SECTION 7(1), PAYMENT OF WAGES ACT, 1991
BLACKROCK LEISURE LIMITED T/A BLACKROCK LEISURE
(REPRESENTED BY MS. SARAH JANE JUDGE B.L.
INSTRUCTED BY TIERNANS SOLICITORS)
- AND -
(REPRESENTED BY RICHARD H MC DONNELL SOLICITORS)
Chairman: Mr Geraghty
Employer Member: Ms Doyle
Worker Member: Mr Hall
1. Appeal Of Adjudication Officer Decision No. ADJ-00008267.
2. This is an appeal of an Adjudication Officer’s Decision made pursuant to Section 7(1) of the Payment of Wages Act, 1991. The appeal was heard by the Labour Court on 23rd July 2019 in accordance with Section 44 of the Workplace Relations Act, 2015. The following is the Court's Determination:-
Ms. Nulty, ‘the Complainant’, stated that she worked for Blackrock Leisure Ltd., ‘the Respondent’ from 2 September 2015 until 3 February 2017. Like much of the evidence in this case, this was disputed by the Respondent, who claimed that she was employed from 26 September 2016 . The claim was for a notice payment arising from her dismissal on the 3 February 2017.
The Complainant referred a case under the Act to the Workplace Relations Commission, (WRC). The Respondent did not attend the WRC hearing and the Adjudication Officer, (AO), found in favour of the Complainant,directed a payment to her of one week’s notice.
The Respondent appealed this decision to the Court.
The Complainant’s arguments
Ms. Ann-Marie Nulty
Ms. Nulty is the Complainant.
The witness gave evidence that she was employed by the Respondent from September 2015 to February 2017. She said that she was appointed as a manager from August 2016. This involved, among other duties, putting a roster together. At all times there would be 2 or 3 cashiers on the premises.
The Complainant stated that she knew Mr. Gary Mullen to be the owner of the Respondent, who also owned similar businesses in Dublin, Newry and Dundalk.
The witness denied that she had only ever worked 10 hours per week. On the contrary, she stated that she worked 4 to 5 days per week with work days of up to 10 hours per day. She stated that the casino stayed open past midnight every night, with a cut off time of 4am.
The witness described how she had been called out one night to turn off the alarm after a break in.
The witness described how party events were held on Bank Holiday week-ends, Christmas and Halloween and that the photographs showing the staff in costume were photographs of these events.
With regard to claims made by her, the witness stated as follows;
1 She had been required to work Bank Holidays between September 2015 and February 2017 and had never received any additional payment
2 She had been required frequently to work Sundays for no extra payment
3 She worked a 42 hour week with no scheduled breaks
4 On occasions she worked double shifts of up to 16 hours per day
5. That on the occasion of her dismissal she did not receive any notice payment
The witness denied that she had ever only worked 10 hours per week.
The witness stated that she had not claimed social welfare payments while working for the Respondent. She stated that she had repeatedly requested a contract of employment but had never received one. She stated also that she had been requesting pay slips for some time until they were provided for part of her earnings from September 2016.
Under cross examination, it was put to the Complainant that if, as she claimed, she was working full time from August 2015, then she had paid no tax and had benefitted accordingly up to September 2016, after which, she claimed, only part of her income was declared for tax, which also benefitted her. The Complainant agreed that she knew that she was liable to pay tax and said that she had sought pay-slips.
It was put to the witness that if, as she claimed, she worked full-time then her P60, which reflects her pay-slips, must be wrong. She was asked why, if this was so, she had not contacted her employer? She replied that she had not done so as she had left her employment.
It was put to the witness, and accepted by her, that she had no documentary evidence to support her claims.
The witness stated that, after pay-slips were introduced, she was given cheques for the amounts shown on the pay-slips and the remainder of her wages was paid in cash. Prior to that, all her wages had been paid in cash, which had been left in an envelope in the safe.
The Complainant was employed from 26 September 2016 to 3 February 2017.
The Complainant was dismissed for gross misconduct, so she had no entitlement to a minimum notice payment.
