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Payment of Wages Claim Well Founded, but Zero Compensation Awarded because of “Unprecedented” Global Pandemic

The Labour Court (the “Court”) in Aer Lingus Limited v Caitriona Jones PW/22/181 considered an appeal against a decision of the Workplace Relations Commission (“WRC”) which found that the Payment of Wages complaint lodged by the Appellant, Ms Caitriona Jones, was not well founded. The Court upheld the appeal, but awarded zero compensation.

Facts: The Appellant commenced employment with the Respondent on 5th June 2018. The Covid-19 pandemic seriously affected the Respondent’s business, reducing its operational activity by more than 80%. As a result, the Respondent introduced changes to the hours and salary of all employees in its workforce, including the Appellant. Her hours of work were reduced to less than 50% of her contracted working hours thereby falling within the definition of “short-time” in the Redundancy Payments Act, 1967. As a result, she was paid €15,734.92 less than she would have been between 22nd March 2020 and 21st September 2020 (the date on which the WRC received her complaint i.e. the “Cognisable Period”), if her hours of work and pay had not been reduced.

The Appellant’s contract of employment did not make provision for a reduction to her working hours or for a reduction to pay. She referred to other employees whose contracts of employment did contain provision in relation to “lay-off” and pointed to the fact that they had not implemented lay-offs when they could have done so. The Appellant argued that the Payment of Wages Act (the “Act”) prohibited the Respondent from making a deduction to her wages except with her written consent.

The Respondent argued that it had an implied right to reduce the hours and pay of its employees and/or to lay them off without pay as an alternative to making redundancies in situations of economic downturn or financial difficulty. The Respondent referred to the severe impact on air travel which arose from the pandemic and Governmental restrictions and argued that in such circumstances it ought to be permissible to temporarily suspend or reduce a contract of employment. It further argued that the fact that the reduction in pay and working time had been accepted by 99.95% of the Respondent’s employees amounted to “custom and practice” for pandemic situations.

Decision: At the outset of its decision, the Court noted that it was required to establish what wages were “properly payable” to the Appellant before considering whether or not a deduction had been made. The Court was satisfied that the Appellant’s contract of employment which included details regarding her working hours and rate of pay established what rate of pay was properly payable to her in any week during the Cognisable Period.

The Court noted that the parties agreed that during the Cognisable Period, the Appellant was paid €15,734.92 less than the remuneration set out in her contract of employment. The Court was satisfied that this represented a deduction within the meaning of section 5(6) of the Act.

The Court referred to the prohibition, under section 5 of the Act, on an employer from making a deduction from an employee’s wages unless the deduction (a) is required or authorised to be made by virtue of any statute, (b) is required or authorised to be made by virtue of a term of the employee’s contract of employment or (c) the employee has given his prior consent in writing to it.

The Court noted that there was no argument before it that the deduction was required or authorised by statute or that the Complainant had provided prior written consent to the deduction. The Respondent’s argument was that the deduction was authorised by virtue of an implied term of the Appellant’s contract of employment permitting it to unilaterally reduce her working hours and/or her pay in situations of economic or financial hardship.

The Court noted that the Act provides “specific circumstances” in which a deduction of wages can be lawful. It found that as an employee’s pay is a “fundamental element” of his/her contract of employment, it could not have been the intention of the Oireachtas to enable an employer to imply into the contract an unwritten term that would undermine this element of the contract. The Court referred to the ratio decidendi of the Employment Appeals Tribunal (“EAT”) in Stefan Chmiel and Others v Concast Precast Limited PW725/2012where it held as follows:

“at common law there is no general right to lay-off/short time without pay and while there are limited circumstances wherein there will be such a right, the employer must demonstrate that it has been custom and practice of the workplace and that the custom must be reasonable, certain and notorious.”

The Court also referred to the ratio of the High Court in Domantas Petkevicius (appellant) v Goode Concrete Limited (in receivership) (respondent) and Employment Appeals Tribunal (notice party) 2013 No. 340 MCA [2014] 25 ELR 117 [2014] IEHC 66 ([2014] ELR 117) where it was held that:

“It is well-established law that lay-off without pay may occur where it can be established that that is the custom and practice of the trade. This custom must be reasonable, certain and notorious, per Jelf J. in Devonald v Rosser & Sons (1906) 2 KB 728.

It is notable that the case law as referenced by counsel for the appellant which highlights the need for custom which allows for lay-off without pay has generally been considered where there is no contract of where the contract is silent on the issue of lay-off.” –

While the issue in Aer Lingus Limited v Caitriona Jones involved short-time rather than lay-off, the above is equally applicable to situations of short-time.

The Court was not persuaded by the Respondent’s argument that the fact that 99.95% of the Appellant’s colleagues had accepted the changes to their pay and hours of work at the time of the reduction to the Appellant’s pay and hours of work created a “custom and practice”. The Court considered that:

“a reference to custom and practice which is ‘reasonable, certain and notorious’, by application of logic, to be a reference to a custom or practice present in the employment before the purported implementation of a contended for right to lay employees off or to place them on short time.”

The Court noted that this was not a case where there was any argument that there had existed, prior to 2020, a custom and practice of reducing the hours of work and pay of employees and placing them on short-time. The Court did not accept that the Appellant’s contract of employment, at the material time, contained an implied right enabling the Respondent to reduce her pay below that set out in her contract of employment, noting that:

“[i]n the view of the Court, any such contractual provision would require to be explicitly expressed and clear in meaning and intent in order for it to be taken as removing from the Appellant the protections afforded by the Act at Section 5(1).”

The Court found that the deduction from the Appellant’s wages was not required or authorised by her contract of employment and amounted to an unlawful deduction from her wages contrary to the Act.

Award: The Court considered the unprecedented circumstances arising from the global pandemic and decided that the amount of compensation which was reasonable in the circumstances of the case was nil. In doing so, the Court referred to a number of undisputed circumstances, including the following:

Takeaway for Employers: This decision highlights that it is essential for employers to ensure that their contracts of employment are carefully drafted and include, amongst other important express provisions, an express contractual right to place employees on lay-off or short-time without pay/on reduced pay. While zero compensation was awarded in this particular case, this was based on the specific factual matrix in this case. There are a range of situations in which an employer may need to place employees on a period of lay-off or short-time and awards of compensation can be costly, particularly where claims are lodged by multiple employees. In these times of economic uncertainty, employers should ensure that their contracts of employment are reviewed and are fit for purpose.

Link – https://www.workplacerelations.ie/en/cases/2022/november/pwd2248.html

Authors – Jenny Wakely and Anne O’Connell

31st January 2023

Anne O’Connell Solicitors

19-22 Lower Baggot Street, Dublin 2


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