Complainant

Respondent

Parties

Padraic Hanley

PBR Restaurants Limited

Representatives

Keans Solicitors

Peninsula Group Limited

Act

Complaint Reference No.

Date of Receipt

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

CA-00040519-001

Withdrawn

21/10/2020

Complaint seeking adjudication by the Workplace Relations Commission under section 27 of the Organisation of Working Time Act, 1997

CA-00040519-002

21/10/2020

Complaint seeking adjudication by the Workplace Relations Commission under section 7 of the Terms of Employment (Information) Act, 1994

CA-00040519-003

21/10/2020

Complaint seeking adjudication by the Workplace Relations Commission under section 13 of the Industrial Relations Act, 1969

CA-00040519-004

Withdrawn

21/10/2020

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

CA-00040519-005

21/10/2020

In August 2008, the complainant set up a business which, by 2019 was made up of five restaurants and a mobile takeaway at various Dublin locations.  In August 2019, the company went into examinership and in December that year, it was acquired by a holding company and exited examinership under new directors.  Two of the restaurants were sold and the business then comprised three restaurants and a takeaway.  This is the respondent in this complaint.

One of the outcomes of the examinership process was that the complainant’s shares transferred to the holding company, he resigned as managing director and he became the general manager, reporting to two directors of the holding company.  At the opening of the hearing, the parties agreed that the complainant’s annual salary from December 9th 2019 was €71,500.  Prior to the examinership, his salary was €97,500.

On March 19th 2020, restaurants across the country were closed due to the Covid 19 pandemic and the complainant was placed on temporary layoff.  In June, the directors commenced a review of the business, and by August, a decision was made that the role of general manager was no longer required.  On August 20th 2020, the complainant’s employment was terminated due to redundancy.  The complainant’s case is that his job was not redundant and that his dismissal was unfair.  He also claims that, in breach of section 15 of the Organisation of Working Time Act 1997 (“the OWT Act”) he worked in excess of 48 hours every week.  Lastly, he claims that, in contravention of section 3 of the Terms of Employment (Information) Act 1994 (“the 1994 Act”), he was not given a written statement of his terms and conditions of employment.

The respondent argues that the complainant is prevented by section 2(1)(a) of the Unfair Dismissals Act from pursuing a complaint of unfair dismissal, because he has service only from December 9th 2019, which is when the company emerged from examinership.  It is the complainant’s case that he was an employee from August 2008.  A preliminary issue arises therefore, in respect of the complainant’s length of service and whether he was an employee or a self-employed person from August 2008 until December 2019.  I will consider this in the first instance, before moving on to consider his specific complaints.

As a useful reference on the issue of employment status, I acknowledge Kevin Langford’s article published in the Commercial Law Practitioner 1998, 5 (3) titled “The Classification of Workers:  Employees and Independent Contractors.”

Addressing the issue of his employment status, Dr Kean said that from the time he founded the company in 2008, the complainant was an employee and he reported to a board of directors.  There were three directors; the complainant, who was the managing director, an accountant who was also the company secretary, and a third person, a chef.  While the complainant was the managing director, Dr Kean said that his salary was paid by the company and he paid tax as a PAYE worker.  His PRSI contribution class was S1.  The complainant said that a company director owning more than 15% of shares in a company is required to pay PRSI at class S1.  Following the examinership, from January 2020, he paid PRSI at class A1. 

In his written submission, the complainant outlined the development of his business from August 2008, when he and two co-directors opened their first restaurant.  In 2010, they opened a second restaurant and by 2019, they had six outlets.  At one stage, 95 people were employed and they had an annual turnover of almost €5 million.   Arguing that he was an employee from 2008, the complainant said that he turned up for work every day and he employed an accountant on a contract basis.  He received an annual salary of €97,500.  He took holidays and sick leave and he was provided with a laptop and a company car.  He said that he made no decisions about his salary without consulting his co-directors.

