Changing Employee Terms and
Conditions of Employment
Implementing cost saving measures
during a downturn
Cian Beecher
Arthur Cox
19 February 2011
Index
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Redundancy.
Pay Freeze
Pay Cut
Withholding Bonuses
Lay/off/Short Time
 New Employees, Lesser
Terms? Withdrawal of
Benefits
 Change of Benefits.
 Other Options?
Redundancy?
Five Definitions
1. Employer… ceased…to carry on the business
for which the employee was employed… or …
ceased… to carry on that business in the place
where the employee was employed
2. …requirements of that business for employees
to carry out work of a particular kind in the
place … have ceased or diminished
3. …employer has decided to carry on the
business with fewer or no employees
4.
… employer has decided that the work for which the
employee had been employed (or had been doing…) should
hence forward be done in a different manner for which the
employee is not sufficiently qualified or trained
5.
… employer has decided that the work for which the
employee had been employed (or had been doing…) should
henceforward be done by a person who is also capable of
doing other work for which the employee is not sufficiently
qualified or trained
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A redundancy dismissal may give the
employee an entitlement to a statutory
redundancy payment under the Redundancy
Payments Acts
2 weeks pay per year of service.
Plus one additional week.
A week capped at €600.
60% rebate.
 Redundancy is a defence to a claim under the Unfair
Dismissals Acts.
 Unfair selection for redundancy constitutes unfair
dismissal even if a true redundancy situation exists.
 If an employee is to be dismissed on the grounds of
redundancy the employee will be entitled to notice in
accordance with the contract of employment (express
or implied) or the Minimum Notice and Terms of
Employment Acts.
Protection of Employment Act 1977
(as amended)
“Collective redundancies” means dismissals
effected by an employer for one or more reasons
not related to the individual concerned where in
any period of 30 consecutive days the number of
such dismissals is:

at least 5 – in an establishment normally employing more than 20 and
less than 50 employees
 at least 10 – in an establishment normally employing at least 50 but less
than 100 employees

at least 10% – in an establishment normally employing at least 100 but
less than 300 employees
 at least 30 – in an establishment normally employing 300 or more
employees
 “establishment” means an employer or company or a subsidiary
company or a company within a group of companies which can
independently effect redundancies
Mandatory consultation process
 a trade union, staff association or excepted body with
which it has been the practice of the employer to
conduct collective bargaining negotiations, or
 in the absence of such….a person or persons chosen
(under an arrangement put in place by the employer)
by such employees from amongst their number to
represent them in negotiations with the employer
Information to be given to employee representatives
 All relevant information relating to the proposed redundancies.
 To include the following, which must be given in writing:
– the reasons for the proposed redundancies;
– the number and description of categories of employees whom it is
proposed to make redundant;
– the period during which it is proposed to effect the proposed
redundancies;
– the criteria proposed for the selection of the workers to be made
redundant; and
– the method of calculating any redundancy payments other than
statutory redundancy payments.
 A copy of the written information given to the Minister.
Notification to Minister
Selection for Redundancy

If an employee is dismissed due to redundancy but the
circumstances constituting the redundancy applied
equally to one or more other employees who have not
been dismissed and either:
– The selection of that employee resulted wholly or mainly
from trade union membership/activities, religious or
political opinions, family leave (parental, carers,
maternity, adoptive), race, colour or sexual orientation,
age, membership of the travelling community,
pregnancy; or
– The employee was selected for dismissal in
contravention of a procedure that has been agreed or has
been established by the custom and practice of the
employment concerned and there were no special
reasons justifying a departure from that procedure.
Redundancy Checklist
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•
•
•
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Is this a redundancy?
Compulsory or voluntary?
Is this a collective redundancy?
On what basis will a person be selected?
Address the issues on which information and
consultation is necessary
• What notice must be given/check the contract of
employment?
• Serve the RP50 Forms
• How much will be paid?
Other Options?
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Pay freezes.
Pay cuts.
Withholding bonuses.
Recruitment of new employees on different terms and
conditions.
 Lay-off/short-time
 Withdrawal/Changing of benefits.
 Others.
Pay freezes
 Potentially the easiest option in the current climate.
 Difficulties arise if:
– Employee has a contractual entitlement to increases.
– An incremental pay scale applies.
– Employer has agreed to national wage agreements (contractual or
collective agreement).
– Employer is financially successful.
