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Important High Court Decision on Point of Law Payment of Wages Act 1991

Case remitted to the Employment Appeals Tribunal

Important High Court Decision on Point of Law Payment of Wages Act 1991 – Case remitted to the Employment Appeals Tribunal


The recent case of EARAGAIL EISC TEORANTA v ANN MARIE DOHERTY, BRENDAN McGINLEY, EVELYN BOYLE, GAVIN McGINLEY, GERARD HARDY, JOHN McGINLEY, JONATHAN BYRNE, JOESPH BYRNE, JOSEPH DOHERTY, KEVIN BRESLIN, LIAM GALLAGHER, MARTIN GILLESPIE, MARY GAZLEY, MARY TUBRIDY, MICHAEL J. KENNEDY, MICHAEL O’DONNELL, NIGEL O’ROURKE, ROGER McSHANE, SEAMUS DOHERTY, SINEAD HAMILTON, THOMAS McGINLEY, TIGHEARNAN CLANCY, ÚNA DIVER, WILLIAM J. HEEKIN concerned an appeal on a point of law pursuant to section 7(3)(b) of the Payment of Wages Act 1991 (‘the 1991 Act’) and the judgement was delivered by Justice Kearns on 5th June 2015. 

In essence the appellant sought a number of orders under Order 84C of the Rules of the Superior Courts and Section 7(4)(b) above directing that the EAT had erred in law in respect of a number of aspects of its determination dated 4th February 2014.

Background
The appellant is a limited liability whose primary business is the supply of premium seafood to a global market. In 2006 the company was experiencing financial difficulties and in or around June 2006 a restructuring programme was introduced. Ultimately, the company was subject to a financial rescue in 2007. Subsequently, as part of a process of cutting costs, the company decided to implement a 10% reduction in payroll costs which came into effect on the 9th May, 2011. A number of respondents did not agree with the proposals and initiated complaints under the provisions of the 1991 Act seeking to argue that the appellant’s actions were unlawful.

The matter came before the Rights Commissioner on various dates in 2011 and 2012. In each case, the Rights Commissioners upheld the complaints.

The appellant appealed the decisions of the Rights Commissioners and the matter came before the Employment Appeals Tribunal on the 15th July, 2013 and the 27th November, 2013. The appellant submitted at the hearing that the Tribunal lacked the jurisdiction to hear the matter at all on the basis that the provisions of the 1991 Act were not designed to address the situation which arose in the present case.

The appellant further contended before the Tribunal that the reduction in pay implemented by the company in the instant case was not a ‘deduction’ within the meaning of s.5 of the Act. In this regard, the High Court (Edwards J.) decision in McKenzie & Anor. v. the Minister for Finance & Anor [2010] IEHC 461 was relied upon.

Statutory Provisions

Section 5 of the 1991 Act provides:

“5.—(1) An employer shall not make a deduction from the wages of an employee (or receive any payment from an employee) unless—
(a) the deduction (or payment) is required or authorised to be made by virtue of any statute or any instrument made under statute,

(b) the deduction (or payment) is required or authorised to be made by virtue of a term of the employee’s contract of employment included in the contract before, and in force at the time of, the deduction or payment, or

(c) in the case of a deduction, the employee has given his prior consent in writing to it.”

Section 5(6) goes on to state that:–

“(6) Where—

(a) the total amount of any wages that are paid on any occasion by an employer to an employee is less than the total amount of wages that is properly payable by him to the employee on that occasion (after making any deductions therefrom that fall to be made and are in accordance with this Act), or

(b) none of the wages that are properly payable to an employee by an employer on any occasion (after making any such deductions as aforesaid) are paid to the employee,

then, except in so far as the deficiency or non-payment is attributable to an error of computation, the amount of the deficiency or non-payment shall be treated as a deduction made by the employer from the wages of the employee on the occasion.”

Section 6 sets out the procedure for the making of complaints by employees in relation to contraventions of s.5 by their employer:–

“6.—(1) An employee may present a complaint to a rights commissioner that his employer has contravened section 5 in relation to him and, if he does so, the commissioner shall give the parties an opportunity to be heard by him and to present to him any evidence relevant to the complaint, shall give a decision in writing in relation to it and shall communicate the decision to the parties.

