George Lawlor on historical insolvencies, redundancy claims

I welcome the bill, but I would just outline two concerns that I have. There are a range of laws that can come into play when an employer closes down. The European law governs some of these. The European Union covers some of these laws. The legislation in this area is usually concerned with ensuring minimum rights underwritten by the Exchequer while allowing the parties to agree more substantial or enhanced terms. Of course, there can be no agreement for enhanced terms if the employer is insolvent and so cannot fund any additional payment. Some comments made about this bill relate to the relative complexity of the whole legislative landscape. First, where jobs are lost due to the closure of a business, the Redundancy Payments Acts apply and provide a statutory minimum redundancy entitlement for employees with a set period of service. Apart from redundancy, outstanding wages, holiday pay, commission and bonuses are protected by the Payment of Wages Act 1991. The Minimum Notice and Terms of Employment Act requires employers to give notice of termination or else to pay employees in lieu of notice. Normally, it is up to the employer to pay statutory redundancy, but in default a liquidator can seek, on behalf of workers, payment from the Redundancy Payment Scheme. Then as regards the other outstanding entitlements, legislation provides for the payments of these by the Department of Social Protection in the event of employer insolvency. Under the Protection of Employees, Employers and Solvency Acts, subject to certain limits and conditions, money due to employees is paid by the Department in a range of situations including arrears of pay, holiday and sick pay and any entitlements under the Minimum Notice and Terms of Employment, employment equality and unfair dismissal legislation. We know that when there is a major insolvency, the Department and its agencies can swing into action so as to reach out to affected workers and to ensure that everyone is aware of their entitlements and that Cliff's claims are swiftly processed. You certainly could not expect an average worker to be able to steer through what can be quite complex procedures without assistance. Under this Bill however, due to a need to correct the way in which EU law was originally transposed, we are allowing applications to be made dating back to insolvencies that occurred since 1983. I appreciate that we are not dealing with all insolvencies, just a category of informal insolvency that should have been captured in our legislation but which was omitted. These are cases where an employer ceases trading and lets staff go but never enters into formal liquidation. The Department's officials very fairly told the Committee that the nature and extent of what will now be recognised as outstanding claims is virtually unknowable. The year 1983 is important because this was the year when the original EU Directive ought to have been transposed into Irish law and it ought to have applied to informal as well as formal insolvencies. The Supreme Court's decision in Gligola found that the Directive was not fully transposed into Irish law. The Department then got clear legal advice that this failure in transposing the Directive had subsisted since 1983 and therefore this Bill needs to make provision for all the people who might have been affected over 40 years. Modelling work within the Department, as we have heard, estimates that there could be in excess of 4,000 and perhaps closer to 5,000 applications. The Bill proposes a two-year window of opportunity for applications to be made arising from these historical informal insolvencies, although I note that this is extendable by a further two years by ministerial order in exceptional circumstances. If I understand the position correctly, there is provision for up to £14.5 million for the cost of these 4,000 to 5,000 historical applications, a separate provision of £500,000 per year going forward. There is also provision for an additional £172,000 for the Department of Social Protection in order to process these claims. CIP2 has recommended extending the two-year limit to six years and the Department's witnesses to the committee said that this could be considered. I appreciate the need for finality in medium-term budgetary planning, but I am concerned whether it is realistic to think that a major communications campaign can be devised and put in place and will reach out to all those with an entitlement within just two years. For example, given the scale of immigration that took place over those decades, is there any consideration as to how the communications campaign will reach those now outside the State? It seems clear to me that dealing properly with the historical backlog is the biggest issue the Department faces, since we were told that including these deemed insolvencies will, as regards future claims, increase the numbers by just 220 or so annually. A second issue that arose in the scrutiny of the General Scheme was about employment status. The Supreme Court has offered clarity as to the correct approach to be followed when deciding whether an individual is in truth an employee or is self-employed. As we know, many firms over the past decades resorted to questionable contract terms that sought to misclassify their staff. In the process, they also shortchanged the Exchequer in terms of tax and PRSI contributions. It seems hard to believe that the clarity offered by the Supreme Court on these issues will not have some impact on the processing of historical claims dating back several decades. Is the Department prepared to deal with a set of claims that will occupy not just its redundancy and insolvency unit, but may also take up the time and resources of its scope section? It seems at least foreseeable that some individuals would not have regarded themselves as employees due to views prevailing at the time that they lost their jobs, but on fresh examination and applying the more recent Supreme Court tests would now have an argument that they were indeed employees and that the bill should apply to them. Will the communications campaign make this clear? But Minister, I want to assure you that I very much welcome this bill. I am a member of the Supreme Court.