Equality Officer Decision No: DEC-E/2010/083
Five Named Complainants
(Represented by SIPTU)
(Represented by Matheson Ormsby Prentice - Solicitors)
File No: EE/2006/377
Date of issue: 26 April, 2011
Headnotes: Employment Equality Acts, 1998 & 2004 - sections 6, 8 and 34 - age - redundancy - compromise agreement - jurisdiction - prima facie case - objective justification - EU Directive 2000/78/EC.
This dispute involves claims by five named complainants (See Appendix 1) that they were discriminated against by Hospira Ltd. ("the respondent") on grounds of age, in terms of section 6(2) of the Employment Equality Acts 1998 and 2004 and contrary to section 8 of those Acts, in relation to the terms applied to their redundancy package on termination of their employment by the respondent in October, 2006.
2.1 The complainants were employed by the respondent for periods ranging 16 - 25 years. In August, 2005 the respondent announced its intention to close the plant where the complainants worked over the following eighteen months with the loss of all 560 jobs over that time. The respondent immediately commenced discussions/negotiations with the relevant trades unions in respect of a redundancy/severance package for the employees. The outcome of these discussions was a package containing a formula which resulted in employees receiving the lesser of two amounts when the formula was applied. The complainants contend that this constitutes less favourable treatment of each of them on grounds of age contrary to the Employment Equality Acts, 1998 and 2004. The respondent rejects the complainants' assertion. It states that the package was negotiated between the respondent and the various trades unions and in the complainants' case its terms were accepted by a ballot of the members following the union having obtained legal advice. It adds that each of the complainants accepted the payment in full and final settlement of all claims emanating from their employment with the respondent and therefore each of them waived their rights to pursue a complaint to this Tribunal. Without prejudice to this argument it is submitted on behalf of the respondent that the manner in which the payments to each of the complainants was calculated is governed by the exemption provided at section 34(3) (d) of the Employment Equality Acts, 1998 and 2004.
2.2 The complainants referred complaints under the Employment Equality Acts, 1998 and 2004 to the Equality Tribunal on 5 October, 2006. In accordance with her powers under the Acts the Director delegated the complaints to Mr. Vivian Jackson, Equality Officer for investigation and decision and for the exercise of other relevant functions under Part VII of the Acts. My investigation of the complaints commenced on 8 May, 2009, the date the complaints were delegated to me.
3. SUMMARY OF COMPLAINANT'S CASE
3.1 The complainants were employed by the respondent for periods ranging from 16-25 years (See Appendix 1) at its plant in Donegal. They state that in late August, 2005 the respondent announced its intention to close the plant where they worked over the following eighteen months with the loss of all 560 jobs over that time. They add that the respondent immediately commenced discussions/negotiations with the relevant trades unions in respect of a redundancy/severance package for the employees and state that they were represented by SIPTU in these discussions/negotiations. They state that during these discussions the respondent indicated its position in respect of those employees close to retirement, which was that those employees would be paid the lesser of (a) the terms of the redundancy package or (b) the amount of salary which those employees would have earned if they had continued in employment until the normal retirement age of 65. It is stated on the complainants' behalf that SIPTU informed the respondent that it considered this approach to be discriminatory on grounds of age and that the respondent argued it was lawful in terms of section 34(3) of the Acts.
3.2 The complainants state that negotiations on the redundancy terms concluded on 30 August, 2007. These terms provided for a redundancy package of seven weeks' remuneration per year of service (inclusive of statutory entitlement). A number of items were detailed as requiring further clarification, including "the legal entitlement to redundancy of employees close to retirement age". It is stated on behalf of the complainants that, notwithstanding this point of clarification, the terms were recommended for acceptance by SIPTU and were accepted by the members in a secret ballot by an overwhelming majority on 23 August, 2005. It is stated on behalf of the complainants that, in tandem with this process, SIPTU sought clarification on this aforementioned point from the Employment Rights Unit of the Department of Enterprise, Trade and Employment (as it then was) and the Legal Section of the Equality Authority. It is further stated on behalf of the complainants that the former responded "there was no provision in the redundancy legislation limiting the amount of a redundancy payment to what an employee would have earned between the date of redundancy and the normal retirement age" and the latter confirmed (verbally) that the respondent's proposed approach was not contrary to the Acts. In the course of the Hearing the complainants' representative advised that it had not obtained any other independent legal advice on this issue.
