How To Calculate Holiday Entitlements | Calculating Holiday Pay in Ireland

holiday-entitlements

Calculating holiday entitlements can be a real pain.

And can lead to bad feeling and a sense of grievance if not done correctly.

How do you calculate holiday entitlements in Ireland?

Annual leave, like minimum rest periods for employees, is covered by the Organisation of Working Time Act, 1997 and is a statutory right of an employee.

The first thing to note about annual leave is that all employees are entitled to paid holidays/annual leave.

There is no qualification requirement and part time employees are also protected by the Protection of Employees (Part Time) Work act, 2001.

The best way to deal with holidays for part timers is to give them holidays on a pro-rata basis with their full time colleagues.

What is “working time”?

Working time is an important concept for the purpose of calculating holiday entitlements, rest breaks, etc and is defined in section 2 of the Organisation of Working Time Act, 1977 as

working time” means any time that the employee is—
(a) at his or her place of work or at his or her employer’s disposal, and
(b) carrying on or performing the activities or duties of his or her work,

Time spent on call or standby?

Time spent on call or standby is regarded as working time provided the worker is required to be physically present at a particular place, regardless of the time actually done.

The Organisation of Working Time Act, 1977 does not apply to Gardai or members of the defence forces.

In addition, certain sections of  the Act do not apply to regulated employees, employees covered by collective agreements approved by the Labour Court, workers covered by registered employment agreements or employment regulation orders, workers working in exceptional circumstances or an emergency, workers at sea, doctors in training, a person who is employed by a relative in certain circumstances, a person who determines his/her own working time, shift workers and those doing “spread work” (periods of work spread out over the day).

How to Calculate Holiday Entitlements

The relevant section of the Organisation of Working Time Act, 1997 is section 19. It states:

19.—(1) Subject to the First Schedule (which contains transitional provisions in respect of the leave years 1996 to 1998), an employee shall be entitled to paid annual leave (in this Act referred to as “annual leave”) equal to—
(a) 4 working weeks in a leave year in which he or she works at least 1,365 hours (unless it is a leave year in which he or she changes employment),
(b) one-third of a working week for each month in the leave year in which he or she works at least 117 hours, or
(c) 8 per cent. of the hours he or she works in a leave year (but subject to a maximum of 4 working weeks):
Provided that if more than one of the preceding paragraphs is applicable in the case concerned and the period of annual leave of the employee, determined in accordance with each of those paragraphs, is not identical, the annual leave to which the employee shall be entitled shall be equal to whichever of those periods is the greater.
(2) A day which would be regarded as a day of annual leave shall, if the employee concerned is ill on that day and furnishes to his or her employer a certificate of a registered medical practitioner in respect of his or her illness, not be regarded, for the purposes of this Act, as a day of annual leave.
(3) The annual leave of an employee who works 8 or more months in a leave year shall, subject to the provisions of any employment regulation order, registered employment agreement, collective agreement or any agreement between the employee and his or her employer, include an unbroken period of 2 weeks.
(4) Notwithstanding subsection (2) or any other provision of this Act but without prejudice to the employee’s entitlements under subsection (1), the reference in subsection (3) to an unbroken period of 2 weeks includes a reference to such a period that includes one or more public holidays or days on which the employee concerned is ill.
(5) An employee shall, for the purposes of subsection (1), be regarded as having worked on a day of annual leave the hours he or she would have worked on that day had it not been a day of annual leave.
(6) References in this section to a working week shall be construed as references to the number of days that the employee concerned usually works in a week.

Source: www.irishstatutebook.ie

As you can see there are a number of different methods of calculation. However you must use the one which gives the employee the biggest entitlement.

In summary therefore all employees are entitled to:

  • 4 working weeks where at least 1365 hours have been worked in the leave year OR
  • One third of a working week where the employee works at least 117 hours in a calendar month OR
  • 8% of the hours worked in a leave year (subject to a maximum of 4 working weeks)

Note 1: the maximum entitlement is four of the employee’s normal working weeks and NOT twenty days; this can be significant because the “working week” itself is not defined in the Act and must be construed by reference to the number of days/hours encompassing a work cycle.

Note 2: pay must be paid in advance of the annual leave.

Note 3: periods of sick leave are not counted as hours worked but parental and maternity leave are. Periods of sick leave are now counted for the purpose of calculating holiday entitlements. Please read this article.

Examples

(a)    4 working weeks where the employee works at least 1,365 hours in the year

Sheila works a 39 hour, 5 day week.

She has worked 1400 hours at the end of September. As this exceeds 1,365 hours she is entitled to 4 weeks paid holidays.

Her normal working week is 5 days. She is entitled therefore to 20 days (4 weeks @ 5 days) paid annual leave.

(b)   One third of a working week per calendar month in excess of 117 hours

Michael works a four day week at 39 hours per week.  This is in excess of 117 hours per month (over 600 hours in fact).

So Michael accumulates annual leave at a rate of 1.34 (one and one third) days per month worked, that is, one third of four days = 1.34.

In a full year (12 months) Michael will accumulate 1.34 * 12 = 16.08 days annual leave.

( c) 8% of the hours worked

Jonathan works for 8 weeks and did 200 hours over the 8 weeks and then quit.

Jonathan is entitled to 8% of hours worked, that is, 16 hours of paid leave which he is entitled to receive when leaving the employment.

