Complainant

Respondent

Parties

Michelle  Collins

Tile & Wood Factory Outlet (Limerick) Limited

Representatives

Caitriona Dwane, O'Gorman Solicitors

Sinead Garry, John McNamara & Associates

Act

Complaint Reference No.

Date of Receipt

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

CA-00049208-001

15/03/2022

The Complainant commenced her employment with the Respondent on 1 May 2017. Her employment terminated on 22 October 2021.

The Complainant referred her complaint to the Director General of the WRC on 15 March 2022 alleging that she was unfairly dismissed.

The Respondent raised a preliminary matter of the Complainant’s employment status. The Respondent asserted that the Complainant was a director and not an employee of the Respondent.

The Respondent submits that that company directors, such as the Complainant, should be treated as office holders, on the basis that a company director holds that position as an office holder under the constitution of the company and has duties to the company under the Companies Act 2014 and pursuant to company law generally. The fact that someone can claim to be a director of a company does not entail or imply that that person is also an “employee” by virtue of that position. It is perfectly possible to act as a director of a company and have no rights under employment law.

Equally however, the positions of “director” and “employee” are not mutually exclusive, and it is also possible that a director of a company may enter into a contract of employment, the effect of which would be to entitle that individual to the protections of employment law. If an individual is a director solely, he or she can be removed from the board by an ordinary resolution passed by the members of the company, pursuant to the provisions of Section 146 Companies Act 2014, as happened in the case of the Complainant.

In this instance, as noted above, the Complainant was afforded notice of the resolution and was invited by letter of the 19 August 2021 to put in representations on the resolution. The Complainant chose not to put in a representation. By letter of the 19 October 2021 the Complainant was advised that the resolution had passed and the Complainant had accordingly ceased to be a member of the Respondent company.

The position under company law was that the Complainant’s position as director of the Respondent had been validly determined and there has been no correspondence from the Complainant taking issue with that position.

To obtain a remedy under the Unfair Dismissals Act 1977, as amended, the Complainant must establish that, in addition to her position as a director, she also held the position of “employee”. That is a question of fact.

The nature of the Complainant’s employment is not clear from the complaint form lodged with the Workplace Relations Commission. In terms of position held, the complaint form simply states, “Director & Employee”. In fact, the Complainant took issue at an earlier juncture when the Respondent sought to deal with a number of allegations of misconduct on the basis of the company’s honesty policy and disciplinary procedures, which applied to employees of the Respondent. The Complainant disputed the authority of the Respondent and the other co-directors to enter into a disciplinary investigation. By letter of the 1 July 2021, she sought, amongst other things; “Full details in relation to the authority you have to roll out a disciplinary investigation in relation to me in circumstances where we are Co. Directors”.  The Complainant also sought; “A copy of my Contract of Employment and Job Specification.” The Complainant knew no such documents existed. This refusal to engage with the disciplinary investigation process was significant in circumstances where serious issues involving the misappropriation of company monies had been raised, but the Complainant declined to address the point of substance and declined the invitation to respond to the allegations.

The position of the Complainant is relevant in that the Complainant put in dispute her status as an employee and emphasised her position solely as a director of the company, but now suggests that she was an employee after all, without divulging to the WRC what the Complainant contends she was employed to do.

The Complainant does not have, and never has had, a written Contract of Employment. There was no agreement between the parties as to duties to be carried out by the Complainant and there was no “Job Specification”, as the Complainant refers to it.

The relationship between the Complainant and the Respondent lacked what has been referred to as the “mutuality of obligation” which is the characteristic feature of a contract of service. This essential requirement of the employment relationship was recently re-visited in the Court of Appeal decision of Karshan (Midlands) Limited trading as Domino’s Pizza V. The Revenue Commissioners (2022) IECA 124. This was described by Mr. Justice Haughton as the sine qua non of the employment relationship, in the following terms, quoting from the judgment of Edwards J. in Minister for Agriculture V. Barry (2009) 1 IR 215 (at 230):

“The requirement of mutuality of obligation is the requirement that there must be mutual obligations on the employer to provide work for the employee and on the employee to perform work for the employer. If such mutuality is not present, then there is no contract at all or whatever contract there is must be a contract for services, or something else, but not a contract of service….”.

The position in this instance was that the Complainant was the wife of the co-director and single member of the company. There were no set duties assigned to the Complainant and whilst the Complainant helped in the business, she was not subjected to supervision or minimum work hours. An examination of the Complainant’s payslips furnished by the Complainant demonstrates that, whilst the payslips make provision for hours to be recorded, the hours section for the Complainant always shows up as “0”.

There was an established roster for employees of the Respondent which recorded hours worked by employees of the Respondent. The Complainant was never assigned hours and was never rostered as an employee to work certain hours, which would have been the case if the Complainant and the Respondent had understood the relationship subsisting between them to be one of a contract of service.

The Complainant was not part of any reporting structure within the Respondent company and would engage in various tasks as agreed with her husband and co-director. In that context, the Complainant might work on the shop floor on a given day but would also carry out activities consistent with the role of director and officer of the Respondent, including making lodgements at the bank for the Respondent or preparing books and receipts for the company accountant. For that, the Complainant received a static director’s salary, on which she paid S class PRSI contributions only, not the A class contributions applicable to employees.

The Complainant took time off away from the business either at the same time as her husband and co-director or through discussion and arrangement with her co-director. The Complainant was not restricted to taking statutory holidays or annual leave pursuant to the provisions of the Organisation of Working Time Act 1997.

Previously, the Complainant had taken issue with the Respondent’s attempt to treat her as an employee by reference to the Respondent’s Honesty Policy and disciplinary procedures as contained in the Respondent’s staff handbook and had declined to participate in a disciplinary investigation process.

The Complainant now seeks to resile from that position and claim that she was an employee of the Respondent after all, without identifying what her employment was.

It is submitted that there is no basis to be found in the Complainant’s arrangements with the Respondent, to support the inference that the Complainant was ever engaged as an employee of the Respondent under a contract of service. The Complainant, as a company director, was an office holder only, subject to removal by the single-member of the Company in accordance with Section 146 of the Companies Act 2014. The Complainant was removed in accordance with the legislation and was afforded notice of the making of the resolution. The Complainant chose to make no representation. This was not a situation similar to that in Glover V. BLN Limited (1973) IR 388, where no notice was given of the director’s removal.