(2) Where a rights commissioner decides, as respects a complaint under this section in relation to a deduction made by an employer from the wages of an employee or the receipt from an employee by an employer of a payment, that the complaint is well-founded in regard to the whole or a part of the deduction or payment, the commissioner shall order the employer to pay to the employee compensation of such amount (if any) as he thinks reasonable in the circumstances not exceeding—
(a) the net amount of the wages (after the making of any lawful deduction therefrom) that—

(i) in case the complaint related to a deduction, would have been paid to the employee in respect of the week immediately preceding the date of the deduction if the deduction had not been made, or

(ii) in case the complaint related to a payment, were paid to the employee in respect of the week immediately preceding the date of payment,

or

(b) if the amount of the deduction or payment is greater than the amount referred to in paragraph (a), twice the former amount.”

Decision of the Employment Appeals Tribunal

The EAT determined that the net issues in the appeal from the Rights Commissioners related to section 5 of the Payment of Wages Act 1991 and paragraph 8.2 of the contract of employment between the appellant and the respondents. An extract from the Tribunal’s determination is as follows:

“…the Tribunal does not accept the appellant’s contention that it could unilaterally deduct the wages of its employees based only on the provision of management’s requirements. Such a deduction would be contrary to the wording of section 5(1) (b) of the Act. In this case the appellant did not advance its own case for a deduction as it opted not to fully engage with the respondents as to the reported serious financial situation it was facing at the relevant time.

Section 8.2 of the contract of employment states From time to time these terms and conditions of employment may need to be revised, to take account of new circumstances. Such revisions may be brought about by legislation, employee request, or management’s requirements, and will be discussed with employees as necessary. Section 5(1) of the Act states: An employer shall not make a deduction from the wages of an employee unless – Section 5(c) reads in the case of a deduction, the employee has given his prior consent in writing to it. The above clearly means that an employer must receive the explicit written permission of its workforce to allow it to deduct its remuneration. In all of the circumstances of this case the Tribunal cannot accede to the appellant’s request that the Tribunal exercise its discretion not to award compensation.” [sic.]

The Tribunal upheld and reaffirmed the recommendations of the Rights Commissioner.

Submissions of the Appellant
The appellant submitted that the purpose of the 1991 Act was to provide protection for employees who, at the time, were largely in unregulated employment. The appellant also submitted that as there is a contract of employment and a company handbook in existence, the matter was not suitable for adjudication by the Tribunal but rather amounted to a contractual dispute between the parties.

It was further submitted that while there is no definition contained in the 1991 Act as to what amounts to a ‘deduction’, the purpose of the Act is widely accepted as being to ensure that employees are paid wages on a regulated and regular basis and that the reduction in pay was not a ‘deduction’ which brings it within the scope of the 1991 Act. The appellant relied on the decision of Edwards J. in McKenzie and the Permanent Defence Forces Other Ranks Representative Association v. The Minister for Finance and Others [2010] IEHC 462. in this case Edwards J. held that:–

“…the reduction in the PDF allowance is not a ‘deduction’ from wages payable. It is a reduction of the allowance payable. The Act has no application to reductions as distinct from ‘deductions’.”

Counsel also contended that the Tribunal erroneously interpreted section 5(1) and proceeded on the basis that the provisions at sub-sections (a)-(c) were to be taken conjunctively. However, the appellant submitted that the provisions are disjunctive and deal with separate situations where deductions in wages are legally permissible. Counsel also contended that the EAT failed to apply well settled principles of construction when considering the provisions of the company handbook alongside the relevant statutory provisions.

It was further submitted that even if the Tribunal had correctly applied section 5, which was denied, it failed to effectively engage with and correctly apply the provisions of section 6 of the 1991 Act, which conferred a discretion on the Tribunal not to award compensation in certain cases even where a breach of the Act by the employer had been established.

The appellant also contended that the Tribunal failed to provide any basis for its decision, despite having the benefit of detailed written and oral submissions and reserving its decision for a period of four months. Counsel referred the Court to the recent Court of Appeal decision in Bank of Ireland v. Heron [2015] IECA 66 wherein Kelly J. summarised the law surrounding the obligations on decision makers to give reasons.