3.3 The complainants state that at a meeting in late October, 2005 the respondent restated its position as regards employees close to retirement who were to be made redundant after the plant closed. They add that it confirmed this position in writing on 22 November, 2005 as follows - "these employees will receive a gross payment equivalent to what they would have been paid between their date of termination (i.e. date manufacturing ceases) and the date of their normal retirement (i.e. the date the employee reaches 65 years) plus a statutory redundancy payment provided that the combined payment does not exceed seven weeks per year of service (i.e. the sum of the two payments will not exceed the equivalent of seven weeks per year of service.)". The complainants state that this was the formula applied to their redundancy terms and consequently they suffered the shortfalls set out at Appendix 1 when their employment ceased on the dates indicated. It is further stated on behalf of the complainants that SIPTU was contacted by the Equality Authority in late April, 2006 in relation to the redundancy package on foot of queries raised with the Authority by another employee of the respondent. They state that following correspondence between SIPTU and the Equality Authority the latter opined that the "aspects of the redundancy package may be in breach of the Employment Equality Acts, 1998- 2004. In addition, we are also concerned that section 34 may conflict with the Framework Directive.". It is stated on behalf of the complainants that SIPTU wrote to the respondent asking if it was prepared to re-negotiate this element of the redundancy package in light of the new advice received by it and the respondent refused to do so.
3.4 The complainants state that each of them had sufficient service to be covered by the redundancy payments legislation. They add that they were therefore entitled to the statutory redundancy of two weeks' pay per year of service plus a year. The redundancy package provided for an overall upper limit of seven weeks' pay per year of service and they submit therefore that the "cap" impacts on the ex-gratia element of five weeks' pay per year of service, in that it was limited to an amount that when added to their statutory entitlement, would match the amount the complainants would have received had they continued to work until the age of 65 years. It is submitted on their behalf that given the terms of the redundancy package the maximum ex-gratia entitlement any of the complainant could receive is 125 weeks (Ms. Roper - 25x5) and therefore any employee with longer than that period to go before retirement would not have the "cap" applied to their redundancy payment. In the circumstances it is argued that employees under the age of 62 years of age would have avoided the "cap" and that any employee under that age, with the same level of service and pay as the complainants, would have received a higher amount of redundancy. It is further submitted that this constitutes less favourable treatment of the complainants on the age ground contrary to the Acts.
3.5 The complainants reject the contention that the respondent can rely on section 34(3) of the Acts. It is submitted on their behalf that the redundancy package is not an "Occupational Benefits Scheme" as defined in the provision. It is further submitted on their behalf that the provision does not permit a reduction of statutory redundancy payments and it cannot therefore be used to limit ex-gratia payments - as it would be unfair. In addition, it is submitted on behalf of the complainants that the Acts must be interpreted in accordance with the Framework Directive. Their union adds that Article 6 of the Directive permits Member States to allow for difference in treatment on grounds of age not to constitute discrimination where such treatment is "objectively and reasonably justified by a legitimate aim, including legitimate employment policy, labour market and vocational training objectives, and if the means of achieving that aim are proportionate and necessary.". It submits that the actions of the respondent cannot be said to be objectively justified as a legitimate aim - in that the outcome of those actions resulted in the older workers suffering less favourable treatment in comparison to younger employees in order to reduce the cost to the employer of making employees redundant. The complainants' union concludes by contending that the actions of the respondent constitute less favourable treatment of them on grounds of age and that it cannot rely on the defence at section 34(3) of the Acts or the protection provided at Article 6 of the Directive.
4. SUMMARY OF RESPONDENT'S CASE
4.1 The respondent rejects the complainants' assertion that it discriminated against them on grounds of age contrary to the Acts. It submits that the manner in which the ex-gratia payments made to them was calculated falls squarely within the exception related to age provided at section 34(3) of the Employment Equality Acts, 1998 and 2004 and that this exemption is in accordance with Article 6 of the Framework Directive. Without prejudice to this argument it further submits that each of the complainants voluntarily signed an acknowledgement that the ex-gratia sums were paid to them in full and final settlement of all claims in relation to their employment which they may have against the respondent, under both statute and common law, following their union having obtained legal advice and therefore they have no basis upon which to maintain their proceedings to this Tribunal.
