RPD2119

FULL RECOMMENDATION

REDUNDANCY PAYMENTS ACTS, 1967 TO 2014

PARTIES :

HARTWAY TRADING LIMITED HARDING FIREPLACES

- AND -

MR JOSEPH MCGRATH

DIVISION :

SUBJECT:

1.Appeal of Adjudication Officer Decision No’s: ADJ-00029124, CA-00038868-001.

BACKGROUND:

2.The worker appealed the Decision of the Adjudication Officer to the Labour Court on 05 August 2021 in accordance with the Redundancy Payments Acts 1967 to 2014. A Labour Court hearing took place on 22 October 2021. The following is the Determination of the Court:


DETERMINATION:

Background

This matter before the Court is an appeal by Mr Joseph McGrath (the Complainant) against a decision of an Adjudication Officer (ADJ-00029124, dated 29 June 2021) under the Redundancy Payments Act 1967 (‘the Act’) against his former employer, Hartway Trading Ltd Harding Fireplaces (the Respondent).

In May 2020 the Respondent wrote to the Complainant to advise that the company had no money to continue trading and regrettably could no longer continue to employ him. The Complainant was offered alternative employment in a sister company, Butlers Grove Stone Ltd, on the same site, at the same rate of pay and similar conditions.

The Complainant declined the offer of employment and instead sought a redundancy payment.

The Adjudication Officer rejected Mr McGrath’s claim that he was entitled a redundancy payment in circumstances where he had received an offer of employment that amounted to an offer of suitable alternative employment within the meaning of Section 15 of the Act.

The Notice of Appeal was received by the Court on 05 August 2021. A remote hearing of the Labour Court was held on 22 October 2021.


The Law

The relevant sections of the Redundancy Payment Act (“the Act”) are as follows:

Dismissal by employer.

9.— (3) ( a) An employee shall not be taken for the purposes of this Part as having been dismissed by his employer if—
(i) he is re-engaged by another employer (hereinafter referred to as the new employer) immediately on the termination of his previous employment,
(ii) the re-engagement takes place with the agreement of the employee, the previous employer and the new employer,
(iii) before the commencement of the period of employment with the new employer the employee receives a statement in writing on behalf of the previous employer and the new employer which—

(A) sets out the terms and conditions of the employee’s contract of employment with the new employer,

(B) specifies that the employee’s period of service with the previous employer will, for the purposes of this Act, be regarded by the new employer as service with the new employer,

(C) contains particulars of the service mentioned in clause (B), and

(D) the employee notifies in writing the new employer that the employee accepts the statement required by this subparagraph.

( b) Where in accordance with this subsection an employee is re-engaged by the new employer, the service of that employee [ with the previous employer ] shall for the purposes of this Act be deemed to be service with the new employer.

Disentitlement to redundancy payment for refusal to accept alternative employment.

15.— (1) An employee shall not be entitled to a redundancy payment if

( a) his employer has offered to renew that employee’s contract of employment or to re-engage him under a new contract of employment,

( b) the provisions of the contract as renewed, or of the new contract, as to the capacity and place in which he would be employed and as to the other terms and conditions of his employment would not differ from the corresponding provisions of the contract in force immediately before the termination of his contract,

( c) the renewal or re-engagement would take effect on or before the date of the termination of his contract, and

( d) he has unreasonably refused the offer.

(2) An employee shall not be entitled to a redundancy payment if

( a) his employer has made to him in writing an offer to renew the employee’s contract of employment or to re-engage him under a new contract of employment,

( b) the provisions of the contract as renewed, or of the new contract, as to the capacity and place in which he would be employed and as to the other terms and conditions of his employment would differ wholly or in part from the corresponding provisions of his contract in force immediately before the termination of his contract,

( c) the offer constitutes an offer of suitable employment in relation to the employee,

( d) the renewal or re-engagement would take effect not later than four weeks after the date of the termination of his contract, and

( e) he has unreasonably refused the offer.

(2A) Where an employee who has been offered suitable employment and has carried out, for a period of not more than four weeks, the duties of that employment, refuses the offer, the temporary acceptance of that employment shall not solely constitute an unreasonable refusal for the purposes of this section.

(2B) Where —

( a ) an employee ’ s remuneration is reduced substantially but not to less than one-half of his normal weekly remuneration, or his hours of work are reduced substantially but not to less than one-half of his normal weekly hours, and

( b ) the employee temporarily accepts the reduction in remuneration or hours of work and indicates his acceptance to his employer, such a temporary acceptance for a period not exceeding 52 weeks shall not be taken to be an acceptance by the employee of an offer of suitable employment in relation to him

(3) Where a person who is entitled to a weekly payment has unreasonably refused suitable employment offered or approved by the National Manpower Service, that person shall be disqualified from receiving any further weekly payments

Associated companies

16.— (1) Where the employer is a company, any reference in this Part to re-engagement by the employer shall be construed as a reference to re-engagement by that company or by an associated company, and any reference in this Part to an offer made by theemployer shall be construed as including a reference to an offer made by an associated company.

