Complainant

Respondent

Parties

David  Morris

Cushla Health Systems Limited

Representatives

Self-represented

Richard Egan, CEO

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-00063992-001

08/06/2024

The Complainant asserts that he is owed outstanding salary for the first five months of 2024, along with three months’ salary in lieu of notice and payment for ten days of accrued annual leave which he had not taken when his employment was terminated.

The Respondent accepts that it owes the Complainant outstanding salary for the first three months of 2024, together with three months’ salary in lieu of notice and payment for ten days of accrued annual leave.  However, it asserts that the Complainant’s employment was terminated on 3 April 2024 and, therefore, he is not owed any outstanding salary for April and May 2024.

The Complainant submits that he commenced full time, permanent employment as the Chief Medical Officer of the Respondent on 4 July 2022 with an annual salary of €125,000, to be paid monthly on the last day of every month.

The Complainant submits that he had always been clear and explicit with the Respondent that he could not accept late or deferred payment as his personal financial situation did not allow for this. It was necessary to repeatedly remind the Respondent that there was a significant difference between the risk taken on by founders of the business and employees, such as the Complainant. Despite this, 25% of the Complainant’s monthly salary payments from July 2022 to December 2023 were late, by varying degrees. The Complainant emailed the Respondent in this regard on 1 December 2023.

The Respondent failed to pay the Complainant’s monthly salary on 31 January 2024. The Complainant queried the situation with the CEO who referred to temporary challenges with funding.  The CEO indicated that there were funding options in negotiation and that the Respondent was actively working to finalise funding and resolve the issue as soon as possible.  The Respondent continued to assign tasks to the Complainant, and he continued to work as normal throughout February 2024 with the expectation that the funding issues would be resolved.

The Complainant’s next salary payment due on 29 February 2024 was not paid. Similar conversations took place with the CEO.  At this point the Complainant was informed of a number of further funding opportunities in negotiation and that the Respondent would be closing the current funding round at the end of March 2024.  The CEO was hopeful that funding would be secured, and the Complainant’s salary would be fully paid once the funding issues were resolved.

The Respondent continued to assign tasks to the Complainant, and he continued to work as normal throughout March 2024 with the expectation that funding issues would be resolved as indicated by the CEO.

Due to significant personal financial strain, the Complainant emailed the CEO on 14 March 2024 to inform him of the dire nature of his situation and demand payment for all work completed by the end of March 2024.

The Complainant’s salary payment due on 31 March 2024 was not paid.  At this point, the Complainant had accrued three months of unpaid salary for work he had completed.

In a meeting on 3 April 2024, the CEO indicated that the Respondent company could no longer retain the Complainant in a fulltime role but would continue to require his services on an ad hoc basis for clinical oversight of key product elements. The CEO instructed the Complainant to stop working for the Respondent.  No formal notice of termination was provided, and the CEO asked the Complainant to consider and propose some options for how an ongoing relationship could be achieved.

On 3 May 2024, the Complainant emailed the CEO to suggest three options as his work status was still in limbo and his outstanding salary remained unpaid. The Complainant requested a formal response by email, to ensure that both parties had a clear and agreed path forward.  The situation was at a critical point for him regarding his personal finances.

The CEO did not respond to the Complainant’s request for an updated position.  Instead, there followed a number of vague responses and proposals to meet, rather than committing the Respondent’s position to writing.

The CEO presented the Complainant with a new contract to sign on 15 April 2024.  The Complainant realised that there were no provisions to enforce lay-off or short hours in his existing contract, and he deferred signing the updated contract pending further advice.

In the absence of any formal, mutually agreed changes to his working conditions, the Complainant contends that his salary and benefits have continued to accrue as the unilaterally applied lay-off was a breach of his contract of employment.

On 30 May 2024, the CEO provided formal notice by email that the Respondent was terminating the Complainant’s employment due to a lack of funding and that his final day with the company would be 30 June 2024.

The notice of termination issued by the Respondent on 30 May 2024 provided only one month's notice, which contravened the three months’ notice period provided for in the Complainant’s contract of employment.

Given that the Respondent company had a significant unpaid debt; had imposed a unilateral, non-contractual lay-off in April 2024; and that the CEO proposed one month's notice instead of the contracted three months, the Complainant proposed that the termination should be immediate, with payment in lieu of notice, as allowed for in section 7 of the Minimum Notice and Terms of Employment Act 1973, rather than keeping the Complainant unnecessarily bound by his contract.