NOTE: if more than one of these methods of calculation is applicable, the employer must use the method which gives the greatest entitlement.

How Much Holiday Pay?

If the employee is paid hourly or weekly or monthly, indeed any time based method, then she is entitled to a normal week’s wages before the leave commences and this includes any normal bonus or allowance but excludes overtime.

If the employee is paid a piece rate, the rate of holiday pay is the average weekly pay calculated over the 13 weeks prior to commencing leave.

How to Calculate Holiday Pay

Firstly, if the employee is paid by reference to a salary or a time rate, the amount due for one week of annual leave will be the amount paid to him/her for a normal working week prior to the commencement of holidays.

This payment includes any regular allowance and bonus but does not include overtime.

Secondly, if the employee is not paid by reference to a time rate but by reference to commission or a piece or productivity rate, then his/her holiday pay for one week of annual leave is calculated by reference to the average pay for that employee calculated over the 13 weeks immediately prior to taking leave.

What if the employee gets sick during annual leave?

If the employee provides a sick certificate then his leave should not be counted for the days of his certificate and the employees will be allowed carry over his leave, even where it takes him/her into another leave year.

Timing of leave

The employer can decide when annual leave can be taken, subject to certain requirements such as the requirements of the business and the requirements of the employee in respect of work/life/family balance.

By the same token it is the employer’s responsibility to see that the employee takes his/her full entitlement within the leave period.

Leave must be given and taken within the leave year, unless the employee consents to getting leave in the first six months of the following leave year.

Any leave not taken is forfeited unless the employer agrees to the leave being taken within 6 months of the end of the leave year.

An employee has no cause of action for leave untaken in previous years.

The leave year begins on the 1st of April according to the Act but the employer can stipulate a different time period.

20.(1) The times at which annual leave is granted to an employee shall be determined by his or her employer having regard to work requirements and subject—
(a) to the employer taking into account—
(i) the need for the employee to reconcile work and any family responsibilities,
(ii) the opportunities for rest and recreation available to the employee,
(b) to the employer having consulted the employee or the trade union (if any) of which he or she is a member, not later than 1 month before the day on which the annual leave or, as the case may be, the portion thereof concerned is due to commence, and
(c) to the leave being granted within the leave year to which it relates or, with the consent of the employee, within the 6 months thereafter.
(2) The pay in respect of an employee’s annual leave shall—
(a) be paid to the employee in advance of his or her taking the leave,
(b) be at the normal weekly rate or, as the case may be, at a rate which is proportionate to the normal weekly rate, and
(c) in a case in which board or lodging or, as the case may be, both board and lodging constitute part of the employee’s remuneration, include compensation, calculated at the prescribed rate, for any such board or lodging as will not be received by the employee whilst on annual leave.
(3) Nothing in this section shall prevent an employer and employee from entering into arrangements that are more favourable to the employee with regard to the times of, and the pay in respect of, his or her annual leave.
(4) In this section “normal weekly rate” means the normal weekly rate of the employee concerned’s pay determined in accordance with regulations made by the Minister for the purposes of this section.

Section 20, Organisation of Working Time Act, 1997.

How much pay?

Annual leave is paid leave and the obligation is to pay the normal weekly rate of pay.

A statutory instrument, 475/1997 sets out in detail how to calculate payment which will depend on a number of factors and need to account for bonuses (may be included), allowances (may be included), and overtime (not included). (See above)

Losing the job?

The employee is entitled to compensation for any leave that they have not taken in the leave year.

23.—(1) Where—
(a) an employee ceases to be employed, and
(b) the whole or any portion of the annual leave in respect of the current leave year or, in case the cesser of employment occurs during the first half of that year, in respect of that year, the previous leave year or both those years, remains to be granted to the employee,
the employee shall, as compensation for the loss of that annual leave, be paid by his or her employer an amount equal to the pay, calculated at the normal weekly rate or, as the case may be, at a rate proportionate to the normal weekly rate, that he or she would have received had he or she been granted that annual leave.

Public Holidays

Public holidays in Ireland are set out in the act as follows:

1. Each of the following days shall, subject to the subsequent provisions of this Schedule, be a public holiday for the purposes of this Act:
(a) Christmas Day,
(b) St. Stephen’s Day,
(c) St. Patrick’s Day,
(d) Easter Monday, the first Monday in May, the first Monday in June and the first Monday in August,
(e) the last Monday in October,
(f) the 1st day of January,
(g) any other day or days prescribed for the purposes of this paragraph.
2. The Minister may by regulations vary paragraph 1 by substituting for any day referred to in that paragraph another day.
3. An employer may, for the purpose of fulfilling any relevant obligation imposed on him or her by this Act, treat as a public holiday, in lieu of a public holiday aforesaid, either—
(a) the Church holiday falling in the same year immediately before the public holiday, or
(b) the Church holiday falling in the same year immediately after the public holiday or, if the public holiday is a day which is a public holiday by virtue of paragraph 1 (b), the 6th day of January next following,
by giving to the employee concerned notice of his or her intention to do so not less than 14 days before the Church holiday (where that holiday is before the public holiday) or before the public holiday (where that holiday is before the Church holiday or, as the case may be, the said 6th day of January).
4. Each of the following days shall be a Church holiday for the purposes of paragraph 3:
(a) the 6th day of January, except when falling on a Sunday,
(b) Ascension Thursday,
(c) the Feast of Corpus Christi,
(d) the 15th day of August, except when falling on a Sunday,
(e) the 1st day of November, except when falling on a Sunday,
(f) the 8th day of December, except when falling on a Sunday,
(g) any other day or days prescribed for the purposes of this paragraph.

