PWD2246

PARTIES :

1.Appeal Of Adjudication Officer Decision No(S) ADJ-00032166 CA-00039671-001

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 27 September 2022 in accordance with Section 44 of the Workplace Relations Act, 2015. The following is the Court's Determination:



DETERMINATION:

Mr David Shanahan (represented by Thomas O’Donnell BL, instructed by Cleary & Co Solicitors) and County Tipperary Chamber of Commerce (Peninsula Business Services (Ireland) Limited)

This is an appeal by County Tipperary Chamber of Commerce against a Decision of an Adjudication Officer (ADJ-00032166) in relation to a claim by Mr David Shanahan made under the Payment of Wages Act 1991 (“the Act”). The Adjudication Officer found that the complaint was well founded and ordered County Tipperary Chamber of Commerce to pay Mr David Shanahan the sum of €12,854.80.

In this Determination the parties are referred to as they were at first instance. Hence, County Tipperary Chamber of Commerce is referred to as “the Respondent”and Mr David Shanahan as “the Complainant”.

Position of the Complainant

The Complainant was employed as the CEO of the Respondent organisation and was in receipt of an annual salary of €35,000. In September 2019 the Complainant was suspended from his employment with full pay pending the completion of an internal investigatory process.

On 20 March 2020, the Complainant was informed by letter that he was to be placed on lay-off from 23rd March 2020 due to the Covid-19 pandemic. The letter stated: ”due to the impact of Covid 19 (the coronavirus) on our business, the company now has to notify you that you are being placed 0n temporary layoff. The period of layoff will take effect from Monday, 25 March”. The Complainant was advised that he may be entitled to thePandemic Unemployment Payment(PUP) orJobseekers Benefit.
Enclosed with the letter was an RP9 Form, which notified him that the lay-off was a temporary lay-off as defined under the Redundancy Payments Act, 1967.The complainant objected to being placed on temporary layoff while on paid suspension. His solicitor wrote to the respondent on his behalf citing the measure as inappropriate, premature, and opportunistic, and sought that the status quo remain unchanged until the investigation was completed.

The Complainant submits that the Respondent wrongfully sought to convert ‘a holding suspension’to ‘temporary lay-off’to capitalise on the Covid-19 pandemic. There is no legal or contractual basis to change an employee’s status from being on paid suspension to lay-off.

On the 17 May 2020 the Respondent wrote to the Complainant. That letter was titled “return to work”and stated ”...you can be paid the subsidy scheme and return to work, however you will remain on suspension until the disciplinary process has come to its conclusion for which you will be paid”.

The Complainant submits that he was entitled to full pay pending the outcome of the investigation and the Respondent wrongfully, unlawfully, and in breach of his contract ceased “full pay”, while acknowledging that the Complainant would remain on suspension until the disciplinary process concluded.

The Social Welfare (Covid-19) (Amendment) Act 2020, at section 68L(b)(i) sets out that an entitlement to the Covid-19 pandemic unemployment payment applies to those employed contributors who have “ceased to earn an income from the employment concerns and lost his or her employment as a direct consequence of Covid-19”.The Complainant submits that it is arguable that the Complainant did not technically qualify for the PUP payment as he did not lose his employment as a direct consequence of Covid-19. In this case, the complainant ‘ceased to earn an income’ as the Respondent decided to reclassify the Complainants as being on “temporary lay-off”.

The Complainant seeks payment of his full contractual salary for the period from 23 March 2020 to the date of his termination on 18^thSeptember 2020.

The Complainant relies onA Supervisory Pharmacist v A Pharmacy (ADJ-00026886) where the Adjudication Officer held that a decision to place a complainant on unpaid suspension repudiated the contract of employment and the case ofLake Regional Medical Limited v Mark Reeves (PWD2230) where the Labour Court held that the Emergency Measures in the Public Interest (Covid-19) Act 2020 did not require or authorise the employer to make a deduction from a worker’s wages.

Position of the Respondent

The Respondent rejects the claim that an unlawful deduction was made from the Complainant’s wages. The Complainant and his colleagues were laid off due to Covid-19 by letter dated 20 March 2020. It submits that no wages as defined by the Act were properly payable to the Complainant, as no work was undertaken by him, and there was no work for him to do.

