08/05/2024

SPRING 2024

 LEGISLATIVE UPDATES

1. Publication of Automatic Enrolment Retirements Savings System Bill 2024

Further to our previous updates, we can confirm that on 5^th April 2024, the Government published the long-awaited Automatic Enrolment Retirement Savings System Bill 2024 (AE Bill).

The publication of the landmark legislation sets out the framework for the introduction of a pensions auto enrolment savings systems in Ireland.

Under Auto-Enrolment (AE), employees will have access to a workplace pension retirement scheme which is co-funded by their employer and the State.

Announcing the publication of the Bill, Minister Humphreys stated that the introduction of the legislation ‘represents one of the biggest reforms of the pension system in the history of the State’.

It is intended that the first ‘in scope’ workers, thought to be approximately 800,000 employees, will be enrolled in January 2025, and a new public body, the National Automatic Enrolment Retirement Savings Authority (NAERA), will be established to administer the system.

‘In scope’ employees will be those who are aged between 23 and 60, whose gross pay exceeds €20,000 and who are not already in “exempt employment”. Exempt employment is broadly defined as when an employee participates in a pension scheme or personal retirement savings account (PRSA). At present there is no minimum threshold on employee or employer contributions for employment to be considered as “exempt employment”.

Employers who fail to meet their obligations in respect if auto enrolment will be subject to penalties and potential prosecution.

We have summarised below, the key details of the draft Bill which is now making its way through the various stages of the Oireachtas.

• AE will apply to employees between the ages of 23-60 whose gross pay is in excess of €20,000. Contributions based on gross pay of up to a maximum €80,000.
• Expected enrolment date in January 2025 (subject to legislative process being completed) and will be phased in over a 10-year period (see below)
• Contributions will increase on a gradual incremental basis as set out in the table below.

	Years 1-3	Years 4-6	Years 7-9	Years 10 onwards
Employee Contribution	1.5%	3%	4.5%	6%
Employer contribution	1.5%	3%	4.5%	6%
State contribution	0.5%	1%	1.5%	2%
TOTAL	3.5%	7%	10.5%	14%

• The AE authority will notify employers of any ‘in scope’ employees via payroll notification of contributions to the AE system. Upon receiving such notification employers must:
• Calculate, deduct and pay employee contributions to the AE authority
• Calculate and pay employer contributions to the AE
• Employees will be eligible to ‘opt out’ in months 7 & 8 or suspend their contributions. Employees who opt out may be entitled to a refund of their own contributions. However, the Bill does not currently provide for a refund of the employer’s contributions

• Employees who leave the plan or suspend their contributions will be automatically re-enrolled in the scheme after 2 years if they are still eligible.

• If any employees leaves employment, their pension pot, and enrolment in the scheme is unaffected, and will continue in their new employment.

The government has produced guidance for employees /employers on auto enrolment, including a FAQs section, which can be accessed here.

The draft Bill is also available to view by visiting here.

2. Publication of the General Scheme of the Employment (Restriction of Certain Mandatory Retirement Ages) Bill (the General Scheme)

The government has recently published the General Scheme of the Employment (Restriction of Certain Mandatory Retirement Ages) Bill (the General Scheme). This Bill proposes to introduce a ban on employer enforced mandatory retirement ages that are below the state pension age of 66, where the employee does not consent.

Under the Bill, as currently drafted, an employee whose employer has a mandatory retirement age in operation which is earlier than the state pensionable age:

• who wishes to remain in employment until that date,
• can make written notification to their employer that they do not consent to the operation of the employer’s mandatory retirement age.
• Employee must provide at least 3 months written notice.
• If the employer proceeds to dismiss, the employee will be able to seek redress under the Unfair Dismissals Act or the Employment Equality Acts, but not both.

Currently in Ireland there is no statutory mandatory retirement age for private sector employers. Any provision for a mandatory retirement age in private sector should be set out in the employees’ contract of employment. Additionally, any employer who wants to enforce on mandatory retirement age must demonstrate that it is a proportionate means of achieving a legitimate business aim i.e. objectively justify it. If the employer is unable to objectively justify it, then any age-related discrimination will be successful.

The Workplace Relations Commission (WRC) Code of Practice on Longer Working  (the Code) sets out best industrial relations practice in managing engagement between employers and employees in the run up to a mandatory retirement age. It also sets out a number of potential legitimate aims for having a mandatory retirement age in the first place, these include:

• intergenerational fairness (allowing younger workers to progress);
• motivation and dynamism through the increased prospect of promotion;
• health and safety concerns (generally in more safety critical occupations).

Decisions from the WRC and Labour Court in recent years have highlighted the difficulties for employers in operating mandatory retirement ages. However, in the recent case of Deasy v Daughters of Charity Child and Family Service (see below) the Workplace Relations Commission found that the employer could successfully rely on a mandatory retirement age within their workplace.

