ADJ-00021302

Complainant

Respondent

Anonymised Parties

A Service Manager

A Motor Vehicle Sales and Repair company

Act

Complaint/Dispute Reference No.

Date of Receipt

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

CA-00027933-001

24/04/2019

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

CA-00027933-002

24/04/2019

This is a decision in respect of complaint, CA-00027933-001, the substance of which is that the Complainant was unfairly dismissed by a decision of the Respondent to make him redundant in circumstances where the Complainant does not accept there was a genuine redundancy situation.

The complaint in relation to Pay, CA-00027933-002, was withdrawn at hearing.

The Complainant commenced his employment on 3 January 2011 as a Service Manager, with the Respondent. The Respondent is Motor Vehicles Sales and Repair/Services business established by a previous generation of the Respondent owner’s family.

When the Complainant joined the Respondent in January 2011, it enjoyed a profitable franchise dealership with Volkswagen.

The Complainant’s responsibilities as Service Manager lay on the Repair and Services side of the business as opposed to the Sales side. These included the following: ISO coordinator; work-shop manager; training coordinator; product safety manger; quality reporting; digital media organiser; after sales data analyst and customer care manager. His main responsibility was managing the workshop side of the business (repairs, services and parts.)

On 30 October 2018 the Respondent owner informed him that his position of Services Manager was being made redundant and following this the Complainant  was paid a statutory redundancy payment.

The Complainant’s departure from the company was acrimonious. Three weeks prior to the redundancy the wife of the Respondent owner (who also worked in the business as a service advisor – the Complainant was her line manager) blamed the Complainant for the fact that the Respondent had not passed an ISO accreditation audit, which the Complainant took serious objection to.

Following the Complainant’s redundancy, the Respondent owner’s wife took over the Complainant’s work responsibilities and a new employee was recruited to cover the work that the owner’s wife had done.

The Complainant contends that the work that he did- as a Service Manager - needed to be done when he was dismissed and still needs to be done and the Respondent’s contention that his position was redundant or was no longer required, has no basis in fact.  The Complainant contends that it is no coincidence that the argument over ISO accreditation took place just weeks prior to the decision to make him redundant. The Complainant contends that it was this argument together with ongoing tensions between him and his employer which led to his dismissal.

On being informed that he was being made redundant the Complainant immediately objected and went straight to the Respondent’s accountant to ensure that he received a bonus payment that was due to him together with outstanding holiday entitlements. He did not trust that it would be paid to him and he was not incorrect about this. The payment of the bonus was resisted by the Respondent and was only conceded in the course of the Adjudication hearings. The Complainant contends that the poor faith demonstrated by the Respondent by denying his bonus entitlement is consistent with the Respondent claiming falsely that a redundancy situation pertained.

The Complainant contends that following the dismissal in October 2018 the Respondent was over-reactive and aggressive towards him despite nearly ten years of committed service to the company. On the day that  he was dismissed the Complainant was using a customer car (he was testing it following a repair to its braking system.)  When he returned the car the next morning, he found that access to his emails had already been shut down and the owner’s wife was sitting at his former desk apparently acting as the new service manager.  When the Complainant was asked to leave he said that he would only leave when he was provided with a letter of redundancy and was paid his entitlements. The Respondent owner rang the Gardai. When the gardai arrived, the Complainant left the garage but without a car, he walked home. The Complainant contends that there was no reason for this  and it demonstrates the personal animosity that was behind the decision, as opposed to it being an objective and dispassionate economic-based redundancy.

A few weeks later the Complainant learned that a new employee had been recruited. The work that the Complainant had previously done was now being done by the owner’s wife, and the work that the owner’s wife had previously done, as service advisor, was now being done by a new employee. This shows that while there was a change of job titles, that the work of a Service Manager was very much still alive, it being central to the operation of the business and that the Respondent’s assertion that his role was redundant was and is false.

The Complainant asserts that regardless of the loss of VW contract in 2018, the work within the workshop never significantly fell. In fact, the workshop had never been as busy and there was a 3-week waiting list for service and repairs. These delays could have been ameliorated had the Respondent replaced technicians who had left, but this was never done. He contends that there was still huge scope for the Respondent to expand the workshop business, but the Respondent owner refused to hire the staff that were needed.

The Complainant contends that the audited accounts of the Respondent produced in evidence do not show a significant dip in the business viability of the workshop. The workshop figures show that while the workshop business dropped from its 2017 level (and the Complainant could not dispute this as his 2017 diary was missing) that the 2018 figures were still on a par with the 2015 and 2016 levels, from which the Complainant contends that if it was justified to have a Service Manager in 2015 and 2016 (with the same level of profit as in 2018) why was he made redundant? And if the VW sales contract was lost, that would create more of a reason to re-invest in the workshop side of the business as opposed to not replacing technicians and allowing the workshop business to increasingly become less and less profitable. The Complainant’s view is that from August 2017 onwards the workshop business activity was deliberately kept low in order to prepare an evidential basis for the Respondent’s subsequent decision to make him redundant.