Public holidays confer public holiday benefits on employees and the employer has a choice of

  1. A paid day off on that day
  2. An additional day’s pay
  3. An additional day of annual leave
  4. A paid day off within a month of that day.

How much you are entitled to be paid will be roughly similar to the calculation of annual leave pay as set out in SI 475/1997, Organisation of Working Time (Determination of Pay for Holidays) Regulations, 1997.

Public Holiday Benefit Entitlements

Full-time workers have an immediate entitlement to benefit for the public holidays whilst part-time workers have entitlement to benefit when they have worked 40 hours in the previous 5 weeks.

So, when the employee works on the public holiday, they are entitled to their normal pay. But they are also entitled to a public holiday benefit. However this benefit may vary from one public holiday to another, depending on whether they would have been normally due to work or not.

If the business is closed on the public holiday, and the employee would normally have been due to work, they will be entitled to their normal day’s wages.

If the business is open and the employee works, then they are entitled to their normal day’s wages and, in addition, an additional day’s wages or paid time off.

If the business is open, but the employee does not work and normally doesn’t, then they will be entitled to one fifth of their normal weekly wages or a paid day off within a month or an extra day’s annual leave, as the employer decides.

Public Holiday Rate of  Pay

For an employee who is normally required to work on the day on which a public holiday falls

If the employee’s pay is calculated by reference to a time rate or salary, he is entitled to a day’s pay according to his normal daily hours prior to the holiday;

If the employee’s pay is calculated by reference to a piece rate or commission, he is entitled to the average daily pay calculated over the 13 weeks prior to the public holiday.

For an employee who is not normally required to work on the day on which the public holiday falls

If the employee’s pay is calculated by reference to a time rate or salary, he is entitled to pay equivalent to one fifth of the normal weekly hours last worked before the holiday;

If the employee’s pay is calculated by reference to a piece rate, he is entitled to one fifth of the average weekly pay calculated over 13 weeks prior to the public holiday.

Complaints

A claim may be brought in the first instance to the WRC (Workplace Relations Commission) (within 6 months of alleged breach, 12 months allowed in exceptional situations), and thereafter appealed to the Labour Court.

Section 27 deals with complaints to the Rights Commissioner and the sanctions which can be imposed which include:

(3) A decision of a rights commissioner under subsection (2) shall do one or more of the following:
(a) declare that the complaint was or, as the case may be, was not well founded,
(b) require the employer to comply with the relevant provision,
(c) require the employer to pay to the employee compensation of such amount (if any) as is just and equitable having regard to all the circumstances, but not exceeding 2 years remuneration in respect of the employee’s employment, and the references in the foregoing paragraphs to an employer shall be construed, in a case where ownership of the business of the employer changes after the contravention to which the complaint relates occurred, as references to the person who, by virtue of the change, becomes entitled to such ownership.

Record Keeping

Section 25 of the Act requires employers to maintain employee records of holidays and public holidays for a period of 3 years. Statutory Instrument 473/2001 contains the regulations concerning the records and forms that must be kept.

Terry Gorry & Co. Solicitors has prepared a spreadsheet to record hours worked which is based on these regulations and on the OWT1 form prescribed which you can download by clicking on the link. The requirement to complete our form or form OWT1 is only where the employer has no electronic clocking-in facilities.

Section 27 of the act allows an employee to complain about a breach of a “relevant provision” to a Rights Commissioner. (A relevant provision concerns rest periods and/or holiday entitlements).

A Rights Commissioner (or Labour Court on appeal) can

(3) A decision of a rights commissioner under subsection (2) shall do one or more of the following:
(a) declare that the complaint was or, as the case may be, was not well founded,
(b) require the employer to comply with the relevant provision,
(c) require the employer to pay to the employee compensation of such amount (if any) as is just and equitable having regard to all the circumstances, but not exceeding 2 years remuneration in respect of the employee’s employment, and the references in the foregoing paragraphs to an employer shall be construed, in a case where ownership of the business of the employer changes after the contravention to which the complaint relates occurred, as references to the person who, by virtue of the change, becomes entitled to such ownership.

Holiday and public holiday entitlements can also be claimed at an Employment Appeals Tribunal.

Disciplinary and Grievance Procedures-The Facts You Should Know

workplace-discipline

It’s fairly simple, you know.

One of the easiest ways for employers to blow a lot of cash is to fail to follow proper procedures when dismissing an employee.

No matter how justifiable the dismissal may be it will be a costly affair if proper procedures are not followed.

Employers have a legal obligation to provide their employees with written procedures to be followed before dismissal of an employee.

The safest approach for the employer to take is to follow the best practice set out in Statutory Instrument 146/2000. The Labour Relations Commission have published codes of practice for many aspects of employment.

Here is the Labour Relations Commission code of practice for fair disciplinary and grievance procedures.If you are an employer it will pay you to read it and be very familiar with it.

