reorganizing business within the law cceb march 09

Morgan McManus Solicitors

MANAGING YOUR BUSINESS IN A CHALLENGING

ENVIRONMENT Cavan County Enterprise Board Seminar

Hotel Kilmore, Cavan31st march 2009Brian Morgan

Morgan McManus SolicitorsPh no 047 51011



• Practising in Republic of Ireland Northern Ireland

• Comparative Analysis of Employment Law North & South

• Web : www.morganmcmanus.com

www.accidentclaimslaw.com



A progressive Law Firm in the Border Midlands Western region of Ireland.

Private and Commercial clients.


BE AWARE

In times of economic recession

• Litigation increases

• Claims Increase

• Now – more than ever – Employment Law Claims will increase


BE AWARE

• Many forms of Claim – Dismissal, Terms of Employment, Equality etc

• Many different Courts – EAT, Rights Commissioner, Labour Court, Equality Tribunal etc

• Employee is – in reality – under no threat of liability for Costs in event of losing Claim


AGENDA

• YOUR BUSINESS AND THE LAW

• Redundancy and Reorganization• (1) Redundancy

• (2) Reorganization


Your Business and the Law

Redundancy


REDUNDANCY

• Irish Times – 16th March 2009

• “Plasterers unfairly dismissed get €360,000.00”

• This was a Redundancy Case.


RedundancyPayments Acts 1967 - 2001

• Application

• Over 16• Employee continuously employed for 104 weeks• Employee – Contract of Employment• “Continuous Service” – unless terminated by

Dismissal


RedundancyPayments Acts 1967 - 2001

• An Employee is entitled to a Redundancy payment if :

• (a) Dismissal by reason of Redundancy; or• (b) Laid of or kept on short time for a minimum

period : - • 4 or more continuous weeks in a 13 week period;• Series of 6 weeks not more than 3 consecutive.


Dismissal

• Taken to be dismissed if : -

• Employer terminates Contract;• Where fixed-term Contract is not renewed;• Employee terminates Contract due to employer`s

conduct.


Dismissal

• No Dismissal where : -

• Employment renewed or employee is re-engaged;• Must be suitable alternative employment;• Offer within 4 weeks of old Contract.


Definitionof Redundancy

• Redundancy - 5 grounds for genuine redundancy : -

• (1) Cessation of business;

• (2) Requirement of business to do that type of work has ceased or diminished;

• (3) The employer has decided to carry on the business with fewer employees;


Definitionof Redundancy (cont`d)

• Redundancy - 5 grounds for genuine redundancy : -

• (4) The work of certain employees is to be carried on in a different way for which the employee is not suitably qualified or trained;

• (5) The work of the employee may be done by another person who is also capable of doing other work for which the employee is not suitably qualified or trained.


Genuine Redundancy

• Genuiness of Redundancy

• Unfair Dismissals Acts can apply• Voluntary Redundancy• - EAT may expect this before compulsory

redundancies effected• - Employees may be willing to take redundancy

package


Positions are Redundant

• Redundant Position

• Positions redundant - not people

• Impersonal process


Implementing Redundancies

• In order to plan and implement a redundancy situation properly, the following stages will be followed in most redundancies:

• planning

• invitation of volunteers

• consultation, both collective and individual

• identification of a pool for selection

• notification of Collective Redundancies to the Department of Enterprise Trade and Employment


Implementing Redundancies (cont`d)

• use of objective selection criteria

• compliance with dismissal procedures

• advance notice of individual consultation meeting

• permitting a colleague to be present at consultation meetings

• opportunity to appeal

• allowing seeking of suitable alternative employment

• statutory or other redundancy payment


Implementing Redundancies (cont`d)

• Employer with Northern Ireland based employees

• Remember that that Statutory Disciplinary and Grievance Procedures apply to NI based employees

• Therefore, to maintain consistency in a Redundancy situation, consider very carefully the application of the same type of Procedures to the RoI based employees


Consultation

• Consultation should include:

• appropriate disciplinary and dismissal procedures

• the reason for the redundancy dismissals

• why and how individuals have been selected

• possible ways of avoiding redundancy

• possible alternative work.


