Substantial Award by WRC Highlights Requirement For Redundancy Consultation

by Jenny Wakely, Senior Associate at AOC Solicitors

This was an unfair dismissal case in which the Complainant, Mr Ray Walsh, claimed that his dismissal by the Respondent, Econocom Digital Limited, was a sham redundancy and fair procedures were not followed.

The Respondent is an Irish registered company that is part of an international provider of finance and IT services to private and public sector businesses. The Complainant joined the company in November 2004 as a sales executive and was an account manager by April 2020 with an annual salary of just over €120,000. In 2020 he was one of six employees of the Irish business. A decision was made to close the sales operation of the Irish entity in 2020. The Complainant and his manager were the only two employees who worked as part of that operation. Both roles were made redundant so selection was not an issue in this case. The Complainant’s job was made redundant on 31 July 2020.

The Complainant was invited to a Microsoft Teams meeting on 27 April 2020. The meeting invite provided no indication of the purpose of the meeting. The meeting was short and the Complainant was informed that his job was going to be made redundant without being provided with an explanation for the decision or an opportunity to suggest or consider alternative options to dismissal. Later that day, he was provided with a breakdown of his statutory redundancy entitlements. He responded, describing the proposed redundancy pay as “derisory and devaluing”. He requested an enhanced payment based on four weeks’ pay per year of service along with a number of other things, including “some leeway” on his private health insurance and employer pension contributions; assistance with an outplacement service; and legal and tax advice. These requests were refused. Certain other matters were agreed and his notice period was extended from 8 weeks to 12 weeks.

Issues

The Complainant’s main arguments were as follows:

1. The managing director who dismissed him did not have authority to do so;
2. His dismissal did not result “wholly or mainly” because of redundancy; and
3. The Respondent failed to follow fair procedures.

Decision:

1. Authority of decision-maker to dismiss

The Adjudicator rejected the Complainant’s argument that a manager who is not employed by an Irish entity has no authority to dismiss an employee of that entity, noting that “[i]f that was the case, then many dismissals would be unlawful, as in my experience, it is not infrequent for a non-Irish parent company to close down an Irish subsidiary.”

The Adjudicator was informed that the managing director who dismissed the Complainant is employed by the UK entity and is the most senior member of management of the Irish and UK branches of the company. She is the managing director of the UK and Irish operations and is a member of the Board of Directors of the UK entity and a member of the Board of the Executive Committee of the company.

The Adjudicator was satisfied that the managing director had the requisite authority to close down the sales operation of the Irish entity and make the Complainant’s role redundant.

• “Wholly or mainly”

The Adjudicator noted that under section 6(1) of the Unfair Dismissals Acts 1977 to 2015 (the “Unfair Dismissals Acts”), a dismissal is unfair “unless, having regard to all the circumstances, there were substantial grounds justifying the dismissal”, the burden of proof resting with the Respondent to provide evidence of those substantial grounds. She noted that section 6(4)(c) of the Unfair Dismissals Acts permits an employer to dismiss an employee in circumstances where the dismissal results “wholly or mainly from the redundancy of the employee.”

The Adjudicator considered the definition of “redundancy” contained in section 7(2)(a) of the Redundancy Payments Act 1967. She noted that there had been considerable argument by both parties regarding the rationale behind the decision to close the sales operation in Dublin and a dispute regarding the accuracy of the Respondent’s financial data. However, she accepted the evidence of the Respondent’s witnesses that the sales operation in Dublin had been closed down because, in their view, it was not generating sufficient profit and she accepted that the Complainant’s job and that of his manager were not replaced. The Adjudicator found that this was the “fundamental point” for the purposes of redundancy and pointed out that an employer is entitled to close down “all or any part of its business”, even if the company is profitable.

The Adjudicator concluded that the Complainant’s role was redundant “wholly or mainly due to the closure of that part of the respondent’s business.”

• Fair process

The Adjudicator referred to section 6(7) of the Unfair Dismissal Acts noted that she was required to consider the reasonableness of the Respondent’s conduct in dismissing the Complainant. She noted that “[i]n the context of a redundancy, ‘reasonableness’ means treating the employee with respect and fairness in the circumstances that prevail.”

The Adjudicator referred to the Respondent’s argument that a “truncated” process had been followed because in their view the redundancy was unavoidable and there were “no suitable alternatives to redundancy to discuss”. The Respondent argued that a consultation procedure would have therefore been futile. However, the Adjudicator referred to the Respondent’s failure to provide any explanation “as to why that assumption was not tested”. She pointed out that the Respondent could not have known what alternatives to redundancy may have emerged from a discussion with the Complainant, had one taken place. She referred to the Respondent’s considerable revenue, along with its presence in many countries, and the fact that it employed people with many different skills and expertise. She also noted that the Complainant had significant skills in sales and languages, and an important understanding of the business in which he had worked for over 15 years, commenting that “[A]ny reasonable employer would conclude that, at the height of Covid, and perhaps because of Covid, there may have been useful work that the complainant could have done.”

Outcome: The Adjudicator found that although she was satisfied that the Complainant’s role was redundant and that any appeal against that decision “was likely to be a wasted exercise”, the Respondent failed to follow fair procedures in dismissing the Complainant and treated him with disrespect. She held that the Respondent had “departed from the standard of reasonableness that a reasonable employer would have shown when dealing with an employee in similar circumstances.” The Adjudicator found that the Complainant had been unfairly dismissed by the Respondent.

Award: The Complainant was awarded €120,000 in compensation, equivalent to one year’s gross pay. In making the award, the Adjudicator noted that the Complainant had found another job in mid-August 2021, just over one year after his redundancy. She also took into consideration the fact that he had received a statutory lump sum redundancy payment of €19,152.

Takeaway for Employers: This case demonstrates that employers ought not to rely on their own assessment of the futility of consultation in a redundancy process or the absence of alternatives to redundancy. Employees should be afforded the opportunity of engaging with their employers to investigate possible alternatives and redundancy should never be presented as a fait accompli. Meaningful consideration ought to be given to possible alternative ways in which an employee’s skills may be utilised, particularly in larger organisations with a diverse workforce, and employees should be given the opportunity to put forward suggestions. Where no viable alternatives can be identified, the Adjudicator was of the view that a consultation process should address the redundancy terms on offer, and she took a very dim view of the Respondent rejecting the Complainant’s request for enhanced terms in circumstances where his manager was given enhanced terms notwithstanding that he had considerably less service.

Link  – https://www.workplacerelations.ie/en/cases/2022/january/adj-00029093.html

About the author

Jenny Wakely qualified as a solicitor in 2012 and holds a first class LL.B and LL.M. She specialises in Employment Law and joined the AOC Team as a Senior Associate in September 2021.

Jenny has worked with a broad range of employers in Ireland and abroad as well as with major insurers and private individuals. Her work encompasses all aspects of non-contentious and contentious employment law and related litigation. She advises clients in respect of all matters relating to the employment relationship, from recruitment to termination, and everything in between. Jenny also regularly drafts and reviews contracts of employment and employee handbooks and policies. She also advises employers on data protection matters and assists employers in responding to complex and wide-ranging data subject access requests.

Jenny is a member of the Employment Law Association of Ireland. She frequently writes on employment law related matters.