EMPLOYMENT APPEALS TRIBUNAL
APPEAL OF: CASE NO.
Permanent TSB Plc PW372/2013
against the recommendation of the Rights Commissioner in the case of:
Jason O'Halleran
APPEAL(S) OF:
Mark Creane PW360/2013
Ann Kealy PW425/2013
Hannah Graham PW426/2013
Catherine Boxwell PW427/2013
Paula Howlett PW428/2013
Majella McAuley PW429/2013
against the recommendation of the Rights Commissioner in the case of:
Permanent TSB Plc T/A Permanent TSB, 56-59 St Stephen's Green, Dublin 2
Under
PAYMENT OF WAGES ACT, 1991
I certify that the Tribunal
(Division of Tribunal)
Chairman: Mr D. Hayes B.L.
Members: Mr. L. Tobin
Mr T. Brady
heard this appeal at Dublin on 4th February 2015
and 5th February 2015
and 18th February 2015
Appellant: Mr. T. Mallon BL instructed by Ms Noeleen Meehan solicitor
A & L Goodbody, Solicitors, IFSC, North Wall Quay, Dublin 1
Respondent: Mr R Ryan BL instructed by Mr Andrew Turner, Hamilton Turner, Solicitors, 66 Dame Street, Dublin 2
These cases came before the Tribunal by way of an employer appealing the recommendation of a Rights Commissioner under the Payment of Wages Act, 1991, (ref: r-132324-pw-13/SR) and by way of employees appealing the recommendation of a Rights Commissioner under the Payment of Wages Act, 1991, (refs: r-130242/130238/130243/133279/130237-pw-13/MMG and r-130943-pw-13/EH).
Determination:
These seven claims come before the Tribunal by way of appeals from recommendations of Rights Commissioners made under the Payment of Wages Act, 1991. All seven were at all relevant times employees of the respondent. All seven claims relate to the non-payment of salary increments to the appellants by the respondent. In one of the seven claims, that of Jason O’Halleran, (hereinafter “the first-named appellant”) the Rights Commissioner made a recommendation in favour of the employee. That recommendation was appealed by the employer. In each of the other six cases, the employees’ claims were unsuccessful before the Rights Commissioners. Each of those six employees has appealed his or her respective recommendation to the Tribunal. For the sake of clarity, each employee will be referred to as an appellant in this determination and the employer will at all times be referred to as the respondent, notwithstanding that the contrary is correct in the case of the first-named appellant.
Each appellant had, until 2009, received an annual increment in salary. This situation also applied to many other, but not all, employees of the respondent. As the financial crisis took hold, the respondent was one of the banks that required substantial assistance from the State. In January 2009 the respondent unilaterally stopped the payment of increments to its staff. In the course of 2009 talks took place at the Labour Relations Commission. These talks culminated in a November 2009 agreement the effect of which was that the respondent would pay to all staff a 2.5% increase on the first €55,000 of salary in 2009 and would pay a further 2.5% in 2010. These payments were to be in lieu of all increments and performance-related payments payable during the currency of the agreement. When the agreement expired in January 2011, none of the appellants, in common with their colleagues, received any further increments in their salaries to which they say they were contractually entitled.
The first-named appellant, Mr O’Halleran, has been a permanent employee of the respondent since 2001. He received a salary increment each year up to 2008 in the approximate amount of €1,300. The increment was divided by twelve and added to his monthly salary. His salary increased each year by the amount of the increment. It was automatically added. He did not have to apply for it to be paid. His contract of employment referred to the payment of increments in the following terms:
“Salaries are reviewed annually and are normally incremented on the anniversary of your joining the Company.”
He was not paid his increment in 2009. It was his understanding of the 2009 agreement that the payment of increments would resume in 2011 and that the payments under the agreement were in lieu of increments. He did not receive any further increments. He was not consulted about the issue of the reinstatement of increments and he did not consent to what he considered to be a reduction in pay.
