LEGALINK CROSS-BORDER LAYOFFS QUESTIONNAIRE

Redundancy in Ireland is governed by the Redundancy Payments Acts, 1967 – 2007.

Definition of Redundancy

A redundancy situation is defined as occurring when there is a dismissal of an employee by his employer which results “wholly or mainly” from one of the following scenarios:

a) where an employer has ceased, or intends to cease, to carry on the business for the purposes for which the employee was employed by him, or has ceased or intends to cease to carry on that business in the place where the employee was so employed; or
b) where the requirements of that business for the employee to carry out work of a particular kind in the place where he was so employed have ceased or diminished or are expected to cease or diminish; or
c) where an employer has decided to carry on the business with fewer or no employees, whether by requiring the work for which the employee had been employed (or had been doing before his dismissal) to be done by other employees or otherwise; or
d) where an employer has decided that the work for which the employee had been employed (or had been doing before his dismissal) should henceforward be done in a different manner for which the employee is not sufficiently qualified or trained; or
e) where an employer has decided that the work for which the employee had been employed (or had been doing before his dismissal) 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.

There are two important characteristics of redundancies, namely, impersonality and change.  It is the job itself, and not the person, that is made redundant.  The redundancy must be for reasons not related to the employee concerned and must not be for the purpose of merely making way for an alternative employee to do the same job.

The Unfair Dismissals Acts, 1997 – 2005 provide that a dismissal of an employee will not be deemed to be an unfair dismissal if it results “wholly or mainly” from the redundancy of the employee.  However, employers must strictly adhere to the definition of redundancy.

Selection of Employees for Redundancy

Employers must act reasonably in taking the decision to dismiss a person on the grounds of redundancy.  Redundancy legislation provides that when determining whether a dismissal is an unfair dismissal, regard may be had to the reasonableness or otherwise of the employer’s conduct in relation to the dismissal.

Once it is established that redundancies are necessary, employers must decide which employees are to be made redundant.  If an employee is dismissed due to redundancy, but the circumstances constituting the redundancy applied equally to one or more employees in similar employment with the same employer who are not dismissed, the dismissal will be deemed to be unfair where the selection of a particular employee:

(a) resulted wholly or mainly from one or more of the following matters:

(i) the employee’s membership of a trade union or engagement in trade union activity;

(ii) the religious or political opinions of the employee;

(iii) civil proceedings, whether actual, threatened or proposed, against the employer, to which the employee was or will be a party or is likely to be a witness;

(iv) criminal proceedings against the employer, whether actual, threatened or proposed, in relation to which the employee has made, proposed or threatened to make a complaint or statement to the prosecuting authority or to any other authority connected with or involved in the prosecution of the proceedings or which the employee was or is likely to be a witness;

(v) the race, colour or sexual orientation of the employee;

(vi) the age of the employee;

(vii) the employee’s membership of the travelling community; or

(viii) the pregnancy of the employee; or

(b) was in contravention of an established procedure (whether agreed between the employer and the employee or a trade union or established by custom and practice) and there were no special reasons justifying a departure from that procedure.

Where there is no established procedure and the dismissal was not on one of the 8 grounds listed above, then consideration will be given to the reasonableness of the employer’s decision.  Where there are 2 or more employees engaged in similar employment, the employer is obliged, in the absence of an established procedure, to adopt objective criteria for determining who should be selected for redundancy.

Employers must ensure that the criteria chosen are applied consistently across the board.  The employer must be able to demonstrate that a particular employee had been compared to others who might have been made redundant and that he had been selected fairly on the basis of the pre-determined criteria.  Furthermore, the employer must be able to show that the procedure was applied to each employee who has been made redundant.  Departure from an established procedure without special reasons justifying such a departure will give rise to an inference of unfair selection for redundancy and ultimately a finding of an unfair dismissal.
 
