Oireachtas Joint and Select Committees
Wednesday, 31 May 2023
Joint Oireachtas Committee on Jobs, Enterprise and Innovation
General Scheme of the Plan of Action on Collective Redundancies following Insolvency Bill 2023: Discussion
We will now begin in public session. Members who are participating remotely need to do so from within the Leinster House complex. Apologies have been received from Senator Paul Gavan.
Today we will have pre-legislative scrutiny of the general scheme of the plan of action on collective redundancies following insolvency Bill 2023. In June 2021, the Government launched a plan of action on collective redundancies following insolvency which set out a broad range of commitments to enhance the protection afforded to employees who find themselves in a collective redundancy situation following insolvency. The general scheme of the plan of action on collective redundancies following insolvency Bill 2023 aims to deliver on this action plan and provides for several measures, including amendments to employment law and company law legislation and the setting up of an employment law review group.
We are pleased that we have an opportunity to consider this and other related matters with the following representatives from the Department of Enterprise, Trade and Employment: Ms Fiona O'Dea, principal officer; Ms Sarah Flood, assistant principal officer; Ms Dara Breathnach, principal officer; Mr. Peter O'Brien Hogan, assistant principal officer; Ms Áine Maher, principal officer; and Mr. Shane Smith, higher executive officer.
I wish to explain some limitations to parliamentary privilege and the practice of the Houses as regards references witnesses may make to another person in their evidence. The evidence of witnesses physically present or who give evidence from within the parliamentary precincts is protected pursuant to both the Constitution and statute by absolute privilege. Witnesses are again reminded of the long-standing parliamentary practice that they should not criticise or make charges against any person or entity by name or in such a way as to make him, her or it identifiable, or otherwise engage in speech that might be regarded as damaging to the good name of the person or entity. Therefore, if their statements are potentially defamatory in relation to an identifiable person or entity, they will be directed to discontinue their remarks. It is imperative that they comply with any such direction.
The opening statement has been circulated to members. To commence our consideration of this matter, I invite Ms O'Dea to make her opening remarks on behalf of the Department.
Ms Fiona O'Dea:
I thank the Chair and the committee for the opportunity to discuss the general scheme of the plan of action on collective redundancies following insolvency Bill 2023 which is included as a legislative priority for drafting on the Government’s legislative programme for the summer session.
The general scheme amends, in an integrated manner, employment, redundancy and company laws. As it is a shared project across the Department, I am accompanied by my departmental colleagues Ms Dara Breathnach and Mr. Peter O’Brien Hogan in respect of amendments to the collective redundancy rules and Ms Áine Maher and Mr. Shane Smith regarding the statutory establishment of the employment law review group, ELRG. The scheme also provides for discrete but important amendments to the Companies Act 2014 that are material to the protection of workers as creditors. To that end, I am accompanied by my colleague Ms Sarah Flood. We welcome the opportunity to contribute to the committee’s scrutiny of the scheme and to assist in any way we can.
The context for this general scheme is the plan of action on collective redundancies following insolvency which was launched in June 2021 following extensive and constructive engagement with the social partners. The plan, which was welcomed by the social partners, was also informed by the work of the Company Law Review Group, CLRG, a statutory advisory body made up of representatives from a wide range of stakeholders, including those from the trade unions, business associations, Government bodies, auditing and banking bodies, as well as academics, legal practitioners and insolvency experts. Further consultations also took place during the development of the scheme with Restructuring & Insolvency Ireland, RII, the insolvency practitioners’ representative group, and the Department of Social Protection.
The plan of action addresses matters relating to employment rights and company law. It is not in response to any one previous company insolvency resulting in collective redundancies. Rather, it addresses the issues arising across the generality of such situations and seeks to further supplement the already robust legislative protections and safeguards afforded to the employees involved.
Significant progress has already been achieved in delivering on the various actions under the plan of action. In 2021, a guidance document to help workers and their representatives navigate the existing legal frameworks was published. Also that year, improvements were made to the quality and circulation of information to workers as creditors, with amendments to the Companies Act 2014 made by the Companies (Rescue Process for Small and Micro Companies) Act 2021.
Last year, the obligations on directors to consider the interests of creditors in the period leading up to insolvency was put on a statutory footing. Work has already commenced on establishing the ELRG on a non-statutory basis. This general scheme is a key step in implementing the outstanding employment rights and company-related legislative commitments set out in the plan of action.
