ADJ-00007345

ADJUDICATION OFFICER DECISION/RECOMMENDATION

Adjudication Reference: ADJ-00007345

Parties:

Complaint(s)/Dispute(s) for Resolution:

Date of Adjudication Hearing: 22/06/2017

Workplace Relations Commission Adjudication Officer: Caroline McEnery

Location of Hearing: The Kilmurray Lodge Hotel

Procedure:

In accordance with Section 13 of the Industrial relations Act. 1969 following the referral of the complaint(s)/dispute(s) to me by the Director General, I inquired into the complaint(s)/dispute(s) and gave the parties an opportunity to be heard by me and to present to me any evidence relevant to the complaint(s)/dispute(s).

Background:

This claim is taken by an Employee of a commercial State Body in relation to a dispute regarding the allocation of shares under the Respondent’s Employee Share Ownership Plan (ESOP).

Complainant’s Submission and Presentation

CA-00009927-001 Industrial Relations Issues:

The Complainant is in dispute with her employer in respect of the allocation of shares under the company ESOP Scheme. The Complainant contends that she has been subjected to grossly unfair and unreasonable treatment in respect of the allocation of shares arising from the fact that she was on reduced working hours between the years 2007 to 2009. The material impact of the application of the reduced share option resulted in a shortfall of 272 shares at a value at that time of €16.39 per share giving a total lost value to the Complainant €4458.96. The Complainant is seeking to be compensated for the lost value involved.

The Complainant has been employed by the Respondent Company for a period of almost 20 years and was originally engaged on a 35 hour per week contract. The origins of this dispute date back to 2005 when the company as part of an internal restructuring decided to move their base of operations. In 2007 The Complainant on returning to work following Maternity leave indicated to the Respondent that given where she resided additional time and mileage required to attend work in the new base were causing difficulty and so she sought to rearrange her attendance times to ease these difficulties. As part of this request the Complainant proposed that she could reduce her 1 hour lunch break to a half hour. The Respondent had facilitated a number of the Complainant’s colleagues with similar arrangements. However in the Complainant’s case the company resisted her attempts to maintain her contracted hours leaving her with no other choice but to take the option of going on reduced hours.

The Complainant signed a new 2 year contract in July of 2007. The contract terms specified that the new working arrangements would be reviewed after 6 months. No such review was undertaken by the company.

The contract confirmed that the Complainant’s salary would be retained on a pro rata basis. The terms of the contract further specified that the entitlement to annual leave would be calculated on a pro rata basis. In addition, the contract further confirmed that the Complainant’s superannuation contributions would be made on a pro rata and that the applicable death in service benefit would be paid pro rata to her salary. However, there was no specific provision in this contract entitling her employer to adversely affect the allocation of shares under the share option scheme.

Following an encounter with the chairman of the Respondent’s Group of Unions who was visiting the area the Complainant took the opportunity of raising with him her concerns that she had been treated less favourably than her colleagues when she had applied for a more flexible working arrangement. The Chairman made immediate representations on the Complainant’s behalf resulting in her returning to her original contracted hours with a half hour lunch break. This is a clear indication by the company that the Complainant had not been treated appropriately in 2007. However the company have remained resolute in relation to maintaining their position in respect of the ESOP Scheme.

The Complainant has thought long and hard about the company position and has come to the conclusion that she has been treated in a grossly unfair manner and ultimately decided to request her union to challenge the company position through a referral to the WRC Adjudication Service. The Complainant’s Union fully support the Complaint’s belief that her employer has treated her both unfairly and unreasonably based on the following

1. The Complainant based on her personal circumstances sought a reasonable accommodation in respect of her working hours.

2. Several of her colleagues had received the benefit of similar accommodations

3. At no stage was she advised that her allocation of shares under the ESOP scheme would be adversely effected by reducing her hours

4. The Part time contract drafted and offered by the employer does not provide for the reduction in the Share allocation

5. The company objections in respect of the flexible working arrangements requested by the Respondent were immediately reversed when the matter was raised by the Chairman of the Group of Unions.

