Complainant

Respondent

Anonymised Parties

A Production Operator

Manufacturing Company

Representatives

Deirdre Canty  SIPTU

Mairead Crosby IBEC

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-00030263-001

12/08/2019

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

CA-00030263-002

12/08/2019

The Complainant commenced employment with the Respondent in 2004 as a production operator (Evening Shift). The Complainant was paid a weekly wage of €595 gross; net €438.70 for a 39-hour week. The Complainant is claiming that there was an unlawful deduction of wages in relation to her salary amounting to €1,310.62 when 11 shifts were cancelled following the imposition of short-time working. The Respondent refutes the complaint as being without merit by nature of an implied contractual term which allowed the Respondent to properly pay wages to the Complainant for the hours worked only, for the period in question. 

In March 2019, the Complainant submits that she was informed by the Respondent that she was being put on short time working due to a delay in the supply chain, meaning she would be required to work a shorter working week than her contracted 39 hours per week. The Complainant asserts that the Respondent’s actions of putting her on short time without her consent, or contractual obligation, amounted to an unlawful deduction under section 5 of the Payment of Wages Act 1991. She submits that this unlawful deduction amounted to the sum of €1,310.62. The Complainant submits that she had the opportunity to avail of social welfare payments for the period.

The Complainant submits that at the end of 2008 and the beginning of 2009, the Respondent, in response to trading difficulties, sought agreement from the workers to place them on lay off and short time, to avoid redundancies.  The Complainant submits that her trade union agreed to work under protest at that time due to the precarious financial position of the Respondent. The Complainant submits that the collective agreement makes no mention of a short-time/lay-off arrangement. The Complainant further submits that due to the dispute at the time all new contracts issued thereafter to new employees, excluding the Complainant, have a layoff / short time clause included which reads:

LAY OFF AND / OR SHORT TIME

The company reserves the right to lay you off from work or reduce your workings hours, where through circumstances beyond its control it is unable to maintain you in employment or maintain you in full employment. You will receive as much notice as possible prior to such lay-off or short time. You will not be paid during the lay-off period. You will be paid only in respect of hours actually worked during periods of short time.  

Witness Mr A:

Mr A identified himself as being a trade union shop steward in the trade union of the Complainant at a time at the beginning of 2009, when the company sought short-time working. He gave evidence that there was no agreement between the trade union and the Respondent at that time and that any short time working was done under protest.

Complainant’s Legal Argument:

The Complainant submits that Section 5(1) of the Payment of Wages Act 1991 provides:

 “… An employer shall not make a deduction from the wages of an employee (or receive any payment from an employee) unless-

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

 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

In the case of a deduction, the employee has given his prior consent in writing to it…”

The Complainant submits that the deduction by the Respondent was not authorised by virtue of statute or any instrument under any statute, nor was there a contractual term that allows for a deduction for short time/lay-off in her contract of employment. 

The Complainant submits that it is well accepted that an agreed lay off / short time without pay clause is required in a worker’s contract of employment to provide the employer with the legal authority to make the necessary deductions from their wages. The Complainant cited the Labour Court case of Panel Duct v Brian Mulhare PWD1814 for authority that the detail and specificity of the contractual clause is also important to establish the parameters in which such a deduction can take place.

The Complainant argues that her contract of employment contains no such clause and that the Respondent in this instance is relying only on the defence of custom and practice. The Complainant cites the Employment Appeals Tribunal in  Steffan Chmiel and others v Concast Precast Limited PW725/2012 for the position that at common law there is no general right to lay off / short – time without pay and while there are limited circumstances wherein there will be such a right, the employer must demonstrate that it has been the  custom and practice of the workplace and that the custom must be reasonable, certain, and notorious. The Complainant further cites Mr Justice Jelp in Devonald and Rosser (1906) 2 KB 728., relied upon in the foregoing case, for the assertion that “A custom so universal that no workman could be supposed to have entered into this service without looking to it as part of the Contract”.

The Complainant argues that the one-off situation, because of unprecedented circumstances in 2008, does not establish a custom and practice of lay off / short time in the Respondent’s workplace and therefore the Respondent made an unlawful deduction from her wages that was neither authorised by statute nor by any term of her contract.

The Respondent submits that it is in the business of specialist manufacturing and employs over 1,110 people at two sites in Ireland.  The Respondent submits it   is the most significant employer in the local region and is therefore an essential part of the economic infrastructure.

