Complainant

Respondent

Parties

Fionnuala  O’Donnell

Bridie Flannery and Maura McSharry trading as Simones  of Sligo

Representatives

Eoin Griffin, Mandate Trade Union

 In person

Act

Complaint/Dispute Reference No.

Date of Receipt

Complaint seeking adjudication by the Workplace Relations Commission under Section 39 of the Redundancy Payments Act, 1967

CA-00046026-001

08/09/2021

This redundancy complaint is that the Complainant was not paid the correct redundancy payment because it was wrongly calculated.

Under oath the Complainant gave evidence as follows:

The Complainant worked for the Respondent, a wedding outfit retail business, in Sligo. She worked in a sales and administrative role.  Her employment commenced in 2008 and came to an end in September 2021, during the Covid 19 restrictions.

Initially in 2008 the Complainant worked a five-day week and did so until 2018.

In October 2018 due to a down-turn in the Respondent’s business, the Complainant’s work hours (along with those of other staff) were reduced, and she started working a three-day week. At this time, she wrote to the Respondents and informed them that her acceptance of this reduced week was on given a temporary basis and she wished to be put back onto full hours as soon as possible.

In January 2019 she was put on a four-day week and again she wrote recording that this was a temporary arrangement only and that she wished to return to a five-day week as per her contract. In May 2019 following a review she was put on a four-day week and again she wrote to the Respondent in similar terms, recording that her acceptance of this was temporary only.

In September 2019 she was put on a three-day week and the Complainant wrote again and objected to this and sought a return to a five-day week. The Respondents replied indicating that this was not possible but that they would review her position in January 2020. The Complainant replied and asked that in the meantime could she work 3 set days rather than variable days, because that would allow her to look for work elsewhere. The Respondent replied indicating that 3 set days was not possible to fix but that they would continue to give her a week of notice if she was required to work on a Saturday.

In January 2020 the Respondent wrote to the Complainant and informed her that she could recommence a four-day week at the start of March 2020. The Complainant replied by letter stating that she wished to return to a five-day week.

On 19 March 2020 the Respondent placed the Complainant on temporary lay-off due to the Covid 19 pandemic. The Respondents business remained closed until May 2021 during which period the Complainant was placed on temporary lay-off.

The Respondent wrote to the Complainant on 5 May 2021 stating that they wished to reopen the shop on 17 May 2021 and that she would be placed on a four-day working week.

The Complainant returned to work but on 25 May 2021 she wrote to the Respondents and stated that given the job for which she was employed initially was for five days and as there appeared to be no indication that her job would ever return to a full-time post, she requested to be treated as having been made redundant. She reminded them that each time her hours had been reduced from 2018 onwards she had protested this fact. She either wished to have a full time 5 day per week job or else be made redundant.

By letter dated 4 June 2021 the Respondent wrote to the Complainant and said that redundancy was not possible at that time, but if she continued to work on a 4-day per week basis until August 2021, she would then be treated as having been made redundant, which is what happened.

The termination of her employment (the date of the redundancy) took place on 7 September 2021 on which date her redundancy payment was calculated on a four-day week. However, the Complainant believed that she should have received a redundancy payment based on a five-day per week because at all times she had objected to the reduction of her hours and sought to have her hours reinstated.

The Complainant’s representative did not identify the statutory basis upon which he asserted that the calculation should have been made on her original and not the reduced hours but instead relied on a decision of the Employment Appeals Tribunal, Reilly v. Odessa Properties Ltd [RP296/2012] in which the redundancy was calculated on that employee’s full-time weekly wage and not on the wage she was on when she was dismissed for reason of redundancy.

The Complainant contended that there was a short fall in her gross weekly salary of €96.15 and that her redundancy payment was deficient to the value of €2678.74.

The Complainant was not cross examined by the Respondents who appeared in person.

The Respondents, who were not represented, gave evidence under oath.

Their evidence arose from advice that they received from their Accountant.

The Respondents accepted that the Complainant had objected to the reduction in her work hours and did this under protest. It is accepted that she requested a return to a five day week on many occasions however the business simply did not have enough work to give to their staff.