The second-named appellant, Mr Creane, has been an employee since 2000. He received salary increments each year until 2008 and he had the benefit of the 2009 agreement. He never had to ask for his increment to be paid. As far as he was concerned it was added automatically. He was not aware of any meetings in which the payment of increments was reviewed. His increments were not reinstated. He did not consent to their non-payment. His contract of employment referred to the payment of increments in the following terms:
“Salaries are reviewed annually and are normally incremented on the anniversary of your joining the Company.”
The third-named appellant, Ms Kealy, had commenced employment on 9th January 2008. She received an increment in January 2009. She told the Tribunal that she understood that the increment was to be paid each year. When she was paid her increment in January 2009 she did
not have to ask for its payment. She told the Tribunal that there was no assessment by the respondent of whether she was eligible for the payment of an increment. She had participated in the 2009 agreement and had received no increments since its expiry. She also told the Tribunal that it some bonuses had since been paid to other staff and that extra staff had been employed. Her contract of employment referred to the payment of increments in the following terms:
“Salaries are reviewed annually and increments are normally implemented on the anniversary of your start date.”
The fourth appellant, Ms Graham, had been an employee since 2004. She received annual increments up until 2008. She participated in the 2009 agreement and has received no increments since its expiry. In each of the years in which she received increments she had not met anyone to discuss it and she said that no review had been carried out in advance of any such payment. Her contract of employment referred to the payment of increments in the following terms:
“Salaries are reviewed annually and are normally incremented on the anniversary of your joining the Company.”
The fifth-named appellant, Ms Boxwell, had commenced employment with the respondent on 9th January 2008. She received an increment in January 2009. Before the increment was paid in January 2009, she said that there was no discussion about whether she was entitled to the increment. She participated in the 2009 agreement and the payment of increments did not resume on the expiry of that agreement as had been her understanding. Her contract of employment referred to the payment of increments in the following terms:
“Salaries are reviewed annually and increments are normally implemented on the anniversary of your start date.”
The sixth-named appellant, Ms Howlett, had commenced employment on a fixed term contract in May 2003 and became a permanent employee in May 2004. Thereafter she received annual increments up to the payment of the 2008 increment. She said that on each occasion it was an automatic payment and did not involve any appraisal or assessment. She had never had to ask for it to be paid. She had participated in the 2009 agreement and had not received any increments after the expiry of that agreement. Her contract of employment referred to the payment of increments in the following terms:
“Salaries are reviewed annually and are normally incremented on the anniversary of your joining the Company.”
The seventh-named appellant, Ms McAuley, had been an employee since 1993. She had received salary increments from 1994 until 2008. It was paid automatically and she never had to ask for it to be paid. She said that there was never any discussion about whether she would receive it in any given year. She participated in the 2009 agreement and did not receive any further increments upon its expiry. She had no written contract of employment.
The respondent’s former employee relations manager, FS, gave evidence and told the Tribunal that he had been in that role for some twenty five years up until about 2014. He said that increments had stopped in January 2009 and that this had been a unilateral move on the respondent’s part. There were subsequent negotiations under the auspices of the Labour Relations Commission culminating in a November 2009 agreement. The agreement relating to the whole of the Irish Life and Permanent group of which one part was the respondent bank and the other the Irish Life insurance company. The group at that time had about five thousand employees of whom about half worked for the respondent. Of those, approximately one thousand were subject to increments. The agreement dealt with increments, performance-related pay, bonuses, profit-sharing schemes and compulsory redundancies. Since November 2009 the respondent’s employees had reduced to about one thousand eight hundred and the number of branches from about one hundred and ten to about eighty.
