Complainant

Respondent

Representatives

Act

Complaint/Dispute Reference No.

Date of Receipt

Complaint seeking adjudication by the Workplace Relations Commission under section 6 of the Payment of Wages Act, 1991

CA-00027146-001

19/03/2019

The Complainant claims that she has been paid less than the amount properly payable to her by the Respondent and that this constitutes a deduction within the meaning of the Payment of Wages Act 1991.

Background

1.       The Complainant commenced employment with the Respondent in July 2008 as a Finance Officer, pursuant to a contract of employment. As appears therefrom, it was an express term of the said contract that she would receive a starting salary of €44,387(pro rata), which is the 3rd point of the HSE Grade V scale, with an increment one year from the day she started.

2.       The Complainant received all increases under the National Wage Agreements from 2008 until 2011. In 2011, the Complainant was asked to take a voluntary pay cut of 5%, which was in keeping with pay reductions taking place in the HSE.

3.       In or around February 2012, she was issued with another contract. It was an express term of that contract that she would receive “a pro -rata salary of €22,958.42 which is a 5% reduction of the pro rate roughly equivalent to the former 5th point of HSE Grade V scale”

4.       Further explanation was given in relation to the calculation of her salary as follows: “Formerly the scale was attached to the Grade V HSE Clerical Scale. This has been reduced by agreement by 5%. The current scale used €40,525 - €49,037(2LSI attached) [long service increments] per annum is calculated using Grade V of the 7 point HSE clerical scale less 5%. In this case, pro rata scales apply - @20,262 - €24,518 (2 LSI attached). You are currently at point 5 of this scale.”

5.       The Respondent’s Staff Handbook, 2014 version, states that the respondent pay scales are “based on Health Sector grades with a 5% reduction as of August 2011 and are adjusted in accordance with agreed national wage agreements.”

6.       In or around 13th September 2017, the Board approved the pay restoration for Admin Grades.   It was also noted in the said Board meeting that the Minister had announced that he had secured additional funding as and from 2018 for the Service.  

7.       On the same date, the Finance Sub group noted in their meeting that “The Respondent employs namely Administrative staff linked to the HSE Admin Grades namely Grades IV, Grade V and Grade VII in their contracts of employment”

8.       The position of the Board is reflected in an email from TS of 18th October 2017 in relation to applying the HSE salary scales as follows:

“In essence, the respondent has maintained the link with the HSE scales since its inception in 2007. The voluntary pay cut in 2011 maintained the link to the scales so no break occurred. Now that the restoration agenda has led to an increase in the HSE payscales, the respondent intend to apply these as a routine matter. As you are aware, the Board of the respondent have approved this…..”

9.       On 5th December 2017, the respondent Manager was instructed by the chairman of the Board to implement the salary increase.

10.   The pay restoration was implemented in December 2017 and was also backdated to April 2017 to reflect the amendments to HSE Admin salary grades. This was re-affirmed during the Board meeting of6th December 2017: “The respondent Board unanimously reaffirmed its decision to implement the renewal of the HSE salary scale for administration staff”

11.   In January 2018, the Complainant’s pay was again increased by 1% to match the HSE Admin Grade salary.

12.   By letter dated 8th May 2018 the Complainant was advised that the Respondent’s funder had taken issue with pay restoration and it was proposed to replace the HSE salary scale with the respondent’ s salary scales, which would be lower. The Complainant did not agree to this.

13.   In October 2018, the HSE Admin Scale was again adjusted by 1% (please see email from the Complainant of 1st October 2018. However, the Respondent refused to implement the said increase in respect of the Complainant and her colleagues. The Board has sought to renege from its previously stated position and to ignore its contractual obligations to the Complainant and her colleagues.

14.   The HSE salary scales are due to increase again in October 2019, by which point there will be a discrepancy of 2.75% between the Complainant’s salary and the HSE salary scale.

