“Can’t pay? Won’t pay! My employer is ignoring the WRC’s decision. Where do I stand if they become insolvent?”

All the evidence has been taken, both parties have been given the opportunity to present their case. Submissions have been made, on whom the burden of proof rests has been established and the relevant case law has been batted around. But what happens when the written decision has been issued to the parties and your Employer chooses to ignore it?

If an Employer/Respondent (Employer) fails to carry out a decision of an Adjudication Officer of the Workplace Relations Commission (“WRC”), or a decision of the Labour Court arising from an appeal of an Adjudication Officer’s decision, within the prescribed time, an application may be made to the District Court for an order directing the Employer to carry out the decision.

Who can make an application?

The application can be made by the following:

  • The Employee/Complainant (or legal representative on their behalf)
  • A Trade Union, with consent of employee, or
  • An excepted body of which the employee/complainant is a member.

In the case of an Adjudication Officer’s decision, the application to the District Court can be made after a period of 56 days has elapsed from the date the decision was issued to the parties. A period of 42 days must have elapsed from the date the Labour Court decision was issued to the parties before the application can be made in respect of that decision.

The application must be made to a judge of the District Court in which the Employer/Respondent concerned ordinarily resides.

The WRC when exercising its discretion, can have regard to various factors including the parties resources, capacity available, cost and the particular circumstances of a case, as to whether it can accept a request to make an application to the District Court on behalf of the complainant. Details surrounding the Criteria for Enforcement in exercising that discretion can be found here.

Where do employees stand protection wise in the winding up of insolvent companies?

You have just received the news  from your employer that there is no money to pay your wages. Panic sets in. What do you do? This was the scene before Limerick FC took on Bohemians last Friday, 1 June.

Players and coaching staff of Limerick FC were called into a meeting just after 6pm where financial difficulties were to be discussed and players were informed that the finances weren’t available to pay wages owed for the month of May. As a result, there are serious doubts over Limerick FC’s involvement in the 2018 SSE Airtricity League. While the club itself has not entered insolvency, this case shows how vulnerable employees can be.

What is insolvency?

A company is said to be insolvent if it has insufficient assets to discharge its debts as they fall due (commonly referred to as the cash flow test).

An employer becoming insolvent can cause many problems for employees, especially in relation to arrears of pay, holiday pay, sick pay, and notice entitlements.

The insolvency and winding-up procedures applicable to companies are:

  • receivership;
  • schemes of arrangement;
  • examinership;
  • members’ voluntary winding up;
  • creditors’ voluntary winding up; and
  • compulsory liquidation.

The application of these procedures are governed by the Companies Act 2014, the National Asset Management Act 2009, the Rules of the Superior Courts and case law.

The appointment of an examiner or a receiver does not immediately terminate the employment relationship as the court must be satisfied that there is a reasonable prospect of the survival of the company.

However, the appointment of an official or provisional liquidator may lead to termination of the employment relationship but not in all cases.

So where do employees stand when an employer becomes insolvent? Where are there protections and who pays arrears in wages, holiday pay, and other pay related entitlements?

The Insolvency Payments Scheme implements the provisions of EU Directives 80/987 and 2002/74/EC on the approximation of the laws of the Member States relating to the protection of employees in the event of the insolvency of their employer.

The Protection of Employees (Employers’ Insolvency) Act 1984  and in particular section 6 provides that the Minister shall pay employees for arrears in pay, holiday pay, pay in lieu of statutory notice entitlements, and certain other employment related entitlements from a Redundancy and Employers’ Insolvency Fund (“Social Insurance Fund ”) which, in his opinion is or was due to the applicant in respect of that debt.

Awards made under employment rights legislation such as unfair dismissal, discrimination, working time and the minimum wage are covered. On top of that, certain unpaid pension scheme and personal retirement savings account (“PRSA”) contributions are also covered.

What if a business shuts down without becoming legally insolvent?

It is important to note that an employer that  ceases trading but does not go into official liquidation is not covered. The employer must become insolvent within the terms of the Companies Act 2014. For an employee to come within the Scheme, an employer must be legally insolvent under the legislation under which the Scheme operates (Protection of Employees (Employers’ Insolvency) Acts 1984–2012). If a business shuts down without becoming legally insolvent the employer remains responsible for the payment of employees’ pay and other entitlements.

Who is covered?

The Scheme covers employees who:

  • are in employment which is insurable for all benefits under the Social Welfare Acts (in general this means employees who pay full PRSI contributions).
  • are between 16 and 66 years of age or, if over 66 years, in employment which, but for their age, would be insurable for all benefits under the Social Welfare Acts.

Limitations

  1. All entitlements based on pay are limited to a maximum weekly rate (revised periodically).
  2. Current limit is €600 per week.
  3. There is also a limit of 8 weeksfor arrears of pay, sick pay, holiday pay and pay in lieu of statutory notice.
  4. Generally, the Scheme only covers entitlements arising in the 18 months prior to the date of insolvency or the termination of employment.

Can I Appeal?

Any person who has applied for a payment under the Scheme in respect of arrears of pay, sick pay, holiday pay or outstanding occupational pension scheme or PRSA contributions may appeal to the Labour Court on the grounds that the payment made was less than the amount that should have been paid, or the application has been refused.

Time limits

A party to proceedings before the Labour Court may, within 42 days from the service on that party of the decision of the Labour Court in those proceedings, appeal that decision to the High Court on a point of law, and the decision of the High Court shall be final and conclusive.

For more information on the Insolvency Payments Scheme, please see the Department of Employment Affairs and Social Protection.

Let’s look at this practically

Magdalena Glegola v The Minister for Social Protection, Ireland and the Attorney General [2017] IECA 37

In this case a woman was awarded €16,818.75 in damages against the State by what was previously known as the Rights Commissioner. This was due to her being unfairly dismissed by her employer, and  she  was unable to collect the award before her employer became insolvent. She successfully argued that the State failed to implement EU legislation which would have allowed her to be paid the award from the Social Insurance Fund.

Ms Justice Finlay Geoghegan held on appeal to the Court of Appeal that the State failed to transpose Directive 2008/94/EC by failing to provide in Irish law for the procedure required to protect employees in the event of the insolvency of their employer.

The Glegola decision highlighted the importance of looking past the relevant Irish legislation to the grounding European law to ensure that the aim and articles of a Directive have been fully transposed into Irish Law.

The Supreme Court has since granted leave to appeal this decision on a number of grounds including that “The Court of Appeal erred in law in failing to distinguish between a “clear cut” breach of EU law and Ireland’s implementation of Directive 2008/94/EC by way of a requirement of insolvency consistent with Irish company law’s definition on insolvency.”

The matter is listed for hearing at the end of June 2018.

The implications of which will have a huge future effect on employees and the Department of Social Protection.

Disclaimer: This publication is for guidance purposes only. It does not constitute legal or professional advice. No liability is accepted by Leman Solicitors for any action taken or not taken in reliance on the information set out in this publication. Professional or legal advice should be obtained before taking or refraining from any action as a result of the contents of this publication. Any and all information is subject to change.