Complainant

Respondent

Parties

Thomas  Dempsey

Iarnrod Eireann / Irish Rail

Representatives

Des Courtney, SIPTU

 Seán Walsh, Head of IR

Act

Complaint Reference No.

Date of Receipt

Complaint seeking adjudication by the Workplace Relations Commission under section 6 of the Payment of Wages Act, 1991

CA-00059122-001

29/09/2023

Complaint seeking adjudication by the Workplace Relations Commission under section 6 of the Payment of Wages Act, 1991

CA-00059122-002

29/09/2023

The Complainant submits that the Respondent has made, and continues to make, unlawful deductions from his wages in contravention of the Payment of Wages Act, 1991 (the Act).

The Respondent rejects the complaint.

Preliminary Issue

The Respondent has raised a preliminary issue whereby it is asserted that the WRC has no jurisdiction to hear this case.

The Complainant contends that a similar preliminary issue was raised by the Respondent in Ryanair Limited (appellant) v AlanDowney (respondent) PW6/2005 [2006] 17 E.L.R. 347, in which the Employment Appeals Tribunal referred to section 7 (1) of the Act (as it was then) and found that it was required to hear the parties and hear any evidence presented.

The Complainant relies on section 6 (1) of the Act, containing a similar provision to the above referenced section and, which allows for the presentation of a complaint to an Adjudication Officer and that the Adjudication Officer 'shall give the parties an opportunity to be heard by him and to present to him any evidence relevant to the complaint'. The Complainant submits that he is, therefore, properly before the Adjudication Officer and, in line with section 6 (1), is entitled to be heard.

Background

In 2016 management at the Respondent company sought the introduction of compulsory medical examinations for safety critical staff. Whilst the union was not opposed to such an introduction, along with its sister unions, SIPTU sought the introduction of an income continuance scheme to assist those who may be deemed medically unfit to carry out their roles.

Agreement could not be reached between the parties and the matter was the subject of a conciliation conference under the auspices of the WRC and, subsequently, a full Labour Court hearing on 19 April 2016. The Court issued its Recommendation on 22 April 2016.

The Court recommended the establishment of an income continuance scheme for the relevant staff with the following conditions:

·       The Respondent should contribute 30% of the cost of the scheme and members of the scheme should contribute 70% of the cost,

·       The cost of the scheme to the Respondent should be taken into account in the ongoing discussions on productivity (then) underway,

·       On the completion of the productivity discussions the ratio of contributions to the scheme, as between the Respondent and the members of the scheme should be reviewed.

The scheme was initially introduced on 23 April 2020 for a three-year period, with a rate expiry date of 22 April 2023. The Complainant submits that whilst the scheme is contributory, the benefits of the scheme are not provided by the Respondent. The scheme is underwritten by New Ireland Assurance. The contribution is tax deductible for employees and, for the first three years the full weekly contribution was €18.56 i.e. €5.56 per week for the Respondent and €13.00 gross per week for the employee less the tax deduction at either 20% or 40%.

In 2023, New Ireland Assurance reviewed both the contribution rates and the other benefits associated with the scheme. The weekly rate increased significantly from €18.56 to €27.46 whilst at the same time the benefits were significantly reduced.

A number of SIPTU members indicated that they were unable to meet the increased premium and as a result the union requested of the Respondent that no premiums would be deducted until individual written sanction, allowing for the deduction, was secured from each member. On 28 June 2023, the Head of IR advised by email that verbal legal advice had been secured by the Respondent on foot of which the Respondent believed the deductions were lawful.

Complainant’s Case

For the purposes of the Payment of Wages Act, 1991 'wages' are defined as 'any sums payable to the employee by the employer in connection with his employment, including –

a) Any fee, bonus or commission, or any holiday, sick or maternity pay, or any other emolument, referable to his employment, whether payable under his contract of employment or otherwise’

Section 5(1)(c) of the Act provides that:

'An employer shall not make a deduction from the wages of an employee (or receive any payment from an employee) unless, in the case of a deduction, the employee has given his prior consent in writing to it'. 

The Complainant submits that individual prior consent has not been sought from or given by him.

The Complainant submits that the Respondent relies upon the existence of a collective agreement to establish a right to make a deduction from the Complainant’s wages which, it asserts, is in line with section 5 (1) (b) of the Act, which provides that:

‘An employer shall not make a deduction from the wages of an employee (or receive any payment from an employee) unless the deduction (or payment) is required or authorised to be made by virtue of a term of the employee’s contract of employment included in the contract before, and in force at the time of, the deduction or payment…’

The Complainant submits that a collective agreement must be compliant with, and subject to, the terms of employment legislation. In this regard, the Complainant relies on section 11 of the Act which provides that:

‘A provision in an agreement (whether a contract of employment or not and whether made before or after the commencement of this Act) shall be void in so far as it purports to preclude or limit the application of, or is inconsistent with, any provision of this Act’.

