EMPLOYMENT APPEALS TRIBUNAL
CLAIM(S) OF: CASE NO.
MN341/2012
William Kelly, - claimant UD394/2012
against
Charles Kelly Limited, - respondent
under
MINIMUM NOTICE AND TERMS OF EMPLOYMENT ACTS, 1973 TO 2005
UNFAIR DISMISSALS ACTS, 1977 TO 2007
I certify that the Tribunal
(Division of Tribunal)
Chairman: Mr M. Gilvarry
Members: Mr. D. Morrison
Ms. A. Moore
heard this claim at Letterkenny on 30th July 2013
Representation:
_______________
Claimant : In Person
Respondent(s) : Mr Tiernan Doherty, IBEC, Floor 3, Pier 1, Quay Street,
Donegal Town, Co Donegal
Determination
The claimant and the managing director (MD) of the respondent are siblings, and this case comes in the context of a history of litigation relating to the company which has been taken as far as the Supreme Court.
While of course this legal dispute is entirely separate to the claim before the tribunal, which is for unfair dismissal and minimum notice, some reference was made to it during the course of evidence from the parties.
The claimant in this case was unrepresented but presented a complicated matter with no small degree of skill, and likewise the respondents’ representative also presented the Company’s case in a skilful and incisive manner.
While a large amount of detailed evidence and submissions were heard by the Tribunal, the case in its essence turns on the status of the claimant.
If the claimant is found to have been an employee of the respondent then his claim will have to succeed as no evidence to justify dismissal was volunteered by the respondent, whereas if he is not it must fail.
The question of whether or not a person is an employee is one which must be decided on the individual circumstances of each case. There are often mixed questions of fact and law Nonetheless some factors are common to many of the decided cases in this area.
Mr Justice Edwards in the case of Minister for Agriculture –v- Barry (2008 IEHC 216) stated “The case of Henry Denny and Sons v Minister for Social Welfare [1998] I I.R. 34 is very instructive. The appellant Ms Mc Mahon worked as a shop demonstrator for Denny she received a daily rate of pay and her contract described her as an independent contractor. The demonstrations were not carried out under supervision and materials were provided by the company. The question arose as to whether Ms. McMahon was employed under a contract of service or a contract for services. The Supreme Court held that in deciding whether a person is employed under a contact of service or a contract for services, each case must be determined in light of its particular facts. In general, a person will be regarded as being employed under a contract of service and not as an independent contractor (a contract for service’s) where he or she is performing service for another person and not for himself or herself.”
In Kirwan –v- TEEU [2005] IEHC 5 Miss Justice Laffoy stated
“The decision in the Denny case was followed by the Supreme Court in Castleisland Cattle Breeding Society Limited v. Minister for Social and Family Affairs [2004] I.E.S.C. 42. In his judgment, with which the other four members of the court concurred, Geoghegan J. stated as follows;
"There is nothing unlawful or necessarily ineffective about a company deciding to engage people on an independent contractor basis rather than on a 'servant' basis but as this Court has pointed out in Henry Denny and other cases, in determining whether the new contract is one of service or for services the decider must look at how the contract is worked out in practice as mere wording cannot determine its nature. Nevertheless the wording of a written contract still remains of great importance. It can, however, emerge in evidence that in practice the working arrangements between the parties are consistent only with a different kind of contract or at least are inconsistent with the expressed categorisation of the contract."
Counsel for the defendant submitted that this case could not be decided by reference to the principles set out in the Denny case. In that case, there was no question but that there was a contractual relationship between the demonstrator and Denny and the only question was whether the contractual relationship was an employer/employee relationship or the demonstrator was an independent contractor. The issue here, it was submitted, is whether there was a contract between the parties at all.”
A company director is an office holder who may also be an employee. In Glover –v- BLN Ltd (1973 IR 388) the features of an office were stated “it is created by Act of National Parliament, charter, statutory regulation, articles of association of a company………and that the holder of it may be removed if the instrument creating the office authorises this.”
It is common case that the claimant and the MD of the respondent worked together for a number of years in the company. The company itself was formed in 1932 and traded successfully and uneventfully for a number of years. It was a building suppliers and hardware company and at its peak employed nearly 100 people sadly now reduced to less than 30 due to the recession.
The claimant has been, for a long period of time, a substantial shareholder in the respondent Company and also a director of the company, commencing in or about the 26th of January 1987.
It appears that he was a director at all material times and likewise a substantial shareholder.
The evidence was given by the claimant and the MD of the respondent who are siblings. Both are qualified accountants but have worked for the company for most of their working lives, in the case of the claimant since 1980 and in the case of the MD since 1984. Each has had three different roles in relation to the company over the years. First, each has been either an employed executive or a self-employed director of the company. On the evidence, it would appear that for most of the period during which they worked in the company, they were referred to and paid as employees of the company. Secondly, they were shareholders of the company, jointly owning almost all the issued share capital of the company. The High Court directed that this be registered in the register of members of the company in accordance with the Court’s finding in a 2010 judgment. Thirdly, they are directors, and from 2004 until the date of the High Court Judgement in 2011, they were the only directors of the company. In that capacity they were paid directors’ fees annually.
Prior to 1992 the shares were held by others but the MD’s evidence was that all decisions were effectively made by the claimant and him jointly. Subsequently they each held 49.99% of the company, with the balance held by a relative.
The High Court by a decision delivered on the 31/08/2011 gave an order that the claimant resign as a director of the company forthwith, and the claimant claims he was dismissed as of that date.
The claimant and the MD had each been paid under two separate PRSI numbers in an apparent effort to distinguish director’s fees from wages, but PRSI had been deducted at employee rate A. The MD gave evidence that he sought to regularise the position as he saw it in 2008 to director’s rate S1, and was successful but the claimant appealed this to the Department and sought and obtained a decision from the Department of Social Welfare that he was an employee for PRSI purposes. However such a determination is only one factor for the Tribunal to take into account in reaching its decision.
A lot of evidence was adduced as to the operation of the company and the interaction of the claimant and the MD. The Tribunal felt it was clear that from 1992 at the latest the claimant and MD were joint owners and directors of the company and even if they had prior to that the status of an employee they were now not employed by the company but were office holders. Neither worked under the control or direction of the other, each set their own hours and took holidays and days off as it suited them to. Neither had a written contract specifying them to be an employee. The operation of dual payment methods and separate PRSI numbers for them is not a factor supporting the contention that the complainant was an employee as it seemed to the Tribunal that the “wages” being paid were effectively payments on account of director’s fees, with the second payment made at a later stage to make up to the total payment for the year. They each were entitled to equal shares in the profits of the company. In all respects save as to the rate of PRSI paid by the claimants they were self-employed as opposed to employees.
The Tribunal therefore finds that the claimant was not an employee of the respondent company and his claim therefore fails and is hereby dismissed.
Sealed with the Seal of the
Employment Appeals Tribunal
This ________________________
(Sgd.) ________________________
(CHAIRMAN)