Complainant

Respondent

Anonymised Parties

Project Coordinator

A Translation/Interpretation Service

Representatives

none 

Loughlin Deegan, Solicitor, Byrne Wallace

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-00036344-001

25/05/2020

The Complainant commenced employment with the Respondent, a translation/interpretation service, on 7 January 2013, in the role of Project Coordinator.

On 1 April 2020, the Respondent wrote to the Complainant advising that, due to the impact of the COVID-19 pandemic, a temporary salary reduction, of 15%, would be applied to all staff, with effect from 1 April 2020.

The Complainant immediately corresponded with management advising that she disagreed with the pay cut and had not expressed her consent to same. In a series of correspondence, with HR/Senior Management, the Complainant reiterated her objection to the salary reduction and raised a number of questions in relation to the matter.

On 22 May 2020, management advised staff that salaries would be restored to 100% with effect from 1 June 2020.

On 25 May 2020, the Complainant submitted a complaint to the Workplace Relations Commission under Section 6 of the Payment of Wages Act 1991.

That complaint is the subject matter of this adjudication. A remote hearing took place, in this regard, on 23 February 2021.

In submission in support of her complaint, the Complainant stated that, even in the event of a crisis, such as the Covid-19 pandemic, the Respondent is not entitled to apply a pay cut unless each of their employees explicitly agrees to it.

The Complainant further submitted that, when she exercised her right, as an employee, to seek figures from the Respondent, which would support the proposed salary reduction, all the Respondent supplied was vague graphics, which did not allow any comparisons to be made with previous years business. According to the Complainant’s oral submission, the Respondent did not have figures for the Irish operation for 2019 against which comparisons could be made. The Complainant further stated that there was a need to see a trend of business/projections being down, but this was not forthcoming from the Respondent. The Complainant further stated that they were actually very busy and working very hard throughout this period.

Further in this regard, the Complainant referred to the Respondent’s application for the Temporary Wage Subsidy Scheme. According to the Complainant, the fact that the Respondent only applied the scheme for one month, indicates that their application was probably rejected.  

In support of her complaint, the Complainant submitted, as evidence, the correspondence she sent to the Respondent in an effort to get answers to the questions she had in relation to the salary reduction. However, the Complainant submitted that her questions were not answered.

According to the Complainant’s submission, her colleagues came to the same conclusion as she did in relation to the application of the 15% reduction in salary. However, she stated that, with one exception, none submitted complaints to the WRC. According to the Complainant, this was due to fears that they would lose their jobs or would be pointed at in the company or simply that they had families to look after and were not in a position to object to the reduction.

In further submission, the Complainant stated that the general feeling among staff was that the Respondent saw the Covid crisis as an opportunity to address a decrease in revenue over the previous years, which, she stated, was due to poor business decisions rather than anything to do with the pandemic.

According to the Complainant, there were a number of alternative approaches which the Respondent could have implemented, such as an agreement to pay back the money once the business was restored or to provide staff with time off in lieu. The Complainant also stated that she had expressed her wish to the Respondent that they find an amicable resolution to the situation. In this regard, the Complainant stated that they had initially requested mediation, however, this did not progress as the Respondent rejected the approach. 

In conclusion, the Complainant stated that the pay cut was not a reasonable option for the Respondent to have pursued. She further stated that it was not fair to say that the staff had agreed to this and she emphasised the fact that she did not give any written consent for the reduction in her salary.

Background:

According to submission made on their behalf, the Respondent is the Irish entity of a global language-based services company who employ approximately 460 employees worldwide, spread over seven countries.

It was stated on behalf of the Respondent that, in spring 2020, when the global COVID-19 pandemic hit, the nearly instantaneous economic recession forced the Respondent’s global leadership to: (a) attempt to predict how the crisis would impact the group and (b) make decisions that would secure the short-term survival of the group, as well as its long-term resilience in the context of a very uncertain global economic outlook.