Dr Kean submitted that the complainant’s status is protected by the European Communities (Protection of Employees on Transfer of Undertakings) Regulations 2003 (TUPE).  He argued that he was an employee before the sale of his shares to the holding company, and that he continued as employee following the sale.

In response to questions from Mr Treanor, the complainant said, “I was an employee, who happened to be the managing director.”  He said that, when he was the managing director, some of the employees were given contracts of employment, but that he didn’t issue a contract to himself.

It is evident from the jurisprudence that there is no specific test for determining the employment status of an individual whose status is in dispute.  From the outcome of the High Court decision in Minister for Agriculture and Food v Barry [2008] IEHC 216, we know that all the tests are potential aids for identifying the nature of the working relationship and that no single test is definitive.  To determine therefore, if the complainant falls under the heading of an employee or a self-employed director, I intend to examine what I consider to be the critical components of his relationship with the company he founded in 2008 and where he was the managing director until it went into examinership in August 2019. 

Mutuality of Obligation

In every enterprise where people are employed, on one side is the employer and on the other are the employees, reflecting the “master-servant” relationship as it was described in the past.  The principle of “mutuality of obligation” recognises this relationship as one where the employer provides work and directs how it is to be carried out and, in return for an agreed wage, the employee does the work.  In the UK Court of Appeal case of Nethermere (St Neots) Limited v Gardiner and Another [1984] ICR 612, Lord Justice Stephenson referred to the “…irreducible minimum of obligation on each side to create a contract of service.”  While that case addressed the difference between a contract of service and a contract for service, the “mutuality of obligation” theory has some relevance for our purposes here. 

It is apparent that, between an employer and an employee, there is a relationship of obligation between the two.  In the case under consideration, Dr Kean asks me to find that, when he was the managing director, the complainant was an employee, leaving open the question, who was the employer?  Alternatively, I am asked to find that the managing director was both the employer and an employee.  Dr Kean argues that, from 2008, the complainant was employed under a contract of service.  Stephenson LJ’s “irreducible minimum of obligation on each side” is contingent on the employer being in a position of power (“the master”) to offer work to a person willing to carry it out.  The question arises therefore:  who offered the work of managing director to the complainant?  Clearly, the answer is as bizarre as the question.  In the role of employer, the master cannot also occupy the position of servant, otherwise, who is there to give direction and make decisions about how the work is to be done?

From my enquiries into this matter, I find that the complainant did the work of the managing director and his co-directors did other work and that, in collaboration, they expanded from one restaurant in 2008 to six outlets by 2018.  There is no evidence that the complainant took instruction from the other directors or from any other person and, as the managing director and majority shareholder, one would assume that he had the final say regarding business decisions.  I find that the complainant and his co-directors shared the responsibility of providing work for the 95 employees in their business.  While he may have paid himself and had tax deducted through the PAYE system, it is my view that, as the person with an obligation to provide work for others, he was an employer and not an employee.

The Enterprise Test

It is evident that the complainant and his co-directors were in business on their own account.  This is the basis of the enterprise test; if the business had done well, the directors were on course to profit; however, as they expanded their enterprise, they increased their exposure to financial risk, ending eventually in examinership.  The burden of financial risk is not carried by employees and employees do not make decisions about opening new outlets and taking leases on buildings.  These and other commercial decisions including who to employ and how much to pay them were made by the complainant and his co-directors.  This “economic reality” (U.S. v Silk [1946] 331 U.S. 704) points to the complainant’s role as the head of an enterprise, and not as an employee shielded from the vicissitudes of commercial life.

Contract

From the time he founded the company in 2008 and, until it went into examinership in 2019, the complainant did not issue himself with a contract of employment, or with a statement setting out his terms and conditions of employment.  He said that some of the people he employed were issued with contracts, but he did not say why one employee got one and another did not.  No letter or any other document was produced that showed that he was to work for an agreed wage or that he would have benefits such as holidays, sick pay or pension.  No information was provided that confirmed his start date, his hours or his place of work.  He received none of the standard information that is normally provided to employees such as a health and safety policy or a grievance and disciplinary procedure.