Clause 16 of the Complainant’s contract of employment states that:

• “The company reserves the right to lay you off from work or reduce working hours where, through circumstances beyond its control, it is unable to maintain you in full employment. You will receive as much notice as is reasonably possible prior to such layoff or short time. You will not be paid during the layoff period. You will be paid for hours worked during the periods of short time.”

The business, like so many businesses in the country, had no option but to place employees on layoff. The Respondent relies largely on subscriptions, which ceased rapidly with the onset of Covid-19. The Complainant cannot expect to be treated differently or more favourably to other employees who were laid off and had to avail of social protection payments. The Complainant cannot remain on a state of paid suspension protected from layoff.

There is no provision in the Payment of Wages Act to pay employees when on layoff. In order to make a claim under the Act an employee must work, with limited exceptions. The Complainant did not work within the meaning of the terms set out in the Act.

Furthermore,the complainant cannot argue a contractual entitlement to be paid based on his contract of employment, whilst concurrently denying that the pay deductions formed part of the same contract of employment.

The Complainant was issued with a letter on the 17 May 2020 advising him that the respondent had successfully applied for the (Government funded) wage subsidy scheme. It submits that the Complainant availed of the social protection payments to the amount of €350 per week from 21 May 2020 to 24 September 2020. It is submitted that these monies do not meet the definition of wages under the Act, as they were not payable under his contract of employment or otherwise. Accordingly, it is submitted that the complainant has no entitlement to claim the monies in question as those monies are not wages that are properly payable to him under the Act.

The Respondent relies on theDepartment of Education and Skills v O’Loughlin PWD1725where the Labour Court referred to the decision of Budd J. inCoen v Employer’s Assurance Corporation [1962] I.R. 314 who stated that

• “…the repudiating party cannot be allowed approbate and reprobate. He cannot thus be allowed to say: ‘I deny the existence of the contract which you say exist between us, but I also relay on a term of that contract”…”.

It also relies onBalans v Tesco Ireland Limited [202] IEHCthat the first matter to be addressed by the Court is to determine what wages are properly payable. The Respondent submits that in this case there are none.

The Contract of Employment

The relevant clauses from the Complainant’s contract of employment are as follows:

Clause 8 – Remuneration states as follows:

• “Your basic salary is €35,000 per annum and is subject to statutory and other agreed deductions and will be paid monthly in arrears by electronic transfer into your account. You will be notified in writing of any change to your salary and any notification shall be and remain confidential...”.

• “The company reserves the right to lay you off from work or reduce working hours where, through circumstances beyond its control, it is unable to maintain you in full employment. You will receive as much notice as is reasonably possible prior to such layoff or short time. You will not be paid during the layoff period. You will be paid for hours worked during the periods of short time.”

• 
  “All disciplinary matters, including termination, are dealt with in accordance with the provisions of the Company’s disciplinary procedure. Further details are available in the Company Employee Handbook”.

• 
  “In the event of an incident of serious or gross misconduct, the Company will carry out a full and fair investigation. You may be suspended on full pay pending the outcome of such investigation.”
  

• (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.

• (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.

• “Subject to subsection (8), an adjudication officer shall not entertain a complaint referred to him or her under this section if it has been presented to the Director General after the expiration of the period of 6 months beginning on the date of the contravention to which the complaint relates”.

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 during the relevant period. 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?

There are two separate and distinct periods for the Court to assess in determining what was properly payable to the Complainant within the six-month period encompassed by the complaint.

From 23 March 2020 until the 17 May 2020 the Complainant was on layoff and received no payment from the Respondent. From the 18 May 2020 until the termination of his employment on 18 September 2020, the Complainant was paid via payroll and the Respondent availed of the Government funded Temporary Wage Subsidy Scheme (TWSS).

The Complainant’s case is that he is entitled to be paid in accordance with his contract of employment, which specifies an annual salary of €35,000. He submits that the amount properly payable to him during the periods encompassed by his complaint was his contractual salary which equated to €673.60 gross (€558.16 net) per week from the date that he was placed on lay off on 23 March 2020 until the date of the termination of his employment on 18 September 2020.

