IN THESE CHALLENGING ECONOMIC TIMES, with businesses coming under increasing pressure to reduce costs, redundancies are becoming a more common occurrence. For employees who may find themselves on the receiving end of a redundancy notice, the first question is quite often “Why me?”
AS OF RIGHT, an employer is entitled to continue their business with fewer employees. They are entitled to dismiss a person on the grounds of a genuine redundancy and no claim for unfair dismissal will succeed. The exception to this rule is when fair selection criteria have not been applied.
UNFAIR SELECTION FOR REDUNDANCY is a common occurrence, with employers frequently using the redundancy cloak as a means of cherry picking the staff they want to retain and those they wish to get rid of, without applying a fair selection process.
FOR EMPLOYEES who believe that their dismissal is not genuine, or who believe that they may have been unfairly selected, the Unfair Dismissals legislation enables them to challenge both the validity of a redundancy situation and the fairness of the selection procedure. Unfair dismissal claims may be heard by a Rights Commissioner or by the Employment Appeals Tribunal. In unfair dimissal claims, the onus is on the employer to show that the redundancy was genuine and that the employee was fairly selected. All of an employer's arrangements are open to scrutiny; for example, employees may claim that they were 'singled-out' when other positions might have been deemed to be equally at risk, or that the criteria applied in the selection process were unfairly biased against them. Important points to note relating to unfair dismissal claims are as follows:
A claim for unfair dismissal claim must be brought within six months from the date of dismissal.
In order to take an unfair dismissal claim, employees should have a minimum of twelve (12) months continuous service. The requirement to have one year’s continuous service does not apply in respect of dismissals due to pregnancy.
The remedies available under the unfair dismissals legislation include financial compensation of up to two year’s gross pay; reinstatement to their old job from the date of the dismissal; or reengagement in their old job or in a suitable alternative job on conditions which the Rights Commissioner and/or the Employment Appeals Tribunal consider reasonable.
FOR EMPLOYERS who may have little or no previous experience in this area, the entire redundancy procedure, from the selection process to implementation, can be quite daunting. Important points to bear in mind when considering the selection criteria are as follows:
Where there is an existing agreement or practice in place, that rule must be applied, unless there are genuine reasons for departing from this rule.
An employer is not obliged to apply the “last in, first out” rule, and can set the criteria for selection for redundancy appropriate to its needs, provided those criteria are reasonable and are set out in a fair manner.
The selection process must be fair and reasonable and must not discriminate against any employee or group of employees.
Before setting selection criteria, employers should have regard to the provisions of the employment equality legislation. It is automatically unfair to set selection criteria which would discriminate against an employee on any of the following grounds; age, race, gender, colour, disability, marital or family status, religious opinion or membership of the travelling community.
It is deemed unfair to set selection criteria that would discriminate against staff on the basis of their part-time status.
The criteria for the selection process may include experience, qualification, length of service, cost (both the cost of retaining an employee or the cost of making an employee redundant), job performance, flexibility, and any other relevant factors.
Where a number of redundancies are being made, the employer should check as to whether this would constitute a collective redundancy. A collective redundancy will arise when a certain proportion of the workforce is let go within a 30-day timeframe. Where collective redundancies occur, there is an obligation on the employer to enter into consultations with the employees for at least 30 days before anyone is given notice of redundancy. There is also an obligation to inform the Minister for Enterprise, Trade and Employment in writing of the proposed redundancies.
If an employer is not in a position to pay the statuatory redundancy to their employees, there can avail of a procedure whereby the Department of Enterprise, Trade and Employment will pay the redundancies out of the Social Insurance Fund, provided that the Employer provides a letter to the Department accepting liability for the 40% owing to the Social Insurance Fund together with a letter from their accountant stating the company is not in a position to pay. This should be supported by documentary evidence (e.g. audited accounts/statement of affairs.)