There must be a legal contract of employment between the parties if the Complainant is to be entitled to redress. The only pay slips available do not support the Complainant’s claim as to when she started work. If the Complainant’s version of events is favoured by the Court then the Complainant was aware that she would receive her wages in cash without deduction of income tax and was, therefore, fully complicit in the arrangement. In the case of a contract which is neither entered into for an illegal purpose nor prohibited by statute, the performance of the contract to be unenforceable requires not just that it involves illegality but also that the employee actively participated in the illegality.
In the case ofHayden v. Sean Quinn Properties Limited(1994) ELR 54although it was found that a wrongful dismissal had occurred, because the contract involved a fraud on the Revenue, it was found that the contract itself was an illegal one and because the Plaintiff in that case ‘allowed himself to agree to something which would benefit the defendant at the expense of the Revenue..’, the Plaintiff’s claim was deemed to fall. (Reference was made also to the ruling inHussein v The Labour Court (HC) (2014)).
If the Complainant’s version of events is favoured then she was fully complicit and her contract of employment was tainted by illegality.
Ms. Ann Connolly
Ms. Connolly stated that she was the Office Manager for the Respondent.
The witness stated that the Complainant worked 10 hours per week for the Respondent and that she commenced working for the Respondent in September 2016. She stated that the Complainant had started as a cashier and had helped out in emptying the machines and had assisted with events.
In respect of the various claims made by the Complainant, the witness stated as follows;
1 The Complainant never worked Bank Holidays
2 To the best of the witness’ knowledge, the Complainant never worked Sundays
3 As the Complainant only worked 10 hours per week, she did not have an entitlement to breaks
4 No reduction in pay had ever been imposed on the Complainant and none is shown on the pay slips
5 The Complainant received a cheque for €193.78 in respect of her holiday entitlements when she was dismissed
6 The Complainant was given a contract of employment at the end of September 2016, which she never signed
7 The Complainant was dismissed for gross misconduct and had no entitlement to a notice payment.
The witness did not have a copy of the contract given to the Complainant and could not explain why the Respondent had failed to provide the complainant with all relevant HR documents when requested to do so. The witness said that other cashiers had signed their contracts.
The witness was shown 2 photographs, one from 1 November 2015 and one from August 2016 from the Respondent’s Facebook page. Both showed the Complainant. The first showed a ‘Happy Halloween’ message from the Respondent and the second showed a ‘Thank you’ message from all the staff of the Respondent to all who came to the Respondent’s party. The witness confirmed that the Complainant was not in the photographs as a regular customer but she was unable to explain her presence. The witness also claimed not to recognise a number of those in the second photograph.
In response to a query on the attendance of the Director at the premises, the witness stated that the Director, Ms. McGarrity, was frequently on the premises alone.
The Applicable Law
Payment of Wages Act s.1 defines what constitutes wages for the purpose of the Act
- 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:
Provided however that the following payments shall not be regarded as wages for the purposes of this definition:
(i) any payment in respect of expenses incurred by the employee in carrying out his employment,
(ii) any payment by way of a pension, allowance or gratuity in connection with the death, or the retirement or resignation from his employment, of the employee or as compensation for loss of office,
(iv) any payment to the employee otherwise than in his capacity as an employee,
(v) any payment in kind or benefit in kind
- Section 5(1) sets out the prohibitions on the employer to make a deduction from wages
5.— (1) 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 6 provides as follows:
Complaint to adjudication officer undersection 41of Workplace Relations Act 2015
- 6. (1) A decision of an adjudication officer undersection 41of the Workplace Relations Act 2015, in relation to a complaint of a contravention of section 5 as respects a deduction made by an employer from the wages of an employee or the receipt from an employee by an employer of a payment, that the complaint is, in whole or in part, well founded as respects the deduction or payment shall include a direction to the employer to pay to the employee compensation of such amount (if any) as he considers reasonable in the circumstances not exceeding —
( a ) the net amount of the wages (after the making of any lawful deduction therefrom) that —
(i) in case the complaint related to a deduction, would have been paid to the employee in respect of the week immediately preceding the date of the deduction if the deduction had not been made, or
(ii) in case the complaint related to a payment, were paid to the employee in respect of the week immediately preceding the date of payment,
- ( b ) if the amount of the deduction or payment is greater than the amount referred to in paragraph (a) , twice the former amount.
