Complainant

Respondent

Parties

Keith  Kerley

Arralis Ltd

Representatives

  Self-represented

Anna Butler Peninsula

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-00045999-001

07/09/2021

This matter was heard by way of remote hearing pursuant to the Civil Law and Criminal Law (Miscellaneous Provisions) Act, 2020 and S.I. No. 359/2020 which designates the WRC as a body empowered to hold remote hearings.

The complainant and two witnesses for the respondent gave evidence under affirmation and all were cross-examined.

The complaint is one of constructive unfair dismissal.

The complainant submitted that he began with the company in 2017 and over the next few years he was given successive wage increases and there were changes in his responsibilities and job title.  In 2019 he was made General Manager and Director of the Irish office.

The complainant stated that between 2019 - 2020 he attended many top-level meetings along with other senior managers where they were informed of the share allocations. His stock options were given to him in writing in July 2019.

The complainant submitted that in January 2021 the staff were informed that the Limerick office was closing and that the staff were being made redundant.  However, following the CEO’s intervention, he outlined new terms that would save the regional office.  This proposal involved three staff being made redundant and one of the local offices being closed. The staff agreed to undertake new roles and responsibilities to save the local office.

The complainant stated that on 19 February 2021 he was informed that he would now be reporting to someone else, a former sales manager who is now the ‘sales and marketing manager’.  The complainant said that this is the first he has heard of this change but that an hour later a company-wide email was sent around with this new reporting structure.  The complainant noted that he raised his concerns with the CEO that this amounted to a demotion and enquires as to whether this change will affect the share options as previously discussed.  He was told that this would not change.

The complainant submitted that emailed HR regarding his grievance about the restructuring and at a subsequent meeting, informed the CEO and HR that although he did not accept the changes he would continue to work.  The complainant noted that this strained the work relationship.

The complainant submitted that a management meeting in April 2021 was the last time that management from the Limerick office were included in meetings at this level.  On 5 May 2021 the letter regarding the stock options was sent out and the complainant was only offered 750 shares not the 3000 outlined at previous meetings.  The complainant submitted that in a meeting the following day regarding the share options, he was told that the CEO had made his decision and to take it or leave it.

The complainant stated that one of the staff expressed their concerns to him in his capacity as a director and he sent a letter to the board in Asia outlining the grievances of the Limerick office.  In the response the Chairperson from Hong Kong indicated that the board supported the CEO completely.  The complainant submitted that that he stepped down as a director that day and submitted his resignation three days later.

The respondent submitted that S. 1 of the Unfair Dismissals Act as amended defines constructive dismissal as, “the termination by the employee of his contract of employment with his employer, whether prior notice of the termination was or was not given to the employer, in circumstances in which, because of the conduct of the employer, the employee was or would have been entitled, or it was or would have been reasonable for the employee, to terminate the contract of employment without giving prior notice of the termination to the employer.”

The respondent submitted that regarding the burden of proof, Tusla v Flynn, UDD1810 (2018) set out the requirements as follows: “As the complainant is alleging constructive dismissal, the fact of dismissal is in dispute and the onus of proof rests with the complainant to establish facts to prove that the actions of the respondent were such as to justify her terminating her employment.”

The respondent also referred to Debbie Kearns v Silverfern Properties Ltd. [2013] 2 JIEC 0701 where the EAT held that “In order to succeed in a claim of constructive dismissal a claimant must show, that either their contractual terms were altered in such a way, going to the root of the contract, as to justify their claim or the conduct of the employer was so unreasonable as to justify the claim of constructive dismissal.”

The respondent submitted that neither the complainant’s contractual terms were altered in such a way going to the root of the contract nor was its conduct so unreasonable as to justify the complainant to deem himself to have been constructively dismissed.

The respondent submitted that the Limerick branch of the company was operating at a loss through 2019 and 2020. The shareholders of the company instructed the CEO to notify the staff members in Limerick that the branch would be closing in June 2021.  The CEO fought for the branch restructure in order to save their long-standing employees jobs, including the complainant.

The respondent submitted that it did consult with the complainant in respect of the restructuring of the company, and that the complainant credits himself with fully engaging with the CEO to ensure Limerick operations remained open.

The respondent submitted that there was no change in the role, responsibilities, salary, pension entitlement, medical insurance or any other benefit which the complainant enjoyed in the restructure of the company. It submitted that the only alteration was in the reporting line which had been temporarily reporting to the CEO. The respondent noted that the complainant suffered no detriment in the change in reporting lines and was fully aware that the Limerick branch would no longer continue to stand alone, with no production being continued on site.