4.2 The respondent accepts that the details set out at Appendix 1 in respect of each of the complainants are correct. It agrees with the complainants' version of events as regards the announcement to close the plant in August, 2005 and the timing of the subsequent discussions between the respondent Management and the trade unions. It further agrees that at the end of these negotiations a redundancy package of seven weeks' remuneration per year of service (inclusive of statutory entitlement) was agreed, that a number of items were detailed as requiring further clarification, including "the legal entitlement to redundancy of employees close to retirement age and it was agreed that each side would seek legal advice on the matter. The respondent states that both sides obtained this advice and that it had a meeting with the complainants' union on 25 October, 2005. The respondent agrees that it followed this meeting up with its letter of 22 November, 2005 in which it outlined its position in relation to those employees close to retirement age at the date of closure of the plant as set out by the complainants at paragraph 3.3 above. The respondent states that the complainants received appropriate advice and with the benefit of this advice they all voluntarily signed acknowledgements that the payments they received were in full and final settlement of all claim as a result of their employment with it, both in statute and at common law. It submits therefore that the complainants have waived their right to pursue their complaints to this Tribunal and it has no jurisdiction to investigate them.
4.3 Notwithstanding its arguments in the preceding paragraph, the respondent submits that the manner in which it calculated the complainants' entitlements are in compliance with section 34(3)(d) of the Employment Equality Acts, 1998 and 2004. It further submits that the definition of "occupational benefits scheme" at section 34(3)(A) of the Acts includes benefits paid to employees on their becoming redundant and that the definition of "severance payment" in the same provision cover the ex-gratia amounts paid to the complainants as they were sums paid voluntarily by the respondent to them upon leaving their employment. The respondent further submits that section 34(3) of the Acts properly transposes Article 6 of the Framework Directive and urges the Tribunal to consider the degree of autonomy that article affords Member States in providing that difference in treatment on grounds of age does not constitute discrimination under national law. In addition, the respondent asserts that Article 6(1) of the Framework Directive does not require employers to objectively justify differences in treatment on grounds of age provided for under national law, rather it asserts that the requirement to objectively justify such differences to Member states to justify such differences in legislating for such exemptions.
5. CONCLUSIONS OF THE EQUALITY OFFICER
5.1 The issues for decision by me is whether or not (i) the complaints are properly before the Tribunal for investigation and if so, (ii) whether the respondent discriminated against the complainants on grounds of age, in terms of section 6(2) of the Employment Equality Acts, 1998 and 2004 and contrary to section 8 of those Acts when it placed a cap on the calculation of the redundancy package which applied on termination of their employment at various dates in 2006 (See Appendix 1). In reaching my decision I have taken into consideration all of the submissions, both written and oral, submitted to the Tribunal.
5.2 The first matter which I must address is whether or not the complainants' claims are validly before this Tribunal for investigation. The essence of the respondent's arguments on this point is that the complainants voluntarily signed acknowledgements that the payments they received were in full and final settlement of all claim as a result of their employment with it - both statutory and at common law - and consequently they waived the right to pursue their claims under the employment equality legislation. It is common case that in the course of negotiations the parties agreed that the proposal in respect of the legal entitlement to redundancy of employees close to retirement age required further clarification and both undertook to obtain independent legal advice. The complainants' trade union sought this advice from the Employment Rights Unit of the Department of Enterprise, Trade and Employment (as it then was) and the Legal Section of the Equality Authority. It did not however seek independent legal advice from any other source. It is stated on the complainants' behalf that the subsequent opinion of the latter was that the manner in which it was proposed to treat the complainants was not contrary to the Acts and as this concurred with the respondent's advice, the union did not take issue with the proposal at that time. It did however raise the matter with the respondent subsequently when it received a contradictory view from the Equality Authority, asking it to "revisit" the matter and the respondent refused to re-open discussions and applied the terms as previously notified to the complainants' redundancy packages.
5.3 In Hurley v Royal Yacht Club the Circuit Court (Buckley J) when examining the question (on appeal from the Employment Appeals Tribunal) as to whether or not the claimant was precluded from pursuing his complaint by reason of having signed an agreement accepting certain payments in full discharge of all claims against his employer, held that no legitimate compromise agreement could be effected until the employee was in a proper position to agree to a compromise and concluded that such an agreement should have the following elements -
the employee was entitled to be advised of his entitlements under employment protection legislation.
any agreement should have listed all the various Acts applicable or made it clear that they had been taken into account by the employee.
