ADJUDICATION OFFICER DECISION
Adjudication Reference: ADJ-00029093
Econocom Digital Finance Ltd
Alastair Purdy & Co. Solicitors
Alison Fynes BL
Complaint Reference No.
Date of Receipt
Complaint seeking adjudication by the Workplace Relations Commission under Section 8 of the Unfair Dismissals Act, 1977
Date of Adjudication Hearing: 11/10/2021
Workplace Relations Commission Adjudication Officer: Catherine Byrne
This complaint was submitted to the WRC on July 20th 2020 and, in accordance with section 8 of the Unfair Dismissals Acts 1977 - 2015, it was assigned to me by the Director General. Due to the closure of the WRC during the Covid-19 pandemic, a hearing was delayed until June 14th 2021. The hearing scheduled for that date was adjourned in anticipation of the amendment to the Workplace Relations Act 2015 arising from the decision of the Supreme Court in the case of Zalewski v Adjudication Officer and the WRC, Ireland and the Attorney General. A hearing then took place on October 11th 2021, in accordance with the Civil Law and Criminal Law (Miscellaneous Provisions) Act 2020 and Statutory Instrument 359/2020 which designates the Workplace Relations Commission as a body empowered to hold remote hearings. At the hearing, I made enquiries and gave the parties an opportunity to be heard and to present evidence relevant to the complaint.
The complainant, Mr Walsh, was represented by Mr Alastair Purdy of Alastair Purdy & Company, Solicitors. Econocom Digital Finance Limited, the respondent, was represented by Ms Alison Fynes, instructed by Ms Niamh Crotty of Lewis Silkin Solicitors. The respondent’s managing director, Ms Frances Weston and the human resources (HR) director, Ms Úna McGuinness attended the hearing and gave evidence. Before they gave evidence, the witnesses all affirmed their intention to tell the truth.
While the parties are named in this decision, for the remainder of the document, I will refer to Mr Walsh as “the complainant” and to Econocom Digital Finance Limited as “the respondent.”
The respondent is an Irish registered company, part of an international provider of finance and IT services to businesses in the private and public sectors. In 2020, the Irish business had six employees, including the complainant, who joined the company in November 2004 as a sales executive. By April 2020, he was an account manager on an annual salary of just over €120,000. The complainant’s job was made redundant on July 31st 2020 as a result of the closure of the sales operation in the respondent’s Dublin office. On the form he submitted to the WRC, he claimed that his dismissal due to redundancy was “a sham.”
Summary of Respondent’s Case:
In a submission provided to the WRC in advance of the hearing of this complaint, the respondent set out the reason for the closure of the sales operation in Ireland. The high costs associated with the Dublin business, and the decline in profit before tax since 2017 meant that the sales operation comprising two account managers could not be sustained. Detailed financial statements were provided in the respondent’s book of documents showing a decline in profit before tax from 11.7% in 2017, to -4.3% in 2020. A decision was made that risk and compliance would be the only aspect of the business that would remain in Ireland, and the complainant was not qualified to work in this area.
At separate meetings over Microsoft Teams on April 27th 2020, the complainant and his manager were informed that their jobs were being made redundant. The decision was unrelated to the complainant’s performance or his contribution to the business, but as a result of the closure of the sales operation. He was informed that there was no alternative to redundancy. Some correspondence was exchanged between the complainant and the HR director at the end of April and details of his redundancy lump sum and other termination payments were set out. A further meeting took place on May 1st 2020 and the HR director agreed to increase the complainant’s notice period from eight weeks to 12 weeks, meaning that his employment would terminate on July 31st 2020. On May 18th, Mr Purdy sent correspondence to the HR director, outlining the complainant’s rejection of the respondent’s decision to make his job redundant. On May 25th, Mr Purdy stated that he and the complainant were prepared to engage in mediation, as an alternative to submitting a complaint to the WRC. On June 12th, Mr Purdy wrote to the HR director to inform her that the complainant would accept his statutory redundancy entitlements under protest and stated that “litigation is for another day.”
On June 22nd 2020, the complainant went on garden leave, and his employment was terminated on July 31st. He received a statutory redundancy payment of €19,152, plus outstanding holiday pay and commission due up to the date that he finished work on June 22nd 2020 and on deals drawn down after he left. He submitted this complaint to the WRC on July 20th, and his employment was terminated on July 31st.
Dismissal was a Genuine Redundancy
It is the respondent’s case that the termination of the complainant’s employment was a genuine redundancy in accordance with section 7(2)(a) of the Redundancy Payments Act 1967 which provides that a redundancy arises in the context of the closure of a business or a part of a business. Referring to the two important characteristics in a redundancy situation, impersonality and change, the respondent referred to the decision of the Employment Appeals Tribunal (EAT) in the case of St Ledger v Frontline Distribution Limited which emphasised this point:
“This means change in the workforce. The most dramatic change of all is a complete close down. Change may also mean in the reduction in the need for employees or a reduction in number.”
As the redundancy of the complainant’s role was as a result of the closure of the sales operation in Dublin, the respondent submits that it was a genuine redundancy. The complainant worked as a sales executive and was not qualified to work on the risk and compliance team. It is the respondent’s case that the redundancy was impersonal in nature and due to a change in the workplace. It was entirely justified and unavoidable, due to the closure of the sales part of the business and there were no other roles that the complainant could have carried out.
Referring to section 6(7) of the Unfair Dismissals Act and the requirement for an employer to act reasonably when dismissing an employee, the respondent submitted that a “truncated” consultation process was required due to the fact that the sales operation was closing. In her submission, Ms Fynes referred to the decision of the EAT in the UK in Mugford v Midland Bank which noted the generally accepted principle that consultation will generally be required unless “a reasonable employer would have concluded that consultation would be an utterly futile exercise in that particular case.” The respondent argued that the fact that there were no discussions with the complainant regarding alternatives to redundancy in circumstances where such discussions would have been futile does not render the redundancy process as a whole unfair.
