Kyran Fitzgerald: Virus could spark serious legal headaches for Irish employers

The prospect of the coronavirus leading to redundancies in under pressure companies could spark an upsurge in employment litigation, warns Kyran Fitzgerald

The prospect of the coronavirus leading to redundancies in under-pressure companies could spark an upsurge in employment litigation, warns Kyran Fitzgerald

The Taoiseach’s announcement in Washington DC has shocked many people. Out of the blue, the Irish economy is faced with a so-called black swan event which has raised the prospect of large scale redundancies.

There is a concern that employers could mishandle the situation that has arisen so unexpectedly and that one outcome will be a large upsurge in

employment litigation and in demand on the services of the Workplace Relations Commission (WRC) and the Labour Court.

Many employers — particularly those in highly exposed sectors like hospitality and retail — may be tempted to lay off staff in significant numbers in the hope that this will stem the flow of financial losses as cash flow begins to dry up.

However, businesses need to tread with care.

Many firms — in particular, those in trade associations — will have been advised to include lay-off provisions in their employment contracts, giving them the right to introduce unpaid lay-offs in the event of an economic emergency.

However, those firms which have not put in place contractual agreements, or have downloaded some form of agreement off the internet could find themselves in a difficult place.

Dublin solicitor Richard Grogan believes that many labour under a serious misconception that staff can be simply sent home without pay.

In reality, assuming no agreement to the contrary, “you have to pay them for as long as you sent them home. It doesn’t matter if this is a day, a month, or a year”.

Some employees believe that they can unilaterally opt to stay at home. In such circumstances, they will not be entitled to any continuing payment.

It is a different story if they are asked by the HSE to self-isolate. They will be legally protected from dismissal in such circumstances. According to Mr Grogan, if a firm lays people off, the employees concerned have the right — after four weeks have elapsed — to send their employer notice of intent to claim a redundancy payment.

The employer, in turn, has just seven days — not seven working days — in which to notify the employee or employees that they will be offered full-time work within two weeks. If this notice is not given, the employee automatically becomes entitled to a redundancy payment.

The tax authorities and, for that matter, the banks, are being as flexible as possible when it comes to easing back on demands for outstanding Vat, or loan payments. Finance Minister Paschal Donohoe has confirmed that the Revenue Commissioners will not be charging interest on tax due for the time being.

Nobody wishes to see good people forced out of business as a result of an event so entirely out of their control.

The Government is anxious to minimise the amount of lay-offs given the implications for the public finances. However, large scale job losses will be unavoidable.

A key challenge for the authorities will be to facilitate the transfer of workers to roles such as caring and transport where they will be needed.

Laws governing the selection of employees for redundancy or lay-off cannot be wished away. That said, there is some scope for creativity on the part of firms and businesses faced with this sudden slump in demand for their services.

During the financial crisis, workers, trade unions, and employers worked together in many cases to ensure that the load was shared. As a result, jobless levels in Ireland never approached those in Greece or Spain.

A number of legal rulings on lay-offs are worth considering. In 2012, the Employment Appeals Tribunal — now subsumed into the Workplace Relations Commission — ruled that a Co Kilkenny firm was entitled to lay off four employees without payment.

In this case the respondent firm relied on a specific condition in the workers’ contracts of employment allowing for a period of unpaid lay-off and the firm’s employee handbook contained a clause to that effect.

The tribunal sympathised with the workers concerned but noted that it was the established custom and practice in the industry in question that employees not be paid during a period of lay-off.

However, this ruling will not be relevant if the necessary contractual terms do not exist and such custom or practice does not pertain.

The WRC and Labour Court — which considers appeals — will not be able to bend the law in favour of an employer simply on the grounds that the business is faced with a crisis.

Businesses will also be considering whether to make people redundant on a permanent basis. In this scenario there must be a genuine redundancy situation and selection criteria must be objectively applied.

Consultation with the employee or employees affected must be “real and substantial”. In a recent decision, the Labour Court awarded €20,000 to the employee of a technology firm, Tolerance Technologies, after the chairman, Kevin Foley, concluded that the worker was selected without prior notice, the redundancy kicking in with immediate effect.

No alternatives to dismissal were explored. He was not offered redeployment within the group. The worker was not afforded a right of appeal or offered representation.

Employers are advised to give careful thought to criteria. In redundancies, it is the job, not the individual that is being removed. If the job is later filled, this will present plenty of ammunition to the displaced worker.

The drafting of criteria is no easy task. Employers could opt for traditional “last in, first out” getting rid of newcomers.

But, as Mr Grogan points out, this could result, for example, in a restaurant having to dismiss a valued head chef who has recently arrived.

Management needs to look carefully at the business to assess which functions are critical and which are less so.

Employers are advised to consult employment law specialists — many are already doing so.

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