The Respondent submits that the business to which the Respondent supplies is notoriously agile and subject to change at the best of times but in the recent decade that process has itself become more dynamic due to rapid technological developments and market changes. The Respondent submits that the business model that was originally adopted no longer exits and constant change and increased adaptability is now the new reality. The Respondent is currently struggling financially due to the volatility of the market.

 On 07 March 2019, the Respondent issued a communication to all employees, including the Complainant, that due to a shortage of demand for its products it was seeking a reduction in the working week from 5 days to 3 days. Options were offered including the taking of holidays, unpaid leave, minus hours up to a maximum of 39 hours for all staff or the use of banked hours where possible.

 The Respondent submits that on 14 March 2019, the trade union representing the Complainant confirmed the fact that the reduction in customer demand was indeed outside of the Respondent control and although they understood the rationale for the implementation of a short time work, they wanted to put on record their opposition to the above decision.  On 13 March 2019, the Respondent arranged a meeting with its employees where they had the opportunity to meet with Social Welfare representatives when they visited the site.

On 22 March 2019, the Respondent issued a communication to the trade union which detailed the Company’s action in response to the reduction in customer demand. The trade union was advised that based on the expectation that future demand would necessitate the retention of existing staffing levels, the Respondent believed it was the correct course of action to implement a three-day working week. On 4 April 2019, the Respondent advised the employees including the Complainants of an improvement in customer orders, therefore, the need for a reduced working time arrangement had ceased and the 3-day week schedule would end on 19 April 2019.

The Respondent submits that in total, there were 213 employees affected by the three-day working week. Out of 213 employees, 72 employees did not have the short time working clause in their contracts. And out of these 72 individuals, 48 pursued claims to Workplace Relations Commission through their trade union. The Respondent submits that a decision in the Complainant’s favour would have significant cost implications for the company and would also create an undesirable divide between those with a short-time/lay-off clause in their contract, and those without such a clause.   

The Respondent submits that this was not the first time the Complainant was on short time working. The Respondent asserts that a similar situation took place in 2009 but at that time there were no issues raised by the Complainant nor her trade union regarding payment and the honouring of 39 hr contracts by the Complainant.

Witness Mr B

Mr. B introduced himself as a Personnel Manager with the Respondent. He gave evidence that he was in situ in this position at the end of the year 2008, coming into 2009, when the company experienced trading difficulties. He had no recall of the Complainant, or the Complainant’s trade union, agreeing to short-time working/lay-off, formally under protest. He gave evidence of attending a number of meetings on the issue in 2008/2009. He refutes the Complainant’s contention that the subsequent incorporation of a lay-off/short-time work clause for subsequent employees was in response to the trade union protestations at the time. Instead, he asserts that the incorporation of such a clause was to cover expected volatility in production demands due to new products and systems coming down the line.

Respondent’s Legal Argument:

The Complainant is arguing that there was a deficiency in payment of their wages on the period in question. The Payment of Wages Act, 1991, under section 5(6) 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, […] then […] the amount of the deficiency […] shall be treated as a deduction made by the employer from the wages of the employee on the occasion”.

The Respondent submits that in this case an important element to establish is what were the wages “properly payable” to the employees. Due to unforeseen circumstances, the Complainant’s working week was reduced temporarily from 5 working days to 3 working days. It is the Respondent’s position that the Complainants would be entitled to be paid only for the actual number of hours worked during that period.

The Respondent further submits that there was a term in the Complainant’s contract, implied by ‘custom and practice’, and/or by prior agreement that allowed for payment for hours worked only.

The Respondent cites also Steffan Chmiel and others v Concast Precast Limited PW725/2012, where the Employment Appeals Tribunal found that it would defy logic if a person who was in receipt of Social Welfare would also be entitled to be fully remunerated for the same period and that it would be contrary to the very well-established principle in relation to double compensation.

The Respondent cites also the decision of the Labour Court in Bord Na Mona v SIPTU LCR21148, where the Court held:

 “the Court is satisfied that every effort was made to mitigate employees’ loss of earnings as a result of the temporary reduction in production requirements…. No breach of procedures and no circumstances to warrant compensation of loss of earnings”.  

The Respondent submits that the complaint is without merit and therefore must fail.

Section 5 of the Payment of Wages Act 1991 (The Act) provides, in its relevant parts:

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….