In this regard, the respondent relies on the decision of the EAT in 2013 in the case of Nigrell v Sandra Graham. Here, the employer appealed against a finding of the Rights Commissioner that their failure to consult with Ms Graham regarding her redundancy rendered her dismissal unfair. The EAT rejected this argument as it was “not persuaded that such prudent practices are mandatory with automatic consequences for employers that do not follow them.” Two adjudicators’ decisions were adduced in further support of this stance, ADJ-00018448 and ADJ-00023614.
The respondent argued that it conducted itself as a reasonable employer, having regard to the fact that the sales team in Dublin was impacted by the closure of the sales operation and that there were no suitable alternatives to redundancy. My Fynes submitted that the respondent behaved as a reasonable employer would do in the circumstances. She argued that the complainant’s dismissal was not made unfair by the truncated consultation process.
Notwithstanding the fact that no discussion took place regarding a possible alternative job for the complainant, the HR director engaged with the complainant in April and May 2020 to discuss the impact of the office closure and the redundancy of his job. She engaged with the complainant, focusing on “the real and practical implications of the office closure announcement.” He “was not brought through a protracted process causing unnecessary stress and uncertainty in circumstances where the outcome of the process was inevitable.”
It is the respondent’s case that the redundancy of the complainant’s role was inevitable in circumstances where the sales operation in Ireland was closing down. His dismissal on the redundancy ground was not unfair. There was no selection process to be considered and no suitable alternative job available to which he could have been appointed. The decision not to go through a protracted consultation process is in line with the outcome in Nigrell, which makes clear that there is no mandatory requirement to engage in consultation and that failing to consult does not render a dismissal unfair.
This complaint was initially scheduled for a hearing on June 14th 2021. In advance of that date, both sides submitted comprehensive statements regarding their respective positions concerning the dismissal of the complainant in July 2020. On October 1st 2021, in advance of the actual hearing on October 11th, in response to the respondent’s June 2021 submission, Mr Purdy sent what he referred to as a “targeted submission.” This focussed in the first instance, on a challenge to the financial statements and the sales record in the Dublin operation provided by the respondent in their original submission and secondly, a challenge to the authority of the respondent, a UK business entity, to dismiss the complainant, who was employed by an Irish entity. By way of rebuttal, the respondent’s solicitors sent a supplemental submission to the WRC in advance of the hearing on October 11th 2021.
The decision to close the Dublin sales operation and to make the complainant’s job redundant was based on the sales and turnover profit in the Dublin office over the last number of years and the associated costs of the sales team. The only two roles in the sales operation were made redundant.
The respondent denies the complainant’s assertion in the targeted submission that he achieved 85% of his sales targets for the financial year 2020, a year in which he worked for just six months. It is submitted that he achieved 29.87% of his revenue target for that period.
The complainant’s redundancy arose due to the poor profitability of the Dublin sales operation. This was part of the technology, management and finance (“TMF”) business which was under-performing and unprofitable. While the under-performing parts were down-sized, the respondent also carried out other activities involving the re-financing of non-Irish clients. The reference in the statutory accounts to Irish leasing activity do not relate to the TMF business, but to the company’s wider activities for European clients.
The respondent stands over its information regarding profit and loss from 2017 to 2020 and noted that the complainant produced no evidence to corroborate the “bald allegations” made in his targeted submission regarding profit and loss during that period.
Ostensible Authority to Dismiss the Complainant
The respondent is an Irish registered company which is part of the Econocom group. The respondent’s managing director, Ms Frances Weston, who dismissed the complainant and who attended the hearing to give evidence, is employed by the UK entity and is the most senior member of management of the Irish and UK branches of the company. She was responsible for the sales operation for the TMF business. Ms Weston is a member of the Board of Econocom UK Limited and of the Board of the Executive Committee. She is responsible for deciding on and executing cost-saving decisions in the Irish and UK entities. The decision to close the Dublin sales function was based on a review of the respondent’s sales and profit turnover over the previous number of years. As managing director of the UK and Irish operations, Ms Weston was authorised to make this decision and to terminate the complainant’s employment.
The respondent’s solicitor rejected the relevance of the decision of the High Court of Grenet v Electronic Arts Ireland Limited referred to by Mr Purdy in his targeted submission.
Evidence of the Managing Director
Ms Weston explained her role as the managing director of the Irish and UK businesses. She also set out the activity of the company, which is to provide leasing capital to companies, and to amortise the cost of technical spending. Having joined the business in March 2020, Ms Weston said that her role was to generate cost-saving initiatives and to regain stability for the group. She said that if the Irish TMF operation had been a standalone business, it would have been insolvent.
At a virtual meeting on April 27th 2020, Ms Weston said that she and the HR director informed the complainant that his role was redundant. She said that they explained that there were no alternatives to the closure of the sales operation and that the current financial situation and the Covid-19 pandemic had combined to make the operation untenable. She said that he was not qualified for a role in risk and compliance.
Asked about the handover of the complainant’s clients, Ms Weston said that the complainant was requested to handover uncompleted work to his manager in the UK, but that that manager was ill. Ms Weston said that she asked another executive to do a quick assessment of the complainant’s deals and then to pass them to a person in administration. This person did the maintenance and collection of payments, which took about a half day a week.