the employee should have been advised, in writing, that he should take appropriate advice in relation to his rights
and went on to hold that in the absence of such advice the agreement was void and the claimant was entitled to pursue his claim. In PMPA Insurance Company Ltd v Keenan & Others Carroll J (High Court) held that the phrase "all claims" contained in a document which the Plaintiff purported prevented the Defendants from pursuing a claim of equal pay under the Anti-Discrimination (Pay) Act, 1974 could not be found to include "all claims by employees- e.g. including a claim by an employee for personal injuries against the company. The words must be limited by the context of the negotiations. In my opinion they could be construed as meaning all claims connected with the matters on which the trade union were negotiating" in that case rates of remuneration. The Supreme Court, on appeal, confirmed the judgement of Carroll J and stated "that the reference in the agreement to 'all claims' must be construed in the light of the salary claims made in the course of the negotiations leading to that agreement.".
5.4 In the course of the Hearing each of the complainants stated that they were called to an office by a member of the respondent Management and presented with the waiver document. They added that nothing was explained to them and whilst they were not coerced into signing the documents they were clearly under the impression that they had no alternative but to sign them. In the circumstances, I am satisfied that the complainants' waiver was not based on free and informed consent with the full knowledge of their legal rights. In my view the actions of the respondent fell well short of what the caselaw mentioned at paragraph 5.3 above requires. The caselaw indicates that the terms of a waiver must be construed against the party from whom it emanated and where there is doubt, the course of the negotiations between the parties must be examined so as to ascertain what was intended. The complainants trade union raised its concerns about the proposed treatment of the complainants in terms of the redundancy package for a second time in April, 2006 - when it received a conflicting view from the Equality Authority (to a previous view obtained from the same source) that elements of the redundancy proposals may be contrary to the employment equality legislation - and the respondent refused to re-examine the matter. The trade union later informed the respondent that if the matter was not resolved it would refer complaints to this Tribunal. In the circumstances I cannot accept that the complainants intended to waive their statutory right to refer such complaints when they signed the waiver documents. In light of the foregoing I find that the complainants did not enter into a binding and enforceable agreement which prevents them from pursuing their complaints to this Tribunal and those complaints are properly before me for investigation.
5.5 I shall now examine the second elements of the complaints - whether the respondent discriminated against them on grounds of age contrary to the Employment Equality Acts 1998 and 2004. Section 85A of the Acts sets out the burden of proof which applies to claims of discrimination. It requires a complainant to establish, in the first instance, facts upon which s/he can rely in asserting that s/he suffered discriminatory treatment on the grounds specified. It is only where such a prima facie case has been established that the onus shifts to the respondent to rebut the inference of discrimination raised. If the complainant does not discharge the initial probative burden required his case cannot succeed.
5.6 In the course of the Hearing the respondent confirmed that the details set out at Appendix 1 of this Decision in respect of each of the complainants was correct. In doing so, it accepts that each of the complainants suffered the shortfall indicated by applying the following arrangement to the terms of the complainants' redundancy packages - a gross payment equivalent to what the complainants would have been paid between their date of termination (i.e. date manufacturing ceases) and the date of their normal retirement (i.e. the date the employee reaches 65 years) plus a statutory redundancy payment provided that the combined payment does not exceed seven weeks per year of service (i.e. the sum of the two payments will not exceed the equivalent of seven weeks per year of service) I am satisfied that the application of this formula resulted in a cap on the complainants' entitlements (ex-gratia payments) and that the resulting shortfall was as a direct consequence of their age - in particular their proximity to the normal retirement age operated by the respondent. Such a cap did not apply to the calculation of similar entitlements to younger colleagues. Accordingly, I find that the complainants have established a prima facie case of discrimination on the grounds of age contrary to the Acts and the burden shifts to the respondent to rebut that inference.
5.7 The core of the respondent's case is that the approach it adopted is lawful in terms of section 34(3) of the Employment Equality Acts, 1998 and 2004 and that this provision in turn, is consistent with Article 6 of the Framework Directive. The complainants reject this argument. Section 34(3) of the Employment Equality Acts, 1998 and 2004 provides as follows-
"(3) In an occupational benefits scheme it shall not constitute discrimination on the age ground for an employer -
(a) to fix ages for admission to such a scheme.............
(d) to provide different rates of severance payment for different employees or groups or categories of employees, being rates based on or taking into account the period between the age of an employee on leaving the employment and his or her compulsory retirement age."
