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Statutory Redundancy Payment No Longer Taken into Account when Calculating Unfair Dismissal Award

In the recent decision of the WRC in the case of Kieran Murray v Sherry Garden Rooms Limited, ADJ-00028766, the Complainant took a claim for Unfair Dismissal against the Respondent. The Respondent argued that the Complainant had been made redundant. The Complainant was awarded €32,833.70. When calculating the Complainant’s financial loss,  Adjudicator did take into account the PUP payment or the Statutory Redundancy lump sum payment that he had received.

Facts: The Complainant was employed by the Respondent from 2015 until his employment came to an end in 2020. The Complainant was placed on lay-off on 18th March 2020. The Respondent referred to correspondence from its accountant and financial statement for April and May 2020 and also minutes of 19th May which concluded that the Managing Director would do the project management/ sales role and that the Complainant’s role was therefore redundant. The Complainant was informed of this on a phone call on 26th May 2020 and confirmed by email.

The Complainant submitted that the redundancy was opportunistic and that there had been a recent written warning with no process. The Complainant was not allowed the right of representation, no proper consideration of alternatives and no right of appeal. The Complainant took two further claims, one under the Terms of Employment (Information) Act, as the Complainant had been furnished with a contract with the incorrect start date, and a claim under the Minimum Notice and Terms of Employment Act as he had not been paid his notice.

The Respondent argued that this was a genuine redundancy following a restructuring of the company. It was submitted that a more detailed consultation would not have changed the outcome. The Respondent further argued that even if a finding was made that the Complainant had been unfairly dismissed, the Complainant has not suffered financial loss because he was on the Pandemic Unemployment Payment and on lay-off. The Complainant would have stayed on this had he remained an employee. The Respondent submitted that the Terms of Employment (Information) Act claim was out of time and if successful represented a minor breach. In respect of the Complainant’s Minimum Notice and Terms of Employment Act claim, the Respondent submitted that the Complainant had waived his entitlement to minimum notice in order to stay on the PUP payment.

Decision: The Adjudication Officer acknowledged that the period from March to May 2020 was a turbulent and uncertain period which led to the Complainant being placed on lay-off. The Complainant was put on the PUP payment and therefore was not costing the Respondent anything. There was, therefore, no urgent impetus for the Respondent to act.

The Respondent reorientated its business and decided, without any input from the Complainant, that the Complainant did not have the skills for a new role, and it was not reasonable for the employer to present the Complainant with a fait accompli. In respect of this, the Adjudicator referred to the High Court decision of JVC v Panisi [2011] IEHC 279 in which the High Court stated that the absence of any procedure allows an inference to be drawn in respect of whether there was a genuine redundancy.

Finally, the Adjudicator noted from the Complainant’s submission that the Respondent had advertised for new staff with the newspaper article representing a growing business and also accepted the Respondent’s own evidence that they were busy.

Therefore, the Adjudicator, Kevin Baneham, concluded that the Complainant had been unfairly dismissed. The Complainant mitigated his loss by applying for a number of positions and started in a new role on 27th October 2020 at a lower wage. The Adjudicator determined that the PUP payment does not impact the Complainant’s financial loss in line with Section 7 (2A) of the Unfair Dismissals Act. However, extraordinarily the Adjudicator held that the statutory redundancy lump sum should also not be taken into consideration when calculating the financial loss stating that –  

“Section 19 of the Unfair Dismissals Act provides the circumstances that a lump sum should be repaid to the employer and those circumstances are where the employee is re-instated or re-engaged. Neither applies in this situation, so there is no statutory basis to deduct a lump sum payment made from actual or prospective loss incurred.

It is also not just or equitable to deduct a lump sum already paid, as the lump sum is based on service and financial loss (excluding any loss or diminution) is based on actual or prospective loss. Section 7 already provides grounds to reduce any award of compensation in light of the employee’s contribution to the dismissal or to financial loss, including a failure to mitigate. It also takes account of the employer’s adherence to procedures.

Deducting a lump sum from an award of actual or prospective loss undermines the effectiveness of the protections offered by the Unfair Dismissals Act, especially for employees with long service. Such an employee will have a relatively significant lump sum entitlement and they will have little protection from the Unfair Dismissals Act if the employer gauges that the employee should find employment relatively quickly. This leaves this category of employee open to an egregiously unfair dismissal.”

This decision is a dramatic change to the treatment of statutory redundancy payments to date. The decision also does not address the fact that the statutory redundancy lump sum was paid tax free and would not qualify as a tax free payment after the dismissal being found not to be a redundancy.

The Adjudicator went on to determine that the Complainant was entitled to his full loss arising from the date of his dismissal until the date he got his new job on 27th October 2020. He stated that he anticipated the Complainant to be promoted and receive increments in his salary over time with experience and therefore provided for 40 weeks salary shortfall. The total award amounted to €32,833.70.

The Complainant was also awarded €1,961.52 in respect of the breach of Minimum Notice and Terms of Employment Act as the Complainant did not give written consent to waive his notice entitlement and €1,500 for the breach of the Terms of Employment (Information) Act as the incorrect date had been put on the Complainant’s contract which was an ongoing breach and therefore not out of time.

Takeaway for the Employers: Employers should be more vigilant than ever in following all proper procedures and criteria when making a redundancy, especially as an employee’s financial loss will not be reduced by the statutory redundancy payment. This may change the approach taken by employers in situations where it is evident that the employee will take a claim. It appears from this decision that the employer would have been better off not to have paid the statutory redundancy payment at all and let the employee take a claim for it to prevent duplicate payment.

Separately, the decision made an additional award for an error in the contract which was not corrected. This award could have been easily avoided with reviews of the contracts.

Link  – https://www.workplacerelations.ie/en/cases/2022/april/adj-00028766.html

Authors – Anne O’Connell and Eva Lindsay

29th April 2022

Anne O’Connell Solicitors

19-22 Lower Baggot Street, Dublin 2

www.aocsolicitors.ie

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