Referring to the complainant’s targeted submission and the challenge to the respondent’s financial statements, Ms Weston said that the most recent submission provided by the complainant’s solicitor refers to the entirety of the company’s activity in Ireland and the re-financing across 17 countries. Ms Weston said that the complainant’s submission attempts to “compare apples and oranges” and the statement is not about the re-financing of Irish clients.
Cross-examining of the Managing Director
In response to questions from Mr Purdy, Ms Weston said that she is the manager of the UK and Irish operations and a member of the company’s executive committee, comprising 17 country managers. They report to the company’s founder. Ms Weston said that the decision to close the Irish sales operation was taken by her predecessor before she joined the company in March 2020.
Mr Purdy asked Ms Weston about the second employee in the sales operation who was made redundant. She agreed that this employee received an ex-gratia payment in addition to his entitlement to statutory redundancy. Ms Weston said that this employee was the country manager for the Irish business. She said that he asked for the additional payment. She said, “if your client had asked, I would have been happy to give it.”
Mr Purdy referred to an email sent by the complainant on May 7th 2020 following a conversation with the HR director on May 1st. In paragraphs 3 and 4, the complainant addressed the issue of the redundancy payment that he was offered:
“3. Notwithstanding and without prejudice to the above, the offer of statutory redundancy to my mind was derisory and devaluing, particularly for a company of our size (circa €3Bn p.a.) and in light of the outstanding service I have given.
“4. I am reliably informed that the average redundancy package in Ireland is 4 weeks pay per year of service, plus Statutory and Notice period, calculated at On-Target-Earnings (OTE, not on base salary) plus Allowances (e.g. car) and Pension. Indeed all claims that go before the WRC in Ireland are based on OTE not on base salary. While I would dearly like to keep my job, this I would deem the basis of a reasonable redundancy package.”
Ms Weston said that she did not interpret this as asking for an ex-gratia package. She said that the company paid the complainant commission which was not yet allocated and she thought that was fair. She said that this was paid as an ex-gratia amount. She did not accept that, in the email referred to above, the complainant was seeking four weeks’ pay per year of service.
In response to a question from Mr Purdy, Ms Weston described the complainant’s job as agreeing credit lines with clients, agreeing spending, working with clients and their risk and compliance officers and placing credit lines with banks.
There followed a series of questions to Ms Weston concerning the complainant’s precise contribution to the sales business, compared to the company’s overall profit. She summarised the position by stating that the TMF business was “practically insolvent.”
On her arrival in the role, Ms Weston said that, as part of an overall cost-saving plan, she was instructed to close the sales operation in Dublin.
On the issue of an alternative role for the complainant, Mr Purdy asked Ms Weston if it would not have been prudent to “look at where he could have gone?” Ms Weston replied that, with many employees laid off due to the Covid pandemic, it wasn’t feasible to move anyone and the ability to offer an alternative role was impossible. Referring to the two executives named by Mr Purdy who were not laid off, she said that they were handling significant deals. She said that the Irish book is now maintained by an administrator and the second person to whom Mr Purdy referred has left the business.
Evidence of the Human Resources Director
Ms McGuinness is the director of HR for Ireland, the UK and the USA. Referring to the MS Teams meeting she and Ms Weston had with the complainant on April 27th 2020, Ms McGuinness said that they explained the need for cost-savings as the reason for the closure of the sales operation in Dublin. After the meeting, she said that sent the complainant the redundancy figures “to kick off the process” and “to work to agree a redundancy payment.” She said that she knew that the complainant was shocked. She got no reply to her email of April 27th and she wrote again on the 29th. When she got no response, she sent him an email to arrange a phone call. They spoke by telephone on May 1st and the complainant sent her an email on May 7th, setting out his response to the decision to make his job redundant. This is the correspondence in which the complainant sought an enhanced redundancy payment. Ms McGuinness replied on May 15th. There was no improvement on the offer of the statutory amount, although the notice period was extended from eight to 12 weeks.
Referring to her letter of June 9th 2021, in response to Mr Purdy’s letter of June 2nd, Ms McGuinness repeated the financial case that was the basis for the decision to close the Irish sales operation. She also explained that the complainant could not be offered a job in the compliance and risk part of the business, because he was not qualified to work in that area. He could not be offered a job in the UK, because part of that business was affected by Covid-19 and there were no vacancies.
Ms McGuinness responded to questions from Ms Fynes concerning the handover of the complainant’s remaining work to a colleague. He should have handed over his work to his UK manager, but this person was ill and instead he was instructed to hand over to an executive who joined the company in April 2020. This person has since left. She said that this colleague “babysat” the accounts in addition to his role as head of structured finance for the marine sector.
Ms McGuinness said that the complainant was paid commission on his clients’ deals up to October or November 2020. The commission was paid before it was earned. Ms McGuinness said that she had “a lot of back and forth about commission” and that she worked with the complainant to ensure that he was paid the commission he was due.
Cross-examining of the Human Resources Director
Following some argument about who made the decision to close the Irish operation, Mr Purdy moved to the issue of the ex-gratia payment given to the complainant’s manager who was also made redundant. Ms McGuinness argued that the complainant was given extra in the form of commission that was due to come in in October. He also received more holiday pay than he was entitled to and he was paid three months’ pay in lieu of notice.
Ms McGuinness said that it was normal not to consult with employees when there were just two people affected and the business unit was closing.
Taking issue with the figures set out in the letter of June 9th 2021 from Ms McGuinness to Mr Purdy, Mr Purdy asked why, if things were so bad in 2017, another person was hired. Ms McGuinness said that the second sales executive was recruited to try to improve things.
Regarding an alternative role for the complainant, Ms McGuinness said that they looked at the UK, but the team there were “furloughed.” The role carried out by the person the complainant handed over to was entirely different, as he worked in structured finance related to the marine industry.