The Complainant contends that his work had not diminished, he was never as busy and the decision to make him redundant was not reasonable and that he was unfairly dismissed.

He contends that the Respondent has failed to discharge the onus of proof that the dismissal was a genuine redundancy.  It happened because he fell out with the Respondent owner’s wife and she was more than happy to take his job.

The redress that the Complainant seeks is compensation of ten months of loss of salary. He claims a limit of ten months because following his dismissal he set up his business on his own and within ten months his income had already superseded the salary that he received from his employment with the Respondent (including the bonus that he was paid monthly.)

In calculating loss of income arising from the dismissal, the Complainant contends that the payment of a bonus was a normal part of his monthly income. He was paid it every month. It was neither (as the Respondent claims) discretionary or work related but rather was rather a tax efficient device for the Respondent to pay him. The Complainant’s calculation of loss is based on an annual salary of €77,000 [€42,000 salary plus €35,000 (bonus)] 

The compensation he seeks is € 59,306 which is a loss of ten months taking account of the statutory redundancy that has already been paid to him.

The Respondent denies that the decision to make the Complainant redundant was an unfair dismissal.

Redress

Dealing first with the redress that is claimed, the Respondent contends that the Complainant’s monthly salary did not automatically include a bonus and that the bonus was discretionary. Therefore, whilst the Respondent contends that the redundancy decision was fair, in the event that the Adjudicator finds that it was not, the Respondent asserts that the calculation of loss should not include the bonus and should rather be based on ten month salary of €35,000  (based on an annual salary of €42,000) minus the statutory redundancy of €9687 that was paid to him ie €25,313 rather than the €59,306 that is claimed by the Complainant.

Substantive Complaint

Turning to the Complainant’s substantive claim - that the redundancy was false - the Respondent accepts that the onus of proof is upon the employer to show that the decision was fair. In doing so the Respondent witnesses contends as follows:

The debate over the ISO accreditation had nothing to do with the decision to make the Complainant redundant. This was neither the first nor the last time that the ISO accreditation had not been awarded.

2018 was a significant year for the Respondent business as a result of which a downturn to the Respondent business and a reduction in staff numbers became inevitable.

In late 2017 the Respondent received instructions from Volkswagen (VW) that the franchise agreement with them would be likely to cease in 2018.

In Spring 2018 VW confirmed this and following which, important strategic decisions were required to be quickly made by the Respondent to ensure viability of the business in the future.

The end of the VW dealership would take 3 years from 2018 to take effect, following which there would be an option for the Respondent to invest in a separate franchise for the sale of electric VW vehicles for a 2-year contract. Therefore, while the loss of the business would not have immediate impact in 2018, when the public were unaware of the loss of the contract, the Respondent owner knew that its VW sales would completely cease at the end of 2022 and that the workshop repair/service work would also be reduced by the loss of the VW franchise– because much of the repair work was connected to the fact that the Respondent held a VW dealership.

In 2018, in anticipation of this downturn, the Respondent offered voluntary redundancies to all its staff and took the decision to stop recruitment of staff.

In response to the offer of voluntary redundancies, the warranty manager elected to go on a 3-day week and a work shop mechanic accepted voluntary redundancy. Additionally,  two mechanics who had already left the employment were not replaced. One of which was a VW Master Technician, who had resigned in August 2017.  The technicians went down to 3, alongside an apprentice. There were 22 staff before the redundancy process and today there are only 16 staff.

The decision to make the Complainant redundant arose in the following circumstances; The Respondent accepts that the Complainant was disagreeing with much of management decision making around this time. He disagreed with the decision that no priority being given to retrain the VW master technician after August 2017. He voiced his concern that the work shop was undermanned and that the waiting time for a service and repair was too long. He disagreed with the approach to the ISO. He disagreed with a lot. But the Respondent the Complainant was not aware of the whole picture at this time. He did not become aware of the loss of the VW franchise until Spring 2018 and from then on there was little point in investing in VW technicians to repair VW cars if the Respondent would not have a VW dealership for much longer.

The decision to restructure the business and to reassign the duties of the Service Manager to other employees was taken to reduce costs. It was not done for any personal animosity towards the Complainant. The Complainant’s salary was high and it was decided that his duties could be reassigned to other employees.

The Respondent accepts that the duties of Service Manager remained, however the decision to reassign those duties was taken because it made economic sense. It was cheaper. The Complainant’s salary was high and others were able to do these duties in a more cost effective way.

