Frances Fitzgerald (Dublin Mid West, Fine Gael) | Oireachtas source

The Bill provides a welcome opportunity to discuss the protection of employees in cases where collective redundancies occur due to a company being insolvent. As the Deputy has outlined, the Bill is well-intentioned and is about protecting workers. It is a response to the Duffy-Cahill report on the examination and review of laws on the protection of employee interests when assets are separated from the operating entity. That report was commissioned by the previous Government as part of the Government’s response to the closure of Clerys department store in 2015.

The Government supports the broad principles of the Bill. It is well intentioned and in line with proposals being developed in my Department in response to the Duffy-Cahill report. The Bill represents part of the response required and I will point out certain issues to the Deputy where it contains some flaws and drafting errors. It is a very important Bill in the protection of employees.

The Bill deals only with two of the six proposals set out in the Duffy-Cahill report. The Bill should proceed to pre-legislative scrutiny by the relevant Oireachtas joint committee - I am sure the Deputy will not object to that - to allow for a detailed examination and a comprehensive public consultation with employer and employee representatives and other interested stakeholders, in particular the Minister for Social Protection, soon to become Minister for employment and social protection.

We are all well aware that collective redundancies can occur for many reasons and in many different circumstances. However, when they occur in the manner in which they occurred when Clerys department store closed on Friday, 12 June 2015, the impact can be devastating. The manner in which the Clerys workers were treated was shocking. What occurred was an appalling way to treat workers.

Before I address the specifics of this Private Members' Bill, I remind the House of the steps taken by Government in response to the closure of Clerys and will update Deputies on developments. In the immediate aftermath of the sudden closure, a report was prepared for Government and published in July 2015. Entitlements of workers affected were expedited through the Department of Social Protection system.

Information on employment rights was also provided to the workers concerned in a speedy and effective way.

In January 2016, the then Minister for Jobs, Enterprise and Innovation, Deputy Richard Bruton, and the Minister of State with responsibility for business and employment, now Senator Ged Nash, commissioned Nessa Cahill, a company law specialist, and Kevin Duffy, the then chairman of the Labour Court, to conduct an expert examination of legal protections for workers with a particular focus on ways to ensure that limited liability and corporate restructuring are not used to avoid a company's obligations to its employees. The Duffy-Cahill report was published on 26 April 2016, following submission to the Government. My Department conducted a public consultation on the report, the responses to which contained divergent views. We also asked the Company Law Review Group, CLRG, to examine legislation with a view to recommending ways company law could be amended to better safeguard employees and creditors. I am pleased to say the work in that regard is at an advanced stage and we should receive the report very shortly. That will be most helpful in terms of the future development of the legislation in this area.

Inspectors from the Workplace Relations Commission, WRC, are conducting an investigation, as authorised officers of the Minister, of the collective redundancies that took place in OCS Operations Limited, the trading company which was the employer of the staff of Clerys, on 12 June 2015. The work of the authorised officers relates to the application of the Protection of Employment Act 1977 to the collective redundancies in question. The 1977 Act imposes a number of obligations on employers who are contemplating collective redundancies, including an obligation to engage in a 30-day consultation period with employees and an obligation to notify the Minister for Jobs, Enterprise and Innovation of proposed redundancies. It provides that collective redundancies should not take effect before the 30-day consultation period has expired but it does contain an exemption for companies wound up due to bankruptcy or insolvency.

The authorised officers' investigation began in April 2016. The investigation has been and continues to be subject to legal challenges. A legal challenge was taken by two of the parties from whom information was sought by the authorised officers. In October 2016, the High Court ruled comprehensively in favour of the authorised officers. An appeal was made and that appeal remains before the Court of Appeal. The investigation by the authorised officers is continuing. Prosecutions have been initiated and are pending before the District Court. I will not comment any further on the investigation but I wished to give the House an update on how it is progressing.

Returning to the Bill, it seeks to address in particular the mechanism for recovering an asset or proceeds of an asset in circumstances where the transfer of the asset had the effect of perpetrating a fraud on the employees. That goes some way to addressing two of the recommendations contained in the Duffy-Cahill report.

I wish to point out some problems and shortcomings in the Bill in areas that need to be addressed. First, the other four recommendations in the Duffy-Cahill report need to be addressed. One of the points in the Duffy-Cahill report was that no one proposal alone would provide the answers sought and that the proposals need to be considered in light of the existing provisions of employment and company law. The recommendations are interlinked and that is something that needs to be addressed.