Control

In examinations of whether an individual is employed on a contract for service or a contract of service, the control test is not as significant as it once was; however, it retains some relevance for an enquiry into the status of an employee versus a self-employed director.  This test is concerned with the determination by an employer regarding how and when work is to be done and the standard according to which it is to be done.  The nature of the control in the employment relationship was examined in the High Court of the UK in 1968 in the case of Ready Mixed Concrete (South East) Limited v Minister of Pensions and National Insurance [1968] 2 QB 497.  Finding that the owner and driver of a cement truck, Mr Latimer, was not an employee but “a small business man” MacKenna J provided this insight into the relationship of control:

“Control includes the power of deciding the thing to be done, the way in which it shall be done, the means to be employed in doing it, the time and the place where it shall be done.  All of these aspects of control must be considered in deciding whether the right exists in a sufficient degree to make one party the master and the other his servant.”

Regarding the complainant here, no evidence was submitted that showed that his co-directors, or any other person, exerted control over his work and it is apparent that he decided how, when and where it was to be done.  No evidence was produced to the effect that he was in a relationship where he was subordinate to his co-directors or that he was supervised in the manner in which he carried out his work. 

Code of Practice for Determining Employment or Self-Employment Status of Individuals

(https://www.revenue.ie/en/self-assessment-and-self-employment/documents/code-of-practice-on-employment-status.pdf) Issued by the Revenue Commissioners, this document provides helpful guidance when considering an individual’s status and whether they are self-employed or an employee.  The criteria listed to determine if an individual is self-employed include the following:

§    Owns his or her own business;

§    Is exposed to financial risk by having to bear the cost of making good faulty or substandard work carried out under a contract;

§    Assumes responsibility for investment and management in the enterprise;

§    Can profit from sound management in the scheduling and performance of engagements and tasks;

§    Has control over what is done, how it is done and whether he or she does it personally;

§    Is free to hire other people, on his or her terms, to do the work which has been agreed to be undertaken;

§    Can provide the same service to more than one person or business at the same time;

§    Provides the equipment and materials for the job;

§    Has a fixed place of business, where materials and equipment are located;

§    Costs and agrees a price with clients and customers;

§    Provides his or her own insurance cover, for example, public liability insurance;

§    Controls the hours during which work is to be done. 

Having considered the complainant’s relationship with his company from 2008 until August 2019, it seems to me that it is well described by the criteria in the list above, leading to a clear indication that he was self-employed.

Pay, Tax and Social Insurance

The fact that a director elects to be paid monthly or even weekly or that tax is deducted through the PAYE system does not determine his status as an employee.  The complainant said that he was paid an annual salary of €97,500 until December 2019, and that he required the agreement of his co-directors regarding salary increases.  The collaborative process by which directors agree on their wages is not the same as the process by which a managing director decides how much to pay a chef or any other employee and the complainant’s description of his discussions with his co-directors regarding his wages does not lead me to a conclusion that his relationship with them was that of an employee.

As a class S PRSI contributor, the complainant was regarded by the Revenue Commissioners and the Department of Social Protection as a self-employed individual.  If he was a class S PRSI contributor, no employer’s PRSI was paid in respect of his employment, indicating that he was not an employee. 

Conclusion

I have considered the evidence of the complainant and I have examined the submissions he presented at the hearing and the additional submission of April 12th 2021.  I have assessed his status in respect of the recognised tests and I find that his role prior to December of managing director positions him firmly as an employer and a self-employed person and not as an employee.  Aside from these tests, looked at “in the round,” it is clear that the complainant was engaged with his co-directors in an enterprise in which they shared equally the risk of failure and the potential for success.  The effect of this economic circumstance is that, from August 2008 until December 2019, he was an employer and a self-employed company director.

