Mr. Kevin Duffy:

I thank the Chairman and I think I speak for both of us in saying we are happy to assist the committee in its deliberations in any way possible. The report that the committee is considering was commissioned by the then Minister for Jobs, Enterprise and Innovation and the then Minister of State with responsibility for business and employment on 14 January 2016. Detailed terms of reference were provided and we were required to deliver the report by 11 March 2016, which we duly did.

It is important to note the context and parameters of the terms of reference, which in turn set the context and parameters of the report. First, the specific focus of the terms of reference is on a situation where companies separate assets from operations by moving assets into a separate legal entity. While the terms of reference note that there may be sound business reasons for such actions, the problem identified is that, if the operating entity subsequently becomes insolvent and faces liquidation, the separation of assets from operations may have adverse consequences for employees of the operations entity, regardless of the priority to which they are entitled under the Companies Act 2014. The specific scenario the report aims to address is the separation of assets and operations into two corporate entities with the operations company subsequently entering insolvent liquidation.

Second, the opening paragraph of the terms of reference refers to high-profile cases such as the liquidations of Clerys department store and Connolly shoes, but it is expressly not based on the specific facts of any particular liquidation. This is an important aspect of the terms of reference of which we were at all times mindful in preparing the report. The report is not based on the facts of any individual company or liquidation.

Third, the terms of reference state that situations of insolvency highlight the complex interface between company law and employment rates. It was for this reason that two persons with distinct areas of specialisation were asked to work on the report.

Fourth, it was a specific stipulation of the terms of reference that the report should not just consider new solutions, but better, more effective use of existing provisions. This informed the approach taken to the report.

Against that background, the matters the report was asked to consider included whether and if so, how, employees' quantifiable pecuniary entitlements could be ring-fenced in the event of the separation of assets from operations; whether more effective use could be made of existing employment legislation; how employees could negotiate better terms and conditions in circumstances where the employer entity is separating an asset of significant net value from the operations entity; when any new measure to protect workers' interests may be triggered at the time of the transaction or at the time of the liquidation; and whether the assets transferred should be capable of being set aside.

Regarding the approach taken in the report, in accordance with the terms of reference each of the authors of the report examined the existing provisions of the legislation in our respective areas of specialisation and considered whether the existing provisions could be used to address the type of issues that gave rise to the report. We also considered whether amendments were required and, if so, made provision for the general category of amendments that may be considered. In this assessment, we did not and were not asked to take into account considerations of policy or cost. Such matters were and are beyond our remit. We confined ourselves to examining the legislation in our respective areas of specialisation with a view to identifying whether and if so, how, amendments could address the specific issues raised in the terms of reference.

On the outline of the report, Part I sets out the existing provisions of employment legislation that may be most relevant to the issues raised by the terms of reference. Part II sets out the most relevant provisions of the Companies Act 2014.

Part III considers proposals for reform and Part IV summarises the conclusions. The proposals that are made are predominantly concerned with amendments to employment legislation.

With regard to employment law proposals on redundancy, as outlined earlier the terms of reference required us to consider, inter alia, how workers could be facilitated in negotiating enhanced redundancy terms in circumstances in which the employer entity is separating an asset of significant net value from the operations entity. This question was addressed in a number of connected proposals for legislative change contained in the report. They were directed towards providing a statutory mechanism by which compensation could be awarded for the loss of a contractual or quasi-contractual entitlement to enhanced redundancy terms in the type of circumstances referred to in the terms of reference.

The relevant background against which our proposals were formulated can be summarised as follows: section 9(1) of the Protection of Employment Act 1977 provides an obligation on employers to consult employees and their representatives where collective redundancies are in contemplation. The purpose of this consultation is set out in section 9(2) of the Act. It includes the possibility of avoiding some or all of the redundancies and of mitigating their consequences. This can include such matters as offering redeployment, retraining or financial compensation. Where an employer fails to respect its statutory duty to engage in the process of consultation required by the Act, employees are deprived of the opportunity to pursue all or any of these possibilities and to put forward their own proposals as to how they might be achieved.

Section 14(1) of the Act provides that collective redundancies cannot take effect for a period of 30 days after notification of the redundancies is given. In ordinary circumstances, this 30-day consultation period is used by employees and their representatives to negotiate and agree the terms on which the redundancies will take effect. In these negotiations the focus is generally on terms provided in a collective agreement between the parties or established by custom and practice within the employment concerned or in analogous employment. Where agreement is not reached, the issues in dispute can be referred to the Labour Court for adjudication. However, this 30-day prohibition on giving effect to collective redundancies does not apply in cases of insolvency. Hence, in this category of redundancies workers can be deprived of the opportunity to bargain with their employer for enhanced redundancy terms that they might otherwise legitimately have expected.

The maximum redress that can be awarded to an employee for a failure to consult is capped at the equivalent of four weeks' pay. Our proposals on collective redundancies, and the rationale upon which they were based, can be summarised as follows. Proposal No. 1 suggested that the exemption from the requirement to consult in the case of collective redundancies caused by insolvency should be deleted. The intention of this proposal was to place the same obligation to consult on a liquidator as that which applies to all employers, thus placing all employees in the same position, whether the redundancies arise from insolvency or otherwise.

Proposal No. 3 was to the effect that the redress available to an aggrieved employee for a failure to observe the statutory consultation period should be increased to the equivalent of two years' pay, in line with that available for a contravention of most employment rights enactments.

Proposal No. 6 suggested a mechanism by which it would be possible for an adjudication officer of the Workplace Relations Commission, WRC, and the Labour Court on appeal, to take into account any prejudice suffered by employees in consequence of their employer’s failure to comply with the Act. This could include a failure to obtain enhanced redundancy payments on foot of an express or implied term incorporated in the employees' contracts of employment, whether through a pre-existing collective agreement or established by custom and practice.

We further proposed that any amount awarded would then be recoverable under the Protection of Employees (Employers’ Insolvency) Act 1984 in circumstances in which it cannot be discharged by the employer due to insolvency. Through the mechanism suggested in proposal No. 4, the amounts paid out could be recoverable against any significant asset separated from the employing entity.