In cross-examination, FS accepted that increments had been paid each year up to 2009. However, he disagreed that such payments had been automatically made. He said that there was an annual board approval of the payment of increments. He said that the review did not take place on an individual basis but on the basis of whether to pay increments generally. The only circumstance in which the payment of an increment would be considered on an individual basis was in a disciplinary context. Such a context did not arise in respect of any of these appellants. He said that until 2009 the board had never had a reason not to pay the increment and accordingly they had always been paid. That had changed when matters were reviewed in January 2009. He did not agree that the agreement provided that the increments would be reinstated in 2011 on the expiry of the agreement. He said that in 2009 there had been an expectation that things would be better by 2011 and that the respondent could go back to the payment of increments but that there was no explicit agreement that this would happen.
The respondent’s head of financial planning, BT, told the Tribunal that she is a qualified accountant and has been in the respondent’s employment since 2014. She told the Tribunal that a stress test in March 2011 indicated that the respondent was in need of €4bn of capital. This was raised by the sale of Irish Life and by the State taking control of 99.3% of the company in return for a €2.75bn capital injection. The respondent had been profitable until 2008 but that from 2009 until the first half of 2014 had sustained cumulative losses in excess of €2.3bn. She said that the cost-income ratio was 113% compared to a target of 50%. As a result severe actions had been taken to reduce costs. She told the Tribunal that the five-year cumulative effect of the payment of increments would require the respondent to increase its output by 65%.
BT also discussed the provisions of a placing agreement, made under the Credit Institutions (Stabilisation) Act, 2010, and the terms of an associated letter from the Minister for Finance which made provision for the approval of a variable pay component of remuneration. She told the Tribunal that it was not conceivable that, when still loss-making, the respondent would seek approval to make payments that would have the consequence of increasing losses. Approval had been sought and obtained for the payment of performance bonuses to certain staff engaged in the retail end of the respondent’s business. BT told the Tribunal that there was a case to be made for such payments where they created a value for the respondent’s business but that where they did not have the potential to create value, there was no case for making such payments.
A placing agreement was entered into by the Minister for Finance, the National Treasury Management Agency (NTMA), Irish Life & Permanent Group Holdings plc and the
respondent on 27th June 2011. Under the terms of the placing agreement the respondent was required to comply with the provisions of the Minister for Finance’s letter of the same date. The Minister’s letter directed that no performance bonus be paid by any group company, which included the respondent. It further provided that no form of remuneration with any variable pay component was to be paid to any employee save with the prior written consent of NTMA. It also provided for the release of the respondent from the strictures of the Minister’s letter in certain circumstances in respect of statutory or pre-existing contractual rights of any employee. It does not appear that the respondent sought to trigger this release in respect of any of the appellants in this case.
The Tribunal was greatly assisted by both written and oral submissions made by Counsel for the appellants and Counsel for the respondent.
In essence it is the respondent’s case that the Tribunal must consider a number of propositions in sequence. If the Tribunal accepts any one of the respondent’s submissions, then these claims must be determined in the respondent’s favour. They can be summarised as follows:
- There is no contractual entitlement on the part of any claimant to the payment of an increment and, accordingly, their claims do not fall within the terms of the Payment of Wages Act;
- If there was a contractual entitlement, then the non-payment constituted a reduction in pay rather than a deduction, thereby taking it outside the terms of the Payment of Wages Act;
- If it was in fact a deduction then it was authorised by the provisions of the Credit Institutions (Stabilisation) Act, 2010, provisions of the placing agreement and the Minister’s Letter; and
- If it was not so authorised, then the Tribunal should take account of the respondent’s financial circumstances and award nil compensation in each case.
In respect of the second limb outlined above, the Tribunal was directed to the decision of the High Court in the case of McKenzie & Anor v. The Minister for Finance & Anor [2010] IEHC 461 and the discussion therein on the distinction between a reduction and a deduction in pay.
The Tribunal was also referred to an earlier determination of the Tribunal in the case of Sullivan v. Department of Education [1998] 9 ELR 217 where the Tribunal, having noted that the definition of wages includes all sums to which an employee is properly entitled, held that, if an employee does not receive what is properly payable to him or her from the outset, it can amount to a deduction within the meaning of the Payment of Wages Act.