Submission

15.   It is submitted that the Complainant’s salary is contractually linked to the HSE Salary Scales. It was not the position, in this case, that public sector pay scales were used as “benchmarks for salary scales” but rather they were expressly linked to the HSE salary scales, as stated in the Complainant’s contract of employment and the Company handbook. This is further established and confirmed by the custom and practice within the organisation, as recognised and affirmed by the Board on various occasions as set out above.  

16.   Section 1 of the Act states:

“wages”, in relation to an employee, means any sums 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, and……

17.   It is submitted that the salary properly payable to the Complainant, under her contract of employment, is that associated with the appropriate HSE Salary Scale.  

18.   In case ref ADJ-00003726, the Adjudication Officer held that “The contract of employment issued to the Complainant is binding in law. The contractual wages outlined in that contract is the amount ‘properly payable’ to the Complainant“

19.   Section 5(6) of the Act states:

“Where—

(a) the total amount of any wages that are paid on any occasion by an employer to an employee is less than the total amount of wages that is properly payable by him to the employee on that occasion (after making any deductions therefrom that fall to be made and are in accordance with this Act), or

(b) none of the wages that are properly payable to an employee by an employer on any occasion (after making any such deductions as aforesaid) are paid to the employee,

then, except in so far as the deficiency or non-payment is attributable to an error of computation, the amount of the deficiency or non-payment shall be treated as a deduction made by the employer from the wages of the employee on the occasion”.

20.   It is therefore submitted that payment of wages to the Complainant that are less than the total amount of wages properly payable to her from October 2018, amounts to a deduction made by the employer within the meaning of the Act.

21.   In the case of Noonan Service Group Limited and Tomasz Sieradzan[1], the Labour Court upheld the Adjudication Officer decision that night shift rates that had been linked to ERO rates must be increased when the ERO increased.

The Complainant raises a complaint under s.6 of the Payment of Wages Act 1991 (‘the 1991 Act’) stemming from her role as Finance Officer within the Respondent’s organisation.

The Respondent raises no issue with the Complainant details and Respondent details as furnished by the Complainant to the WRC as part of her complaint form.

By way of clarification the Respondent sets out the following factual background to the matter:

(i)      The Respondent was established in 2007 and is a company limited by guarantee. It is governed by a Board of Directors and receives the majority of its funding under a Service Agreement with a state agency, the Citizens Information Board.   The Citizen’s Information Board does not have an employer relationship with the Respondent’s staff.

(ii)    The Complainant commenced employment with the Respondent on or about February 2008.

(iii)  The Complainant expressly agreed to a reduction in wages of 5% on 11 January 2012 through the form of a written contract, with said contract to take effect on 1 February 2012. (Appendix 1).

(iv)      The Respondent implemented a voluntary 2.5% restoration in salaries in or around December 2017, with said restoration backdated to April 2017. This restoration was implemented without the approval of the funder.

(v)    The Complainant wrote to the Respondent’s Board of Management on 1 October 2018, seeking further restoration in salaries for herself and two other employees. This correspondence was forwarded to the Funder who advised that the Respondent’s employee’s did not fall under FEMPI legislation.

(vi)   The Respondent wrote to the Complainant and the other two employees on 2 November 2018, explaining that employees’ salaries were not directly aligned to the HSE Salary Scale.  

(vii)    On 19 March 2019, the Complainant lodged a complaint with the WRC.  

Without prejudice to the generality of the foregoing, the Respondent maintains that:

(a)      The Respondent submits as a preliminary issue that the WRC does not have jurisdiction to hear the matter on the basis that the complaint does not concern an “unlawful deduction” pursuant to s5 of the 1991 Act.

(b)      The Respondent submits as a preliminary issue that the WRC does not have jurisdiction to hear the matter on the basis that the complaint concerns a pay restoration and therefore does not fall within the jurisdiction of the 1991 Act.

