The Protection of Employment (Exceptional Collective Redundancies and Related Matters) Act 2007 (“the Act”) was signed into law on 8 May 2007. The Act establishes a Redundancy Panel (“Panel”) to which references can be made in certain circumstances concerning proposed collective redundancies. Put simply a proposed compulsory collective redundancy can be deemed to be an “exceptional collective redundancy” where the employees who are to be dismissed are to be replaced by other employees who are employed to perform essentially the same functions as those dismissed, and the terms and conditions of employment of those new employees are materially inferior to those of the dismissed employees.

Referral of a proposed collective redundancy to the Panel can be made by either the employer or the employee representatives. The Panel can then either give notice to the Minister of Trade, Enterprise and Employment that it is of the view that the referral did not come within the remit of the Act, or request the Minister to seek an opinion of the Labour Court.

In July, the Labour Court issued its first opinion under the Act. Marine Terminals Limited (MTL) conducted a restructuring exercise, which included both compulsory and voluntary redundancies, and paycuts. The employees were notified of new terms and conditions by letter. The letter stated that if new terms were not accepted within five days, that the posts would be made redundant. None of the employees accepted the new terms and conditions. SIPTU referred the matter to the Panel, on 28 May 2009. On foot of this, MTL withdrew the proposed new terms and conditions, and proceeded to notify employees that there would be a further nine redundancies. No further action was taken in relation to those redundancies, pending the outcome of the referral to the Panel.

The Labour Court was asked to consider whether the dismissals proposed by MTL, of which notice was given on 15 May 2009, and the proposed dismissal of employees who did not accept new terms and conditions of employment, together constituted an exceptional collective redundancy. The Labour Court considered that the dismissals notified on 15 May, to take effect on the 29 May, were for the purpose of reducing the overall number of persons employed. As there was no evidence that those employees positions would be backfilled by other people, either directly or indirectly, the Labour Court concluded that these were not exceptional collective redundancies.

The Labour Court then considered the deferred dismissals of the employees who did not agree to new terms and conditions. Whilst the Labour Court accepted that the employer had withdrawn the proposed new terms and conditions since the initial referral under the Act, the Court went on to state, “for the sake of completeness, the Court was of the opinion that were those dismissals to take effect, it would, as a matter of probability be operationally necessary for the employer to replace some or all of them. In that event… an exceptional collective redundancy in relation to those dismissals could arise.”

The opinion of the Labour Court in the MTL case serves as a reminder that in cases where redundancies are implemented as part of a cost-cutting exercise, any subsequent new hires in comparable roles, on lower salaries than the employees they have replaced, may lead to a potential exposure to unfair dismissal claims on the basis that the redundancies are not genuine. In addition to that, under 2007 Act compensation awards are much higher than those under the Unfair Dismissals legislation. Instead of a maximum of two years remuneration, awards can be up to four or five years pay. These potentially very high awards are in addition to an inability to claim the rebate on any redundancy payments made to departing employees. However, these proposed provisions only arise where the employer goes ahead and implements a collective redundancy where it has been declared by the Labour Court to be an exceptional collective redundancy.