 All contracts should explicitly state that pay increases are
discretionary/reviews do not imply an increase or confer any
such entitlement.
National Wage Agreements
 Towards 2016
– 10% over 27 months.
– June 2006.
 Towards 2016 – Transitional Agreement
– 6% over 18 months, with initial 3/12 month pay pauses.
– September 2008
 IBEC/ICTU Protocol
– March 2010
National Wage Agreements
 Protocol
 Private Sector
– “…maximisation of sustainable employment is the most
important objective…”
– “The parties recognise that they are operating in a new
context without a formal agreement on pay
determination”
– “This protocol is effective for 2010…”
Pay Cuts
 Agree changes/consent
 Unilateral imposition of change.
 Terminate contract and simultaneously offer reengagement on revised terms.
Consent
 Notify employees (and trade unions, if applicable)
of plan.
 Engage with employees, consider reasonable
proposals.
 Present redundancies as inevitable if suitable
alternative cannot be agreed?
 Obtaining written consents?
 Negotiate with trade union.
Negotiating changes with a Trade Union
 May be obliged by collective agreement to
consult/agree pay cuts or changes to employee
terms.
 Even if change is agreed with Union may not bind
all employees need to consider:
– Terms of employees contracts.
– Rules of trade union.
– Individual employee decision.
Unions - Case Law
 Goulding Chemicals v Bolger
– Agreement reached with Trade Unions did not bind
employees who had consistently objected to the terms and
made that objection abundantly clear to employees.
(Supreme Court, 1976)
 Reilly v Drogheda BC
– Reduction in normal retirement age agreed with Trade
Union. The Court held the higher retirement age which
prevailed on recruitment was a term of the employee’s
contract and not the subsequent change. No evidence
presented that the employee was bound under the union’s
rules by the agreed change or that he acquiesced in it.
(High Court, 2008)
Impose change
 Begrudging tolerance/acquiescence (over time).
 OR employee can:
– Accept the repudiatory breach of the employer, bring his
or her employment to an end and sue for constructive
unfair dismissal.
– Remain in employment “under protest”and sue:
 Payment of Wages Act – unlawful deduction/nonpayment.
 Civil courts for breach of contract (damages/debt).
Imposed Change - Cases
 Burdett-Coutts v Herfordshire Co. Co.
– Unilateral reduction of employees’ pay.
– Union clearly objected and made it clear members would
not accept revised terms.
– Employees were entitled to damages in the form of the
arrears and a declaration that the employer was not
entitled in law to vary the employment contracts
unilaterally. (High Court, UK, 1984)
 Rigby v Ferodo
– 5% pay cut proposed to trade union.
– Trade union warned rejection would mean imposition.
– Employer duly imposed the change.
– House of Lords (UK, 1988):
 Continuing to work under protest while receiving
reduced pay was not acceptance.
 Employee entitled to recover the difference either as
damages or debt.
Dismiss and re-engage
 Used in the UK, less so in Ireland.
 Even then, UK lawyers do not consider it an automatic
solution – treated with caution.
 Hollister v National Farmer’s Union
– Dismissal and re-engagement
– EAT (UK, 1979):
 Employer has acted reasonably, had demonstrated
genuine business needs and had consulted.
 Dismissal was not unfair on the basis of “other
substantial grounds”.
 Requirement to have genuine and substantial reasons to
avoid unfair dismissal risk.
Withholding Bonuses
 Depends on nature of bonus scheme.
 Does employee have a contractual right to the bonus?
– Minimum bonus guarantee or guaranteed bonus?
– Award determined by performance matrix/sales targets,
results for current bonus year preordained? Scope to
amend for subsequent bonus years?
 Is withholding another unilateral variation of contract?
 If bonus is discretionary, no obligation on employer to pay.
Recruitment on New/Lesser terms
 Legally permissible.
 Industrial relations/employee relations issues? Pay
increase/IR complaints.
 Risk of (indirect) discrimination?
 Risk of less favourable treatment if recruiting fixedterm or part-time employees?
 Exceptional collective redundancy risk if dismissing
longer service staff simultaneously.
Lay-off and Short-time
 Lay-off: Section 11(1) of Redundancy Payments Acts 1967
to 2007
– “Where an employee’s employment ceases by reason of
his employer’s being unable to provide the work for which
the employee was employed to do and
 (a) it is reasonable in the circumstances for that
employer to believe that the cessation of employment
will not be permanent, and
 (b) the employer gives notice to that effect to the
employee prior to the cessation,
– That cessation of employment shall be regarded for the
purposes of this Act as lay-off”.