… (6) 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”.

Th Respondent contends that there was no deduction because the Complainant was being paid for the hours she worked and, accordingly, the phrase "properly payable" as in section 5(6) of the Act should be examined in the first instance.  The Respondent further submits that there was a custom and practice within the company for short-time working with pay for hours worked only   and that this is an implied term in the Complainant’s contract.

 The requirement for an employer to pay employees in a layoff situation was articulated by White J. in the Circuit Court case of John Lawe v. Irish Country (Pig Meats) Ltd (1998) 9 ELR 266, when he noted that ‘An employer’s fundamental obligation is to pay the agreed remuneration for the times of work during which the employee is prepared to work’. It is clear in the evidence in this case that the employees were prepared to work, but the question that needs to be addressed in this instant case is whether this obligation can be set aside based on an implied term in the contract.

The contractual position for the imposition of unilateral short-time working was examined by the Employment Appeals Tribunal in International Packaging Corporation (UK) Ltd v Balfour Reduction [2003] I.R.L.R. Mr Balfour and his co-workers were employed for a basic 39- hour week. There were falling orders and the company introduced short time working without agreement. The company paid wages only for the short hours worked. The UK Employment Appeals Tribunal, interpreting  a similarly worded statute to the Act in this jurisdiction,  stated that “…a reduction  in working hours is plainly a variation of a contract of employment and, unless expressly catered for within that contract, or allowed by implication again within the terms of the contract, any actual deduction of wages, even if related to the hours worked, is not authorised by the statute and can only be achieved by agreement.”

I find the reasoning in International Packaging Corporation, together with the comments of White J in Lawe v Irish Country (Pig Meats) Ltd, to be persuasive and a valuable template for effective interpretation of section 5 of the Act.  The obvious purpose behind the provisions of section 5 is to prevent an employer from reducing wages, otherwise payable, without the authority of a statute or a contractual term express or implied within the employee's contract. Therefore, I find that the wages properly payable in this case to be the 39hr week as alluded to in the contract, save where an implied contractual term dictates otherwise.  

The Labour Court noted in Financial Services Union v. Gerry Hanna PWD202, ‘Where a deduction is made in an employee’s salary it is incumbent on the employer making the deduction to identify the statutory or contractual provision under which that deduction is authorised’. The Respondent argues that there is a term, implied by conduct, otherwise known as ‘custom and practice’ which allows it to pay for hours worked only. This term was inserted by an agreement reached with the Complainant’s union in 2008/2009 when a downturn in business led to the imposition of short-time working at the time.

The Complainant refutes the argument of the Respondent and argues that no such term can be implied by ‘custom and practice’. The Complainant cites Mr Justice Jelp in Devonald and Rosser (1906) 2 KB 728., for the assertion that the practice has to be a “… custom so universal that no workman could be supposed to have entered into this service without looking to it as part of the Contract” for the proposition that a contested agreement on a once off basis in 2008, does not fulfil the test for the Respondent to imply a term into the contract.

The ‘custom and practice’ test was adopted in this jurisdiction and followed by Maguire P in O'Reilly v Irish Press [1937] 71 I.L.T.R 194. Here it was held that the practice must be: -

“…so notorious, well-known and acquiesced in that in the absence of agreement in writing it is to be taken as one of the terms of the contract between the parties…it is necessary in order to establish a custom of the kind claimed that it be shown that it was so generally known that anyone concerned should have known of it or easily become aware of it.”

Mr B, the personnel manager for the Respondent, gave evidence that the agreement with the Union in 2009 was to work short-time with pay for hours worked only, and that this was agreed without    any formal protest by the Complainant or her trade union.  He outlined that the reason for incorporation of the lay-off/ short-time clause in the contracts of new staff after that period was to allow for greater flexibility due to new technological developments for products required by customers. Mr A, the shop steward giving evidence on behalf of the Complainant, was adamant that there was agreement to work the short-time hours in 2009 but that this was done ‘under protest’. It is common case that there was unease expressed from the Union and Mr B was aware of the Union’s misgivings at that time. Mr B came across as a plausible witness and I cannot doubt that the variation clause for new employees afterwards allowed for greater production flexibility for the Respondent. That may well have been a function of the variation clause, but I cannot find that it was the primary reason for its introduction.  I prefer the Complainant’s evidence on this point and can only find, on the balance of probabilities, that the primary reason for the introduction of the variation clause was in response to the contractual deficit which became glaringly obvious in the dispute that ensued prior to the onset of short-time working in 2009. The Respondent was more than prudent in recognising the need for such a variation clause, and indeed it does give greater flexibility to the Respondent to cater for continual change in the marketplace. However, the plain fact of the matter in this case is that the Complainant’s contract was not amended to incorporate the express variation clause nor was there any evidence proffered of a variation clause being introduced into the collective agreement after that period. 