It was submitted therefore that the Tribunal did not have jurisdiction to adjudicate on the complaint and in the event the Court found it did, it was submitted that the Tribunal made a number of errors in law which warranted the quashing of the determination and the remittal of the matter to the Tribunal for fresh adjudication.

Submission of the Respondents
Counsel for the respondents submitted by way of background that by correspondence dated 20th April, 2011 the company nominally sought the express written agreement of all employees to the proposed wage cuts, although it was clear that the company’s intention was to proceed to implement the cuts from 2nd May, 2011. The respondents contended that the company then proceeded to unilaterally impose the pay cuts on 9th May, 2011, when only a minority of employees had agreed by that stage, resulting in a number of complaints being made under the 1991 Act.

Counsel for the respondent submitted that the criteria which the Court ought to consider in determining whether or not to upset a determination or decisions of an expert administrative body have been considered in a number of cases which make clear that an appellant has a formidable burden to discharge. 

Counsel referred to a number of cases in this regard including Henry Denny & Sons (Ireland) Limited trading as Kerry Foods v. the Minister for Social Welfare [1988] 1 IR 34, Faulkner v. the Minister for Industry and Commerce (Unreported, High Court, 25th June, 1993) Murphy J., Brides v. Minister for Agriculture [1998] 4 I.R. 250 and Mulcahy v. Minister for Justice and Law Reform and Others [2002] ELR 12. Counsel further submitted that the decision of Gilligan J. in ESB v. the Minister for Social, Community and Family Affairs & Ors. [2006] IEHC 59 summarised the principles set out in such cases and which are to be applied in appeals of this nature. In that case, Gilligan J. stated:–

“I take the view that the approach of this Court to an appeal on a point of law is that findings of primary fact are not to be set aside by this Court unless there is no evidence whatsoever to support them. Inferences of fact should not be disturbed unless they are such that no reasonable tribunal could arrive at the inference drawn and further if the Court is satisfied that the conclusion arrived at adopts a wrong view of the law, then this conclusion should be set aside. I take the view that this Court has to be mindful that its own view of the particular decision arrived at is irrelevant.

The Court is not retrying the issue but merely considering the primary findings of fact and as to whether there was a basis for such findings and as to whether it was open to the Appeals Officer, to arrive at the inferences drawn and adopting a reasonable and coherent view, to arrive at her ultimate decision.”

Counsel submitted that it is clear from the various exhibits that the Tribunal had before it extensive material supporting the workers’ position that numerous requests for verifiable data relating to the company’s financial situation at the relevant times were simply not addressed and that company accounts showed the company was profitable.

Counsel for the respondents also submitted that the written submissions filed before the Tribunal suggested that three very net issues fell for determination at that stage and could be summarised as:

(a) whether there was an unlawful deduction falling foul of s. 5 of the Act,

(b) section 8.2 of the employee handbook, and

(c) the exercise of discretion not to award compensation.

Counsel further provided that the EAT had extensive submissions before it to determine the difference between “reduction” and “deduction” and referred to the case of Bruce v. Wiggins Teape [1994] IRLR 536 which involved an analysis of any apparent distinction between reduction and deduction for the purposes of the UK’s Wages Act 1986. It was held by the EAT that the Industrial Tribunal had fallen into error as it had misconstrued the provisions of the Wages Act 1986 and the decisions on it “as drawing a distinction between a deduction from wages and reduction in wages”. 

In this case Counsel contended that the Tribunal was entitled to treat the reduction in wages as a deduction for the purposes of the 1991 Act and no error in law occurred in this regard.

In relation to the appellant’s contention that the Tribunal misinterpreted the company handbook, and section 8.2 thereof in particular, it was submitted that the Tribunal had the benefit of oral and written submissions on this issue and the company’s assertion that section 8.2 of the handbook provided a contractual basis to unilaterally cut wages is simply not borne out by the actions of the company surrounding the implementation of the pay cuts.

Counsel for the respondent also denied that the Tribunal erred in law in relation to its decision not to award compensation. It is expressly stated in the determination of the Tribunal that the decision not to accede to the appellant’s request was made “in all the circumstances of the case”. 