The respondent submitted that the complainant took issue with the share option which had been proposed to him in the letter of 5th May 2021. The Respondent submit that all previous discussions in respect of the share option allocation had been the CEO, relaying his own proposed allocation to the shareholders of the company. No assurances had been made, at any point, as the CEO was not in control of distribution of the shares.

The respondent submitted that at no time did the complainant engage the company grievance procedure. It submitted that when the complainant sent defamatory emails to the shareholders, targeting the CEO and HR manager, the complainant was contacted with a request to use the appropriate form for a grievance.

The respondent submitted that the complainant engaged in the correspondence, noting he would consult with his solicitor. The complainant was informed an independent HR company would carry out an investigation into the grievance. It was submitted the complainant withdrew from the grievance discussions some three days later, during the HR’ manager’s attempts to address the issues raised in his shareholder correspondence of 12 July 2021.

The respondent submitted that the complainant resigned his position, without utilising the grievance procedure, despite its assertions an independent company would be brough on board. It submitted that the complainant did not wish to resolve the matter with the company.   The respondent referred to the decision of An Employee v Employer (UD720/2006) where the Employment Appeals Tribunal held that “the claimant did not exhaust the grievance procedure made available to him and this proves fatal to the claimant’s case.”

The respondent submitted, that the Tribunals have consistently held that failing to engage the grievance procedure is “fatal to a claimant’s case” as stated in the above referenced case and more recently in the matter of Bronagh Whelan -v- Glana Controlled Hygiene Limited ADJ-28850 where the Adjudication Officer made reference as follows: “The EAT in Reid v Oracle EMA Limited, UD1350/2014 stated: “It is incumbent on any employee to utilise and exhaust all internal remedies made available to him or her unless he can show that the said remedies are unfair.”  “I must therefore conclude that, whilst there were aspects of the respondent’s behaviour that provided grounds for the complainant to believe it to be unreasonable, the action of the complainant in resigning without notice and not invoking the provisions of the Grievance Procedure was also unreasonable.”

The respondent submitted that it acted reasonably in all the circumstances, faced with the closure of the Limerick branch, the Respondent CEO devised a route to save as many jobs as possible, including the complainants. His role, responsibility, salary and benefits were not changed.   It submitted that that as a result of this step, they have maintained half of their workforce at the Limerick branch, through removing the production side of things, and downscaling their premises.

The respondent submitted that the complainant did not engage the grievance procedure, but instead sought to air his distaste for the allocation of share options with the shareholders, threatening a constructive dismissal case were he not to be allocated the share options he felt entitled to.  The respondent submitted that it is noteworthy that the shareholders, confirmed it was their decision to close the Limerick branch, that they fully backed the CEO and that he had been acting under their direction in respect of share option allocation.

The respondent submitted that when the complainant did not receive the response, he desired he then sought to defame the HR, and CEO of the company in his response of the 12th July 2021.

The respondent referred to the Tribunal decision in Barry v Precision Software Ltd. (UD 624/2005) [2006] JIEC1801 the Tribunal said:

“… It is not for the Tribunal to intrude into the Respondent’s managerial decisions. The Tribunal has to look at what a reasonable employer would do in the circumstances. Neither is it for the Tribunal to consider what sanction it would impose. The Tribunal’s function is to decide whether the employer’s reaction and sanction came within the range of responses, which a reasonable employer might make.”

The respondent submitted that it could then have enacted the disciplinary procedure against the complainant for his actions, but rather than fuel the situation, it sought to diffuse same, by offering the grievance procedure, and an investigation to be carried out independently.

The Respondent referred to the decision of Donegan v Co. Limerick VEC (UD828/2011) where the Tribunal held that “the respondent’s conduct was not so unfair or damaging to the claimant’s rights and entitlements that she had no option but to resign from her position.”

The respondent submitted that in the Labour Court case of Caci Non-Life Limited v Daniela Paone [2017] UDD 750, the chairman, Mr Haugh stated:

“It is well-settled law that a complainant who is advancing a claim of constructive dismissal under the Act must demonstrate that his or her employer has acted so unreasonably and/or committed a fundamental breach of contract such that it was not possible for that person to remain in their employment any longer. Whether or not this test has been satisfied in any particular case has to be considered from an objective perspective.”

The respondent submitted that the share option scheme was a discretionary scheme, was not part of his contract of employment, and had been at proposal stage at all points, until the company was due to float on the stock exchange. The flotation was always envisioned to be in or around 2021/2022, and all staff who were aware of the share options were aware of the timeline.

