PWD2230

1.Appeal Of Adjudication Officer Decision No ADJ-00030224.

BACKGROUND:

2.This is an appeal of an Adjudication Officer’s Decision made pursuant to Section 7(1) of the Payment of Wages Act, 1991. The appeal was heard by the Labour Court on 11 March 2022 in accordance with Section 44 of the Workplace Relations Act, 2015. The following is the Court's Determination.

DETERMINATION:

This is an appeal by Lake Region Medical Limited against a Decision of an Adjudication Officer (ADJ-00030224) in relation to a claim made by Mr Mark Reeves under the Payment of Wages Act 1991 (“the 1991 Act”). The Adjudication Officer found that the complaint was well founded and ordered Lake Region Medical Limited to pay the sum of €439.63 as compensation.

An appeal was lodged to the Labour Court on 05 August 2021 and a remote hearing of the Labour Court was held on 11 March 2022. In this Determination the parties are referred to as they were at first instance. Hence, Lake Region Medical Limited is referred to as “the Respondent”and Mr Mark Reeves as “the Complainant”.


BACKGROUND:

In March 2020, the Government announced the Temporary Wages Subsidy Scheme (TWSS), introduced by the Emergency Measures in the Public Interest (Covid-19) Act, 2020 (“the 2020 Act”). The Scheme was introduced to help employers maintain staff in employment during the early days of the Covid-19 pandemic. The scheme provided payment of income supports to employers in respect of eligible employees. The Scheme lasted for 12 weeks during which the government funded 70% of eligible employee’s salaries up to specified levels. The Respondent availed of this scheme. This appeal relates to the calculation of the Complainant’s wages under the terms of that scheme.

The Government funded subsidy payable to employers under the rules of the Scheme was a percentage payment calculated by reference to an employee’s average wage in January and February 2020, referred to as the “average Revenue net weekly pay”(ARNWP).

The Complainant, who is employed as a manufacturing operative, works 12-hour shifts on 4 days on and 4 days off rota. He works an average of 42 hours per week for which he receives a weekly net payment of €638.81. The Complainant was absent for two days unpaid sick leave during the reference period of January and February 2020. This impacted on the calculation of his average earnings during the reference period and, as a result, the Complainant’s “average Revenue net weekly pay” (ARNWP) for the purposes of the Scheme was €614.99.

The Respondent topped up the 70% Government subsidy to the Complainant’s ARNWP of €614.99 for the 10-week period that it operated the scheme. The Respondent accepts that because of the Complainant’s two-day unpaid sick leave during the reference period in January and February 2020, his average net weekly wage was less than it normally would have been for working his full shifts. It is accepted that a difference in total pay of €448.60 arose for the period that the Respondent availed of the scheme.

The Complainant contends that the total shortfall in payment of €448.60 amounts to an unlawful deduction under the Act. The Complainant submits that the Respondent made an unlawful deduction from his salary, in breach of section 5 of the 1991 Act, when it failed to pay him normal net weekly earnings of €638.81 net for the hours worked during this period.

The Respondent submits that no unlawful deduction of wages occurred, and that any deductions from the Complainant’s salary were made in accordance with Section 5(1)(a) of the 1991 Act and required by statute.


POSITION OF THE COMPLAINANT:

The Complainant’s case is that he is entitled to be paid for the hours that he worked in accordance with his contract of employment. The amount properly payable to him based on hours worked for the period encompassed by his claim is his normal weekly net wage of €638.81.

The Complainant submits that he had a legal entitlement to be paid the amount that was properly payable for the 10-week period encompassed by his complaint. The failure of the Respondent to pay the Complainant for the hours that he worked is a deduction within Section 5 of the 1991 Act.

The Complainant accepts that the Respondent was eligible to apply to participate in the TWSS, which was introduced to compensate employers and help them pay employees. However, it was a company decision to place the Complainant on the scheme. That was an internal policy decision and not mandated by statute. The company chose not to apply the scheme to 136 other employees.

