Covid-19: Reduced Pay, Reduced Hours and Redundancy

Introduction to Irish Employment Law and Covid-19

The Covid-19 pandemic has brought about significant disruption in our economy and society. 

As a consequence of the economic slowdown, many employers have struggled to navigate their way through the difficult financial times, we now find ourselves in. 

When income is reduced, employers will naturally look to reduce costs. One of the most obvious ways to implement significant cost savings, across any business, is to reduce salary spend. This can be achieved through a variety of means. 

Reduced Hours or Pay due to Covid-19

Some employers may decide to reduce the hours' employees will work or seek an overall reduction in pay. These changes may be temporary or long-term measures, however, depending on the specific contract of employment, it is critical that employers constructively engage with employees, when looking to implement such an amendment to the fundamental terms and conditions of employment. 

The abrupt and unilateral introduction of reduced hours or reduced pay, without employee consultation or consent, could lead to a potential payment of wages or industrial relations claim in the Workplace Relations Commission, even if the contract of employment alludes to the employer having such a right. 

There may be remedies in the civil courts for a disgruntled employee who considers these changes to be a breach of contract. 

It wouldn’t be unimaginable for an employee to bring a claim for unfair dismissal by way of constructive dismissal, arguing they had no option but to resign, but this would be a high bar to overcome, without having exacerbated all internal recourses first. 

In any event, detailed legal advice should be sought before pursuing any of these actions. 

Lay-Off due to Covid-19

We have already seen large numbers of employees in Ireland, placed on layoff. When an employee is placed on layoff, it is usually on the expectation that they will eventually return to work, if the economic circumstances, and the commercial viability of the business, improve. 

Emergency legislation was brought into force, across Ireland, to allow employers to place employees on layoff, for a longer period than would ordinarily be allowed, as a direct consequence of the Covid-19 pandemic (the Emergency Measures in the Public Interest (Covid-19) Act applied from 13 March 2020 and is now scheduled to continue until 30 November 2020). 

Ordinarily, if an employee has been on lay-off for 4 weeks or more, or 6 weeks in the previous 13 weeks, they may be entitled to propose their intention to claim redundancy from their employer, who in turn, can confirm the redundancy or issue a counter-notice, within 7 days. 

During lay off, an employee is still ‘employed’ by their employer and the essential terms of their contract of employment remain in force. 

Redundancy due to Covid-19

The most consequential decision an employer can take, in reducing headcount spend, is to terminate the employment of some of its employees, potentially through a redundancy process. 

The Covid-19 pandemic does not provide an automatic explanation or justification, for the redundancy of any employee, per se. The guiding legal principles and protocols, surrounding a redundancy scenario, continue to apply throughout the pandemic, and any employer who does not strictly adhere to these best practices, may be liable to a potential claim for unfair dismissal, in the Workplace Relations Commission.

Under Irish redundancy law, an employee who is dismissed shall be deemed to be dismissed by reason of redundancy if the dismissal is attributable wholly or mainly to:

“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; or 

the fact that the requirements of that business for employees to carry out work of a particular kind, or for employees 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.” 

Despite the economic turmoil that we find ourselves in, an employer will still be under an obligation, if implementing redundancies, to prove that such a process was undertaken, pursuant to the grounds cited in the legislation above. 

A redundancy cannot be used as a method to eliminate, what would otherwise be described as ‘difficult’ or ‘problem’ employees. The courts previously held, in JVC Europe, that a redundancy “cannot be a clock for weeding out those less competent”. 

Justification for Redundancy due to Covid-19

Although the Covid-19 pandemic will obviously be a catalyst for significant change in many businesses, it is crucial that an employer can point to one of the accepted justifications for the implementation of a redundancy process, if they are to successfully defend that process, when challenged.

Citing Covid-19, in isolation, shall not be sufficient. An employer who can clearly demonstrate the impact Covid-19 has had on their business, be they economic, organizational or strategic, will be better placed in defending a potential claim.

Change in the Business Direction

For most employers citing redundancy, they will need to demonstrate that there have been significant changes in the direction of the business, closure of all or particular parts of the business, or significant changes in how the business operates. 

Change in the Skill Set Required

Quite often, a business will justify a termination of employment by redundancy, by the justification that they intend to carry out the business, in a way and manner, for which the skill-set of the terminated employee, is no longer required. 

Fewer Employees

Another potential scenario is when businesses assert that they will carry on providing the same type of service or output, but will do so with a fewer number of employees. 

Change in Working Methods

Furthermore, a business may cite a change in working methods, as justification for the termination of an employee, by way of redundancy. 

Selection Method for Redundancy due to Covid-19

What we do anticipate, in many claims wherein redundancy is disputed, is that some employers may have issues in providing that they applied an objective selection process and procedure when implementing redundancies, or that they failed to carry out a comprehensive consultation process, with the potentially impacted employees. 

Objective Criteria

An employer is permitted to retain their best and most critical employees, in a revised and restructured organization. However, there must be some objective criteria, against which, employees are judged and appraised, for redundancy selection. The type of criteria usually utilized includes qualifications of training, educational qualifications, experience, client relationships, work rate, technical skills, quality of work and length of service. 

In any potential claim, it would be expected that an employer would be able to provide some criteria, against which, the terminated employee was measured, against those who eventually retained their roles. 

Meaningful Engagement

An employer will need to have meaningfully engaged with the proposed employees selected for redundancy, to determine whether there are any alternatives to the redundancy. If an employee offers to work in another department, relocate, work in another position, take reduced hours and/or a reduction in salary, the employer will need to demonstrate that they took into consideration, the suggestions made. The employer may, during a Workplace Relations Commission hearing, be asked to explain, why the employee proposal was not sufficient or reasonable, in avoiding their redundancy. 

Conclusion

Citing Covid-19, in isolation, is not a sufficient justification, for initiating a redundancy process, unless the employer can point to significant strategic or operational changes, within the organization, requiring a reduction in headcount, for any number of employees. 

Having said that, we do anticipate, that the context of the Covid-19 pandemic, will not be lost on the Workplace Relations Commission, when they do hear future claims for unfair dismissal, arising from a redundancy process, during the pandemic.

If an employee believes that a genuine redundancy scenario does not exist, that they have been unfairly selected, or that the employer failed to meaningfully engage with them as to potential alternatives, they may be entitled to bring a claim for unfair dismissal before the Workplace Relations Commission. 

Proceed with caution and seek advice!