The Respondent submits that no wages were properly payable to the Complainant during this period, as the Complainant had no contractual or statutory entitlements to be paid during a period of layoff, and, as a result, no wages as defined by the Act were properly payable to him. Furthermore, the Respondent submits that any monies he received during this period do not meet the definition of wages under the Act, as they were not payable under his contract of employment or otherwise.

InBalans v Tesco Ireland Limited [2020] 31 E.L.R. 125MacGrath 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.”Accordingly, the starting point for assessing what is properly payable is the Complainant’s contract of employment.

The Court was provided with a copy of a contract of employment, effective from 10 May 2017 and signed by both parties. The relevant clauses in relation to the Complainant’s remuneration, Clause 8, states as follows:

• “Your basic salary is €35,000 per annum and is subject to statutory and other agreed deductions and will be paid monthly in arrears by electronic transfer into your account. You will be notified in writing of any change to your salary and any notification shall be and remain confidential..”.

• “The company reserves the right to lay you off from work or reduce working hours where, through circumstances beyond its control, it is unable to maintain you in full employment. You will receive as much notice as is reasonably possible prior to such layoff or short time. You will not be paid during the layoff period. You will be paid for hours worked during the periods of short time.”

The Complainant was placed on lay-off, in accordance with his contract of employment, for the period from 23 March 2020 until 17 May 2020. The employment relationship between the Respondent and the Complainant was not severed by virtue of the Complainant being placed on lay-off. The Complainant remained available to work for his employer during this period.

The Court therefore concludes that the contract of employment, which remained in place during the period encompassed by the complaint, establishes the wages that were properly payable to the Complainant at that time. The contract of employment specifies that during a period of lay-off the employee is not entitled to be paid.

The second period for the Court to consider in determining what was properly payable is the period after 18 May 2020 until the termination of his employment on 18 September 2020. On 17 May 2020 the Complainant was sent a letter entitled “return to work” and advised that the company had applied for the wage subsidy scheme, that he would return to payroll with effect from 18 May 2020, and that he would remain on suspension until the disciplinary process had concluded.

The Respondent submits that any monies he received during this period do not meet the definition of wages under the Act, as they were not payable under his contract of employment or otherwise.

It is clear to the Court that from 18 May 2020 the Complainant was no longer on lay-off and was on suspension pending the completion of an investigation. Clause 21 of his contract of employment headed “Disciplinary” refers the Complainant to the Employee Handbook which states that in the event of an incident of serious or gross misconduct“You may be suspended on full pay pending the outcome of such investigation.”

The Court, therefore, concludes that the wages that were properly payable to the Complainant - having received a letter titled “return to work” which advised him that he would remain on suspension pending the conclusion of an investigation - was his contractual rate of pay, which amounted to his normal weekly earnings of €673.60 gross (€558.16 net).

Was there a shortfall in the amount payable?

It is accepted that from the period commencing 23 March 2020 when the Complainant was placed on layoff up until 17 May 2020, when he was returned to payroll, that no payments were made to the Complainant by the Respondent. The Complainant was in receipt of social protection payments during this time. The Complainant submits that there was a shortfall or deduction in his wages for this period amounting to his normal weekly earnings of €673.60 gross (€558.16 net) per week.

It is also accepted that from the period commencing 18 May 2020 until the termination of his employment on 18 September 2020, that the Respondent availed of the (Government funded) temporary wage subsidy scheme (TWSS) and that the Complainant was paid €350 gross per week through payroll during this latter period. The Complainant submits that there was a shortfall or deduction for this period amounting to the difference between his normal weekly earnings of €673.60 gross (€558.16 net) and the €350 amount paid to him which resulted in a shortfall of €208.16 net per week.

Were the deductions required or authorised within the meaning of section 5(1)(a) of the Payment of Wages Act 1991?

The first period for consideration by the Court is the period commencing 23 March 2020, when the Complainant was placed on layoff, up until 18 May 2020 when he was returned to payroll. It is accepted that prior to this time, the Complainant was on temporary suspension and during this period he continued to be paid his full salary, as provided for under his contract of employment.

The question for the Court to determine is if the Complainant was required to pay the full wages of the Complainant in the relevant period of lay-off.

