Changing Employee Terms and Conditions of Employment Implementing cost saving measures during a downturn

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Changing Employee Terms and Conditions of
EmploymentImplementing cost saving measures
during a downturn

• Cian Beecher
• Arthur Cox
• 19 February 2011

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Index

• Redundancy.
• Pay Freeze
• Pay Cut
• Withholding Bonuses
• Lay/off/Short Time

• New Employees, Lesser Terms? Withdrawal of
  Benefits
• Change of Benefits.
• Other Options?

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Redundancy?Five Definitions
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1. Employer ceasedto carry on the business for
   which the employee was employed or ceased to
   carry on that business in the place where the
   employee was employed
2. requirements of that business for employees to
   carry out work of a particular kind in the place
   have ceased or diminished
3. employer has decided to carry on the business
   with fewer or no employees

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• employer has decided that the work for which
  the employee had been employed (or had been
  doing) should hence forward be done in a
  different manner for which the employee is not
  sufficiently qualified or trained
• 5. employer has decided that the work for which
  the employee had been employed (or had been
  doing) should henceforward be done by a person
  who is also capable of doing other work for which
  the employee is not sufficiently qualified or
  trained

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• A redundancy dismissal may give the employee an
  entitlement to a statutory redundancy payment
  under the Redundancy Payments Acts
• 2 weeks pay per year of service.
• Plus one additional week.
• A week capped at 600.
• 60 rebate.

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• Redundancy is a defence to a claim under the
  Unfair Dismissals Acts.
• Unfair selection for redundancy constitutes
  unfair dismissal even if a true redundancy
  situation exists.
• If an employee is to be dismissed on the grounds
  of redundancy the employee will be entitled to
  notice in accordance with the contract of
  employment (express or implied) or the Minimum
  Notice and Terms of Employment Acts.

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Protection of Employment Act 1977(as amended)

• Collective redundancies means dismissals
  effected by an employer for one or more reasons
  not related to the individual concerned where in
  any period of 30 consecutive days the number of
  such dismissals is

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• at least 5 in an establishment normally
  employing more than 20 and less than 50 employees
• at least 10 in an establishment normally
  employing at least 50 but less than 100 employees
• at least 10 in an establishment normally
  employing at least 100 but less than 300
  employees
• at least 30 in an establishment normally
  employing 300 or more employees
• establishment means an employer or company or a
  subsidiary company or a company within a group of
  companies which can independently effect
  redundancies

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• Mandatory consultation process
• a trade union, staff association or excepted
  body with which it has been the practice of the
  employer to conduct collective bargaining
  negotiations, or
• in the absence of such.a person or persons
  chosen (under an arrangement put in place by the
  employer) by such employees from amongst their
  number to represent them in negotiations with the
  employer

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• Information to be given to employee
  representatives
• All relevant information relating to the
  proposed redundancies.
• To include the following, which must be given in
  writing
• the reasons for the proposed redundancies
• the number and description of categories of
  employees whom it is proposed to make redundant
• the period during which it is proposed to effect
  the proposed redundancies
• the criteria proposed for the selection of the
  workers to be made redundant and
• the method of calculating any redundancy payments
  other than statutory redundancy payments.
• A copy of the written information given to the
  Minister.
• Notification to Minister

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Selection for Redundancy

• If an employee is dismissed due to redundancy but
  the circumstances constituting the redundancy
  applied equally to one or more other employees
  who have not been dismissed and either
• The selection of that employee resulted wholly or
  mainly from trade union membership/activities,
  religious or political opinions, family leave
  (parental, carers, maternity, adoptive), race,
  colour or sexual orientation, age, membership of
  the travelling community, pregnancy or
• The employee was selected for dismissal in
  contravention of a procedure that has been agreed
  or has been established by the custom and
  practice of the employment concerned and there
  were no special reasons justifying a departure
  from that procedure.

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Redundancy Checklist

• Is this a redundancy?
• Compulsory or voluntary?
• Is this a collective redundancy?
• On what basis will a person be selected?
• Address the issues on which information and
  consultation is necessary
• What notice must be given/check the contract of
  employment?
• Serve the RP50 Forms
• How much will be paid?

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Other Options?

• Pay freezes.
• Pay cuts.
• Withholding bonuses.
• Recruitment of new employees on different terms
  and conditions.
• Lay-off/short-time
• Withdrawal/Changing of benefits.
• Others.