Ms Fynes summarised the respondent’s case that the complainant’s role was redundant and that his dismissal was necessary due to the profitability issue in the Irish sales business. She said that he was selected based on objective criteria and that there was no alternative to the redundancy of his role. While there was business in Northern Ireland, the problem was the loss of revenue in Ireland. She said that the decision was not personal, and that the entire Dublin sales operation comprising two employees was affected.
Ms Fynes asserted that the complainant was not singled out for redundancy, and she disputed the relevance of the Mulligan v J2 Global case (cited at page 10 below). She also argued that other precedents referred to by Mr Purdy are not relevant to the complainant’s case, as they refer to the selection of certain employees for redundancy, whereas the complainant and his manager were the only two employees in their department and there was no issue with selection.
Referring to what was described as a “truncated” redundancy process, Ms Fynes said that the respondent acted reasonably in this regard. She said that there is no statutory entitlement to appeal against a decision to make a job redundant. She said that, the HR director engaged continuously with the complainant, but that discussions about an alternative role would have been futile.
Considering the issue of the authority of the managing director to dismiss the complainant, Ms Fynes said that the managing director is a member of the Board of Directors of the UK entity and a member of the Executive Committee of the company. She asserted that Ms Weston had authority to terminate the complainant’s employment due to redundancy and that she exercised that authority.
Summary of Complainant’s Case:
On April 27th 2020, the complainant was invited to a meeting on Microsoft Teams, the purpose of which was unknown to him. A screen-print of the email invitation included in the complainant’s book of documents shows that no purpose or agenda was included in the meeting invitation. At the meeting, the complainant was informed by the managing director, Ms Weston, that his job was redundant. On the same day, after the meeting, the HR director, Ms McGuinness, sent the complainant a breakdown of his statutory redundancy entitlements. The complainant responded on May 7th, claiming that the redundancy pay was “derisory and devaluing” and he sought enhanced terms of four weeks’ pay per year of service. In a reply on May 11th, Ms McGuinness rejected the complainant’s request.
Correspondence was then exchanged between Mr Purdy and Ms McGuinness. Mr Purdy referred to the lack of process, consultation and the exploration of an alternative job for the complainant. On June 9th, Mr Purdy argues, for the first time, Ms McGuinness set out the reason that the complainant’s role was redundant:
“The annual sales for 2017 were €2,997,000 and after costs deducted the net profit was €351,000. In 2018, sales were €4,792,000 and after costs deducted the profit for the company was -€114,000. For 2019, the sales were €4,773,000 and the profit was €0.00. For present purposes we can confirm that these included both operating costs and the costs of doing business. Therefore, even though in 2018 and 2019 it looked as though business had improved, in actual fact, this business had a high cost level associated with it and therefore adverse economic consequences for the company. The considerable high costs of the business with no return means that this is not a sustainable model and therefore subject to closure.”
While the risk and compliance part of the business would continue to operate in Dublin, Ms McGuiness said that the complainant “does not meet the skills and qualification requirements to work in this department and Econocom cannot therefore offer him an alternative position in that team.” There was also no position available in the UK sales team.
While the complainant wanted to work his notice and to avail of his commission on maturing deals, having commenced garden leave on June 22nd, he was locked out of the company’s computer system on June 26th 2020. He learned that his clients were transferred to an executive in the UK.
The complainant argues that he was unfairly dismissed. Irrespective of whether the redundancy of his job was a valid redundancy, the manner in which it was effected is entirely at odds with his right to fair procedures as provided for the Unfair Dismissals (Amendment) Act 1993.
While the Redundancy Payments Act does not prescribe a set procedure for an employer to follow in a redundancy situation, the Unfair Dismissals Act, specifically at section 6(7)(b) provides than an adjudicator may have regard to the process followed by the employer to implement the redundancy. Mr Purdy referred to the guiding principles established by the former EAT to supplement an employee’s right to fair procedures and natural justice when faced with a redundancy scenario. In that regard, the respondent must prove that:-
I. The dismissal resulted wholly or mainly because of redundancy;
II. The employer’s decision was fair and reasonable.
“Wholly or Mainly”
Mr Purdy asserted that the respondent is required to show that the redundancy was genuine and not a “disguise” to terminate the complainant’s employment. In accordance with section 7(2)(a) of the Redundancy Payments Act, redundancy is considered to have occurred where the dismissal of an employee arises “wholly or mainly” because the employee’s work requirements have diminished or if the remaining work can be done by other employees or when part of a business ceases.
Mr Purdy referred to the decision of the EAT in Flanagan v MW Wallpaper Specialists Limited where the respondent provided evidence that no other employee was employed in the position of the claimant after he was made redundant.
Referring to the requirement for the selection of an employee for redundancy to be impersonal in nature, Mr Purdy referred also to the St Ledger case (cited at page 3 above). He said that this requirement is strengthened by section 7(2) of the Redundancy Payments Act, as was held by the EAT in its decision in Boucher v Irish Productivity Centre. This provision makes it clear that the selection of an employee for redundancy must be “for one or more reasons not related to the employee concerned.” As the explanation of the reason for the redundancy of the complainant was stated to be related to the decrease in the number of sales achieved, Mr Purdy argued that this was directly related to his performance. Therefore, he was selected for redundancy on the basis of subjective criteria, thus invalidating the impersonal nature of the process.
Mr Purdy submitted that, at the time that the complainant was made redundant, his role remained active, as he handed over to another colleague in the UK. He suggested that the claimant’s role continues to be carried out in the UK and that his duties were not redundant.