The policy objective of the scheme is to further enhance the protection of employees in a collective redundancy in a way that does not unduly impede enterprises in the conduct of their business. It is primarily focused on improving awareness and increasing transparency for the employees of insolvent employers. The scheme is comprised of 22 heads, divided into four parts. I will now provide a brief summary of its main aspects.
The scheme will amend the Protection of Employment Act 1977, which governs redundancy rules, to further protect employees as workers affected by collective redundancies. The scheme ensures that all collective redundancies are subject to a 30-day notification period before they take effect, including where the employer is insolvent. Where the employer makes them redundant before the 30-day notification period finishes, the employees can seek redress from the Workplace Relations Commission, WRC. The scheme also provides that where a liquidator is managing the collective redundancy process in an insolvency situation, the liquidator has similar obligations and where it fails to comply with those duties, the WRC may prosecute it. Finally, in respect of proposed collective redundancies, the scheme allows for notification to the Minister by electronic means.
The scheme also provides for the establishment of the ELRG on a statutory basis. The ELRG will be a significantly valuable resource to the Department, allowing for an ongoing assessment of employment and redundancy law to ensure it is fit for purpose. It will comprise members with expertise and an interest in the development of employment and redundancy law. This will include members from the legal, accountancy and insolvency professions, worker and employer representatives and regulators, and ministerial nominees.
In respect of corporate law, the Companies Act 2014 sets down a framework within which directors and companies are expected to operate. It provides for separate corporate legal personality and limited liability which is designed to encourage and foster enterprise by permitting individuals to engage in entrepreneurial activity while limiting personal exposure to financial loss in the event of commercial failure. However, the Companies Act 2014 demands that, in return for the privilege of limited liability, directors act in good faith and abide by the requirements of governance, transparency and commercial probity.
In the event of non-compliance, remedies and accountability are important. The 2014 Act contains several provisions that can be utilised by creditors to set aside transactions which have been entered by companies and which have the effect of transferring assets or giving an advantage to certain creditors. The scheme, which includes amendments sought by the Irish Congress of Trade Unions, ICTU, and recommended by the CLRG, intends to enhance access to these remedies. It raises the bar for the permissibility of transferring assets in the period prior to insolvency and lowers the threshold required by the court to order a related company to contribute to the debts of the company being wound up.
The scheme will amend the 2014 Act to allow workers as creditors to have greater access to information regarding liquidations. These amendments are reflective not just of the CLRG’s March 2021 report on the provision of information to workers as creditors but also ICTU’s minority report. Given the cumulative economic impacts of Covid-19, Brexit and the invasion of Ukraine on the liquidity of companies, it is reasonable to anticipate an increase in winding-up petitions. The general scheme seeks to mitigate this, with a view to enhancing the protection of employees that is already a feature of the existing legal landscape.
My colleagues and I are happy to discuss the scheme in more detail with the committee. I thank the Chair.
I thank the witnesses for attending and for their work on this. It is a complicated area but it is also very necessary. In the opening submission, the Department explicitly stated it is not in respect of any one previous company insolvency. I understand that, but it is helpful to think about this in terms of what we know has happened. Certain high-profile cases, such as those involving Debenham's, Clerys and TalkTalk, that brought the issue of collective redundancy into the public consciousness and sparked a debate. I understand that the general scheme was not drafted in the context of a particular case; it could not be. If we had a time machine and nipped back in time and made these amendments before the Debenham's workers were made redundant, how would it have been different? Will the witnesses talk us through that? It would be useful.
Ms Fiona O'Dea:
I understand where the Deputy is coming from. We fully acknowledge the impact on the workers who were made redundant. As the Deputy mentioned, the general scheme addresses the generality of insolvencies. It is an important step in implementing the outstanding legislative commitments in the plan of action, which is the Government's considered policy in this area. It followed extensive and intensive consultation, supported by ICTU, and also took on board the Cahill-Duffy and CLRG reports in this space.
The proposed Bill will benefit the workers of insolvent employers in two ways. It will improve awareness and increase transparency and will improve access to the mechanisms which increase the assets available to the creditors. It will also provide for the statutory establishment of the employment law review group, which will ensure that employment and redundancy law is fit for purpose.
