Gerald Nash (Louth, Labour) | Oireachtas source

Today is a bit of an emotional day for me. The Minister will recall the work done by the Government in which I served to start to address these issues, issues that became all too apparent to us in light of the Clerys debacle. I will never forget two phone calls I received that afternoon, the first from Gerry Light, the then deputy general secretary of Mandate trade union, soon followed by another call from my good friend John King of SIPTU. As the then Minister of State with responsibility for business and employment, but principally as a human being, I was absolutely incredulous at what I heard. Almost 500 staff, some directly employed but most linked to concession holders at the iconic Clerys store on the main street of our capital city, had been given minutes to leave their work premises. Their jobs were gone, with no calls from the person who now owned the storied building, nothing from the operating company, the Clerys workers' legal employer, an operation that, as the Minister will recall, was hived off from the structure that owned the building and that was then liquidated in a corporate power play in the early hours of that morning, on a day that will live on in infamy in terms of Irish society and Irish business. Deirdre Foley, the owner of the company called Natrium, rode off into the sunset with a building worth tens of millions in her back pocket. Workers, people such as Susie Gaynor McGowan and many others I got to know during that period, were left on the side of O'Connell Street with nothing - no consultation, no humanity, absolutely nothing. They were victims of a liquidation with no redundancy, only basic statutory redundancy from the State, and few rights for individual or collective redress.

The events of that infamous, notorious day turned the stomachs of even the most hard-nosed of businesspeople. The work of SIPTU, officials such as Ethel Buckley and Teresa Hannick and workers such as Susie Gaynor McGowan, Gerry Markey, John Finn, John Crowe and others, people who had never before seen themselves as activists, swung into action and campaigned with me for change. The report I brought to Cabinet in early 2015, in direct response to the Clerys debacle, and our commission and publication of the Duffy-Cahill review in mid-2016 were important starting points in the process that is concluding here today. The resolve of the Irish people said this should not happen again.

Happen again it did, however. It happened to the Debenhams workers. It has been more than eight years since Clerys and more than seven years since the publication of the Duffy-Cahill report, which recommended many of the kinds of changes to employment and collective redundancy law and the greater use of aspects of company law to better vindicate the rights of and deliver results for workers as employees and in terms of their status as creditors in an insolvency. The fact that workers and we as legislators have had to wait so long for these changes to the law, many of them first proposed by me in 2015 and 2016, is an indictment of the system.

In any event, this legislation and these essential reforms are a testament, a legacy and a monument to the determination and commitment of the Clerys workers and the Justice for Clerys campaign and the Debenhams workers and their trade unions. The Labour Party welcomes this legislation not exclusively for the necessary changes it heralds in respect of the rights of workers in insolvencies and in other circumstances where responsible people are appointed by the courts to manage and restructure the affairs of corporate entities, but also in respect of modernisation of some features of the collective redundancies legislation that are in dire need of modernisation and reform.

We also very much welcome the sections of the legislation that will see the establishment of the employment law review group, based on a similar model under which the Company Law Review Group, CLRG, operates and functions. I have been making the case for several years for the creation of such a mechanism. Such is the pace of change and transformation driven by technology, AI and other factors that the world of work is changing at a rate of knots. The traditional employment model is frayed, and jobs and professions we have taken for granted may be headed for obsolescence. A decent society, social solidarity and a productive, dynamic and open but regulated enterprise economy depend on decent work. That means a commitment to collective bargaining, to promoting trade unions and their function in society and to a system that has the agility to respond to bring in legislative changes to protect workers and working people as the nature of work continues to evolve at a rapid pace. All too often, as we know, ways have been found by bad-faith actors to exploit perhaps unintended lacunae in our suite of employment legislation and to take advantage of workers. The system, if we can call it that, is consistently in catch-up mode, as is the nature of such things.

The employment law review group, ELRG, is one way in which we as a country will have a new capacity to respond quickly to new challenges and sometimes unwelcome new labour market trends. This Bill is a major win for working people. When Clerys staff were thrown out of their jobs, when the Debenhams workers were thrown out of their jobs, the law bestowed few rights on them. The laws we have coldly viewed these workers as collateral damage, in that: "It is an insolvency. Companies cannot trade recklessly. If you are insolvent, the company has no money to pay enhanced redundancies, so off to the State you go to collect your two weeks' statutory redundancy." In the case of Clerys, a rich businesswoman ran off with a plump asset while the State picked up the tab for redundancies and jobseekers' payments. That is a fact. I will never be dissuaded from the fact that a fraud was perpetrated on those workers. That is a fact, in my view.

