Once an employee has one year’s continuous service with the same employer, that employee is protected by the Unfair Dismissals Acts 1977-2015 (“the Unfair Dismissals Acts”). A question that frequently arises is whether paying an employee in lieu of notice can prevent the employee from accruing a year’s service for this purpose.
A recent Labour Court Determination in Action Health Enterprises Ltd –v- Michael D’Arcy, Determination No. UDD2019 discusses this question in detail and sets out important guidance on this point.
Before discussing the facts of this case, it is important to point out that an employer is only entitled to pay an employee in lieu of notice if the employee has consented to it or if the employer has specifically retained the right to do so in the employee’s written contract of employment.
Facts:
Mr. D’Arcy (“the Complainant”) commenced employment with Action Health Enterprises Ltd (“the Respondent”) as a Business Development Manager on 31st January 2017. Ten months later on 30th November, 2017 the Respondent terminated the Complainant’s employment on a “no-fault” basis. The Complainant had a three month contractual notice entitlement and the Respondent had included a provision in the Complainant’s contract of employment allowing the Respondent to pay the Complainant in lieu of his three month notice entitlement.
The Respondent issued the Complainant with a letter on 30th November, 2017 informing him that his employment was terminating effective immediately and that he would be paid in lieu of notice. The letter stated that he would receive the payment in lieu of notice within 14 days.
The Complainant received the payment in lieu of notice on 17th December, 2017. However, the payment was prompted by a letter from the Complainant’s solicitor requesting the payment.
The Complainant successfully sued the Respondent for unfair dismissal before the Workplace Relations Commission (“WRC”) and was awarded €45,000.00 in compensation under the Unfair Dismissals Acts.
The Respondent appealed that decision to the Labour Court on the sole point that the WRC did not have jurisdiction to hear the claim as the Complainant did not have one year’s service.
The Respondent argued that the correct “date of dismissal” for the purpose of assessing whether the Complainant had the protection of the Unfair Dismissals Acts (“Date of Dismissal”) was 30th November, 2017.
The Respondent argued in the alternative that the latest date the Labour Court should consider entertaining as the Date of Dismissal was the date on which the Complainant’s statutory minimum notice period prescribed by the Minimum Notice and Terms of Employment Act 1973 (“the Minimum Notice Legislation”) would have expired had the Complainant not been paid in lieu of notice. Since that date would only be one week later, the Respondent argued that either way the Complainant did not have the requisite one year’s service to avail of the protection of the Unfair Dismissals Acts.
The Complainant on the other hand argued that the Date of Dismissal should be the date on which his three month notice period would have expired had he not been paid in lieu of notice. Since that date would have been the end of February, 2018, this would have brought him to over a year’s service.
Decision and Takeaways:
While ultimately the Labour Court overturned the WRC Adjudicator’s decision and upheld the Respondent’s appeal, it examined some important technical legal points that, depending on the facts of any given case, could have a big impact on the question of whether payment in lieu of notice will bring the employee over one year’s service.
The following is a summary of the main points an employer should be aware of arising from this Labour Court’s Determination:
The fact that the employee in this case did not succeed in claiming that his contractual notice period (which had been paid in lieu) took him over one year’s service is a helpful precedent for employers.
Having said that, the case very much demonstrates the number of complex and technical legal considerations that can come into play when trying to calculate whether an employee has accrued a year’s service.
Employers should, therefore, bear in mind that the closer an employee gets to accruing a year’s service, the harder it can be to successfully terminate the employment relationship before the employee accrues the protection of the Unfair Dismissals Acts.
In light of this, if an employer is considering terminating an employment relationship they should take legal advice as to how best to do so at the earliest possible stage and well in advance of the employee getting near the one year’s service mark.
Authors – Anne O’Connell, Laura Reid
Date: 23rd June, 2020
Anne O’Connell Solicitors
Fitzwilliam Hall
Fitzwilliam Place
Dublin 2
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