It is not mandatory to adopt the procedures set out but it makes good business sense to do so. It is particularly important in workplaces where there is no trade union and the employee is relying on individual representation.

Both the Employment Appeals Tribunal and the Civil Courts will measure your procedures against what is set out in the Industrial Relations Act, 1990 Declaration Order when it comes to adjudicating in a dispute.

The guiding principles of a good disciplinary and grievance procedure is that

  1. It is fair
  2. It is clear
  3. The penalties that can be imposed are clear and
  4. There is an internal appeals mechanism.

Broadly good practice demands that

  1. The issue is brought to the attention of the immediate manager and then progressed up the line to more senior management
  2. The employee is represented
  3. Referral to a third party depending on local arrangements.

The penalties should include, in the first instance an oral warning, then a written warning, then a final written warning, suspension without pay, transfer to another job or part of the company, demotion, and dismissal.

The basic test at all stages of the procedure is “what would a reasonable employer do in the circumstances” and this will depend on the problem, be it incompetence, misconduct, or whatever issue arises. There is no set number of warnings required as it will depend on the circumstances and cases of serious misconduct may justify moving to a later stage of the procedure more quickly.

Less serious problems may be dealt with by pointing out the shortcomings, providing the opportunity to improve, the offer of training and allowing room and time for improvement. When this route is adopted the employees should be advised of the consequences of not improving and what penalties may apply.

For employers it is strongly advisable to have your grievance and disciplinary procedures reviewed regularly as the legislation can be updated regularly, case law may necessitate change, and the circumstances in the workplace can necessitate it.

Successful claims for unfair dismissal or constructive dismissal can be incredibly expensive for the employer.

Firstly there is the award to be paid to the successful claimant and then there is the time and money and legal advice required to prepare for a Rights Commissioner or Employment Appeals Tribunal hearing.

You might also be interested in a step by step disciplinary  procedure.

You may be interested in how to avoid costly employment related claims.

Online Training Course

You may be interested in my online training course: How to Carry Out a Disciplinary Procedure in the Irish Workplace

How Employers Can Safely Cut Wages or Reduce Hours Without Expensive Claims

how-to-cut-wages

Let’s admit it.

One of the first areas that employers look to in seeking to cut the costs in the business is employees’ wages and salaries.

Cutting staff wages unilaterally though can be fraught with danger.

One of the fundamental terms of the contract of employment will be that dealing with pay/salary.

Cutting wages therefore is a variation or change of a fundamental term of the contract and is a dangerous area for the employer.

As you know, one party to a contract simply cannot change that contract without the consent of the other party.

Legal professionals have different views however with some arguing that you can vary the contract by relying on the common clause in most contracts which reserves the right to the employer to the variation of the contract of employment.

However it is an implied term of any contract of employment that any variation would have to be reasonable. And it is arguable that cutting pay in reliance of the variation clause is not reasonable. Nevertheless whatever chance the employer has with a variation clause, he/she has none without it.

Lawyers who argue that you can cut unilaterally are of the view that provided you give reasonable notice of the reduction and the reasons for the cut it is acceptable.

Defending this decision would need to be supported should it be challenged under the Payment of Wages Act or in a constructive dismissal claim would require the employer being able to show that he/she is incurring losses.

However the safer view seems to be that it is not possible to cut salaries/wages without the consent of the employee. On the other hand if the contract reserves the right to the employer to withdraw or reduce a specific benefit (for example company car or bonus scheme) to the employee he/she would be in a much stronger position.

The Safer Method of Reducing Wages

The safest way to reduce wages and salaries is with the employee’s consent. This will involve consultation, explanation, and agreement and is most likely to be successful with respect to benefits other than basic pay.

The explanation will need to deal with the difficulties faced by your business or organisation and the difficult economic climate with as much information as you can reasonably provide being given to the employee.

Once the change is made the employer must provide notice of the change under the Terms of Employment (Information) acts 1994-2001 within one month but it would be better to provide this notice in advance.

From an employee’s perspective it is noteworthy that should he/she be made redundant subsequently he/she will be paid statutory redundancy on the basis of the lower amount (at the date of termination of employment), not what he/she historically earned.

If the employee does not agree to the reduction in hours or wage rates there are a number of options open to him/her:

  • A complaint to the Rights Commissioner service under the Industrial Relations Acts 1969-2001
  • A complaint to the Rights Commissioner service on the grounds of an unlawful deduction of wages under the Payment of Wages Act 1991
  • A claim for unfair dismissal where the employer makes the employee redundant on the grounds that this is not a genuine redundancy and/or there was unfair selection for redundancy or the employer did not use fair procedures
  • A claim for constructive dismissal on the grounds that the employee had no option but to resign given the breach of the terms of the contract
  • A claim in the Civil Courts for breach of contract and/or wrongful dismissal.

How to reduce costly employment related claims by employees.

Sick Leave and Illness Leave in Irish Employment Law-How to Avoid Needless Disputes with Your Employees

sick-leave-ireland

Another bloody sick cert…

Yes, it’s frustrating.

You are an employer and you have had it up to the two eyeballs with these sick certs.

You know he’s been seen drinking all over the parish at the weekend. And now he’s giving you this sick cert stating that he is suffering with back trouble.

Sick or illness leave can be a thorny subject in Irish workplaces and the source of much frustration for employers.