I accept entirely Dr Kean’s argument that the TUPE regulations applied to the transfer of the business from the complainant and his co-directors to the holding company.  However, the Regulations offer no protection to the complainant, because I have concluded that, prior to the transfer, he was not an employee.

In December 2019, when the complainant sold his shares and relinquished the role of managing director, his company exited the examinership process.  He then took on a new position as general manager, and, from then on, he was an employee.  The logical outcome from this finding is that, having commenced in the role of general manager with the respondent on December 9th 2019, and, having been made redundant on August 20th 2020, the complainant does not have the requisite service to bring a complaint under the Unfair Dismissals Act 1977.

I have concluded that the complainant was not an employee of the respondent between August 2008 and December 2019.  I am satisfied that he was an employee from December 9th 2019 until August 20th 2020.  With just over eight months of service as an employee, he does not meet the requirements of section 2(1)(a) of the Unfair Dismissals Act.  On this basis, I decide that I have no jurisdiction to adjudicate on this complaint.

This complaint under the Organisation of Working Time Act 1997 (the “OWT Act”) concerns the complainant’s allegations that, between December 2019 and March 2020, he was required to work more than the maximum weekly hours and that he worked between 55 and 65  hours each week.  He claims that, when the new directors took over responsibility for the company, they dismissed the accountant and the bookkeeper, and that he had to take on their work.  On February 20th 2020, due to the pressure of work, the complainant said that he had to take a week off, but that he returned to even more pressure, as the demands from the directors increased.

In response to questions from Dr Kean, the complainant said that he understands that the maximum weekly hours that an employee is permitted to work is 48.  He also said that he understands that a record must be kept of the hours of work of employees.  Under the heading of his complaint under the OWT Act, paragraph 27 of his submission notes that the complainant kept records of the hours of work of all staff.  He said that the directors never told him what his weekly hours were and that he worked excessive hours due to the amount of work that he was required to do.  The complainant said that most of the staff in the restaurants clocked in and out and that their working hours were recorded, but that his hours were not recorded. 

The respondent’s case is that the complainant was at all times responsible for recording the hours of work of employees.  They claim that he failed, refused or neglected to maintain a record of his working hours and that now, “due to his own dereliction of duty,” he claims he is entitled to compensation for working long hours.

The Relevant Law

Section 15 of the Organisation of Working Time Act 1997 sets out the provisions in relation to weekly working hours:

(1) An employer shall not permit an employee to work, in each period of 7 days, more than an average of 48 hours, that is to say an average of 48 hours calculated over a period (hereafter in this section referred to as a “reference period”) that does not exceed - 

(a) 4 months, or

(b) 6 months -

The remainder of this sub-section is not relevant to the complainant’s case.

Excessive Working Hours

The complainant alleges that from December 9th 2019 until March 17th 2020, he worked more than 48 hours a week and that he “ended up working six days a week and up to 65 hours per week.”  On February 20th 2020, he said that he was exhausted and that he had to take a week off.

December 9th 2019 was the commencement of the exit from the examinership process, the transfer of ownership to the holding company, the involvement of two new directors and the re-organisation of the business from six to four restaurants.  By the middle of March 2020, it was clear that the Covid pandemic was creating havoc in the restaurant business, and every proprietor scrambled to manage the myriad of challenges they faced.  In the very unique circumstances of these 15 weeks, I am certain that every other general manager in a restaurant business would have worked very long hours.

Paragraph 10 of the complainant’s initial submission sets out the responsibilities of his role:

“In his role as the General Manager and Chief Executive Officer, the Claimant was responsible for all obligations and duties such a position holds in respect of the company.”

From December 2019, as the general manager, the complainant was in a key position in the company; effectively, he was its most senior employee.  His complaints regarding his hours of work are unusual for a person at his level of seniority, where he could determine the time at which he started and finished on any given day and he was responsible for ensuring that he did not work excessive hours to his own detriment.  I accept that the dismissal of the accountant and the book-keeper may have caused difficulties for the complainant in his efforts to provide the information requested by the directors; but this is not a problem about hours of work, but rather about the kind of work that he was asked to do and the lack of resources to assist him.  It seems to me that the root of this complaint lies in the changed status of the complainant in his new role as a general manager reporting to new directors, and the directors’ demands for information.

