PWD206

This is an appeal by Crosswood Developments Ltd., the ‘Respondent’, of a decision by an Adjudication Officer, ‘AO’, of the Workplace Relations Commission, ‘WRC’, under the Payment of Wages Act 1991, ‘the Act’.

The AO decided that Mr. Ryan, ‘the Complainant’, was an employee of the Respondent for an 11 week period between 11 December 2018 and 27 February 2019 and that the failure to pay him wages for that period was a contravention of s. 5 of the Act. The AO directed that the relevant sum of €32,300 in respect of this period should be paid by the Respondent.

In November 2018, it was agreed between the Complainant and Mr. Brendan Kavanagh, Director of the Respondent, that the Complainant would become CEO of the Respondent. The Complainant presented himself at the Respondent’s premises on 11 December 2018. On 14 January 2018, the in-house Solicitor, Mr. John King, presented the Complainant with a draft contract of employment with a proposed salary of €150,000 p.a. It is common cause between the parties that the Complainant raised issue with the fact that the contract was for a one year fixed term period. The Complainant presented Mr. King with an alternative draft contract that would involve him being engaged by the Respondent as a consultant rather than as an employee. Discussions took place, in the course of which Mr. King indicated on behalf of the Respondent an unwillingness to agree to the Complainant’s proposal due to concerns regarding taxation.

The Complainant did not sign a contract of employment.

On 27 February 2019, the Complainant was advised by Mr. King that the board had decided to ‘leave it’, which, on clarification, meant that the Respondent was terminating the relationship with the Complainant.

It is the Respondent’s position that, in the period concerned, the Complainant was not an employee and was not covered by the terms of the Act.

The Complainant brought a claim under the Act to the WRC and this is an appeal by the Respondent of the AO decision.

As a preliminary point, the Court noted that the name of the Respondent in the appeal documents was incorrect, which the Respondent explained was due to clerical error. The Complainant’s representative accepted that it was clear from the documentation provided which case was under appeal and raised no objection to the Respondent’s request that this be amended. The Court granted this request.

Summary of the Respondent’s arguments

Section 5 of the Act provides that an employer may not make a deduction from the wages of an employee, except in limited circumstances that are not relevant to this case. That section defines an employee as a person who is party to a contract of employment. The Complainant was not an employee as he refused to conclude a contract of employment with the Respondent. There was no contractual relationship between the parties. As a result, the Complainant has no entitlement to the protections of the Act.

Summary of the Complainant’s arguments

It is accepted that the Complainant did not sign a contract and that he had put a counter proposal to carry out the functions concerned through a consultancy arrangement. However, he had a verbal agreement with the Director of the Respondent that he would become an employee on a salary of €150,000 p.a. He commenced employment on 11 December 2018 and carried out all relevant duties until his employment was terminated on 27 February 2018.

As an employee, he was presented with a proposed written contract of employment on 14 January 2019. While he had sought to become a consultant, this was rejected by the Respondent and he remained an employee at all relevant times. As such, he was entitled to be paid his wages.

Note: Extensive case law was cited on the difference between a contract of service and a contract for services that, for reasons explained below, it is not necessary to set out here.

Witness evidence

Mr. Brendan Kavanagh

Mr. Kavanagh is Director of the Respondent.

He gave evidence that the Complainant and himself were friends and that, when the Complainant had brought a client in, they had discussed the Complainant joining the company. He said that, initially, the Complainant had come in to look at the company until going on holidays after Christmas. They had then discussed his contract upon the Complainant’s return in early January.

The witness stated that the Complainant had engaged with staff, had identified a need to ensure that all staff had contracts and had engaged an outside company to draw these up.

The witness stated that it was his intention that the Complainant would become an employee but that it had not been possible to agree his contract.

With regard to a section in the Complainant’s submission that he had attended a conference in London on behalf of the company, the witness said that, in fact, the Complainant had attended for one day only at the request of the witness in order to meet some people.

Under cross examination and questions from the Court, the witness accepted that the Complainant had received a company e-mail address from 11 December, that he had received a lap-top and keys to the premises within days, that he had received details of clients and had been given access to the company’s finances in that period. However, he regarded the period prior to Christmas as a period in which the Complainant was gathering information prior to commencing work for the company. He stated that final agreement on the Complainant coming to work for the Respondent was reached in the days immediately after Christmas, prior to the Complainant going abroad on a week’s holiday.

Under questioning, the witness accepted that, prior to Christmas, the Complainant had identified the need to provide all staff with contracts and had participated in a meeting with an outside company in order to ensure this.

With regard to the period from the beginning of January onwards, the witness said that he would have liked to ensure that the Complainant was paid for his services but there was not a legal context to do so. The witness felt that there was a need to clarify the ‘platform’ for payment.

The witness did not accept that the Complainant had carried out the full range of CEO duties for 11 weeks as a lot of the time was spent fact-finding. When it was pointed out that the Respondent’s submission referred to the Complainant as having presented for work on 11 December 2018, the witness said that the Complainant was a friend whom he had invited to come in and get to know the business before they agreed, shortly after Christmas, the terms under which the Complainant would come into the company.