(2) Subsection (1) shall not affect the operation of section 20 in a case where the previous owner and new owner (as defined by that section) are associated companies; and where that section applies, subsection (1) shall not apply.

(3) Where an employee is dismissed by his employer, and the employer is a company (in this subsection referred to as the employing company) which has one or more associated companies, then if—

(a) none of the conditions specified in section 7 (2) is fulfilled, but

(b) one or other of those conditions would be fulfilled if the business of the employing company and the business of the associated company (or, if more than one, each of the associated companies) were treated as together constituting one business,

that condition shall for the purposes of this Part be taken to be fulfilled in relation to the dismissal of the employee.

(4) For the purposes of this section two companies shall be taken to be associated companies if one is a subsidiary of the other, or both are subsidiaries of a third company, and “ associated company” shall be construed accordingly.

(5) In this section—

“ company” includes any body corporate;

“ subsidiary” has the same meaning as, by virtue ofsection 155of theCompanies Act, 1963, it has for the purposes of that Act.

The Companies Act 1963 was repealed and replaced by the Companies Act 2014. The definition of a subsidiary company is now contained in Section 7 of the Companies Act 2014 which reads as follows:

Definition of “subsidiary”

7. (1) In this section the expressions “superior company” and “lower company” are used solely to assist the understanding of its terms and—

(a) are not indicative of the status (in any manner not relevant to this section) of the respective companies vis a vis one another; and

(b) do not constitute definitions to which regard must be had for any other purpose of this Act.

(2) For the purposes of this Act, a company (the “lower company”) is, subject to subsection (5), a subsidiary of another (the “superior company”) if, but only if—

(a) the superior company—

(i) is a shareholder or member of it and controls the composition of its board of directors; or

(ii) holds more than half in nominal value of its equity share capital; or

(iii) holds more than half in nominal value of its shares carrying voting rights (other than voting rights which arise only in specified circumstances); or

(iv) holds a majority of the shareholders’ or members’ voting rights in the lower company; or

(v) is a shareholder or member of it and controls alone, pursuant to an agreement with other shareholders or members, a majority of the shareholders’ or members’ voting rights;

or

(b) the superior company has the right to exercise a dominant influence over it—

(i) by virtue of provisions contained in the lower company’s constitution; or

(ii) by virtue of a control contract;

or

(c) the superior company has the power to exercise, or actually exercises, dominant influence or control over it; or

(d) the superior company and the lower company are managed by the superior company on a unified basis; or

(e) the lower company is a subsidiary (by virtue of the application of any of the provisions of this section) of any company which is the superior company’s subsidiary (by virtue of such application).

(3) For the purposes of subsection (2)(a)(i), the composition of the lower company’s board of directors shall be regarded as being controlled by the superior company if, but only if, the latter company, by the exercise of some power exercisable by it without the consent or concurrence of any other person, can appoint or remove the holders of all or a majority of the directorships.

(4) In applying subsection (3), the superior company shall be deemed to have power to appoint to a directorship in relation to which any of the following conditions is satisfied—

(a) that a person cannot be appointed to the directorship without the exercise in his or her favour by the superior company of such a power as is mentioned in that subsection; or

(b) that a person’s appointment to the directorship follows necessarily from his or her appointment as director of the superior company.

(5) In determining whether the lower company is a subsidiary of the superior company—

(a) any shares held or power exercisable by the superior company in a fiduciary capacity shall be treated as not held or exercisable by it;

(b) subject to paragraphs (c) and (d), any shares held or power exercisable—

(i) by any person as a nominee for the superior company or by any person acting in that person’s own name but on behalf of the superior company (except where, in either case, the superior company is concerned only in a fiduciary capacity), or,

(ii) by, or by a nominee for, or by any person acting in that person’s own name but on behalf of, a subsidiary of the superior company, not being a subsidiary which is concerned only in a fiduciary capacity,

shall be treated as held or exercisable by the superior company;

(c) any shares held or power exercisable by the superior company or a nominee for the superior company or a subsidiary of it shall be treated as not held or exercisable by the superior company where the shares are so held or the power is so exercisable by way of security but only if such power or the rights attaching to such shares are exercised in accordance with instructions received from the person providing the security;

(d) any shares held or power exercisable by the superior company or by a nominee for the superior company or a subsidiary of it shall be treated as not held or exercisable by the superior company if the ordinary business of the superior company or its subsidiary, as the case may be, includes the lending of money and the shares are so held or the power is so exercisable by way of security but only if such power or the rights attaching to such shares are exercised in the interests of the person providing the security.

