Worker

Employer

Anonymised Parties

An Assistant Manager

Bank

Representatives

Jean O'Dowd Unite the Union

 Employer Manager.

Act

Dispute Reference No.

Date of Receipt

Complaint seeking adjudication by the Workplace Relations Commission under section 13 of the Industrial Relations Act, 1969

IR - SC - 00000808

01/11/2022

The employee commenced employment on 12 November 1979.  He was promoted and now holds the grade of Assistant Manager.  The employee reported sick in April 2008. He remained on sick leave until October 2008.  At that time, he qualified for the employer’s Income Continuance Plan and was placed on the scheme.  The employee remains on that scheme.  The employee has had no increase in his payment from the Plan since October 2008.  The employee’s dispute with the employer concerns the application of the benefits he claims to be entitled to receive under the terms of the Plan. 

The employer’s position is that the employee has not been treated differently to any other employee in similar circumstances.  The employer asserts it has acted as a fair and reasonable employer.

The employee commenced employment on 12 November 1979.  He is currently graded as an Assistant Manager.   The employee became ill and went on sick leave on 24 April 2008.  The employer’s sick pay scheme provided full pay for a six-month period.  In October 2008, due to ongoing ill health the employee made an application to the employer’s Income Continuance Plan.  He was admitted to cover under the Plan and continues to receive benefits from that Plan.  However, he has not received any increase in payment since 2008.

The Income Continuance Plan (ICP) is provided by the employer for members of the Staff Pension Plan.  The ICP was first established in 1970 and was underwritten by a Life Assurance Company.  The employer produced an Explanatory Booklet in 1996 setting out the benefits of the Pension Plan and the ICP.  In 2002 the employer merged with another financial institution.  In 2006 the terms and conditions of the ICP were incorporated fully into a self-assured policy and were applied, approved, and granted to all successful applicants up to 31 May 2013.  The employee’s claim continues to be administered under the 2006 self-assured policy.

The employee’s benefits from the ICP have not been increased since 2008.  No cost-of-living increase has been applied.  The employee’s purchasing power has diminished over the years and particularly in recent years with the cost-of-living crisis.  The employee contends that to address this problem his ICP payment should be index linked.

In April 2023 the employee was notified that the employer, as part of a renewal of its Income Benefit Protection policy, was provided with the opportunity to purchase a policy which includes an inflationary (CPI) benefit, which would apply from 01 April 2023.  The employer then reviewed its other policies and took the decision to offer the benefit based on CPI to all colleagues.  The inflationary benefit will mean that those employees on the Income Benefit Protection will receive a CPI associated increase, up to a maximum of 3% per annum.  There will be no backdating of CPI prior to 01 April 2023.

The employee contends that the employer must honour his existing terms as set out in the 1996 Explanatory Booklet.  In particular the terms that provides for an increase of up to 5% per annum, subject to the increase not exceeding the Consumer Price Index (CPI).  The employee also relies on the content of an email to him from the employer, dated 27 May 2010.

The employee is under ever increasing financial pressure as a direct result of increasing inflation.  The cost-of-living has increased significantly in the period 2021 to 2023 with prices on average being 7.7% higher in March 2023 compared to March 2022.  The most significant increases being in essential items such as food, fuel, and clothing. 

The employee contends that he has suffered financial loss as a direct result of the cost-of-living crisis.  The employee claims the employer should honour the terms of the 1996 ICP scheme and the benefits as set out in the email of 27 May 2010.  The email contains the following statement of benefit: “Instead, an increase is normally applied to Income Protection benefit payments on an annual basis by (company name).  However, these increases depend on the Consumer Price Index.  If it drops below 0%, no increases are applied”.

The employee acknowledged that inflation was low between 2009 and 2015 but with no increase paid for fifteen years the effect on his income was significant.  The terms and conditions of the policy should apply throughout the period of illness.  If any change was to occur in the policy cover the employer was obliged to notify the members of such change.  No notice was sent to the employee of any change, until April 2023. 

The employee claims that under the terms of the ICP policy and the email of 27 May 2010 he should be receiving increases based on CPI, up to a maximum of 5%.  The employee asks that the employer honour the terms of the ICP, as set out in the 1996 booklet, and the statement in the email of 27 May 2010.

The employer is a bank regulated by the Central Bank of Ireland and the European Central Bank.  The bank employs approximately 3,000 people in offices in Dublin, Cork and over 100 branches nationwide.  The employee commenced employment on 12 November 1979.  In 2008, following six-months sick leave the employee was placed on the employer’s Income Protection Benefit (IPB) scheme.

In 2002 the employer merged with another financial institution.  The employer was severely impacted by the economic crash in 2008.  The employer had a profit after tax in 2007 of €449 million.  Two years later in 2009 the employer reported a deficit of €313 million, a reduction of 117%.  By 2011 the State and the EU were required to intervene in the employer’s difficulties and provided €4 billion of capital.  The State became the majority shareholder.  Given the severe financial position of the employer cost reducing measures had to be implemented.  These included not paying shareholder dividends, pay freezes, elimination of bonus payments, voluntary severance, career breaks, new department structures, recruitment freezes and closing the Defined Benefit pension scheme.