The Complainant accepts that her engagement with the Respondent ended with her removal as a director. The Complainant has not suggested in any correspondence that her employment with the Respondent continues to subsist, in some fashion, notwithstanding her removal as a director. The Complainant was not an “employee” of the Respondent and is not entitled to any redress pursuant to the terms of the Unfair Dismissal Acts, as amended.

Substantive matter

The Respondent, in a written submission submitted that the Complainant was appointed as a company director of the Respondent company on the A1 application to incorporate the Respondent on the 8 of April 2016. The Complainant was one of three directors of the Respondent, the other two being Alan Collins who was also appointed to act as Company Secretary and Sean Collins who is a son of the two directors. The Respondent is a single-member company, the single-member being Alan Collins, the Complainant’s co-director.

The Complainant and the Respondent’s co-director, Alan Collins are married. Divorce proceedings have been instituted between Alan Collins and the Complainant and are ongoing. Both the Complainant and Alan Collins have carried out various duties on behalf of the Respondent over the years, in connection with the business operations of the Respondent which consist of a wholesale and retail outlet, selling to consumers and business customers.

The Complainant’s engagement with the Respondent was at all times predicated on her position as a director. The Complainant was given no separate contract of employment and was never furnished with terms of employment pursuant to the Terms of Employment (Information) Act 1994, as amended.

The Complainant was paid the sum of €500 net per week, not the figure of €671.91, as mentioned in the Complainant’s complaint. The Complainant, at all times, during her appointment as company director, paid PRSI contributions on the basis of S Class contributions, applicable to her status as a company director. The Complainant did not make any class A contributions.

In or about the 16 November 2020 the Complainant went on sick leave from the Respondent and, whilst there was no sick leave policy for employees of the Respondent, the Complainant received her director’s remuneration for the duration of her absence from work.  The Complainant was subsequently certified as fit to return to work in or about June 2021 but did not do so.

By letter dated the 22 June 2021, the Complainant was invited to a disciplinary investigation meeting by the Respondent arising from four specified instances where it was suspected the Complainant had misappropriated company funds for personal use. There had been a previous issue in relation to the Complainant withdrawing funds for personal use which she paid back.

By letter dated the 1 July 2021 the Complainant wrote to the Respondent and declined to attend or participate in the proposed investigation meeting, raising a number of queries, including, amongst other things; “….Full details in relation to the authority you have to roll out a disciplinary investigation in relation to me in circumstances where we are Co-Directors”.

The same letter called on the Respondent (in fact, the Complainant’s co-director) to furnish the Complainant with a copy of the Complainant’s Contract of Employment and Job Specification. The letter further commented that the Complainant would not participate in a disciplinary process until the Complainant was satisfied that the process was “legitimate”.

By letter dated the 19 August 2021 the Respondent informed the Complainant that it proposed to pass an ordinary resolution removing the Complainant as director of the Respondent, pursuant to the provisions of the Companies Act 2014. The letter invited her to make any representation in relation to the proposed resolution to remove her as company director. The letter also indicated that such representation should be received no later than the 20 September 2021. No representations were received by the Respondent.  By letter dated the 19 October 2021 the Complainant was advised by the Respondent that the proposed resolution had been passed and accordingly, the Complainant had ceased to be a director of the Respondent. The Complainant’s directorship ceased at that point and the Respondent immediately ceased paying director’s remuneration to the Complainant.

A complaint was submitted to the Workplace Relations Commission on the 15 March 2022, alleging the Complainant had been unfairly dismissed from the Respondent.

At the adjudication hearing, the Respondent’s representative submitted that, in the event that it is found that the Complainant was and employee of the Respondent, the Complainant was on sick leave when issues arose in relation to misappropriation of funds. The Complainant as invited to a disciplinary hearing but she failed to engage in any way. The Complainant had an opportunity to attend an investigation process. She was accused, not charged. The Complainant was not dismissed in an employee context, she was removed as a director.

Summary of direct evidence and cross-examination of Mr Alan Collins

Mr Collins said that he is the owner of the business which was set up with his wife (the Complainant) and their son.

Mr Collins said that the Complainant would come and go as she pleased, she did not have a roster. She dealt with receipts, administration of payments, customers, and the accountant. Mr Collins said that the Complainant did not have set hours. They have three kids in two different school so she would have done school runs, dinners, etc.

Mr Collins said that the Complainant was a director, not an employee. She was paid her full salary during her sick leave as a director. The Complainant was due to return to work in June 2021 and Mr Collins wrote to her regarding a disciplinary issue related to misappropriation of funds. Mr Collins said that the same issue happened a year earlier when €1,000 was withdrawn from the company bank account. Mr Collins said that he made it clear to the Complainant that she could not use the business account for personal use. She acknowledged that and returned the money. While out sick, the Complainant used the company credit card without consultation. Before she went out sick, the Complainant would have talked to staff and customers about their private life and the divorce. Customers were uncomfortable about it. The Complainant was not acting in the best interest of the company.

Mr Collins said that the Complainant did not attend the disciplinary meeting that she was invited to. She refused to attend and asked for various documents. Mr Collins said that at that stage he was investigating the matter, no decision was made to dismiss the Complainant.

Mr Collins said that the Complainant was removed as a director on 21 August 2021. The Complainant was given 6-8 weeks’ notice.

In cross-examination, Mr Collins confirmed that the couple’s son was not appointed a director until after the commencement of family law proceedings.

Mr Collins further confirmed that the Complainant carried out a number of duties but disagreed that she acted, and was treated, as an employee. He agreed that the Complainant was paid a weekly salary. It was put to Mr Collins that the Complainant was rostered, a copy of a roster was exhibited. Mr Collins asserted that the roster was just a piece of paper, not signed off, had no company name. He said that it was not a genuine roster and that the Complainant was not rostered, that she could come and go.

