Redundancy for Employees on Temporary Lay-Off

The restrictions imposed as a result of COVID-19 have had a severe impact on the Irish economy. Due to the initial uncertainty regarding the length of time the restrictions would be in force for and the reasonable expectation that the decline in economic activity would be quite temporary, many employers opted to place employees on temporary lay-off as opposed to making them redundant. However, the bleak economic outlook and the ongoing restrictions mean that many employers may now be considering making these employees redundant.

We set out below some key questions and answers to consider.

1. As a recap, what are the basic statutory redundancy entitlements?

An employee is entitled to a statutory redundancy payment if they have at least two years' continuous service.

If an employee has the requisite service, they will be entitled to a lump sum payment of two weeks' pay for every year of service (capped at €600 per week) and one further week's pay (also capped at €600).

It is usually up to the employer to decide to pay an additional ex-gratia amount on top of the basic statutory entitlement.

Redundancy lump sum payments are tax-free.

An employee who is being made redundant (and who has at least two years' continuous service) must be given at least two weeks' notice of the redundancy in writing.  However, two weeks is the minimum notice and employees may be legally entitled to longer notice periods, based on their length of service, or their contract of employment.

2. Is an employee who has been placed on temporary lay-off entitled to claim a statutory redundancy payment?

Generally, and in ordinary circumstances, where the period of temporary lay-off continues for four or more consecutive weeks (or for six weeks within a period of 13 weeks, of which not more than three were consecutive), an employee is entitled to give notice in writing of their intention to claim a statutory redundancy payment.

However, this entitlement was paused for the period 13 March 2020 until 31 May 2020 under the emergency legislation enacted by the Irish Government (Emergency Measures in the Public Interest (COVID-19) Act 2020). This was to help ensure that as many employees as possible would remain employed and to assist employers who may otherwise have had large statutory redundancy bills to pay and potentially workforce shortages when their business was ready to reopen.

On 29 May 2020, the Government confirmed that the temporary suspension of an employee's entitlement to claim redundancy (where that employee has been placed on temporary lay-off) is extended until 10 August 2020. Minister for Employment Affairs and Social Protection Regina Doherty stated as follows in relation to this announcement:

"For employees an extension of the end-date is important to ensure that they have a continued link to their job and a pathway to return. For employers, many still regard their businesses as being temporarily closed and plan to re-open as soon as is possible for them to do so. If we did not extend the end date further, redundancies could occur in the very near future which will burden employers with further debt and have a serious impact on the potential for a business to recover. This in turn increases the risk of insolvency and bankruptcy situations which will only exacerbate the risk of further permanent job losses.”

3. Can an employer make an employee redundant while they are on temporary lay-off?

Yes, the same rules on redundancy apply. Therefore, if an employer proposes to make an employee who is on temporary lay-off redundant, the employer must ensure that:

1. there is a genuine basis for the redundancy and it comes within the definition of redundancy under Irish law; and
2. they consult with the employee before making a final decision.

While there is no prescribed statutory process for carrying out individual redundancies in Ireland, where an employee has more than 12 months' service (inclusive of notice entitlements), every termination of employment is considered automatically unfair until proven otherwise. Therefore, the employer must act in a reasonable manner when dismissing an employee (including by reason of redundancy). The obligation to act reasonably can be quite far-reaching and requires the employer, amongst other things, to consider any alternatives to redundancy, such as suitable alternative roles, reduced working hours, a pay cut, a career break, etc. before making any final decision in relation to the proposed redundancy. 

The employer will need to determine whether the proposed redundancies affect stand-alone positions where no selection is required or whether it would affect a larger number of interchangeable employees from which only some redundancies are needed. If the latter is the case then the employer must identify a redundancy selection pool and apply a careful process in determining who from amongst that group would be selected for redundancy.

The employer may conduct the redundancy consultation process virtually/remotely, either by phone or video conferencing. If the consultation process is conducted in person, the employer should adhere to all applicable public health guidance.

4. Is the redundancy process different if there is a large group of employees proposed for redundancy?

If the employer proposes to make a group of employees redundant, they may trigger a "collective redundancy". A collective redundancy is one that involves a proposal to make a specified number of employees redundant within a 30-day consecutive period. The specified number of employees varies depending on the size of the employer's workforce.  The statutory thresholds are set out in the table below:

The number of employees normally employed is the average number employed in each of the 12 months preceding the date on which the first dismissal takes effect. 

In a collective redundancy situation, there are a number of obligations placed on an employer, including:

• Obligation to consult with employee representatives;
• Obligation on the employer to provide certain information to the employee representatives (including the reasons for the proposed redundancies, the number of proposed redundancies, the time period, the criteria proposed for the selection of the workers to be made redundant, etc.); and
• Obligation on the employer to provide certain information to the Minister for Employment Affairs and Social Protection.

5. What if the employer has been availing of the Temporary Wage Subsidy Scheme (TWSS) for an employee and proposes to make this employee redundant?

Section 28(2)(b) of the Emergency Measures in the Public Interest (Covid-19) Act 2020 provides, in relation to the TWSS, that "… the employer has the firm intention of continuing to employ the specified employee (and to pay to him or her emoluments accordingly) …". Therefore, once notice of redundancy has been served on an employee, the employer should no longer avail of the TWSS on behalf of that employee. There is also a risk that the employer may be in breach of the TWSS if they continue to avail of subsidies for employees who have been placed at risk of redundancy. The key is that the employer can still show that there is "a firm intention of continuing employment”.

Once the notice of redundancy is served, the employer would then be liable for the employee's notice entitlements and a TWSS payment should not subsidise an employee's notice payment.