Prior to 2002 there were three legacy Income Protection schemes underwritten by external companies.  A decision was taken to self-assure the IPB and the employer assumed all financial responsibility for those in receipt of payment under the scheme.  In 2012 the Government purchased part of the business, resulting in the establishment of two independent institutions. 

The employee’s claim appears to be that he is entitled to CPI inflationary increases on his IPB scheme income, based on the terms of the scheme in place in 1979, when he was first employed.  The 1996 Explanatory Booklet is the only available documentation setting out the terms of the scheme.

The explanatory booklet sets out the benefit for disabled members as (page 18):

“You will receive an amount equal to 66 2/3% of your Plan Salary as at the previous renewal date less an amount equal to once the basic disability benefit payable to a fully qualified single contributor under the Social Welfare Acts subject to a maximum benefit (currently €90,000 which will be notified to affected member.

The amount payable will be reduced by any payments under any other insurance against disablement, any remuneration paid by the Employer, or any payments from any other employment.”

The booklet also contains the following statement relating to changes in the income to be paid (page 21):

“The benefits will increase at the rate of 5% per annum compound the first increase to apply after payment of benefit for 52 weeks, subject to the increase not exceeding the increase in the Consumer Price Index.”

The following statement in the booklet deals with Amendments to the Plan (page 24):

“The Company hopes to continue the Plan indefinitely.  It must however, reserve the right to modify, suspend or discontinue the Plan by giving notice to the eligible employees if future conditions warrant such action.

The benefits under the Plan are secured for the Company under a policy effected with the (named) Assurance Company of Ireland.  No entitlement to any benefit will arise under the Plan unless a corresponding benefit is secured under such policy.”

The employee is claiming that as the above-mentioned policy was in place when he became ill and was approved for benefits, in October 2008, and he is entitled to CPI increases from that date.  The employer’s position is that the employee’s contracts of employment do not confer a right or entitlement to an IPB payment in the event he required same.  The information booklet reserved the right to the employer to modify, suspend or discontinue the income benefit plan.  It also makes it clear that no employee has a contractual right to membership of the income continuance plan or to any benefits thereunder.  The employer continues to reserve the right to modify, suspend or discontinue the income continuance plan at any time and from time to time.

The employer reviewed all their IPB policies in 2023 and decided to harmonise the policies.  It had an opportunity to purchase a policy which included an inflationary benefit from 01 April 2023.  The intention was that in future all colleagues would be treated equally.  The IPB benefit enhancement will mean that those on IPB, this employee included, will receive a CPI associated increase, up to a maximum of 3% per annum from 01 April 2023. 

The employer submits that its Income Benefit Protection policies do not confer a right on individuals to receive an inflationary associated increase if in receipt of IPB.  This payment is an employee benefit.  The employer is acting in good faith to support all its colleagues and ensuring all are treated equally.  The employer reserves the right to amend, terminate, modify, suspend, or discontinue its income protection plan.

The employer submits that the employee has not been treated differently to any other employee in a similar circumstance.  The employer asserts that it acted within its rights to amend an employee benefit during an exceptional time for the company.  The employee continues to avail of this benefit and the employer acted in a fair and reasonable way throughout the employee’s service.

In conducting my investigation, I have considered all relevant submissions presented to me by the parties.

The employee’s dispute concerns the application of the benefits of the Income Continuance Plan (ICP) and changes to the benefits proposed by the employer. 

For the sake of clarity, I will refer to the scheme as the ICP in this recommendation as that is the term used on the title page of the 1996 Explanatory Booklet.

The employee commenced employment 1979.  He was promoted in 1991 and his current grade is that of Assistant Manager.  The employee became ill in 2008 and was on sick leave for six months.  He received full pay for the six-month period in line with the employer’s sick pay scheme.  After the first six months on sick leave, he qualified for the employer’s ICP scheme.  He started to receive payments under that scheme in October 2008.  Since that date he has not received any increase in his payment.

The employer could not provide a copy of ICP that was in place in 1979 but was able to provide a copy of the 1996 Pension Plan and Income Continuance Plan Explanatory Booklet.  The employee seeks to have the terms of the ICP, as set out in the 1996 booklet, applied to him. 

The employer submits that the ICP provides a benefit to employees, is not a contractual entitlement and it has reserved the right to modify, suspend or discontinue the plan.  The employer has now purchased a policy that will, from April 2023, provide for CPI associated increases, up to a maximum of 3% per annum, for all colleagues.

Income Continuance Plan

When the employee qualified for payments from the ICP scheme he received payment as set out on page 20 of the 1996 explanatory booklet.  Page 21 of the booklet contains the following statement about increases:

“DOES THE INCOME REMAIN STATIC?

No.  The benefits will increase at the rate of 5% per annum compound the first increase to apply after payment of benefit for 52 weeks, subject to the increase not exceeding the increase in the Consumer Price Index.”