It was put to Mr Collins that an email was sent regarding the rosters. Mr Collins asserted that this was Covid related, so there were not too many people in at the same time.  It was put to Mr Collins that the Complainant was fit to return to work on 17 May 2021 but he sent her an email that she couldn’t because rosters have been done, to which the Complainant replied that roster is done on a weekly basis. Mr Collins said that he wanted to have an independent review carried out that the Complainant was fit to return to work in the capacity of a director. Mr Collins said that if the Complainant was to come back to manage the shop with him, he needed to know that she was fit to work. That’s why he sent the Complainant for a medical assessment. Mr Collins said that he needed to make sure that any staff member was fit to work. It was put to Mr Collins that he took upon himself to have the Complainant assessed and, as an employee, she did not dispute that. On 15th June 2021 the Complainant attended Dr Madden. Mr Collins confirmed that the assessment was sent to him and the Complainant was deemed fit to work.

It was put to Mr Collins that the Complainant presented herself to work only to be informed by Ms Ryan, HR Adviser that she was suspended with pay pending investigation. It was further put to Mr Collins that the Complainant did not refuse to participate in the process, but she sought certain documents. Mr Collins replied that it would have been his HR Adviser who replied to the Complainant, he could not confirm whether his HR Adviser replied to the Complainant.

Mr Collins said that the Complainant had access to bank accounts, credit card, etc., no other employee had access to those.

It was put to Mr Collins that at all times the Complainant was treated as an employee, e.g., in the letter of 22 June 2021 Mr Collins attached a Disciplinary Policy, he suspended her, he commenced a disciplinary action, and dismissed her as an employee. Mr Collins said that the Complainant was removed as a director.

Mr Collins confirmed that no investigation was carried out, and there was no further correspondence. He did not dispute that the Complainant learned that she was dismissed when he told her to check her Revenue online details.

Mr Collins did not dispute that no procedures were followed in relation to the Complainant’s dismissal, she was not given the right to appeal the decision.

It was put to Mr Collins that no sick leave policy or a handbook was exhibited to indicate what the sick leave policy was. Mr Collins said that the Complainant would have issued contracts, ensured that staff signed them, and she would have given them the handbook.

Mr Collins said that the incidents in question occurred in November and December 2020, but he was told that that if a staff member is sick, he had to wait until they are back fit to work to proceed with a disciplinary process. The Complainant was out sick due to occupational stress.

In re-examination, the Respondent said that regardless the status of the Complainant she would be required to be certified as fit to work. The Complainant failed to respond to the correspondence regarding her removal as a director.

In her written submission, Ms Dwane, on behalf of the Complainant submits as follows.

The status of the Complainant as a Company Director and/or an employee.

The position of "director" and "employee" are not mutually exclusive. The director of a company may also be an employee of the company, the effect of which entitles the individual to the protection of employment law.

The Complainant was at all times treated and viewed as an employee of the Respondent. The fact that the Complainant was an employee of the Respondent is clear from her relationship with the Respondent. The Workplace Relations Commission complaint form compels a Complainant to complete the section entitled "positions held". The Complainant correctly described her position as a "director and employee" of the Respondent. The Complainant's complaint is in relation to her unfair dismissal as an employee by the Respondent and there is no ambiguity.

The Respondent wrote to the Complainant, as an employee of the company, by letter dated the 22 June 2021 requesting her attendance at an investigation meeting pursuant to the company's Disciplinary Policy to discuss allegations of breach of the company's Honesty Policy by misappropriation of company funds on dates between the 24 November 2020 and 9 December 2020. The Complainant was informed that she would be suspended with full pay until the investigation process was concluded. She was also informed that the "outcome of this process may ultimately result in the imposition of the disciplinary sanction up to and including dismissal

It is clear from the letter and its references to the company's Disciplinary Policy and the company's Honesty Policy that the Complainant was at all times being treated as any employee of the Respondent. The Complainant did not take issue when the Respondent sought to deal with her as an employee. She took issue with the legitimacy of the purported disciplinary process.

The Complainant wrote to the Respondent by letter dated the 1 July 2021 stating that until she was satisfied that the purported investigation was legitimate, she would not participate in such a process. She requested certain information for her consideration which was not provided by the Respondent. It is misleading to suggest that the Complainant "declined the invitation to respond to the allegations"The Complainant sought necessary information which was not provided by the Respondent and no response was received to her letter of the 1 July 2021.

The Complainant's relationship with the Respondent had the typical characteristics of an employee, and while all the factors may not apply, a person would normally be considered an employee as per the Code of Practice on Determining Employment Status, published in July 2021, if the following characteristics apply:

·       Is under the control of another person who directs them as to how, when and where the work is to be carried out,

·       Supplies labour only,

·       Receives a fixed hourly/weekly/monthly wage,

·       Cannot subcontract the work,

·       Does not supply materials for the job,

·       Does not provide equipment other than the small tools of the trade,

·       Is not exposed to personal financial risk in carrying out the work,

·       Does not assume any responsibility for investment and management in the business,

·       Does not have the opportunity to profit from sound management in the scheduling of engagements or in the performance of tasks arising from the engagements,

·       Works set hours or a given number of hours per week or month,

·       Works for one person or for one business,

·       Receives expense payments to cover subsistence and/or travel expenses,

·       Is entitled to sick pay or extra pay for overtime,

·       Is obliged to perform work on a regular basis that the employer is obliged to offer to them (this is known as 'mutuality of obligation'),

·       Has their tax deducted from their wages through the PAYE system.

There are important caveats to those characteristics, as set out in page 7 of the Code of Practice on Determining Employment Status, the following of which are relevant:

·       An individual could have considerable freedom and independence in carrying out work and still be an employee.

·       If tax is not deducted from the individual's earnings through the PAYE system, this does not mean a person with the other 'employee' characteristics is self-employed.

·       Employees may work in a range of ways, including, but not limited to, part time work, temporary work, seasonal work or occasional work.

·       Some employees are paid by reference to contracted hours, while others may be paid by reference to the amount of work actually done.

·       The hours of work or remuneration of the employee may be uncertain.

The Complainant was not aware of her S Class PRSI contributions and the implications of same until it was raised in submissions by the Respondent. The Complainant was not obliged to submit an Income Tax Return each year or comply with the Self-Assessment regime, whereby she was classed as an unpaid Director or Non-proprietary Director who are excluded from the obligation to file an annual Income Tax Return. Pursuant to the Social Welfare and Pensions (Miscellaneous Provisions) Act 2013 the classification of Proprietary Directors who own or control less than 50% of the shareholding of a company are determined on a case-by- case basis, taking into consideration the Code of Practice for Determining the Employment or Self-Employment Status of Individuals.

