Monday, February 3, 2020
As published in the Business Post, February 2nd 2020.
The financial difficulties of RTÉ are likely to continue into 2020. In 2019, the Director-General announced that the station is in discussion with high–earning presenters in an attempt to negotiate salary cuts.
RTÉ is not the first employer to find itself in this position by any measure – any Irish employer, because of unfortunate financial circumstances, may find itself in a situation where it can no longer afford to maintain salaries at their current level.
So what options does an employer have in this situation? The first, and most fundamental, point to note is that if the employee has a contractual entitlement to a particular salary, that cannot be reduced unilaterally. One of the most basic rules of contract law in Ireland is that if two parties to a contract have negotiated certain terms, one party cannot unilaterally amend those terms – to do so would be breach of contract.
In the employment setting, that obviously means that an employer cannot unilaterally reduce an employee’s salary. If an employer purports to do this, the affected employee can immediately bring a claim in either the Workplace Relations Commission or the courts – and will inevitably win their case.
Occasionally, contracts of employment contain variation clauses – which state that the employer is entitled to vary the terms of the contract at its discretion. However, the effectiveness of these clauses is usually overstated. In reality, they have limited effect at best. They will allow an employer to make minor changes to the terms and conditions of employment, but they can’t be relied upon to make sweeping or fundamental changes across the board.
Ultimately, if the employee doesn’t consent to their contract of employment being varied, they can’t be compelled to make the change. In cases like this, the employer is going to have to go back to the drawing board.
On this, it’s important to note that an employer is not without remedy in circumstances where the salary bill endangers the continued viability of the company. There is nothing to prevent an employer from either restructuring roles within the company, or making certain roles redundant.
Restructuring of roles typically arises where an employer can no longer maintain the original terms and conditions. In those circumstances, the old role is made redundant and a new role is created – with different terms and conditions and, if necessary, a lower rate of salary.
However, an employer needs to tread carefully. First of all, there will have to be a genuine basis for the restructuring/redundancy – an employer will have to point to objectively justifiable factors which prove that the restructuring/redundancy is necessary. Merely doing so because the employer wants to increase profits is unlikely to be sufficient.
In addition, the employer will have to follow a fair process – any restructuring/redundancy will have to be preceded by a period of genuine consultation with the “at risk” employees.
Those employees have the right to be given meaningful information about what is proposed (and why it is proposed). They must also have the opportunity to make representations or submissions in relation to the employer’s provisional plans. The rationale is that it is possible that the “at risk” employees could make proposals that might stave off the necessity for making roles redundant/restructuring them.
As a related point, there is also nothing at all to prevent an employer from approaching the workforce as a whole and informing them that the financial position of the company is precarious.
Equally, there’s nothing to stop an employer from entering into a dialogue with the staff on options for resolving the situation. An employer could, for example, propose that all staff take an across-the-board pay cut of 10 or 20%, or make other proposals: during the last recession, employers often proposed that staff members move from five to four–day weeks, for a period of time.
An employer can be candid – and indicate that if staff are not prepared to sign up to a proposal, compulsory restructuring/redundancies will have to follow. This is not threatening behaviour – it is simply an employer being very realistic with the workforce about the situation the company finds itself in. In an ideal situation, the employees will appreciate the employer’s honesty and work with them in an attempt to salvage the company.
Employers should obviously bear in mind the fact that making a role redundant carries consequences. An employee who is able to demonstrate to the WRC that they were the subject of a “sham redundancy” will likely succeed in an unfair dismissal claim. As well as that, any employee with more than 104 weeks of continuous service will be automatically entitled to statutory redundancy payments.
However, for a business that is struggling, restructuring/redundancy – in the absence of any other options – may represent a practical way forward.
For further information on the above article, or on other employment law queries, please contact Patrick Walshe.