Selection Criteria

• Selection Criteria

• Need for objectively justifiable redundancy criteria

• “Last in – first out?” (LIFO)• Age Discrimination


Selection Criteria

• Selection Criteria (cont`d)• must be based on objective criteria which may include:

• length of service

• attendance records

• disciplinary records

• skills, competencies and qualifications

• work experience

• performance records


Termination byreason of

Redundancy

• Termination of employment

• Redundant position does not necessarily mean that the employee must leave the company

• Company should always consider : -

• Re-training

• Re-deployment

• Employee suggestions


Unfair Dismissal

• Many reasons which are automatically unfair for selecting employees for redundancy, including:

• trade union activity

• part-time status

• pregnancy or maternity-related reasons

• exercising rights under Minimum Wages Act

• penalization under the Safety, Health & Welfare at Work Act


Unfair Dismissal

• Automatically Unfair Reasons (cont`d)

• sex, race, religion, disability, age, marital status, family status, membership of travelling community and sexual

orientation

• NB : There is no minimum service requirement for these statutory provisions to apply


Unfair Dismissal

• Unfair Dismissal – Normal, where there is the one year service requirement

• A dismissal may be unfair if there is not a genuine redundancy or if the selection criteria are too imprecise or subjective

• And although the reasons for redundancy may be completely fair, it may still be judged unfair on procedural grounds such as lack of consultation


Payroll Issues

• Procedure

• 2 Weeks Notice minimum (even where employee would in the normal course be entitled to less than 2 weeks)

• Greater of statutory or contract notice

• RP50 Form – to be given at minimum 2 weeks before Dismissal (but probably best given with notice)

• RP6 – for employees wishing to terminate early


Payroll Issues

• Procedure• Ex-gratia payments

• Take commercial legal tax advice on ex-gratia payments

• Take this advice early : employee is going to want to know what he is going to get into his hand

• Get tax advice before delivering “Severance Agreement”


Payroll Issues

• Calculation of Statutory Lump-sum payment

• 2 weeks pay per year of continuous and reckonable employment over the age of 16 years

• Plus additional bonus weeks pay

• Subject to ceiling of €600 per week

• Rebate of 60% lump sum from Social Insurance Fund


Not Reckonable Service

• Not Reckonable• Reckonable service excludes absence in 3 years preceding

termination for :

• (1) Absence in excess of 52 consecutive weeks by reason of an occupational accident or disease

• (2) Absence in excess of 26 consecutive weeks by reason of illness not referred to at (1) above

• (3) Absence by reason of lay-off; and

• (4) Strike Action in the employee`s business or industry


Reckonable Service

• Reckonable• Reckonable Service includes : -

• (1) Sick Leave of Less than 26 consecutive weeks

• (2) Holiday Entitlements

• (3) Maternity Leave or natal care absence

• (4) Adoptive Leave or Additional Adoptive Leave or while attending certain pre-adoption classes or meetings

• (5) Parental Lease or Force Majeure Leave


Reckonable Service

• Reckonable (cont`d)• (6) Carer`s Leave

• (7) Absence prior to re-instatement or re-engagement under the Unfair Dismissals Acts

• (8) Any absences authorized by the employer (eg Study Leave)

• (9) Absence by reason of Lock-out and

• (10) Absence by reason of Strike Action before 1st January 1968


Lay-off and Short-time

• Lay-off or Short-time• Lay-off : cessation of work - not permanent

• Short-time : half the hours or half the pay

• If –

• 4 or more continuous weeks in 13 week period

• Or series of 6 weeks not more than 3 consequetive

• Then employee is entitled to serve Notice of Intention to Claim Redundancy


Collective Redundancies

• Collective Redundancies – Protection of Employment Act 1977

• Thresholds : -

• 5 employees in establishment employing 20 to 49

• 10 employees in establishment employing 50 to 99

• 10% of employees in establishment employing 100 to 299

• 30 employees in establishment employing 300+



• Replacement inserted by 2007 Act• Sect 7(2A) Redundancy Payments Act 1967 : not to be

considered Redundancy for purpose of Statutory Redundancy payment if : -

• Collective Redundancy

• Compulsory

• Dismissed person replaced by other person doing same work anywhere in the state (except where employer has existing operation with established terms and conditions)



• Replacement (cont`d)

• Other person is either an employee or is provided to employer under “other arrangements”

• On materially inferior terms


“Exceptional Collective”Redundancies

• Referral of Collective Redundancies : - • If redundancies come under Sect 7(2A) of 1967 Act they

are “Exceptional Collective Redundancies”. This is decided by a referral process.