In respect of the argument that the Tribunal failed to give adequate reasons for its decision, counsel for the respondent submitted that it has been established in a number of cases that the duty of administrative tribunals to give reasons in their decisions is not a particularly onerous one and only broad reasons for the decision need to be given. Counsel referred to a number of cases in this regard including Faulkner v. Minister for Industry and Commerce [1997] 8 E.L.R. 107 and Byrne v. The Official Censor (Unreported, High Court, 21st December 2007)

Decision

The Court firstly considered whether or not the complaint was suitable for adjudication by the Tribunal and did not accept the submission of the appellant that the Tribunal was not the appropriate body to hear the complaint simply because there is a contract of employment and company handbook setting out the various terms and conditions. The Court was also satisfied that the decision in McKenzie was distinguishable from the facts of the present case in a number of respects. The Court accepted the submissions of the respondents that the remarks of Edwards J. in relation to ‘reduction v. deduction’ issue were obiter and that it related to the reduction in an allowance payable in respect of motor travel and subsistence which was outside the definition of ‘wages’ in the 1991. 

The Court then considered whether or not the decision arrived at was tainted by any error of law. It noted that it must confine itself to a consideration of a point of law only and may only interfere with a finding of fact when it is entirely unsustainable based on the information before the Tribunal. The court referred to the decision of National University of Ireland Cork v. Ahern and Others [2005] 2 IR 577, at paragraph 9:–

“…matters of fact as found by the Labour Court must be accepted by the High Court in any appeal from its findings. As a statement of principle, this is certainly correct. However, this is not to say that the High Court or this court cannot examine the basis upon which the Labour Court found certain facts. The relevance, or indeed admissibility, of the matters relied on by the Labour Court in determining the facts is a question of law. In particular, the question of whether certain matters ought or ought not to have been considered by account by it in determining the facts, is clearly a question of law and can be considered on an appeal under [the relevant section].”

The Court also referred to Dunnes Stores v. Doyle [2014] 25 E.L.R. 184 where Birmingham J. held as follows:–

“Identifying the contractual entitlement of an employee of course involves legal determinations. Where such legal determinations are made by a tribunal then there is the option of having the conclusions reviewed in the High Court through the appeal on a point of law route. When that occurs, and the High Court is asked to consider whether the Tribunal correctly applied the law, there is no scope for the doctrine of curial deference.”

The Court concluded that there was a manifest error of law in the Tribunal’s interpretation of section 5 of the 1991 Act. It noted:

The determination of the Tribunal clearly indicates the Tribunal’s view that, pursuant to s.5(1)(c) of the 1991 Act, the written consent of the employees was required before the appellant company could bring about any changes to salary levels. However, these exceptions listed at (a), (b), and (c) of section 5(1) are clearly not to be taken conjunctively. The word ‘or’ is expressly used in the provision and it is clear that each sub-section concerns separate instances which might give rise to an exception to the rule that an employer shall not make a deduction from the wages of an employee. Sub-section (b) states that deductions are allowable where they are authorised by virtue of an employee’s contract of employment, which is something the Tribunal should have considered independently of sub-section (c). However, in treating sections (a)-(c) as conjunctive the Tribunal erred in law“.

The Court was also satisfied that the Tribunal failed to provide adequate reasons for a number of other findings and whilst the Court accepted that previous decisions of the Court have established that the duty to give reasons does not require extensive analysis of every aspect of a complaint, “the brief determination of the Tribunal is wholly inadequate to meet even this low threshold”.  

The Court noted that the Tribunal was also required to interpret the provisions of the contract of employment and terms and conditions as set out in the handbook however “aside from briefly stating that section 8.2 it was not applicable in light of section 5(1)(b), which, as is apparent from the second paragraph of the determination, the Tribunal erroneously read alongside section 5(1)(c), there is no engagement with the provisions of the handbook”.

Edwards J further stated “….I am satisfied that the Tribunal erred in failing to apply well established principles of construction to the provisions of the handbook and by failing to give reasons for its finding in relation to it. Both sides were in dispute on this point and the decision of the Tribunal fails to indicate which submission was preferred and why“.

In relation to the decision of the Tribunal not to exercise its discretion in relation to the payment of compensation in favour of the appellant, the Court accepted that this is a matter for the Tribunal based on the facts of each case. 

Conclusion

The Court remitted the matter to the Tribunal for fresh adjudication in light of the findings of the court.

We have referred to extensive extracts from the above decision in the above post.