The Reasonableness of the Employer’s Decision
Referring to the requirement for reasonableness, as set out in section 6(7) of the Unfair Dismissals Act, Mr Purdy referred to the decision of the EAT in the case of Barton v Newsfast Freight Limited. Mr Purdy used a quote from an article by Ms Steven Lorber on the website of the respondent’s solicitors, where Mr Lorber concluded that,
“The crucial thing then is to follow a reasonable procedure, including consulting the affected employees, applying a fair selection process and considering alternative employment.”
Despite the lack of statutory guidelines around the issue of fairness in a redundancy situation, the procedures to be applied depend on the circumstances of each case. This was recognised in the decision of the EAT in Gillian Free v Oxigen Environmental in 2011, where the Tribunal stated:
“While there are no hard and fact rules as to what constitutes the criteria to be adopted, nevertheless, the criteria will come under close scrutiny if an employee claims that they were unfairly selected for Redundancy. The employee must follow the agreed procedures when making the redundancy. Where there are no agreed procedures in relation to selection for redundancy, as in this case, then the employer must act fairly and reasonably.”
Mr Purdy submitted that fairness and reasonableness includes meaningful consultation. This was reinforced in the decision of the EAT in Mulligan v J2 Global (Ireland) Limited:
“In cases of redundancy, best practice is to carry out a genuine consultation process prior to reaching a decision as to redundancy. While in some cases there may be no viable alternative to the making of one or more jobs redundant, whatever consultation process is carried out, the employer who fails to carry out a consultation process risks being found in breach of the Unfair Dismissals Act as such a lack of procedure may lead to the conclusion that an unfair selection for redundancy had taken place.”
Less drastic measures than redundancy must be considered by an employer. In this respect, Mr Purdy referred to the EAT decisions in O’Kelly v Xsil Limited and Fennell v Resource Facilities Support Limited. These decisions show that an employer is required to “consider earnestly the claimant’s proposals regarding the reorganisation of the work which would have realised significant savings.” In this regard, Mr Purdy referred to the decision of the EAT in Sheehan and O’Brien v Vintners Federation of Ireland Limited, where the Tribunal concluded that, while the jobs of Mssrs Sheehan and O’Brien were redundant, there were deficiencies in the process because no consideration was given to the claimants’ proposals regarding alternative roles or cost-saving measures that could have been implemented to avoid the redundancy of their jobs.
Mr Purdy submitted that no procedures whatsoever were applied by the respondent, and no consultation took place with the complainant prior to the date on which he commenced garden leave on June 22nd 2020. There was no consideration of the possibility of an alternative role, and lastly, there was no appeal of the decision to make the complainant’s job redundant. Mr Purdy submitted three legal precedents in support of the right of appeal:
A Worker v a Construction Company
A Hotel Manager v a Hotel and Spa Resort
A Researcher v a University
He said that by virtue of the deficiencies in the process, “irrespective of whether the redundancy is genuine, the complainant’s right to fair procedures was entirely ignored.” This, he said, rendered the dismissal unfair.
Evidence of the Complainant
The complainant said that when he commenced with the company in November 2004, he was the third person in the sales division of the Irish entity. The two earlier sales people left and until around 2017, he was the only person in a sales role. He worked on deals in Ireland and Northern Ireland and he said that the Northern Irish business comprised about one third of his work. He said that he had been achieving good figures and that revenue was increasing. He said that there is a cycle to the business; contracts are generally for three years, and revenues in one year deliver profits in year three.
The complainant said that on April 27th 2020, the managing director invited him and his manager to a meeting on Microsoft Teams with the title “Ireland Team Meeting.” He said that his manager was later uninvited and the HR director was added. He said that the managers got to the point quickly and he was informed that his job would be made redundant. He said that he was told that the sales operation was closing and that the decision had been made centrally. He said that the meeting lasted about 10 minutes. He said that he tried to get an explanation for the decision, and that he couldn’t construct an argument in response to what he was told.
Mr Purdy asked the complainant about the email he sent to the HR director on May 7th 2020 in which he set out his reaction to the decision to make his job redundant. In this email, he also asked for consideration to be given to the provision of an outplacement service, ex-gratia payment on top of the statutory redundancy amount, and for advice with regard to the taxation of his lump sum. The complainant said that, in Ms McGuinness’s response on May 15th, his requests were rejected.
The complainant said that he doesn’t know why his manager was treated differently to him. He had been in the business for just three years, but he was a director of the Irish entity. The complainant said that his revenues were double that of his manager, although his manager was responsible for the risk and accountancy part of the business. Half of the manager’s responsibilities were management-related and half involved sales.
Mr Purdy asked the complainant to consider the letter of June 9th 2020 from Ms McGuinness in which she set out the financial background to the decision to close the Irish sales operation. The complainant said that the figures only take account of the Irish clients and that they omit the business he was involved in with a UK classification. Referring to the “targeted” submission sent in advance of the October 11th hearing, the complainant said that the target for the margin on sales in the first six months of 2020 was €250,000 and that he achieved a margin of €267,000. He said that revenue, at just over €2m, was slightly down. However, the complainant said that a good proportion of business comes in at year-end, and that you could book 40% of business in the fourth quarter. He said that, on the basis of the targets achieved in the first quarter, he was confident that he could make his margin target of €500,000. With Covid affecting the revenue target, he said that he expected to achieve around 70% of revenue and 90% of overall targets.
Following the meeting on April 27th 2020, the complainant said that he thought that the entire Irish operation was closing. Then he said that he discovered that just two jobs, his and his manager’s, were being made redundant. He said that he heard that his manager was leaving on May 1st. He said that he was informed that he was to report to a manager in the UK. He said that it was his understanding that he would continue to work until July 31st and he thought he could continue to earn commission. He said that due to Covid, he knew that there was no work out there.
