Complainant

Respondent

Parties

John  Ryan

Ryan Fennelly Limited Fennelly Fitness - Davy Jones Fitness

Representatives

Act

Complaint Reference No.

Date of Receipt

Complaint seeking adjudication by the Workplace Relations Commission under Regulation 10 of the European Communities (Protection of Employees on Transfer of Undertakings) Regulations 2003 (S.I. No. 131 of 2003)

CA-00029944-003

26/07/2019

Complaint seeking adjudication by the Workplace Relations Commission under Regulation 10 of the European Communities (Protection of Employees on Transfer of Undertakings) Regulations 2003 (S.I. No. 131 of 2003)

CA-00029944-004

26/07/2019

Complaint seeking adjudication by the Workplace Relations Commission under Regulation 10 of the European Communities (Protection of Employees on Transfer of Undertakings) Regulations 2003 (S.I. No. 131 of 2003)

CA-00029944-005

26/07/2019

Complaint seeking adjudication by the Workplace Relations Commission under Regulation 10 of the European Communities (Protection of Employees on Transfer of Undertakings) Regulations 2003 (S.I. No. 131 of 2003)

CA-00029944-006

26/07/2019

Complaint seeking adjudication by the Workplace Relations Commission under Regulation 10 of the European Communities (Protection of Employees on Transfer of Undertakings) Regulations 2003 (S.I. No. 131 of 2003)

CA-00029944-007

26/07/2019

Complaint seeking adjudication by the Workplace Relations Commission under Regulation 10 of the European Communities (Protection of Employees on Transfer of Undertakings) Regulations 2003 (S.I. No. 131 of 2003)

CA-00029944-008

26/07/2019

Complaint seeking adjudication by the Workplace Relations Commission under Regulation 10 of the European Communities (Protection of Employees on Transfer of Undertakings) Regulations 2003 (S.I. No. 131 of 2003)

CA-00029944-009

26/07/2019

Complaint seeking adjudication by the Workplace Relations Commission under Regulation 10 of the European Communities (Protection of Employees on Transfer of Undertakings) Regulations 2003 (S.I. No. 131 of 2003)

CA-00029944-010

26/07/2019

The Complainant claims that he was a director and employee of the Respondent since 26 July 2016. However, on 16 November 2018 an “exit strategy agreement” was reached with Mr. A, the other director, where the Complainant was to exit the business as of that date, a payment plan was put in place where €300 per week would be paid to him for 2.5 years. He said on 27 June 2019 that the business transferred from the Respondent to a new operator. He has not received payment of wages since.

The Respondent said that the business, a gym, closed as of 27 June 2019 as it was not viable, and that the landlord took back the property and seized the gym equipment as part payment for debts owed. Mr. A said he was unaware of what happened to the business thereafter. He said that he was left to pay loans and other debts owed by the business incurred in his and the Complainant’s name since that time.

The following is a summary of the Complainant’s case.

The Complainant said that the Respondent originally had two directors - Mr. A and himself. However, the business was very poorly run, and he felt that Mr. A was largely to blame as he had other businesses and was concentrating on those, leaving the Respondent’s business to suffer.

In November 2018 an exit strategy agreement was reached between both directors that consisted of an agreed payment plan to the Complainant as an outgoing director where €300 was paid per week for 2.5 years to commence upon signing off of all legal documents.

The Complainant said that on 16 November 2018 he left the business, and this agreement was put in place to protect his ‘employment rights’ where a legal document was prepared for sign off, and his employmentstatus was therefore active with this company since that time.

He said the other director had made assertions that the payments were part of the exit deal and not a wage. However, the Complainant said that he sought assurance on his position from the Respondent a number of times to reinforce his employment rights. To support that he sought his weekly payslips and after much deliberation received payslips for a period. Therefore, he contests that all payments were ‘wages’ following the agreement in principle, until the remaining director had closed off the exit strategy agreement, legally.

He said when the business transferred over, by way of a transfer of undertaking to another entity, that he was not contacted to transfer nor had he been paid, while other staff of the Respondent have been moved across to the new operator of the fitness centre and he was not moved nor informed of the move.