• Representatives -> Redundancy Panel ->Minister -> Labour Court within 30 day consultation period

• Time can be extended and redundancies cannot be made within the extended period

• Penalty for breach is €250,000.00



• Referral of Collective Redundancies : - • If Dismissals found by Labour Court to have been

exceptional collective redundancies but employer had proceeded - results in : -

• Loss of Rebate

• 20 years service or less – max Unfair Dismissal compensation 4 years gross remuneration

• More than 20 years service - max Unfair Dismissal compensation 5 years gross remuneration



• Referral of Collective Redundancies (cont`d) : -

• Loss is irrelevant – compensation is “such as is just and equitable”, subject only to having regard to any redundancy as may already have been paid


Application of Unfair Dismissals Acts (cont`d)

• Substantial Grounds justifying Dismissal in restructuring situation : -

• Genuine Redundancy situation

• Normal Retirement Age (but beware of Age Discrimination)

• Not properly capable or qualified

• Continuation would be in breach of statutory requirements (eg, where ascertained that employee does not have a Work Permit)

• NB – Dismissal and Procedures followed must be fair.


Notice

• Minimum Notice

• Statutory entitlement determined by length of service

• Contract may provide for greater entitlement

• Entitled to greater of statutory or contractual entitlement

13 weeks-2yrs 1 week

2-5 yrs 2 weeks 5-10 yrs 4 weeks 10-15 yrs 6 weeks 15 yrs plus 8 weeks


Your Business and the Law

Reorganization


Avoiding Redundancies

• Before Redundancies are implemented consideration should be given to other ways of managing staff costs : -

• Restricting recruitment

• Revising expenses policies

• Reviewing use of Contractors / Agency Staff

• Restructuring reward and incentive schemes via negotiation and agreement with employees


Avoiding Redundancies (cont`d)

• Implementing salary sacrifice schemes or flexible benefits to help reduce tax obligations and bring cost savings

• Reviewing pension schemes and identifying opportunities for cost reduction, even in the short term through negotiation with the Fund Trustees, and the redesign of benefits to reduce costs and risk

• Using appropriate processes, varying working arrangements, such as reducing over-time or introducing short-time working or temporary Lay-offs to get through temporary shortages of work


Avoiding Redundancies (cont`d)

• Exploring opportunities for re-deployments or secondments to other parts of the business or to clients and customers, with appropriate retraining

• Outsourcing business functions where this will achieve costs efficiencies

• Offering voluntary severance opportunities

• BUT this involves varying the terms of the employees` Contracts of Employment


Varying Contractof Employment

• Unilateral Alteration• Where employer and employee have previously agreed

terms those are the terms of the Employment Contract

• They are not subject to unilateral alteration by either party

• Therefore, for example, the employer cannot unilaterally decide to reduce wages

• Such a move by an employer could result in a breach of contract entitling the employee to resign and claim Constructive Dismissal


Varying Contractof Employment (cont`d)

• The Courts do accept some very minor variations to contracts so as not to give rise to a right for the employee to terminate the contract

• However, any attempt by the employer to alter a fundamental term unilaterally will give rise to a right of repudiation by the employee (wrongful constructive dismissal) and often a right to sue for Unfair Dismissal

• Changes in hours of work, rates of pay and bonus arrangements etc are changes to terms and conditions



• How do you vary the terms and conditions?

