A number of decisions published over the last six months indicate that the Employment Appeals Tribunal (EAT) and the Courts appear to have little sympathy for employers in redundancy cases and will not shy away from making large awards when employers get it wrong. EMMET WHELAN examines two of the more interesting decisions.

Panisi v JVC: It’s nothing personal

In the High Court case of JVC Europe Limited v Panisi, Mr Justice Charleton awarded the former General Manager of JVC in Ireland a sum of €197,000 for unfair dismissal/unfair selection for redundancy, in addition to the sum of €101,000 Mr Panisi had received as an ex gratia payment. The outcome also left JVC with a substantial bill for legal costs (which included an appeal from the EAT to the Circuit Court and, ultimately, to the High Court).

While Mr Justice Charleton accepted that JVC had experienced serious trading difficulties and that a reorganisation was not unreasonable, he had a difficulty with the process applied leading to the purported redundancy of Mr Panisi. In this respect, Mr Justice Charleton confirmed that redundancy should be impersonal, which contrasts with dismissal:

“Redundancy is not … a personal choice. It is, in essence, the external or internal economic or technological reorienting of an enterprise whereby the work of employees needs to be shed or to be carried out in an entirely different manner. As such, redundancy is entirely impersonal. Dismissal, on the other hand, is a decision targeted at an individual.”

Background

Mr Panisi was informed at the beginning of March 2008 that his position, and two other positions based in the UK, would no longer be required. While these three positions were disappearing (for reasons which Mr Justice Charleton stated “were not at all apparent during the hearing”) three new positions were being created, including a “new” position of Sales Manager for Ireland.

Mr Panisi entered into a consultation process with JVC and was invited to interview for the position of Sales Manager for Ireland. Ninety percent of Mr Panisi’s work in Ireland involved sales and he declined to be interviewed as, in his view, he was being asked to interview for his own role. Mr Justice Charleton agreed with Mr Panisi and indeed he might even have found in Mr Panisi’s favour purely on this basis. However, to make matters worse for JVC, while JVC was still in consultation with Mr. Panisi and he was still considering the option of interviewing for the new role, Mr Panisi’s boss announced in an “off the record” statement to other senior managers that the role of Sales Manager for Ireland was to be filled by another employee. It appeared that this employee had been preferred for the role from the very start of the process and JVC was severely criticised for applying such a fundamentally flawed process.

The judgment of Mr Justice Charleton emphasises the importance of employers ensuring that any redundancy consultation process is fair and legitimate and, if there is to be competition for roles, that such competition must be open and fair. The judgment is also a stark warning to employers that “off the record” statements can cause serious difficulties if the case ends up before a Court or Tribunal and former employees are called to give evidence.

Fitzpatrick v Eurodrug Limited: Procedures, procedures, procedures

A more worrying approach is to be found in the case of Fitzpatrick v Eurodrug Limited, which was published last month. In that case, the EAT awarded the former Managing Director of Eurodrug, a pharmaceutical wholesale business based in Dublin, a sum of €295,000 for unfair dismissal/unfair selection for redundancy. This was in addition to an undisclosed sum that Mr Fitzpatrick had received from Eurodrug as an ex gratia payment.

Background

Mr Fitzpatrick was made redundant in July 2009 after a cost analysis report identified his redundancy as a possible cost saving measure. The EAT did not dispute that Eurodrug was experiencing financial difficulties or that there was anything inappropriate in the proposal to make Mr Fitzpatrick redundant. The EAT simply found that “there was no adequate or fair procedure” afforded to Mr Fitzpatrick in relation to his redundancy. The EAT focused on the level of input Mr Fitzpatrick was allowed during the preparation of the cost analysis report and criticised Eurodrug for misleading Mr Fitzpatrick as to the real reasons for the interview. The EAT also criticised Eurodrug for not providing Mr Fitzpatrick with a copy of the report in advance of the board meeting where his redundancy was considered, or informing him that his redundancy was to be considered at that board meeting. The EAT also criticised Eurodrug for not considering other cost cutting measures.

There was no suggestion that Mr Fitzpatrick was to be replaced as Managing Director by another employee, or that the process was a sham (as was the case in Panisi). Mr Fitzpatrick’s main complaint related to the procedures adopted and the failure to consider alternatives, but it is not evident from the written decision of the EAT that the procedures adopted were inherently unfair and the only apparent alternatives on offer appeared to be pay cuts and the redundancy of other employees. In such circumstances, the decision of the EAT, and particularly the level of award, appears to be very harsh.

Time for change?

It is important that employers seek legal advice before the commencement of any redundancy process, particularly where senior employees are involved, in order to minimise their exposure to significant awards.

At present the EAT can award up to a maximum of two years’ gross remuneration in an unfair dismissal claim in Ireland. In cases involving senior employees (such as Panisi and Fitzpatrick) employers can be exposed to substantial awards when basic salary, bonus, expenses and pension entitlements are taken into account. In contrast, in the United Kingdom, the statutory cap is currently approximately £68,000.

The Minister for Jobs, Enterprise and Innovation, Mr Richard Bruton TD, has recently announced his intention to reform the employment rights system in Ireland. Is it time to introduce a similar, more employer-friendly, statutory cap for unfair dismissal awards in this jurisdiction?