The complainant said that there was no mention of the possibility of an appeal against the decision to dismiss him, and no discussion about an alternative job. He said that he is a fluent speaker of Spanish and Italian and that his wife is Spanish. He was open to moving to another country to remain working with Econocom.
The complainant gave evidence regarding his efforts to find another job. He said that he applied for around 37 jobs and he started in a new role 54 weeks after his dismissal, on August 16th 2021. He now earns a base salary of €60,000. He is eligible for commission on sales, but he said that it would be unusual to earn full commission in the first year.
Cross-examining of the Complainant
Ms Fynes referred to the meeting over Microsoft Teams on April 27th, Ms Fynes and to the explanation given to the complainant that his job was redundant because the Irish business was unprofitable. The complainant said that he wasn’t given exact figures at the meeting. He said that he was simply told that the decision was made “centrally.” He said that there was “an extreme lack of definition” of the reason for the closure and that “no number” was offered for discussion. He said that he has no recollection of the word “profitability” being used.
Referring to the emails from Ms McGuinness on April 27th, 28th and 29th, the complainant made no comment. He accepted that he wrote to Ms McGuinness on May 7th and that she replied on May 15th.
The complainant accepted that his contract of employment contains a clause that provides that he may not be required to work out his notice. However, he said that his understanding from his new UK manager was that he would be required to work until July 31st. In a letter to his solicitor on June 18th 2020, he was informed that he was to commence garden leave on June 22nd and his access to the company’s computer systems and to his work email was cut on July 26th, without prior notice.
Ms Fynes asked the complainant about his engagement with Ms McGuinness to calculate commission on sales that would be drawn down after his departure. He said that, as his manager was leaving on May 1st, it was necessary to get details onto the company’s system. Deals had to be verified by his manager before he finished up. He said that some deals “got pulled back on” and he referred to page 28 of the respondent’s supplemental submission, which shows a margin of €201,021, which the complainant said was reduced to €195,003. Accepting that he received commission on deals drawn down after the left, the complainant said, that Ms McGuinness “worked with me up to a point.”
Ms Fynes referred to the complainant’s evidence that the profit and loss account didn’t include his business in Northern Ireland. The complainant replied that the figures relate only to the Irish business, but Ms Fynes said that the respondent’s evidence is that the details refer to Ireland-based clients.
Referring to his efforts to find another job after his dismissal, the complainant said that he was on job-seeker’s allowance of €203.00 per week from August 1st 2020 until April 2021. He said that his former manager had set up a business and that together, they “attempted many things,” but had no income. He also set up his own business, but he drew no wages for the entire period until he started a new job in August 2021.
Summarising the complainant’s case, Mr Purdy said that “no one can say who took the decision” to dismiss the complainant and, on this basis, it must be considered to be unfair. He said that Ms Weston is not employed by the Irish company and that I must take account of the decision in the Grenet v Electronic Arts case (referred to on page 5 above).
Mr Purdy submitted that the only evidence of the need for a redundancy was a loss of profits in one year. He said that the figures produced by the respondent do not include the business the complainant did in Northern Ireland. He argued that there was no rationale for closing the Irish operation.
Regarding the procedure followed by the respondent in the lead-up to the complainant’s dismissal, Mr Purdy said that it was not carried out reasonably. He was not warned in advance, and at a meeting lasting about 10 minutes, he was informed about a unilateral decision to make his job redundant. There was no discussion about alternatives. He was not represented, he was given no right of appeal and there was no opportunity for consultation regarding the impact or any consideration of the possibility that he could move to a different job. Contrary to the way his manager was treated, the complainant’s request for an enhanced redundancy package was rejected.
Mr Purdy reiterated the complainant’s efforts to mitigate his loss. He said that over 54 weeks, he was at a loss of his wages of €124,895 gross. In the first year of his employment in his new role, he estimates that he will have an ongoing loss of around €34,000 a year due to the delay in earning full commission.
Findings and Conclusions:
The Relevant Law
The complainant’s case is that the rationale for the elimination of his role was unclear, the decision-maker did not have authority to dismiss him and the procedure that resulted in the termination of his employment was unfair. His complaint falls to be considered under the Unfair Dismissals Acts 1977 – 2015 and the Redundancy Payments Acts 1967 – 2014.
The Unfair Dismissals Acts 1977 – 2015
Section 6(1) of the Unfair Dismissals Acts (“the UD Act”) provides that a dismissal is unfair, “unless, having regard to all the circumstances, there were substantial grounds justifying the dismissal.” The burden of proof rests with the respondent to provide evidence of the “substantial ground justifying the dismissal” of the complainant. The respondent’s position is that the redundancy of the complainant’s job was executed in the context of the unprofitability of its Irish sales operation.
Section 6(4)(c) of the UD Act recognises the right of an employer to dismiss an employee due to redundancy:
“…the dismissal of an employee shall be deemed, for the purposes of this Act not to be an unfair dismissal if it results wholly or mainly from
(c) the redundancy of the employee.”
Subsections (a), (b) and (d) of this section are not relevant to this complaint.
We know from section 6(3) that this right is predicated on an obligation to select employees for redundancy on the basis of fairness and to adhere to an agreed procedure or a code of practice regarding dismissals. In his submission in advance of the hearing, Mr Purdy pointed to the importance of section 6(7) of the UD Act which was inserted by the Unfair Dismissals (Amendment) Act 1993 and which expands further on the issue of reasonableness. This 1993 addition to the UD Act provides that, when considering a complaint of unfair dismissal, I, as the adjudicator, may have regard,
“(a) to the reasonableness or otherwise of the conduct (whether by act or omission) of the employer in relation to the dismissal, and
“(b) to the extent (if any) of the compliance or failure to comply by the employer, in relation to the employee, with the procedure referred to in section 14(1) of this Act or with the provisions of any code of practice referred to in paragraph (d) (inserted by the Unfair Dismissals (Amendment) Act, 1993) of section 7(2) of this Act.”