In accordance with the restructure,  workshop management was assigned to the owner personally and greater responsibility was given to the technicians directly and the ISO work and customer service work was assigned to the owner’s wife. It is accepted that a new receptionist was employed around then but her duties were confined to reception duties alone. It is not true to suggest that she was engaged as a service advisor or that she took on the work that the owner’s wife had done previously. The upshot of the decision was there was a saving in terms of the Complainant’s salary and bonus, albeit one that was discretionary.

On Day 5 of the Adjudication the Respondent provided audited accounts for 2017 and 2018 which showed a down turn in operating profit of the Respondent by 26 %. On Day 6 the Respondent provided accounts in respect of Labour and part sales (ie. the workshop accounts) in respect of 2017 and 2018.

With respect to the Complainant’s contention, that regardless of the loss of VW contract the work rate in the workshop never dipped, the Respondent’s workshop accounts on Labour and part-sales showed that there was a 21% loss in profits when 2017 figures are compared with 2018 figures. So there was a loss in all areas of the business, there was also falls in the areas that the Complainant managed.

The reality was that to ensure the ongoing viability of the company, cost cuts across the board were needed to be made. The decision to make the Complainant redundant was not one that was reached in a vacuum. Other staff had already been made redundant and others who had left were not replaced. The loss of the VW contract had serious repercussions for the company, which was not immediate but as time moved towards the contract end in 2021 it was clear that the business needed to respond to the loss of the contract, reduce its outgoings, change its work model and reduce staff numbers. At the end of 2022 – when the VW dealership concludes – it is likely that other redundancies will need to be made. VW dealerships within Ireland have been centralised and reduced to about 15 garages several of which are owned by the same few businesses.

The decision to make the role of Service Manager redundant was a reasonable decision in the face of a downturn of business and a need to reduce staff costs.

Section 7 (2) of the Redundancy Payments Act 1967 as amended provides as follows:

An employee who is dismissed shall be taken to be dismissed by reason of redundancy if for one or more reasons not related to the employee concerned the dismissal is attributable wholly or mainly to

(a)…

(b)…

(c) The fact that his employer has decided to carry on the business with fewer or no employees whether by requiring the work for which the employee had been employed (or had been doing before his dismissal) to be done by other employees or otherwise

Analysis

The Complainant’s case relies on a contention that because the work he did as Service Manager continued after he was dismissed, that the redundancy was not genuine, which is not a correct interpretation of Section 7 (2)(c) of the 1967 Redundancy Payments Act.

I found the Complainant to be a credible witness and at all time clear and cooperative.

At the start of the Adjudication the Respondents approach was less than cooperative and  I place the protracted nature of the Adjudication process which involved six hearing days, mainly at the door of the Respondent. At the outset of the Adjudication the Respondent misunderstood the burden of proof on them in an unfair dismissal case and there was no problem with that. However, after this was explained to them and time was afforded to allow them an opportunity to evidence their case, it took until the fifth day for the Respondent to produce audited accounts to evidence their defence.

The Adjudication process required breaks and adjournments to allow the Respondent to look up accounts that it had not prepared in advance, which was less than satisfactory.

Evidence

There is no dispute that there was a down turn in the overall performance of the Respondent business from 2017 as compared with 2018.

A consideration of the workshop accounts that were produced in evidence on Day 6, are significant not to show that the workshop output reduced between 2017 and 2018, because the Complainant did not deny this (but laid that at poor business decisions and a failure of management to recruit staff for the workshop.) Rather the significance of the workshop figures when viewed alongside the full audited accounts of the business, is the remarkable stoical performance of the workshop given the technician losses from August 2017 onwards. The workshop figures show that in 2018 the workshop maintained a solid, albeit reduced, performance but this was on a significantly reduced workforce. The workshop team must have been working very hard in 2018 to reach the profits that they did.

However, the viability of the overall business was being considered at this time, and for good reason. Arising from loss of the VW contract the Respondent had a variety of options but these fell broadly in two categories: It could have recruited more staff, cut waiting times and increased through put even more and essentially concentrate on developing the repair and service part of its business or it could hunker down, reduce its outgoings as much as possible and redirect energies into developing a used-car sales market. The Complainant advocated the first option but the Respondent owner chose the second.

In terms of the Complainants assertion that from Spring 2018 onwards there was a deliberate reduction in workshop profitability to create a redundancy situation to justify later “getting rid” of the Complainant, I am not convinced of this.  If true, this would have meant a deliberate intention to lose business which seems unlikely and it would be a very expensive way of making the Complainant redundant.  For this reason I do not find this to be credible.

Legal test to be applied:

The role of an Adjudicator in UD/Redundancy claims is to apply the law the facts. It is not to determine whether business decisions made by the Respondent are prudent or otherwise.