The Complainant claims that this matter has been orchestrated in a very underhand manner. The Complainant said that Mr. A did not manage the business to be a success, he was seldom on site and always attending to his other food business and as such, amassed both lease arrears and revenue bills.

The Complainant said that an exit strategy was agreed upon as he was “unwilling to work in that environment or work with this director [Mr. A] any longer.”

The Complainant said that there was no contract of employment drafted for directors or no service contract drawn up at the inception of the Business nor thereafter.

The Complainant claims that this amount to a breach of the Regulation of the European Communities (Protection of Employees on Transfer of Undertakings) Regulations 2003 (S.I. No. 131 of 2003).

The following is a summary of the Respondent’s case.

The Respondent said that the Complainant exited the business, moved away and left the country and was not available for work. The exit strategy agreed was for the Complainant to leave the business in November 2018, there was no employment relationship.

The business failed and the landlord took back responsibility for the premises and the fitness equipment thereafter as part payment for what was owed. Mr. A said he had nothing to do with the business from that point onward, but he is still paying off loans to the banks taken out in his and the Complainant’s name.

Preliminary issue for consideration.

At the outset I advised the parties that I needed to determine the employment relationship between the Complainant and the Respondent.

The Complainant argued that the Respondent owes him €300 per week in unpaid wages from an agreement reached in November 2018. The Respondent disputed the claim.

It is necessary to determine the nature of the employment relationship between the parties and decide whether the Complainant was engaged under a "contract ofservice".

It is common case that no written contract existed between the parties in respect of the arrangements entered. Therefore, I must consider the totality of the relationship between the parties to help me make a determination here.

The authorities in relation to the employment status has developed over the years and a number of tests have been applied by the courts in order to help determine the employment relationship. The High Court in The Minister for Agriculture and Food v John Barry & Ors [2008] IEHC 216 made clear that all the tests are potential aids for identifying the nature of the working relationship and no single test is definitive.

I note that in the case of McAuliffe v Minister for Social Welfare [1994] ELR 239 Barr J. said it was not possible to devise any hard and fast rule as to what constitutes a contract of service. Therefore, a tribunal is required to look at the totality of the relationship between the parties and each case must be considered on its merits.  Accordingly, it is necessary to consider the evidence as presented under a series of tests as set out in the various court cases that have dealt with this issue.

I shall look at them in sequence below to help determine the relationship that existed.

Mutuality of obligation

The mutuality of obligation test has often been referred to as the irreducible minimum requirement which must be present before a contract of employment can be held to exist. In order for a contract of service to exist there must be mutual obligation on the employer to provide work for the employee and on the employee to perform work for the employer. Where there is an ongoing obligation on the Employer to provide work to the worker and likewise an obligation on the employee to accept work and carry out that work accordingly. 

In High Court decision of Minister for Agriculture and Food v Barry & Ors[2011] IEHC 43 the mutuality of obligation test was endorsed by Edwards J. when he stated “The requirement of mutuality of obligation is the requirement that there must be mutual obligations on the employer to provide work for the employee and on the employee to perform work for the employer. If such mutuality is not present, then either there is no contract at all or whatever contract there is must be a contract for services or something else, but not a contract of service”.

I note the uncontested evidence presented here by the Complainant where he declared that he left the business, on his own accord, in November 2018 and had nothing to do with the business from that point forward.  He never worked for the Respondent again and it was him that insisted on a legal document to establish his exit plan from the business, where he said it was agreed that he would be paid €300 per week for 2.5 years. He said this was to “protect his employment status”. However, this was never signed off by the Respondent. The Complainant declared that he chased the Respondent for payslips, and they were given to him for a while after he threatened the Respondent’s Accountant and legal team of the legal steps, he would take, should they not be forthcoming. The Complainant relies on these payslips as proof of an employment relationship.

The Respondent agrees that the Complainant left the business in November 2018. Mr. A said that he was in contact with the Complainant over the business from time to time, but the Complainant was not working for the business.

