Ms Maeve McElwee:

IBEC welcomes the opportunity afforded by the committee to address the committee on the Companies (Protection of Employees’ Rights in Liquidations) Bill 2021. In amending section 621 of the Companies Act 2014, this Bill makes provision for recognition of enhanced redundancy payments in a liquidation, including those agreed in relevant collective agreements, and proposes to give preferential creditor status to employees in the event of a company being wound up in a company liquidation.

IBEC notes that the impetus for the Bill arises from the Debenhams dispute following the closure of its Irish operation in April 2020. IBEC opposes the Bill, not least in the context of the far-reaching effect it will have if implemented. While IBEC recognises the distress of the Debenhams employees on the closure of the Irish operation, it respectfully submits that the Bill is a disproportionate response to the situation and will ultimately undermine the voluntarist nature of the industrial relations landscape in Ireland giving rise to constitutional challenge.

The Bill proposes two amendments to the 2014 Act. In the first instance, IBEC submits that statutory redundancy entitlements in Ireland are already more favourable than those of our nearest neighbour and competitor, the UK, not least for the fact that, unlike Ireland, the UK imposes a maximum statutory redundancy payment of £17,130 and caps length of service in any such calculations at 20 years. It is the case that claims for enhanced redundancy payments are generally pursued as industrial relations claims using established industrial relations mechanisms whereby any recommendation issued is not binding in law. Therefore, any such enhanced payment cannot be considered a legally enforceable debt recoverable from the social insurance fund, owing to employees and binding on a liquidator.

The proposed amendment will fundamentally undermine the voluntarist nature of the industrial relations landscape in Ireland. Giving a collectively bargained agreement statutory footing and effectively penalising employees who are not subject to such agreements will significantly and irreparably undermine the constitutionally protected voluntarist system of industrial relations in Ireland. IBEC submits that there are serious constitutional concerns with giving legal effect to an industrial relations instrument considering the constitutional right to dissociate, as recognised by the Supreme Court.

The effect of legislating, as proposed, would be to place an enhanced redundancy payment on a statutory footing in insolvency situations only, with the State paying the bill. Should an enhanced redundancy payment be limited to insolvencies, as proposed, it would create a two-tiered system. It will essentially mean that those who are made redundant arising from an insolvency will be entitled to an enhanced redundancy payment and every other employee made redundant, where no insolvency arises, will only be legally entitled to statutory redundancy. Any such proposal would not only be completely unfair and illogical, but, IBEC respectfully submits, a disproportionate and misguided response to the Debenhams situation.

The Duffy Cahill report published on 11 March 2016 arising from the circumstances resulting in the redundancy of employees from Clery's department store, which must be distinguished from the circumstances giving rise to the Debenhams closure, considered the question of what protections could be afforded to an ex gratiapayment in a collective redundancy situation. The authors stated, "it is not desirable to create a special class of redundant worker with legal rights that go beyond those of the generality of workers who lose their employment in circumstances of redundancy". On 11 May 2021, the Department of Enterprise, Trade and Employment published the plan for action on collective redundancies following insolvency setting out its conclusions arising from the examination of the legal landscape underpinning redundancy provisions in insolvency situations. Notably, with regard to a proposal to introduce enhanced redundancy payments where there has been a breach of the Protection of Employment Acts, the plan concludes that "this approach is not recommended" as it "could create two classes of redundant employee and undermines the purpose of collective redundancies in the context of corporate restructuring". IBEC submits that amending legislation resulting in a secondary class of employee is entirely unacceptable, regardless of whether the redundancies arise collectively or otherwise or due to insolvency or otherwise. IBEC submits that rather than placing an additional and excessive burden on an already stretched Exchequer, resources would be better used to require timely submission by liquidators of claims for payments from the social insurance fund and ensure efficient administration of such claims.

Section 621 of the 2014 Act, as amended by section 49 of the Workplace Relations Act 2015, already requires certain payments to employees to be classified as preferential payments in liquidation, including compensation payable under Part 4 of the Workplace Relations Act 2015. Furthermore, section 42 of the Redundancy Payments Acts 1967 to 2015 provides for priority of payment of statutory redundancy payments in a winding-up situation. It is concerning that the Bill seeks to put, without any justification, one class of employee above another in a redundancy situation by proposing more favourable statutory rights for employees made redundant where an employer becomes insolvent. Any such amendment would result in the State deciding that one class of employee is more deserving of preferential treatment than another despite both being made redundant, which, IBEC submits, is at best entirely unfair and disproportionate.

It is clearly the case that not all redundancies will be the result of employer insolvency. IBEC refers to those companies that faced unprecedented challenges arising from the Covid-19 pandemic resulting in them having to affect redundancies arising from a restructure or downsizing in order to remain solvent. To suggest that those employees would not be as preferred in the eyes of the law as employees made redundant due to insolvency is a matter of concern. Furthermore, the proposed amendment provides that payments due to employees as a result of employer insolvency "shall have priority to all other debts". Consideration must, therefore, be given to the potential impact any such amendment would have on the preferential ranking of other creditors in recovering any debts owed. If implemented, the amendment would put employee debts ahead of State creditors, including the Revenue Commissioners, resulting in a potential adverse impact on the Exchequer and the social insurance fund.

While IBEC is acutely aware of the need to protect employees at times of an employer’s financial difficulty, it submits that effective legislative provisions and mechanisms already exist under both employment and company law.

We respectfully submit that the Bill is an entirely disproportionate response to the Debenhams dispute, with proposed amendments that are not only unreasonable and divisive but also constitutionally challengeable.