The Complaint contends that there is clear merit in the Complainant’s complaint and requests that a decision is issues in her favour.

On the day of the hearing, the Complainant’s representative stated that although the Complainant’s hours were reduced by her and at her request, the review of her hours did not occur via her line manager in 2007. The Complainant asked via her Trade Union Representative in 2009 to have her hours increased back to her original hours and this was done then.

The dispute is relation to 2007 – 2009 when she was on reduced hours. She got everything pro-rata while she was on reduced hours including shares – which is the matter in dispute.

The key issues in this case is that the Complainant wasn’t aware by taking reduced hours that it would impact on her shares. This was not put to her in writing. The Complainant never wanted reduced working hours. She only ever wanted 35 hours and a reduced lunch break of 30 mins.

Respondent’s Submission and Presentation

CA-00009927-001 Industrial Relations Issues:

Introduction

The allocation of shares to The Complainant under the Employee Share Ownership Plan (“ESOP”) was entirely in accordance with the rules of the ESOP. A copy of the explanatory documentation to the ESOP, which was provided to the Complainant at the time of her acceptance into the ESOP, was submitted to the Adjudicator.

Background to the Company and the Complainant

The Respondent Company is a commercial State Body. The Company employs in excess of 550 employees.

The Complainant commenced employment with the Company on 12 November 1997 in the role of Clerical Officer on a temporary basis and was subsequently made Permanent from 1^st June 2000. She is currently employed as a Data Operations Analyst.

The Employee Share Ownership Plan

Based on extensive discussions from 2005 between the Company, unions and shareholders, the Company and unions entered into a Transformation Agreement as part of the establishment of the ESOP. This Agreement described the 5 year transformation programme which was taking place in the Company over the period 2005 to 2009 (inclusive) and which was expected to deliver a significant net value to the Company. The level of change required under the Transformation Agreement would not have been possible without the commitment and co-operation of the Company’s staff. In recognition of this, the Company put in place the ESOP.

The ESOP is a tax efficient mechanism designed to allow employees of a company build up a shareholding in that company or its parent company. The ESOP at issue in this complaint contains the following two trusts:

(a)      ESOT – Employee Share Ownership Trust: This trust acquires the capital stock on behalf of the participants, holds the capital stock collectively for the required holding period and then passes the capital stock to the APSS trust to be distributed.

(b)      APSS – Approved Profit Sharing Scheme: This is another related trust which is set up to ensure the tax efficiency of the scheme. It receives the capital stock from the ESOT once the required holding period has expired and passes the capital stock onto the participants.

At the date of the establishment of the ESOP in April 2008, transformation savings in respect of 3 years of the 5 year programme had been delivered. Accordingly, following the commencement of the ESOP in 2008, the capital stock equivalent to the value of these transformations was acquired by the ESOT. The balance of the capital stock was then allocated to the ESOT in further tranches, subject to the verification of the agreed transformation changes at later dates.

The qualification criteria in the ESOP’s rules provide that permanent and fixed term employees who had 12 months continuous service with the Company or any wholly owned subsidiary company participating in the ESOP on 1 January 2008 were eligible to participate in the first tranche of the ESOP relating to 2005 to 2007 (and allocated in 2008). Permanent and fixed term employees with 12 months continuous service with the Company or any wholly owned subsidiary participating in the ESOP on 1 January 2009 were invited to participate in the second phase of the ESOP relating to 2008. Permanent and fixed term employees with 12 months continuous service on the Company or any wholly owned subsidiary participating in the ESOP on 1 January 2010 were invited to participate in the third and final phase of the ESOP relating to 2009. The Complainant met the qualifying criteria for all three tranches of the ESOP.

