ADJUDICATION OFFICER DECISION

Adjudication Decision Reference: ADJ-00001535

Dispute for Resolution:

Date of Adjudication Hearing: 22/06/2016

Workplace Relations Commission Adjudication Officer: Pat Brady

Procedure:

In accordance with Section 41(4) of the Workplace Relations Act, 2015 following the referral of the dispute to me by the Director General, I inquired into the dispute and gave the parties an opportunity to be heard by me and to present to me any evidence relevant to the dispute.

Complainant’s Submission and Presentation:

The issues in this case had previously (February 2015) been the subject of a reference to a Rights Commissioner and agreement was reached between the parties on the payment of €6,000. While the Rights Commissioner assisted the parties to reach agreement no recommendation was issued by the Rights Commissioner.

The claimant expected that this sum would be paid to him gross and without deduction of income tax.

In the event it was not and he says this resulted in some hardship to him.

He submitted extracts from a Revenue Commissioners document ‘Exemption from Income Tax IT71, section 2 which he says underpins his entitlement to have the settlement amount paid tax free.

Respondent’s Submission and Presentation:

The respondent’s submitted that at what it describes as ‘the hearing’ and in respect of the sum agreed ‘it was made clear’ that the payment was a gross payment which would have to be put through payroll and taxed.

However the respondent stated that although there may be some inconvenience in rectifying the situation whether the payment was paid as a gross figure or taxed had no financial implications for it, provided it complied with Revenue requirements.

Conclusions and Findings

I have considered all of the relevant evidence, oral and written that was laid before me before and in the course of the hearing. 

The overriding principle in relation to the taxation of awards is the relatively straight forward one as to whether the relevant payments are in some way the recovery, or otherwise the payment of unpaid wages or not.

If they are, they are taxable If they represent compensation for the breach of a right on the other hand they are not.

I am satisfied that the sum agreed between the parties on this case falls squarely into the second category and meets the requirements of the Revenue Commissioners Guideline ‘IT71’.

In those guidelines provision is made for payment arising out of claims ‘following a formal hearing before a relevant authority’. A Rights Commissioner at the time of the original referral, or under the Workplace Relations Act, an Adjudication Officer is defined as a relevant officer.

The parties have had to return for a decision in this case because no formal decision was made by the Rights Commissioner.

The Revenue Commissioners also address this in Part 4 of the Document IT71 under the heading ‘Out of Court Settlements’.

There it is stated;

‘Claims concerning the infringement of employees’ rights and entitlement and claims concerning employers obligation to employees may sometimes be settled by agreement without referral to a relevant authority. A payment made under such an agreement will also qualify for the exemption where all the following conditions are met’.

In my opinion all the conditions which followed in the document were met in this case.

While the Industrial Relations Act is not included in the ‘examples of a relevant Act’ the list of examples is not exhaustive and it has been the practise of the Rights Commissioners for many years to treat awards of compensation (other than those which represent actual payment of wages) as payable without tax.

There is no sensible basis for excluding it subject to the general principles in IT 71 being strictly observed. It would be contrary to all public policy and the Code of Practice SI 146/2000 to exclude that Act.

Nonetheless for the avoidance of any doubt I will make an award in the case. This is not a fresh or additional award to the claimant, merely a classification of the payment already agreed as being an award ‘by a relevant authority’ (the WRC) to be paid without deduction of tax or, in the alternative a settlement which meets the requirements of the Revenue Commissioners for ‘Out of Court’ settlements. (The practical arrangements for recovering the tax is a matter for the parties).

Either way the sum is not liable to tax.

Decision:

Section 41(4) of the Workplace Relations Act 2015 requires that I make a decision in relation to the complaint(s)/dispute(s) in accordance with the relevant redress provisions under Schedule 6 of that Act.

The figure of €6,000 agreed between the parties meets all of the criteria in IT71 as an exempt compensation and I recommend that the claimant be entitled to payment of the previously agreed sum without deduction of tax.

Dated:   29^th July 2016