I recall, as the then Minister of State, trying to get in contact with the liquidator. He finally agreed to meet me. My experience was that he was uncomfortable meeting me. Meeting a Minister in the context of an insolvency was not something he had ever done before. I wanted engagement with workers and unions. I wanted him to share information with SIPTU on the process and any assets of the company. I think he thought I was from another planet. He did not have to do so, and why should he? That seemed to be the demeanour he adopted. I recall seeking a meeting with Deirdre Foley, the new owner of the property, under the company name Natrium, before I concluded a report I took to Cabinet in early July of 2015, three weeks after the shock closure. Every excuse under the sun was given not to meet me, such as, "Why would I meet you? I am not the employer. What do I have to do with this? If I meet you, I will meet you only on the condition that all we can discuss is what I will do with the new building I own. If I agree to meet you, it will be at my business address, not the Department of Enterprise, Trade and Employment." Imagine saying that to a Minister of State duly elected and appointed by the Dáil. As it happened, the company's business address was changed a few days previously to the address of its solicitors, A&L Goodbody. That is where she wanted to meet me, a Minister of State appointed by the Dáil concerned about the plight of workers. This was arrogance taken to a breathtaking level.

When we looked at trying to go after the related assets of connected companies, a wall came down. We did this to see if a better package could be put together for enhanced redundancies for the Clerys workers and, indeed, to benefit the State as well. In my view, the State, whether it was the Revenue Commissioners or the Department of Social Protection, should have gone after the connected assets of those related companies to which I referred under section 599 of the Companies Act. It is to my dismay to this day that neither the Revenue Commissioners nor the Department of Social Protection took a case to test section 599. This is what happens when company law takes primacy over the rights and dignity of workers. This is what happens when there is not even a balance of rights, and a balance of rights is all we are looking for. The Clerys and Debenhams debacles expose much of what was wrong and still is wrong around the intersection of company law and employment law. Much of what we wanted, much of what we have been campaigning for and advocating for, is included in this Bill, and that is to the Minister's credit.

Sections 4 to 11 make some very important changes. When the Bill is enacted, a responsible person - in the case of Clerys or Debenhams it would have been the provisional liquidator and subsequently the liquidator - will be required to consult workers and their representatives where collective redundancies are being contemplated. The responsible person will have to provide the trade unions with all relevant information with regard to the proposed redundancies. This is the approach I asked the liquidators of Clerys operating company to take, but they did not do so because they did not have to.

The liquidator will also be obliged to notify the Minister of the contemplation of a collective redundancy. In the normal way, the first dismissal cannot take effect at least until the expiry of those 30 days. The liquidator will have to provide statements of claim to employees and their representatives within a given timeframe. This was a key recommendation of the Duffy-Cahill review, as was what I am about to say next. There will now be no exemption from the 30-day rule. If one is at risk of losing one's job in a redundancy situation, there will be no exception from the 30-day requirement, regardless of whether the company is still trading or going through insolvency. This is absolutely critical. I put it to the Minister that a great deal turns on this. It is troubling that during the consultation process, and indeed since we started this process, IBEC has been opposing this. All collective redundancies will now be covered by the 30-day notification and consultation period, as per this Bill. Crucially, this, along with other aspects of the legislation, prevents what the Duffy-Cahill review described as "the peremptory manner" of the dismissal of the Clerys workers and the similar experience of the Debenhams workers subsequently.

I plan to bring forward amendments on Committee Stage. They relate, for example, to the need, in the view of the Labour Party, to align parts of section 12 more closely with the intention of the Duffy-Cahill report, which was to treat a dismissal in contravention of the current section 14 of the Protection of Employment Act as a legal nullity.

In addition, the maximum compensation to an aggrieved employee should be increased beyond four weeks' pay. In the words of the Duffy-Cahill report, the current four-week provision is not believed to be "an effective remedy having deterrent effect."

On section 7, we need to look again at the level of fines which would be imposed on a responsible person who fails to carry out their legal obligation to notify and consult.

Section 8 provides a welcome route to redress for individual workers to the WRC. A worker will now be able to make a complaint as an individual to the WRC where he or she is dismissed before the expiry of the 30 days, which is a right that does not exist at the moment. Arguably, the compensation level should be set at the level awarded arising from an unfair dismissal. That would be a real deterrent.

