PW664/2012

EMPLOYMENT APPEALS TRIBUNAL

APPEAL(S) OF:                                                                                             CASE NO.

Employee        -           claimant                                                                     PW664/2012

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

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. P. Trehy

heard this appeal in Dublin on 15 November 2013

Representation:

_______________

Appellant(s):

             Mr. Conor Byrne BL instructed by Ms. Ruth Lynch

            for Mr. Richard Grogan, Richard Grogan & Associates, Solicitors,

            16 & 17 College Green, Dublin 2

Respondent(s):

            No legal representation

The decision of the Tribunal was as follows:-

This case came to the Tribunal as an employee appeal under the Payment of Wages Act, 1991, against Rights Commissioner Determination r-106347-pw-11/MMG.

The appellant was a carpenter paid sixteen euro per hour who had started work with the respondent company in October 2009 and who had claimed compensation under the said legislation. He had been out of work from January 2011 after being laid off. It was argued that he had not been paid for short time around late 2010 when he had worked a three-day week and been paid social welfare for the other two days in each week. However, the Rights Commissioner found that the respondent had not violated the payment of wages legislation because temporary lay-off was “an accepted norm” in the construction industry.

An appeal was lodged with the Tribunal on the grounds that the appellant had not been paid while on lay-off and that the lay-off was not lawful.

By way of defence it was queried on behalf of the respondent as to exactly when the appellant’s rights had been breached given that the appellant had got his ultimate P45 in late October 2010. It was challenged that the appellant had worked till mid-January 2011 as alleged to the Rights Commissioner. Also, the respondent echoed the Rights Commissioner’s finding by asserting that lay-off was an accepted norm in the construction industry such that it could not be a breach of payment of wages legislation. It was contended that in June 2010 the appellant had left the respondent of his own volition and gone back to Poland but that he had been rehired in July 2010 on a three-day week only to be laid off on 22 October 2010. It was acknowledged that the appellant had received an award of €1,500.00 under the Terms of Employment (Information) Acts, 1994 and 2001, and an award of €1,202.00 under the Organisation of Working Time Act, 1997, but it was desired that the Rights Commissioner Determination under the Payment of Wages Act, 1991, be upheld.

In a submission on behalf of the appellant it was stated that from 23 September 2010 the appellant had been laid off and that on 12 January 2011 there had been “a formal lay-off”.

Given that the appellant earned sixteen euro per hour it was submitted that his loss for a forty-four hour week was €704.00 such that he had incurred a total loss of €12,108.80 (based on thirteen weeks on a three-day week and twelve weeks at €704.00 per week) and that, unless there was compliance with redundancy legislation, there was no provision for lay-off without pay.

It was contended that there continued to be an obligation on an employer to pay an employee during a period of lay-off and that, whenever it was reasonable for an employee to believe that a cessation of employment would not be permanent, the non-payment of wages during a lay-off period was a deduction which was not authorised by statute, not a term of the employee’s contract nor a deduction consented to by the employee. It was argued that there had been a deduction of as much as one hundred per cent of the employee’s pay and that at the hearing before the Rights Commissioner there had been no evidence that the employer could reasonably have thought that the cessation would be temporary. It was submitted that a company might hold a genuine view that a commercial difficulty would be short-lived but that an accountant might believe that the difficulty would not be temporary particularly as there was near-fatal decline in construction activity in the years around 2009.

It was argued that an employer was entitled to lay off an employee without pay if the lay-off at issue was temporary and if there was a custom and practice which made the employer entitled to lay someone off without pay and if notice was given that the lay-off was temporary.

It was submitted that an employer was entitled to lay off employees for any reason provided that the employer continues to pay them but that a lay-off could be treated as a dismissal if it were carried out without paying the normal agreed wages.

It was stated that Section 11 (1) of the Redundancy Payments Act, 1967, defined a lay-off as when an employer is unable to provide work of the kind which the employee was hired to do but it is reasonable in the circumstances for the employer to believe that he will be re-hiring the employee and notice to that effect must be given to the employee before the lay-off. It was submitted that, apart from limited circumstances, there was no general right to lay an employee off without pay.

It was argued that the laying-off of the appellant had not been temporary but, rather, part of a winding-down of the workforce and that it had led to redundancy such that the period from 23 September 2010 was not one where custom or practice entitled the employer to lay the appellant off without pay.

The point was made on behalf of the appellant that an employer could avoid paying minimum notice to a redundant employee by laying off the employee and waiting for the employee to seek redundancy thus losing all entitlement to minimum notice. The corollary of this was that an employer should prove that it was reasonable to believe that a lay-off would only be temporary.

Regarding custom and practice it was argued that the circumstances where there could be a lay-off without pay were limited and exceptional such that the custom and practice had to be reasonable, certain, clearly established and within the knowledge of the employee to the extent that it could be clearly read into the employee’s contract.

It was submitted that no contract provided for lay-off without pay.

Determination:

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

The Tribunal is satisfied that the appellant voluntarily left his employment in June, 2010 and returned home to Poland. On his return to Ireland in July 2010 he sought employment from his previous employer, the respondent. He was informed that all they could offer him was a three- day week. He accepted this and commenced a new three-day contract on the basis. On 22^nd October, 2010 the appellant was put on lay-off. The appellant returned to Poland in December, 2011 and did not return to his employment in the New Year. The appellant states that he is entitled to be paid for the 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 prior agreement of parties. Lay-off is a creature of statute.

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

“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...,

(b)   …

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

1 (1)  Where after the commencement of this Act 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,

(b)   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 find that it would not be absurd to suggest that a lay-off which gives rise to a cessation of work must by implication also give rise to a cessation of wages.

The respondent was of the belief that the cessation of employment would not be permanent. There was a downturn in the market however they were still getting work albeit less work than before the recession. The work available to the Respondent was on a contract to contract basis. The appellant was not issued with an RP9 in October, 2011 but was informed that he was being placed on lay-off. It is accepted by both parties that he was placed on lay-off at that time. Between 22^nd October, 2011 and December, 2011 the Appellant did not serve an RP9 on his employer and therefore we can only conclude that he too was of the belief that his lay-off period would not be permanent. Therefore, Section 11 (1)(a)and (b) are satisfied.

The question the Tribunal must answer is whether or not by virtue of the employer havinginvoked section 11 of the 1967 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 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 ’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 ‘ 67, 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 JohnLawe 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 notes 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 lay-off 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 an unlawful use of Section 11. The plaintiff contended that the lay-off 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 lay-off was not temporary but formed part of the winding-down of the company and its workforce. The Tribunal finds 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 lay-off. 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. There was no evidence of such procedure 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 lay-off will be without pay. That custom and practice has existed since thecoming into force of the Redundancy Payments Acts.

The Tribunal finds that when Section 11 is genuinely invoked and the employer has 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 lay-off.

The appeal under the Payment of Wages Act, 1991, against Rights Commissioner Determination r-106347-pw-11/MMG fails.

Sealed with the Seal of the

Employment Appeals Tribunal

This   ________________________

(Sgd.) ________________________

     (CHAIRMAN)