The complainant submitted no evidence to show that he was constrained in his effort to determine his hours of work, and he provided no information to show that he was prevented from exercising the normal discretion of a general manager to manage his own time.  It is my view that, as the general manager, the complainant’s role was governed by section 3(c) of the OWT Act and that he was,

“…a person the duration of whose working time (saving any minimum period of such time that is stipulated by the employer) is determined by himself or herself, whether or not provision for the making of such determination by that person is made by his or her contract of employment.”

For this reason, I find that Part II of the OWT Act, in respect of hours of work, does not apply to the complainant.

Based on my conclusion that the complainant’s role was not governed by Part II of the OWT Act in respect of hours of work, I decide that this complaint is not well founded.

It is the complainant’s case that, from the date of the establishment of the company in 2008, he had a contract of employment, but that it wasn’t written down.  He argues that, as his status changed in December 2019, when he became the general manager, he was then entitled to a written statement of his terms and conditions of employment.

In his submission on behalf of the respondent, Mr Treanor said that on January 21st 2020, the complainant sent a template of an employment contract to one of the new directors.  On January 22nd, the director replied, asking the complainant to draw up a contract for himself and each of his three sons who also worked in the business.  The complainant replied that he would “get on to that in the morning for you…”

Nothing further was done and on March 19th, the complainant was placed on temporary lay-off due to the restrictions around the Covid pandemic.  Up to the date of the termination of his employment on August 20th 2020, he had not been issued with a statement of his terms and conditions.

In December 2019, the complainant found himself in very changed circumstances compared to the previous 11 years.  He had effectively lost his business, but, on the upside, he saw it rescued by an investor.  Rather than having full control over what was formerly his own business, from December 2019, he reported to two of the holding company’s directors.

For the respondent, Mr Treanor pointed out that the complainant was responsible for issuing contracts and that he was instructed to draft a contract for himself, which he did not do.  As the respondent’s general manager and its most senior employee, it seems to me that he was entitled to receive a written statement of his terms and conditions of employment, and that it should have been issued by the directors, and not based on a document that he drafted himself.  It seems to me that, as the general manager who had just relinquished his shareholding, there must have been certain clauses and terms to be included in the complainant’s contract which required legal input.  In their request to the complainant to draw up a contract for himself, the directors failed to treat him seriously, and with the respect to which he was entitled as a senior manager.

I note Mr Treanor’s reference to the Labour Court decision in Irish Water v Hall, TE/16/6.  Here, the Court dismissed Mr Hall’s claim for compensation on the basis that the infringements of the 1994 Act resulted in “no present or future detriment.”.  In the case we are considering here however, the failure of the directors to issue the complainant with a written statement of his terms and conditions of employment left him in a position of uncertainty, which the requirement to issue a written contract is intended to avoid.

The more recent decision of the Labour Court in the case of Megan Hayes Kelly and Beechfield Private Homecare, DWT 1919, considered a complaint that there were errors and omissions in Ms Kelly’s contract.  In his determination on that case, the Chairman, Mr Haugh, considered the errors and omissions to be “at the serious end of the spectrum” and awarded the maximum of four weeks’ pay in redress.  As the failure to issue any statement of terms and conditions of employment must be considered to be more serious than issuing an imperfect statement, I must follow the authority of the Labour Court and make the maximum award in the case under consideration here.

The complaint under the Terms of Employment (Information) Act 1994 is well founded.  I decide therefore, that the respondent is to pay the complainant €5,500 in compensation, equivalent to four weeks’ pay.  This award is made by way of compensation for a breach of a statutory entitlement and is not taxable.

Status of employment, excessive hours, breach of the Terms of Employment (Information) Act 1994