(2) ( a ) An adjudication officer shall not give a decision referred to in subsection (1) in relation to a deduction or payment referred to in that subsection at any time after the commencement of the hearing of proceedings in a court brought by the employee concerned in respect of the deduction or payment.
( b ) An employee shall not be entitled to recover any amount in proceedings in a court in respect of such a deduction or payment as aforesaid at any time after an adjudication officer has given a decision referred to in subsection (1) in relation to the deduction or payment.
This is a claim by the Complainant for a payment in lieu of notice. The agreed evidence is that the employee was dismissed without notice. The Court has determined, in a parallel case, that the Complainant was the subject of an unfair dismissal under the Unfair Dismissals Act and compensation was awarded for lost earnings. In circumstances where summary dismissal is unlawful then an entitlement to notice or, more properly, payment in lieu of notice arises.
The case is complicated by the Respondent's argument that because the performance of the contract was unlawful, the contract itself and any statutory rights flowing from it, are unenforceable.
The legal principle was enunciated in a case from 1772 calledHolman v Johnsonin which Lord Mansfield summed it up as follows; ‘No court will lend its aid to a man who founds his cause of action upon an immoral or an illegal act’.
As case law has developed, the courts have taken the view that much depends on the importance of the term that involves the illegality and the extent to which the person seeking to enforce the contract participated in the illegality.
InRed Sail Frozen Foods v Companies Acts (2007) ELR 246Laffoy J. noted the comments of Gibson LJ inHall v Woolston Hall Leisure Limitedas follows; ‘In cases where the contract of employment is neither entered into for an illegal purpose nor prohibited by statute, the illegal performance of the contract will not render the contract unenforceable unless in addition to knowledge of the facts which make the performance illegal the employee actively participates in the illegal performance. It is a question of the facts in each case whether there has been a sufficient degree of participation by the employee’.
The case ofHall v Woolston Hall Leisure Limited  EWCA Civ 170involved a situation where the employee negotiated a pay rise. She asked for £250 per week net of deductions and that was what she got. The pay slips which accompanied her wages however, showed gross pay of £250, deductions of £63.35 and a net sum of £186.65. She said that when she queried this she was told ‘this was the way we do business’. The Tribunal found that the employee was turning a blind eye to the illegality and that she knew the Inland Revenue was being defaulted and, in those circumstances, participated in the illegality.
The Court of Appeal disagreed with this finding. It said:“There was nothing illegal about Mrs Hall's contract when she was first appointed sous chef on 15thJuly 1994, or when it was varied by her promotion to head chef in or about September 1994 at an increased pay of £250 per week net of deductions. There is nothing necessarily wrong or illegal in agreeing to pay an employee a sum net of deductions: seeMiller v. Karlinski(1945) 62 TLR 85, 86 per du Parcq LJ cited inNewland v. Simons & Willer Ltd. ICR 521, 527D-E. After her pay increase, however, although Mrs Hall received £250 net as agreed, she noticed that her pay slips showed a gross pay of £250 and a net pay of £186.65, with deductions purportedly made of £63.35 per week. On querying this with the respondent she was told simply "It's the way we do business". So matters continued, evidently, for some 5 or so months. The Industrial Tribunal held that Mrs Hall was turning a blind eye to the fact, and knew, that the Revenue was being defrauded.
It is a fact that Mrs Hall continued to receive payslips and did not report her employers to any authorities. But, as Peter Gibson LJ has said, there was no positive duty on Mrs Hall to pay or do anything (cfRC v. Herd 1 WLR 1090), nor was she herself guilty of any unlawful conduct. Her continuing passive receipt of payslips, after her initial query, cannot in my view be regarded as making her a party to her employers' plan to deceive, or as amounting to participation in it such as to preclude her from enforcing her contract of employment.
I consider that the Industrial Tribunal and Employment Appeal Tribunal were wrong to regard Mrs Hall as involved in her employer's unlawful scheme in any way that disabled her under English law from enforcing her contract of employment, even if she had, by her present claim, been seeking to enforce it.”
In the Supreme Court decisionof Quinn -v- Irish Bank Resolution Corporation Limited (In Special Liquidation) & Ors  IESC 29Clarke J,said as follows, albeit obiter:“ the case of Lewis v. Squash Ireland  I.L.R.M. 363,can, I think fairly, be said to represent the orthodox position in this jurisdiction and has also been implicitly recognised by the courts.
