advised to seek legal advice before signing the waiver and discharge form. This was a key factor in its decision. The EAT relied on the test in the Hurley v Royal Yacht Club [1997] ELR 225 case. In that case the Court considered a waiver clause in the context of the unfair dismissals legislation and held that there must be informed consent to such a waiver. There were two limbs to the test:

  • That the employee should be advised of their entitlements under employment legislation and that any agreement or compromise should have listed the various Acts which were applicable or at least made it clear that the employee should take them into account.
  • That the employee should be advised in writing that he should take appropriate advice, which presumably in this case would be legal advice.

The EAT held that, notwithstanding that the unfair dismissals legislation was specified in the waiver clause, it was not sufficient to deny jurisdiction as the second element (the advice aspect) of the Hurley test had not been satisfied.

Agreement upheld

The second case of Healy v Irish Life Assurance (DEC-E2015-002) demonstrates that where the appropriate steps are followed, a validly executed compromise agreement will be upheld. In this case, the parties had concluded a full and final settlement in respect of 'all claims'. The employee had the benefit of legal advice at the time, being represented by his solicitor, senior and junior counsel. He received a sum in consideration of the settlement and, also, a contribution towards his legal costs.

The employee later asserted he was unhappy with the manner of the settlement. He alleged that what was taking place were exploratory talks. He also described a 'ham-fisted' approach and being put under pressure. The Equality Officer, relied on the Sunday World Newspapers Limited v Steven Kinsella and Luke Bradley [2008] ELR53 case where it was stated that 'in the instant case the agreement is expressly stated to be in full and final settlement and that means what it says… there was meaningful negotiation and discussion…professional advice of an appropriate character before the agreement was signed'.

The Equality Officer found in this case that 'full and final' meant just that and that the complainant could 'not now ignore the obligations placed upon him by signing this agreement'. On foot of this, the Equality Officer found that he had no jurisdiction to hear the case.

Tips

These cases demonstrate the importance of informed consent when employees are signing a settlement/compromise agreement terminating their employment relationship. In order to ensure that the consent is 'informed', employers should advise employees to seek independent legal advice. This should be referenced in the document, that is, that the employee has taken or has been given the opportunity to take independent legal advice in relation to the waiver. It may also be appropriate in certain circumstances for the employer to make a contribution towards the cost of this legal advice (on receiving appropriate vouching documentation). This should provide some comfort to the employer that a settlement agreement executed in full and final settlement may be upheld, if an employee subsequently tries to renege on its provisions.

This factsheet was written by A&L Goodbody, Solicitors, IFSC, North Wall Quay, Dublin 1.

© A&L Goodbody Solicitors. The material is not intended to provide, and does not constitute, legal or any other advice on any particular matter, and is provided for general information purposes only.