The applicable law

Payment of Wages Act 1991

Interpretation

contract of employment” means—

( a) a contract of service or of apprenticeship, and

( b) any other contract whereby an individual agrees with another person to do or perform personally any work or service for a third person (whether or not the third person is a party to the contract) whose status by virtue of the contract is not that of a client or customer of any profession or business undertaking carried on by the individual, and the person who is liable to pay the wages of the individual in respect of the work or service shall be deemed for the purposes of this Act to be his employer,

whether the contract is express or implied and if express, whether it is oral or in writing;

“employee” means a person who has entered into or works under (or, where the employment has ceased, entered into or worked under) a contract of employment and references, in relation to an employer, to an employee shall be construed as references to an employee employed by that employer; and for the purpose of this definition, a person holding office under, or in the service of, the State (including a member of the Garda Síochána or the Defence Forces) or otherwise as a civil servant, within the meaning of the Civil Service Regulation Act, 1956, shall be deemed to be an employee employed by the State or the Government, as the case may be, and an officer or servant of a local authority for the purposes of the Local Government Act 2001 (as amended by the Local Government Reform Act 2014) , a harbour authority, a health board or a member of staff of an education and training board ] shall be deemed to be an employee employed by the authority or board , as the case may be;

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.

(2) An employer shall not make a deduction from the wages of an employee in respect of—

(a) any act or omission of the employee, or

(b) any goods or services supplied to or provided for the employee by the employer the supply or provision of which is necessary to the employment,

unless—

(i) the deduction is required or authorised to be made by virtue of a term (whether express or implied and, if express, whether oral or in writing) of the contract of employment made between the employer and the employee, and

(ii) the deduction is of an amount that is fair and reasonable having regard to all the circumstances (including the amount of the wages of the employee), and

(iii) before the time of the act or omission or the provision of the goods or services, the employee has been furnished with—

(I) in case the term referred to in subparagraph (i) is in writing, a copy thereof,

(II) in any other case, notice in writing of the existence and effect of the term,

and

(iv) in case the deduction is in respect of an act or omission of the employee, the employee has been furnished, at least one week before the making of the deduction, with particulars in writing of the act or omission and the amount of the deduction, and

(v) in case the deduction is in respect of compensation for loss or damage sustained by the employer as a result of an act or omission of the employee, the deduction is of an amount not exceeding the amount of the loss or the cost of the damage, and

(vi) in case the deduction is in respect of goods or services supplied or provided as aforesaid, the deduction is of an amount not exceeding the cost to the employer of the goods or services, and

(vii) the deduction or, if the total amount payable to the employer by the employee in respect of the act or omission or the goods or services is to be so paid by means of more than one deduction from the wages of the employee, the first such deduction is made not later than 6 months after the act or omission becomes known to the employer or, as the case may be, after the provision of the goods or services

Deliberation

This is not a case in which the Court is required to consider whether the Complainant was engaged on a contract of service or on a contract for services. The Respondent refused to enter into a contract for services with the Complainant, declined to pay a number of invoices submitted by him and sought to regularise his position on a contract of service. The Respondent is not seeking to rely on any assertion that a contract for services existed. Submissions that dealt with this issue are, therefore, of no relevance to the Court in determining if the Complainant’s rights were breached under the Act.

The Respondent accepts that, from January on, the Complainant carried out work in the CEO role but argues that, by declining to sign a contract of service, his status falls into a third category in which no contractual relationship existed between the parties. In support of this novel argument, the Respondent stated that an agreement between the parties is a necessary pre-condition for any contract and that the unwillingness of the Complainant to sign the proferred employment contract meant that he could not be considered to be an employee and thus have entitlements under the Act.

The Act makes clear that a contract of employment does not require a written agreement. It is not necessary for an employee to have a written contract in order to be an employee. What is required is an agreement to perform work personally for a third party who is not a client or a customer. That agreement can be implied or expressed and can be oral or written. The fact that the Respondent accepts that work was carried out on behalf of the Respondent company by the Complainant from early January and the fact that the Respondent company itself declined to enter into a contract for services, as it was entitled to do in the circumstances, makes the Court’s deliberation in respect of that period quite straightforward and self-evident. The Complainant was, quite simply, entitled to be paid in accordance with the Act.

With regard to the period from 11 December until early January, the Respondent accepts that the Complainant identified a need for contracts of employment to be provided to all staff and participated in engagements with an outside company to ensure that this happened . These actions constitute work for the Respondent consistent with the role of CEO. As the Respondent was not a client or customer under a contract for services, the Complainant must necessarily, have carried out this work in the role of employee, for which the Complainant is entitled to be paid. Contrary to the novel argument put forward by the Respondent, there is no third category on which the Respondent can rely. In effect, the Respondent is seeking to claim that the Complainant ought to have had no expectation of payment for this period while he was ‘fact finding’. This amounts to a claim of the provision of voluntary labour, for which claim no substantive evidence was provided.

It is not in dispute that there was agreement on a rate of remuneration of €150,000 p.a. That is the rate at which the Complainant was entitled to be paid under the Act for the period during which he acted as an employee of the Respondent.

The AO was correct to direct that the Respondent must pay the Complainant a sum of €32,300.

Determination

The decision of the Adjudication Officer is upheld.

Signed on behalf of the Labour Court



Tom Geraghty
CO'R______________________
29 January 2020Deputy Chairman



NOTE

Enquiries concerning this Determination should be addressed to Clodagh O'Reilly, Court Secretary.