Complainant

Respondent

Anonymised Parties

A Forensic Accountant

A Professional Services Company

Act

Complaint Reference No.

Date of Receipt

Complaint seeking adjudication by the Workplace Relations Commission under Section 8 of the Unfair Dismissals Act, 1977

CA-00024903-001

09/01/2019

The complainant is a Chartered Accountant who was recruited by the respondent to a specialised position as ‘Head of Forensic Accounting’ in July 2017 but who commenced employment on September 1st 2017.

She moved to work on a part-time basis from July 2018.

In September 2018 the respondent made her redundant. She complains that she was unfairly dismissed.

The company undertakes work related to insolvency and the complainant was recruited to develop and expand a forensic accounting service.

However, it transpired that here was actually very little of this work and the complainant only undertook one specific forensic accounting assignment.

The respondent company was incurring significant losses requiring the owner to invest a significant amount of his personal money (approximately €80,000) to keep the business trading.

In June 2018 the respondent’s own external auditor raised questions about the viability of the forensic accountancy function and did so again on two occasions in August.

Following the second of these it was decided to make the complainant’s role redundant.

In terms of the possible alternatives available to making the complainant redundant, none of these were realistic, either because those alternative roles in the company were paid at a significantly lower rate than the complainant or had different and much lower level functions, such as simple data entry.

The company owner gave direct evidence related to the trading difficulties. He confirmed the personal investment of €85,000 and stated that he only drew a small salary of €25,000 approximately. Evidence was also given of the refusal by the respondent’s bank to grant credit facilities sought; a facility was eventually arranged elsewhere on the basis of a personal guarantee from the witness.

He rejected the suggestion that an alleged ethical issue raised by the complainant had any bearing on his decision to make her redundant. In fact, he fully supported the reservation she had expressed about the particular project and told her she did not have to sign the report which gave rise to her concern.

Indeed, he had no issue with any aspect of the quality of her work and praised it.

When he met the complainant on September 3rd, 2018 he told her of the decision to close down the forensic accounting service but did say he would review it with the auditor. The auditor’s reaction was to ask why it was being raised again; with the implication that there was no choice but to proceed as originally agreed.

The witness also advised the complainant that the business in general had sustained losses of €50,000 in the period to February 2017, that this continued after that and that no profit was being generated by the forensic accountancy service.

They also discussed the other relevant financial indicators such as wages, turnover and his own reduced income.

Regarding other options, if other employees had to be considered for redundancy he would have had to make two and a half jobs redundant to achieve the same saving.

There were no other roles within the company suitable for the complainant.

There was an appeal which was heard on October 24th.

The witness also heard that appeal by the complainant. The appeal had been made on the grounds that she was being dismissed for her ethical objections in the case referred to above and for availing of her rights under the legislation.

The respondent has not offered the service in which the complainant was involved since her departure and the company website has been edited to remove it so the function is not part of the company services.

The respondent set out a comprehensive statement of its general financial position, including the turnover attributable to the forensic accountancy service, profit and losses, and the other factors already described.

In conclusion the respondent says that the termination was lawful and fair and attributable only to the redundancy of the complainant.

The complainant says that she had always undertaken some forensic accounting work.

She expressed professional and ethical concerns about the completion of one piece of work and advised the Managing Director (the witness above) of these concerns and of her position which was that she would not be able to complete the report.

There was a gap of some weeks as a result initially of the absence of the MD on leave for two weeks and then a period of three weeks’ parental leave of her own followed by an office closure for a week.

It was after this that she was informed of the redundancy.

She was invited to a meeting without notice as to its purpose and told of the redundancy. She believes that this was attributable to her refusal to complete the report referred to about which she had the ethical concerns.

The complainant also says that there should have been a greater level of consultation about the redundancy and this did not happen because a decision had been made to terminate her employment and contrive the redundancy. She had not been given any advance warning that her position was at risk of redundancy.

Had there been better consultation the complainant would have been willing to undertake other duties, apart from those for which she had been specifically recruited, and some appointments were made by the company which she could have undertaken. She could also have worked fewer hours.

The appeals process was not independent and was heard by the MD who had made the original decision.

The Redundancy Payments Acts 1967 to 2007 provide the legislative basis for assessing redundancies. A valid redundancy situation is deemed to have occurred where a dismissal occurs "wholly or mainly" from one of the following situations:

1.       Where an employer has ceased or intends to cease to carry on the business for the purposes for which the employee was employed by him or has ceased or intends to cease to carry on that business in the place where the employee was so employed.

2.       Where the requirements of the business for an employee to carry out work of a particular kind, in the place where he was so employed, ceased or diminished, or are expected to cease or diminish.

3.       Where an employer has decided to carry on the business with fewer or no employees, whether by requiring the work for which the employee had been employed, (or had been doing before his dismissal) to be done by other employees or otherwise.

4.       Where an employer has decided that the work for which the employee has been employed should henceforth be done in a different manner for which the employee is not sufficiently qualified or trained.

5.       Where an employer has decided that the work for which the employee has been employed (or had been doing before his dismissal) should henceforth be done by a person who is also capable of doing other work, for which the employee is not sufficiently qualified or trained.

It should be noted that a redundancy will not be a valid defence to a claim for unfair dismissal in circumstances where there are inadequacies in the selection process or where the redundancy is not a genuine redundancy situation:

In this latter situation the concept of a ‘disguised’ redundancy, or a dismissal ‘under the cloak of redundancy’ is well recognised legally. (See JVC Europe v Panisi [2011] IEHC 279) and the terms are self-explanatory.