It was submitted on behalf of the Respondent that, at that time, it was predicted the volume of work across the majority of business units would be affected significantly by the pandemic, with an anticipated negative impact of US$6m on the group’s revenue. In addition, it was projected that infection control measures would add significantly to the group's cost base, with a figure of US$300,000 for operating expenses being identified.

According to their submission, the Respondent, in an effort to prevent job losses arising from these two sets of challenges, considered multiple survival plans including, but not limited to: redundancies, compulsory annual leave, wage cuts, layoffs and other remedies. It was further stated that, as the group's most significant cost is its wage bill, it was decided that the group's employees globally, at all levels, would be given a reduction in wages of at least 15% for a period of 60 days, in order to maintain employment levels until work volume is returned to sustainable levels and to avoid redundancies. It was further stated that the group also implemented a number of other cost saving measures.

The Respondent submitted that the wage reduction was for an initial 60 day, with effect from 1 April 2020 and salaries were restored to 100% with affect from 1 June 2020, despite the reality of a continuing negative trading environment.

Response to the Complainant’s complaint:

According to the Respondent’s submission, the Complainant had been employed by them and a predecessor company since 7 January 2013.

It was further submitted by the Respondent that the Complainant is employed on a permanent contract, dated 28 December 2012. In this regard, the Respondent referenced the “Changes to Conditions of Employment” clause in that contract, which states: “the Company reserves the right to make reasonable changes to your terms and conditions of employment. Any such change will be notified to you before the date of the proposed change.” 

According to the Respondent’s submission, despite engaging in detailed correspondence with the Complainant, she did not accept the pay reduction. The Respondent stated that it was not in a position to exempt the Complainant from the reduction and as there was no agreement between the parties in this regard there was no basis for the correspondence to continue.

In further submission, the Respondent stated that the Complainant’s contractual annual salary was €27,500 per annum. The Respondent further stated that by 1 April 2020, the date on which the temporary wage reduction came into effect, the Complainant’s annual salary had increased to €33,727.80. According to the Respondent, the effect of the 15% wage reduction was that the Complainant’s annualised salary was, for 60 days only, reduced to €28,668.63. According to the Respondent, even at this reduced level, the amount of wages paid to the Complainant was more than her contractual wage.

Relevant statutory Provisions:

The Respondent cited the following provisions of the Payment of Wages Act, 1991, as having relevance to the Complainant’s complaint:

o   Section 1 - definition of wages

o   Section 5 – subsection 5 (1) (a), (b) and (c) and subsection 6 (a) and (b)

o   Section 6 (1) (a) and (b)

Case Law:

In support of their response to the Complainant’s complaint, the Respondent cited the case of Marek Balans v Tesco Ireland Ltd [2020] [IEHC55]. In this regard, the Respondent submitted that as no issue arises in relation to a potential error of computation, the core question is whether the wages that were paid to the Complainant, during the 60-day period of the pay reduction, were wages that were “properly payable”.

According to the Respondent, even the reduced level of wages that applied to the Complainant during the 60-day reduction was more than the wages provided for in her contract of employment. Therefore, the Respondent contended that, even during the period of wage reduction, the Complainant was paid more than the wages that was properly payable to her.

In the event that the above argument is not accepted, the Respondent stated that they wish to rely on the fact that the Complainant’s contract of employment clearly provided the Respondent with the right to vary the terms of that contract. According to the Respondent the contract expressly provides that such changes may be made where they are “reasonable” and where they are exercised in a reasonable manner.

In support of their submission in this regard, the Respondent cited the case of Cleary & Ors v B&Q Ireland Ltd [2016] [IEHC119]. According to the Respondent’s submission, the variation in the within complaint, i.e. the temporary salary reduction, was reasonable in all the circumstances. The Respondent contends that the wages properly payable to the Complainant, during the 60-day period, was either the contractual wage or, at most, the reduced wage level. The Respondent contends that it was the higher of those two amounts that were paid to the Complainant. Therefore, the Respondent submitted that the Complainant received all of the wages that were properly due to her and, as a result, that there was no deduction and, therefore, no contravention of Section 5 of the 1991 Act.