Disputes and bad feeling can easily arise through a simple lack of clarity and planning when drawing up the contract of employment or the company policy on sick leave.

There is no general entitlement under Irish law to be paid whilst out of work due to sickness/illness.

However it is something that can be provided for between the employer and employee when agreeing a contract of employment.

Doing so prevents rows, bad feeling and disputes arising between employer and employee.

The Terms of Employment (Information) Act 1994 specifically refers to the provision for incapacity for work due to sickness as being one of the things about which the employer must provide information to the employee within two months of starting employment.

The employee, if he/she has sufficient social insurance contributions, may qualify for illness benefit from the Department of Social Protection.

If there is provision in the contract for sick pay to be paid by the employer it is common for provision to be made for the illness benefit received by the employee to be paid over to the employer.

The contract of employment will probably also put a limit on the amount of paid sick leave that you are entitled to over a specific period of time, for example a 12 month period.

The employment contract should also provide clear rules and procedures as to the provision of medical certificates and notification to the employer. The medical certificate should also state when the employee is likely to be able to return to work. If this is not possible then weekly medical certificates will likely be required.

Whilst it is difficult to terminate the employment of an employee on sick leave, it is not impossible but considerations surrounding unfair dismissal should be borne in mind and legal advice sought.

Injury or Accident at Work

If the employee suffers an injury or occupational disease or is involved in an accident he/she may apply for injury benefit which is a weekly payment from the Department of Social Protection. However if he/she is being paid sick pay by the employer there will probably be a provision in the contract for the injury benefit payments to be paid to the employer.

The employee can also, of course, bring a personal injuries claim against the employer.

Public Holidays and Annual Leave

If the employee is on annual leave and suffers an illness for which he/she can provide a medical certificate he/she is entitled to annual leave at a later date in lieu of the sick days.

If the employee is certified sick then the employer cannot insist that he take annual leave to cover this period.

It is a similar situation in relation to public holidays: if the employee can certify that he was sick during a public holiday he is entitled to time off for the public holiday he missed.

Public Service and Specific Industries

Many public servants and particular categories of workers, for example teachers, enjoy better entitlements in relation to sick leave and may well enjoy paid sick leave. In fact public servants have enjoyed six months paid sick leave followed by a further six months on half pay.

Many public servants also enjoy uncertified sick pay entitlements but these perks are due to change from January, 2014 thanks to a recent Labour Court recommendation. Teachers’ uncertified sick leave entitlements have also come under pressure following the Labour Court recommendation and have changed since September, 2012.

If you are an employers and you are concerned about your existing employment contracts you might be interested in having them reviewed/drafted.

You might also be interested in how to manage sickness related absence from the workplace.

You can learn more about our services in this area here.

The Employment Contract in Irish Employment Law-The Facts You Should Know

Employment contract
Employment contract

It’s true, you know.

The foundation stone of the employer/employee relationship is the employment contract.

So, it’s critical from day one, and becomes even more important if there is a dispute.

It is vital that it is drafted correctly, especially from the employer’s viewpoint.

This extensive article looks at the contract of employment in Irish law and some of the critical issues which arise in the employment relationship.

It will also look at

  • terms of employment,
  • the express terms you should include
  • who is a “deemed employee” and why it matters
  • changing a contract of employment,
  • termination of the contract,
  • minimum notice periods,
  • the difference between a contract of service and contract for services,
  • issues prior to employing someone
  • and more.

The employment contract is the source of much misunderstanding and strife between employers and employees.

Even though legislation has come to play a huge role in the employment relationship the legal relationship between employer and employee is rooted in the law of contact. There is no requirement in law that the employment contract be in writing.

However, there is an obligation on the employer under the Terms of Employment (Information) act, 1994 to give employees a written statement of certain terms of employment (see below).

This legislation does not apply to employees with less than one months’s service or to employees who are expected to work less than 8 hours per week.

Who is an Employee in Irish Law?  Is an Employment Contract Necessary?

It is vitally important for both employers and employees to understand who is considered to be an employee in Irish law versus the worker being an independent contractor.

Clearly an independent contractor will not enjoy the benefits of Irish employment legislation.

Contract of service or contract for services?

The vital difference is that an employee works under a contract of service while an independent contractor supplies his/her labour and/or services under a contract for services.

The status of the worker, in a dispute situation, will be determined by legal interpretation and some basic rules. Important decided cases in this area include

  • Ready Mixed Concrete v Minister of Pensions and National Insurance[1968] and
  • Henry Denny & Sons (Ireland) limited (t/a Kerry Foods) v Minster for Social Welfare[1998]
  • Minister for Labour v PMPA Insurance Co. Ltd.

It is worth noting that regardless of the label put on the relationship by the parties the Courts will look at the facts of the situation and decide what type of contract exists. In making it’s decision the Court will be influenced by:

  1. Whether there is written evidence of terms
  2. Whether there is control over the worker as to how, what, when, why, and how the worker works
  3. Whether the employee provides his own labour/skill to the “employer” and cannot assign his duties to another.

The key areas therefore which a Court or tribunal will consider will be the aspect of personal service, the degree of control over the worker, and any written terms of the contract.

A Deemed Employee

A deemed employee situation will arise where a person is working for an employer through another agency or body.