I want to make a few comments on section 599 of the Companies Act and its untapped potential. When I was Minister of State with responsibility for business and employment in 2015, in response to the scandalous sale and liquidation of Clerys I wrote a report to the then Government on that affair in a matter of weeks on the need for a governmental and legislative response. I should point out that it is not only direct employees who lose out when a trading company which is an employer is split from an asset-holding company and then wound up, as happened in Clerys. As the Minister may recall, many small franchise holders and other small enterprises were badly affected by this manoeuvre. My report was written with the expert assistance of Brian Murray SC, who is now a Supreme Court judge, and Finbarr O'Malley. The report included an analysis of what is now section 599. The section was introduced into Irish law in 1990 to provide a means by which the assets of the company being wound up could be increased by applying to the court for an order directing that a separate but related company should contribute to its debts. Potentially, this could bring about a quite dramatic piercing of the corporate veil that otherwise gives each company in a group a separate legal identity.

It seems that New Zealand is the only other jurisdiction in the common law world with a comparable statutory provision. I wrote in 2015, and it seems to be still true today, that there were no reported court judgments which considered in detail the proper application of this section. This may well be an indication of how rarely, if ever, it has been invoked. I go back to what I said earlier on: I believe it should have been the case at the time that the Revenue Commissioners or the Department of Social Protection, as preferred creditors, should have tested section 599 and sought some recompense for the State with regard to, for example, statutory redundancy payments. That did not happen. In any event, the 1990 provision is now re-enacted as section 599 of the Companies Act 2014. Under this section, a court, in considering whether to make a contribution order, must determine whether it is just and equitable to do so. In so deciding, the court must have regard to the extent to which the related company took part in the management of the company being wound up, the conduct of the related company towards the creditors of the company being wound up, and the effect which the order would be likely to have on the creditors of the related company.

As I have noted, we are still awaiting an authoritative Irish judgment on the circumstances in which a contribution will be made as between related companies. However, we know the legislative policy behind this provision. We know that the original New Zealand provision had its origins in a recommendation of the 1973 MacArthur committee responding to two recent cases in that jurisdiction, where two well-known companies had simply abandoned their subsidiaries. New Zealand court judgments have discussed a number of relevant factors, including whether directors of the subsidiary acted in that capacity or rather as employees of the parent company; whether they distinguished between the best interests of the subsidiary and the parent company; whether the subsidiary had the financial capacity to continue to trade separately; whether the parent company's conduct had indicated that it stood behind the subsidiary; the interests of shareholders versus those of creditors; the intermingled nature of the business; whether the actions of the parent company led directly to the liquidation of the subsidiary; and the group’s conduct towards its creditors.

It is worth noting that in its December 2021 report, the CLRG commented that, as originally drafted back in 1990, our provision was in fact identical to the New Zealand legislation. However, the CLRG reported that "some perceived the contribution order to be anti-risk taking and anti-business and pointed out that "In this context, a number of changes were made to moderate the proposed provision". In Ireland but not in New Zealand, therefore, the court must be satisfied that the circumstances which gave rise to the liquidation were attributable to acts of the related company. In New Zealand, there is no such prerequisite to the making of an order. Second, an express provision in the New Zealand legislation permits the court to have regard to any other factor it considers fit in exercising its discretion. This was not included in the Irish legislation, going back to 1990 originally, seemingly on the basis that it gave too broad a discretion to the court.

Section 24 of the Bill we are examining today provides for amendments to section 599. First, it is proposed to delete subsection (5), under which an order cannot be made unless the circumstances that gave rise to the winding up are attributable to acts or omissions of the related company. Second, the court will instead be able to have regard to the extent to which the circumstances that gave rise to the winding up are attributable to the acts or omissions of the related company and “any other factor it considers fit in exercising its discretion to make a contribution order”. That is manifestly a good thing. In short, these amendments bring us back, 33 years later, to what should have been our original intention, which is what is set out in the original New Zealand legislation. All that is needed now is a creditor or liquidator who will go to court and seek to have the law applied as a less restrictive and, I hope, more accessible remedy.

That amendment of section 599 is very significant given our experiences in recent years, looking especially at the Clerys case and the questions it threw up. The Labour Party is happy to support this legislation. This is a good day and the Minister can be proud of the fact that he is bringing this legislation to the Dáil after many years of commitments to change the law, to examine properly the intersection between company law and employment law, to change that and to balance those rights differently to ensure, especially, that workers who are caught up in insolvencies are treated much more fairly and more equitably than the workers in Clerys and, subsequently, in Debenhams. We are happy to support this legislation. We look forward to amending it on Committee Stage and to engaging in more detail on the provisions of the Bill. I believe the Minister can be proud of bringing this legislation, which we broadly support, to the House.

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