SECTION 7(1), PAYMENT OF WAGES ACT, 1991
UNIVERSITY COLLEGE CORK TYNDALL NATIONAL INSTITUTE
(REPRESENTED BY MARK CONNAUGHTON, S.C., INSTRUCTED BY ARTHUR COX, SOLICITORS)
- AND -
MR FINBARR WALDRON
(REPRESENTED BY SERVICES INDUSTRIAL PROFESSIONAL TECHNICAL UNION)
1.Appeal of Adjudication Officer's Decision No. ADJ-00021590
The Adjudication Officer decided that the complaint of the Complainant was well founded.
The Complainant has been employed by the Respondent, initially on a one year contract since November 1991 which was renewed in 1992; and on a permanent contract since May 1993. He made Class A1 PRSI contributions throughout his employment until 2016. Following an application for review made by the Complainant to SCOPE section of the then Department of Employment Affairs and Social Protection (DEASP), it was determined that the Complainant’s employment was insurable at a modified rate of PRSI Class D.
That decision applied with effect from the commencement of the Complainant’s permanent employment on 1stMay 1993. The amount of a PRSI Class D contribution is less than PRSI Class A1 contributions.
The Complainant received refunds of PRSI contributions from the DEASP for a period of four years. The Respondent also made a refund of contributions to the Complainant in a lump sum payment in the amount of €29,568 made in December 2018.
The lump sum payment made by the Respondent was calculated by reference to the salary and contributions made by the Complainant since 1993 albeit not incorporating the period for which the DEASP had made a refund payment to the Complainant.
In making the calculation of the quantum of refund to be made to the Complainant, the Respondent made an adjustment so as to notionally apply a reduction in salary since 1993 reflective of what it considered the arrangements in place in the public sector whereby employees who paid a Class A1 PRSI contribution have, since 1995, been paid on a higher scale than employees who paid a Class D PRSI contribution.
The lump sum paid to the Complainant in November 2018 amounted to €29,568. The Complainant contends that the lump sum payment made to him was negatively affected by the Respondent’s incorporation into the method of calculation of quantum to be paid of a notional salary adjustment across the entire period.
That negative impact amounted, in the Complainant’s view, to a deduction of €48,458 from the total amount which should have been paid to him in December 2018.
There is no dispute between the parties as regards the mathematics of the calculations at issue before the Court.
Summary position of the Complainant
The Complainant contends that the total amount paid to him to him in December 2018 by way of a lump sum payment to address his overpayment of PRSI and pension contributions since 1993 was affected by a calculation made by the Respondent which reduced the payment to him by €48,458. He contends that this reduction amounts to an unlawful deduction within the meaning of the Act.
The Complainant contends that he was paid a personal rate of pay throughout his employment. There was no Scale A or Scale B in place in respect of his employment reflective rates of PRSI contribution. Across the entire period until 2016 no national pay agreement adjustments made to his rate of pay and pay progression was based on performance reviews.
The Complainant never gave his consent to the reduction which was applied to the lump sum payment made in December 2018 and neither was there in place a contractual terms which allowed for this reduction to be applied.
The monies claimed by the Complainant were properly payable to him.
Summary position of the Respondent.
In September 2017 the Respondent became aware of the outcome of a SCOPE review which found that the Complainant was insurable under the Social Welfare Acts at the modified rate of Class D PRSI. The decision of SCOPE had retrospective effect from 1stMay 1993. The Complainant therefore had paid a greater amount of employee PRSI contribution than he should have over the period from 1993 to 2017.
As a result of that decision the complainant was placed on the non-personal Pension Contribution salary scale with effect from 12thSeptember 2016 which meant that with effect from that date he was making PRSI contributions at the Class D rate and was making no personal pension contribution other than a contribution of 1.5% in relation to spouses and childrens’ benefits.
In effect his salary was reduced on that date from €85,603 to €81,322 as a result of his reclassification as a Class D employee. No aspect of this salary adjustment is in dispute between the parties. The salary adjustment reflected the position in place since 1995 with the issuance of Department of Finance Circular Letter 6/1995.
The Department of Employment Affairs and Social Protection refunded the Complainant in respect of overpaid employee PRSI contributions for the statutory period of four years.
The Respondent undertook to refund PRSI and pension contributions with effect from 1993 despite the fact that the vast bulk of any claim he might make was statute barred.