As regards the time machine the Deputy mentioned, for workers, in theory, it would have provided that all collective redundancies would be subject to a 30-day notification period before the redundancies could take effect, including in an insolvency situation and where a liquidator is appointed and that the employees could also seek redress from the Workplace Relations Commission, WRC, when they were made redundant ahead of that 30-day notification period. Under company law, it would have further enhanced the circulation of information to workers, as creditors by, for example, giving them free access to the statement of affairs lodged with the court. It would also ensure that the provisional liquidator appointed in an emergency situation to secure the assets would meet the workers as creditors at the earliest opportunity, because there is a recognition that this is a difficult situation and the workers as creditors should be engaged in the process as quickly as possible, allowing that the provisional liquidator is appointed to deal with an emergency situation. Also under company law, it would enhance access to asset-swelling provisions, as we call them, which would have the potential to increase the pot available to creditors. This proposed Bill is not a stand-alone measure; it builds on work already done since the plan of action was published in June 2021.
I thank Ms O'Dea for her very good explanation. It is useful. She spoke about raising awareness. Nobody thinks about redundancy until they get a notification. They just do not. We hear about it happening to other people and we do not think about it. Many people are unaware of their rights. I know of many situations - I am sure Ms O'Dea does too - in which people walk away from their employment without their legal entitlement simply because they do not know their rights. Whenever it happens, there must be a comprehensive information programme. It is usually in small companies and it is most definitely in companies that are not unionised. When it happens, very often, you meet the worker and talk to them after the time has expired. It is a bit like that quiz show when they say, look at what you could have won and did you know you could have got this. It might only be a small amount of money but it is certainly necessary. That is important.
In head 19, which would amend section 599 of the 2014 Act, it is indicated that the courts will be given a fair amount of discretion to bring forward a result which is fair. We want to make sure it is fair. It gives creditors the opportunity to prove why a related company should contribute to the debts of the company being wound up. The principle of equality of creditors of equal standing still holds. In the standing of creditors, workers' wages are secured but their collective redundancy agreements are unsecured. In many ways, what is proposed will not address that, which I am aware of, but where collective redundancy agreements are not honoured on the winding up of a company, it could be done if workers were given preferential creditor status. Will the witnesses talk us through why that option was not taken?
Ms Fiona O'Dea:
I can speak about company law. I will then pass to my colleague on employment rights. There are implications with regard to the preferential creditors. In terms of company law, workers are already preferential creditors in their statutory entitlements. In an insolvency, the reality is that the company has run out of money. There is a limited pool of money. If you broaden the pool of creditors or the amounts that will be drawn from that pool, it will have a knock-on effect on other creditors. Other creditors would be pushed down and those creditors are likely to be suppliers, who are also employers, and there is the risk of contagion in that instance. That would be the key issue. I will now pass over to my colleague, Mr. O'Brien Hogan.
Mr. Peter O'Brien Hogan:
From an employment rights perspective, there is a risk in going down the route of creating a special class of redundant worker when they are insolvent in order that they would have legal rights that go beyond those of workers made redundant generally. It is about ensuring equality and uniform treatment of workers when they are made redundant.
I am conscious that there is a balancing that has to go on. I fully appreciate that many of those suppliers would be sole traders. They are not facing redundancy but when you lose your job, you lose your job. The badge you put on it is not much consolation. I understand that, but on the flip side, in any agreement between a worker and an employer, there will always be compromise. To get enhanced redundancy, a person may have compromised on something else. It is hard for workers to understand at the end of that process regarding the collective agreement. If anyone has ever negotiated these agreements, which I have, they will know that you are up all night doing them. You could be down in the WRC until 3 a.m. or 4 a.m. getting an agreement done. Blood, sweat and tears go into them. Then, at the end, you find that it does not have the standard you thought it had but it has been balloted on and accepted. That is tough, because people will come with their collective agreement and say they agreed and balloted on it, gave up whatever they did and there was a compromise. It is hard for workers to understand why that suddenly has no standing.
I appreciate the contagion and all of that. The counterargument is that somebody has to go first. Why should it not be the workers? There has to be someone at the top of the queue. The only question is who. Whoever is at the top of the queue is pushing down the others who are not, regardless of whether they are small businesses, multinationals or whatever. I appreciate the balance.
Head 20 relates to situations where a transaction is an unfair preference within the timeframe of the winding up of a company and is deemed to be invalid. This covers a period of six months before the winding up of a company. Was that to align with the Companies Act or is there another reason for that? On the same head, has the Department given any consideration to expanding the definition of a connected person or creating additional definitions to cover situations where preferential transactions are made to persons who are not a creditor or a connected person?