The Complainant accepts that the rules of the TWSS scheme prevent an employer from topping up wages beyond the thresholds permitted by the scheme. However, the shortfall could have been addressed another way. The Complainant requested to be paid for the hours that he physically worked or, alternatively, be removed from the scheme, or be allowed to work reduced hours.

The Complainant submits that the TWSS cannot be used as a mechanism to pay employees less than their contractual entitlement. The Scheme did not amend an employer’s obligations or an employee’s statutory entitlements that were already in existence. The 2020 Act does not provide for a deduction in a worker’s wages, and the accompanying Guidelines are not an Act. The rules of the TWSS do not supersede an employee’s contractual entitlements or overrule Section 5 of the 1991 Act.

The deduction made by the employer was unlawful, as the rules of the scheme do not override the terms of a contract of employment. The Complainant worked his full contractual hours, while the Respondent paid him less than what was properly payable to him. The Employer benefitted from the Scheme while the Employee did not.


POSITION OF THE RESPONDENT:

The Respondent met the criteria set out by Revenue to qualify for the TWSS due to the effect of COVID-19 on the New Ross Site. It correctly implemented and applied the TWSS as set out by legislation - the Emergency Measures in the Public Interest (Covid-19) Act 2020 (the 2020 Act) and the guidance documents issued by the Revenue Commissioners.

The Respondent had to apply the rules of the TWSS, as set out by the 2020 Act and by the guidelines issued by Revenue. Such rules prohibited the Respondent from receiving more (in a combination of TWSS subsidy payment and any top up payment) than what his average net weekly wages were in January and February 2020. The Respondent submits that it was required to make a deduction from the Complainant’s wages due to the TWSS legislation and the manner in which that scheme was implemented by Revenue. As the deduction was required by statute, no unlawful deduction of wages occurred.

An average income (ARNWP) during the reference period of January and February 2020 was mandated by the Revenue as the basis for TWSS calculations. As a result, it contends that the amount that was properly payable to the Complainant for the period encompassed by the within claim was his average income (ARNWP) for January and February 2020 of €614.99.

The Respondent submits that employees were informed at town hall meetings that the company was availing of the TWSS and that the Respondent was committed to topping up the difference between the TWSS subsidy payment and each employee’s ARNWP.

The Respondent accepts that because of the Complainant’s two-day sick leave absence his average income for January and February 2020 was less than his normal income for that period. The scheme specifically envisaged that some employees may not receive their normal earnings. The Guidelines state that ‘The employer is expected make the best efforts to maintain the employee’s net income as close as possible to normal net income for the duration of the Subsidy period.

In support of its position, the Respondent referred the Court to Section 28(6)(c) of the 2020 Act, which states as follows:

“(c) In determining what is to be the amount of the temporary wage subsidy under this subsection, the Minister shall have regard to an amount being determined that, in the opinion of the Minister, would represent a significant contribution to making good the shortfall in the amount of emoluments that would otherwise have been payable, as mentioned in subsection (2)(a), to the specified employee concerned.“

The Respondent also referred the Court to Section 28(19) of the 2020 Act, which envisages the publication of guidelines as follows:

“The Revenue Commissioners shall prepare and publish guidelines with respect to the matters that are considered by them to be matters to which regard shall be had in determining whether a reduction, as referred to in subsection (3), will occur by reason of Covid-19 and the disruption that is being caused thereby to commerce.”

Subsection 3 provides:

“The business of an employer shall be treated as being adversely affected to the extent referred to in subsection (2)(a) where, in accordance with guidelines published by the Revenue Commissioners under subsection (19), the employer demonstrates to the satisfaction of the Revenue Commissioners that, by reason of Covid-19 and the disruption that is being caused thereby to commerce, there will occur in the period of 14 March 2020 to 30 June 2020 at least a 25 per cent reduction either in the turnover of the employer’s business or in customer orders being received by the employer.”

The Scheme guidelines expressly prohibits an employer availing of scheme subsidies and topping up employee payments over and above average income (ARNWP). In this regard, the Respondent referred the Court to Section 1.6 of the Operational TWSS FAQ, which states:

"What is an additional gross payment under the Temporary Wage Subsidy Scheme?"