The explanatory documentation to the ESOP provides that all employees, including part-time employees, who met the eligibility requirements were entitled to participate in the allocations on a pro rata basis, pro rata to the hours worked during the period for which the allocation was made. The Complainant was a part time employee for certain of the relevant periods and, accordingly, her allocation was reduced on a pro rata basis in line with the reduction in her working hours.

Background to the Complaint

In 2007, following discussions between the Complainant and her line manager at the time, it was agreed that the Complainant would undertake her role on a part-time basis.   The Company agreed to this request for a period of two years from 16 July 2007 to 15 July 2009. Under this part time contract of employment, the Complainant’s hours of work were reduced from 35 hours per week to 30 hours per week.

On 16 July 2009, the Complainant reverted to her role on a full time basis and once again worked 35 hours per week. In late 2009, the Complainant requested that her weekly working hours be reduced and the Company agreed to this request. From 12 October 2009, the Complainant worked a reduced working week of 32.5 hours per week. Confirmation of this change to the Complainant’s terms and conditions of employment was provided. When the Complainant’s working week was reduced, her salary was also reduced on a pro rata basis.

As set out in the explanatory documentation to the ESOP, part time employees have their allocation of shares under the ESOP calculated on a pro-rata basis in line with their reduced working hours. The Complainant’s allocation was calculated by taking into account the above part time arrangement which she requested from the Company and to which the Company agreed. The Company provided details of the Complainant’s employment to the ESOT, which in turn calculated and allocated her proportionate entitlement to shares based on the employment information provided.

The Complainant was entitled to and received a full share allocation in 2005 and 2006 as she was a full time employee during this time. It was only in 2007 – 2009, when her working hours were reduced, that her share allocation was reduced on a pro rata basis in line with the reduction in her working hours during that period. The fact that her share allocation was less than that of an equivalent full time employee was solely as a result of her part time status and the Complainant was allocated her full entitlement of shares in accordance with the rules of the ESOP during 2007 to 2009.

During 2007 and 2008, the Complainant also took periods of unpaid maternity and parental leave. Under the rules of the ESOP, periods of unpaid maternity, adoptive and parental leave were reckonable for the purposes of the allocation of shares and, accordingly, these periods did not affect the Complainant’s share allocation.

The Company facilitated the Complainant’s requests to reduce her working week due to her family circumstances. The ESOT was provided with her employment information by the Company and the Company is satisfied that the information provided was correct. The ESOT in turn calculated and allocated the appropriate shares to the Complainant based on the employment information provided by the Company. The Complainant sought a reduction of her hours of work in both 2007 and again in 2009, which requests the Company facilitated. It was as a result of the reductions in the Complainant’s working hours alone that the allocation of shares to her under the ESOP was proportionately reduced. Such a proportionate reduction in the allocation of shares was provided for in the rules of the ESOP, which rules were applied consistently and fairly to all employees of the Company.

On 4 June 2014, Head of HR at the Respondent Company met with The Complainant and her Trade Union Representative. At this meeting, The Complainant outlined that she was unhappy that she had not received the full allocation of shares under the ESOP. Following on from this meeting, the Head of HR wrote to the Complainant by letter dated 10 June 2014. In this letter, the Head of HR explained to the Complainant that, in order to be eligible for a full allocation of shares in each of the relevant years, a beneficiary had to be a full time employee during that particular year. His letter went on to state the following:

“As discussed at the meeting you received a full allocation for the years 2005 & 2006. In 2007 you applied for and were granted a part time contract of employment for the period 16^th July 2007 to 15^th July 2009. Accordingly your allocation was applied on a pro rata basis for the years 2007 & 2008 to reflect this reduced working week. In 2009 you reverted to full time work from 16^th July to 11^th October. On the 12^th October 2009 you reduced your hours to 32.5 per week. Again your 2009 allocation was prepared on this basis.

The company accommodated your request to work part time hours due to your family circumstances at that time. You were paid accordingly for the reduced working week.