Ms Fiona O'Dea:
In terms of the six-month period in head 20, that reflects the period in place under the Companies Act. That period is not being changed. It is six months in the case of a connected person but two years in the case of an unconnected person. What we are putting forward in this proposal is that the court be given greater discretion to extend those periods where it is justifiable and equitable to do so. This was in response to a request from ICTU that those periods be extended out.
In terms of the connected person, I can come back to the Deputy on some of the points she made because I do not have the definition in front of me right now. If I may, I will respond to two earlier points the Deputy made. She spoke about making information available to the workers, particularly at difficult times. What the Department did as part of the plan of action was to make a general information note explaining, in very simple terms and in plain English, the rights and remedies that workers have under employment law and company law. On collective agreements, it is important to remember that these collective agreements, as the Deputy fully appreciates, are creatures of restructuring. They arise when a company is in the process of restructuring its debts as opposed to in a redundancy situation. I just wanted to make that point.
Yes, but that does not really matter. There is a collective agreement, workers have gone through the process and balloted on it. They get held to every line of it, including the compromise parts, in the run-up to a redundancy but I appreciate the point Ms O'Dea makes.
I have a question relating to the fines, some of which are quite small. There is a fine of €5,000 for a failure to consult or for a failure to notify the Minister but a fine of €250,000 where redundancies take place before the end of the 30-day consultation period. A fine of €5,000 is not massively dissuasive. Was consideration not given to some figure that would cause people to think twice? A fine of €5,000 does not seem serious.
Ms Dara Breathnach:
Deepest apologies for my delayed arrival but I had a power cut.
We examined the fines. The fines we are looking at here are the fines that we would apply to a liquidator and equivalent receivers. Those are relatively small, as the Deputy has observed but that is really so that we are not displacing the assets of the business and thereby depriving the various creditors of those assets, including the actual employees themselves.
The €250,000 fine the Deputy mentioned relates to very specific types of situations where people were made redundant and were essentially displaced by cheaper labour from elsewhere. That is not appropriate for a liquidator simply because he or she is not going to be displacing the existing workers in favour of others. That is intended as a punitive measure and is not appropriate in the circumstances of a liquidation. I hope that answers the Deputy's question.
It does indeed. Thanks. My final question is on the employment law review group, ELRG, which the Department has cited as being a significant and valuable resource for ongoing assessment and so on, which is very good. Putting the ELRG on a statutory footing is also very good. How are people going to be appointed to the ELRG? Will they come through the social partners? Will it be possible for people to nominate members or will they just be selected? Our guests said that the members will be experts, which is grand, but everybody has an opinion and we need to have a bit of balance at the table.
Ms ?ine Maher:
I thank the Deputy for her question. We are establishing the ELRG here in statute and it is intended that there will be a piece around a decision required by the Minister in terms of the operational establishment later on. I can say that it is intended to seek nominations from representative organisations. The intention is that the membership of the ELRG will comprise people professional, technical, and legal expertise and skills to contribute to the development of employment, redundancy and insolvency law. It is intended that there will be worker and employer representation, along with representation from academia, the Law Society and practitioners from entities such as the Labour Court.
I welcome all of our guests and thank them for the work they have done on this. As Deputy O'Reilly has said, it is quite complicated and very welcome indeed. Am I right in assuming that this will deal with all collective redundancies and not just those involving insolvency?
Ms Dara Breathnach:
Yes, or at least certain aspects will but there are a couple of matters which are specific to collective redundancies on insolvency. Those are specifically the ones where there have previously been exemptions in the law. We are removing those exemptions but the other matters, where we are looking at saying that there will be penalties if somebody is let go before the 30-day period, for example, are for everybody.
Ms Dara Breathnach:
That is 30 days from when the ministerial notification is received in our offices. At the moment, it is received by quite old fashioned methods, generally by registered post or hand delivered. Under these new proposals we will also be accepting by electronic means. We get it on the day and so, as a rule, we will know exactly when it comes in.
Ms Dara Breathnach:
The minimum, as I recall, is five where there are 21 employees and it goes up to 30 where there are more than 300 employees. So it is five or more employees where there are 21 or more employees, up to 30 where the number of employees is above 300 but we have specific numbers in the interim and I am more than happy to pass them on to the Deputy.