Sometimes referred to as ‘top-up payments’, an employer can choose to make an additional gross payment to the employee to fully or partially make up the difference between the amount provided by the subsidy scheme and the employee’s Average Revenue Net Weekly Pay. Such additional payments, which cannot be re-grossed, are regarded as gross pay and liable to Income Tax and USC.

If the employer makes excessive additional gross payments, then either the subsidy value applicable for the employee and refundable to the employer will be reduced, or the employee may not be eligible for the subsidy scheme.

Neither the employer nor the employee may benefit from the scheme where the sum of payments (subsidy plus any additional gross payment but excluding tax refunds) payable to the employee, in the week being processed, exceeds the lessor of the Average Net Weekly Pay (ARNWP) or €960 (with the exception of where the ARNWP does not exceed €412, the gross pay plus the temporary wage subsidy can exceed the ARNWP subject to a cap of €350 per week).”

The Respondent submits that it could not exceed the Complainant’s ARNWP with a combination of the TWSS subsidy and a top up payment. Where an employer receives a subsidy under the scheme and an employee does not meet the eligible employee criteria, the employer will be compelled to refund those amounts to Revenue.

The Respondent relies on the WRC decision inFinancial Controller v Hotel (ADJ-00030547) where the Adjudication Officer found "that the reduction in pay effected by the respondent was authorised by statute - Emergency Measures in the Public Interest (Covid-19) Act" where a respondent reduced the claimant's wages in order to maintain the claimant's net wages (the TWSS subsidy and the respondent top up combined). The Adjudication Officer found this complaint not to be well founded.

The TWSS was introduced during emergency times, and it was a requirement of the scheme that it be operated in accordance with Revenue guidelines. The Scheme mandated the level of payment. The Respondent had 890 employees on payroll at the time of availing of TWSS.

The company met the eligibility criteria set out by the Revenue scheme and while it was not mandated to join the scheme, it chose to do so, to avoid other measures. As an alternative to availing of the subsidy scheme, the Respondent considered a number of cost-reduction options, including reductions in the workforce, short time and unpaid temporary layoff.

The Respondent acknowledges that it did not avail of the Scheme in respect of all its workforce. Certain employees were in-eligible because they were on higher salaries or had joined the company after the cut-off date set down by the TWSS rules. A cohort of 42 employees were excluded from the Scheme as they had unpaid leave in excess of 24 hours in January and February 2020.

The threshold of 24 hours unpaid leave was set by the Respondent as a policy matter and was not a requirement set down in the TWSS rules. It was devised as a means of ensuring that employees were disadvantaged as little as possible, while at the same time availing of the TWSS. The Respondent submits that the threshold was reasonable in the circumstances and was applied in an objective and fair manner for all employees. The application of this threshold by the Respondent does not affect the Respondent's implementation of the TWSS.

The Respondent submits that the fact that the scheme does not mandate a company to place an employee within the scheme is not relevant to the within complaint.

The deduction made falls within Section 5(1)(a) of the 1991 Act. Such a deduction does not have to be mandated by statute; the only requirement is that it is authorised by statute. The TWSS mandated how average income was to be calculated and provided no discretion to top up payments, outside what is permitted within the terms of the scheme.

The Complainant’s pay during the relevant period was governed by the rules of the TWSS Scheme. The Respondent was required to make a deduction from the Complainant’s wages by virtue of the 2020 Act and the manner in which the TWSS was implemented. As a result, the reduction in the Complainant’s wages was required by legislation and was, therefore, permitted under section 5(1)(a) of the Act. No breach of the 1991 Act occurred.


THE APPLICABLE LAW:

Section 5 of the Payment of Wages Act 1991 provides in part as follows:

(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.

To ground a claim under the Payment of Wages Act 1991 the Court needs in the first instance to ascertain what wages are properly payable. Having established that the Court then needs to ascertain whether there was a shortfall in the proper payment and, if that was the case, whether the shortfall arose for one of the reasons set out in section 5(1) above.