The Complainant submits that the terms of a collective agreement must be examined in detail to ensure that it complies with the requirements of the Act.

The Complainant submits that the collective agreement is the mechanism through which the Labour Court recommendation was ratified. However, the delivery of the scheme on a day-to-day basis is not the subject of any collective agreement.

The income continuance scheme relates to the long-term illness, and absence from work, of employees of larnród Éireann/Irish Rail and is, therefore, of benefit to both employees and the Respondent.  The Complainant contends that as the Respondent makes a direct financial contribution to the weekly premium, the scheme should more accurately be considered a good or service supplied to or provided for the employee by the Respondent, the supply or provision of which is necessary to the employment.

The Complainant submits that the scheme is necessary to the employment because it underpins the compulsory/periodical medicals process introduced by the Respondent and whilst the benefits of the scheme are delivered through a third party, the Respondent is a provider of the service (scheme) to employees.

The Complainant contends that, as the income continuance scheme is a service provided for the employee by the Respondent, this places the scheme under the remit of section 5(2)(b) of the Act, which provides as follows:

'An employer shall not make a deduction from the wages of an employee in respect of any goods or services supplied to or provided for the employee by the Respondent the supply or provision ofwhichis necessary to the employment, unless-

(i)                  The deduction is required or authorised to be made by virtue of a term (whether express or implied and, if express, whether oral or in writing) of the contract of employment made between the Respondent and the employee, and

(ii)                The deduction is of an amount that is fair and reasonable having regard to all the circumstances (including the amount of the wages of the employee) …’

The Complainant contends that the inclusion of the word 'and' rather than ‘or’ in section 5(2)(b) ensures that, even where a term or condition may be implied into a contract of employment based on a collective agreement, the amount of deduction must be fair and reasonable having regard to all the circumstances.

The Complainant further contends that the Respondent cannot simply rely upon the existence of a clause in a contract of employment to assume a right to make deductions. Deductions must be made in compliance with the Act.  In support of this contention, the Complainant relies on Ryanair Limited (appellant) v Alan Downey (respondent) PW6/2005 [2006] 17 E.L.R. 347 in which the Employment Appeals Tribunal, in similar circumstances, found that:

'the appellant is relying on the fact that a clause in the employment contract provides for a deduction and therefore the deduction cannot be unlawful. This is not the law as the Tribunal understands it. The appellant company, in order to make a lawful deduction, must comply with the provisions of the Act'

Conclusion

The Complainant contends that the deductions made by the Respondent from his wages constitute a breach of the Act. In this case, like the Ryanair case, the Respondent is relying on a belief that a clause in the employment contract provides for a deduction and therefore the deduction cannot be unlawful.  The Complainant asserts that the Respondent's rights and obligations extend beyond those set out in section 5(1)(b) of the Act.

The Complainant has assessed the fairness, reasonableness or otherwise of a deduction from his wages having regard to his income and financial responsibilities on a weekly basis.  The Complainant contends that there is no evidence nor indeed any indication at all that the Respondent has given this requirement under the Act any consideration.  Furthermore, a collective agreement which did not require an employer to consider the test of reasonableness and/or fairness would not be compliant with the terms of the Act.

The Complainant contends that as the income continuance scheme constitutes a service/good supplied to or provided for the employee, it more properly falls within the remit of section 5(2)(b) of the Act.

The Complainant also relies on section 5(4) of the Act which provides that:

‘A term of a contract of employment or other agreement whereby goods or services are supplied to or provided for an employee by an Respondent in consideration of the making of a deduction by the Respondent from the wages of the employee or the making of a payment to the Respondent by the employee shall not be enforceable by the Respondent unless the supply or provision and the deduction or payment complies with subsection (2).

The Complainant also relies on section 5(6)(a) which provides as follows:

'Where-

The total amount of any wages that are paid on any occasion by an employer to an employee is less than the total amount of wages that is properly payable by him to the employee on that occasion (after making any deductions therefrom that fall to be made and are in accordance with this Act) then, except in so far as the deficiency or non-payment is attributable to an error of computation, the amount of the deficiency or non-payment shall be treated as a deduction made by the Respondent from the wages of the employee on the occasion'.

The Complainant believes that he has demonstrated that the Respondent has breached his statutory entitlements under the Payment of Wages Act, 1991.