In any event, the determinations of a person's employments status made by the Department of Social Protection, the WRC or the Office of the Revenue Commissioners are not binding on each other.

Therefore, the PRSI classification of the Complainant is not a determining factor here as it is well established, account must be giving to the five main factors in establishing the difference between "Contract of Service" and "Contract for Services" which have evolved from the case law of the Courts. These factors are as follows:

·       Mutuality of obligation.

·       Substitution.

·       The Enterprise Test.

·       Integration.

·       Control.

These factors must be considered and weighed up in a rounded way when making a decision on employment status.

The Complainant quite clearly meets the "mutuality of obligation" which is a key characteristic of a Contract of Service. There was a mutual obligation on the Respondent to provide work for the Complainant and for the Complainant to perform work for the Respondent. The Complainant was on a set weekly wage and carried out various duties on behalf of Respondent over the years in connection with the business operations of the company. The Complainant's freedom and independence in carrying out work does not impact on her status as an employee. The Complainant was subject to the Respondent's work rota as can be seen from a rota and letters exhibited at the hearing.

In the Judgement of Mr Justice Haughton in the Court of Appeal decision of Karshan (Midlands) Limited trading as Domino's Pizza V. The Revenue Commissioners (2022) IECA 124 found that:

“Of greater importance are other terms that demonstrate an intent to create an ongoing relationship which is not intended to have mutuality of obligation, and that in my view signify an intent not to import such mutuality into the series of engagements of the deliverer arising under the umbrella of the Agreement"

Mr Justice Haughton goes on to describe the provisions of central importance to include where the contractor was in control of the financial risks and rewards associated with providing the services, had the right to engage in similar contract delivery type service for other companies, and right engage a substitute delivery person.

The Complainant could not send a substitute in the event that she was unable to work and was not carrying out work on her own account or have an ability to profit from her efforts or at a risk of suffering financial loss. The Complainant's work was an integral part of the business and her duties were controlled by the Respondent.

Substantive matter

Regarding the substantive matter, the Complainant’s representative furnished the following written submission.

It is well established in Labour Court decisions that due process and natural justice must apply where an employer is moving to dismiss an employee. In LRC 21798 Beechside Co. Ltd T/A Park Hotel, Kenmare and A Worker, the Court found:

"Having considered the positions of both sides, the Court is of the view that the procedures adopted in the termination of the Claimant's employment were seriously flawed. He was not afforded fair procedures in accordance with the Code of Practice on Grievance and Disciplinary Procedures S.I. No 146 of2000. "

The Complainant was given no reason for her dismissal. The Respondent suspended the Complainant with full pay pending an investigation which was not carried out. The Respondent wrote to the Complainant, as an employee of the company, by letter dated the 22 June 2021 requesting her attendance at an investigation meeting pursuant to the company's Disciplinary Policy to discuss allegations of breach of the company's Honesty Policy by misappropriation of company funds on dates between the 24 November 2020 and 9 December 2020. The Complainant was informed that she would be suspended with full pay until the investigation process was concluded. She was also informed that the "outcome of this process may ultimately result in the imposition of the disciplinary sanction up to and including dismissal"

The Complainant who was a Company Director at the time by letter dated the 1 July 2021 queried Alan Collins authority to roll out a disciplinary investigation in circumstances where they were co-directors. The Complainant also requested copies of the following;

1.     A copy of her Contract of Employment and Job Specification

2.     The date that the disciplinary policy was rolled out by the Company and by whom?

3.     Full details in relation to the authority Mr Collins has to roll out a disciplinary investigation in relation to the Complainant in circumstances where they were co-directors.

4.     A copy of the Resolution of the Board of Directors validating the policy and this procedure.

5.     A copy of Mr Collins’s Contract of Employment and Job Specification.

The Respondent did not reply to the Complainant's letter or provide any of the documents requested. The Complainant continued to be paid her full pay as per the letter from Alan Collins dated the 22 June 2021 up to the 22 October 2022 as agreed by Alan Collins on behalf of the Respondent by letter.

The Respondent failed to follow the Company's own Disciplinary Policy and to comply with the Code of Practice on Grievance and Disciplinary Procedures S.I. No 146 of 2000. The Respondent failed in not allowing the Complainant to invoke a grievance procedure or right of appeal.

As per the decision in LRC 21798 Beechside Co. Ltd T/A Park Hotel Kenmare v A Worker, the Court found:

...the Claimant was not provided with details of any performance issues, no warning was given that his employment was in jeopardy: he was not afforded the right to representation; he was not provided with reason for his dismissal and he was not afforded an opportunity to reply. Therefore, the Court is satisfied that he was denied natural justice

CONCLUSION

The Complainant was at all times an employee of the Respondent and her relationship with the company contained the typical characteristics of an employee as set out in the Code of Practice for Determining the Employment or Self-Employment Status of Individuals

The Complainant's employment status meets the five main factors to be considered when deciding if a worker is an employee or self-employed whereby the Complainant's employment contained mutuality of obligation, control, integration, could not be substituted and the enterprise test. The Complainant was informed by the Respondent that her employment had ceased almost a month after she was formally removed as a director on 29 September 2021. The Complainant continued to be paid by the Respondent up until  22 October 2021.

The Complainant was unfairly dismissed by the Respondent who was now trying to avoid its obligations to the Complainant by claiming that she was not an employee of the company. The Complainant as an employee of the Respondent was unfairly dismissed without any explanation, proper procedure or due process.

At the adjudication hearing, the Complainant’s representative submitted as follows.

The Respondent company was set on 21 April 2016. The Complainant was appointed as a director and became an employee as of 1 May 2017, as of that date she received her payslips.

The Complainant and Mr Collins separated in August 2019 and commenced family court proceedings in May 2020. The couple’s son was appointed a director in November 2020. The Complainant continued to work as an employee and received a fixed salary.

The Complainant was rostered for work by a manager who prepared her roster on a weekly basis. The Complainant’s hours would fluctuate depending on family responsibilities but she would have worked full time, often six days a week. The Complainant was the only director who was on the roster.

The Complainant commenced her sick leave on 16 November 2020. She was obliged to hand in her monthly cert to the Respondent. When she was due to come back to work, she was told that she could not, as the roster had already been made. The Complainant was then contacted by Ms Ryan, the Respondent HR Adviser regarding a medical assessment.

