The obiter comment of Mr Justice Edwards in Permanent Defence Forces Other Ranks Representative Association v The Minister for Finance and Others (‘PDFORA’) to the effect that the Payment of Wages Act 1991 had no application to reductions as opposed to deductions from wages payable had come to the fore in recent Employment Appeals Tribunal determinations.

In a number of determinations, the EAT has repeatedly held that section 5 of the 1991 Act applies only to “deductions from”, not “reductions in”, wages: see Bessborough Centre Ltd v Long PW 86/2011, Santry Sports Injury Clinic v Padden PW 251/2011, [2014] E.L.R. 46, Byrne and Kelly v Dublin 12 Congress Centre Ltd PW 257 & 258/2011 and Hog Heaven Ltd v O'Gorman PW 774/2012.

Accordingly, the Tribunal has held that nonpayment of an increment does not constitute a deduction: see Irish Continental Group v 10 employees PW 197 to 201 & 222 to 225/2013. The import of these decisions was that pay cuts were not necessarily captured by the jurisdiction of the 1991.

This caused difficulties for employees seeking to challenge pay cuts imposed by employers as an unlawful deduction of wages properly payable to them pursuant to the 1991 Act.

Earagail Eisc Teoranta v Doherty and others [2015] IEHC 347, was concerned with an appeal on a point of law from a decision of the Employment Appeals Tribunal under the Payment of Wages Act 1991 in a case where the Tribunal considered the implementation of a 10% reduction in wages as a part of a cost cutting process by the Appellant.

The High Court was required to consider the issue of whether the dicta of Mr Justice Edwards was authority for the proposition generally accepted by the EAT to the effect that the 1991 Act had no application to a reduction in wages was correct in law.

It is certainly the case that the judgment of Mr Justice Edwards in PDFORA arose in particular circumstances, being the reduction in allowances in respect of motor travel and subsistence. The argument which arose for consideration in this case was whether the context in which the comment of Mr Justice Edwards arose was of relevance to the general applicability of the comment to general reduction in wages brought under the 1991 Act.

The President of the High Court, Kearns P, had little difficulty in confining the dicta to its facts and holding that the situation where salaries or wages were reduced is very different: The Court is also satisfied that the decision in McKenzie is distinguishable from the facts of the present case in a number of respects.

The Court accepts the submissions of the respondents that the remarks of Edwards J. in relation to ‘reduction v. deduction’ issue were obiter. Furthermore, McKenzie related to the reduction in an allowance payable in respect of motor travel and subsistence.

The definition of ‘wages’ in the 1991 Act expressly excludes any payment in respect of expenses incurred by the employee in carrying out his employment and so the finding by Edwards J. that the ‘RDF Allowance’ did not come within the scope of a deduction under the Act relates to an entirely different situation to that the present case where employees salaries were reduced.

I am satisfied therefore that the Tribunal was entitled to proceed to consider the complaints on the basis that the reduction to the employees’ wages in the present case may have constituted a deduction in breach of the 1991 Act. This has very practical and substantive consequences for claimants maintaining claims of unlawful reductions in salaries by reason of reductions in salaries by their employer.

Before this judgment, there was a strong likelihood their claim would not be heard in substance as the preliminary objection to such claims, on the basis of the PDFORA judgment, would be accepted as a full bar to the EAT accepting jurisdiction.

The decision of the President of the High Court has effectively restricted the obiter comment of Mr Justice Edwards to the facts at issue in that judgment, reduction in allowances, and held that a reduction in salary is justiciable under the 1991 Act. That is an important decision for employees seeking to challenge reductions in their salaries under the 1991 Act.

It is also correct as the obiter comment of Mr Justice Edwards was very much in the context of the claim before him concerning allowances and not reductions in core parts of wages or salaries of employees.

Aside from this aspect of the judgment, there are two other parts of the judgment worthy of consideration given their consequences for employment law practitioners. The first is the interpretation of section 5(1) of the 1991 Act, being the conditions required in order for a deduction in wages to be made, and whether the conditions were conjunctive or disjunctive.

The Tribunal had determined that these three preconditions: the deduction being required or authorised by statute, being authorised by a term of the employees contract of employment or prior consent in writing were all required in order for a reduction in salary to be applied and the failure on the part of the employer to obtain the written permission of the respondents meant the implementation of wage cuts breached the 1991 Act.

This interpretation was found to amount to an error of law as Mr Justice Kearns stated: 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. Therefore if any of the other provisions of section 5(1) are met, there is no requirement for the written consent of the employee to any reduction in pay.

This finding is correct in light of the wording of section 5(1) which clearly refers to each requirement in the alternative by reason of the use of the word ‘or’ as opposed to ‘and’. The second important issue examined by the High Court was the adequacy of reasons in the Tribunal determination.

As employment practitioners are well aware, it is not uncommon for the reasons for the Tribunal’s decisions to be very brief and it is difficult therefore to advise on the merits of an appeal. The High Court was very critical of the brevity of the decision of the Tribunal and commented that the “brief determination of the Tribunal is wholly inadequate …

It is not clear how the Tribunal arrived at the determinations it did and there is not as much as a fleeting reference to the vital matters such as the ‘reduction or deduction’ argument or that ‘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”.

These comments must be of importance to the Workplace Relations Commission and the newly appointed adjudicators. On the basis of its findings the High Court remitted the matter to the Tribunal for fresh consideration in light of the findings of the High Court.

http://www.bailii.org/ie/cases/IEHC/2015/H347.html