PW674/2012

EMPLOYMENT APPEALS TRIBUNAL

APPEAL(S) OF:                                                                                                CASE NO.

Employee        -           appellant                                                                      PW674/2012

against the recommendation of the Rights Commissioner in the case of:

Employer         –         respondent

Employer         -          respondent

under

PAYMENT OF WAGES ACT, 1991

I certify that the Tribunal

(Division of Tribunal)

Chairman:   Ms N. O'Carroll-Kelly BL

Members:     Mr J. Horan

                    Mr J. Maher

heard this appeal at Dublin on 1st November 2013

Representation:

_______________

Appellant(s) :       Mr. Fiach McHugh, McKeever Taylor, Solicitors, 31 Laurence

                              Street, Drogheda, Co Louth

Respondent(s) :   Ms. Caroline McGrath BL instructed by Paul A. Moore & Co., 4 Dyer Street,

                            Drogheda, Co. Louth

This case came before the Tribunal by way of an appeal by an employee (appellant) against the decision of the Rights Commissioner ref (r-123040-pw-12/JW) under the Payment of Wages Act, 1991.

Summary of Case

The appellant was employed as a full-time bar and restaurant manager by the respondent from April 1996. He was placed on lay-off from 6 February 2012 and was not paid during this period of lay-off. He accepted that there had been a downturn in the respondent’s business from 2010 onwards. He was never contacted by the respondent after February 2012 with any offer of work. In May 2012 he sought his redundancy entitlement and this entitlement was conceded by the respondent at the Tribunal hearing.

During his tenure of employment with the respondent he was never provided with a contract of employment. It is the appellant’s case that he is entitled to payment for the period of lay-off as he did not consent to a deduction from his wages. He told the Tribunal that he has worked in the industry since his teens and he has never heard of lay-off without pay for full-time employees. He believed his lay-off in February 2012 was a ruse and a genuine lay-off situation did not exist.

The Tribunal heard evidence from the owner of the respondent’s business that the appellant was well aware of the company’s financial position. He laid-off the appellant in February 2012 in the hope that the business wold grow again and recover. He also reduced the working hours of other employees at this time. The business had not recovered sufficiently enough by April/May to re-employ the appellant. He told the Tribunal that the appellant was well aware that he would not be paid during his period of lay-off.

Determination

The Tribunal have carefully considered all of the evidence together with the documentation handed in during the hearing.

The appellant was placed on temporary lay-off from 6 February 2012. He was not paid during that lay off period. He did not contact the respondent nor did the respondent contact him prior to lodging his claim with the Tribunal in May 2012. The appellant did not have a written contract of employment nor was he given any terms of his employment. The appellant states that he is entitled to his pay for the period he was on lay off as he did not consent to the deduction either verbally or in writing. He also stated that there was no custom and practice in the industry in relation to lay-off as opposed to payment during lay-off. Furthermore, he states that the deduction made to his wages was unlawful. The Tribunal notes that the appellant did not know anyone in the industry who had been put on lay off in the past and therefore by extension could not have known anyone who had been paid during a period of lay- off.

The Payment of Wages Act, 1991 prohibits the employer from deducting the wages of an employee unless specifically provided for by Statute or where has been by prior agreement of parties. Lay off is a creature of statute.

Wages are defined in the Payment of Wages Act 1991 as:-

“Wages” in relation to an employee, means any sum payable to the employee by the employer in connection with his employment, including-

(a) Any fee, bonus or commission or any holiday, sick or maternity pay or any other emolument referable to his employment whether payable under his contract of employment or otherwise...,

Lay – off is defined by Section 11 Redundancy Payments Act, 1967 as follows:

(1)   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

“Wages” arise in connection with the employment, and lay-off arises for the period of the “cessation of employment”. The Tribunal finds that it would not be absurd to suggest that a layoff which gives rise to a cessation of work must by implication also give rise to a cessation of wages.

It is clear from the facts submitted that the respondent was of the belief that the cessation of employment would not be permanent. That in fact was the case. From the accounts submitted it was clear that the period after Christmas until late spring was traditionally quite. It always picked up in late spring/early summer and continued until the end of the year. Therefore, section 11 (1) (a) is satisfied. The respondent did give notice to the appellant prior to the period of lay off, however that notice was not in the usual form. The appellant was not issued with an RP9. He was told that the cessation would not be permanent and he was told that his employer would contact him when things picked up. It should also be noted that appellant was very familiar with the company’s accounts and was fully aware that there was always a quiet period after Christmas. Therefore Section 11 (1) (b) is satisfied.

The question the Tribunal must answer is whether or not by virtue of the employer havinginvoking section 11 of ’67 Act the employee’s contractual and statutory right to pay during that period of lay off is suspended.

At common law there is no general right to lay- off without pay. However it has always been accepted that there are some limited circumstances wherein there will be such a right. This right has been implied in the past in cases such as Browning and Others V Crumlin Valley Collieries ( 1926) 1 KB 698. In that case the Court found that there was an implied term that a mine owner could lay off miners without pay while repairs are effected through no fault of the mine owners. Furthermore, it is a well established practice in this jurisdiction that lay-off without pay is operable where an employer can demonstrate it has been the custom and practise of the trade and/or workplace and that the custom must be reasonable, certain and notorious.