Thanks. In situations where a company is changing but not necessarily entering insolvency, and redundancies come in on a staggered basis in small numbers, how is the 30-day period calculated? Where does it start? Is it when the redundancies reach a certain threshold of numbers? I ask our guests to explain that. Could companies let people go over a period of time and avoid some of the penalties here and some of the implications of the legislation?
Ms Dara Breathnach:
They possibly could if they did it slowly enough but they would have to do it in a very calculated way over quite a long period. Companies need to look at the cumulative number of redundancies within a 30-day period, so they would need to stagger it over a long period to evade the legislation.
We know well enough that there would definitely be consequences to that because people would notice something like that happening. I think it would be difficult to evade, if I can put it that way.
On EU directives, how do we compare with other EU countries with respect to this form of legislation? Are we ahead or behind? Has a comparison been done with other partners in the European Union? Germany is pretty advanced in this whole area.
Ms Dara Breathnach:
I am not sure. We are pretty okay in these terms. We certainly look for collective redundancy notifications at a lower level than many other EU countries so we have perhaps a little more of a picture of what is going on. Our protections, because they are directive-derived, are broadly comparable with most jurisdictions. Our redundancy payments, for example, are a little more generous than they are in rather a lot of EU jurisdictions. I would put us certainly in the front half of the pack.
Ms Dara Breathnach:
They will certainly be employees for the purposes of the legislation. If they are temporary or apprentices, there is a distinct possibility that they will not qualify for redundancy, particularly if they are temporary and have less than two years of service. If they are apprentices and are more than two years into their apprenticeship, like any other employee, they will be entitled to a redundancy payment.
To be clear, the issue may not arise. When we normally think of employees we do not think of whether the people in management or at board level are employees. Many people might not be especially concerned about them because they may feel such people will be well off. Maybe management and board members are well off in some companies but who knows? When is it expected that the Bill will be enacted, signed off and in course?
Ms Fiona O'Dea:
On the timeline, the Bill is on the Government's priority legislation programme for drafting as part of the summer programme. I imagine we will have it published before the autumn session begins. I hope it will go through the Houses as part of the autumn programme but that is subject to many things.
Ms Dara Breathnach:
Even though there is a large cast of officials here today, it is another of our colleagues who is predominantly working on works councils. We would not see the Bill as having a significant interaction with works councils. That is largely a separate track because in these situations we are looking at consultations with unions and workers' representatives. I do not think works councils will be significantly relevant. We will consult another of our colleagues to see if she has a view on any possible interactions in that regard.
When the works councils are up and running properly, there could be consultation issues involved.
Are there any EU directives that we have not transposed into Irish law which could have an impact on this legislation, either directly or indirectly?
Ms Dara Breathnach:
That is on the insolvency payments scheme. The Deputy may be aware of the Glegola case which held that a particular article of a specific directive had not been fully transposed. We are working on those issues and expect to be before the committee again in the not-too-distant future with proposals. However, I do not think this will have a direct bearing on this specific legislation. I am not aware of other issues where we do not have full transposition but my colleague, Ms Maher, may wish to comment.
Ms ?ine Maher:
Although I am not aware of any current issues around the transposition of directives under employment rights policy, the intention is that once the employment law review group is established, it will have within its remit, similar to the CLRG, the power to review directives or regulations that may emerge in time to come in terms of potential impacts around employment or redundancy and insolvency law.
During Covid a lot of companies were supported. I have seen reports in which people have speculated that many companies that would have closed down in the normal course of events were kept alive, which is a good thing in many ways. Now that these supports are being unwound and taken away, do the officials anticipate that many companies will become insolvent and close? Is there a pent-up demand or potential for closures, which may be a delayed reaction in some ways? Has research been done on that? This legislation, if and when it is enforced, will be important.
Ms Fiona O'Dea:
Before answering the question on statistics, I should point out that there is an EU proposal on insolvency which deals with anti-transactional avoidance measures. It is still at proposal stage and has a long road to travel but it addresses anti-transactional avoidance measures which the Bill is also addressing. Ireland is very much a leader in this space in the EU.
On statistics and what we see as an increase in the rate of insolvency, there is certainly an increase in the number of insolvencies year on year but the figure is still below that of 2019. There are three types of liquidation. The vast majority of liquidations are members' voluntary liquidations, which account for 75% of liquidations. About 23% are creditors' voluntary liquidations and they are insolvent but this is where the directors themselves decide to wind up the company.