In May 2021, when the Complainant requested that the Respondent make her redundant, their Accountant advised that they were not under any obligation to do this because the Covid lay off restrictions were still in place. He advised that, should they however decide to make her redundant, the calculation of her redundancy payment, should be based on the average hours that she had worked over the previous 52 weeks. This meant that her weekly work hours fell somewhere between 3 and 4 days. The Respondent decided that rather than rely on an average weekly pay of between 3 and 4 days, they decided to give the Complainant the benefit of the days and calculated her redundancy payment using on a four-day salary basis, which was in excess of what she was entitled to.

The Respondent contended that the Complainant had been paid the appropriate redundancy payment based on what constitutes Normal Weekly Remuneration under section 13 of Schedule 3 of the Redundancy Payments Act 1967.

The Respondents were cross examined by the Complainant’s representative whereby they accepted that the Complainant had objected in writing to being placed on a reduced working week in 2018 on multiple occasions.

This is a redundancy complaint.

The first test to apply in a redundancy adjudication is to establish if a redundancy situation pertained and whether the Complainant’s role was redundant. However, because the Respondents does not dispute that they agreed to make her redundant and this occurred in August 2021 I intend to treat this as being an acceptance by the Respondent that a redundancy situation pertained and that her role was redundant.

Given that the Respondents accept that the Complainant was entitled to a lump sum Redundancy Payment the only issue for this Adjudication Officer to decide is whether the calculation that was applied by the Respondents was correct.

The Calculation

I accept that the Complainant was dissatisfied from 2018 onwards when she was placed on a reduced working week. I also accept that she recorded this dissatisfaction on each occasion it occurred and made multiple requests to be returned to a five-day week. It is common case that from March 2020 onwards the Complainant was placed on Covid layoff (which is non reckonable for redundancy purposes) until she was re-engaged in May 2021 and that in May 2021, she returned to work on a four-day week.

The Complainant’s representative did not identify – either in his submissions or during the Adjudication – the statutory basis for asserting that as she had not agreed to the reduction, that a five-day -  as opposed to a four day - working week should have been applied. Instead, he relied on a decision of the Employment Appeals Tribunal on short-time.

As a creature of statute, an Adjudication Officer is obliged to give effect to the statutory scheme, which is in this case the Redundancy Payments Act 1967, as amended.

Schedule 3 of the Redundancy Payments Act 1967

The calculation of a redundancy payment and what constitutes a Normal Weekly Remuneration is found at Schedule 3 of the Redundancy Payments Act 1967.

For employees who have a fixed salary or hours of work whose remuneration does not vary the calculation of Redundancy is dealt with in Regulation 13 (“his normal weekly remuneration shall be taken to be his earnings (including any regular bonus or allowance which does not vary in relation to the amount of work done) for his normal weekly working hours as at the date on which he was declared redundant.”)

For employees who have no normal working hours, the calculation is dealt with by Regulation 20 of Schedule 3 (“whose normal weekly remuneration shall be taken to be the average weekly remuneration, including any bonus, pay allowance or commission, received by the employee concerned over the period of 52 weeks during which he was actually working immediately prior to the date on which he was declared redundant”.)

During in the Adjudication hearing, the Respondents sought to rely on Regulation 13, however what they (and their Accountant) actually had relied on when they calculated the Complainant’s redundancy, was Regulation 20 (which applies to employees who have no normal working hours). This was presumably because the Complainant’s hours varied and had not been fixed from 2018 onward, despite the fact that she objected to this variation. I don’t make any criticism of the Respondents in this regard, I am merely recording this to distinguish what they said was done during the Adjudication hearing and what was actually done.

Reduced Working Hours performed under Protest

There is no doubt that for the first ten years of her employment ie from 2008-2018 that the Complainant worked a five-day week. From 2018 until the termination of the Complainant’s employment she worked varying lengths of working weeks – sometimes 3 days sometimes 4 days, sometimes she worked on a Saturday, sometimes not.

The questions that are required to be answered in this hearing are:

(1)    Did the Complainant have a fixed wage or salary whose hours did not vary – in which case should her redundancy have been calculated under Regulation 13 and not Regulation 20?

(2)    Or did the Complainant have no normal working hours – in which case, the Respondent was correct to assess her under Regulation 20.