The appellant relied on a precedent from the Tribunal PW 426/2011 wherein the case of Industrial Yearns v Greene [1984] ILRM 15 was opened to the Tribunal. The factual situation that existed in the Industrial Yarns case is different from those in the appellant’s case. Thatcase primarily focused on the right of an employee to be given statutory notice of the termination of his employment or to be paid in lieu in circumstances where the company, knowing that the employees where going to claim redundancy, used the statutory lay off legislation to force its employees to invoke their rights under Section 12 of the ’67 Act. All of the parties were fully aware that the lay off period would be permanent and that the sole purpose for putting the employees on lay off was so that they would invoke their right to claim redundancy. The company then used that to avoid its legal obligation to pay notice, based on the fact that it was the employee who sought redundancy. That was clearly an improper use of the legislation and was not its intended use. In the case before the Tribunal Section 11 of the ’67 Act was used for its intended purpose and the respondent clearly satisfied Section 11 (1) (a) and (b).

It would seem from the appellant’s submissions to the Tribunal that he too was relying on Costello J. when he stated that “It is clear that the employer in operating this section is not terminating the contract of employment – there is a cesser of employment , but the contract still subsists”. The appellant went on to argue that by virtue of the fact that the contract still subsists together with the fact as per Costello J. “ there is no contractual power ( express of implied) in the contract of employment to suspend the operation of the contract for a limited period than by ceasing to employ an employee and refusing to pay him wages the employer is guilty of a serious breach amounting to repudiation of it” that the respondent’s failure to pay him during the lay off period was unlawful. If one reads on, Costello J. states correctly that repudiation does not automatically bring the contract to an end. The employee is free to accept that the repudiation has brought the contract to an end or not as the case may be. The learned Judge in that section of his judgement was specifically referring to the employer’s erroneous use of Section 11 and the legal position that followed from it. His comments are inextricably linked to the factual situation that existed in that case and cannot be applied to the appellant’s case. Furthermore, whilst there may not be a “ contractual power in the contract of employment to suspend the operation of the contract for a limited period of time” there is a statutory one, Section 11 of the‘ 67 Act, and that statutory power takes precedence over a contract regardless of whether the contract is silent on the issue or not. Once Section 11 is invoked there is a temporary cessationof employment but the contract of employment still existed but in a state of temporary suspension. There can be no breach of contract in these circumstances.

In the case of John Lawe v Irish Country Meats Limited 1998 [ELR] 266 White J. from Hanleyv Pearse & Partners 1915 1 KB 698   “Absent a term in the contract, the employer’s fundamental obligation is to pay the agreed remuneration for the times of work during which the employee is prepared to work. Ordinarily an employer is free to lay off workers for any reason provided he continues paying them. The Tribunal note that White J. relied heavily on authorities from the United Kingdom. Whilst they are helpful in some respects one must take note of the fact that the United Kingdom’s statutory position in relation to layoff differs from ours in that the legislation specifically refer to the employee “being employee under a contract on terms and conditions.....” Our equivalent legislation is silent in relation to the contractual terms.

Section 147 Employment Rights Act 1996 (UK)

(1)For the purposes of this Part an employee shall be taken to be laid off for a week if—

(a)he is employed under a contract on terms and conditions such that his remuneration under the contract depends on his being provided by the employer with work of the kind which he is employed to do, but

(b)he is not entitled to any remuneration under the contract in respect of the week because the employer does not provide such work for him.

(2)For the purposes of this Part an employee shall be taken to be kept on short-time for a week if by reason of a diminution in the work provided for the employee by his employer (being work of a kind which under his contract the employee is employed to do) the employee’s remuneration for the week is less than half a week’s pay.

Furthermore, British common law seems to rely on the employee “being prepared to work”. No such legal test exists in this jurisdiction. What is noteworthy about the Lawe case is that, as in the Industrial Yarns case there seems to have been and unlawful use of Section 11. The Plaintiff contended that the layoff was not justified and was done to put pressure on the workforce to accept the new practices and that it was essentially a lock out situation. Also White J found that the layoff was not temporary but formed part of the winding down of the company and its workforce. The Tribunal find that it would be wrongto applyprinciples of law established in circumstances where a party attempted to avoid its legal obligation by wrongly invoking legislation for a purpose for which it was never intended. To apply such principles generally could lead to an injustice.

White J., based on the specific set of circumstances that were before him, found that in that situation the employees are entitled to pay during the period of layoff. Interesting White J. did state that a right to lay-off without pay could exist where the lay-off was temporary and where a custom and practice existed. Such custom must be reasonable, certain and notorious. No evidence was produced before the Tribunal in relation to the custom and practice of the respondent. However, it can be said that generally throughout this country the custom and practice is that layoff will be without pay. That custom and practice has existed since thecoming into force of the Redundancy Payments Act.

The Tribunal find that when Section 11 is genuinely invoked and the employer satisfied Section 11 (1) (a) and (b) then the contract of employment is temporarily suspended and there is no right to payment during that period. Furthermore, the Tribunal finds that there is a notorious custom and practice in this jurisdiction that employees will not be paid during a period of layoff. Lay-off itself is an instrument of statute.

Sealed with the Seal of the

Employment Appeals Tribunal

This   ________________________

(Sgd.) ________________________

     (CHAIRMAN)