Then there are the court liquidations, which are in the low double-digit figures, so they make up the minority.
Certainly, there is an upward trend in insolvency figures. I saw a predictive figure of 600 insolvencies anticipated for this year. I think 800 would have been the figure pre-Covid, so we are not there yet. I imagine that over a longer period of time, the figures will continue to go up.
I thank the Department for being here. We are here because of the shameful situation we have seen in a number of companies, such as Debenhams, Clerys and others, over recent years. There is a degree of expectation with regard to this Bill both in respect of the information but also the position of employees. Last night, I was looking at the Company Law Review Group, CLRG, report on corporate liquidations in certain circumstances. One of the recommendations there relates to the obligation to inform creditors of their right to participate in a committee of inspection. I am not sure if that appears in this Bill. Specifically, trade unions would feel strongly that employees should have a right of participation in that committee of inspection given they make up the company. They do not have that position as a preferred creditor but I think we can all accept they have a unique position as a creditor. Perhaps Ms O’Dea can talk a bit about the transition from the CLRG to what we have here with regard to that committee of inspection.
Ms Fiona O'Dea:
The Senator will be delighted to hear that we implemented that recommendation from ICTU's minority report and the CLRG’s March 2021 report. It was included in the Companies (Rescue Process for Small and Micro Companies) Act 2021. It provided for minimum representation of one worker representative on the committee of inspection. I understand these committees of inspection are quite frequently used. In that legislation, we provided that an obligation be placed on the liquidator or the director to let the workers and creditors know that they can form a committee of inspection that can have oversight of the liquidation process and protect their interests. I believe it is quite a frequent occurrence. That was implemented in 2021.
Head 19 amends section 599 of the 2014 Act with regard to related companies. In terms of lowering the bar or test with regard to the consideration of related companies, how will that work in practice? In particular, I am thinking of unlimited companies or companies located abroad and the extent to which they will be recognised as a related company in the context of this process.
Ms Fiona O'Dea:
This section is modelled on a New Zealand provision. When it was introduced under the Companies Act 2014, it was a less liberal provision than the New Zealand model it is based on. These amendments will make it a less restrictive provision. It will align more with the New Zealand provision. This is something ICTU sought. It will be no longer mandatory for the court to be satisfied that circumstances of the winding up were attributable to the company’s action. It can have regard to the extent of the circumstances that gave rise to the liquidation and how it was attributable to the actions of the related company. In addition, it can have greater discretion to have regard to any other factor. An important feature of this provision is the extent to which the court can have regard to factors. What is an important bar in respect of this provision is that it is not just a related company but that it is a related company with regard to what extent it was involved in the management of the company, how much its behaviour contributed to the insolvency of that company, and the impact it would have in relation to their own company. Regarding scope and what a related company is, I imagine a group of companies is recognised and established, and the court would have to have regard to extent of those relationships and how they impact on the insolvency of the company.
It is a welcome provision but I am thinking about the operation, especially in the context of an unlimited company and access to information. I do not know what power of discovery there is with regard to accessing the finances of an unlimited company either located here or, particularly, those located abroad. When we look at the likes of Vita Cortex and other companies over the years, it is companies controlled by entities abroad, where money was effectively sent abroad. I am trying to see, in the context of an Irish court, how they can identify that this company located abroad is effectively attributable for why the company is now in the situation it is in.
It is perhaps a conversation we need to continue with the Department in terms of setting out greater detail.
It was mentioned that the Companies Act demands that, in return for the privilege of limited liability, directors act in good faith. Perhaps one of the bugbears or features of the Irish system is that we have, I think, either more than 2,000 or 4,000 unlimited companies operating in this country at this time. Access to information for any creditor, let alone workers, is a significant challenge. What is the Department’s view on unlimited companies? Is this something Ms O’Dea believes is a healthy feature of the corporate landscape in this country? Does it need to be changed in future years?
Ms Fiona O'Dea:
The law is a careful balancing of rights. Any amendments made to the Companies Act are considered. We are fortunate to have the CLRG in place in that it represents the balance of views in this area. Of course, we keep company law under review. We always do. It is a modern framework but we keep it under review. If there are any issues arising with regard to any aspect of it, the CLRG can be asked to consider it and examine those issues. I have no comment on that.