In addition, the Respondent submitted that the Complainant received notice of the wage reduction in advance of that reduction taking effect.

However, notwithstanding and without prejudice to their submission, as set out above, that there was no deduction made in this case, the Respondent submitted, in the alternative, that if it was found that there was a deduction, then the Respondent’s position is that it was authorised by contract.

In support of their arguments in this regard, the Respondent place relevance on the High Court case, Earagail Eisc Teo v Doherty & Others [2015] [IEHA 347] as it applies in relation to Section 5 (1), (a), (b) and (c). According to the Respondent, if the variation in the within case resulted in the deductions from the Complainant’s wages it was authorised by virtue of the Complainant’s contract of employment. Therefore, the Respondent contends that there was no contravention of Section 5 of the Act.

Legal submission re Redress:

In the alternative and without prejudice to their submission that there was no contravention of Section 5 of the Act, the Respondent submitted that, in the event of a finding that there was a contravention, then Section 6 of the Act provides that where such a contravention occurs the Adjudication Officer should give “a direction to the employer to pay the employee compensation of such amount (if any) as he considers reasonable in the circumstances not exceeding ….”

According to the Respondent’s submission, the words “if any” in Section 6 (1) are very significant and, in particular, they contended that the Adjudication Officer has discretion to make a “nil” award. In support of their submission in this regard, the Respondent advanced the following circumstances has being particularly relevant in influencing the exercising of the discretion referred to in section 6 (1) of the Act:

a)       Even taking into account the wage reduction, the Complainant was, during the 60-day period, paid more than her contracted wage.

b)      The reduction in wages was affected by the Respondent in order to preserve their business and to help prevent redundancies in its workforce, in Ireland and elsewhere.

c)       It was a reasonable and proportionate response to an unprecedented crisis.

d)      It was time limited and ceased after only 60 days.

e)      It was accompanied by a range of other cost-saving measures.

f)        It was applied at all levels of the business globally and affected even the most senior executives of the group.

g)       It helped to reduce the impact of the pandemic on the group, although, even with this measure, the group suffered significant financial hardship during 2020.

h)      It was widely accepted by the Respondent’s workforce, only a handful of employees raising concerns or objections and only two employees, out of 53 in Ireland, brought complaints under the 1991 Act. None of the Respondent’s employees anywhere else in the world have raised a complaint about the wage reduction.

In conclusion, the Respondent submitted that, having regard to all of the above circumstances, and all of the other circumstances set out in their submission, they respectfully submit that, if a determination is made that a contravention of Section 5 of the 1991 Act has taken place, then the discretion, provided for in Section 6 (1) of the Act, should be applied and a nil award should be made.

With regard to the issues arising in relation to this complaint, the Complainant and the Respondent made written submission and also provided oral evidence at the Hearing. I have carefully considered and evaluated all of the evidence and submissions adduced, in this regard, in reaching my determinations as set out below.

In her claim, submitted under the Payment of Wages Act, 1991, the Complainant contended that the Respondent made a series of unlawful deductions from her wages.

Section 1 of the Act defines wages as:

“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,”

With regard to deductions made by an employer from the wages of an employee, Section 5 of the Act provides as follows:

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.”

Having carefully considered the circumstances involved in the within case, I am satisfied that the reduction of 15% applied to the Complainant's salary in each of the payroll periods between 1 April and 31 May 2020 represents a deduction from her wages.

With regard to the application of Section 5 (1) (a) and (c) of the 1991 Act, I am satisfied that the deductions in question were not required or authorised by any statute and that the Complainant did not give her prior consent in writing to the deduction.

With regard to the application of Section 5 (1) (b), I can find no term or clause in the Complainant’s contract of employment which explicitly requires or authorises a deduction from her wages or makes any reference to potential circumstances in which such a deduction might occur.