That person will be a deemed employee of the person for whom they are doing the work. This situation will commonly arise where employment agencies place people in a work environment.

The employment agency must be one as defined by the Employment Agency Act, 1971 but this act defines an employment agency very widely. It is important to note though that the notion of a deemed employee only applies in relation to the application of specific statutes which provide for protection for a deemed employee.

However it can be a dangerous situation where a business does not know of their potential liability to a deemed employee until a problem occurs and the deemed employer can be held responsible for a dismissal over which he had no control or knowledge.

You might also be interested in the law surrounding temporary agency workers.

 Partnerships

Partners are not employed by or with each other but may, as a partnership, have employees.

Shareholders/Directors

Ownership of a shareholding in a company does not prevent the owner from being an employee of the company. But a controlling shareholder may have difficulty establishing that he was an employee.

Prior to Contract

Before entering into a contract of employment there are three areas that an employer needs to consider carefully.
These areas can be broadly categorized as follows:

  1. Advertising the position
  2. Interviewing for the job
  3. Conditions precedent.

Job Advertising

Advertising the job can be fraught with danger for the employer as it is easy to fall foul of employment equality legislation.

In addition the wording of the advertisement can be held to form part of the subsequent contract of employment.

Interviewing for the job

Employers need to be careful not to ask questions which fall foul of the Employment Equality Acts, 1998-2004 and avoid asking questions that could be considered discriminatory on the grounds of age, marital status, sex, and the other grounds referred to in employment equality legislation.

Keeping note of the interview is a smart practice as what is said at interview (by both parties) can be held to form part of the subsequent contract.

Conditions precedent

The employer should make a job offer conditional on certain conditions being fulfilled, depending on the position.

These conditions may cover Garda vetting, clean driving licence, health to do the job, suitable references, registration with professional bodies, and others-this will depend very much on the nature of the work and position.

The areas of references and medical examinations can cause problems and the key principle always for the employers is that you have the employee’s consent to take up references and medical reports/evidence.

The Data Protection Commissioner has held that you need written consent to take up references. However there is no general requirement in law that an employer furnish a reference.

Medical evidence?

There is no reason why a prospective employee should not be asked to undergo a medical prior to a job offer being made even though it is common for employers to only require a medical examination after the offer has been made and accepted.

Union membership? 

A pre-contractual closed shop is lawful under the Common law and European law.

Terms of Employment

The contract of employment in Ireland is made up of both express terms and implied terms with the Terms of Employment (Information) Act, 1994 stipulating that certain basic information must be given to the employee in writing.

This includes the names and addresses of both employer and employee, the place of work, the title of the job, pay, any terms relating to sick pay, periods of notice and many other basic details.

Implied Terms

In every contract of employment, written or otherwise, there are 4 categories of implied terms which fall under the headings of
a) terms implied by custom/practice (depending on the industry)

b) terms implied by statute (right to redundancy, right not to be unfairly dismissed, right to notice, right not to be discriminated against as per Employment Equality Acts, right to breaks, annual leave, holidays as per Organisation of Working Time Act, 1997, protective leave including maternity leave, payment of wages as per Payment of Wages Act 1991, atypical workers such as part timers and fixed term workers protected by the Protection of Employment Acts, health and safety provisions as per Health and Safety at Work Act 2005)

c) terms implied by law (employers duty of care and employees duty of trust and confidence)

d) collective agreements in unionized employment.

Express Terms of Employment

The express terms of employment are those terms clearly agreed between the employer and employee and can be oral or in writing.

The principal express terms that should be included in any document setting out the terms and conditions of a contract are set out in this article.

employment-contract

Terms of Employment (Information) Acts

The Terms of Employment (Information) Acts 1994-2001 provide that employees must be given a statement, signed by the employer, of certain of their terms and conditions of employment within 2 months of their employment.

What must be included in this statement?

  • The names of the employer and employee
  • The address of the employer
  • The place of work (This can be a thorny issue if you need the employee to move to another location or provide geographical mobility in the course of employment and it has not been provided for in the contract of employment)
  • Hours of work (this needs to be clear about shifts, overtime, work breaks, lay offs, short time, and so forth)
  • The job title or nature of the work for which they are employed (Drafting this too widely can give problems when it comes to redundancy; drafting too narrowly can lead to practical, on the ground difficulties)
  • The date of commencement of employment (when does employment start is an important question as most statutory entitlements will be dependent on the length of service)
  • The duration of the contract and expiry date if the contract is a fixed term/temporary contract
  • The rate of pay or method of calculation (the salary package and the breakdown between basic salary, commission, bonuses, allowances, and so forth should be set out)
  • How often/the intervals at which pay will be paid
  • Terms and conditions re paid leave (what is the position re holidays and is there extra days over and above those set down by statute in the Organization of Working Time Act,1997)
  • Terms and conditions re illness/sickness or injury and pensions (what is the situation re sick pay; there is no general right to be paid while out sick but the contract can provide for it expressly or custom and practice of the industry/job can imply it but this may need to be proven if questioned)
  • The period of notice obliged to be given by both parties
  • If any collective agreement affects the contract
  • Times of breaks/rest periods both daily and weekly
  • The company’s pay reference period.

If the employer fails to provide this statement to the employee a claim can be made to the Rights Commissioner service who may order compensation of up to 4 weeks remuneration and require the employer to give the statement of terms to the employee.