(c)      Notwithstanding the above, the Respondent submits that the legal principles in this complaint have already been dealt with by the WRC in the decision ADJ-00009700 dated 14 November 2017 and on the basis of the rationale in that decision, the WRC should find for the Respondent.

(d)    Furthermore, the Respondent submits that the language and terminology used in the    Complainant’s contract of employment never directly aligned the Complainant with the HSE salary scale.

(e)   Finally, the Respondent is not a public sector employer and the Complainant is not a public sector employee, therefore, the Respondent submits that it is not statutorily and/or contractually bound to directly align the Complainant’s salary to HSE salary scales.

The complaint does not concern an unlawful deduction from wages

2.1  The Respondent asserts that the complaint does not concern an unlawful deduction from wages pursuant to s5(1) of the 1991 Act as the Complainant expressly consented to the deduction by way of a contract entered into between the Complainant and the Respondent dated 11 January 2012, with said contract to take effect on 1 February 2012.

2.2     At paragraph 2.1 of said contract, it is expressly stated that the Complainant would:

“receive a pro-rata salary of €22,958.42 which is a 5% reduction on the prorata roughly equivalent to former 5th point of HSE Grade V scale”  

2.3    In making this submission, the Respondent relies upon s5(1)(b) and (c) of the 1991 Act, both of    which are applicable to this complaint, which state:

“s5.— (1) An employer shall not make a deduction from the wages of an employee (or receive any payment from an employee) unless— … ( b) the deduction (or payment) is required or authorised to be made by virtue of a term of the employee's contract of employment included in the contract before, and in force at the time of, the deduction or payment, or

(c) in the case of a deduction, the employee has given his prior consent in writing to it.”

2.4    On the basis the Complainant has authorised the deduction by virtue of a term in her contract of employment and/or has given her prior consent in writing to the deduction, the Respondent submits that this complaint does not concern an unlawful deduction from wages pursuant to the 1991 Act and therefore the Respondent submits that the current complaint does not come within the jurisdiction of the 1991 Act and should be dismissed.    

3.     The complaint concerns pay restoration

3.1   The Respondent submits that this complaint concerns a claim for pay restoration as opposed to a pay reduction/deduction and therefore is not a matter that comes within the jurisdiction of the 1991 Act.  

3.2    The Respondent submits that Decision ADJ-00013423 dated 17 December 2018 is relevant in    these circumstances. In that complaint, nine language teachers took a complaint against a language school, pursuant to section 6 of the 1991 Act. Similar to the complaint the subject of these proceedings, the complainants in ADJ00013423 had agreed to a prior pay reduction of 5% and were aggrieved that said pay had not been restored.

3.3      In Decision ADJ-00013423, the Adjudication Officer found that section 41 of the Workplace Relations Act 2015 required that a decision in relation to the complaint be made in accordance with the relevant redress provisions under Schedule 6 of that Act and therefore he was not in a position to uphold the complaint given that the issue raised about “the restoration of the 5% reduction in wages” was an issue which was “not under the Payment of Wages Act”. On the basis that the complaint the subject matter of these proceedings concerns a claim for pay restoration by the Complainant in similar circumstances to Decision ADJ-00013423, the Respondent submits that said claim is not within the jurisdiction of the 1991 Act.

5        The Complainant’s contract of employment never directly aligned the Complainant with the HSE salary scale

5.1    On 1 January 2010, in accordance with the FEMPI (No. 2) Act 2009 a number of pay reduction measures were introduced across the public service, including the HSE.  

5.2   As they are not public sector employees, employees of the Respondent, including the Complainant, did not fall within the scope of this legislation and therefore their salaries were not reduced in 2010 in line with HSE employees. This is clear, undeniable and irrefutable evidence that the Complainant’s salary was not directly aligned to the HSE Salary Scale.

5.3      On 20 January 2011, over a year after the commencement of HSE salary reductions, the Respondent’s Board of Management met and agreed to implement a 5% reduction in salaries for all employees and to issue new contracts reflecting same .