It was submitted that the letter of 22 June 2021 treats the Complainant as an employee. The Respondent fully intended to follow the process which could lead to the Complainant’s dismissal. At this stage, the Complainant asked for documents so she could prepare herself to the process. The Complainant remained on suspension until the Respondent stopped paying her. The Complainant then received a letter from the Respondent regarding her directorship. Her role ceased as of 29 September 2021. She was notified of same on 19 October 2021, and was paid until 21 October 2021 when Mr Collins told the Complainant to check her Revenue online account.

The Complainant submits that she meets the criteria as per the Code of Practice on Determining Employment Status. The Complainant supplied labour only, she was on a fixed wage, she could not subcontract her work, she did not provide materials or equipment. The Complainant was not exposed to personal financial risk.  The Complainant worked only for the Respondent. She was entitled to sick leave. Regarding mutuality of obligation, the Complainant had to turn up for work, could not send a substitute.  Furthermore, it was submitted that the Complainant did not gain from the company’s profit, and she was under the control of the Respondent. She was directed by a manager or Mr Collins as to what and where to do.

The Complainant submits that the Respondent did not follow procedure regarding her dismissal. A letter setting out the procedures to follow was sent to the Complainant, she replied but received no response.

Summary of direct evidence and cross-examination of Ms Collins, the Complainant

The Complainant, in her sworn evidence said that she started work at 9am. She would have cleaned the shop, answered phone calls, dealt with customers. The Manager would have told her what to do. Mr Collins usually arrived around 10.30-11.00am.

The Complainant said that the rosters would be done every Monday by the Manager (Kieran). The Complainant exhibited a copy of a roster.

The Complainant said that she went out sick on 20 November 2020. She was told to submit a monthly medical certificate. The Complainant said that she was going to go back to work and was told by Ms Ryan, the Respondent’s HR Adviser to see the company doctor. The Complainant attended the doctor, as requested. She then met with Ms Ryan who gave her a list of allegations, the Complainant was told that she would be investigated for fraud. The Complainant said that she was taken aback. The Complainant asked for documents but never heard anything back. There was no further contact by Ms Ryan.

The Complainant was not returned to work but was paid until October 2021. The Complainant said that she was shocked when the wages were stopped. She said that she tried to get in touch with Ms Ryan but hasn’t heard back from her. The Complainant said that she got an email from Mr Collins telling her to check her Revenue online. The Complainant learned then that she was removed as a director.

The Complainant said that, as of the date of the hearing, she has not secured new employment. She said that she spent 13 years building the business with Mr Collins. She said that nobody wants to take her on. She said that the alleged misappropriation has never been raised with her, and it was Mr Collins who asked her to withdraw €1,000 for a staff party. The Complainant said that it was Mr Collins who made all decisions, she only did what she was instructed to do. She said that she would have done school runs and gone back to work straight after.

In cross-examination, the Complainant agreed that she did not have a contract. She said that she was paid her sick pay because she built the business with Mr Collins who told her that she looks after his children, so he would pay her.

The Complainant said that she had to work six, sometimes seven days a week. The only time she left the shop was between 2.45pm and 3.40pm to collect children as Mr Collins would not want her to leave the shop.

The Complainant said that she did not prepare rosters, she said that the manager (Kieran) would prepare them. The manager would tell her in the morning what was her list of jobs.

In relation to the money taken out of the company bank account, the Complainant said that around November 2020 Mr Collins told her to take the money from the bank account and then he said that he can “do you for fraud”, so she returned the money into the bank.

It was put to the Complainant that she received a letter regarding personal spending. The Complainant said that she waited for the Respondent to launch an investigation but it never did. It was put to the Complainant that if she was an employee, she would have to attend. The Complainant said that there was no date given to her. When it was put to the Complainant that the letter gives the date of 29 June 2021, she said that she sent a letter asking for paperwork but never got a reply.

The Complainant was asked why she believed that the investigation was not legitimate. She said that Mr Collins was bringing their personal life to the workplace. She said that they used the company credit card all the time. She said that she was bullied out of the shop floor.

The Complainant described her usual day at work for the Adjudication Officer. She said that she would have started at 9am cleaning the shop. The shop opened at 9.30am. If a customer came in, she would have dealt with them, she would have answered phone calls. She would have driven to Ennis for tiles if needed. If the shop was quiet, she would have done paperwork, printed out invoices, prepared documents for the accountant. However, she was mostly on the shop floor. She would have gone to do school runs between 2.50-3.40pm. She would have then stayed in the shop until 6-6.30pm.  The Complainant said that she was never allowed to go for coffees etc., as alleged by Mr Collins. She said that she reported to the manager (Kieran), he would have told her what her break time was.

Regarding her efforts to mitigate her loss, the Complainant said that she spoke to people, sent some application to local food stores (approx. 4) but nothing was available. She had no interviews; she did not contact any agency or website. In cross-examination, the Complainant said she spent years building the business with her husband, she said that she only knows tiling. She applied to other tiling shops but that the parties’ situation is known in the industry, and nobody wants to take her on because of Mr Collins’s behaviour. The Complainant confirmed that she worked in deli/shops over 20 years ago. She said that she was at home with kids when her husband was making a career as a tiler.

Post-hearing, on 5 December 2022, the Complainant forwarded a copy of her CV, a copy a letter confirming that she applied for a job with a shop on 7 April 2022, and a copy of two text messages (one dated 21 November 2022) in relation to, what appears to be a course inquiry.

The first issue that I must decide relates to the jurisdictional issue raised by the Respondent as to whether or not the Complainant is entitled to maintain a claim under the Unfair Dismissals Acts. The Respondent contends that the Complainant was a director and not and employee and therefore, cannot maintain a complaint under the Acts.

The term “employee” is defined in Section 1 of the Act as follows:

““employee” means an individual who has entered into or works under (or, where the employment has ceased, worked under) a contract of employment and, in relation to redress for a dismissal under this Act, includes, in the case of the death of the employee concerned at any time following the dismissal, his personal representative”.

The term “contract of employment” is defined in Section 2 of the Act as follows:

““contract of employment” means a contract of service or of apprenticeship, whether it is express or implied and (if it is express) whether it is oral or in writing”.