(3)    If she was assessable under Regulation 13, did the fact that she never agreed and expressly disagreed to the reduction of her working week (of five days) mean that her redundancy should have been calculated on the basis of a five-day week or does the wording of Regulation 13 mean that her working hours (and therefore pay) “on the date at which she was declared redundant” determine how her Redundancy payment should be calculated?

Findings

This is not a case of short time and the Complainant’s reliance on the Employment Appeal Tribunal decision in RP 296/2012 (a case involving the rules on short-time) does not assist this Adjudication.

It is less than satisfactory that the statutory basis to the complaint was not identified during the Adjudication hearing and an Adjudication Officer should not be obliged, to create a case that has not been made out by the Complainant. Indeed, it would be improper to so do. However, a WRC Adjudication is an inquiry and as such this Adjudicator was obliged to inquire into the law and in this case, how redundancy pay should be calculated in these circumstances.

Advice published on the Department of Social Protection website (Welfare.ie) states that, in calculating a redundancy payment, where hours have been reduced but have not been agreed to by an employee, and this reduction in salary has gone on for in excess of a year, when the worker’s redundancy payment is calculated this should be based on the contracted pre-reduction salary and not that which was paid to the employee at the time the redundancy occurs.  

However, following a perusal of Redundancy Payments Acts it is not clear where the statutory basis of this advice lies.

In the case of ADJ 32127 Iwona Drawc v Belfam Ltd t/a the Zip Yard (Cavan) the Adjudication Officer decided that despite the Dept of Social Protection website advice, section 13 of Schedule 3 of the 1967 Act should be applied and the redundancy should be calculated on the basis of the normal weekly working hours on the date on which the employee was declared to be redundant. That case is distinguishable from the present case because the Adjudicator found as a matter of fact that the employee in question had agreed to the reduction in pay.

In another decision Adj 3524 the Adjudication Officer decided that the redundancy payment should be calculated on the basis of the normal weekly working hours performed by the employee on the date on which the employee was declared to be redundant. But again, that case is distinguishable because again, in that case, the employee had agreed to the reduction in salary.

In considering whether the Complainant should have been assessed under Regulation 13 (as the Respondents contended during the Adjudication, even though the Complainant was in fact assessed under Regulation 20) or under Regulation 20 is significant because Regulation 20 applies an averaging period and Regulation 13 does not. Which of the regulations should be applied is determined by whether or not the employee’s hours were fixed or variable.

Were the Complainant’s working hours fixed?

Certainly, the Complainant in the present case wanted her hours to be fixed at 5 days a week and requested this in writing on multiple occasions. She objected to her hours being varied in the manner that occurred from 2018 onwards but as a matter of fact her hours did vary.  But were the Complainant’s hours fixed or were they not? Should she have been assessed under Regulation 13 or Regulation 20?

Possible Interpretations

1.       It is arguable that the Complainant’s hours were those which she had contracted to, that is, a five-day week and in which case she was assessable under Regulation 13. This would mean that where an employee has not agreed to a reduction in hours, the word “normal” as in “normal weekly working hours” in Regulation 13 must imply that the normal lawful hours that were worked, because a unilateral reduction in hours would be unlawful, in breach of the Payment of Wages Act 1991 and perhaps an employee’s contract of employment, and if this were so, the WRC would be asked to enforce an unlawful contract. However what undermines the above interpretation is that Regulation 13 goes on to refer to the  “normal weekly working hours as at the date on which he was declared redundant” and these words would have to be entirely ignored if “normal weekly working hours” meant the hours that she had worked three years prior to the date she was declared redundant.  

2.       But if Regulation 13 were to be interpreted other than meaning normal (lawful and agreed) working hours this could allow a cynical employer to reduce an employee’s normal fixed hours on the last week of employment - the date on which the redundancy was declared – in order to reduce the redundancy that he is obliged to pay, which also couldn’t be correct.

3.       An alternative interpretation of Schedule 3 to the above is that if an employee’s working hours and pay varied in any respect in the 52 weeks before the Redundancy is declared  -  whether that was as a result of reduction or increase in hours, by agreement or not, the working hours cannot be considered to be fixed and Regulation 13 does not apply but rather that Regulation 20 applies. In such a case an averaging period of 52 weeks is applied which off-sets the cliff-like harshness of the impact that would occur if the reduced hours - worked in the week that the redundancy was declared -  was the sole determinant in calculating the Redundancy payment. A reduction in the last week or weeks of the employment would not significantly impact the calculation of the redundancy entitlement because it is averaged out over the preceding year.