The Respondents Board also agreed at this meeting that the Complainant was to be informed that she would be required in the office for only four days a week. The Respondent submits that there is a clear difference between a 5% pay reduction being applied to all employees as in the Respondent’s case and the FEMPI pay reductions which ranged between 5% and 10% depending on individual salaries and positions. This further bolsters the point that while the Respondents’ employees’ salaries may have been roughly benchmarked against HSE scales, they were not directly aligned to same.

5.4 As outlined at paragraph 2.1 above, on 11 January 2012, the Complainant signed a new contact to reflect her change in working hours and pro rata change in salary with same including an agreement to the salary reduction (Appendix 1). As outlined at paragraph 2.2 above, this contract contained the following statement:

“You will receive a pro-rata salary of €22,958.42 which is a 5% reduction on the pro-rata roughly equivalent to former 5th point of HSE Grade V scale.” (emphasis added)

5.5    The Respondent submits that the wording of the above clause contained within the contract agreed between the parties clearly demonstrates that while the Complainant’s salary was roughly equivalent to the HSE scale, it was not directly aligned with same.  

5.6    On 6 December 2017, the Board of Management of the Respondent met and took the decision to implement a 2.5% increase in salaries. This decision was taken without the knowledge of the funder. The minutes of this meeting (Appendix 9) state that:

“The board hold that [the Respondent] implemented a voluntary pay cut of 5% in 2011 and can implement a voluntary reversal now (which is 2.5%)

5.7     The Respondent submits that these minutes of the Board meeting are clearly reflective of the voluntary decision to both reduce and restore pay without any explicit reference to HSE pay scales and without any requirement to align salary and contractual entitlements directly with the HSE pay scales.  

5.8     Furthermore, the Board of Management of the Respondent, in subsequent correspondence with employees reiterated the stance that employees’ salaries are benchmarked using HSE Salary Scales but are not directly aligned to same.

5.9    Furthermore, the Respondent submits that there is a clear difference to be drawn between the Complainant’s salary and the salary of a HSE Clerical Grade V employee, as is mentioned in the Complainant’s contract.  

5.10    The HSE Clerical Grade V pay scale used as a benchmark by the Respondent is outlined.

5.11   As discussed in more detail at paragraph 6.2 below, the Respondent’s employees, including the Complainant, were not required to increase their working hours in line with HSE employees. Therefore, the Complainant’s hours are based on a pro-rata 35 hours a week rather than a pro-rata 37 hours per week. The Respondent submits that as a result, the Complainant is currently on a higher hourly rate of pay than a HSE employee would be if the HSE employee reverted to 2008 pay of €51,617 per hour.

5.12     The Respondent submits therefore, that based on the entirety of the above, the Complainant’s salary was only roughly benchmarked to the HSE salary scale but was never directly aligned with same.

6          The Respondent is not a public sector employer

6.1      The Respondent is not currently, and never has been, a public sector employer.   As outlined at paragraph 5.1 & 5.2 above, this is best demonstrated by the fact that the various duties and obligations imposed upon public sector employers pursuant to the FEMPI (No. 2) Act 2009 do not apply to the Respondent.

6.2    The Respondent’s independent status from the public sector was further demonstrated on 1 July 2013 when a circular was issued by the Department of Public Expenditure and Reform entitled “Revision of Working Hours and Flexible Working Arrangements for Civil Servants” (Appendix 11). This circular increased working hours for public sector employees, including HSE employees, from 35 hours to 37 hours per week. This increase in working hours was not applied to the Complainant or any other employee of the Respondent, a clear indication that the Respondent is not a public sector employer and is not bound by contractual and/or statutory agreements relating to public sector employers.

6.3    The Respondent therefore submits that it is not and has never been a public sector employer and is therefore not bound by any public sector salary scales including any HSE salary scales.

There is no factual dispute between the parties save for whether or not the respondent pay scale is aligned with that of the HSE.