In other words, where the termination of the employment cannot be said to not fall within one of the definitions above there is a likelihood that it will be an unfair dismissal.

In this case there were competing arguments as follows.

The respondent says that the termination was a valid redundancy and falls within point 1 above;

‘Where an employer has ceased or intends to cease to carry on the business for the purposes for which the employee was employed by him, or has ceased or intends to cease to carry on that business in the place where the employee was so employed’

The complainant, in making the case that her dismissal was unfair relied heavily, perhaps even exclusively on the incident where she declared an ethical objection to signing off on a particular project.

Because of her own and then the business owner’s absence on leave, and the closure of the office for a week there was a gap of some six weeks between the ethical objection and the announcement of the redundancy leading the complainant to link to two events as proximate cause and effect.

In her submission she stated

‘that she was dismissed because she refused to complete the independent forensic accounting report’

There are a number of problems with this submission.

In the first place, the direct evidence of the respondent was that he had no disagreement with the complainant’s position on the project concerned, nor indeed in general with the standard of the complainant’s professional work.

Evidence was submitted of a thread of emails between the complainant and respondent which contain no indication of disapproval on the part of the latter about the complainant’s actions.

Reliance on this argument places the complainant on weak ground. In the circumstances it appears to be a straw grasped by the complainant and no more than that.

Then there is the extensive evidence regarding the financial situation in the company which I accept.

The respondent’s bank refused to advance the credit facility sought by the respondent on the basis that ‘we do not see clear evidence from how you are operating your finances that you can repay the credit’.

(Letter from bank of April 24th 2018).

There was further evidence in relation to the substantial personal loan provided by the witness to the company.

Therefore, I am in no doubt that the economic grounds advanced for the redundancy are credible and real and that the company had been experiencing them for quite some time.

Similarly, while the procedures followed by the respondent left room for improvement there was no practical basis on which alternative employment on the basis of some sort of redeployment was realistic, although the complainant did indicate that she would have been willing to further reduce her hours of work.

Looking further at those procedures, the complainant argued that there was no consultation or ‘at risk’ stage in the process. She was called to a meeting on September 3rd 2018 and advised of the redundancy, and then rather confusingly told by her employer that he would talk to the accountant again, although it was quite clear to him that doing so would change nothing.

On the one hand this represented a superficial element of willingness to review, although in reality it had no prospect of success; a fact accepted by the respondent at the hearing.

She appealed the decision, stating as grounds the ethical objection issue referred to above, and that a genuine redundancy did not exist.

The respondent referred to the appeal as an ‘opportunity to have further consultation with the company and for the company to review issues you have with the redundancy’.

A report of the ‘appeal’ meeting shows that there were detailed exchanges about the company’s financial position, staff costs, cash flow profit forecasts etc. The outcome was that the redundancy was confirmed.

The complainant criticises this on the basis that it was not an independent appeal, as it was chaired by the MD who had made the original decision.

There are some differences between a disciplinary process and a redundancy process. They have in common that they must both be infused with the principles of procedural fairness which are well understood.

In the case of redundancy, this initially requires that there be a genuine redundancy which meets the criteria set out above, and that this is followed by a fair selection process.

However, they differ in that the nature of the judgments to be made is different, once a true redundancy situation is established. Opinions will vary in a disciplinary process on the appropriateness of a sanction, for example, and a second opinion on this at the appeal stage is important as to whether a initial sanction is proportionate, for example, and whether mitigating factors were properly considered.

In other words there is a wider room for the exercise of discretion and for the possibility of error or unfairness.

Where there are strong economic factors influencing the redundancy process (and where these are not disputed) the room for discretion at an appeal level are quite different. The options open to the decision maker is obviously fettered by those economic factors.

The respondent argued that as this was not a disciplinary process the requirement to have an ‘independent appeal’ does not apply.

In a small business there may be serious practical difficulties in severing the decision-making process so that there is clear water between an initial decision maker (who in respect of a major decision such as this may have to be an MD or Chief Executive) and an appeal stratum, which may also have to be the only person with authority to reverse the first decision, possibly also the MD.

This is a dilemma, especially in a disciplinary process. Many businesses resort to what are essentially superficial and cosmetic separation of the decision making in an attempt to avoid breaching fair procedure requirements.

Such an appeal cannot easily be contracted out to a third party who has no actual authority to tell the business how to manage its affairs (other than if they consent to it), or who may only make recommendations which may leave a complainant no better off.

In this case, the report of the ‘appeal’ meeting indicates that a very detailed review of all of the options took place; it lasted thirty-nine minutes. In the course of it the MD told the complainant that ‘she was an excellent accountant and one of the best he had worked with’.

The consultations with the complainant could have been better handled; there seems to have been an element of panic in play.

Nonetheless, I find that the requirements for a lawful redundancy were present, that they resulted ‘wholly or mainly’ from the factors set out above and as required by the Redundancy Payments Acts.

I find that there is no evidence to support the complainant’s attempted linkage of the ‘ethical issue’ to her termination.

I do not find that the procedural defects alleged by the complainant are sufficient to ground her complaint and accordingly, her complaint fails.

For the reasons set out above I do not uphold Complaint CA-00024903-001 and it is dismissed.

Unfair dismissal, redundancy.