However, in their submission, in response to the Complainant’s complaint, the Respondent argues that the variation clause in the Complainant’s contract of employment meets the requirements of Section 5 (1) (b) of the Act. The specific clause referred to by the Respondent is entitled “Change to Conditions of Employment” and states as follows: “the Company reserves the right to make reasonable changes to your terms and conditions of employment. Any such changes will be notified to you before the date of the proposed change.”

It is a general principle of contract law that the terms of a contract cannot be altered without the agreement of both parties. Circumstances where an employer makes unilateral alterations to the provisions of a contract of employment would generally be regarded as constituting a breach of that contract.

With regard to the variation clause in the Complainant’s contract of employment, as relied upon by the Respondent to demonstrate compliance with section 5 (1) (b), I am not convinced that it can be sufficiently relied upon as the sole justification for the imposition of such a significant and financially impactful variation of the Complainant’s contract of employment.

Variation clauses, such as that which appears in the Complainant’s contract of employment, are generally inserted to permit the employer make minor, non-material changes to terms and conditions, such as amendments to work practices/procedures. I believe it is stretching the bounds of reasonableness to suggest that the imposition of a pay reduction, albeit temporary in nature, without consent from or with the agreement of the employee, is covered by a variation clause of this nature.

In order to rely on a variation clause in such circumstances, it would, at a very minimum, require that the action itself be clearly justified and enacted in a reasonable fashion. Having carefully considered all of the evidence submitted, I find there to be significant question marks in relation to the justification presented to the Complainant by the Respondent with regard to the necessity for implementation of the salary reduction, at such an early point in the pandemic.

Submission made on behalf of the Respondent suggested that the decision to impose the temporary salary reduction was made in order to secure the short-term survival of the group in the context of the uncertain global economic outlook and to avoid local redundancies. While the covid pandemic provided unprecedented challenges for businesses across the globe, the reality, in the within case, is that the Respondent was not in the position to provide the Complainant with sufficient evidence to support the alleged impact on the business, as it pertained to the work being carried out by the Complainant and her colleagues in the Irish operation. 

On the contrary, the anecdotal evidence provided by the Complainant suggested that there were no reductions in workload. In fact, when the Complainant proposed that the temporary reduction in salary should be matched by a corresponding reduction in working hours, she was informed that this could not be facilitated as the Respondent required full employee capacity for busy days.

In their own evidence to the Hearing, the Respondent stated that, while they had originally applied for and implemented the Temporary Wage Subsidy Scheme (TWSS) in the first month, they were subsequently found not to have met the eligibility criteria for the scheme, which was a 25% reduction in turnover.  This further supports the Complainant’s contention that the purported downturn in business did not exist.

It is fully accepted that the Respondent’s response to the impending pandemic, in terms of assessing the potential business impact and in considering possible actions as a result, was understandable and prudent in the circumstance. It is also accepted that their motivations in this regard were clearly genuine. However, in a context where the Respondent was not in a position to quantify the potential impact on the business in the Complainant’s work location and where their failure to satisfy the TWSS criteria, in relation to business loss, supported her contention that the impact was not significant, I find that the unilateral imposition of a salary reduction was neither reasonable nor proportionate.  This is particularly so given that the Complainant was willing to consider options, other than the salary reduction, to offset any negative impact on the business as a result of the pandemic. 

Finally, I note the Respondent’s contention that the salary which was properly payable to the Complainant was that which is stated in her original contract of employment, i.e. €27,500 per annum, and, as a result, the figure of €28,668.63 pa, which was paid to the Complainant during the 60 days of the temporary wage reduction, was in excess of what was properly payable to her.

The salary being presented by the Respondent, as representing that properly payable to the Complainant, is that which is set down in her contract of employment when she joined the business in January 2013. In their own evidence, the Respondent confirms that the Complainant’s salary had, over the intervening period, increased to €33,727.80 pa. However, it is clear that the Complainant's contract of employment has not been updated to reflect these increases.