On this basis I am completely satisfied that there was no mutuality of obligation in this instance. This test I am satisfied is the relevant test for consideration in this complaint, as it uncovers a basic premise of what is necessary in an employment relationship context, namely there must be mutual obligations on both sides and when that is not present there is no contract of service as per Minister for Agriculture and Food v Barry & Ors.

The Control Test

Notwithstanding the previous paragraph above, for completeness I will consider the control test.

The test was applied by the High Court in Minister for Industry & Commerce v Elizabeth Healy [1941] IR 545 and by the Supreme Court in Roche v Kelly and Co Ltd. [1969] IR 100 where Walsh J held that in master-servant relationships the master must have right to tell the servant what to do and how to do it, whether or not he exercises that right.  

The Complainant said he did work initially on the business, but he was a director and was in control of what had to be done. I am satisfied that he did what he felt he had to do in the business and the Respondent exercised no day-to-day control over his work. The Complainant was not in a relationship of subordination with the Respondent. He was not reporting to a superior, he was not subjected to a performance review. He was not required to clock in/out, there were no records of his hours of work kept and he was not obliged to inform the Respondent of his whereabouts. He was his own master.

I find that the Respondent did not prescribe the way the Complainant should conduct his business.

I find that there was no control exerted by the Respondent on the Complainant’s work. The Complainant dictated how, when and where the work was carried out. And from November 2018, I find the Complainant has not performed any role or provided any service for the Respondent. He said he left the business by his own accord at that time.

Integration Test & Entrepreneurial Test

Notwithstanding the previous findings above, for completeness, I will consider the integration and Entrepreneurial tests.

The integration test was proposed in Stevenson Jordan & Harrison Ltd. v McDonald and Evans [1952] 1 TLR 101and applied by the High Court in Re Sunday Tribune Ltd. The question to answer is whether an employee is employed as part of the business and his work is an integral part of the business, or whether his work is not integrated into business but is only accessory to it.

The Entrepreneurial test is to assist to determine whether a person is in business on his own account.   The Code of Practice for Determining Employment or Self-Employment Status of Individuals issued through the Department of Social Protection provides clarification of this issue. It states that: “An important consideration in this context, will be whether the person performing the work does so “as a person in business on their own account”.” Is the person a free agent with an economic independence of the person engaging the service?”

The Complainant claims that his role was at the business end of the relationship, and the other director was more involved in the actual training in the gym. By the Complainant’s own admission, he stepped away from the business and had nothing to do with it from November 2018 onward. The application of the Integration and Entrepreneurial tests simply does not assist the Complainant’s case here.

Payslips/taxation

The Complainant points to pay slips and other taxation references provided to him for a while after he left the Respondent and claims that this demonstrates his employee status with the Respondent is ongoing. However, I have been told by the Complainant that he could not work with the Respondent or the other director any longer from November 2018, so he left, and the arrangement reached was an exit strategy.

There is a conflict here. The evidence as noted above does not support a contract of employment relationship. The documentary evidence presented does not support the real actual relationship.

It is not unusual in such complex cases to have such a conflict and therefore that is why the defacto relationship needs to be assessed. I note in the Henry Denny & Sons (Ireland) Ltd. v The Minister for Social Welfare thedemonstrator in question submitted invoices for payment, yet it was deemed that she was an employee. Similarly, in Re Sunday Tribune Ltd. Carroll J stated that a Complainant’s taxation status was not a determining factor in deciding if an employee/employer relationship exists.

Conclusion

Accordingly, my conclusion on the preliminary matter is based on the information obtained from the parties. While it is difficult to comprehend that the parties entered into a complex exit agreement without a signed legal document outlining the arrangements between them, it is clear to me that the Complainant was not an employee at the time the Respondent’s business closed on 27 June 2019. He had long left the Respondent at that point and was not available to work nor was he working as an employee at that point in time.

Having considered the evidence, as presented, I find that the Complainant has no entitlement to statutory protections sought and therefore his case under Regulation 10 of the European Communities (Protection of Employees on Transfer of Undertakings) Regulations 2003 (S.I. No. 131) of 2003 is not well founded.

I find that this complaint is not well founded. 

Protection of Employees on Transfer of Undertakings – not an employee - not well founded