In the case of this former employee, he was not a member of a trade union no evidence was submitted of the existence of a procedure for implementing redundancies. In the absence of an agreed procedure, the respondent was required to ensure that the fair procedures that apply in the case of any dismissal were afforded to the complainant. These include the right to notice, the right to be represented at meetings, the right of the employee to respond to the employer’s decision to make his job redundant and the right of appeal. The respondent’s position is that a truncated process was adequate in the context of the complete close-down of sales operation in Ireland and the absence of any alternative role to which the complainant could have been redeployed.
The Redundancy Payments Acts 1967 – 2014
The starting point for a consideration of the respondent’s position is the definition of redundancy at section 7 of the Redundancy Payments Acts (“the RP Act”). Section 7(2) sets out five definitions of redundancy and, on behalf of the respondent, Ms Fynes submitted that the redundancy of the complainant’s role fell within the definition at subsection (a):
“…an employee who is dismissed shall be taken to be dismissed by reason of redundancy if, for one or more reasons not related to the employee concerned, the dismissal is attributable wholly or mainly to—
“(a)…the fact that his employer has ceased, or intends to cease, to carry on the business for the purposes of which the employee was employed by him, or has ceased or intends to cease, to carry on that business in the place where the employee was so employed [.]”
The employer’s case is that the complainant’s job was no longer required when they ceased carrying out the sales business in Dublin. I will explore this further now.
Wholly or Mainly Due to Redundancy
At the hearing on October 11th 2021, there was a good deal of argument concerning the rationale behind the decision to close down the sales operation in Dublin. There was a dispute about the accuracy of the financial data submitted in evidence, and the inclusion or exclusion of sales figures related to clients in Northern Ireland. Differences also arose regarding how profits were assigned to a specific financial year three years previously and also about the sales targets achieved by the complainant. I accept that the witnesses gave evidence truthfully under oath, and I must also accept that it was open to them to interpret the financial information to support their own particular arguments. While the complainant disagreed with the rationale put forward by his employer for closing the sales department, from the perspective of redundancy, the fundamental point is that the sales operation was closed down because the respondent decided it was not generating enough profit and was too costly to run. The jobs of the complainant and his manager were not replaced. It is my view that an employer is entitled to close down all or any part of its business, and this happens all the time, sometimes even in profitable companies. I accept the evidence of the respondent’s witnesses that they closed down the sales operation in Dublin because, in their view, it was not generating enough profit. I find that this explanation falls clearly within the definition of redundancy at section 7(2)(a) of the RP Act as set out above. As the complainant was one of two employees in the sales department, I accept that his job was redundant wholly or mainly due to the closure of that part of the respondent’s business. While I am satisfied that the job the complainant was employed to do was redundant, it does not follow that his dismissal was not unfair.
The Authority of the Decision-maker
Mr Purdy submitted that the decision of the High Court in Grenet v Electronic Arts (cited on page 5 above) is authority for a finding that a manager who is not employed by an Irish entity has no authority to dismiss an employee of that entity. If that was the case, then many dismissals would be unlawful, as in my experience, it is not infrequent for a non-Irish parent company to close down an Irish subsidiary. As pointed out by Ms Fynes, Grenet concerns an application for an interlocutory injunction in a case alleging wrongful dismissal and a claim of breach of contract. In Grenet, the plaintiff’s manager, Mr Pompei had sought to dismiss him. In his conclusion in that application, regarding the issue of ostensible authority, Mr Justice O’Connor held that,
“…this Court at an interlocutory hearing cannot make any definitive finding about the propriety of the authority which seems to rest with Mr Pompei according to the affidavits which have been exchanged.”
I note that in his letter to the HR director on June 2nd 2020, Mr Purdy referred to the “wide ranging powers including interlocutory relief” of the High Court. If he was seriously of the view that Ms Weston had no authority to dismiss the complainant, then it was open to him to avail of those powers before his client’s employment was terminated on July 31st. As the person with responsibility for the management of the respondent’s business in Dublin, it is my view that the managing director, Ms Weston, had authority to close down the sales operation and to make the complainant’s role redundant. .
Was the Process Fair?
Section 6(7) of the UD Act (quoted above at page 15) requires me to have regard to the reasonableness of the conduct of the employer concerning the dismissal of the complainant. In the context of a redundancy, “reasonableness” means treating the employee with respect and fairness in the circumstances that prevail.
On April 27th 2020, at a meeting with the managing director and the HR director over Microsoft Teams, the complainant was informed that his job was redundant and that his employment would terminate at the end of June. He was not offered the option of being accompanied at the meeting, nor was he advised of the benefit of legal advice. In an email later that day, the HR director confirmed that the complainant would be paid a statutory redundancy lump sum of €19,152 and that he could work out his notice or leave immediately and be paid in lieu of notice.