I now have to establish  if the reasoning of O’Reilly   on custom and practice can be applied so that  the arrangement to work  the short-time hours in 2009 was  “…so notorious, well-known and acquiesced in that in the absence of agreement in writing it is to be taken as one of the terms of the contract between the parties…it is necessary in order to establish a custom of the kind claimed that it be shown that it was so generally known that anyone concerned should have known of it or easily become aware of it.” The Respondent submitted no evidence of the ‘custom and practice’ alluded to, being well known nor indeed submitted any evidence of it being practiced within the manufacturing segment in which it is engaged. One can make a contrast with the construction industry where established custom and practice allows for a reduction in hours and regular lay-off periods and it is easily argued that such a practice is well established and notorious.   It is hard to reconcile the Respondent’s argument in this instance that the previous practice was so widely known and established that it automatically implied a term into all contracts with the subsequent need to introduce a variation clause to allow for the very same practice to be an express term in contracts after 2009.

The Respondent submitted the recommendation of the Labour Court in Bord na Mona v Services Industrial Professional Technical Union LCR21148, a dispute investigation under section 26(1) of the Industrial Relations Act where the Court found no breach of procedures and no circumstances to warrant compensation of loss of earnings in a short-time working. That clearly was an industrial dispute but the matter in this instant case is an investigation of the alleged breach of an individual employment right. I can sympathise with the Respondent on its financial difficulties that has led it to introduce short-time working but I find no reasonable evidence has been submitted to show the existence or effect of the contested implied term. There is nothing to suggest that the affected employees had agreed to an open-ended commitment to accept shorter-hours and lesser wages whenever the Respondent chose unilaterally to introduce short-time working.   I conclude that the Respondent did not discharge the burden as referred to in by the Labour Court in the Financial Services Union v Hanna.  

I conclude that no implied term existed, or can be construed, in the Complainant’s contract of employment to allow the Respondent to authorise the deduction. I find that the complaint is well founded under section 6(1) of the Payment of Wages Act 1991 in that the Complainant’s full wages were properly payable for the period 11 March 2019 to 19 April 2019, when she was put on short-time working.

Redress:

The Respondent raised a valid point on the question of ‘double compensation’. The Respondent cited Steffan Chmiel and others v Concast Precast Limited PW725/2012, as opened  by the Complainant above, where the Employment Appeals Tribunal mentioned that it would defy logic if a person who was in receipt of Social Welfare would also be entitled to be fully remunerated for the same period and that it would be contrary to the very well-established principle in relation to ‘double compensation’. The Act is silent on this issue.  The comment of the then President of the High Court, Kearns P.at the end of the judgment of Domantas Petkevici v Goode Concrete Limited and the Employment Appeals Tribunal 2014 [IEHC], which addressed amongst other issues, a claim under the Act, can be considered.  He states, “It is to be noted in this case that, despite requests made by the Court, it is not confirmed whether or not the applicant was in receipt of social welfare during the currency of his lay-off”. This comment suggests to me that a court may not be receptive to ‘double compensation’ in a claim under the Act.  Evidence in this instant case was given at the hearing that the Complainants either availed of advice or were in receipt of Department of Social Protection payments for the period in question.  I believe that it is fair and reasonable in the circumstances that the Respondent should not be directed to pay the full sum of the wages owed but instead a sum less the amount of payment received, if any, by the Complainant, from the Department of Social Protection for the period 11 March 2019 to 19 April 2019.   

CA-00030263-001: I find that the complaint is well founded under section 6(1) of the Payment of Wages Act 1991, and I order the Respondent to pay the Complainant the sum of €1,310.62 less the amount of any Department of Social Protection payment received by the Complainant, if any, for the period between 11 March 2019 and 19 April 2019. Appropriate lawful deductions should be made from the remaining sum.   

Payment of Wages Act 1991, short-time working, custom and practice, implied terms.