The Complainant commenced employment with the Respondent in July 2008 as a Finance Officer. It was an express term of the said contract that you will “receive a starting salary of €44,387(pro rata), which is the 3rd point of the HSE Grade V scale”, with an increment one year from the day she started. The Complainant received all increases under the National Wage Agreements from 2008 until 2011. In 2011, the Complainant was asked to take a voluntary pay cut of 5%, which she did. In February 2012, she was issued with a second contract. It was an express term of that contract that she would receive “a pro -rata salary of €22,958.42 which is a 5% reduction of the pro rate roughly equivalent to the former 5th point of HSE Grade V scale”. The words roughly equivalent were not in her previous contract. Further explanation was given in relation to the calculation of her salary as follows: “Formerly the scale was attached to the Grade V HSE Clerical Scale. This has been reduced by agreement by 5%. The current scale used €40,525 - €49,037(2LSI attached) [long service increments] per annum is calculated using Grade V of the 7 point HSE clerical scale less 5%. In this case, pro rata scales apply - @20,262 - €24,518 (2 LSI attached). You are currently at point 5 of this scale.”

I note that in the Staff Handbook, it states that the respondent’s pay scales are “based on Health Sector grades with a 5% reduction as of August 2011 and are adjusted in accordance with agreed national wage agreements.” On the 13th September 2017, the Board approved the pay restoration for Admin Grades.  

I also note from the Finance Sub group meeting notes that “the respondent employs Administrative staff linked to the HSE Admin Grades namely Grades IV, Grade V and Grade VII in their contracts of employment”

The position of the Board is reflected in an email from Mr TS dated 18.10.2017 in relation to applying the HSE salary scales as follows:

“In essence, the respondent has maintained the link with the HSE scales since its inception in 2007. The voluntary pay cut in 2011 maintained the link to the scales so no break occurred. Now that the restoration agenda has led to an increase in the HSE payscales, the respondent intend to apply these as a routine matter. As you are aware, the Board of the respondent have approved this…..”

On 5th December 2017, instructions were given by the Board to implement the salary increases.

The pay restoration was implemented in December 2017 and was also backdated to April 2017 to reflect the amendments to HSE Admin salary grades.  

In January 2018, the Complainant’s pay was again increased by 1% to match the HSE Admin Grade salary.

Then in a letter dated 8th May 2018 the Complainant was advised that the Respondent’s funder had taken issue with pay restoration and it was proposed to replace the HSE salary scale with the respondent’s salary scales, which would be lower. The Complainant did not agree to this.

In October 2018, the HSE Admin Scale was again adjusted by 1% (please see email from the Complainant of 1st October 2018. However, the Respondent did not implement this increase.

Section 5.—(1) An employer shall not make a deduction from the wages of an employee (or receive any payment from an employee) unless—

(a) the deduction (or payment) is required or authorised to be made by virtue of any statute or any instrument made under statute,

(b) the deduction (or payment) is required or authorised to be made by virtue of a term of the employee's contract of employment included in the contract before, and in force at the time of, the deduction or payment, or

(c) in the case of a deduction, the employee has given his prior consent in writing to it.  

It is clear that the complainant consented to the 5% deduction in 2011. The issue I am asked to decided is whether or not the non- implementation of the pay increase in October, 2018 is in breach of the Act.

It is very clear from all the documentation submitted by both the complainant and the respondent that up until May, 2018 the respondent’s pay scales were aligned with that of the HSE. It appears in the contracts, it is stated in correspondence and in Board meeting minutes. Even the letter of the 8th May, 2018 states that the respondent intended to replace the HSE salary scale with their own scale. That letter itself acknowledges that the pay scale used by the respondent is that of the HSE. On that basis I find that the complainant’s pay should have been increased in October, 2018 and therefore the respondent has breached Section 5 of the Act.

The complaint is well founded.

The complaint is well founded. The complainant’s pay should be adjusted by 1% in line with the HSE admin scale and back dated to October 2018.