Throughout their email communication, the CEO repeatedly suggested that the Respondent's financial status exempted it from the obligation to pay the Complainant’s salary in a timely manner.  The CEO indicated that the Respondent would arrange a payment plan, at some point in the future when funding allowed.  The Complainant submits that he has consistently indicated to the CEO that such an approach constitutes a contractual breach; a legislative breach of the Payment of Wages Act 1991; and that there is harm being caused to him and his family by the lack of payment. His communications in this regard have been largely ignored.

The Complainant submitted a final demand to the CEO by email on 31 May 2024 requesting payment of the following by 1 June 2024:

·       Outstanding salary for January, February, March, April and May 2024 = €52,080

·       3 months payment in lieu of notice = €31,248 

·       Payment in lieu of 10 days accrued holiday entitlement = €4,806

Total Payment Due = €88,134

The Complainant submits that despite the CEO's claims regarding the Respondent's financial distress and inability to discharge its debt, the Respondent company continues to trade as normal.

It is the position of the Respondent that the Complainant sought employment from the Respondent company with the full understanding of the risks of working in a start-up organisation and lack of certainty around ongoing payment.  The Respondent submits that the Complainant understood fully that the Respondent was a start-up company that was based on a month-to-month ability to fund his employment. 

The Respondent submits that discussion about funding was an ongoing topic throughout the Complainant’s period of employment and the Complainant was aware at all times of the risk around the lack of funding.  In the negotiations around his employment contract with the Respondent, the Complainant specifically called out that as he was accepting the risk of month-to-month commitment, he asked specifically for clause 2.5 around initial 2 years term to be removed (Wording - The Employee acknowledges and understand that the employment is conditional upon the Company securing sufficient funding to cover the Employee salary and benefits for a two year period).  The Respondent agreed in good faith to the Complainant's request to remove clause 2.5 because he was accepting the month-to-month nature of the agreement.  The Respondent also extended the notice period to reduce the risk to the Complainant.  These changes were agreed to in the knowledge that the Complainant understood the spirit of the agreement following full and frank conversations.

At no point before joining the Respondent, or during the course of his employment, did the Complainant state that he could not tolerate any delays in payment.  The Complainant first indicated that delayed payment was an issue at the beginning of November 2023 when payment was made on 3 December rather than on the last day of the month. 

It was clear from the contract negotiations and ongoing meetings that funding was always challenging, as expected in an early-stage start-up in this sector.  Throughout the monthly one-to-one meetings this was a regular topic and it is clear that this was being discussed to assist the Complainant in deciding whether to look at alternative income sources to supplement his role with the Respondent organisation. The Complainant sought to mitigate the risk with other forms of employment during his time with the Respondent and the Respondent proactively supported this. The Respondent constantly attempted to manage the risk to the Complainant by assisting him in securing other sources of income, while remaining involved in the Respondent organisation.  The Respondent was happy for the Complainant to work in non-competing companies and roles, and to also work hours that suited him.  

In the one-to-one meeting in December 2023, the CEO was completely transparent regarding the Respondent’s efforts to secure funding and given the difficulties it was facing, and the Complainant was informed that the Respondent could not guarantee timely payment. The CEO and the Complainant agreed that they would discuss the Complainant’s position at the end of March.  

In the period of January to March 2024, the CEO met with the Complainant several times and discussed the progress, or lack thereof of securing funding.  They met again on the morning of 3 April 2024 when the CEO confirmed that there had been no guarantees of funding, and the Respondent would have to terminate the Complainant’s employment.  They discussed options whereby the Complainant could remain engaged but not in a paid capacity so that his employment could recommence if funding did materialise. 

The Respondent contends that its position is supported by the fact that when the CEO met with the Complainant on 3 April 2024, the Complainant left work that day; he stopped attending meetings and he did not work for the Respondent organisation during April or May 2024.  The Respondent submits that the Complainant knew this was his three months’ notice period.  The Complainant offered to leave his laptop, key and access card but the CEO suggested he keep them as at that time the Respondent was looking at options to retain him.

Conclusion

The Respondent accepts that salary payment is outstanding for January, February and March 2024.  The Respondent also accepts liability for outstanding annual leave.  The Respondent disputes that the Complainant is due a salary for April and May 2024.  The Respondent viewed the end of March 2024 as the end of the Complainant’s employment with the Respondent company.  The notice entitlement would bring the Complainant’s finishing date to the end of June 2024.  The Respondent asserts that the Complainant knew his employment with the Respondent finished at the end of March 2024 and that the Respondent had agreed to pay his three months’ notice as funding allowed.