The respondent referred to the Labour Court decision of Tusla v Flynn, UDD1810 (2018), which found:

““As the complainant is alleging constructive dismissal, the fact of dismissal is in dispute and the onus of proof rests with the complainant to establish facts to prove that the actions of the respondent were such as to justify her terminating her employment. Section 1 of the Act envisages two circumstances in which a resignation will be considered a constructive dismissal. This arises where the employer’s conduct amounts to a repudiatory breach of the contract of employment and in such circumstances the employee would be entitled to resign his position, often referred to as the “contract test”. This requires that an employer be “guilty of conduct which is a significant breach going to the root of the contract of employment, or which shows that the employer no longer intends to be bound by one or more of the essential terms of the contract, then the employee is entitled to treat himself as discharged from any further performance” as held in Western Excavating (ECC) Ltd v Sharp (1978) IRL332. Secondly there is an additional reasonableness test which may be relied upon as either an alternative to the contract test or in combination with that test. This test asks whether the employer conducted his or her affairs in relation to the employee so unreasonably that the employee cannot fairly be expected to put up with it any longer, if so she is justified in leaving.”

The respondent acknowledged that the complainant was unhappy with his share allocation, and that he was unaware that discussions were continuing in respect of the share option scheme. It submitted that the complainant’s behaviour towards the board, against the CEO and HR, and in exiting the company was unreasonable in all circumstances.

The respondent submitted that the complainant has failed to identify the manner in which it had “conducted his or her affairs in relation to the employee so unreasonably that the employee cannot fairly be expected to put up with it any longer, if so she is justified in leaning”.

The respondent submitted that should it be found that the complainant was unfairly dismissed, of which is profusely denied, the complainant is obliged as per Section 7(2)(c) of the Act to mitigate his loss.

The respondent referred to s7(1) of the Unfair Dismissals Act, which states: “(c) (i) if the employee incurred any financial loss attributable to the dismissal, payment to him by the employer of such compensation in respect of the loss (not exceeding in amount 104 weeks remuneration in respect of the employment from which he was dismissed calculated in accordance with regulations under section 17 of this Act) as is just and equitable having regard to all the circumstances, or (ii) if the employee incurred no such financial loss, payment to the employee by the employer of such compensation (if any, but not exceeding in amount 4 weeks remuneration in respect of the employment from which he was dismissed calculated as aforesaid) as is just and equitable having regard to all the circumstances.”

The respondent submitted that no such financial loss was incurred in circumstances where the complainant completed his last day of employment with the Respondent on Wednesday 11th August 2021, and had undertaken a new role on Monday 16th August 2021.

The respondent referred to the Labour Court decision of Cityjet -v Juan Ramon Sanchez Gil; UDD215 wherein it found that

“Section 7(2)(c) provides that in examining the financial loss, the Court must have regard to the measures adopted by the employee to mitigate his loss. The legislation does not allow the Court to award compensation in an amount that goes beyond the financial loss attributable to the dismissal. Therefore, as an award of compensation for unfair dismissal is to make reparation for financial loss actually incurred in consequence of a dismissal, the Court sought specific details on the losses incurred and the efforts made to mitigate those losses.”

The respondent also submitted that were the Adjudication Officer to find the complainant has discharged the burden of proof, and find that he was constructively dismissed, he has suffered no loss and is therefore limited to a maximum award of four weeks wages under the Act.

In evidence the complainant outlined the course of his employment relationship with the respondent detailing positions and responsibilities he held and indicating his progression within the respondent organisation.  He provided detail regarding the proposed closure of the Limerick offices and confirmed that the CEO put forward a rescue plan for the offices which entailed a small number of redundancies, but which saved one the local offices from closure.  The complainant outlined that the closure proposal came as something of a shock but that this was avoided with a restructure of the office and the way in which the office integrated with the company on a global basis.

The complainant gave evidence that the change to his role was a demotion when the new reporting structure was considered but that his salary remained unchanged.  The complainant stated that although he didn’t accept the changes, he continued to undertake the work.  He stated that when he received the share offer, it was much lower than he expected and that this was an issue not only for him but for some of the staff that had previously reported to him too.  He stated that he sought a meeting with HR and it was attended by the CEO who said that this was the position and he could ‘take it or leave it’.

The complainant stated that the wrote to the Board of Directors who replied that they were fully behind the CEO and arising from that response he stood down as a director on Tuesday 13 July 2021 and submitted his resignation on Friday 16 July 2021.  His final day of work was 16 August 2021.

The testimony of the witnesses for the respondent (the CEO and the head of HR) broadly confirmed the details given by the complainant although differed on the ‘take it or leave it comment’ which was denied.  The CEO outlined how he had come under pressure from the shareholders to wind up the operations in the Limerick offices as there were not proving profitable.  Notification issued to the employees that the office was closing but he stated that he put a counterproposal to the shareholders to downsize and change the operation of the Limerick offices with a view to retaining an office there.  He noted that although the division made a loss in 2021 it will make a profit in 2022.