It is clear from these provisions that a person must be employed under a contract of employment within the meaning of the legislation in order to maintain a complaint of unfair dismissal against his/her employer under the Act.

It is common case that no written contract existed between the parties in respect of the arrangements entered into. Therefore, I have considered the totality of the relationship between the parties.

The case law in relation to the employment status has developed over the years and a number of tests have been applied by the courts in order to determine the employment relationship.

The determination of an individual’s employment status in the context of ascertaining whether or not that individual has standing to pursue claims under employment legislation is a mixed question of fact and law.

In the matter of Henry Denny & Sons (Ireland) v Minister for Social Welfare [1998] 1 IR 34, Keane J stated that, in relation to matters regarding employment status,

“Each case must be considered in the light of its particular facts and of the general principles which the courts have developed”.

In McAuliffe v Minister for Social Welfare [1994] ELR 239 Barr J. said it was not possible to devise any hard and fast rule as to what constitutes a contract of service. The Tribunals are required to look at totality of relationship between the parties and each case must be considered on its particular merits.  Accordingly, it is necessary to consider the evidence as presented under a series of tests as set out in the varying court cases that have dealt with this issue.

Mutuality of obligation

The mutuality of obligation has often been referred to as the irreducible minimum requirement which must be present before a contract of employment can be held to exist (Nethermere (St Neots) Limited v Gardiner [1984] ICR 612). In order for a contract of service to exist there must be mutual obligation on the employer to provide work for the employee and on the employee to perform work for the employer. There is an ongoing duty to provide work and one to accept work.

Having considered the parties submissions and the evidence submitted, I don’t accept the Respondent’s assertion that the Complainant could come and go as she pleased. The evidence furnished by the Complainant shows that she was rostered and was given her days off in advance. This is supported by the letter from the Respondent’s solicitor to the Complainant’s solicitor dated 19 May 2021, which sets out as follows:

“…the roster for the shop has been completed for the next three weeks, and unfortunately, due to covid restrictions and the fact that there are other individuals rostered on to complete your client’s work, it is simply not possible for your client to return to work this Thursday.

Therefore, once the current roster expires, your client will be included in the roster going forward…”.

I, therefore, do not accept Mr Collins’s evidence that there was no roster for the Complainant and that she could come and go as she pleased. From the copy of the roster exhibited, it appears that the Complainant worked 5 days a week in the shop. The Complainant gave cogent evidence in relation to her role and duties. Mr Collins also gave evidence confirming the Complainant’s duties such as administration of payments, dealing with receipts, with customers, and the accountant.

There was no dispute that the Complainant was in receipt of a set wage.

I find that under the arrangement that was in place between the parties, the Respondent undertook to provide the Complainant with work and that the Complainant undertook to personally perform that work in consideration of remuneration. 

The Control Test

The test was applied by the High Court in Minister for Industry & Commerce v Elizabeth Healy [1941] IR 545 and by the Supreme Court in Roche v Kelly and Co Ltd. [1969] IR 100 where Walsh J held that in master-servant relationship the master must have the right to tell their servant what to do and how to do it, whether or not he exercises that right.  

Traditionally the control test involved ascertaining the extent to which the employer could direct the operation and determine how it was to be done and when it was to be done. It has, however, diminished in significance over time. As was pointed out by Walsh J in Roche v Kelly [1969] IR 100 it is the right to control the work rather than the actual exercise of that right that matters.

Ordinarily, the greater the level of skill required for the performance of the work in question, the less significant is control in determining whether the person performing the work is an employee, see Re Sunday Tribune Ltd. [1984] IR505.

Moreover, the level of control, in some circumstances, can have more to do with the nature of the regulation of the particular industry than with the nature of the relationship, see Castleisland Cattle Breeding Society Ltd. V Minister for Social and Family Affairs [2004]4 IR 150.

In Denny & Sons (Ireland) Ltd. v Minister for Social Welfare [1998] 1 IR 34, at page 50, Keane J. stated:

“It is, accordingly, clear that, while each case must be determined in the light of its particular facts and circumstances, in general a person will be regarded as providing his or her services under a contract of service and not as an independent contractor where he or she is performing those services for another person and not for himself or herself.

The degree of control exercised over how the work is to be performed, although a factor to be taken into account, is not decisive. Therefore, the question of control, though not determinative, is a factor to be taken into consideration in the analysis.”

In the instant case, I find that there are a number of facts that suggest that the Respondent exercised a high degree of control over the Complainant. The Respondent scheduled the Complainant’s working days and the Respondent set the Complainant’s wage. The Complainant was required to be at work on the days scheduled by the Respondent and perform duties that were assigned to her. When out sick, the Complainant was required to provide a medical certificate.  I accept that the Complainant was afforded time off between approx. 2.45pm and 3.40pm. However, it appears that the arrangement to collect children of the Complainant and Mr Collins was by mutual agreement that clearly suited the Respondent as well.

On the basis of the above, I find that the Respondent exercised a significant degree of control over work done and the manner by which work was to be done by the Complainant and control of this nature is indicative of the existence of a contract of service.

The Integration Test

In Stevenson, Jordan and Harrison Ltd. v McDonald and Evans [1952] 1 TLR 101, Lord Denning, at page 111, stated;

“One feature which seems to run through the instances is that, under a contract of service a man is employed as part of the business, whereas under a contract for services, his work, although done for the business is not integrated into it but is only accessory to it.”

In Re Sunday Tribune Limited [1984] IR 505, at page 507, Carroll J. described the integration test as follows:

“The test which emerges from the authorities seems to me, as Denning LJ said, whether on the one hand the employee is employed as part of the business and his work is an integral part of the business, or whether his work is not integrated into the business but is only accessory to it.”

In Autoclenz v Belcher [2011] UKSC 41, the UK Supreme Court considered whether car valeters were ‘workers’ for the purposes of the relevant UK legislation. It found that the integration test was satisfied on the basis that the valeters were fully integrated into the respondent’s business and that they had no other real source of work.

The Complainant was performing tasks and duties directly related to the Respondent’s core business activity. Her role involved cleaning the shop, dealing with customers face-to-face on the shop floor, answering phone calls, preparing invoices and paperwork for the accountant, and driving to Ennis to collect tiles.  The Respondent did not dispute the Complainant’s assertion that she built the business with Mr Collins. I accept that, considering the hours the Complainant worked for the Respondent, she was not in a position to take on additional work over and above that she performed for the Respondent.