In addition to the above statutory minimum terms and conditions it is prudent and advisable for the employer to include other terms in the contract dealing with

  • Short time/lay offs
  • Illness pay
  • Retirement age
  • Time off work
  • A probationary period (cannot exceed one year)
  • Bullying and harassment procedures
  • Grievance and disciplinary procedures (a specified disciplinary procedure should be in place and a copy of this together with the grievance procedure should be given to the employee along with the contract/letter of offer)
  • Company car
  • Share options
  • Retirement age (should be specified by the employer)
  • Any restrictions re competition and setting up against the employer in the future using trade secrets/contacts. Note that common law implies a duty of loyalty in the employment contract; common law also protects confidential information and trade secrets in the absence of an express or written term in the contract covering this area. However there is no common law barrier to soliciting for business done by the employer once the employee leaves the employment.
  • Email and internet use

In addition to the above, the employer must give new employees, within 28 days of starting employment, a written summary of the procedures to be used should it be necessary to dismiss them.

As an employer you need to be clear what terms and conditions are obligatory in the employment contract as a result of the Terms of Employment (Information) Acts and the additional terms and conditions which might be advisable and prudent for the employer.

Legal advice is recommended as the consequences of a badly drafted contract with an employee will be far more costly than the cost of having a properly drafted contract of employment by a legal professional.

Termination of the Employment Contract and Minimum Notice Periods

Providing for termination of the employment contract is an important term of the contract of employment, one which the employer needs to take care over, particularly the notice period.

There are a number of important considerations to think about such as

  1. The notice period
  2. The reason(s) for termination.

Notice period

An agreed notice period is strongly recommended in all contracts of employment.

If none is specified then the employer is obliged to give “reasonable” notice. Reasonable notice will vary from contract to contract.

Minimum Notice Periods for termination

The statutory minimum notice periods on termination of employment are as set out in the Minimum Notice and Terms of Employment Acts 1973 to 2001 which are based on years of service of the employee.

Service                                        Notice
13 weeks – 2 years                    1 week
2 – 5 years                                   2 weeks
5 – 10 years                                 4 weeks
10 -15 years                                6 weeks
over 15 years                              8 weeks.

Employees are entitled to the above notice periods or pay in lieu except in cases of dismissal for misconduct where the employer is entitled to terminate the employment immediately without notice.

The employer on the other hand is entitled to at least 1 week’s notice from the employee, but this will depend on the contract.

Note: Both the employer and employee have the right to terminate the contract of employment without notice due to the misconduct of the other party.

Any claims in respect of breaches of the Minimum Notice and Terms of Employment Acts go to the Employments Appeal Tribunal which can award compensation to the employee for not receiving proper notice. (Note that if the employee was sick or on strike during the notice period no compensation is payable)

Reason for termination of the employment contract

Both employer and employee have a broadly similar right under common law to terminate the contract of employment. If notice is not provided for in the contract then “reasonable” notice should be given.

“Reasonable notice”, in the absence of a stipulated period of notice, will be decided by

  • Custom and practice
  • Length of service
  • Age and experience of the employee
  • Job role
  • The particular facts of the case.

It is recommended to the employer that a notice period always be stipulated in the contract.

Giving notice of termination of employment contract

Some important points concerning notice:

  1. Notice can be given at any time including during leave or illness leave but not during maternity leave;
  2. It must be clear and unambiguous
  3. It can be in writing or orally (unless it is specified in the contract that it be in writing)
  4. The Minimum Notice and Terms of Employment Act, 1973 sets out minimum notice periods depending on the length of service
  5. The minimum period of notice in all cases is one week
  6. If an employee is dismissed for misconduct he loses his entitlement to notice under the Minimum Notice and Terms of Employment Act, 1973.

Damages following dismissal

In general punitive damages allowed following a dismissal will be restricted to remuneration to which the employee was entitled and not for any distress caused by the manner in which the dismissal has occurred.

Changing a Contract of Employment

Changing or varying the terms and conditions of a contract of employment can only be done with the agreement of the parties. It cannot be unilateral.

An employer is leaving him/herself open to a successful claim if he imposes changes to a contractual entitlement unilaterally. It is worth noting that agreement can be express, implied, or by acquiescence.

However an important distinction should be made between a work practice and a contractual provision or term of the contract.

Variation by the parties

Sometimes variation by one of the parties becomes necessary to give the contract commercial efficacy. If a term is so obvious that common sense would dictate that it must be included in the contract the Courts will imply it into the contract.

hanging-contract-of-employment

Variation by Trade Unions or a 3rd Party

What about variation of the terms of employment through the trade union negotiating on behalf of the employee? Generally employees will accept changes negotiated on their behalf by their trade union.

However a trade union cannot bind those members who have made it clear that they will not be bound by the changes-see Goulding Chemicals Ltd v Bolger [1977], Irish Supreme Court.

Take a more detailed look at the legality of trade union negotiated variations of contracts.

Custom and Practice

Some contracts of employment will have terms of employment implied into them by custom and practice of the employment or industry.

For this to happen the custom must be

“so notorious, well known and acquiesced in that the absence of agreement in writing it is to be taken as one of the terms of the contract between the parties” O’Reilly v Irish Press [1937]

Contractual Right to Vary

Many employment contracts will contain a term reserving the right to the employer to vary or alter the terms and/or conditions of the contract.