Lay-off and Short-time
 Short-time: Section 11(2) of Redundancy Payments Acts
1967 to 2007
“Where
 (a) for any week an employee’s remuneration is less than onehalf of his normal weekly remuneration or his hours of work are
reduced to less than one-half of his normal weekly hours
 (b) the reduction in remuneration or hours of work is caused by a
diminution either in the work provided for the employee by his
employer or another work of a kind which under his contract the
employee is employed to do
 (c) it is reasonable in the circumstances for the employer to
believe that the diminution in work will not be permanent and
he gives notice to that effect to the employee prior to the
reduction in remuneration or hours of work
 the employee shall, for the purposes of this Part be taken to be
kept on short-time for that week”
Right to Redundancy
 Section 12 of Redundancy Payments Acts 1967 to 2007
– “An employee shall not be entitled to a redundancy payment by reason for
reason of having been laid off or kept on short-time unless
 (a) he has been laid off or kept on short-time for four or more
consecutive weeks or, within a period of thirteen weeks, for a series of
six or more weeks of which not more than three were consecutive, and
 (b) after the expiry of the relevant period of lay-off or short-time
mentioned in paragraph (a) and not later than four weeks after the
cessation of the lay-off or short-time, he gives to his employer notice in
writing of his intention to claim redundancy payment in respect of layoff or short-time”
Lay off and Short-time
 No inherent power at common law to suspend payment to employees in
the absence of a contractual provision or agreement with employees.
 Prudent to include an appropriate clause in standard contracts.
Lay off and Short-time - Cases
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Miller v Hamworthy Engineering Limited
Reduction in business and employer sought a 3-day week.
Some unions agreed, the Plaintiff’s union rejected.
Plaintiff’s contract of employment stated
– “there may be a situation in which a temporary reduction in business
may be accommodated by a system of work sharing and this will be
explored in consultation with the employee representatives”
 This clause required the express agreement of the union or the employee,
as there was no such agreement in this case the employer’s failure to pay
in full was in fundamental breach of the company’s contractual
obligations. The employee was awarded arrears in wages. (Court of
Appeal, UK, 1986)
Lay off and Short-time - Cases
 Lawe v Irish Country Meats
 Employer introduced lay-offs and employee brought Circuit
Court proceedings to recover wages
 Held:
– An employer’s fundamental obligation is to pay agreed
remuneration for the times of work during which the
employee is prepared to work.
– There is no general right at common law to lay-off
without pay.
– Such a right may, however, be established in very limited
circumstances.
– An employer’s right to lay-off without pay may be
established through custom or general usage.
– Such a custom must be “reasonable, certain and
notorious”.
Withdraw/Change Benefits
 Terms of contracts (again) or applicable
policies/benefit statements
 Prudent to reserve maximum variation, substitution
or withdrawal rights.
 Change of suppliers – cost saving?
 Change scope of benefits - cost saving?
 Pensions?
Pensions
 Need for consultation.
 Scope/authority within Trust Deed and Rules
– typically entitle employer to cease contributions to the
scheme on notice to trustees?
– Prior notice v. deficit demand/funding rights of trustees?
 Content of … contracts but also explanatory booklets.
 Do they notify employees of the power to amend, replace or
terminate a scheme?
 Specific difficulties with
– Older contracts
– Varied contracts across organisations.
Pensions
 Impose/increase employee contributions.
 Close defined benefit schemes to new entrants.
 Close defined benefit scheme to future accrual i.e.
cease contributions for existing staff for future
service.
 Close/Replace defined benefit scheme with “hybrid”
schemes, defined contribution scheme or PRSA,
change nature of scheme benefits – CARE, etc.
Other options
 Outsourcing
– TUPE.
 Natural wastage/attrition
– recruitment moratorium
– no backfilling.
 Non-renewal of fixed term
contracts.
 Early retirement
programmes.
 Termination/renegotiation
of contracts for services.
 Over-time bans
 Career breaks
– Paid/partially funded.
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Unpaid additional leave.
Shut-downs.
“Time banking”.
Retraining.
Redeployment.
Thank you.
Arthur Cox
Earlsfort Centre
Earlsfort Terrace
Dublin 2