Employers may now feel that they are entitled to cut employees’ salary in light of the recent High Court judgment in which Joint Labour Committees were declared unconstitutional.
However, an employer cannot unilaterally change an employee’s material terms and conditions without the employee’s consent. In the present economic climate many employees may consent to pay cuts where the alternative is redundancy. If consent is not forthcoming, employees affected by unilaterally imposed pay cuts could pursue a breach of contract claim in the civil courts or invoke dispute mechanisms under industrial relations legislation.
Many claims of this nature are brought under the Payment of Wages Act 1991 for unlawful deduction. In McKenzie & Anor. v Minister for Finance & Ors, the High Court recently pointed out that a reduction in pay is not a ‘deduction’ from wages payable, rather it is a ‘reduction’ of the allowance payable. Although the High Court was not the place to seek enforcement of the Act, the court made it clear that the Act would have had no application to that case in any event. It remains to be seen whether any unlawful deduction cases taken under the Act will be challenged on the basis of this decision.
A recent Rights Commissioner decision supports employers’ efforts to reduce costs in times of economic crisis. In this case it was acknowledged that there had been a breach of the Act but no compensation was awarded, as the Rights Commissioner did not believe that an award of compensation was reasonable, due to the financial circumstances of the employer. This decision has been appealed to the Employment Appeals Tribunal.
As can be seen from above, the law in this area is now unclear. However, what is clear is that unilaterally amending the terms and conditions of an employee’s contract of employment is never without risk. It can leave employers open to claims via one of the above mechanisms available to employees. Advice should always be sought prior to implementing any unilateral changes to an employee’s terms or conditions of employment.
Contributed by Caoimhe Heery, Alicia Compton.
Back to Legal News