(6) For the purposes of subsection (2)(a)(iv) and (v), the total of the voting rights of the shareholders or members in the lower company shall be reduced by the following—

(a) the voting rights attached to shares held by the lower company in itself; and

(b) the voting rights attached to shares held in the lower company by any of its subsidiaries; and

(c) the voting rights attached to shares held by a person acting in his or her own name but on behalf of the lower company or one of the lower company’s own subsidiaries.

(7) For the purposes of subsection (2)(b), a company shall not be regarded as having the right to exercise a dominant influence over another company unless it has a right to give directions with respect to the operating and financial policies of that other company which its directors are obliged to comply with.

(8) In subsection (2)(b)“control contract” means a contract in writing conferring such a right as is there referred to which—

(a) is of a kind authorised by the constitution of the company in relation to which the right is exercisable; and

(b) is permitted by the law under which that company is established.

(9) Subsection (7) shall not be read as affecting the construction of the expression “actually exercises dominant influence” in subsection (2)(c).

(10) If a document created before the commencement of this section defines the expression “subsidiary” by reference to section 155 of the Act of 1963, then, for the avoidance of doubt, the construction provided in respect of that expression by the document is not affected by this section in the absence of an agreement to the contrary by the parties to the document.

(11) In this section—

“company” includes any body corporate;

“equity share capital” means, in relation to a company, its issued share capital excluding any part of it which, neither as respects dividends nor as respects capital, carries any right to participate beyond a specified amount in a distribution.

Deliberation

The Court has given careful considered to the oral and written submissions of the parties.

The Respondent is a family-owned business that was engaged in the manufacture and installation of premium quality stone fireplaces and hearths. A ‘sister’ company called Butlers Grove Stone Ltd was established in 1997 on the same site engaged in the manufacture of limestone kerbs, pier caps and wall caps. Both companies share the same directors being Mr. James Harding and Mrs. Mary Harding.

It is accepted by both parties that the Complainant’s service with employment with the Respondent commenced in 1985 and that his service terminated by reason of redundancy in 2020.

The Respondent submits that, as per Section 15 of the Act, the Complainant is not entitled to a redundancy payment in circumstances where he was offered a suitable alternative role on the same site with Butlers Grove Stone Ltd on the same terms and conditions of employment. The work involved is comparable in nature, as both involve cutting and working with stone and the processes involved are very similar.

The Complainant submits that the work is not comparable in nature and that he is entitled to a redundancy payment.

The issue before the Court is a net one. Is the Complainant entitled to a redundancy payment in circumstance where he refused to accept an offer of alternative employment with Butlers Grove Stone Ltd?

Section 15 of the Act disentitles an employee to a redundancy payment in circumstances where the employer offers to renew the employment contract or re-engages the employee under a new contract of employment on terms suitable to the employee. Section 16 of the Act provides that where the employer is a company, re-engagement can be by the company itself or by an associated company. It goes on to define an associated company as one which is a subsidiary of the other, or where both are subsidiaries of a third company, as defined in Companies Act, 1963 now section 7 of the Companies Act 2014.

In this case the offer to re-engage the employee was with Butlers Grove Stone Ltd.

The determinative question for this Court is whether Butlers Grove Stone Ltd is an associated company for the purposes of Section 16 of the Act. In replying to this question, the Respondent confirmed that Butlers Grove Stone Ltd is not a subsidiary of the Respondent nor a subsidiary of a third company connected to the Respondent, but rather a separate legal entity. It confirmed that while both companies share the same work location and the same directors, they are separate entities.

At the hearing, the respondent accepted that Butlers Grove Stone Ltd is not an associated company for the purposes of Section 16 of the Act. Applying the law to the facts of this case, the Court has to find that the offer of employment made to the Complainant was an offer of employment with a completely separate entity and not with an associated company for the purposes of the Act. As a result, that offer cannot amount to an offer of suitable alternative employment within the meaning of Section 15 of the Act.

Notwithstanding that Butlers Grove Stone Ltd is not an associated company for the purposes of Section 16 of the Act, Section 9 does provide for an employee to be re-engaged by another employer immediately on the termination of his employment, where that re-engagement takes placewith the agreementof the employee, the previous employer and the new employer. In the case before this Court, the Complainant did not agree to the Respondent’s proposal to be re-engaged by a new employer, Butlers Grove Stone Ltd. In circumstances where the Complainant was not agreeable to work with a new employer, the Respondent cannot rely on the provisions set out at Section 9 (3) of the Act.

Inall ofthe circumstances, refusal by the Complainant of this offer does not disentitle him to a redundancy payment from the Respondent, in line with the provisions of the Act.


Determination

Accordingly, the appeal succeeds, and the decision of the Adjudication Officer is set aside.

The Court so determines.

NOTE

Enquiries concerning this Determination should be addressed to Cathal Nurney, Court Secretary.