Preliminary Issue

The Respondent asserts that the complaint as presented is misconstrued. The income continuance protection plan was negotiated and collectively agreed with its representative trade unions, of which SIPTU is one. The trade unions are the actual policy holders of the scheme. The scheme was introduced following a dispute over the implementation of an aspect of the Railway Safety Act 2005. This aspect was the introduction of mandatory medical examinations for safety critical railway workers. Failure to pass these mandatory medical examinations could result in an individual having to be removed from their safety critical role. Following negotiation, referral to the WRC and recommendation from the Labour Court, the scheme was agreed. The collective agreement provided that the scheme was compulsory for all staff, and this is reflected in the policy. This compulsory aspect was important as it had a positive impact on the cost of the scheme and consequently on the premium paid by the scheme members. This compulsory aspect was agreed to by the trade unions.

This scheme was put in place following a normal industrial relations process and represents a collective agreement between the Respondent and its trade unions.  The Respondent contends that SIPTU is the only union amongst its five representative unions that have taken cases such as this.  The Respondent submits that if the other unions believed the deductions were unlawful under the Act, they surely would also have referred the matter under the legislation. The Respondent does not believe that an Adjudication Officer of the WRC has the jurisdiction to overturn a collective agreement.

The trade unions balloted on the renewal of the scheme in April 2023 and the ballot was passed in favour of the scheme, even though the cost of the scheme had increased very significantly. Following this ballot, the trade unions requested that the Respondent facilitate the increased deductions on their behalf as the policy holders.

The Respondent submits that if this case was to be heard and was successful i.e., that the deductions requested by trade unions are unlawful, then one of the available redress measures would be the refunding of contributions already made by scheme members.  The Respondent contends that the contributions have already been paid over to the scheme providers New Ireland and are not available to the Respondent to refund.

 In summary, the Respondent would contend that in circumstances where the trade unions are the policyholders for the scheme, and the Respondent merely facilitates the deduction of the contributions, based on a request from those trade unions, the Respondent would assert that it is not appropriate for one of these unions to allege that the deductions are unlawful and seek redress from the WRC. It is on this basis that the Respondent believes there is no actual issue between the Respondent and the Complainant. The Respondent does not believe that this issue falls within the terms of the Payment of Wages Act and, therefore, the WRC does not have jurisdiction to hear this case.

Substantive Issue

Background

The Railway Safety Act 2005 imposes obligations on the Respondent to conduct mandatory periodic medical examinations on safety critical staff. This obligation was reinforced and strengthened by the European Union in Regulation 2015/995.  Following on from this Regulation, the Respondent engaged comprehensively with its recognised trade unions to ensure full compliance with mandatory medical requirements.

Before the Respondent could begin the mandatory medical examinations, the trade unions requested the introduction of an income protection insurance plan for staff in the event that a staff member was deemed unfit for work following the medical. The Respondent entered into discussions with the trade unions regarding the introduction of an insurance plan, similar to the plan that was already in place for drivers. These discussions progressed through state machinery and was ultimately subject to a Labour Court hearing under section 26(1) Industrial Relations Act 1990, resulting in recommendation LCR21213 being issued. The Labour Court recommended that the Respondent contribute 30% to the cost of the scheme and the other 70% be funded by staff members.

Subsequently, the Respondent and trade unions engaged with an insurance broker, Eolas Finance, to seek quotes for an income protection insurance plan. At this stage, it was agreed with the trade unions to extend the scheme to all staff members, excluding drivers (who are members of a separate scheme), as this would reduce the premium.

The income protection policy was implemented in 2020 and deductions commenced from all employees’ wages. The trade unions are the policyholders, and the Respondent merely facilitates the deduction of the premium from wages. There were no objections to the deductions up until the scheme was due for renewal in April 2023. The Respondent and trade unions engaged with the insurance broker to seek quotes for the renewal of the scheme. Due to the high volume of claims made by staff under the scheme, the renewal cost of the scheme increased substantially.

The Respondent entered into extensive discussions with the trade unions and insurance broker in an attempt to reduce the premium. The insurance broker negotiated with the insurance company, on behalf of the trade unions, whereafter the insurance company undertook to reduce the premium if the number of claimants under the scheme reduced by a fixed amount within the year. The trade unions held a ballot with their members, the result of which was to retain the scheme. The Respondent undertook to enter into monitoring committees with the trade unions to assist them in reducing the number of claimants under the scheme which are ongoing.

Legal Analysis

The Payment of Wages Act 1991 governs the lawfulness of deductions from wages at section 5 where it is provided that:

“5.— (1) An employer shall not make a deduction from the wages of an employee (or receive any payment from an employee) unless—

(a)   the deduction (or payment) is required or authorised to be made by virtue of any statute or any instrument made under statute,

(b)   the deduction (or payment) is required or authorised to be made by virtue of a term of the employee's contract of employment included in the contract before, and in force at the time of, the deduction or payment, or

(c)    in the case of a deduction, the employee has given his prior consent in writing to it.”