Notice

Notice in accordance with the employee’s contract must be furnished to the employee if dismissed by reason of redundancy.  If the right to pay in lieu of notice is not specified in the employment contract, or if no contract exists, an employee may waive his or her right of notice and may accept payment in lieu of notice, with the employer’s consent.  Failing that, an employee is entitled to stay on and work during the notice period irrespective of whether or not there is work for the employee to do.  Where an employee accepts payment in lieu of notice, the date of termination is deemed to be the date on which notice, if given, would have expired.

Employees continue to be entitled to either their contractual termination notice or the minimum notice laid down by the Minimum Notice and Terms of Employment Acts, 1973 – 2001.  These minimum periods of notice apply if there is no notice provision in an employee’s contract of employment or if the contractual notice is less than the statutory minimum.  The relevant periods of notice are as follows:

These are the minimum periods of notice only.  The Redundancy Payments Acts also apply a different and overriding minimum notice period of two weeks’ written notice to employees with a minimum of 2 years’ service.

The requisite notice must be given to the employee on the prescribed Form RP50 Part A.  When dismissal actually takes place, and where the employee is entitled to a redundancy payment, the employee must be given a Redundancy Certificate (Form RP50 Part B).  A claim by the employer for a 60% rebate of the cost of statutory redundancy can be made to the Department of Enterprise, Trade and Employment on the Form RP50 accompanied by copies of the Redundancy Certificate.

Redundancy Payment

The statutory redundancy payment is a lump-sum payment based on the pay of the employee.  Employees must have 104 weeks’ continuous service in order to be entitled to the statutory redundancy payment, which is:

• Two weeks’ pay (subject to a maximum of €600 per week or €31,200 per year) for every year of service, regardless of age; and 
• One further week’s pay.

It should be borne in mind that a week’s pay may be calculated in different ways for the purposes of the legislation, depending on whether or not the employees’ pay varies in relation to the amount of work they do, or on whether or not they work full-time or part-time, or on whether or not they have normal working hours, or on whether or not they receive regular bonuses or allowances, or on whether or not they job-share, or on whether or not they regularly work overtime etc. The statutory redundancy payment is tax-free.

Collective Redundancies

As provided for in the Protection of Employment Act, 1977 (as amended), collective redundancies arise where, during any period of 30 consecutive days, the employees being made redundant comprise:

• 5 employees, where 21-49 are employed;
• 10 employees, where 50-99 are employed;
• 10% of the employees, where 100-299 are employed; and 
• 30 employees, where 300 or more are employed.

In a collective redundancy situation, the employer is obliged to enter into consultations with a view to reaching agreement with the employee’s representatives.  The Protection of Employment (Exceptional Collective Redundancies and Related Matters) Act, 2007 (the “2007 Act”) provides that consultation with employees’ representatives must take place at least 30 days before the first notice of dismissal is served.  The aim of the consultation is to consider whether there are any alternatives to the redundancies.

The employer is also obliged to provide the following information in writing to the employees’ representatives:

• The reasons for the redundancy;
• The number and descriptions of the employees affected;
• The number and descriptions of employees normally employed;
• The period in which the redundancies will happen; and
• The criteria for selection of employees for redundancy.

The employer is also obliged to inform the Minister for Enterprise, Trade and Employment in writing of the proposed collective redundancies, and initiate consultations with employees’ representatives representing the employees affected by the proposed redundancies, in each case at the earliest opportunity and in any event at least 30 days before the first dismissal takes effect. 

The 2007 Act provides that a breach of such notification/consultation time periods may attract a fine of up to €250,000.

The 2007 Act effectively allows the Minister for Enterprise, Trade and Employment to refuse to pay the 60% statutory redundancy rebate to an employer where the Labour Court had issued an opinion that the collective redundancies that were proposed and subsequently implemented by the employer were “exceptional collective redundancies” (as referred to in Section 16 of the 2007 Act).

“Lay-Off”

There is also the separate and distinct concept of “lay-off” under Section 11 of the Redundancy Payments Act, 1967.