Many employers will have had little or no previous experience in this area, and may find the entire redundancy procedure, from the selection process to implementation, to be quite daunting. And unless proper procedure is applied, employers may well find themselves facing a claim of unfair dismissal, where an employee could be awarded the equivalent of two years gross salary if their claim is successful. The importance of taking sound legal advice and of careful planning for these situations cannot be overemphasised.
If you require any employment law advice contact Caroline Keane, employment law solicitor at Sweeney McGann on ckeane@sweeneymcgann.com.
www.SweeneyMcGann.com
Rent Reviews in Commercial Leases
Rent reviews in commercial leases
Deirdre Lynch Solicitor in Sweeney McGann explores the topic of rent reviews in commercial Leases.
A HUGE variety of businesses in Ireland, whether retail, industrial or commercial, occupy their premises under what are known as commercial leases.
Many continue to struggle in the current economic downturn to meet their rental payments. These leases will stipulate the rent to be paid by the tenant as well as the manner and frequency of payment to the landlord.
They will also generally provide for a revision of the rent by what is known as a rent review. This is the mechanism enabling the adjustment of the rent payable on a commercial premises to the current market level at the review date.
Prior to February 28, 2010 a rent review clause normally provided for upwards only rent reviews which stated that the rent would remain the same or increase subject to market conditions.
In December 2009 the Land and Conveyancing Law Reform Act banned upwards only rent review clauses in commercial leases. Section 132 of this Act is the relevant section. This effectively put a ban on upward only rent review clauses in commercial leases. However this Section only applies to leases of property used wholly or partly for the purposes of carrying on a business i.e. a commercial lease and only applies to those entered into after February 28, 2010.
After this date, any new commercial lease with a provision for a review of rent will be a review based on open market rent in which case the rent may rise, fall or remain the same. It is not possible to contract out of this new provision. This move however in banning upward only rent reviews has done nothing to improve the plight of retailers and office occupiers who are currently under huge pressure and are continuing to struggle to meet rent payments, due to the fact that the legislation is retrospective and applies only to new leases granted after February 28, 2010.
The occupiers of existing commercial leases do not benefit from this change and continue to face the task of lobbying their landlords to effect temporary rent reductions to assist them to continue to trade throughout the current economic climate. In fact, in practice we are seeing an increased number of variations of existing lease provisions including rent concessions being granted to current tenants of commercial leases granted prior to February 28, 2010 despite the presence of upward only rent review clauses in these leases. The view adopted by most landlords in the current climate being that it is far better to have a tenant in situ paying a rent, all be it a reduced rent than to have a premises vacant and unoccupied.
In addition to doing very little to help existing tenants of commercial leases granted prior to February 28, 2010, there is a very real concern that this legislation may lead to a two tier investment market with commercial properties with existing leases (pre February 28, 2010) being more attractive than properties with Leases granted after February 28, 2010.
Some of the key questions when considering rent review clauses are as follows:
What is a Rent Review?
A rent review is the mechanism enabling the adjustment of the rent payable on a commercial premises to the current market level at the review date. A landlord’s right to increase the rent and the tenant’s right to challenge an increase are detailed in the lease itself. The frequency of rent reviews is typically every five years. As a tenant you will want reviews to be as far apart as possible. Rent review clauses are often very long and complicated and you should always take professional advice when faced with a rent review. The terms of an individual lease can affect the level of rent payable.
What is the Rent Review Process?
process is usually initiated by a notice served by one party to the lease on the other. In the past typically it was the landlord who initiated the process in order to increase his rental income. This may not be the case going forward as it may be in the interest of a tenant to initiate it where the rent payable on the open market at the time of review is less than the tenant is currently paying. A specific figure will be quoted for the renewal of rent. If this does not seem reasonable the other party must write and say so immediately. The recipient of the notice is entitled to ask for the basis of this value and request comparable evidence in which the figure is based. In some circumstances, there are strict time limits to object and you need to be careful that you do not miss these deadlines. Both parties or their representatives will then proceed to agree the revised rent. This will be based on market evidence generated from transactions and properties that can be compared to the property under review.
What happens if the revised rent cannot be agreed?
If the new rent cannot be agreed, the lease will normally specify a procedure for resolving the disagreement. Usually it will state that the parties should first try to agree on the appointment of an independent third party, for example, a chartered surveyor specialising in valuations, to determine the new rent. If the parties are unable to agree themselves a prospective third party, the lease usually provides for the appointment to be made by the President of the Society of Chartered Surveyors. The independent party will act either as an arbitrator or independent expert to determine the new rent. A person will not be appointed if there is a real danger of bias but it should be realised that the arbitrator or independent expert will probably have had dealings with other properties in the area. Bear in mind that it is in the interest of both the landlord and the tenant that the person appointed has the appropriate expertise.
Can rents go down as well as up?
Prior to February 28, 2010, the majority of commercial leases contained upwards only rent review clauses which stated that the rent would remain the same or increase subject to market conditions. Post February 28, 2010 commercial leases have an open market rent review which means that the rent may rise, fall or remain the same.
In this difficult economic climate it is essential that landlords and tenants of commercial premises are aware of their rights and options.
If you require any Landlord and Tenant advice, contact Deirdre Lynch Solicitor with Sweeney McGann Solicitors, 67, O’Connell Street, Limerick.
Further information on this topic can be received from either David J. Sweeney, (email: dsweeney@sweeneymcgann.comThis e-mail address is being protected from spambots. You need JavaScript enabled to view it ) or Deirdre Lynch, (email: dlynch@sweeneymcgann.comThis e-mail address is being protected from spambots. You need JavaScript enabled to view it ) - Commercial Department, Sweeney McGann.
Deirdre Lynch Solicitor in Sweeney McGann explores the topic of rent reviews in commercial Leases.
A HUGE variety of businesses in Ireland, whether retail, industrial or commercial, occupy their premises under what are known as commercial leases.
Many continue to struggle in the current economic downturn to meet their rental payments. These leases will stipulate the rent to be paid by the tenant as well as the manner and frequency of payment to the landlord.
They will also generally provide for a revision of the rent by what is known as a rent review. This is the mechanism enabling the adjustment of the rent payable on a commercial premises to the current market level at the review date.
Prior to February 28, 2010 a rent review clause normally provided for upwards only rent reviews which stated that the rent would remain the same or increase subject to market conditions.
In December 2009 the Land and Conveyancing Law Reform Act banned upwards only rent review clauses in commercial leases. Section 132 of this Act is the relevant section. This effectively put a ban on upward only rent review clauses in commercial leases. However this Section only applies to leases of property used wholly or partly for the purposes of carrying on a business i.e. a commercial lease and only applies to those entered into after February 28, 2010.
After this date, any new commercial lease with a provision for a review of rent will be a review based on open market rent in which case the rent may rise, fall or remain the same. It is not possible to contract out of this new provision. This move however in banning upward only rent reviews has done nothing to improve the plight of retailers and office occupiers who are currently under huge pressure and are continuing to struggle to meet rent payments, due to the fact that the legislation is retrospective and applies only to new leases granted after February 28, 2010.
The occupiers of existing commercial leases do not benefit from this change and continue to face the task of lobbying their landlords to effect temporary rent reductions to assist them to continue to trade throughout the current economic climate. In fact, in practice we are seeing an increased number of variations of existing lease provisions including rent concessions being granted to current tenants of commercial leases granted prior to February 28, 2010 despite the presence of upward only rent review clauses in these leases. The view adopted by most landlords in the current climate being that it is far better to have a tenant in situ paying a rent, all be it a reduced rent than to have a premises vacant and unoccupied.
In addition to doing very little to help existing tenants of commercial leases granted prior to February 28, 2010, there is a very real concern that this legislation may lead to a two tier investment market with commercial properties with existing leases (pre February 28, 2010) being more attractive than properties with Leases granted after February 28, 2010.
Some of the key questions when considering rent review clauses are as follows:
What is a Rent Review?
A rent review is the mechanism enabling the adjustment of the rent payable on a commercial premises to the current market level at the review date. A landlord’s right to increase the rent and the tenant’s right to challenge an increase are detailed in the lease itself. The frequency of rent reviews is typically every five years. As a tenant you will want reviews to be as far apart as possible. Rent review clauses are often very long and complicated and you should always take professional advice when faced with a rent review. The terms of an individual lease can affect the level of rent payable.
What is the Rent Review Process?
process is usually initiated by a notice served by one party to the lease on the other. In the past typically it was the landlord who initiated the process in order to increase his rental income. This may not be the case going forward as it may be in the interest of a tenant to initiate it where the rent payable on the open market at the time of review is less than the tenant is currently paying. A specific figure will be quoted for the renewal of rent. If this does not seem reasonable the other party must write and say so immediately. The recipient of the notice is entitled to ask for the basis of this value and request comparable evidence in which the figure is based. In some circumstances, there are strict time limits to object and you need to be careful that you do not miss these deadlines. Both parties or their representatives will then proceed to agree the revised rent. This will be based on market evidence generated from transactions and properties that can be compared to the property under review.
What happens if the revised rent cannot be agreed?
If the new rent cannot be agreed, the lease will normally specify a procedure for resolving the disagreement. Usually it will state that the parties should first try to agree on the appointment of an independent third party, for example, a chartered surveyor specialising in valuations, to determine the new rent. If the parties are unable to agree themselves a prospective third party, the lease usually provides for the appointment to be made by the President of the Society of Chartered Surveyors. The independent party will act either as an arbitrator or independent expert to determine the new rent. A person will not be appointed if there is a real danger of bias but it should be realised that the arbitrator or independent expert will probably have had dealings with other properties in the area. Bear in mind that it is in the interest of both the landlord and the tenant that the person appointed has the appropriate expertise.
Can rents go down as well as up?
Prior to February 28, 2010, the majority of commercial leases contained upwards only rent review clauses which stated that the rent would remain the same or increase subject to market conditions. Post February 28, 2010 commercial leases have an open market rent review which means that the rent may rise, fall or remain the same.
In this difficult economic climate it is essential that landlords and tenants of commercial premises are aware of their rights and options.
If you require any Landlord and Tenant advice, contact Deirdre Lynch Solicitor with Sweeney McGann Solicitors, 67, O’Connell Street, Limerick.
Further information on this topic can be received from either David J. Sweeney, (email: dsweeney@sweeneymcgann.comThis e-mail address is being protected from spambots. You need JavaScript enabled to view it ) or Deirdre Lynch, (email: dlynch@sweeneymcgann.comThis e-mail address is being protected from spambots. You need JavaScript enabled to view it ) - Commercial Department, Sweeney McGann.
About us
Sweeney McGann is one of the mid-west regions premier law practices providing legal services in all aspects of private client, business and corporate law.
We are a vibrant modern progressive law firm providing efficient and reliable services to our clients. Continued exposure to a wide spectrum of industries, institutions and organisations ensures a well rounded knowledge of the current economic climate for the benefit of our firm's clients.
Our reputation is based on proven professional skills, the quality and cost effectiveness of the service, the depth of experience and level of expertise we provide to all of our clients both locally and at national level. We have a thorough understanding of our clients' requirements and the need to achieve the best results, leading to our solicitors providing practical and prompt solutions for our clients.
Contact Details
Tel: 00353 61-418277 / 61-317533
Fax: 061-319496
Email: enquiries@sweeneymcgann.com
Post: 67 O'Connell Street, Limerick, Ireland
DX: 3025 Limerick
Web: www.sweeneymcgann.com
We are a vibrant modern progressive law firm providing efficient and reliable services to our clients. Continued exposure to a wide spectrum of industries, institutions and organisations ensures a well rounded knowledge of the current economic climate for the benefit of our firm's clients.
Our reputation is based on proven professional skills, the quality and cost effectiveness of the service, the depth of experience and level of expertise we provide to all of our clients both locally and at national level. We have a thorough understanding of our clients' requirements and the need to achieve the best results, leading to our solicitors providing practical and prompt solutions for our clients.
Contact Details
Tel: 00353 61-418277 / 61-317533
Fax: 061-319496
Email: enquiries@sweeneymcgann.com
Post: 67 O'Connell Street, Limerick, Ireland
DX: 3025 Limerick
Web: www.sweeneymcgann.com
An Alternative to Liquidation
KIERAN Oliver, from Sweeney McGann continues the series of articles provided by the Limerick based firm as he offers us some information on an alternative to liquidation.
“The limited liability company is an entity which has been increasingly used in business in recent times as can be seen by the huge increase in the number of limited liability companies incorporated with the Irish Companies Registration Office in the last number of years.
The attractions of a limited liability company are chiefly the limited liability which is offered to the shareholders of the company with regards to the general liabilities of the company.
While the shareholders can benefit from limited liability, unfortunately due to the current economic climate, the large increase in the number of liquidations has resulted in a situation where an increasing number of creditors, and in particular unsecured creditors, find themselves in a position where upon a liquidation when they are owed often very large sums of money by a company they have very little likelihood of achieving any return for the monies owed, particularly when the company entering into liquidation owes monies to preferential creditors, such as Revenue, or secured creditors, such as a Bank holding a debenture.
Furthermore, even though the limited liability vehicle has attractions for shareholders, in many cases a shareholder will be reluctant to allow a company to go into liquidation but the directors of the company will have certain onerous corporate responsibilities, which prohibit them from continuing to trade when the company is in an insolvent situation. A potential alternative to liquidation, which may be looked at can be found under the provisions of Sections 201 and 202 of the Companies Act 1963.
Often it is the case that a company may have every intention of paying its creditors but it itself is operating in the same market as its creditors and is having the very same problems in obtaining payment for goods or services provided by it. Sections 201 and 202 offer a mechanism whereby a company owed substantial monies beyond what it itself owes its creditors can come to a compromise arrangement with its creditors whereby it agrees to pay an agreed sum of the monies owed to its creditors as and when monies come in to the company.
Sections 201 and 202 operate under Court supervision and following an application to the High Court, meetings of each class of creditor grouping will be ordered by the Court and if each class of creditor group representing 50% in number and 75% in value approve the compromised scheme of arrangement then for the duration of that compromise arrangement, the Court may stay all proceedings or restrain future proceedings against the company for such period as the Court deems fit. The only remedy a creditor would have against the company would lie in a situation where the company was in specific breach of the Court Ordered Compromise Arrangement.
This has the effect of allowing the company some breathing space and produces a situation where a company does not have worry about being wound up other than if it breaches the actual compromise arrangement as approved by the Court.
Liquidation often offers a solution only to a secured creditor and parties in the changing climate which we are in should consider whether Sections 201 and 202 can be utilised to the mutual advantage of the company and the creditors.
“The limited liability company is an entity which has been increasingly used in business in recent times as can be seen by the huge increase in the number of limited liability companies incorporated with the Irish Companies Registration Office in the last number of years.
The attractions of a limited liability company are chiefly the limited liability which is offered to the shareholders of the company with regards to the general liabilities of the company.
While the shareholders can benefit from limited liability, unfortunately due to the current economic climate, the large increase in the number of liquidations has resulted in a situation where an increasing number of creditors, and in particular unsecured creditors, find themselves in a position where upon a liquidation when they are owed often very large sums of money by a company they have very little likelihood of achieving any return for the monies owed, particularly when the company entering into liquidation owes monies to preferential creditors, such as Revenue, or secured creditors, such as a Bank holding a debenture.
Furthermore, even though the limited liability vehicle has attractions for shareholders, in many cases a shareholder will be reluctant to allow a company to go into liquidation but the directors of the company will have certain onerous corporate responsibilities, which prohibit them from continuing to trade when the company is in an insolvent situation. A potential alternative to liquidation, which may be looked at can be found under the provisions of Sections 201 and 202 of the Companies Act 1963.
Often it is the case that a company may have every intention of paying its creditors but it itself is operating in the same market as its creditors and is having the very same problems in obtaining payment for goods or services provided by it. Sections 201 and 202 offer a mechanism whereby a company owed substantial monies beyond what it itself owes its creditors can come to a compromise arrangement with its creditors whereby it agrees to pay an agreed sum of the monies owed to its creditors as and when monies come in to the company.
Sections 201 and 202 operate under Court supervision and following an application to the High Court, meetings of each class of creditor grouping will be ordered by the Court and if each class of creditor group representing 50% in number and 75% in value approve the compromised scheme of arrangement then for the duration of that compromise arrangement, the Court may stay all proceedings or restrain future proceedings against the company for such period as the Court deems fit. The only remedy a creditor would have against the company would lie in a situation where the company was in specific breach of the Court Ordered Compromise Arrangement.
This has the effect of allowing the company some breathing space and produces a situation where a company does not have worry about being wound up other than if it breaches the actual compromise arrangement as approved by the Court.
Liquidation often offers a solution only to a secured creditor and parties in the changing climate which we are in should consider whether Sections 201 and 202 can be utilised to the mutual advantage of the company and the creditors.
Insolvency Payments Scheme
IN the first of a series of articles provided by Sweeney McGann solicitors, Caroline Keane explores the topic of insolvency and how business approach their obligations to employees.
Despite signs that the global recession is slowing, there has been a dramatic increase in insolvencies in Ireland over the past twelve month period. Recent figures produced by Insolvency Journal.ie indicate that in January alone, 103 businesses were declared insolvent - the equivalent of around 3 businesses per day.
These insolvencies invariably translate into redundancies and lay offs. With high levels of insolvencies likely to continue throughout 2010, it is critical for employees to know their rights and entitlements if their employer goes out of business.
When a company goes into insolvency, employees have certain rights and entitlements and may be entitled to recover money from the Department of Enterprise, Trade and Employment under the Insolvency Payments Scheme.
The Insolvency Payments Scheme is a Scheme to protect the entitlements of employees whose employer has become insolvent. Under the Scheme the employees may claim arrears of pay, holiday pay, payment in lieu of notice and various other entitlements that may be owed to them by their employer. The Scheme also covers payments due to an employee on foot of a determination or decision under a range of legislation including the Unfair Dismissals Act, the Employment Equality Act, the Maternity Protection Act, the National Minimum Wage Act, the Payment of Wages Act, and the Organisation of Working Time Act. These payments are made from the Social Insurance Fund. In most cases, the Scheme covers entitlements relating to the period of eighteen months prior to the date of the insolvency of the employer.
In order to pursue a claim from the Scheme, the employees should contact the person legally appointed to wind up the business (normally the liquidator or receiver), who certifies the payments due and sends them to the Insolvency Payments Section of the Department of Enterprise, Trade and Employment. Payments are then made out to the liquidator or receiver, who pays the employees concerned
Payment will be made from the Social Insurance Fund only where the employer becomes legally insolvent: this means the employer must be in liquidation, receivership, or bankruptcy. If the business simply shuts down without becoming legally insolvent, the employees will have to pursue the employer for their pay and other entitlements.
The Insolvency Payments Scheme does not cover redundancy payments that may be due to an employee if they are let go as a result of a closure or shut down. There is a separate scheme in place to cover redundancy payments. Not all employees will be entitled to a redundancy payment. In order to qualify, an employee must have two years continuous employment with the same employer. If an employee is made redundant as a result of their employer shutting the business, and the employer cannot afford to pay the redundancy payment to their employees the Department will then make payment out of the Social Insurance Fund, provided that the Employer provides evidence that they are not in a position to pay (e.g., a letter from their Accountant/Solicitor confirming the employer’s inability to pay.). If the employer refuses to pay the redundancy payment due to their employees, the employees should send their employer a Form 77 (available to download from the Department’s website http://www.entemp.ie). If the employer continues to refuse, the employee can apply to the Employment Appeals Tribunal for a determination that they qualify for a redundancy payment. Payment will then be made to the employees from the Social Insurance Fund.
In this difficult economic climate, it is essential that employees are aware of their rights and options in order to avoid missing out on their entitlements. If you require any employment law advice contact Caroline Keane, employment law solicitor with Sweeney McGann Solicitors, 67 O’Connell Street Limerick.
[Caroline Keane is an employment law solicitor with Sweeney McGann Solicitors - ckeane@sweeneymcgann.com ]
Despite signs that the global recession is slowing, there has been a dramatic increase in insolvencies in Ireland over the past twelve month period. Recent figures produced by Insolvency Journal.ie indicate that in January alone, 103 businesses were declared insolvent - the equivalent of around 3 businesses per day.
These insolvencies invariably translate into redundancies and lay offs. With high levels of insolvencies likely to continue throughout 2010, it is critical for employees to know their rights and entitlements if their employer goes out of business.
When a company goes into insolvency, employees have certain rights and entitlements and may be entitled to recover money from the Department of Enterprise, Trade and Employment under the Insolvency Payments Scheme.
The Insolvency Payments Scheme is a Scheme to protect the entitlements of employees whose employer has become insolvent. Under the Scheme the employees may claim arrears of pay, holiday pay, payment in lieu of notice and various other entitlements that may be owed to them by their employer. The Scheme also covers payments due to an employee on foot of a determination or decision under a range of legislation including the Unfair Dismissals Act, the Employment Equality Act, the Maternity Protection Act, the National Minimum Wage Act, the Payment of Wages Act, and the Organisation of Working Time Act. These payments are made from the Social Insurance Fund. In most cases, the Scheme covers entitlements relating to the period of eighteen months prior to the date of the insolvency of the employer.
In order to pursue a claim from the Scheme, the employees should contact the person legally appointed to wind up the business (normally the liquidator or receiver), who certifies the payments due and sends them to the Insolvency Payments Section of the Department of Enterprise, Trade and Employment. Payments are then made out to the liquidator or receiver, who pays the employees concerned
Payment will be made from the Social Insurance Fund only where the employer becomes legally insolvent: this means the employer must be in liquidation, receivership, or bankruptcy. If the business simply shuts down without becoming legally insolvent, the employees will have to pursue the employer for their pay and other entitlements.
The Insolvency Payments Scheme does not cover redundancy payments that may be due to an employee if they are let go as a result of a closure or shut down. There is a separate scheme in place to cover redundancy payments. Not all employees will be entitled to a redundancy payment. In order to qualify, an employee must have two years continuous employment with the same employer. If an employee is made redundant as a result of their employer shutting the business, and the employer cannot afford to pay the redundancy payment to their employees the Department will then make payment out of the Social Insurance Fund, provided that the Employer provides evidence that they are not in a position to pay (e.g., a letter from their Accountant/Solicitor confirming the employer’s inability to pay.). If the employer refuses to pay the redundancy payment due to their employees, the employees should send their employer a Form 77 (available to download from the Department’s website http://www.entemp.ie). If the employer continues to refuse, the employee can apply to the Employment Appeals Tribunal for a determination that they qualify for a redundancy payment. Payment will then be made to the employees from the Social Insurance Fund.
In this difficult economic climate, it is essential that employees are aware of their rights and options in order to avoid missing out on their entitlements. If you require any employment law advice contact Caroline Keane, employment law solicitor with Sweeney McGann Solicitors, 67 O’Connell Street Limerick.
[Caroline Keane is an employment law solicitor with Sweeney McGann Solicitors - ckeane@sweeneymcgann.com ]
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