However this does not give the employer the right to make unreasonable changes and courts and tribunals will always look to see if the change was necessary and reasonable.

It is important to note that if an employee does not object to a change and works away under the changed terms he/she may be held to have implicitly agreed to the changed terms and conditions.

On the other hand an employee could argue that he/she was simply being co-operative and this did not imply approval of the change. The best way for an employer to counter this is to bring any proposed change to the attention of the employee; if he/she does not he cannot slip changes in “under the radar” and claim acquiescence by the employee.

It is worth noting also that where an employer is entitled in law to make changes to contracts of employment employees are still entitled to engage in trade disputes to attempt to bring about change. This is the case even in companies where unions are not recognised as the Labour Court can be asked by the union to investigate the dispute.

 Co-Operation and not variation

A distinction must be drawn between an employee co-operating in a change and acquiescing to a contractual variation. Courts will not allow employers to slip in changes unknown to an employee.

Trade Disputes

Even where the employer is legally entitled to take certain action employees may engage in a trade dispute and seek to persuade to bring about the changes they require.

Even in a “non union” employment the Labour Court can investigate a trade dispute where it is not the practice of the employer to negotiate with a trade union.

Collection agreements and contracts of employment? Read about the legality of collective agreements and the tests applied.

Amending the Terms of Employment in Ireland-historically

Terms and conditions of employment-are employers entitled to unilaterally vary such terms and conditions?

In short, the answer is no.

Where an employment contract does not expressly enable the employer to vary the terms of employment, employers may either:

 

1. Obtain the employee’s express agreement to the change (recommended);
2. Terminate the employee’s employment on due notice and offer re-engagement on new terms (not recommended); or
3. Attempt to impose the change unilaterally (not recommended).

Options 2 and 3 above are not recommended and leave the employer at significant risk to a successful claim for unfair/constructive dismissal/non payment of wages claims.

Unilateral variation of an employee’s terms and conditions of employment to the employee’s detriment may give rise to:

1. A claim of constructive dismissal under the Unfair Dismissal Acts 1977-2007 or at common law;
2. A claim for damages for breach of contract;
3. A claim in respect of an unlawful deduction under the Payment of Wages Act 1991;
4. A “trade dispute” under the Industrial Relations Acts 1946-2004,
5. Industrial relations issues, and
6. Injunctive proceedings to prevent the unilateral variation.

What is contractual, and not merely a work practice, may not be varied unilaterally.

Such variation must be agreed between the parties regardless of whether the term is express or implied.

In practice, whether or not an employee benefit constitutes a term or condition of employment may be somewhat academic if changing it is likely to give rise to industrial relations issues and human resources problems.

In Neville v Waters Munster Glass Ltd RP558/2003, the claimant, having refused to accept a reduction in salary and to work a reduced three day week, was consequently made redundant. Although the claimant argued that he had been unfairly dismissed, the tribunal held that a genuine redundancy situation existed.

It is clear from a UK case, GAP Personnel Franchises Ltd v Robinson UK EAT/0342/07, that where employees do not accept a unilateral variation by the employer, especially one that has an immediate impact (e.g. the reduction in pay or benefits), they should make it clear, preferably in writing, that they do not accept the change and are working under protest. Otherwise the employee may eventually be held to have implicitly accepted the change.

Amending terms of employment in Practice

In the course of varying terms and conditions employers should:
1. Maintain clear communication with employees;
2. Provide employees with reasonable notice of any variation to terms and conditions;
3. Be able to explain why the change is necessary and inform the employees of the alternative (i.e. a more formal re-structuring and ultimately possible job losses);
4. Consider whether the new terms can be imposed in stages as opposed to implementing all variations at once. This may help to ease the transition and allow employees to plan for the change; and
5. Consider whether an incentive can be suggested to assist employees in accepting the change. This does not necessarily have to be a financial benefit.

Collective agreements and contracts of employment-what is the legal position?

Employers’ Obligations and Contracts

Employers need to ensure that they have robust, legally sound contracts of employment in place for all of their staff.

There are 4 main reasons for doing so:
1. it is a legal obligation
2. you will need them for a NERA inspection
3. a well drafted contract will minimize the opportunities open to employees to bring costly and damaging claims against you as an employer
4. it makes good business sense to have clarity between both employer and employee as to their obligations and responsibilities.

We specialize in drafting employment contracts for employers in Ireland.

No matter how small or big your business or school is, we can draft contracts for your particular circumstances.

And we can review and advise on your existing contracts and ensure that you will have nothing to worry about should you be chosen for a NERA inspection.

Our contracts typically include the following terms:

  • date of employment
  • appointment and duties
  • job specification
  • location
  • probationary period
  • hours of work
  • breaks
  • wages
  • annual leave
  • pension
  • retirement
  • absence
  • illness/sick leave
  • maternity, paternity, force majeure leave
  • confidentiality
  • grievance, bullying, harassment, dignity at work, disciplinary
  • internet and email
  • data protection
  • termination-notice and pay on termination
  • health and safety
  • short time and layoffs
  • changes to the terms of employment.

However each employer’s situation is different and each employee is different.

So every contract we draft is an individual contract as opposed to a one size fits all affair.

Learn more about how we help employers here.