A lay-off situation (for the purposes of the above-mentioned Act) arises where an employer is unable to provide work but believes this to be a temporary situation and gives notification of the lay-off before the work finishes.  The employer should explain to the employees the reason for the lay-off and keep the employees informed of the situation during this time.  Where an employee has been laid off for 4 or more consecutive weeks or, within a period of 13 weeks, for a series of 6 or more weeks of which not more than 3 weeks were consecutive, and after this period he gives his employer notice in writing of his intention to claim redundancy payment, the employee will be entitled to redundancy (Section 12 of the Redundancy Payments Act, 1967).  This enables employees to claim redundancy pay where they have been laid off for a specified period of time.  It prevents an employer from keeping an employee for an indefinite period without having to make payments pursuant to the Redundancy Payments Acts.  An employer on receipt of notice from an employee pursuant to Section 12 is entitled to give a counter-notice pursuant to Section 13 of the Redundancy Payments Act, 1967, which must inform the employees that they will recommence employment not later than 4 weeks after the notification and for a period of employment of not less than 13 weeks during which time he or she would not be laid off.  If an employee does not give his or her employer notice pursuant to Section 12, his lay-off can arguably continue indefinitely.  It is only the notice given by the employee which triggers the end of the lay-off on the employee’s part and this can be met by the counter-notice given by the employer pursuant to Section 13.

Other matters

Employees with less than two years’ service are not entitled to a statutory redundancy payment and are only entitled to notice.
Even though an employee is entitled to statutory compensation for being made redundant, it is common for employees to be paid in excess of their statutory entitlement.
The extent to which an employee is paid in excess of his statutory entitlement depends on the industry or the particular employer.  It has to be very clearly stressed that any payment above statutory entitlement is made “ex-gratia,” i.e. there is no legal obligation to make this payment unless there is some form of agreement, either express or implied to so do.  As a very rough rule of thumb, employers can pay a sum equivalent to anything between two and six weeks’ pay per year of service on an ex-gratia basis.

1. An employee can bring a claim under the Unfair Dismissals Acts, 1977 to 2005, claiming that it is not a genuine redundancy on the basis that it does not fall under one of the five definitions of redundancy or on the basis that he has been unfairly selected for redundancy.  An employee must have 12 months’ service with the employer in order to be able to make a claim under these Acts.
2. An employee may also bring a claim under the Employment Equality Acts, 1998 and 2004, on the basis that he has been discriminated against by being selected for redundancy.  The nine discriminatory grounds are race, age, gender, marital status, family status, disability, sexual orientation, religion and membership of the travelling community.  There is no minimum service requirement in order to bring a claim under this legislation.
3. An employee could also bring a wrongful dismissal action to the civil courts.  This is essentially a claim alleging a breach of his employment contract or a violation of his constitutional rights.
   

Unfair Dismissals Acts, 1977 – 2005

An employee unfairly dismissed under the 1977 Act is entitled to redress, which may consist of reinstatement in his old position, re-engagement in a reasonably suitable alternative position, or compensation of up to two years’ salary – depending on the circumstances of the case.

Protection of Employment Act, 1977

Section 11 – an employer who fails to initiate consultations under Section 9 or fails to comply with Section 10 shall be guilty of an offence and shall be liable on summary conviction to a fine not exceeding €5,000 (as amended by the Protection of Employment (Exceptional Collective Redundancies and Related Matters) Act, 2007).
 
Section 13 – an employer who contravenes Section 12 by failing to notify the Minister for Enterprise, Trade and Employment of proposed redundancies shall be guilty of an offence and shall be liable on summary conviction to a fine not exceeding €5,000 (as amended by the Protection of Employment (Exceptional Collective Redundancies and Related Matters) Act, 2007).
 
Section 14(2) – where collective redundancies are effected by an employer before the expiry of the 30-day period mentioned in subsection (1), the employer shall be guilty of an offence and shall be liable on conviction on indictment to a fine not exceeding €250,000 (as amended by the Protection of Employment (Exceptional Collective Redundancies and Related Matters) Act, 2007).
 
Section 18(3) – an employer who contravenes subsections (1) or (2) in respect of keeping records for a specified period shall be liable on summary conviction to a fine not exceeding €5,000 (as amended by the Protection of Employment (Exceptional Collective Redundancies and Related Matters) Act, 2007).