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Pay freezes

• Potentially the easiest option in the current
  climate.
• Difficulties arise if
• Employee has a contractual entitlement to
  increases.
• An incremental pay scale applies.
• Employer has agreed to national wage agreements
  (contractual or collective agreement).
• Employer is financially successful.
• All contracts should explicitly state that pay
  increases are discretionary/reviews do not imply
  an increase or confer any such entitlement.

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National Wage Agreements

• Towards 2016
• 10 over 27 months.
• June 2006.
• Towards 2016 Transitional Agreement
• 6 over 18 months, with initial 3/12 month pay
  pauses.
• September 2008
• IBEC/ICTU Protocol
• March 2010

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National Wage Agreements

• Protocol
• Private Sector
• maximisation of sustainable employment is the
  most important objective
• The parties recognise that they are operating in
  a new context without a formal agreement on pay
  determination
• This protocol is effective for 2010

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Pay Cuts

• Agree changes/consent
• Unilateral imposition of change.
• Terminate contract and simultaneously offer
  re-engagement on revised terms.

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Consent

• Notify employees (and trade unions, if
  applicable) of plan.
• Engage with employees, consider reasonable
  proposals.
• Present redundancies as inevitable if suitable
  alternative cannot be agreed?
• Obtaining written consents?
• Negotiate with trade union.

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Negotiating changes with a Trade Union

• May be obliged by collective agreement to
  consult/agree pay cuts or changes to employee
  terms.
• Even if change is agreed with Union may not bind
  all employees need to consider
• Terms of employees contracts.
• Rules of trade union.
• Individual employee decision.

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Unions - Case Law

• Goulding Chemicals v Bolger
• Agreement reached with Trade Unions did not bind
  employees who had consistently objected to the
  terms and made that objection abundantly clear to
  employees. (Supreme Court, 1976)
• Reilly v Drogheda BC
• Reduction in normal retirement age agreed with
  Trade Union. The Court held the higher
  retirement age which prevailed on recruitment was
  a term of the employees contract and not the
  subsequent change. No evidence presented that
  the employee was bound under the unions rules by
  the agreed change or that he acquiesced in it.
  (High Court, 2008)

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Impose change

• Begrudging tolerance/acquiescence (over time).
• OR employee can
• Accept the repudiatory breach of the employer,
  bring his or her employment to an end and sue for
  constructive unfair dismissal.
• Remain in employment under protestand sue
• Payment of Wages Act unlawful
  deduction/non-payment.
• Civil courts for breach of contract
  (damages/debt).

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Imposed Change - Cases

• Burdett-Coutts v Herfordshire Co. Co.
• Unilateral reduction of employees pay.
• Union clearly objected and made it clear members
  would not accept revised terms.
• Employees were entitled to damages in the form of
  the arrears and a declaration that the employer
  was not entitled in law to vary the employment
  contracts unilaterally. (High Court, UK, 1984)

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• Rigby v Ferodo
• 5 pay cut proposed to trade union.
• Trade union warned rejection would mean
  imposition.
• Employer duly imposed the change.
• House of Lords (UK, 1988)
• Continuing to work under protest while receiving
  reduced pay was not acceptance.
• Employee entitled to recover the difference
  either as damages or debt.

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Dismiss and re-engage

• Used in the UK, less so in Ireland.
• Even then, UK lawyers do not consider it an
  automatic solution treated with caution.
• Hollister v National Farmers Union
• Dismissal and re-engagement
• EAT (UK, 1979)
• Employer has acted reasonably, had demonstrated
  genuine business needs and had consulted.
• Dismissal was not unfair on the basis of other
  substantial grounds.
• Requirement to have genuine and substantial
  reasons to avoid unfair dismissal risk.

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Withholding Bonuses

• Depends on nature of bonus scheme.
• Does employee have a contractual right to the
  bonus?
• Minimum bonus guarantee or guaranteed bonus?
• Award determined by performance matrix/sales
  targets, results for current bonus year
  preordained? Scope to amend for subsequent bonus
  years?
• Is withholding another unilateral variation of
  contract?
• If bonus is discretionary, no obligation on
  employer to pay.

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Recruitment on New/Lesser terms

• Legally permissible.
• Industrial relations/employee relations issues?
  Pay increase/IR complaints.
• Risk of (indirect) discrimination?
• Risk of less favourable treatment if recruiting
  fixed-term or part-time employees?
• Exceptional collective redundancy risk if
  dismissing longer service staff simultaneously.