The Respondent submits that after the meeting on 3 April 2024, communication deteriorated into email communication only and the Complainant began his formal demands which, the Respondent submits, represent additional payments to which he is not entitled.

There is no dispute between the parties that the Complainant is due outstanding salary for the months of January, February and March 2024 when he worked for the Respondent but was not paid.  There is also no dispute that he is owed three months’ salary in lieu of notice and that he is due payment in respect of ten days of accrued annual leave.  However, there is a dispute about the date on which the Complainant’s employment with the Respondent was terminated and whether, as a consequence, he is due outstanding salary for April and May 2024.

The Respondent contends that the Complainant was dismissed on 3 April 2024 when he ceased working for the Respondent and that his three months’ notice commenced with effect from that date.

The Complainant, on the other hand, asserts that he was put on lay-off on 3 April 2024 and that he was not dismissed until the end of May 2024 when he was formally dismissed by the CEO.  The Complainant contends that he accrued salary during his lay-off and that his notice period of three months commenced from the date he was formally dismissed by the Respondent.

Termination Date

The first matter for me to decide, therefore, is the actual termination date of the Complainant’s employment with the Respondent.

While this is a complaint under the Payment of Wages Act 1991, in order to make a finding regarding the Complainant’s termination date, I must refer to the provisions of the Unfair Dismissal Act 1977, as amended and the Redundancy Payments Act 1967. 

The Unfair Dismissals Act defines “date of dismissal” as —

(a) where prior notice of the termination of the contract of employment is given and it complies with the provisions of that contract and of the Minimum Notice and Terms of Employment Acts 1973 to 2005, the date on which that notice expires,

(b) where either prior notice of such termination is not given or the notice given does not comply with the provisions of the contract of employment or the Minimum Notice and Terms of Employment Acts 1973 to 2005, the date on which such a notice would have expired, if it had been given on the date of such termination and had been expressed to expire on the later of the following dates—

(i) the earliest date that would be in compliance with the provisions of the contract of employment,

(ii) the earliest date that would be in compliance with the provisions of the Minimum Notice and Terms of Employment [Acts 1973 to 2005].

With regard to dismissal, the Unfair Dismissals Act provides – ‘dismissal’ in relation to an employee as including the termination by the employer of the employee’s contract of employment with the employer, whether prior notice of the termination was or was not given to the employee.

The Labour Court in Parkboro Developments Ltd T/a Park Engineering v Mariusz Witkowski (UDD2338) noted:

“There can be no absolute rules about what is, or is not, a dismissal and to a very large extent each case in which this point is argued requires to be determined on its own facts.”

Generally, a person is dismissed when the employer informs the employee clearly and explicitly that the contract is at an end or if the circumstances leave no doubt that dismissal was intended or may reasonably be inferred as having been intended [Desmond Ryan, Redmond on Dismissal Law (3rd ed., Bloomsbury Professional, 2017) at 22.13].  Where ambiguous words are used, an objective test should be deployed to decide what was intended by the speaker. In Devaney v DNT Distribution Company Ltd, UD 412/1993 the Employment Appeals Tribunal stated:

“... where words are genuinely ambiguous what needs to be decided is what the speaker intended. Did the employer mean to bring the contract to an end? In answering this question, what needs to be considered is how a reasonable employee in all the circumstances would have understood the employer’s intention.”

The minutes of the ongoing one-to-one meetings between the Complainant and the CEO were submitted in evidence by both parties.  The minutes of the meeting of 3 April 2024 state: “Have to end contract in fulltime capacity” and “need to support CMO on a contracted approach for asks and not able to guarantee a minimum spend per month”.  In his oral evidence to the hearing, the CEO said that the Complainant offered to return his laptop, key and access card after the meeting on 3 April 2024, but the CEO suggested he keep them as at that time the Respondent was looking at options to retain him. Neither the minutes of the meeting of 3 April 2024 nor the instruction of the CEO to the Complainant not to return his work effects suggest in an unambiguous way that the CEO was dismissing the Complainant.

I note that on 15 April 2024, the CEO sent the following email to the Complainant:

“Per our call just now, please see attached letter relating to layoff.  This will allow you to contact welfare if needed.  It also has the additional requirement for the contract which I have updated in section 5.3 which is also attached.  Let me know if there are any other changes you think are needed.

I hope we get back on track with funding or revenue very soon to reverse this and I’m continuing to push accordingly.”