The employee has not received an increase in his benefit payment since 2008.  Between 2008 and 2023 there were years when no increase would arise based on the Consumer Price Index.  However, that is not the position for all years.

Between October 2009 and October 2020, except for one year, CPI was below 1% and, in some years, below 0%.  The employee’s submission notes that prices on average, as measured by the CPI, were 7.7% higher in March 2023 as compared to March 2022.  The employee claims that because there was no increase in his income since 2008, he and his family have suffered a significant reduction in purchasing power.  The employee claims that the employer should pay increases of up to 5% per annum, limited to the CPI increase.

The employee claims that the employer is not entitled to change the terms of the ICP scheme to employees already receiving benefits from the scheme.  Also, any proposed change must be notified to the employees in writing.

Amendments to the ICP

The employer’s position is that the ICP is a benefit and not a contractual entitlement.  The employer was severely impacted by the economic crash of 2008 and had to implement measures to reduce costs across the organisation.  The cost saving measures applicable to staff included pay freezes, elimination of variable bonuses, voluntary severance, career breaks, recruitment freezes and closure of the Defined Benefit pension scheme.

The employer relies on the following section of the ICP explanatory booklet to contend that it is entitled to change the terms of the scheme:

“The Company hopes to continue the Plan indefinitely.  It must however, reserve the right to modify, suspend or discontinue the Plan by giving notice to the eligible employees if future conditions warrant such action.

The benefits under the Plan are secured for the Company under a policy effected with the (named) Assurance Company of Ireland.  No entitlement to any benefit will arise under the Plan unless a corresponding benefit is secured under such policy.”

 In my opinion it is very clear from the above extract that the employer did reserve the right to change or discontinue the plan. 

However, it states that it reserved the right to “modify, suspend or discontinue the Plan by giving notice to the eligible employees if future conditions warrant such action.” It seems the only notice to the employee was in April 2023, through his representative, that a change was proposed.  The employer did not notify the employee of any changes between 2008 and 2023 yet no increases were paid during that period.

The employee was in contact with the employer’s HR department in 2010 and received an email confirming that “an increase is normally applied to Income Protection benefit payments on an annual basis by (named assurance company).  However, those increases depend on the Consumer Price Index.”

Based on the statements in the explanatory booklet and the email of 27 May 2010 the employee clearly had an expectation that his income from the ICP would increase when CPI was above 0% up to a maximum of 5% per annum.

Having carefully considered the submissions of the parties it is my opinion that the employer is entitled to amend the terms of the ICP, on notice to the employees.  The employer in April 2023 issued notice of a change which will result in the benefits payments being increased by the CPI increase up to a maximum of 3% per annum.  

However, the non-payment of increases between 2008 and 2023 was not notified to the employee and he had an expectation, based on the information provided to him by the employer, that he would receive an increase to his benefit payment of the CPI amount up to a maximum of 5%.

I accept that the employer was severely impacted by the economic crash of 2008 and had to take cost saving measures.  In my opinion the employer was entitled to amend or suspend the ICP but was required to notify the employee of such change.  The lack of notice or communication was unfair to an employee who is in ill health and living on a fixed income.

The employer cited the Labour Court decision in Permanent TSB v O’Halloran PW372/2013.  The Court held that there was no contractual entitlement to an automatic increase by way of increments where the employer reviewed the payments on an annual basis.  I do not consider that decision relevant to this dispute as it concerned an interpretation of a provision under the Payment of Wages

Act.

Conclusion

In my opinion the employer has the right to change, suspend or discontinue the plan by giving notice to the eligible employees.  No notice of any change or suspension was given to the employee until 2023.  A failure to communicate with the employee after 2010 is a significant factor in this dispute.

I acknowledge the difficulties the employer experienced due to the 2008 financial crash and the requirements to cut costs.  In those circumstances it is fair and reasonable to amend the scheme to provide that all colleagues are treated equally.  In my opinion the change in the ICP scheme implemented in April 2023 is fair and reasonable in all the circumstances.

Recommendation

I recommend that the employer acknowledges that it failed to give notice of any change in the ICP benefits to the employee between 2008 and 2023.  The failure to notify him was unfair to an employee who is in ill health and living on a fixed income.  To compensate for that failure, I recommend the employer pays €4,000 to the employee in full and final settlement of this dispute. 

I recommend that the employee accepts that, as set out in the 1996 Explanatory Booklet of the Income Continuance Plan, the employer is entitled to modify, suspend, or discontinue the Plan by giving notice to the employee.  Further, I recommend that he accepts that he received notice of a change to the Plan on 21 April 2023 and that as of 01 April 2023 his benefits will be covered by the Income Benefit Protection policy which includes an inflationary CPI associated benefit up to a maximum of 3% per annum.  I recommend the employee accepts the compensation payment of €4,000 if full and final settlement of this dispute.

Income Protection Scheme

Change of Scheme Terms

Compensation