Decision

I find that any interpretation of Regulation 13 whereby the words “as at the date on which he was declared redundant” is effectively ignored is not an interpretation which applies the ordinary meaning of the section and to interpret it in this manner would overstretch the wording within the provision. For this reason, I find that the words in the section - normal weekly working hours as at the date on which he was declared redundant - cannot mean the hours which were agreed in the original contract, but which had not been worked for over three years.

I am inclined rather towards the alternative interpretation that, given the Complainant had varying work hours from 2018 to the end of her employment - even though she objected to the reduction –that Regulation 20 was the correct provision to apply to calculate the Complainant’s redundancy payment and that an averaging period of 52 weeks was applicable.

It is my view that Regulation 13 deals with cases where the working hours are fixed and Regulation 20 deals with non-fixed/variable  working hours and the operation of both ensures protection for an Employee.  This means that where hours are fixed, the calculation of redundancy is based on the normal hours worked at the time he or she is dismissed (Reg 13) but is if his hours have been reduced at the end of the employment, his working hours are averaged out over the previous 12 months.

In the absence of any specific statutory provision on the point, this, in my view, is the ordinary meaning of the wording of Schedule 3.

I should say however that this interpretation does not prevent a cynical employer deliberately running down an employee’s working hours over the last 12 months of employment while at the same time assuring the employee that the reduction is temporary only, before going on to declare redundancy precisely in order to reduce the redundancy payment payable (although the layoff/short time redundancy provisions might assist there before the practice becomes prolonged.)

The Redundancy Acts also appear to provide some additional protection in such a scenario by section 15 (2B) of the Redundancy Payments Acts whereby an employee can accept hours on a temporary basis for up to one year and this shall not be deemed to be an acceptance of the reduced role being a suitable alternative to role previously held. However while this provision might assist against a cynical employer, it does not remedy the problem of calculation of the redundancy payment in these circumstances,  it merely curtails what may or may not be considered as suitable alternative employment and this provision did not arise in the present case as the Complainant chose to be made redundant (and redeployment within the company did not arise) and in any event she had worked on a reduced hours in excess of one year.

The Respondent in this Adjudication was not represented. The Complainant’s representative was unable to identity the statutory basis or legal authority to support his assertion. Having considered the Acts during and after the hearing I was unable to identify the statutory provision which supported his claim.

However, what concerned me was that, during my subsequent inquiry I found that the Welfare.ie and Citizens Information websites both currently advise that, when calculating a redundancy, where work hours have been reduced for more than a year and the employee has objected to this, the payment will be based on the original and not the reduced pay, ie precisely what the Complainant contended at the Adjudication hearing although no references to these websites were cited at the hearing.

The Adjudication Officer in ADJ 3524 as part of her inquiry observed that the website advice reflects a practice of the Department of Social Protection to use the original pay to calculate redundancy where reduced work hours are in place for more than a year but have not been agreed to.  However, the statutory basis or legal authority for this advice was not identified to me during or since the Adjudication and in the absence of same I find I am confined to apply the ordinary meaning of the Redundancy Payments Acts which do not make specific provision for this circumstance. Following the hearing, I also took additional steps to inquire into the statutory basis of the website advice, but no statutory provision or authority was identified to me through that inquiry either.

Findings

In respect of this complaint, I find that the Complainant’s working hours when she became redundant, were varied and that Regulation 13 of Schedule 3 was not the correct provision to use.  I find that the Respondent correctly complied with the Redundancy Payments Acts by using Regulation 20 to calculate the Complainant’s redundancy payment (applying an average of the last 52 weeks of her employment to assess what her normal working week was.)  In the Complainant’s case this resulted in a normal weekly remuneration of between three and four days. The Respondent used a four-day week to calculate the Complainant’s Redundancy lump sum. I find that this calculation was available to the Respondent to make and that in doing so the redundancy payment exceeded that which she was entitled to.

On the basis of the above reasons, I find this complaint is not well founded.

I find this complaint is not well founded

Redundancy  - calculation of redundancy payment -  reduced working week – normal weekly remuneration  - Schedule 3 Regulation 13 and Regulation 20 of the Redundancy Payments Acts 1967