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Lay-off and Short-time

• Lay-off Section 11(1) of Redundancy Payments
  Acts 1967 to 2007
• Where an employees employment ceases by reason
  of his employers 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.

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Lay-off and Short-time

• Short-time Section 11(2) of Redundancy Payments
  Acts 1967 to 2007
• Where
• (a) for any week an employees remuneration is
  less than one-half of his normal weekly
  remuneration or his hours of work are reduced to
  less than one-half of his normal weekly hours
• (b) the reduction in remuneration or hours of
  work is caused by a diminution either in the work
  provided for the employee by his employer or
  another work of a kind which under his contract
  the employee is employed to do
• (c) it is reasonable in the circumstances for the
  employer to believe that the diminution in work
  will not be permanent and he gives notice to that
  effect to the employee prior to the reduction in
  remuneration or hours of work
• the employee shall, for the purposes of this Part
  be taken to be kept on short-time for that week

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Right to Redundancy

• Section 12 of Redundancy Payments Acts 1967 to
  2007
• An employee shall not be entitled to a
  redundancy payment by reason for reason of having
  been laid off or kept on short-time unless
• (a) he has been laid off or kept on short-time
  for four or more consecutive weeks or, within a
  period of thirteen weeks, for a series of six or
  more weeks of which not more than three were
  consecutive, and
• (b) after the expiry of the relevant period of
  lay-off or short-time mentioned in paragraph (a)
  and not later than four weeks after the cessation
  of the lay-off or short-time, he gives to his
  employer notice in writing of his intention to
  claim redundancy payment in respect of lay-off or
  short-time

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Lay off and Short-time

• No inherent power at common law to suspend
  payment to employees in the absence of a
  contractual provision or agreement with
  employees.
• Prudent to include an appropriate clause in
  standard contracts.

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Lay off and Short-time - Cases

• Miller v Hamworthy Engineering Limited
• Reduction in business and employer sought a 3-day
  week.
• Some unions agreed, the Plaintiffs union
  rejected.
• Plaintiffs contract of employment stated
• there may be a situation in which a temporary
  reduction in business may be accommodated by a
  system of work sharing and this will be explored
  in consultation with the employee
  representatives
• This clause required the express agreement of the
  union or the employee, as there was no such
  agreement in this case the employers failure to
  pay in full was in fundamental breach of the
  companys contractual obligations. The employee
  was awarded arrears in wages. (Court of Appeal,
  UK, 1986)

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Lay off and Short-time - Cases

• Lawe v Irish Country Meats
• Employer introduced lay-offs and employee brought
  Circuit Court proceedings to recover wages
• Held
• An employers fundamental obligation is to pay
  agreed remuneration for the times of work during
  which the employee is prepared to work.
• There is no general right at common law to
  lay-off without pay.
• Such a right may, however, be established in very
  limited circumstances.
• An employers right to lay-off without pay may be
  established through custom or general usage.
• Such a custom must be reasonable, certain and
  notorious.

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Withdraw/Change Benefits

• Terms of contracts (again) or applicable
  policies/benefit statements
• Prudent to reserve maximum variation,
  substitution or withdrawal rights.
• Change of suppliers cost saving?
• Change scope of benefits - cost saving?
• Pensions?

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Pensions

• Need for consultation.
• Scope/authority within Trust Deed and Rules
• typically entitle employer to cease contributions
  to the scheme on notice to trustees?
• Prior notice v. deficit demand/funding rights of
  trustees?
• Content of contracts but also explanatory
  booklets.
• Do they notify employees of the power to amend,
  replace or terminate a scheme?
• Specific difficulties with
• Older contracts
• Varied contracts across organisations.

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Pensions

• Impose/increase employee contributions.
• Close defined benefit schemes to new entrants.
• Close defined benefit scheme to future accrual
  i.e. cease contributions for existing staff for
  future service.
• Close/Replace defined benefit scheme with
  hybrid schemes, defined contribution scheme or
  PRSA, change nature of scheme benefits CARE,
  etc.

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Other options

• Outsourcing
• TUPE.
• Natural wastage/attrition
• recruitment moratorium
• no backfilling.
• Non-renewal of fixed term contracts.
• Early retirement programmes.
• Termination/renegotiation of contracts for
  services.

• Over-time bans
• Career breaks
• Paid/partially funded.
• Unpaid additional leave.
• Shut-downs.
• Time banking.
• Retraining.
• Redeployment.

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Thank you.

• Arthur Cox
• Earlsfort Centre
• Earlsfort Terrace
• Dublin 2