The case involves a cross appeal to a decision of the Rights Commissioner (Reference number r-065472-pw-08 et al) under the Payment of Wages Act 1991 by both the employer and the 16 employees concerned. The question to be addressed by the Tribunal was whether there had been a lawful pay deduction by the employer or not. Due to the complexity and extensive evidence provided at the hearing of this matter the case was heard over a nine day period.Â
FACTS
The facts of the case were such that the employer, South West Doctors on Call Limited, had a sole union recognition agreement with two unions: the INMO and SIPTU in respect of the nurses and drivers it employed. The employer engaged in protracted conciliation talks under the auspices of the LRC in 2009 prior to engaging with its unions in respect of cost containment measures which were to include, amongst other measures, a pay reduction. These measures were considered only after non pay reduction measures were addressed in consultation with employees. The INMO came to an agreement with the employer in respect of the cost cutting measures and SIPTU put the question of pay cuts to a ballot of their members.Â
The Employment Appeals Tribunal in its decision finding in favour of the employer that the pay cuts were rolled out on a lawful basis, noted that the employer had individually consulted with non SIPTU members in advance of the roll out of the pay cut. The Employment Appeals Tribunal noted that some 22 SIPTU members defected from SIPTU to an alternative union, The Independent Workers Union, when it became clear to them that it was likely that the result of the ballot would be a vote in favour of a pay cut.Â
In its decision in favour of the employer, the Tribunal was satisfied of the following key points which are an important reminder to employers that appropriate, lawful and sensitive employer management of difficult issues such as cost containment measures can result in a lawful finding in favour of an employer where the situation is appropriately managed:
1. The EAT heard evidence that there was a need for cost containment in South West Doctors on Call Limited in circumstances where HSE funding was reduced. The Tribunal specifically noted the employer’s efforts to consider alternative cost reduction measures other than pay related cost reductions.Â
2. The EAT also noted the employer’s efforts to engage with staff be they union or non union members through meetings organised with a view to discussing cost containment measures and seeking genuine engagement with workers.Â
3. The Tribunal noted the specific policy in relation to union recognition in the employee handbook which provided that while membership of a union is voluntary for an employee, agreements reached with unions had the meaning and effect of binding employees to agreements reached between the nominated unions and the company to include agreements in respect of pay.Â
TRIBUNAL FINDINGS
The Tribunal found accordingly that the pay deduction was lawful and that consent did in fact arise in accordance with section 5(1)(c) of the Payment of Wages Act 1991 in circumstances where consent had been given on behalf of all employees regardless of union membership by SIPTU. In finding that it was to allow the employer’s appeal, the Tribunal found that no compensation in relation to an unlawful deduction was payable, the Employment Appeals Tribunal demonstrated its willingness to accept evidence on the basis that there is an objective need for cost containment within an employer organisation.Â
This decision serves as a firm message that the Employment Appeals Tribunal is willing to listen to employers’ common sense arguments for cost containment measures, but only on the basis where contractual provisions, policies and procedures and appropriate consultation has happened with the effect of considering all possible options other than pay related cost reductions, prior to the roll out of a pay cut.Â
The decision of the Tribunal is further confirmation that the principle set down by the Supreme Court in DS Ă“ Cearbhaill & ors. v. Bord Telecom Éireann [1994] ELR 54 that employees who remain outside recognised unions “may have to accept by reason of a collective agreement ….less beneficial conditions of service than they were previously entitled to if the change is brought about by collective agreement.” This principle was expressly applied by the Tribunal in the recent decision of Employee v. Employer Case No. PW624/2012.Â
It appears to be the settled policy of the Tribunal that an employee will not be able to avoid the financial pain necessitated by the restructuring of wage costs within an employer organisation, simply by absenting himself/herself from the collective bargaining process. This line of authority seems to give clear indication that the Tribunal is cognisant of the commercial realities faced by employers in this context.Â
Furthermore, it displays a determination on the part of the Tribunal to maintain fairness and equity as between members and non-members of recognised trade unions; the Tribunal refused to allow those employees who had defected from SIPTU to avoid the reductions absorbed by their SIPTU colleagues.Â
CONCLUSIONÂ
It is vital, however, that employers take note of the considerations which the Tribunal made in reaching this conclusion. As outlined above, it was noted that South West Doctors on Call Limited had engaged with employees and unions in a meaningful way in attempting to reduce costs. Alternative costs reduction ideas were considered before the decision to reduce wages was made. It is clearly best practise, from the Tribunal’s perspective, for any employer considering a wage reduction to embark upon this type of engagement with his/her employees.Â
In the very recent case of Employee v. Employer PW538/2011 an employer dependent on local authority funding was in dire financial straits and implemented not insignificant reductions in pay following a collective agreement with SIPTU. An employee who was not a member of SIPTU brought a claim objecting to the reduction as contrary to the provisions of the Payment of Wages Act, 1991. The Tribunal again noted that “everything was looked at in an effort to cut costs, but that wages had to be cut” and found in favour of the employer. It is becoming increasingly clear that, if an employer engages with his/her employees and considers alternatives, the Tribunal appears to be reluctant to penalise such an employer for implementing reductions in his/her wage bill.Â
When viewed in the light of the other recent decisions of the Tribunal, the South West Doctors determination outlines in a manner more detailed than is usual, the considerations which underpin the policy of the Tribunal when dealing with payment of wages claims in this area. There is an established body of decisions emanating from the Tribunal in this area. The determination in South West Doctors provides a well-reasoned foundation for the approach the Tribunal has adopted.
In clearly acknowledging the difficulties employers have faced and are currently facing with regard to wage bills, the Tribunal has determined that the Payment of Wages Act, 1991, should not and will not present a barrier to employers who are faced with the necessity of restructuring. If an employer engages with his/her staff through their trade unions, if he/she considers any reasonable options and alternatives to pay cuts, then the Tribunal has been unequivocal that employees will not be able to avoid reductions in their remuneration so agreed by the recognised trade unions. In the interests of aiding employers in a faltering economic climate and in the interest of maintaining fairness and equity between employees, this is the best and wisest course for the Tribunal to take.
Full case Decision:Â
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