The High Court in the case of Dunnes Stores (Cornelscourt) Ltd v. Lacey & Anor [2007] 1 IR 478 made it clear that a determination of the question of what remuneration is properly payable to an employee is essential to the resolution of a claim under the Payment of Wages Act.
The Tribunal must consider whether the non-payment of the increment in the circumstances of this case was a deduction from pay within the meaning of the Payment of Wages Act; whether it was a reduction in pay falling outside the terms of the Act; whether any non-payment was authorised or required by any or all of the Credit Institutions (Stabilisation) Act, 2010, the
placing agreement or the Minister’s Letter; or whether the Tribunal should award compensation notwithstanding there being meritorious claims. However, before considering any of these matters, it seems to the Tribunal that it must firstly determine what remuneration was properly payable to the appellants.
The Payment of Wages Act, in section 1(1), defines wages as:
“wages”, in relation to an employee, means any sums payable to the employee by the employer in connection with his employment, including—
(a) any fee, bonus or commission, or any holiday, sick or maternity pay, or any other emolument, referable to his employment, whether payable under his contract of employment or otherwise, and
(b) any sum payable to the employee upon the termination by the employer of his contract of employment without his having given to the employee the appropriate prior notice of the termination, being a sum paid in lieu of the giving of such notice…
Section 5 regulates the making of deductions and provides in section 5(1) as follows:
An employer shall not make a deduction from the wages of an employee (or receive any payment from an employee) unless—
(a) the deduction (or payment) is required or authorised to be made by virtue of any statute or any instrument made under statute,
(b) the deduction (or payment) is required or authorised to be made by virtue of a term of the employee's contract of employment included in the contract before, and in force at the time of, the deduction or payment, or
(c) in the case of a deduction, the employee has given his prior consent in writing to it.
Section 5(6) provides as follows:
Where—
(a) the total amount of any wages that are paid on any occasion by an employer to an employee is less than the total amount of wages that is properly payable by him to the employee on that occasion (after making any deductions therefrom that fall to be made and are in accordance with this Act), or
(b) none of the wages that are properly payable to an employee by an employer on any occasion (after making any such deductions as aforesaid) are paid to the employee,
then, except in so far as the deficiency or non-payment is attributable to an error of computation, the amount of the deficiency or non-payment shall be treated as a deduction made by the employer from the wages of the employee on the occasion.
Each of the appellants gave evidence that they had not consented to any deduction in their wages and the Tribunal accepts that evidence.
It was submitted on behalf of the appellants that the practice of paying increments was firmly established in the company since at least 1978 and that they were paid each year as a matter of course up to and including 2008. There does not appear to be any dispute about that. FS, in cross-examination, accepted that it was so.
It was further submitted that the appellants had a contractual right to the payment of the increment. It is the appellants’ case that the respondent had no discretion in relation to the payment of the increments and that such a suggestion does not accord with what had in fact happened up to 2008. It was submitted that the appellants’ contracts do not provide for a discretionary payment of increments. Had it been intended that they were discretionary payments the contracts would have provided for that but no such provision was made.
It was further submitted that, if the payments were discretionary, there would have been no need to enter into the LRC-facilitated agreement whereby there was to be flat salary increases in lieu of the payment of increments. Further, why would that agreement have provided that increments would next fall due for payment beginning in January 2011? That the increments next falling due for payment was only consistent with there being an obligation to pay.
It was submitted on behalf of the respondent that, in respect of each of the six appellants with a written contract of employment, each contract provided that the salaries would be reviewed annually. It was submitted that “reviewed annually” does not mean “increased annually”. It was submitted that the word “reviewed”, when considered by a reasonable person and in its natural and ordinary meaning, means “will be considered” and cannot refer to an entitlement to an automatic increase.
It was further submitted by the respondent that the evidence of FS bore out the contention that salaries were reviewed annually by a Board committee and that it was part of the function of that committee to approve the payment of increments for the forthcoming year. It was submitted that the contractual provision meant that salaries would be reviewed by management and that increments would usually, but not always, be paid.
