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WRC Finds Purported Redundancy to be an Unfair Dismissal – Award Capped at Four Weeks’ Remuneration for Failure to Mitigate Loss

This decision is another recent example of the importance of fair procedures in a redundancy consultation process and, in particular, ensuring that due consideration is given to possible alternatives. In this case, the Workplace Relations Commission (“WRC”) found that the Complainant was unfairly dismissed. The WRC noted the Respondent’s decision to hire another employee to fill his position shortly after terminating his employment, along with its failure to offer the Complainant alternative employment notwithstanding the continued need for his skill set.

Facts: The Complainant, Mr Mark McHugh, was one of the founding members of the Respondent company, Gecko Operating Limited. He commenced employment with the Respondent as an IT Specialist in 2017. The Complainant developed and maintained bespoke software to assist financial institutions with regulatory compliance. He was responsible for maintaining all the technical aspects of the product.

The Complainant experienced difficulties with one of the other founders of the company in relation to a number of issues, including concerns he had about the direction that the company was taking and their focus on blockchain technology and the creation of cryptocurrency. He signed a contract of employment on 21st December 2017 which described his role as that of Chief Technical Officer (“CTO”), but he continued to express his reservations about the direction the company was taking. He felt that he was side-lined from the business and he struggled to keep the software service active due to a lack of resources. The Complainant explained that by May 2018, his relationship with the co-founder of the company had completely broken down. He stepped down as CTO, but his day-to-day duties continued as normal.

The Complainant’s employment was terminated on 15th June 2020 purportedly by reason of redundancy on the basis that the Respondent’s sole contract for the software service was to be cancelled. The Complainant argued that his dismissal was a sham redundancy arising because of the issues between him and the co-founder of the company, and that it was substantively and procedurally unfair.

Decision: The Adjudicator noted that it is a defence to an allegation of unfair dismissal if an employer can demonstrate that an employee was made redundant, and that the redundancy was substantively and procedurally fair. He remarked that the Respondent in this case was essentially seeking to rely on the definition of redundancy set out in section 7(2)(a) of the Unfair Dismissals Acts:

“the fact that his employer has ceased, or intends to cease, to carry on the business for the purposes of 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.”

The Adjudicator considered the Complainant’s allegation that the redundancy was motivated by personal factors, and referred to established case law in this area, pointing out that impersonality is an essential characteristic of redundancy. He noted that it appeared that the Complainant was the only employee considered for redundancy and that the Respondent had not considered any other cost saving measures as an alternative to redundancy. The Adjudicator referred specifically to the failure of the Respondent to offer the Complainant an alternative role in circumstances where the Respondent was a technological company and it was, in the Adjudicator’s view, “inconceivable that the Respondent would not have some role for an employee of the Complainant’s talents, especially given that these skills are in short supply in the labour market.” The Adjudicator referred to the Respondent’s submission that much of its technical requirements had been outsourced to third parties, but was of the view that “[t]aking this submission at its height, the Respondent would still require an employee to oversee and implement this outsourced work.” He noted that the Respondent had hired another CTO shortly after terminating the Complainant’s employment.

The Adjudicator also found that the procedure adopted by the Respondent was defective in not permitting the Complainant a right of representation at the redundancy meeting and in not providing for an appeal of the decision to terminate his employment.

The Adjudicator held that the Complainant’s dismissal was procedurally and substantively unfair.

Award: In considering the level of compensation to be awarded, the Adjudicator referred to the Complainant’s obligation to mitigate his losses following his dismissal. He noted that the Complainant’s skill set was “highly sought after and in demand, even during the period of reduced economic activity arising from the restrictions arising from the Covid-19 pandemic.” For this reason, the Adjudicator was of the view that the Complainant ought to have been able to secure alternative employment shortly after his dismissal. While the Complainant gave evidence that he had worked on some new projectssince his dismissal, he did not provide evidence of his attempts to secure new employment following his dismissal and the Adjudicator found that he had failed to mitigate his loss.

In line with a number of recent decisions of the Labour Court and the WRC in relation to mitigation of loss and section 7(1)(c)(ii) of the Unfair Dismissals Acts, the Adjudicator capped the award of compensation at four weeks’ remuneration and awarded the Complainant €5,384.31 for the unfair dismissal.

Takeaway for Employers: There are a number of similarities between this decision and two decisions referred to in our January 2022 and February 2022 newsletters, namely Ray Walsh v Econocom Digital Finance Ltd. (a WRC decision) and Cuan Tamhnaigh Teoranta v Declan McShane (a Labour Court decision) [https://aocsolicitors.ie/substantial-award-by-wrc-highlights-requirement-for-redundancy-consultation-even-in-circumstances-involving-closure/; https://aocsolicitors.ie/labour-court-finds-redundancy-to-be-an-unfair-dismissal-decision-as-no-meaningful-effort-to-consider-alternative-options/]:

  1. All three decisions highlight the importance of a redundancy consultation procedure and the requirement for employers to investigate possible alternatives to redundancy.

Link  – https://workplacerelations.ie/en/cases/2022/march/adj-00029015.html

Authors – Jenny Wakely and Anne O’Connell

31st March 2022

Anne O’Connell Solicitors

19-22 Lower Baggot Street, Dublin 2

www.aocsolicitors.ie

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