If you currently have a mandatory retirement age in place which is below the state pension age, you should carefully consider if you can continue to justify retaining it. In our view this may be difficult to do without a particularly strong business case. If you have any concerns about your ability to justify it, then you should review and amend your policy to increase your mandatory retirement age in line with the statutory pension age. Having a mandatory retirement age of 66 or above will avoid the inherent uncertainty in dealing with notices of objection and will be easier to justify in the event of a challenge.

3. IN FOCUS- The implementation on the Adequate Minimum Wages Directive.

Recap

On 14^th September 2022 the European Parliament voted to approve a directive on adequate minimum wages across member states. The Directive was subsequently published on 19^thOctober 2022 and must be transposed by member states by 15^th November 2024.

What does the Directive require Member States to do?

The Directive aims to improve the conditions of all workers in the EU to promote ‘economic and social progress’ ensuring that all workers have protection of a guaranteed minimum wage. Interestingly however the directive does not require Member States to have a minimum rate of pay for workers.

The Directive has 3 sets of measures:

1. To increase the number of workers who are covered by collective bargaining on wages.
2. For those countries with statutory minimum wages (which includes Ireland) they must put in place clear and stable criteria for minimum wage setting, indicative reference values to guide the assessment of adequacy and to involve social partners in the regular and timely updates of minimum wages.
3. To provide for improved enforcement and monitoring of the minimum wage protection established in each country. The Directive introduced reporting by Member states on its minimum wage protection data to the European Commission.

The Directive does not require member states who currently do not have national minimum rates of pay to introduce same, nor does it intend to set a figure for what minimum wage should be.

The Directive seeks to promote and strengthen collective bargaining on wages. Where less than 80% of workers are covered by collective bargaining, member states are tasked to establish an action plan to increase the percentage in conjunction with social partners (i.e. trade unions and business organisations). This action plan must set out a clear timeline as well as concrete measures to increase the rate of collective bargaining coverage and must be regularly reviewed and updated where necessary.

Currently, there is no statutory recognition process in ROI. Recital 25 of the Directive is clear however thar “the threshold of 80% of collective bargaining coverage should only be construed as indicator triggering the obligation to establish an action plan” (our highlighting) and not a mandatory threshold.

What impact will this have on employers?

It is unclear at present what legislative changes, if any, are required to give effect to the Directive and what immediate impact this will have on employers.  We expect that employers will see an increase in collective bargaining in their workplaces in the years ahead.

There has been ongoing dialogue on the issue of collective bargaining through the Labour employer Economic Forum (LEEF). LEEF have made a number of recommendations including funds being made available from the National Training fund to both employers and trade unions for training /upskilling in collective bargaining.

Ireland also has a national minimum wage in place, governed by the National Minimum Wage Act 2000. The Low Pay Commission (the “LPC”) is the consultative body tasked with making recommendations to the Minister regarding a national minimum hourly rate of pay. Each year the LPC examines the national minimum hourly rate of pay and makes a recommendation to the Minister. This recommendation must have regard to various factors including: changes in earnings; income distribution; the level of unemployment and productivity; the need for job creation; the likely effect that any proposed order will have on levels of employment; the cost of living and; national competitiveness. A detailed report accompanies each recommendation. It is expected that the current arrangement in ROI will satisfy the obligations under the Directive.

On 20^th March 2024, Simon Coveney, Minister for Enterprise, Trade and Employment was asked in the Dail about how the Directive will be transposed into Irish law. He confirmed that officials were obtaining legal advice to assess the legal obligations under the directive as well as transposition options.

We will keep members informed on any updates from Government as and when they are published.

Policy Update

Members are aware that the WRC published the Code of Practice for Employers and Employees Right to Request Flexible Working and Right to Request Remote Working and we updated our suite of specimen documentation to include a Flexible Working Policy and Remote Working Policy. These have been emailed to Members on our mailing list and are also available in the ROI Members area of our website.

CASE LAW UPDATE

1. Martina Deasy v Daughters of Charity Child and Family Service ADJ-00045740

Age Discrimination, employer enforced mandatory retirement age.

Facts 

Ms Deasy (D) was employed by the Respondent as a Family Centre Manager. Her contract of employment stated that a mandatory retirement age of 66 applied, albeit the Respondent’s policy stated that the retirement age was in fact 65.

Prior to her 66^th birthday, D asked for her employment to be extended for a year. The Respondent refused the request on the basis that no colleague had worked beyond this age. D complained that no reasons were provided for the refusal and submitted a grievance about applying the mandatory retirement age. The respondent did not uphold her complaints. D subsequently complained to the WRC for age discrimination arising from the employer’s decision to terminate her contract of employment when she reached 66.

At hearing in the WRC, D stated that she had been discriminated against by the employer on grounds of age as it could not demonstrate that the operation of its mandatory retirement age was a proportionate means of achieving a legitimate aim.  The Respondent admitted at hearing that a very limited number of staff remained in employment beyond 66 years of age. The Respondent’s case was that those were limited and unique situations as progression or promotion to those roles were not possible. This meant that those unique situations did not affect its aim of careers progression for younger employees.

