Employers engaged in “wholesale” unlawful deduction of wages from employees during the first phase of the Covid-19 pandemic.
Employment law expert Richard Grogan was commenting after the Workplace Relations Commission found a translation and interpretation company made an unlawful deduction of wages during the first phase of the pandemic last year from a project manager/translator.
In the case, WRC adjudicator Marguerite Buckley stated that imposing pay cuts, even of a temporary nature, without consultation or consent “is not reasonable”.
In response to the Covid-19 pandemic and a projected reduction of 15 to 25 per cent drop in revenues, the employer implemented a 60-day 15 per cent wage reduction on its 53 staff here.
In her ruling, Ms Buckley stated that while she accepted that the employer “experienced difficulties due to the Covid-19 Pandemic, I do not accept that the decision to impose the deductions in the complainant’s salary was reasonable and proportionate considering the Respondent was a multinational company and the work the complainant was doing was not greatly impacted by the Pandemic”.
Ms Buckley said the complaint under the Payment of Wages Act is well-founded and directed the employer to pay compensation of €830 for the unpaid wages.
The company told the WRC that it did not implement wage reduction lightly.
Email to employees
In an email to employees in March 2020, the company stated: "We need to act proactively to risk preserve cash, protect our company's long-term health, and most importantly, wherever possible, retain employees through this difficult period.
The company stated to do this “we must be focused on taking costs out of our business while avoiding headcount reductions. In order to do this, we are taking difficult but determined actions to protect the financial position of our company”.
The company stated that it was implementing a temporary reduction in pay and that the 15 per cent reduction in pay would result in the Project Manager’s base salary to reduce from €37,852 to €32,174 gross per annum.
The Project Manager submitted that this was a unilateral decision by the company to which she objected. She emailed her employer and advised that she did not agree with the pay cut. She set out that she was open to discuss proposals in order to reach an agreement that would suit everyone.
Her position was that in March and April 2020 revenue for her office was higher than expected. The company told the WRC that while the group lost significant revenue due to Covid 19, by June 2020 the outlook had improved.
The pay reduction was in place from April 1st to May 31 and pay was restored to 100 per cent with effect from June 1st 2020.
The company submitted that revenue from its business was at the time of the wage reduction expected to decrease by 21 per cent. However, the ultimate outcome was not as bad as expected and Revenue for 2020 was down 12 per cent on 2019.
The company implemented the Temporary Wage Subsidies Scheme (TWSS) for a period. However, it did not meet the eligibility criteria and repaid the amount it received to the Irish Exchequer.
Commenting on the case, Mr Grogan said: “An employer cannot unilaterally impose a salary reduction. Any pay reduction can only be put in place with the written consent of the employee."
He said: "There was wholesale unlawful wage deductions during the first phase of the Covid 19 pandemic.
He said: "I can understand why employers did it. A number of employers took the view that if they were looking for consent they were not going to get it.
Claims against unlawful wage deductions must be made within six months and Mr Grogan stated: "There is no doubt that a lot of employee didn't know their rights."
Mr Grogan said that there has been a significant number of unlawful pay deduction cases concerning employees on high salaries at professional firms.
He commented: "Once a demand letter went in, there was a row back by the employer."