WHAT AMOUNT IS PROPERLY PAYABLE?

Section 5(6)(a) of the 1991 Act provides that where the total amount of wages properly payable to an employee is not paid, the deficiency or non-payment is to be regarded as a deduction. Consequently, the first matter for the Court to establish is the amount that was properly payable to the Complainant for the 10-week period commencing on 10 July 2020 when the Respondent availed of the Government funded TWSS.

The Complainant’s position is that the amount properly payable to him during this period was his normal wage based on the hours that he worked. He submits that he worked his normal contractual hours, and accordingly he was entitled to be paid a net weekly wage of €638.81, as per the terms of his contract of employment.

The Respondent submits that the Complainant’s pay during the relevant period for the complaint before the Court was governed by the rules of the TWSS legislation and associated guidelines.

The TWSS rules determined that an employee’s “average Revenue net weekly pay”(ARNWP) be calculated by reference to his or her average wage in January and February 2020. As a result, the Respondent contends that the amount properly payable to the Complainant for the period encompassed by the within claim was the lower figure of €614.99, as that amount was his “average Revenue net weekly pay” (ARNWP), as calculated in compliance with TWSS rules and this requirement not to pay more than the ARNWP was a lawful deduction within the meaning of section 5(1)(a) of the 1991.

InBalans v Tesco Ireland Limited[2020] 31 E.L.R. 125: MacGrath J. held that:-

“[T]he first matter which should be addressed by the Labour Court is to determine what wages are properly payable under the contract.”

In the Court’s view, the Respondent cannot rely on the operation of the 2020 Act and associate guidelines to say that the amount properly payable to the Complainant for the period encompassed by the within claim was the amount determined by his “average Revenue net weekly pay”(ARNWP), as calculated in compliance with TWSS rules for the purposes of the scheme.

The Complainant worked his full contractual hours during the period encompassed by the claim and the Court finds that the amountproperly payableto him was his contractual rate of pay for the hours that he worked. This amounted to his normal net weekly earnings of €638.81 net for the hours worked.

WAS THERE A SHORTFALL IN THE AMOUNT PAYABLE?

It is not disputed that for that 10-week period from 10 July 2020 during which the Respondent availed of the Government funded TWSS the employee’s contractual rate of net weekly pay dropped to €614.99 a week. It is accepted that the total shortfall or deduction for that period amounted to €448.60.


WAS THE DEDUCTION REQUIRED OR AUTHORISED WITHIN THE MEANING OF SECTION 5(1)(a) OF THE PAYMENT OF WAGES ACT 1991?

The essence of the Respondent’s case is that it was authorised by statute to implement deductions to the Complainant’s wages. In particular it pointed to section 28(6)(c) and 28(19) of the Emergency Measures in the Public Interest (Covid -19) Act 2020 (“the 2020 Act”) and Section 1.6 of Operational TWSS FAQ.

It submits that it could not make an additional top up payment to pay any shortfall in the employee’s contractual entitlements and was required to apply a reduction in order to avail of the scheme. As a result, the Respondent submits that it can rely upon section 5(1)(a) of the 1991 Act as it was required to make the deduction from the Complainant's wages by virtue of the 2020 Act and the manner in which the TWSS was implemented.

The question for the Court to decide is whether the 2020 Act and the manner in which the TWSS was implementedrequiresorauthorisesthe Respondent to make a deduction from the Complainant’s wages contrary to the terms of his employment contract.