The Complainant was advised of the process to be employed to carry out a calculation of refund and the fact that an external party was to be engaged to carry out the detailed calculations. Payment of the lump sum was made in December 2018. The Respondent calculated the refund due to the Complainant on the basis that, had he been correctly classified as Class D from 1stMay 1993, he would have been paid a lower salary associated with Class D insurability.
Th Respondent submitted that due to the PRSI reclassification of the Complainant’s employment and its retrospective effect, the Respondent had overpaid him €48,548 in base salary and that such amount should be credited against the amount owed to him for overpayment by him of PRSI and pension contributions. A total payment of €29,568 was paid to the Complainant by the Respondent in December 2018.
The Respondent submitted that the Complainant, in light of the retrospective reclassification of the insurance class of his employment, was never properly entitled to his Class A salary and in allowing this overpayment to be credited against sums owed to him, no unlawful deduction occurred.
The Act at Section 5, in relevant part, provides as follows:
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.and
(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,
The dispute before the Court concerns a lump sum payment made in November 2018.
The Complainant had, throughout his employment up to the date of issuance of a decision by SCOPE section of the DEASP in 2017, made Social Welfare contributions at the Class A rate and had made personal pension contributions. That SCOPE decision determined that the Complainant was liable only for Social Welfare contributions at the D rate and was not liable for personal pension contributions.
The Complainant was, in accordance with the terms of the statute, refunded his Social Welfare contributions for a period of four years by the DEASP. No further statutory entitlement to a refund existed for the Complainant.
The Complainant, separately, in March 2017 had been placed on the Administrative Grade 7 scale of the employer with effect from September 2016 following an industrial relations process which culminated in a Labour Court recommendation in 2017.
Ultimately, following the SCOPE decision, he was placed on the lower salary scale for Grade 7 employees which was reserved for Grade 7 employees with an insurance liability at the Class D rate. The higher Grade 7 scale was reserved for Grade 7 employees with a liability to make Social Welfare and pension contributions at the Class A rate.
This arrangement for two scales with application to the same grade is a public service wide mechanism. That mechanism was introduced by Public Service circular 6/95. Under the terms of that circular, relevant public servants recruited after 1995 were liable to make DEASP contributions at the higher rate and in recognition of that liability, were paid at a higher rate of pay than public servants of the same grade whose liability was for the lower Class D contribution rate.
Following on from the re-classification of the Complainant for Social Welfare contribution purposes and the refund of four years contributions to him by DEASP, the employer undertook to refund the claimant his contributions dating back to 1993 by way of a lump sum payment.
This commitment by the employer followed some form of industrial relations engagement locally. The Court was informed by the parties that the outcome of that engagement was not reduced to writing.
The employer, in furtherance of its commitment, made a calculation which notionally placed the Complainant on a lower rate of pay for calculation of lump sum purposes with effect from 1993. That mechanism was employed to reflect the Respondent’s view that public servants who paid a higher rate of social welfare contribution have been, since 1995, paid more than colleagues of the same grade who paid a lower Social Welfare contribution rate. The employer calculated the full value of social welfare and pension contributions made by the Claimant and applied an offset to the sum of those contributions equal to the value of the notional application of a lower rate of pay to the Claimant since 1993.
The result of the calculation was that the employer made a payment of €29,568 to the Claimant in December 2018 in respect of the commitment to address his overpayment of contributions from 1993.
The Trade Union contends that the correct calculation would not have applied any notional reduction in rate of pay for calculation purposes and the Claimant would have received a lump sum payment equivalent to the full value of the contributions he had made since 1993.
The trade Union submitted on this basis that the lump sum paid to the Claimant should have amounted to €29,568 plus €48,548 which amounts to €78,116 in total. The Trade Union submitted that this amount was properly payable to the Claimant by way of wages in November 2018 and that the Respondent had made an unlawful deduction of €48,548 from the wages of the Complainant.
InMarek Balans v Tesco Ireland Limited  IEHC 55Finnegan J. considered Section 5 of the Act as follows
Section 5 of the Act of 1991 prohibits the making of deductions from wages save in certain circumstances. Section 5(6) provides that where 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, then, except insofar as the deficiency or non – payment is attributable to an error of computation, the amount of the deficiency or non – payment should be treated as a deduction made by the employer from the wages of the employee on the occasion.