On the composition of the employment law review group, there is no stipulation here as to the allocation of places. I suppose there would be a concern that if we are going to set it out in detail and put it on a statutory footing, it would be important that we allocate out the places. Why has that not been included in the heads of the Bill?
Ms ?ine Maher:
I thank the Senator for that. Without commenting too much on policy matters that will be decisions ultimately for the Minister around the operationalisation of the employment law review group, the intention is that this group would be made up of a professional, technical, legal and academic cohort that would provide independent and expert advice on company and employment law. It is intended that the group would be representative and would be modelled on the CLRG composition. That being said, as I mentioned in relation to a question from Deputy O’Reilly, the intention is that there would be a call for nominations and the group would have representation from worker, employer, academic, legal and practitioners to adequately review the legislation we have around employment law and redundancy and insolvency law, and review its adequacy and response to external issues, including any potential forthcoming European law.
While the congress representative on the CLRG is well able to handle himself, there is a real issue with regard to the composition of that group. It is certainly something we would be concerned about in respect of the employment law review group, that there would be greater balance and representation. Effectively, we are talking about employees and employers here.
Ms Fiona O'Dea:
I wish to come back to the Senator with regard to the composition of the CLRG and make the point that the workers are represented on it.
It has employers and insolvency practitioners and so forth. It is an effort to strike the right balance between the different parties and their interests. ICTU produced a minority report to the CLRG's March 2021 report on the provision of information to creditors, particularly workers. The Department took on board a number of the recommendations from the ICTU minority report that might not have been considered by the CLRG. Some of those were implemented. Others are featured but perhaps adapted, so it would have taken the ICTU recommendations and adapted them somewhat. We listen to what comes out of the CLRG, including trying to strike that balance. I would also make the point that under company law, workers are creditors. They are a special category of creditor and company law deals with workers as creditors.
I have raised the issue of the composition already. Is there an objection to putting down in law how the nomination process for the ELRG is going to work? I respect what the witnesses are saying about the likely outcome and that there will be a balance of workers, employers, academics, experts and all that. Just to be belt, braces and baler twine about it, would it not be better to lay down in detail the nomination process to ensure that balance? There might be a reasonable Minister in one Administration - I am not asking the witnesses to comment on whether Ministers are reasonable or not - and perhaps one who is not so minded for balance in the next one. Would we not be better, while in a room full of reasonable people now, to lay it down in law?
Ms ?ine Maher:
I do not want to wade too far into policy matters, which are ultimately going to be related to the decision of the Minister around the operationalisation of this. We are looking at the heads. As regards the nomination process, as mentioned, it is envisaged that representation would be sought from a range of stakeholder groupings and that would include organisations such as ICTU that are representative of workers and representatives of employers and practitioners. The intention is that a balance would be struck in the bodies that we would seek nominations from. We are mindful of the requirement for balance in that regard. Ultimately, much of this pertains to the drafting process. Once the Bill is published, we will have the opportunity for further conversation. I would stress, however, that the intention is that the process around deciding the bodies that we seek nominations from is intended to be a consultative process. We would very much welcome the views of this committee, take those on board and factor them in to how this group will ultimately be set up and move forward.
I want to briefly touch on limited liability. I do not want to go too far into it. We all know that when it is not abused it is grand, but sometimes there can be an attempt to evade responsibility and hide behind the cloak of limited liability. Are the witnesses happy that this has struck that balance? I see in their submission an explanation of what limited liability does, namely, "permitting individuals to engage in entrepreneurial activity while limiting personal exposure". There is an understanding as to why that might be important but also why it might be kind of handy in certain situations. Are the witnesses satisfied that the balance has been struck here between limited liability, and what comes out of that, and justice?
Ms Fiona O'Dea:
The Deputy made the point with regard to the importance of limited liability for directors and how it prevents personal exposure where there is business failure. It is all about entrepreneurial activity, contribution to economic growth and so forth. It is not an absolute right. In return for the privilege of limited liability, directors are required to act in good faith. They are required to comply with the various legal requirements. We have a number of anti-transactional avoidance measures and we are beefing them up with this Bill. Ireland would be very advanced in terms of those anti-transactional measures and the remedies that are available to deal with the misuse of limited liability. However, it requires creditors to go to court to enforce their rights. There is always going to be the issue of costs. When the CLRG looked at this, it raised the issue of costs. With regard to access to the courts, this Bill is not going to address that but it is something the Department of Justice has been considering and has looked at. A review group looked at access to the civil judicial system, including the issue of costs. It produced an implementation plan last year and one of the actions that has come out of it will hopefully provide that liquidators could be funded through third-party funding where they go to court to enforce those rights and have access to asset-swelling measures. That would be a welcome development, I am sure, for many. That is intended to happen next year.