Proposal No. 1 seeks to address the central complaint articulated by the unions representing the former Clerys employees about the peremptory manner of their dismissal. Currently, section 14(3) of the Protection of Employment Act 1977 allows an exemption to the requirement to give 30 days notice of redundancies in circumstances of insolvency and Duffy Cahill recommended that this exemption be removed. Proposal No. 1 aims to ensure that employees will have the opportunity to consult with their employer for a period of not less than 30 days before any collective redundancy can take effect, whether the employer is insolvent or not. That is something we would all like to see. Any dismissals in contravention of the legislation would be treated as a legal nullity. Certain issues and consequences of this proposal are also addressed, including the consequences of non-compliance with the consultation requirement and ramifications for directors under the Companies Act 2014. That proposal is fairly fundamental in terms of a response to the Duffy-Cahill report and it is not in the Bill. Those other recommendations would need to be considered.

Some of the provisions and recommendations made by Deputy Cullinane deviate from the Duffy-Cahill recommendations. For example, section 2 of the Bill provides for power of the court to return assets which have been improperly transferred. The provision does seeks to implement proposal No. 4 of the Duffy-Cahill report but the proposal to allow a trade union or employee representative make such an application is not recommended in the report. Duffy-Cahill recommends only that the Minister or the liquidator, on delegated authority from the Minister, should be empowered to make such application. That is clearly a point for further discussion and debate.

Section 2 does not provide a definition of employee representative. That is something that would need to be done. Section 2(1)(b) refers to "any property of the company of any kind whatsoever...". However, the language is different from the Duffy Cahill recommendation, which refers to "an asset of significant value". The term was used in the terms of reference for the Duffy-Cahill examination against the backdrop of the Clerys closure, where the ownership of the Clerys building was separated out from the company which employed the Clerys workers. The building was clearly an asset of significant value. However, this Bill's use of the term "any property of the company of any kind whatsoever..." gives rise to a considerably broader approach to the definition of an asset. The wording appears to be taken from company law and care is required to ensure that such use of company law terms in the employment law context does not lead to unintended consequences. There is inconsistency in the Bill. For example, section 7 refers to "an asset of significant value", while section 2 uses the broader term "any property of the company of any kind whatsoever...".

I note that the Bill seeks to provide a range of additional powers to the Minister for Social Protection, including the power, as creditor of an insolvent company, to delegate the bringing of applications for asset recovery to the liquidator and to provide funding for that purpose. The financial and administrative costs associated with such an application could be substantial. Whether these costs could be recouped from the Social Insurance Fund requires further analysis and consideration before any decisions are made on implementing this proposal.

A robust public consultation with stakeholders is required in order to get their views. That would be important. We must also take into account the work of the Company Law Review Group on the issue which will be available shortly. Those are important difficulties.

The intention of section 3(1) appears to be in line with the Duffy-Cahill report's proposals, but section 3(2) seeks to change the priority status of creditors. The implications of that provision for the status of other creditors require careful consideration. There are concerns that the preferential rights proposed for employees are too broadly defined in this Bill and, as drafted, it effectively gives a lien on the assets of a business to the employees. I can see where Deputy Cullinane is coming from on this, but there might well be constitutional and property issues that would need to be teased out and considered in terms of the approach taken by him.

The Duffy-Cahill report did not express a view on whether employees should be entitled to priority over other preferential creditors with regard to the distribution of an asset or its value in circumstances where the court has ordered that an asset be restored to the employer. It should also be noted that section 10 of the 1984 Insolvency Act contains references to provisions in the Bankruptcy Act and the Companies Act that purport to provide protections for the Minister for Social Protection in certain circumstances. In addition, the Redundancy Payment Act gives priority to redundancy payments in certain situations. Those are areas that could be teased out in pre-legislative scrutiny.

The Minister for employment and social protection has also expressed reservations about this issue, in particular, that it could have a negative impact on the repayment of employer debts to the Social Insurance Fund and that is an area that needs to be considered. Work is at an advanced stage in the Department on a policy response to the Duffy-Cahill report. A public consultation resulted in a wide range of views and those have been given careful consideration. The Department's proposed policy response consists of a more comprehensive response than that presented in this Bill. I have no doubt Deputy Cullinane will take that into account when it is available, and it should be taken into account when we are considering the legislative process in this area and also the work of the Company Law Review Group.

The Government will not oppose the Bill as it is based on worthwhile objectives that attempt to increase protection for workers in situations similar to the Clerys case. However, because it deals with complex areas of employment law and company law and the interface of both codes, and because of the various issues I have pointed out the Bill would benefit from pre-legislative scrutiny where those issues could be considered and we could take further account of the analysis and recommendations contained in the Duffy-Cahill report, look at the submissions to the Department and the policy response on which the Department has been working.

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We want to ensure that we have that comprehensive response to the Duffy-Cahill report and we do not want to see any unintended consequences coming from the Bill, in respect of the issues I have pointed out during my contribution. We need to correct some of the issues that are there.

I repeat that the Government does not intend to oppose the Bill and I commend on Deputy Cullinane on the work he has done on the Bill.

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