I find that the Complainant was an integral part of a business, as opposed to carrying out work that, although done for the business, is peripheral or accessory to it.

The Entrepreneurial Test

The test is to assist to determine whether a person is in business on her own account.  The Code of Practice on Determining Employment Status compiled by the Department of Social Protection, the Office of the Revenue Commissioners, and the Workplace Relations Commission provides that the test is:

“Whether and to what extent the person who has been engaged to carry out the work is doing so as a person in business on their own account, and has the ability to profit from their own efficiency/entrepreneurial skill or, conversely, runs the risk of suffering a financial loss.”

I find that the Complainant, on her uncontested evidence, worked exclusively for the Respondent. The Complainant was not in a position to profit from her efficiency or entrepreneurial skills or at risk of a financial loss due to a lack of same. She was paid a set weekly wage.

Having regard to the foregoing, I find that the Complainant was subject to considerable control by the Respondent in the manner in which she performed her work. The Complainant was required to give personal service in so far as she could not sub-contract the work. The work done by the Complainant was part of the Respondent’s core business. She was, therefore, an integral part of that business.

In addition, I note that the accountant’s email of 17 August 2020 confirms that the Complainant was “on the Temporary Wage Subsidy Scheme in her employment with Tile & Wood Factory Outlet (Limerick) Ltd.”  (emphasis added). The email further confirms that the Complainant’s average net pay was €500 weekly.

I also note that the letter of 22 June 2021 from the Respondent to the Complainant confirmed that the Complainant was bound by the provisions of the Respondent’s Disciplinary Policy and Honesty Policy, she was subject to disciplinary procedures that were in place at the relevant time. Furthermore, the letter confirms that Complainant’s suspension with pay, a feature that does not apply to a director of a company. The letter further advises the Complainant that “…the outcome of this process may ultimately result in the imposition of the disciplinary sanction up to and including dismissal.”

In addition, I find that the Complainant was obliged to furnish the Respondent with medical certificates regarding her absence. Following her sick absence, the Complainant was obliged to furnish certificate of fitness to return to work and, as per the Respondent’s instruction, she was required to attend a Medmark Occupational Health Assessment to confirm her fitness to return to work. Mr Collins, in his direct evidence confirmed that he sent the Complainant for a medical assessment because he needed to make sure of the fitness to work of “any staff member”. 

Having carefully considered the above, I conclude that the Complainant was engaged at all material times by the Respondent under a contract of service.

Substantive matter

Legislation

Section 6 of the Unfair Dismissals Act, 1977 in relevant parts provides as follows:

6. Unfair dismissal

(1) Subject to the provisions of this section, the dismissal of an employee shall be deemed, for the purposes of this Act, to be an unfair dismissal unless, having regard to all the circumstances, there were substantial grounds justifying the dismissal.

 (4) Without prejudice to the generality of subsection (1) of this section, the dismissal of an employee shall be deemed, for the purposes of this Act, not to be an unfair dismissal, if it results wholly or mainly from one or more of the following:

(a) the capability, competence or qualifications of the employee for performing work of the kind which he was employed by the employer to do,

(b) the conduct of the employee,

(c) the redundancy of the employee, and

(d) the employee being unable to work or continue to work in the position which he held without contravention (by him or by his employer) of a duty or restriction imposed by or under any statute or instrument made under statute. “

The burden of proof to show that a dismissal was not unfair rests with the employer. The Unfair Dismissals Act requires that the employer must be able to show that fair procedures were followed and that there existed substantial grounds justifying the decision to dismiss.

In The Governor and the Company of Bank of Ireland -v- James Reilly (2015) IEHC 241, Mr. Justice Noonan elaborated on what was required by Section 6 of the Unfair Dismissals Acts as follows: “It is thus clear that the onus is on the employer to establish that there were substantial grounds justifying the dismissal and that it resulted wholly or mainly from one of the matters specified in   s. 6(4), which includes the conduct of the employee or that there were other substantial grounds justifying the dismissal. Section 6(7) makes clear that the court may have regard to the reasonableness of the employer's conduct in relation to the dismissal. That is however not to say that the court or other relevant body may substitute its own judgment as to whether the dismissal was reasonable for that of the employer. The question rather is whether the decision to dismiss is within the range of reasonable responses of a reasonable employer to the conduct concerned - see Royal Bank of Scotland v. Lindsay UKEAT/0506/09/DM.”

The Industrial Relations Act, 1990 (Code of Practice on Grievance and Disciplinary Procedures) (Declaration) Order, 2000 (SI No. 146/2000) sets out the general principles that should apply in the operation of disciplinary procedures and the promotion of best practice in giving effect to these procedures.

The combined effect of the above requires me to consider whether or not the Respondent's decision to dismiss the Complainant was reasonable in the circumstances. It is well established that is not the role or function of the Adjudication Officer to determine the guilt or innocence of the employee but rather to assess whether a reasonable employer, in the Respondent's position and circumstances, would have done so. This is the standard the Respondent’s actions must be judged against. The Act places the burden of proof on the Respondent to demonstrate that the dismissal was fair. As part of exercising this burden of proof, the Respondent needs to show that fair process and procedures were applied when conducting the disciplinary process.

Procedural Framework

The first matter I must decide is if the procedural framework adopted by the Respondent is this case was in accordance with the Code of Practice on Grievance and Disciplinary Procedures (SI 146 of 2000), which promotes best practice in the conduct of grievance and disciplinary procedures and emphasises the importance of procedures to ensure fairness and natural justice. 

The Code of Practice provides that best practice entails a number of stages in the discipline and grievance process as follows:

·       That employee grievances are fairly examined and processed;

·       That details of any allegations or complaints are put to the employee concerned;

·       That the employee concerned is given the opportunity to respond fully to any such allegations or complaints;

·       That the employee concerned is given the opportunity to avail of the right to be represented during the procedure; and,

·       That the employee concerned has the right to a fair and impartial determination of the issues concerned, taking into account any representations made by, or on behalf of, the employee and any other relevant or appropriate evidence, factors, circumstances.