The witnesses reference the need for the information to be made available in plain English. Simple and accessible language is really important but it also needs to be available in plain Polish, plain Arabic, plain French and plain Spanish. That is really important when circulating the information campaign. If English is not someone's first language, it might be even more important that they have access to relevant information about their employment rights at work. When Ms O'Dea said plain English I was thinking that to myself. I understand the point but we should build on that.
I thank the witnesses for the presentation. I have a few fairly basic questions. First, what are the tests that are now going to be applied to prevent companies squirrelling away assets to get them out of the reach of predators? That was a key element. Second, during the 30-day period, apart from the obligation to be paid and for there to be some consultation, are there other rights that are triggered for workers in terms of protecting their position? My third question relates to contract workers. That seems to be quite an extensive practice now. Where do they stand? They have a contract and presumably if those contracts are terminated early, they are a creditor under that contract. Where does that stand in the hierarchy of creditors? Is it with workers and therefore they have some greater protection? Where does it exactly stand?
I welcome the ELRG. Its forerunner, the CLRG, did huge work consolidating and evolving company law. Most of it was done on a voluntary basis and there was extraordinary dedication from the people who got involved. I am sure this will be the same. I am not so much interested in who is going to be on it but I would be interested to know what the work programme is likely to be. Do we have a signal of the challenges the Department will be bringing to the group to look at or, indeed, upcoming changes anticipated from Europe?
Ms Fiona O'Dea:
I may take the first question with regard to the threshold and section 608. This section provides that assets that are transferred before liquidation with fraudulent effect can be recovered. It does not hinge on intent but rather the effect. There is a significant difference between the intent and the effect and effect obviously has a lower evidentiary burden of proof. The CLRG looked at various judgments around the issue of thresholds in respect of that section. In its report, it states that it really is about the effect of depriving the creditors of something to which they were entitled. It mentioned another judgment.
What came out of that judgment was a requirement for an additional ingredient of impropriety. When the CLRG looked at section 608, it was happy with the usefulness of the provision but was concerned about the way case law was moving and that there might be a concern with the issue of payments. It wanted to clarify that payments related to payments made in the ordinary course of business, including payments made to employees. That is why this amendment is being made. I will ask my colleague to answer the other questions.
Ms Dara Breathnach:
I will pick up on the 30-day period and workers' rights during that period. There is an entitlement to a level of consultation. The purpose of that consultation is broadly to mitigate or investigate ways of potentially reducing the number of redundancies and so on. Workers will, of course, enjoy all the normal protections they do under the broad suite of employment rights. Essentially there is a right to participate in the consultation and to seek to mitigate any potential redundancies.
Ms Dara Breathnach:
No, it is a stipulated 30-day period. Obviously, employees have a right to bring a complaint if they have a difficulty with the outcome. It does not extend the minimum period. We know of cases where the consultation period is extended by mutual agreement. Essentially people participate in a longer process but we do not think it is necessary to stipulate anything on that in the legislation.
Ms ?ine Maher:
Regarding the work programme for the employment law review group, we are following a model has been laid out for the company law review group and the work it has done, as the Deputy correctly mentioned. The intention is that the work programme of the ELRG will likewise be set by the Minister in consultation with members of the group at least once every two years. That does not preclude events taking place that would enable the Minister to ask the ELRG to look into matters on a more ad hoc basis.
I could not really go into the specifics of the work programme without the policy decision by the Minister to establish the group in operation. However, the intention is that the ELRG will have a broad remit relating to employment, redundancy and insolvency law and that that would include the introduction of any new legislation in that space, any European or international developments, and any judgments of the court. There would be a degree of flexibility for the group to look at elements within the two-year period. Similar to the composition of the group itself and the nominations from the representative organisations, the Department would certainly welcome the views of this committee on items it may wish to have the ELRG consider when forming a work programme for the approval of the Minister.
That concludes our consideration of this matter today. I thank all the officials for assisting the committee in its consideration of this important matter. The committee will consider the matter further as soon as possible.
I now propose that the committee goes into private session.