Redundancy Payments Acts, 1967 – 2007

Section 17(3) – an employer who fails to comply with this section which requires the giving of notice of the proposed dismissal for redundancy or who furnishes false information in such a notice shall be guilty of an offence and shall be liable on summary conviction to a fine not exceeding €5,000 (as amended by the Protection of Employment (Exceptional Collective Redundancies and Related Matters) Act 2007)
 
Section 18(4) – an employer must furnish a redundancy certificate; where an employer fails to do so or furnishes false information in a redundancy certificate he will be guilty of an offence and shall be liable on summary conviction to a fine not exceeding €5,000 (as amended by the Protection of Employment (Exceptional Collective Redundancies and Related Matters) Act 2007)

Employment Equality Acts, 1998 and 2004

An employee dismissed in contravention of this legislation is entitled to redress, which may consist of reinstatement in his old position, re-engagement in a reasonably suitable alternative position, or compensation – depending on the circumstances of the case.  A fine may also be imposed on the employer.

Minimum Notice & Terms of Employment Act, 1973
 
Section 4 imposes an obligation on an employer, where it wishes to terminate the contract of employment of an employee, to provide notice of such termination on the employee.  The length of notice depends on the length of time in which the employee has been in the employer’s service.  See the responses set out at Part 1 above (under the headings “Notice” and “Collective Redundancies”).  In the event of a failure by an employer in this regard, an award of compensation may be made to the employee for any loss sustained by him by reason of such failure.

NOTE: This Memorandum does not purport to provide a comprehensive note of all of the various penalties and sanctions that are provided for in the legislation as referred to in this Memorandum (nor indeed of all of the law that applies to dismissals, redundancies and lay-offs).

While not expressly required by the Redundancy Payments Acts, it is advisable, even in small-scale or individual redundancy situations, to engage in dialogue with employees likely to be affected.  Employers should bear in mind that the news of redundancy may be a shock to the employees.  It is preferable to communicate that news in a way which gives employees the opportunity to consider their options (including any alternative roles) and to put forward their own views.

It is also important to remember that an employer’s conduct in implementing a dismissal (whether on grounds of redundancy or otherwise) can be taken into account by the Employment Appeals Tribunal when assessing the fairness or otherwise of a dismissal.  While employers are not required to create a position for redundant employees where none exists, the Tribunal has found that an employer’s failure to look into the availability of alternative positions and to offer them to the employee can be deemed unfair.

The European Communities (Protection of Employees on Transfer of Undertakings) Regulations 2003 gave effect to the mandatory provisions of the EU Acquired Rights Directive and revoked the earlier 1980 and 2000 regulations in this regard.  Under these Regulations, there is a prohibition on the dismissal of an employee on the grounds of the transfer of all or part of an undertaking or business, except for “economical, technical or organisational reasons which entail changes in the workforce”.

In other words, the transfer of all or part of an undertaking or business will not in itself constitute valid grounds for dismissal.  The affected employees, therefore, would have a claim for unfair dismissal unless the employer could successfully demonstrate that the dismissals were justified for valid “economical, technical or organisational reasons which entail changes in the workforce”.  For example, therefore, dismissals effected purely to make the target business more attractive (perhaps, for example, at the request of the prospective buyer) would be caught by the legislation.

Certain employee rights are triggered by a transfer of all or part of an undertaking or business.  These include a consequent and automatic transfer to the buyer of the rights and obligations of the seller under its employees’ contracts of employment (other than as respects certain benefits).  For the purposes of the Regulations, note that a transfer of an undertaking could include (for example) a sale of assets or the setting up of an outsourcing arrangement.

Where a transfer of a business or undertaking is proposed, there are various specific employee consultation and other requirements which must be met by the seller and buyer. 

In the event of the employer’s failure to meet its obligations under the Regulations, note that each employee could be compensated in an amount equal to as much as two years’ pay (depending on the nature of the failure in question).