Central to the court's analysis must be the concepts of wages properly payable and the circumstances in which, if there is a deficiency in respect of those such payments, it arose as a result of an error of computation.
The provisions of s. 5(6) of the Act of 1991 were considered by Finnegan P. inDunnes Stores (Cornelscourt) Limited v. Lacey  1 I.R. 478. A Rights Commissioner had found in favour of the respondents holding that the cessation of service pay amounted to an unlawful deduction, which was upheld by the EAT. It was argued that the EAT should address the question of remuneration properly payable to an employee before considering the question of a deduction or whether a deduction was unlawful. Finnegan P. concluded at p. 482:-
“I am satisfied upon careful perusal of the documents relied upon by the respondents that the same cannot represent the agreement or an acknowledgement of the agreement contended for but rather contain a clear denial of the existence of any such agreement. No other evidence of an agreement was proffered. In these circumstances I am satisfied that the Employment Appeals Tribunal erred in law in failing to address the question of the remuneration properly payable to the respondents, such a determination being essential to the making by it of a determination.
Insofar as a finding is implicit in the determination of the Employment Appeals Tribunal that the appellant agreed to pay to the respondents service pay and a long service increment, then such finding was made without evidence and indeed in the face of the evidence: I am satisfied that there has been no deduction of pay from the respondents within the terms of the Act of 1991 but rather their remuneration has been unilaterally increased by the appellant making a payment which recognises their long service in excess of that which was payable prior to the 18th September, 2002. In either case there has been an error or law. Accordingly I allow the appeal.”
This decision supports the proposition that the first matter which should be addressed by the Labour Court is to determine what wages are properly payable under the contract.It is clear therefore that in considering a complaint under the Act, this Court must first determine the amount of wages which were, within the meaning of the Act, properly payable on the occasion in question. It is only when that is determined can the Court proceed to examine whether that amount differs from that which was actually paid on the occasion and whether any difference amounted to a deduction within the meaning of the Act.
No submission has been made to the Court that the calculation contended for by the Trade Union was required by statute. Similarly, no submission has been made that the calculation contended for by the employer was required by statute. Neither has either party been able to point to any provision of the contract of employment of the Complainant which addressed how a matter such as the calculation of the lump sum of the nature involved in the within matter should be addressed.
No industrial relations agreement or other specific undertaking has been presented to the Court which would establish a liability for the calculation contended for by the Complainant or would provide for the calculation contended for by the employer.
The employer has submitted that where a benefit is accruing to the Claimant as a result of a decision of SCOPE section of the DEASP, it is reasonable to apply a calculation framework which reflects the treatment of persons with lower social welfare and pension liabilities in the employment since 1995.
This is all the more so according to the employer in a circumstance where there was no legal or contractual liability attaching to the employer to address the Claimant’s overpayment of Social Welfare contributions beyond the four year period addressed under statute by the DEASP.
The Trade Union contends that the calculation carried out by the employer is unreasonable and that the Complainant should have been paid a lump sum equivalent to the full value of the overpayment of Social Welfare contributions he has made between 1993 and 2016.
It is not for this Court under the Act to determine what is reasonable or unreasonable in a circumstance such as that outlined by the parties. The Act does not make provision for the determination of what wages are properly payable on an occasion on the basis of what the Court might think reasonable. Rather, the Act requires the Court, having investigated the matter, to make a determination as regards what wages were properly payable on a given date by reference to objective criteria.
In all the circumstances of this matter and in the absence of any objective determinant such as a contractual provision, a statute, an agreement between the parties or other provision placing a liability upon the Respondent in terms of calculation methodology or the quantum of lump sum to be paid, the Court must conclude that, within the meaning of the Act, the wages which were properly payable on the day were those which were decided upon by the Respondent and paid to the Complainant in the form of a lump sum.
The fact that the Trade Union believes that the lump sum payment should have been greater does not, of itself, create a means for the Court to conclude that a higher quantum was, within the meaning of the Act, properly payable on the occasion.
The Court, having determined that the wages paid by the employer in the lump sum payment made in December 2018 were the wages which, within the meaning of the Act, were properly payable on the occasion, must find that the complaint of the Claimant is not well founded.
For the reasons set out above the Court determines that the within complaint is not well founded.
The decision of the Adjudication Officer is set aside.
The Court so decides.
Enquiries concerning this Determination should be addressed to Ceola Cronin, Court Secretary.