To suggest that salary increases, which have been applied by an employer to an employee, over a significant period of time, based, most likely, on continuing good service and/or positive performance reviews, do not form part of the employees properly payable salary is neither reasonable nor credible. To accept such a contention would be to suggest that any salary increase acquired by an employee during their employment could be removed or discarded on the whim of an employer in the event that the original contract of employment had not, in the meantime, been updated to reflect the increase(s).

In any event, Section 6 (1) (a) (1) of the 1991 Act addresses this matter by setting out that the appropriate reference point in this regard is the amount that would have been paid to the employee in respect of the week immediately preceding the date of the deduction.

Consequently, based on the above and taking all of the evidence into consideration, I can only conclude that the Respondent’s application of the 15% reduction in the Complainant salary, for the period in question, represents a deduction which is in contravention of Section 5 (1) of the 1991 Act.

Based on the above finding, I must now consider the issue of redress, which is covered in Section 6 (1) of the 1991 Act, wherein it states as follows:

6 (1) “A decision of an adjudication officer under section 41 of the Workplace Relations Act 2015, in relation to a complaint of a contravention of section 5 as respects a deduction made by an employer from the wages of an employee or the receipt from an employee by an employer of a payment, that the complaint is, in whole or in part, well founded as respects the deduction or payment shall include a direction to the employer to pay to the employee compensation of such amount (if any) as he considers reasonable in the circumstances not exceeding—

(a)    the net amount of the wages (after the making of any lawful deduction therefrom) that—

(i)                  in case the complaint related to a deduction, would have been paid to the employee in respect of the week immediately preceding the date of the deduction if the deduction had not been made, or

(ii)                in case the complaint related to a payment, were paid to the employee in respect of the week immediately preceding the date of payment,

      or

(b)    If the amount of the deduction or payment is greater than the amount referred to in paragraph (a), twice the former amount.”

Section 6 (2) (a) and (b) of the Act elaborates further on the matter as follows:

6 (2) (a) “an adjudication officer shall not give a decision referred to in subsection (1) in relation to a deduction or payment referred to in that subsection at any time after the commencement of the hearing of proceedings in a court brought by the employee concerned in respect of the deduction or payment”.

6 (2) (b) “an employee shall not be entitled to recover any amount in proceedings in a court in respect of such a deduction or payment as aforesaid at any time after an adjudication officer has given a decision referred to in subsection (1) in relation to the deduction or payment.

With regard to a claim for unlawful deduction from an employee’s wages, an Adjudication Officer, can, where the claim is upheld, order the employer to pay arrears for any unlawful deduction made in the six-month period preceding the date on which the complaint was made.  Contraventions occurring after the date of submission of complaint cannot be considered for the purposes of redress. This calculation of the reckonable period was confirmed by the Labour Court in the case of Vurzol Dublin West Limited Bluebird Care t/a Bluebird Care Meath v Aisling Kehoe [PWD215].

Consequently, I am satisfied that, when considering the matter of redress in the within case, the reckonable period is that which commences on 1 April 2020, the date the first deduction was applied to the Complainant’s wages and concludes on 25 May 2020, the date on which she submitted her complaint to the Workplace Relations Commission.  This covers five of the six pay periods in which the deductions were made to the Complainant’s wages.

Over the course of the hearing, I was provided with three different figures in relation the total of the deductions made from the Complainant’s wages. At the oral hearing the Complainant updated the figure cited in her complaint document and the Respondent provided another slightly different figure. However, having carefully reviewed the pay slips submitted in evidence, as they apply within the reckonable period, I find the sum of €740.00 to represent reasonable and appropriate compensation for the Complainant.

Having carefully considered all of the evidence adduced and based on the considerations/findings as detailed above, I find the Complainant’s complaint under the Payment of Wages Act, 1991 to be well founded and I direct the Respondent to pay the Complainant the sum of €740.00 gross. This amount is subject to the normal statutory deductions applying to pay.

Payment of Wages Act

Unlawful deduction from pay/wages

Contract of Employment Variation Clause