Maria Connolly Solicitor

Employment Law Issues in the Recession

Published on Thursday, 08 September 2011

As the recession gains more and more momentum by the day, so too does its effect on employment. Desperate times call for desperate measures as employers are forced to look at ways of reducing costs and redundancies are inevitable. It is important that employers and employees alike are aware of the employment law issues surrounding redundancy; employers from the point of view of avoiding an action being brought against them and employees from the point of view of ensuring that their legal rights are protected.

Redundancy in Ireland is governed by the Redundancy Payments Acts, 1967 to 2007 and the Unfair Dismissals (Amendment) Act 1993. Collective redundancies, which involves the laying off of a number of people is governed by the Protection of Employment Acts, 1977 to 2007. This legislation must be followed when an employer employing more than 20 people proposes to make at least five redundant in any period of 30 consecutive days.

Employees must be given at least two weeks notice of the Employers intention to make them redundant. Long serving employees will be entitled to receive longer periods of notice depending on their length of service. Also if Employees have a written contract of employment any terms in the contract concerning notice entitlements must be adhered to.

Among other criteria Employees must have a least two years service to qualify for a statutory redundancy payment from their Employer. Employees qualifying for [and receiving] the basic statutory payment are entitled to two weeks salary, capped at €600.00 per week, for every year of service plus one additional week. Very often, however, employees and trade unions negotiate higher extra – statutory payments with Employers. Statutory redundancy lump sums are tax free but any payments over and above this may be taxable. Provided all proper procedures are followed an Employer is entitled to a 60% rebate within six months on all statutory redundancy lump sum payments made. If Employers cannot afford to pay the statutory lump sum payment they can apply to the Department of Enterprise, Trade and Employment and the payment can be made out of the Social Insurance Fund. The Employer must first, however, prove to the Department that he cannot afford to the make the payment by providing accounts or a statement of affairs. If satisfied, the Department will make the payment and the Employer will become a preferential creditor of the Department.

Except in the case of collective redundancies the legislation does not set out selection procedures to be followed but Employers should ensure that Employees are fairly selected for redundancy or they could expose themselves to a case in Unfair Dismissal. The reasons for selection must be genuine and objectively justifiable. Employers faced with having to make redundancies should consult Employees and invite them to put forward alternative proposals which should then be carefully considered by the Employer. Employers carrying out redundancies may face [successful] unfair dismissals claims even where a genuine redundancy exists if they do not follow fair procedures and consider alternatives to redundancy.

If an Employee feels that his / her selection is unfair or not genuine then they can take a case to the Employment Appeals Tribunal. The onus will be on the Employer to show that the redundancy was fair.

In cases of collective redundancies the Employer is obliged under the legislation to inform and consult Employees or their Representatives. These consultations must take place at the earliest opportunity and at least 30 days before notice of redundancy is given. The aim of the consultations is to see if there are any alternatives to redundancies.

Redundancy can be complex area of Employment Law and employers and employees alike should make themselves aware of the legal issues surrounding the fair and proper procedure for effecting redundancies.

For further advice contact us

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