Based on the totality of the evidence adduced, both written and oral, it is abundantly clear that the Respondent did not follow any procedures before coming to the decision to dismiss the Complainant.  The Respondent instigated the disciplinary process by sending the letter of 22 June 2021. I note that the Complainant wrote to the Respondent on 1 July 2021 questioning the legitimacy of the disciplinary process. The Complainant further noted the impact of the personal circumstances on the disciplinary process. The Complainant stated in the letter that if Mr Collins “…insist on progressing with a disciplinary process against me I require the following information as a preliminary…”

I note that there has been no further communication from the Respondent following the Complainant’s letter of 1 July 2021 regarding the disciplinary process.

The Complainant was subsequently removed as a director of the company on 29 September 2021. The Respondent informed the Complainant by letter dated 19 October 2021 that it “will cease any payment to you with immediate effect”. I note that the Complainant’s Revenue online details show that her employment ceased on 22 October 2021. I find that the Complainant was reasonable in her understanding that she was dismissed at this juncture.

I find that the Respondent’s actions were contrary to the norms of employment relations practice in Ireland which requires that the dismissal of an employee is effected in line with SI 146 of 2000, the core tenet of which is that all employees are entitled to fair procedures and natural justice in all of their engagements with their employer.

The constitutional right to fair procedures and natural justice was recognised in re Haughey ([1971] I.R. 217), where O'Dalaigh C.J. stated that: “Article 40 s 3 of the Constitution is a guarantee to the citizen of basic fairness of procedures”. The principles enshrined in Haughey were implied into contracts of employment by the Supreme Court in the case of Glover v BLN Ltd ([1973] I.R. 388) and have been cited in Labour Court Decisions including UDD1815 A Commercial State Body v a Worker, UDD1611, Kilsaran Concrete Kilsaran International Ltd and Vitalie Vet, UD1294/2008. 

Walsh J, giving the majority judgment for the Supreme Court in Glover v. BLN Limited [1973] IR 388, stated that:-

"This court in re Haughey [1971] IR 217 held that [Article 40.3] of the Constitution was a guarantee of fair procedures. It is not, in my opinion, necessary to discuss the full effect of this Article in the realm of private law or indeed of public law. It is sufficient to say that public policy and the dictates of constitutional justice require that statutes, regulations or agreements setting up machinery for taking decisions which may affect rights or impose liabilities should be construed as providing for fair procedures. It is unnecessary to decide to what extent the contrary can be provided for by agreement between the parties.”

In light of the above, I find that the dismissal of the Complainant was procedurally unfair.

Substantive matters

I must now decide if the decision to dismiss was a reasonable and proportionate response to the alleged Complainant’s conduct.  

In Bunyan -v- United Dominions Trust (Ireland) 1982 ILRM 404, the EAT endorsed and applied the view in the case of N.C.Watling Co Limited -v- Richardson 1978 IRLR 225 EAT (ICR1049) where it was stated; “The fairness or unfairness of dismissal is to be judged by the objective standard of the way in which a reasonable employer in those circumstances in that line of business would have behaved. The Tribunal therefore does not decide the question whether, on the evidence, before it, the employee should be dismissed. The decision to dismiss has been taken and our function is to test such decision against what we consider the reasonable employer would have done and/or concluded’’.  

As the alleged shortcomings on the part of the Complainant were not the subject any investigation or disciplinary procedures, if appropriate, I am not in a position to determine if dismissal was a reasonable response in the circumstances.  Accordingly, I find the Complainant was unfairly dismissed.

Redress 

I find that the Complainant was unfairly dismissed by the Respondent within the meaning of section 6 of the Unfair Dismissals Act. Accordingly, I find that the complaint is well founded.

In accordance with the provisions of Section 7(1) of the Act I am obliged to determine which of the three forms of redress open to it is most appropriate having regard to the circumstances of this case. In the circumstances, I have decided that reinstatement or re-engagement of the Complainant is not a practical option in this case. Instead, I take the view that compensation is the appropriate redress in this case.

Section 7(2) of the Acts provides: -

“(2) Without prejudice to the generality of subsection (1) of this section, in determining the amount of compensation payable under that subsection regard shall be had to—

(a) the extent (if any) to which the financial loss referred to in that subsection was attributable to an act, omission or conduct by or on behalf of the employer,

(b) the extent (if any) to which the said financial loss attributable to an action, omission or conduct by or on behalf of the employee,

(c) the measures (if any) adopted by the employee or, as the case may be, his failure to adopt measures, to mitigate the loss aforesaid….”

Section 7(3) of the Act provides that future loss may be taken into account as follows: “financial loss, in relation to the dismissal of an employee, includes any actual loss and any estimated prospective loss of income attributable to the dismissal and the value of any loss or diminution, attributable to the dismissal, of the rights of the employee under the Redundancy Payments Acts 1967 to 1973, or in relation to Superannuation”.

I note that the parties were in agreement that the Complainant’s weekly wage was €500 net. This is supported by the payslips provided to me and the email of the accountant of 17 August 2020.

As of the date of the adjudication hearing, the Complainant has not obtained alternative employment. The Complainant gave evidence that she spoke to people and sent approximately 4 job applications. The Complainant did not contact recruitment agencies or websites. Post-hearing, on 5 December 2022, the Complainant forwarded a copy of her CV, a copy a letter confirming that she applied for a job with a shop on 7 April 2022, and a copy of two text messages (one dated 21 November 2022) in relation to what appears to be a course inquiry.

I am cognisant of the difficult position the Complainant found herself in whereby her personal circumstances are known to other businesses in the industry. I accept the Complainant’s assertion that this may well impact on her chances to secure employment.

However, in calculating the level of compensation, I took into consideration the efforts of the Complainant to mitigate her losses as I am required to do by section 7(2)(c) of the Act.  I find that the Complainant’s efforts do not meet the standard set out by the Employment Appeals Tribunal in Sheehan v Continental Administration Co Ltd UD 858/1999 that a “claimant who finds himself out of work should employ a reasonable amount of time each weekday in seeking work. It is not enough to inform agencies that you are available for work nor merely to post an application to various companies seeking work ... The time that a claimant finds on his hands is not his own, unless he chooses it to be, but rather to be profitably employed in seeking to mitigate his loss."

I declare this complaint to be well founded.

I consider it just and equitable in all the circumstances of this case to award the Complainant compensation in the sum of €20,000 which takes into account the Complainant’s inadequate attempts to mitigate her losses.

Unfair dismissal - directorship