Section 1 of the Payment of Wages Act 1991 defines wages as:

“"wages", in relation to an employee, means any sums payable to the employee by the employer in connection with his employment, including—

(a)   any fee, bonus or commission, or any holiday, sick or maternity pay, or any other emolument, referable to his employment, whether payable under his contract of employment or otherwise, and

(b)   any sum payable to the employee upon the termination by the employer of his contract of employment without his having given to the employee the appropriate prior notice of the termination, being a sum paid in lieu of the giving of such notice”

As noted by Anthony Kerr SC in Industrial Relations Law, where a contract of employment expressly provides that an employee’s terms and conditions of employment will be determined by collective agreements made with any recognised trade union representing employees, the terms of the collective agreements will be incorporated into a contract of employment. This has the effect of binding an employee to the terms of the collective agreement.

Application

The Respondent submits that, as per section 1 of the Act, the WRC should have regard to all of the circumstances pertaining to the employment, including collective agreements in place, when determining what was properly payable to the workers.

The Respondent engages in collective bargaining with recognised trade unions. The introduction of the income protection insurance was a result of collective bargaining, and on instruction from the trade unions, the Respondent deducted the premium from employees’ wages to pay the insurance premium. In this circumstance, the Respondent asserts that, having regard to the collective agreement, the workers were paid their proper wage. 

Regardless of the preceding point, employees at Iarnród Éireann are bound by collective agreements through their contracts of employment. In each statement of employment, it states:

“The Terms and Conditions outlined above may be altered during its currency by agreement or consequent on collective agreements reached between the Respondent and Trade Unions recognised for negotiation purposes”. 

The Complainant’s contract of employment expressly incorporates collective agreements into the contract. The Respondent submits that this incorporation has the effect of binding the Complainant to the terms of the collective agreement. Section 5(1)(b) of the Payment of Wages Act 1991 allows deductions from wages where the deduction is authorised by a term in the contract of employment in force at the time of the deduction. The collective agreement is a term of the workers employment. Where the payment of wages is made in accordance with the collective agreement, section 5(1)(b) has the effect of making the deduction lawful.  Therefore, it is the Respondent’s position that the complaint as presented is not well founded.

Conclusion

The Respondent introduced the income protection insurance plan on foot of a collective agreement with its recognised trade unions.  The Respondent contends that by virtue of the definition of wages in the Payment of Wages Act 1991, the collective agreement should be considered when determining what was properly payable to the Complainant.

The Respondent contends that collective agreements are incorporated into the Complainant’s contract of employment. This has the effect of binding the Complainant to collective agreements. Therefore, the deduction of the premium is authorised by virtue of the contract of employment. Accordingly, the deduction is lawful as per section 5(1)(b) of the Payment of Wages Act 1991.

The Act at section 5 provides as follows:

5.— (1) An employer shall not make a deduction from the wages of an employee (or receive any payment from an employee) unless—

(a)   the deduction (or payment) is required or authorised to be made by virtue of any statute or any instrument made under statute,

(b)   the deduction (or payment) is required or authorised to be made by virtue of a term of the employee's contract of employment included in the contract before, and in force at the time of, the deduction or payment, or

(c)    in the case of a deduction, the employee has given his prior consent in writing to it.

I note the Complainant’s contention that section 5(1)(c) of the Act provides that for a deduction from wages to be valid, an employee must give his or her individual consent to it. In this regard, I note the findings of the Employment Appeals Tribunal (EAT) in Field-Jennings v South West Doctors on Call Ltd PW 14/ 2011, where it was found that the complainant's contract of employment provided that all employees were bound by any collective agreement reached between the union(s) and the employer “to include pay”. The Employment Appeals Tribunal found that the unions had given consent on behalf of the employees.

In reaching a decision in this case, I am also guided by the findings of the Labour Court in Office of Public Works and O’Sullivan PWD40/2016 where the Court found that “the arrangements applied to the Claimant’s pay in respect of work at non-shift sites was in accordance with a collective agreement made with the Trade Union recognised by the Respondent for that purpose. The Court finds that the Claimant’s contract of employment provided for the alteration of the Claimant’s terms and conditions of employment in consequence of such agreements. The Court therefore, taking account of the Act at Section 5(1)(b), finds that no unlawful deduction from the Claimant’s wages has taken place.”

The situation that pertains in this case is the analogous to the situation that pertained in both of the precedents cited above in that the deduction of the insurance premium from the Complainant’s wages was in accordance with a collective agreement made by the trade unions recognised by the Respondent for that purpose and did not require individual consent from the Complainant.  The Complainant’s contract of employment provides for the alternation of the Complainant’s terms and conditions as a result of such collective agreements. 

Accordingly, I find that no unlawful deduction was made from the Complainant’s wages.  Consequently, I find that his complaint is not well founded.

I declare this complaint to be not well founded.

Payment of Wages Act – collective agreement