On April 29th and 30th, the HR director sent emails to the complainant to enquire if he had any comments regarding the “proposed redundancy payment structure,” and to discuss the figures. It is apparent that some discussion took place on May 1st because, in a very detailed response on May 7th, the complainant referred to a phone call on May 1st. In this email, a copy of which was submitted in evidence, the complainant expressed his shock at the decision to make his job redundant, and the “profound and distressing” impact it would have on him and his family. He suggested that a payment based on four weeks’ pay per year of service would be more acceptable than statutory. He also requested certain other items to be agreed before his employment ended: retention of his mobile phone and number, wages for holidays not taken, payment of business expenses and “some leeway” on his private health insurance and employer pension contributions. He requested a contribution towards a job outplacement service, an accountant to advise him on the taxation of his lump sum and a solicitor to review his redundancy terms and “to represent me, should a dispute arise.” He also asked to be released from the clause in his contract that prevented him from working for a competitor. He ended his email on a sanguine note:
“On my part, I shall effect a smooth Handover of my business portfolio to your appointed representative. This shall enable Econocom business continuity, from the portfolio and pipeline. I shall continue to be professional and diligent in all my dealings. Should you agree to all of the above, it avoids any complicated arrangements vis-a-vis commissions due during my Notice Period, and I could complete the Handover by perhaps 31 May, or shortly thereafter, and act in a support role for the remainder of my notice period.”
In her reply of May 15th, the HR director rejected the complainant’s request for enhanced redundancy terms, for leeway on his health insurance and employer pension contributions and for assistance with an outplacement service and legal and tax advice. His notice was extended to July 31st and the remaining items he requested were generally agreed. This is the extent of the consultation with the complainant regarding the termination of his employment of fifteen years.
Conceding that the process that ended with the complainant’s dismissal was “truncated,” the respondent’s case is that the redundancy of his job was unavoidable and there were “no suitable alternatives to redundancy to discuss.” From the employer’s perspective, it may have appeared that no useful outcome would have emerged from consulting with the complainant; however, no explanation was offered as to why that assumption was not tested. Who knows what might have emerged from a discussion with the complainant about an alternative to redundancy? I have reviewed the findings in Nigrell and the outcome from the UK EAT in Mugford Bank. The annual report that was submitted in evidence shows that the respondent’s business had revenue in 2018 of €2.8bn. Unlike Mugford Bank, they have a presence in many countries and employ people with a complex variety of skills and expertise. Its business profile couldn’t be more different from that of the respondent in Nigrell, a small business engaged in the distribution of weight loss products. Any reasonable employer would conclude that, at the height of Covid, and perhaps even because of Covid, there may have been useful work that the complainant could have done. It seems to me that, with his skills in sales and languages, and with an understanding of the workings of the company over 15 years, he could have been assigned to some alternative job, perhaps working from home and even on a part-time basis. Some consideration could also have been given to the possibility that his notice could have been extended for six or 12 months, while he looked for another job.
In a redundancy context, where there is no possibility of an alternative job, the process of consultation usually addresses the terms on offer. It was disturbing to hear the managing director say in evidence that she would have offered the complainant an enhanced package if he had requested it. It is beyond doubt that he did precisely this in his email to the HR director on May 7th, when he suggested four weeks’ pay per year of service and when he said,
“Whilst I would dearly like to keep my job, this I would deem the basis of a reasonable redundancy package.”
In paragraph two of the email from the HR director on May 15th, Ms McGuinness rejected the complainant’s request for four weeks’ pay per year of service. However, at the end of nine paragraphs, she concluded as follows:
“I understand that it may take a little more time for you to agree to our redundancy payment terms, once we come to an agreement, I will arrange the payment of the remainder of your notice period and the redundancy payment.”
It seems to me that an ordinary interpretation of the phrase, “once we come to an agreement” is that there is room for negotiation and that the position is not entirely fixed. It is regrettable that some more constructive engagement did not occur between the HR director and the complainant’s solicitor so that settlement terms could be agreed.
From a review of the case law submitted by Mr Purdy, (specifically Barton v Newsfast Freight, Mulligan v J2 Global, O’Kelly v Xsil and Fennell v Resource Facilities cited on pages 10 and 11 above) it is clear to me that engagement with the employee who is the target of redundancy is the cornerstone of reasonable treatment.
I find that it was disrespectful to the complainant to invite him to a meeting with no forewarning of the subject-matter, and to announce that his job was redundant. No credible explanation has been given for the decision of the managers not to engage with the complainant to identify a suitable alternative role, or to extend his notice period so that he could find another job. As his manager and colleague (with three years’ service) left the company on enhanced redundancy terms, and, as the managing director indicated that she would have paid more than statutory redundancy if the complainant had asked, it was unfair and inequitable not to exit the complainant on agreed terms, thereby avoiding this adjudication process.
I accept that the complainant’s job was redundant and any appeal against that decision was likely to be a wasted exercise. I find however, that in the manner in which his employment was terminated, the respondent departed from the standard of reasonableness that a reasonable employer would have shown when dealing with an employee in similar circumstances.
Section 8 of the Unfair Dismissals Acts, 1977 – 2015 requires that I make a decision in relation to the unfair dismissal claim consisting of a grant of redress in accordance with section 7 of the 1977 Act.
I have decided that this complaint is well founded. No evidence was submitted that the complainant made any contribution to his dismissal and, in terms of mitigation of his losses, he found another job in mid-August 2021, just over one year after he was made redundant. In his evidence, he said that it will take some time to earn the equivalent in commission that he earned with the respondent.
I decide that the respondent is to pay the complainant €120,000 in compensation, equivalent to one year’s gross pay. In making this award, I have taken account of the complainant’s redundancy lump sum payment of €19,152. As this compensation is in the form of loss of earnings, it is subject to the normal statutory deductions.
Dated: 11th January 2022
Workplace Relations Commission Adjudication Officer: Catherine Byrne
Redundancy, unfair procedure
  IESC 24
 UD 56/1994
  IRLR 208
 UD 690/2013
  IRHC 786
 UD 153, 154, 155, 156/1989
 UD 882/1992
 UD 1269/2005
 UD 206/2011
 UD 993/2009
 UD 1086/2011
  22 ELR 26
  ELR 155