The case concerned the alleged unfair dismissal of a director of the respondent company. The decision focused on a sum of €2,000 which the appellant director received annually in addition to his
annual salary. This sum was treated by the company as an expense for the purpose of tax evasion, thereby defrauding the Revenue. The Tribunal, having distinguished the case from St. John Shipping held the illegality did not render the contract of employment void, but that the illegality caused the contract to be unenforceable.
In the view of the Tribunal, public policy rendered the illegal contract unenforceable. The Tribunal considered, relying on the decision of the Tribunal in Newland v. Simons and Willer Ltd.(1981) I.C.R. 521, that the essential question is “Has the employee knowingly been a party to the deception on the Revenue?”. The Tribunal decided, on a subjective test, that the employee in question had been party to the deception.
Since then the Unfair Dismissals Act has been amended by the Unfair Dismissals (Amendment) Act 1993 so that an employee now is, notwithstanding a contravention of the type which occurred in Lewis, entitled to redress under the Act in respect of his/her dismissal. This was observed by Laffoy J.in Re Red Sail Frozen Foods Ltd. (In Receivership)  2 I.R 361.
It was held that the amendment to the Unfair Dismissals Act 1977 did not impede an employee from successfully pursuing a claim under that Act. As regards holiday pay and arrears of wages, which were governed by the Protection of Employees (Employers' Insolvency) Act 1984, there was no such statutory provision and the common law rules on illegality were found to apply. However, the Department had adopted a pragmatic approach and made payments to the former employees on the basis of taxed payments to employees. Laffoy J. found that the Department made this decision either without regard to the issue of enforceability of the contracts of employment or, perhaps, was satisfied that no issue of enforceability arose. Laffoy J. held that it was lawful for the receiver to pay the arrears of wages and holiday pay to the Department in the circumstances.
The test therefore is active participation in addition to knowledge. It is for the person seeking to rely on the illegality to prove knowledge and participation.
In the instant case, some comparison can be drawn with the circumstances of theHallcase. The Complainant was certainly aware of the fact that her income was potentially subject to income tax and she was aware that this income was not being declared. She gave evidence under oath, however, that she had repeatedly requested a written contract and pay slips. The Court finds her evidence on this to be credible. Therefore, the Court accepts that she made efforts to put her contractual relationship on a legal footing. Any legal obligations to make deductions of tax and social protection payments rest with an employer and no evidence was offered to the Court of any complicit act on the part of the Complainant such as to amount to participation.
Under cross examination, it was put to the Complainant that she was a beneficiary of any alleged illegality. However, the Court is of the view that the efforts made by the Complainant to change this situation illustrate the difficulties in which she found herself as an employee in circumstances where, it is alleged, her employer was not compliant with the legal requirements to make accurate returns to the State authorities. Both the power and the responsibility to do so rested with her employer and, as Gibson LJ noted in the case of Ms. Hall, there is no positive duty on the Complainant to pay or do anything in such circumstances.
It is worth noting again the significant observation in that judgement that the continued passive acceptance of the situation ‘cannot, in my view, be regarded as making her a party to her employer’s plan to deceive, or as amounting to participation in it, such as to preclude her from enforcing her contract of employment’.
It is a reasonable interpretation of Laffoy J’s judgement in theRed Sailscase to say that she did not demur from the broad approach adopted in theHallcase that the test in such cases depends on evidence of active participation in any alleged illegality and that knowledge, of itself, is an insufficient basis to render contractual obligations to be unenforceable. While there is no doubt in the instant case that the Complainant had knowledge, it is up to the Respondent to prove active participation. The facts, as outlined to the Court, do not support such an assertion.
In view of this consideration, the Court accepts that the Complainant is entitled to the protections of the Act and upholds the decision of the AO to award one week’s notice pay based on her income declared for tax of €95 per week.
The decision of the Adjudication Officer is upheld.
Signed on behalf of the Labour Court
30 August 2019Deputy Chairman
Enquiries concerning this Determination should be addressed to Fiona McCarthy, Court Secretary.