In respect of the LRC agreement, the Tribunal is satisfied that it did not relate solely to the payment of increments. Nor did it relate solely to the employees of the respondent. It related to some five thousand Group employees of whom approximately half were in the respondent’s employment. Of that half, some thousand were subject to the payment of increments. In addition to salary increments, the agreement dealt with performance-related payments, pensions, job security, compulsory redundancies and the Group profit share scheme. It was suggested to the first-named appellant in cross-examination that this agreement was, to a large extent, about the buying of industrial peace and there does seem to be some merit to that suggestion. However, it is unclear to what extent the terms of this agreement assist the Tribunal in that it also provides that the agreement “is not intended to permanently alter traditional established remuneration arrangements.” It still falls to the Tribunal to determine what the remuneration arrangements were. In other words, what was properly payable to the appellants?
In considering what was properly payable to the appellants, it is of some assistance to look at the established practice within the company. It is clear that since their respective employments had commenced all of the appellants had received an annual increment up until they received their 2008 increment, except in the case of the third-named appellant who received her 2009 increment in early January 2009 shortly, it would appear, before the decision was taken to stop the payment of increments. It is also clear that none of the appellants ever engaged or were asked to engage in any for of a review in respect of the payment of increments. However, that does not mean that no such review ever took place. The Tribunal heard evidence from FS who said that the increments were never paid automatically and that were subject to Board approval each year. He said that they were reviewed annually and a decision made in respect of their payment. In all previous years up to 2009 the respondent had been making profits and there had never been a reason not to pay the increments. FS acknowledged that the employees themselves were not party to the review in respect of the payment of increments. This accords with the evidence given by each of the appellants. As far as they were concerned there was no process and no approval and they just received the increment each year. That does not, however, mean that the review did not take place. The Tribunal accepts the evidence of FS in this regard and finds that there was an annual review and a decision made in respect of the payment of increments. These payments were not automatic.
The Tribunal is also satisfied that it must have regard to the whole of the contractual clauses in relation to salaries. For the contract to mean what is urged on behalf of the appellants, the word “review” would have to not be present. The word review must mean something. If it had not been intended that a review of the salaries would take place, the contract would have simply provided that salaries would be increased each year. The Tribunal is satisfied that the contractual provision does not provide for an automatic increase.
The Tribunal is satisfied that there was no contractual entitlement to an automatic increase and that it finds that it was, in fact, the respondent’s practice to review the payment of increments on an annual basis and to make a decision whether to pay or not on an annual basis. Given the lack of contractual entitlement and given the annual practice, the Tribunal is satisfied that it was within the discretion of the respondent whether to pay the increments or not. Since the expiry of the LRC agreement in January 2011, the respondent has exercised that discretion not to pay the increments.
The Tribunal is satisfied that the increments only became properly payable when a decision was made upon review to pay them. Had the Board decided to pay the increments but had subsequently decided that it could no longer afford to, the Tribunal would have had to consider whether that constituted a deduction or a reduction; or whether it was authorised or required by any or all of the Credit Institutions (Stabilisation) Act, 2010, the placing agreement or the Minister’s Letter. The increments which were the subject of these claims were not properly payable within the meaning of the Payment of Wages Act, 1991. In the circumstances the Tribunal does not require to consider the latter elements of the respondent’s contentions as outlined above.
In respect of the first-named appellant, the Tribunal upholds the respondent’s appeal, and overturns the recommendation of the Rights Commissioner. The first-named respondent’s claim therefore fails.
In respect of the second-named to seventh-named appellants inclusive, the Tribunal dismisses their respective appeals and upholds the recommendation of the Rights Commissioner in each case thereby finding that each claim fails.
Sealed with the Seal of the
Employment Appeals Tribunal
This ________________________
(Sgd.) ________________________
(CHAIRMAN)