Section 11(1) of the Redundancy Payments Act 1967, as amended, provides the following definition of lay-off –

“(1) Where an employee’s employment ceases by reason of his employer’s being unable to provide the work for which the employee was employed to do, and—

(a) it is reasonable in the circumstances for that employer to believe that the cessation of employment will not be permanent, and

(b) the employer gives notice to that effect to the employee prior to the cessation,

that cessation of employment shall be regarded for the purposes of this Act as lay-off.”

I further note that the CEO emailed the Complainant on 30 May 2024, the CEO to inform him that his employment with the Respondent was being terminated and “that his notice period will also be included in the payment terms and as such your final day will be 30th June 2024”.

One would have to ask, why if the Complainant was dismissed on 3 April 2024 as asserted by the Respondent, did the CEO feel the need to formally terminate his employment in writing on 30 May 2024.

Considering the entirety of the above, I find that the definitive, unambiguous termination of the Complainant’s contract by the Respondent occurred on 30 May 2024 when the CEO emailed the Complainant to that effect.  In my view, it was reasonable of the Complainant to assume that he had not been dismissed on 3 April 2024 when his was placed on lay-off.

Deduction from wages

Section 5(1) of the Payment of Wages Act 1991 prohibits an employer from making a deduction from an employee’s wages 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.”

Failure to pay all or part of the wages due to an employee is considered to be an unlawful deduction.

In Dunnes Stores (Cornelscourt) v Margaret Lacey and Nuala O’Brien [2005] IEHC 417, the High Court found that in determining claims under the legislation, “the Employment Appeals Tribunal in order to make a determination ought first properly to have had regard to the remuneration properly payable to the to the employee”. 

I must therefore decide if Respondent’s assertion that it was not liable to pay the Complainant salary for April and May 2024 is valid or if the Complainant’s salary for April and May 2024 was properly payable so that the non-payment of the salary was, in fact, a deduction under section 5(1) of the Payment of Wages Act. 

It is clear from the totality of the evidence adduced by the parties, that the lay-off of the Complainant was not effected in accordance with the provisions of the Redundancy Payment Act 1967 with respect to the notification requirements for lay-off.  Furthermore, the Complainant’s contract did not confer a right on the Respondent to place him on lay-off without pay. 

The employee in the Labour Court case Kostal Ireland Gmbh and Sinead Cannon PWD2452 asserted that she was not laid-off within the meaning of the Redundancy Payments Act 1967 or the collective agreement in place and, therefore, her employer was breach of section 5(1) of the Payment of Wages Act when it placed her on unpaid lay-off. The Labour Court found that:

“The Act makes clear that a deduction from the wages properly payable to an employee on an occasion will be lawful only in the circumstances set out at Section 5(1). There is no contention that the deduction at issue was authorised by statute or that the worker had given his prior consent to that deduction in writing. This case therefore turns on whether the deduction is required or authorised to be made by virtue of a term of the Complainant’s contract of employment included in the contract before, and in force at the time of, the deduction or payment.”

In finding for the employee, the Labour Court determined that:

“The short-time arrangement implemented by the Appellant on three other dates is not a lay-off within the meaning of the contract of employment and any resulting deduction from the wages properly payable to the Complainant cannot constitute a deduction mandated by the contract of employment. Neither is it the case that any such deduction was agreed to by the Complainant. In those circumstances the Court concludes that the deductions from the wages of the Complainant … were unlawful within the meaning of the Act.”

Applying the reasoning of the Labour Court in Kostal to the current case, I find the non-payment by the Respondent of the Complainant’s salary in April and May 2024 was not required or authorised to be made by virtue of any statute.  Furthermore, the deductions were not required or authorised to be made by virtue of a term of the Complainant's contract of employment and the Complainant did not provide his written consent to authorise a deduction in wages as permitted by section 5(1)(c) of the Act.  Additionally, I have found elsewhere in this decision that the Complainant was not dismissed by the Respondent until 30 May 2024.

Accordingly, I find that the following unlawful deductions were made from the Complainant’s wages:

·       Outstanding salary for January, February, March, April and May 2024 = €52,080

·       3 months payment in lieu of notice = €31,248 

·       Payment for 10 days of accrued annual leave = €4,806

which equates to a total unlawful deduction of €88,134.

I declare that this complaint is well founded, and I direct the Respondent to pay the Complainant the sum of €88,134.

Dismissal – lay-off – unlawful deduction from wages