As discussed at our meeting last week, the Human Resources department is responsible for verifying your employment record. In that regard we have confirmed your employment details to the ESOT, who in turn have allocated the appropriate shares based on that employment record.

You sought and were granted reduced working hours from 2007 to 2009, on that basis there is no merit in revisiting your employment status.”

The Company’s position remains as set out in the above letter. The Company sees no reason why the Complainant should be treated any differently or indeed more favourably than her colleagues, including her part time colleagues, all of whom were also subject to the proportionate reduction in their share allocation in line with the reduction in their working hours.

The Complainant twice requested the Company to facilitate her requests for reductions in working hours, requests which the Company facilitated in both 2007 (for a two year period) and 2009 due to family circumstances. The Complainant cannot now seek to disproportionately or unjustly profit from her decision to move to part time employment in now seeking an entitlement to the full allocation of shares under the ESOP. The Complainant was provided with a copy of the explanatory documentation to the ESOP at the time, this documentation contains a specific provision relating to the allocation of shares to part time employees, is clear and unambiguous and was applied fairly and consistently to both the Complainant and other employees, both part time and full time. To apply more favourable terms to the Complainant alone, by allowing her the full share allocation notwithstanding her part time employment during 2007 to 2009, would be unfair to the other participants in the ESOP and is not a position that the Company could support. The Complainant received her full entitlement for years 2005 and 2006 during which period she was in full time employment, and her full proportionate share entitlement, calculated on a pro rata basis to reflect her reduced weekly working hours, for years 2007 to 2009. There is no further allocation of shares due and owing to the Complainant.

This claim relates to the ESOP which was in place between 2008 and 2010. The Complainant met with the Company on 4 June 2014, three years ago, to outline her unhappiness that she had not received the full allocation of shares under the ESOP. The Company explained the position comprehensively in the Head of HR’s letter of 10 June 2014. In the intervening three years, the Company has undergone a sale and a major corporate restructure during which time the Complainant did not raise the matter with the Company. Accordingly, it would be unethical to allow the Complainant to reopen the matter at this remove.

For the reasons set out above, the Adjudication Officer is respectfully requested by the Respondent to uphold the Company’s position and to reject The Complainant’s claim in its entirety.

On the day of the hearing, the Respondent stated that the Complainant received her entitlement pro-rata to the hours she worked.

There was an agreement to reduce her hours of work for two years and after this she reverted back to her original hours until she requested another reduction from October 2009. Her hours again reverted to her normal full time hours in June 2010 - i.e. 35 hours per week with a reduced lunch break of 30 mins.

The Respondent stated that all part time employees were treated the same. The Respondent claimed that the Complainant had all of the details of the scheme from the outset of the scheme including the information relating to pro rate shares for part time employees.

Legislation

Section 13, Industrial Relations Act, 1969 allows for an adjudication officer to investigate disputes and to make a recommendation accordingly.

Issues for Consideration

The Complainant stated that she did not want reduced hours and that she only wanted to reduce her lunch hour to 30 minutes thus continuing to work 35 hours per week.

The employee did get the shares booklet which included information relating to part time hours and an explanation in relation to pro rata entitlements. This was available in advance of her going on part time hours.

The Complainant also saw that all of her other terms were reduced on a pro rata basis while on part time work.

The shares scheme is very specific for a specific cohort of employees as a benefit for cooperation to a change programme at the time.

The Complainant is aggrieved about the process surrounding the reduction of her hours of work but that is not before me today.

Recommendation

Having carefully considered all of the evidence adduced and based on the issues for consideration as detailed above, I recommend as follows:

This matter is in relation to the Employee Share Ownership Plan of which the terms were clear and fairly applied on a pro rata basis on the hours that the Complainant worked during that period. Therefore I find that the Complainant’s claim fails and I recommend acceptance of the current pro rata system that was applied by the Respondent Company.

Dated:   29/11/17

Workplace Relations Commission Adjudication Officer: Caroline McEnery

Key Words: