Changes to Terms of Employment and Rate of Pay

Background

The case of Dermot Flanagan v Dublin Bus (ADJ00046729) examines the circumstances under which changes to the terms and conditions of employment, impacting pay, will ordinarily be enforceable.

Mr Flanagan (the Complainant) brought a complaint under Section 27 of the Organisation of Working Time Act, 1997 against Dublin Bus (the Respondent) to the Workplace Relations Commission (WRC), alleging that he should be paid at the bus driver rate for the annual leave he accrued while working as a bus driver, but did not take until after he assumed a new role.

By way of background, the Complainant was a bus driver who, as a result of two assaults suffered while driving for the Respondent, was unable to continue to work as a bus driver so took on an alternative, lower paid role with the Respondent organisation.

Legislation and Case Law

Section 20(1)(c)(iii) of the Organisation of Working Time Act 1997, as amended, (the Act), prescribed that, where an employee is unable to avail of their annual leave entitlement due to illness, and has provided a medical certificate to that effect, any untaken annual leave can be carried over for up to 15 months after the end of the year it which it was earned.

Section 20(2)(b) of the Act states that "the pay in respect of an employee's annual leave shall (b) be at the normal weekly rate or, as the case may be, a rate which is proportionate to the normal weekly rate”.

The Respondent paid the Complainant’s annual leave at his new 30-hour rate, even though the annual leave in question had been earned whilst the Complainant was a bus driver on a higher rate of pay. 

Section 19(1)(a) of the Act states the following:

"(1)(a) For the purpose of this section, a day that an employee was absent from work due to illness shall, if the employee provided to his or her employer a certificate of a registered medical practitioner in respect of that illness, be deemed to be a day on which the employee was

(a) At his or her place of work or at his or her employer's disposal, and

(b) Carrying out or performing the activities or duties or his or her work."

The Complainant further submitted that the Respondent was in breach of section 5 of the Payment of Wages Act 1991, as amended, because an illegal deduction had been made.

Section 5 of the Payment of Wages Act provides that:

"(6) Where the total amount of any wages that are paid on any occasion by an employer to an employee is less than the total amount of wages that is properly payable by him to the employee on that occasion (after making any deductions therefrom that fall to be made and are in accordance with this Act), or

none of the wages that are properly payable to an employee by an employer on any occasion (after making any such deductions as aforesaid) are paid to the employee,

then, except in so far as the deficiency or non-payment is attributable to an error of computation, the amount of the deficiency or non-payment shall be treated as a deduction made by the employer from the wages of the employee on the occasion. "

The Complainant submitted that in this case, the deduction from his wages was not authorised by him and he was not made aware of it prior to the deduction.

Decision

Ultimately, the Adjudication Officer decided that, when the Complainant agreed to accept a lower rate of pay, that would impact any annual leave entitlements owed to him and therefore he couldn’t bring a complaint in respect of a lower rate of pay in respect of accrued but untaken annual leave.

The Adjudication Officer determined that the Organisation of Working Time Act sets out that annual leave entitlements should be set at the rate of normal pay.

Subsection 20(2) of the Organisation of Working Time Act, 1997, as amended, (the Act) provides that:

“The pay in respect of an employee’s annual leave shall—

(a) be paid to the employee in advance of his or her taking the leave,

(b) be at the normal weekly rate …”

The ‘normal weekly rate’ is set out under S.I. No. 475/1997 - Organisation of Working Time (Determination of Pay for Holidays) Regulations, 1997, which provides that:

“The normal weekly rate of an employee's pay, for the purposes of sections 20 and 23 of the Act (hereafter in this Regulation referred to as the "relevant sections"), shall be determined in accordance with the following provisions of this Regulation. If the employee concerned pay is calculated wholly by reference to a time rate or a fixed rate or salary or any other rate that does not vary in relation to the work done by him or her, the normal weekly rate of his or her pay, for the purposes of the relevant sections, shall be the sum (including any regular bonus or allowance the amount of which does not vary in relation to the work done by the employee but excluding any pay for overtime) that is paid in respect of the normal weekly working hours last worked by the employee before the annual leave (or the portion thereof concerned) commences or, as the case may be, the cesser of employment occurs”.

Takeaway

The takeaway for employees considering accepting any changes to their terms and conditions of employment, is to consider the whole impact such a change could have on core and ancillary benefits such as annual leave.

For employers, it will be necessary to demonstrate that any reduction in payments made to an employee on foot of a change to their terms and conditions of employment, has a basis in law. Ordinarily, the written consent of the employee will ordinarily be required to give legal affect to such changes.

Further information

This article was prepared by Barry Crushell for informational purposes only. For further advice, please email contact@crushell.ie or contact the offices of Crushell & Co Solicitors.