Clause 16 of the Complainant’s contract of employment provides that the company reserves the right to lay the Complainant off from work where, through circumstances beyond its control, it is unable to maintain him in full employment. The clause specifies that he will receive as much notice as is reasonably possible prior to such a layoff or short time. It expressly states that he will not be paid during a period of layoff.

The Redundancy Payments Act, 1967 defines the terms ‘lay-off’ at section 1 as follows:

“Lay-off and short-time.

• 11.— (1) Where an employee’s employment ceases by reason of his employer’s being unable to provide the work for which the employee was employed to do, and—
  • (a) it is reasonable in the circumstances for that employer to believe that the cessation of employment will not be permanent, and

    (b) the employer gives notice to that effect to the employee prior to the cessation,

  that cessation of employment shall be regarded for the purposes of this Act as lay-off.”

• “Dear David,
  
  I hope you are keeping well. The business has applied for the wage subsidy scheme and has now been successful.
  
  This means that the company can obtain the subsidy payments from the government, which subsequently means that you can be paid the subsidy scheme and return to work, however you will remain on suspension until the disciplinary process has come to its conclusion, for which time you will be paid.
  
  This will take effect immediately and you will return to work and payroll Monday the 18 May 2020. Payroll will commence via a weekly payroll process.”

The Respondent accepts that the layoff period ended after it notified the Complainant of his “return to work”. It submits that the Complainant remained on suspension and that during this period no wages, as defined by the Act, were properly payable to the Complainant as no work was undertaken by him and there was no work for him to do. It submits that any monies received by the Complainant during this period do not meet the definition of wages under the Act, as they were not payable under his contract of employment or otherwise.

The Complainant submits that he was on suspension pending the completion of an investigation and so he was entitled to full pay pending the outcome of that investigation. He submits that the amount that was properly payable during this period was his full contractual salary.

The Court has already determined that the wages that were properly payable to the Complainant during this latter period when he was on suspension pending the conclusion of a disciplinary process was his contractual pay, which amounted to a normal weekly wage of €673.60 gross (€558.16 net).

The Act at Section 5 prohibits an employer from making a deduction from the wages that are properly payable to an employee unless the deduction (a) is required or authorised to be made by virtue of any statute, (b) is required or authorised to be made by virtue of a term of the employee's contract of employment or (c) the employee has given his prior consent in writing to it.

The Respondent did not assert that the deduction from the Complainant’s wages during the period from 18 May 2020 to 18 September 2020 was required or authorised by statute, was a contractual term of the Complainant’s employment, or that the Complainant had given his prior consent in writing to the deduction.

InLake Regional Medical Limited v Mark Reeves (PWD2230) the Court determined that the Government funded Temporary Wage Subsidy Scheme does not amend an employer’s obligations or an employee’s statutory entitlements that were already in existence, and that the rules of the TWSS did not supersede an employee’s contractual entitlements or overrule Section 5 of the Act.

In the circumstances outlined to the Court in this case, the Respondent cannot rely on Section 5(1) of the Act to say that the deductions made from the Complainant’s salary were lawful.

The Court determines that an unlawful deduction from the Complainants wages occurred during this period and as a result this aspect of the complaint is well founded.

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.

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 a deduction in the Complainant’s wages, as allowed under sections 5(1)(a) and 5(1)(b) of the Act. The Complainant did not give his prior consent to a deduction in writing as provide for under section 5(1)(c) to the Respondent. 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 €7796.38.

Decision

The Court determines that no unlawful deduction from the Complainants wages occurred during the period from 23 March 2020 until the 17 May 2020 and as a result this aspect of the complaint is not well founded.

The Court determines that an unlawful deduction from the Complainants wages occurred during this period 18 May 2020 to 18 September 2020 and that this aspect of the complaint is well founded. The Court determines that the Complainant suffered a deduction from his wages during this latter period of €7796.38.and that this deduction was unlawful.

The Court directs the Respondent to pay the Complainant the sum of €7796.38 by way of compensation.

The Court finds that the complaint is partially well founded.

The decision of the Adjudication Officer is varied accordingly.

The Court so Determines.

	Signed on behalf of the Labour Court
	Katie Connolly
CO'R	______________________
26 October 2022	Deputy Chairman