Redundancy Terms for Fixed-Term Workers May Not Be Less Favourable Than For Permanent Workers

Background to Complaint

The complainants in this case were engaged on a series of fixed-term contracts with the College.
In September 2003, it was announced that the college was to close down and the closure took place eventually in August 2007, at which point the complainants had six and seven years service respectively.

 

They claimed that they were less favourably treated in relation to their conditions of employment on grounds of their fixed term status, when they were only offered a lump sum calculated by reference to their statutory redundancy entitlement of two weeks per year of service.

 

Permanent staff on the other hand were presented with three different severance options, each more favourable than that offered to the complainants.

 

The complainant’s union wrote to the College seeking equal treatment.

 

On behalf of the Minister, a reply to the union stated that ex-gratia payments were not a condition of employment under s.6 of the Act and refused an improved payment.

 

Rights Commissioner Ruling

When the complainants brought a claim before a Rights Commissioner (R.C) however, the College then argued that there was an objective justification for the less favourable treatment of the complainants, namely the necessity to compensate staff for the loss of tenure in their employment.
The Rights Commissioner found in the complainant’s favour and St Catherine’s appealed to the Labour Court.

 

Appealed to Labour Court

The Court concluded that the College mistakenly believed at the time of the redundancies that ex- gratia payments were not covered by the legislation and this could not be relied upon as an objective justification for less favourable treatment.

 

It then went on to consider whether an employer is entitled to rely upon an objective justification that was not raised at the time the less favourable treatment took place.

 

For this purpose, it outlined the elements of the objective justification test set out in Bilka-Kaufhaus case by the European Court of Justice and reproduced in the domestic legislation – that the discriminatory measure must meet a real need of the employer, the measure must be appropriate to meet the objective it pursues and it must be necessary to meet that objective.

 

The Court stated that an exception from the principle of equal treatment must be applied strictly and concluded that ‘the requirements of this test could only be met if at the time the decision to discriminate was taken, the objective which it was intended to pursue was actually within the contemplation of the decision maker’.

 

Nonetheless, for the sake of completeness, it went on to analyse the College’s ‘compensation for loss of tenure’ justification.

 

The Court referred to the decision of the High Court on a point of law in the case of Sunday World Newspapers and Kinsella and Bradley [2007] IEHC 324, where Smyth. J held that a redundancy lump sum offered to a permanent employee calculated by reference to his/her loss of earnings up to normal retirement age, compared to a lump sum offered to a fixed term employee calculated by reference to the unexpired portion of his or her fixed term contract, was equal and not discriminatory treatment.

 

However, it was clear that in this case different formulae were applied to permanent as opposed to fixed term employees. The amount received was not linked to tenure or potential service and so could not be said to be compensating staff for such loss, even if it conformed to the criteria for objective justification.

 

Outcome

The College was ordered to offer the complainants the first of the severance options given to permanent employees, and €2,500 in compensation for the inconvenience suffered.

 

Lessons

This case illustrates that employers with both permanent and fixed term employees who are proposing to make redundancies should not treat fixed term staff less favourably, unless legal advice suggest that there is a clear legitimate basis for doing so.

 

Case: St Catherine’s College and the Minister for Education and Science v Maloney/Moran, Labour Court, FTC/08/21, Determination No. FTD0819, 2008

 
 
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