Section 34(3A) of the Acts defines "occupational benefits scheme" and "severance payment" for the purposes of section 34(3) as follows -
"(3A) 'occupational benefits scheme' includes any scheme (whether statutory or non- statutory) providing for benefits to employees or any categories of employees on their becoming ill, incapacitated or redundant but does not include any occupational pension scheme providing for pensions, gratuities or other allowances payable on retirement of death.
'severance payment' means a sum paid voluntarily by an employer to an employee otherwise than as pay when the employee leaves the employment.' .
5.8 It is common case that the "cap" applied to the ex-gratia payment of five weeks' pay per year of service which formed part of the complainants' redundancy package. This scenario is clearly a severance payment which comprised part of an occupational benefits scheme as defined by section 34(3A) of the Acts. It follows therefore that the approach adopted by the respondent complies with the exclusion provided at section 34(3)(d) of the Employment Equality Acts, 1998 and 2004. However, that is not the end of the matter. The Acts, inter alia, transpose the Framework Directive into national law. It is settled law that in interpreting national legislation national courts must do so in light of the wording and purpose of European legislation and where there is conflict between both, European legislation takes precedence. Article 6 of the Framework Directive permits Member States to legislate for exemptions to the principle of equal treatment on grounds of age, provided such exemptions are objectively justified. Section 34(3)(d) the Employment Equality Acts, 1998 and 2004 permits a derogation from the principle of equality of treatment derived from Community law. In Donnellan v The Minister for Justice, Equality and Law Reform et al. McKechnie J stated, in looking at the regulations governing the application of compulsory retirement ages of senior members of an Garda Síochána, that "national measures relating to retirement ages are not excluded from consideration under Directive 200/78/EC. Any discrimination with regards to age must, as put by that Directive, serve a legitimate aim or purpose and the means taken to achieve that purpose be appropriate....". In light of the foregoing I am satisfied that I can therefore construe section 34(3)(d) of the Acts in light of Article 6(1) of the Framework Directive. Consequently, it falls to the respondent to satisfy me that the approach it adopted in placing a "cap" on the complainants' entitlements is "objectively and reasonably justified by a legitimate aim ... and the means of achieving that aim are appropriate and necessary".
5.9 The respondent offered little argument by way of objective justification. It referred to the cost of implementing the redundancy scheme but provided no detail of same. In any event the ECJ has previously held that an employer cannot justify discrimination solely on grounds of increased costs. In the circumstances, I find that the respondent has failed to satisfy me that its actions, insofar as the treatment of the complainants is concerned, can be objectively justified and the complainants are therefore entitled to succeed in their claims.
6. DECISION OF THE EQUALITY OFFICER.
6.1 I have completed my investigation of this complaint and make the following Decision in accordance with section 79(6) of the Employment Equality Acts, 1998-2008. I find that -
(i) the complainants did not enter into a binding and enforceable agreement which prevents them from pursuing their complaints to this Tribunal and those complaints are properly before me for investigation,
(ii) the respondent discriminated against the complainants on grounds of age in terms of section 6(2) of the Employment Equality Acts 1998 and 2004 and contrary to section 8 of those Acts in relation to the manner in which it calculated their entitlements as regards redundancy packages on termination of their employment, (iii) the respondent has failed to objectively justify its actions in terms of section 34(3) of the Employment Equality Acts, 1998 and 2004 and Article 6 of the Framework Directive,
and the complainants are entitled to succeed with their claims.
6.2 In accordance with my powers under section 82(1) of the Acts, I order that the respondent pay each of the complainants the appropriate shortfall amount - as detailed at Appendix 1 to this Decision - and to calculate the effect of those payments, when added to the amounts previously paid to each of them and make the necessary adjustments which arise in terms of individual liability to the Revenue Commissioners having regard to the rules and regulations governing the taxation etc. of termination agreements on cessation of employment. I further order that the respondent pay to each complainant the sum of €4,000 by way of compensation for the distress suffered by them as a result of the discrimination. These amounts are not in the form of remuneration and are therefore not subject to the PAYE/PRSI Code.
26 April, 2011
LIST OF COMPLAINANTS
Details of Complainants
Name Years of Service Shortfall Date of Termination
1. Ms. Margaret Bryson 23.64 yrs €13,456 29/6/2006
2. Ms. Phyllis Needham 16.37 yrs €27,727 13/10/2006
3. Ms. Evelyn Dunnion 16.72 yrs €6,705 12/10/2006
4. Ms. Mary Roper 24.87 yrs €32,980 29/6/2006
5. Ms. Breege Ward 17.07 yrs €8,825 29/9/2006