The CEO suggested that the complainant was not demoted but rather the reporting structure was changed.  He accepted that there perhaps should have been a longer process for dealing with matters and also noted that the issue for the complainant seemed to be a title issue rather than a function one.

The second witness for the respondent worked in HR.  She indicated that the complainant was willing to work under the new terms and that there was no mention of a grievance at all.  She indicated that the complainant was offered the grievance procedure after writing a letter to the shareholders.  She noted that it was agreed that the issue would go to an outside person, and external consultant, for consideration and that the complainant was offered the assistance of the EAP service.

This witness stated that when the complainant handed in his resignation, he was asked to think about it and given an option to retract his resignation and go through the grievance procedure.  She indicated that she only accepted his resignation when he confirmed that the was not going to retract it.  When asked under cross examination whether she followed the grievance procedure steps in relation to the share option issue, she indicated that to the best of her memory, it was never identified to her as a grievance.

The complaint is one of constructive unfair dismissal.  In such cases the onus rests on the complainant to show that resignation was the only reasonable option and that no other course of action could be pursued.

As noted by the respondent, the Labour Court in Tusla v Flynn (UDD1810) outlined the following:

As the Complainant is alleging constructive dismissal, the fact of dismissal is in dispute and the onus of proof rests with the Complainant to establish facts to prove that the actions of the Respondent were such as to justify her terminating her employment.

Section 1 of the Act envisages two circumstances in which a resignation may be considered a constructive dismissal. This arises where the employer’s conduct amounts to a repudiatory breach of the contract of employment and in such circumstances the employee would be “entitled” to resign his position, often referred to as the “contract test”. This requires that an employer be “guilty of conduct which is a significant breach going to the root of the contract of employment, or which shows that the employer no longer intends to be bound by one or more of the essential terms of the contract, then the employee is entitled to treat himself as discharged from any further performance” as held in Western Excavating (ECC) Ltd v Sharp [1978] IRL 332.

Secondly, there is an additional reasonableness test which may be relied upon as either an alternative to the contract test or in combination with that test. This test asks whether the employer conducted his or her affairs in relation to the employee so unreasonably that the employee cannot fairly be expected to put up with it any longer, if so she is justified in leaving.

In the instant case, the Limerick division was in difficulty and rather than close, a proposal was put forward to save the majority of jobs and to safeguard the salaries of the employees.  The basic facts behind this account were not contested by the complainant.  What followed represented ongoing attempts to save the maximum number of positions and salary levels of employees.  Having regard to this aspect of the case, I find that the respondent acted in a reasonable fashion, given the circumstances under which it was operating and find that it was not so unreasonable that it could not have been tolerated any further.

As to the matter of the letter outlining the share distribution and its contribution to a constructive dismissal.  I note a grievance was never taken in relation to this matter.  It is also not disputed that the complainant was offered an external consultant review of the situation but declined to pursue that option.  As this option was put to the complainant during his

In the case of UD720/2006 the EAT found the following:

We however find that that the claimant did not exhaust the grievance procedure made available to him by the respondent and this proves fatal to the claimant’s case. There was no reason put forth as to why an appeal to the European Head of Telemarketing would have been unfair or biased and we accept that his failure to avail of this right by resigning on May 2nd 2005 is fatal to his claim.

This position has been repeatedly outlined in decisions by the EAT, the Labour Court and by the WRC – it is incumbent upon a person pursuing a case of constructive unfair dismissal to exhaust all internal remedies or to establish why such internal remedies cannot be relied upon before that person can succeed in a claim of constructive unfair dismissal.

In the instant case it is accepted by both parties that the complainant had an issue with the disbursement of shares, it is accepted by both parties that he did not take a grievance and it is accepted by both parties that if he wished to make a grievance that it would be looked at by an independent external consultant, albeit it after tendering his resignation but before it took effect.  It was also accepted by both parties that the complainant was asked if he wished to take a grievance before his resignation was accepted. 

On the basis of the foregoing, I find that the complainant did not exhaust all internal remedies before his resignation.  Therefore, I consider that he has not established a constructive unfair dismissal and I find that the complainant was not unfairly dismissed.

Having regard to all the written and oral evidence submitted in relation to this complaint, my decision is that the complainant was not unfairly dismissed.

Constructive unfair dismissal – employer not unreasonable - internal remedies not exhausted – no constructive unfair dismissal established - not unfairly dismissed