The Temporary Wage Subsidy Scheme (TWSS) was introduced by means of Section 28 of the 2020 Act. Section 28(2) provides that the Covid-19: temporary wage subsidy provisions shall apply where—

(a)the business of an employer has been adversely affected by Covid-19 to a significant extent with the result that the employer is unable to pay to a specified employee the emoluments the employer would otherwise have normally paid to him or her,(b)notwithstanding the existence of the circumstances referred to in paragraph (a), the employer has the firm intention of continuing to employ the specified employee (and to pay to him or her emoluments accordingly) and is making best efforts to pay to the employee some of the emoluments referred to in paragraph (a) during the applicable period, and(c) the employer has satisfied the conditions specified in subsection (4)

In support of its position the Respondent relies on Section 28(6)(c) and Section 28(19) of the 2020 Act. Section 28(6)(c) provides that:-

“In determining what is to be the amount of the temporary wage subsidy under this subsection, the Minister shall have regard to an amount being determined that, in the opinion of the Minister, would represent a significant contribution to making good the shortfall in the amount of emoluments that would otherwise have been payable, as mentioned in subsection (2)(a), to the specified employee concerned.”

This subsection of the 2020 Act requires the Minister when determining the amount of the subsidy to ensure it represents a significant contribution to making up the shortfall in emoluments to the employee. The Court finds that there is nothing in section 28(6)(c) of the 2020 Act that requires or authorises a deduction of the employee’s net income contrary to section 5 of the Payment of Wages Act 1991. This merely sets out the criteria the Minister shall have regard when determining the amount of the temporary wage subsidy, it does not authorise or require a deduction of wages.

The Respondent accepts that section 28(6)(c) does not in itself authorise a deduction of wages contrary to section 5 of the Payment of Wages Act 1991. However, it relies on the guidelines provided for by Section 28(19) of the 2020 Act, which it submits prescribe how the scheme was to be operated, and which required that a deduction be made from the Complainant’s salary. As a result, it submits that such a deduction was lawfully made in accordance with Section 5(1)(a) of the 1991 Act.

Section 28(19) of the 2020 Act envisages the publication of guidelines to determine whether a reduction in the employer’s business has occurred by reason of Covid -19 and that the reduction amounts to a minimum of 25% of the businesses turnover and provides as follows:

“The Revenue Commissioners shall prepare and publish guidelines with respect to the matters that are considered by them to be matters to which regard shall be had in determining whether a reduction, as referred to in subsection (3), will occur by reason of Covid-19 and the disruption that is being caused thereby to commerce”.

Subsection 3 provides:

“The business of an employer shall be treated as being adversely affected to the extent referred to in subsection (2)(a) where, in accordance with guidelines published by the Revenue Commissioners under subsection (19), the employer demonstrates to the satisfaction of the Revenue Commissioners that, by reason of Covid-19 and the disruption that is being caused thereby to commerce, there will occur in the period of 14 March 2020 to 30 June 2020 at least a 25 per cent reduction either in the turnover of the employer’s business or in customer orders being received by the employer.”

As the 2020 Act itself does notrequireorauthorisea deduction of a worker’s wages, the Court must next determine if the Respondent can rely on the Revenue Guidelines envisaged at Section 28(19) of the 2020 Act to say that it wasrequiredorauthorisedit to make a deduction from the Complainant’s wages.

The Respondent relies on a Revenue document entitled:- “Frequently Asked Questions (FAQ V18) Guidance on the Operational Phase of COVID 19: Temporary Wage Subsidy Scheme which commenced on 4 May 2020”, which it submitted to the Court to support its position. The document was published on 27 August 2020. The TWSS FAQ document was on its 18^thiteration and the cover page noted that the document would continue to be updated as further guidance became available. In actual fact the TWSS closed on the 31 August 2020. No other Guidance document was put before the Court.

The Respondent referred the Court to Section 1.6 of the TWSS FAQ-V18 document which states as follows:-

“Neither the employer nor the employee may benefit from the scheme where the sum of payments (subsidy plus any additional gross payment but excluding tax refunds) payable to the employee, in the week being processed, exceeds the lessor of the Average Net Weekly Pay (ARNWP) or €960 (with the exception of where the ARNWP does not exceed €412, the gross pay plus the temporary wage subsidy can exceed the ARNWP subject to a cap of €350 per week).”

The Complainant submits that the TWSS cannot be used as a mechanism to pay employees less than their contractual entitlement. The Scheme did not amend an employer’s obligations or an employee’s statutory entitlements that were already in existence. The 2020 Act does not provide for a deduction in a worker’s wages, and the accompanying Guidelines are not an Act. The rules of the TWSS do not supersede an employee’s contractual entitlements or overrule Section 5 of the 1991 Act.

