We have four employees who commenced work in our Company in Ireland in 2008. They then transferred to an Associated Company of ours in Boston in 2010 for what we originally thought would be a two year contract. However, due to the financial position of our Irish Company we have no more work available for them in Ireland and have therefore offered them the following:

1. To come back to Ireland and immediately be made redundant; or
2. To extend their contract in Boston for another 2 years.

Two of the employees chose the redundancy option and two chose to extend their contract. For the two that chose the redundancy option will we have to take account of their service abroad when calculating their statutory redundancy entitlements?

John Jermyn writes:

It is first of all important to establish if your employees are entitled to any statutory redundancy payment under Irish legislation. If we form the view that they are, consideration can be given as to whether their service abroad should be taken into account when calculating their entitlements.

The legislation applicable to this situation is the Redundancy Payments legislation, and in particular section 25 of the Redundancy Payments Acts 1967-2007 (“the Acts”), which deals with redundancy entitlements of employees who are employed wholly or partly abroad.

Section 25(1) of the Acts provide that an employee will not be entitled to a redundancy payment if they are (a) outside the State on the date of dismissal and (b) their contract does not provide that they ordinarily work within the State.

However, notwithstanding the above, the section goes on to provide that where employees ordinarily work outside the State, they are not entitled to a redundancy payment unless immediately before they commence working outside the State, the employee was insurable for all benefits under the Social Welfare (Consolidation) Act 2005, (which would be the case for your employees having worked in the State immediately prior to starting their contract in Boston), and the employee was in the State in accordance with the instructions of their employer on the date of dismissal or had not been afforded a reasonable opportunity by their employer of being in the State on that date.

It would therefore seem likely, in light of these provisions of the Acts, that your employees would be entitled to a redundancy payment as they commenced working in Ireland prior to their transfer to Boston. Either they will be back in Ireland on your instructions on the day their employment is terminated for redundancy or they will be able to argue that you did not afford them a reasonable opportunity of being back in Ireland on that date.

In respect of your question as to whether your employees’ service in Boston will have to be taken into account in calculating their statutory redundancy, section 3 states that in computing (for the purposes of the Redundancy Payments Acts only) for what period of service the person was in continuous employment, any period of service in the employment of the employer concerned while outside the State shall be deemed to have been service in the employment of that employer within the State. Therefore, your employees will be entitled to have their service in Boston taken into account when calculating their statutory redundancy entitlements.

The legislation goes on to state that, where an employee has worked outside the State, the employer is entitled to deduct, from any statutory redundancy payment to which the employee may be entitled, any payment made to the employee under a statutory scheme relating to redundancy in the State in which they were working. Therefore if your employees received any payments on the termination of their employment in Boston, under a statutory redundancy scheme, that amount can be deducted from any Irish statutory redundancy entitlements. Even though this may seem unlikely, advice from a US lawyer in relation to this issue should be sought.

Obviously, there are many other factors to be considered when contemplating redundancy of an employee, for example fair selection, suitable alternative work, whether you will be making any payments above the statutory minimum etc. and therefore, prior to making any decisions, employers should seek legal advice.

Note: For the purposes of the Acts two companies shall be taken to be associated companies if one is a subsidiary of the other, or both subsidiaries of a third company. Subsidiary has the same meaning as, by virtue of section 155 of the Companies Act 1963, it has for the purpose of that Act.