The task in this Adjudication is to apply the provisions of the 1967 Act and in doing so I must consider the following:

Was there a down turn in business?

If yes, what was the Employer’s response to that downturn?

Was that response within a band of reasonable responses to the circumstances?

Was the decision to make the Respondent redundant mainly to reduce staff numbers or was it mainly for non-business related reasons arising from an interpersonal conflict between the  Complainant and the Respondent?

In considering these factors, was the decision to make the Complainant redundant reasonable?

Findings of Fact

It was clear at the hearing that the Complainant fundamentally disagreed with some of the Respondent decision making. He could not understand why the Respondent did not recruit for the workshop part of the business. He could not understand that once the Master VW technician left in August 2017, why this position was not replaced or at least priority be given to training existing VW technicians to higher level as quickly as possible. He could not understand the failure of the Respondent to address the issue of long waiting lists for repair/service customers. He could not understand the lack of customer care. He could not understand why, given that waiting lists would negatively impact on the ISO accreditation, why this was not remedied in advance of the ISO audit. He could not understand why he was blamed for the ISO audit failure. He could not understand why the Respondent did not take steps to prevent the haemorrhaging losses that were occurring to the repair/service workshop business. Essentially the Complainant would have taken any number of different decisions to those which the Respondent took.

But it was a hunker-down and reduce costs policy that was adopted by the Respondent and I expect that this frustrated the Complainant, not least because this left the Complainant with the challenge of managing a reduced team of over-worked technicians.

However, when between August 2017 and early 2018, as positions in the workshop were not being replaced, the Complainant would not have been aware of the bigger looming problem to the business, which was the loss of the VW contract.

It was only in Spring 2018 that the Complainant learned of the loss of the VW contract and while if the business had been his, he might have approached the challenge differently, the business was not his and many different approaches fall within a band of reasonable decision making when a business faces significant threat.    

A conservative decision to run the business as profitably as possible with as a small number of employees as possible was made and there was nothing inherently unreasonable about this approach.

Making the Complainant redundant in order that his salary (which together with the bonus must have been one of the largest in the company) could be cut as a company outgoing was not unreasonable from a business point of view. Most significantly however,  it is permitted by the 1967 Act.

While the frustrations of the Complainant led to heated disagreements and within this context a decision was reached to make him redundant I do not accept that the decision to make the Respondent redundant arose wholly or mainly because he disagreed with his boss or argued with his boss’s wife. And even if the interpersonal tension did impact on the Respondent’s decision, it is worth reminding that the wording in section 7 (2) is “wholly or mainly” not “wholly.”

I consider that the Complainant’s dismissal was attributable mainly to the fact that the Respondent’s business had diminished and was likely to diminish further and that cost cutting measures were justified.

When the decision was made to make the Complainant redundant the Respondent was in the process of reducing its workforce in a variety of other ways; redundancies, allowing employees to work reduced hours and by not replacing workers who had left.

The Respondent was within its rights (under Section 7 (2) (c)) as an employer to decide to carry on the business with fewer employees by requiring the work for which the Complainant had been employed to be done by other employees, namely the Respondent owner himself, his wife and/or technicians in the workshop.  I do not accept that the hiring of a receptionist alters this for three reasons: 1. she was not hired to do his work 2. the reassignment of roles is permitted by the Act and 3. the use of the words “or otherwise” in section 7 (2) (c), allows a more flexible restructure process which must include the option of hiring staff to do lesser skilled work, if the employer saves on overall salary costs.

The Respondent’s decision to dismiss the Complainant was ultimately the Complainant’s gain, in that having left his employment with the Respondent his own business reached profitability within ten months. I am not surprised by this. The Complainant presents as a straight-talking, highly competent, efficient and clear-headed person. The success that he has enjoyed since his departure from the Respondent’s employment is not remotely surprising, the only surprise is that he did not set up his own business earlier.

The test in this Adjudication is firstly, did a redundancy situation exist when the redundancy took place? And given the downturn of the business, I find that it did.

And secondly, was the decision to make the Complainant redundant in circumstances whereby the Respondent’s staffing structure was re-designed and the Service Manager duties were redistributed to other employees, permitted by the 1967 Act. And I find that it was.

I find that that the decision to make the Complainant redundant falls within the circumstances permitted by section 7 (2) (c) of the 1967 Redundancy Payments Acts as amended and for the above reasons I find this complaint to be not well founded.

Lillis v. Kiernan (Employment Appeals Tribunal 22 June 2004) applied

CA-00027933-001

Unfair Dismissal: For the above reasons stated above I find this complaint to be not well founded.

CA-00027933-002. Pay complaint withdrawn

Unfair Dismissal – allegation of sham redundancy – reorganisation of business - section 7 (2) (c) Redundancy Payments Act 1967