The Court has reviewed the documentation submitted by the Respondent. It is clear that the TWSSFAQ V18mandateshow the scheme must be implemented in order for an employer to avail of the scheme. It is also clear that the TWSS rules state that an employer cannot claim a full TWSS subsidy in circumstances where the employer pays an employee more than the ARNWP.

The Respondent asserts that once it decided to avail of the scheme, the Complainant’s pay was governed by the rules of the TWSS Scheme for that period. While the Court accepts that adherence to the Revenue guidance was mandatory to avail of employer subsidies under the TWSS, it does not accept that the Revenue FAQ document, which changed and was updated on 18 occasions between the initial publication date of 26 March 2020 and iteration number 18 on 27 August 2020, mandated orrequiredthe Respondent to make a deduction from a worker’s wages within the meaning of section 5 (1)(a) of the Payment of Wages Act 1991.

In the Court’s view, the Respondent made a policy decision about who should be included or excluded from participating in the scheme. It made a policy decision to exclude those with unpaid leave in excess of 24 hours during January and February 2020 from the scheme, because of the potential negative impact that such unpaid leave would have when calculating the “average Revenue net weekly pay”(ARNWP) for those employees.

It also made a policy decision to include the Complainant in the TWSS knowing that this would result in a reduction in the Complainant’s pay. The Complainant requested to be paid for the hours that he physically worked or, alternatively, be removed from the scheme. The Respondent declined to do so.

In the circumstances of this case, where participation in the Temporary Wages Subsidy Scheme (TWSS) was not mandatory and it was possible to admit the Complainant into the scheme while still conforming to the 1991 Act, such as obtaining the Complainant’s prior written consent, the Court finds that the Respondent cannot rely on Section 5(1)(a) of the 1991 Act to say that the deductions made from the Complainant’s salary were required or authorised by statute.

The Court finds that the Section 28(19) of the 2020 Act and the associated guidelines did notrequireorauthorisethe Respondent to make a deduction from the Complainant’s wages.

In circumstances where the Court cannot find any provision in the primary legislation which requires or authorises a deduction it cannot interpret the language of the guidelines to mean more than is provided for in the legislation itself. In those circumstances the Court is satisfied that the guidelines per se cannot be said to require or authorise the deduction from the Complainant’s wages.

The Respondent sought to rely on the case ofFinancial Controller v Hotel (ADJ-00030547) as authority for the proposition that the TWSS required/authorised a deduction within the meaning of section 5(1)(a) of the 1991 Act. The finding of the Adjudication Officer in that case was that the claimant produced no evidence of a deduction in circumstances where there was no deficiency in his net pay. That case is not on all fours with the within appeal. In the within appeal the Respondent reduced the Complainant claimant's wages to his “average Revenue net weekly pay”(ARNWP) and did not pay him his normal weekly net pay for the hours he worked.


DEDUCTION:

Section 5(1) of the Act prohibits an employer from making deductions to an employee’s wages except in accordance with the provisions of that section. Section 5(1)(a) allows for a deduction to be made where “the deduction (or payment) is required or authorised to be made by virtue of any statute or any instrument made under statute”.

The Court is satisfied that the documents submitted, and arguments made to the Court and relied upon by the Respondent do not require or provide authorisation for the deduction made. In those circumstances, the Court is satisfied there was an unlawful deduction of the complainant’s wages that resulted in a shortfall in pay of €448.60.


DECISION:

The Court finds that the complaint is well founded. The Court determines that the Complainant suffered a deduction from his wages during the cognisable period for the within complaint of €448.60 and that this deduction was unlawful.

The Court directs the Respondent to pay the Complainant the sum of €448.60 by way of compensation.

The decision of the Adjudication Officer is varied accordingly.

The Court so Determines.

	Signed on behalf of the Labour Court
	Katie Connolly
SL	______________________
10 June 2022	Deputy Chairman