The Respondent relied on a number of grounds to justify the operation of its mandatory retirement which included:

• intergenerational fairness – to allow succession and promotional opportunities;
• an objective of increasing staff motivation and dynamism through the increased prospect of promotion; and
• assisting staff retention and creating a balanced age structure across the organisation.

The Respondent gave evidence that there was an increase in staff turnover, which they argued was mainly due to lack of opportunity. The Respondent stated that in 2023 it lost three high potential employees due to lack of progression or promotional opportunities.

Decision

The Adjudication Officer found the Respondent did not communicate their legitimate aims to staff that underpinned their retirement policy. However, there was sufficient evidence to demonstrate that the Respondent was taking measures to help retain staff and their mandatory retirement sought to promote those aims. The WRC found that D’s retirement was objectively and reasonably justified by these legitimate aims and the means of achieving those aims were proportionate, appropriate, and necessary.

Learning Points for Employers

Whilst this latest decision on the issue of mandatory retirement ages will be welcomed by employers, it should be read with caution.  Generally, decisions from the WRC and Labour Court demonstrate that employers must be able to clearly and evidentially demonstrate the need for a mandatory retirement age and that it is consistently implemented in the workplace.

1.       ADJ-00042625 – Wim Naude v University College Cork

Unfair Dismissal, Remote Working

Facts

Mr Naude (N) was a Dutch economics scholar and was hired as a Professor of Economics by University College Cork (‘UCC’) during the Covid-19 pandemic. Given the pandemic N initially taught fully remotely while residing in the Netherlands.

Due to difficulties obtaining appropriate accommodation for himself and his family, in the 2021/2022 academic year, N only attended UCC on campus for one week each month. N resided in the Netherlands the remainder of the time.

UCC required the professor to be based in Cork and had made this clear at the time of his appointment. N wrote to UCC on 1 August 2022 suggesting two options in respect of his work for the upcoming academic year 2022/2023:

1. Continuation of his full workload in the ‘blended format’ he had been working.
2. 33% reduction of hours (unpaid leave).

In response to his proposal, and without any warning or further discussion from anyone in UCC, N received an email from UCC’s HR Director dismissing him with 3 months pay in lieu of notice. UCC alleged that his contract was ‘frustrated’ by his actions and was now ‘null and void’.

N brought a claim of unfair dismissal to the WRC.

Decision

N argued that he was unfairly dismissed, without warning or adherence to any internal procedures, fair process, or the principles of natural justice. He reiterated his intention to move to Cork, but the accommodation difficulties prevented him from doing so. N further added that he believed that UCC failed to adequately support him with his relocation.

UCC in their response and evidence stated that N had delayed his relocation and that 20 months into his employment, and that his proposal regarding ‘blended’ working was not acceptable as it did not meet the university/student’s needs.  UCC asserted that N had fundamentally breached his contract of employment by his failure to relocate to Cork and as such he contributed entirely to his dismissal which was, in any event, fair and reasonable.

Decision

Unsurprisingly, the Adjudication Officer (AO) found that N had been unfairly dismissed in what she described as ‘astonishing’ acts on behalf of the employer. AO found it bizarre that the respondent continued to argue that the dismissal was fair at hearing despite following no procedure, not adhering to the legislative framework or the principles of natural justice.

In her decision, the AO reiterated that if an employee is at risk of any disciplinary sanction, including dismissal, then they are entitled to the benefit of fair procedures and natural justice. These are the minimum standards provided in Code of Practice on Grievance and Disciplinary Procedures, with a right of appeal.

In recognition of the impact of UCC actions, AO directed UCC pay him the maximum monetary awards provided for by the Unfair Dismissals Act. In directing this, AO took into account N’s financial losses, his loss of the ‘Professor’ title and his inability to gain consultancy as he was not attached to a state university. As such N received an award of €300,000.

Learning point for employers

It is critical that employers adhere to the Unfair Dismissals Act, the WRC Code of Practice on Grievance and Disciplinary Procedures as well as internal procedures when dismissing an employee. Where the dismissal is because of alleged misconduct, employers must ensure that the principles of fair process and natural justice are also not infringed. Employees must be provided with written notice of the allegation prompting the employer to consider dismissing or taking action against them and have the opportunity to respond to those concerns before a decision is made. The employee should also be afforded the right to appeal the decision.

The timing of this decision is particularly apt following the introduction of The Statutory right to request flexible and/or remote working in April 2024 which will undoubtedly see a rise in requests by employees to work flexibly/remotely, particularly as many employers continue to experience difficulties in getting employees back onto the office post covid.

The WRC Code of Practice sets out a number of steps that an employer must take when considering an employee’s request. Whilst an employer is not obliged to grant a request, failure to follow the code may be taken into account as evidence.