• Collective Agreements

• Express Contractual Right to vary

• Custom and Practice

• Dismissal and Re-engagement



• Collective Agreements• Variation agreed with trade unions acting on behalf of

specific employees or employees generally

• But ensure at start to copy collective agreements to new employees and make it clear to them that these agreements

form part of their terms and conditions of employment • Goulding Chemicals Limited –v- Bolger - a trade union

cannot bind those of its members who have made it clear that they do not wish to be bound



• Express Contractual Right to Vary

• Possible to include within the contract

• However, Courts or Tribunals will not unilaterally agree to this right being exercised

• the change must provide both business efficacy and

reasonableness



• Custom and Practise

• However it must be so notorious and well known that in the absence of agreement in writing it is to be taken as one of the terms of the contract between the parties

• Term also needs to be reasonable and equitable

• Must be necessary to give business efficacy to the contract

• Must also be obvious, with a capable and clear expression and it must not contradict any express terms of the contract



• Dismissal and Re-engagement

• But this is not realistically possible in today`s employment market as any Dismissal carries with it the risk of an Unfair Dismissal Claim



• Unilateral Change + Risk• In current straightened times Court may take a flexible

view• Many employers are unilaterally changing terms and

assuming that their employees will be more concerned about their job security than with their legal rights

• But this process must be managed very carefully• Do not alienate workforce – remember that a disgruntled

workforce of 50 or more employees can now compel their employer under the Information & Consultation Regs to implement compulsory communication procedures



• Changes to “work practices”

• For example, introduction of new technology and new working methods generally do not require employee consent

• Maybe now, in this economic climate, is a good time to look at changing work practices - so that you can have a much leaner organization going into the future for when the economy recovers


“SURVIVORSYNDROME”

• XpertHR Website :

• Those who remain with the organization – the “survivors” - will be at risk of developing survivor syndrome

• resulting in changes in performance including: -

• Lower morale and commitment

• Reduced loyalty to employer

• Reduced motivation


“SURVIVORSYNDROME” (cont`d)

• Lower performance and productivity• Poorer customer focus• Increased Stress levels• Greater risk-avoidance and slower decision-making• A disinclination to learn new skills and• Increased absence

• + more inclined to seek work elsewhere – thus leading to loss of knowledge and skills to a competitor which employer hoped to retain after Redundancy exercise



• Why?• Remaining employees will have experienced a period,

sometimes several months, when the outcome and their future were uncertain

• Sadness of loss of colleagues / witnessing their emotions• Can be compounded if they believe that employer did not

manage the Redundancy process properly• Post Redundancy, their jobs may change / increase of

workload• Linked to survivor`s perception of the employer`s conduct

during the Redundancy process



• How to avoid

• Develop an effective communications strategy

• Acknowledge the employees who remain



• Acknowledging the employees who remain : -• Keep them fully informed of process + implications for

organization

• Consult and agree best way forward

• Convey organization`s appreciation of their efforts and that they went through a difficult time

• Ensure that they understand that jobs and workloads are likely to change

• Provide practical support


DOWNSIZING

• If you must undertake Redundancies, consider the following : -

• Taxation Advice

• Social Welfare Advice

• Group Advice Clinics

• Individual Counselling Sessions

• Individual Statements of Entitlement

• Redundancy Guide

• Consider appointing outplacement consultancy?


THE FUTURE

• Look after the concerns of the remaining workforce : -

• Keep remaining staff informed – to alleviate their concerns about further redundancies

• Motivate remaining staff

• They will need reassurance

• Make sure your messages are positive

• Consider commencing weekly / monthly meetings

• Communicate continually


CONSIDERINGREDUNDANCIES

• REMEMBER : -• You have invested heavily in the recruitment and training

of your staff

• You will replace them only at great cost

• Redundancies should therefore only be considered as a last alternative

• If you must make employees redundant don`t visit further financial loss on your business by implementing redundancies which might be deemed to be unfair + ensure that your Procedures are correct



Advising the Private Client and the Business Community

Web – www.morganmcmanus.com

www.accidentclaimslaw.comPh no 047 51011

http://www.accidentclaimslaw.com/

reorganizing business within the law cceb march 09

Documents

d redundancy

reason of redundancy

redundancy dismissals

redundancy situation

redundancy payments

voluntary redundancy

redundancy case

redundancy irish times