A recent decision from the Equality tribunal may prove very useful for employers on two matters, firstly in relation to Severance Agreements, and secondly in apportioning ex gratia redundancy payments to staff.
The case of McCabe, and Others v SR Technics Ireland Ltd. EE/2009/588 - 597 & 626 was involves claims by the complainants that they were discriminated against by SR Technics Ireland Ltd. on grounds of age within the meaning of sections 6 (2) of the Employment Equality Acts, 1998, and that they were denied the same rate of remuneration (the ex-gratia severance payment) as named employees of a different age employed to do like work contrary to sections 29 and 30 of the Acts.
Background
On 12 February 2009 the Company informed trade union representatives that it had decided to cease its Dublin operations. This entailed the redundancy of all 1,135 employees other than approximately 100 employees engaged in particular activities who were transferred to another operator. This decision came as a complete surprise to both management and employees in the Dublin base. On 10 March 2009 the Company issued details of the severance package which it intended to provide. The package which it valued at 48.6 million euro comprised three elements, to give a total pot of €48.6m:
- Statutory redundancy €25.9m
- Payment in lieu of statutory notice €7.7m
- Ex-gratia element €15.0m
The ex-gratia element comprised an apportionment of the total amount of €15m on the basis of years of service and basic salary. A factor of 0.84 weeks per year of service was derived. The payment was calculated by multiplying weekly basic salary by number of years' service and multiplying the product by 0.84. However staff aged 61 years and over who were members of the SRT Defined Benefit Pension Fund did not receive the ex-gratia payment because under the terms of the SRT Defined Benefit Pension Scheme they were entitled to an immediate full pension.
Twenty two persons, including the eleven complainants, fell into this category. They received their statutory redundancy payments and payments in lieu of notice, but not the ex-gratia element. By contrast, 25 employees aged 61 and over who were members of another pension scheme, the Irish Airlines (General Employees) Superannuation Scheme (IASS) were not entitled to a pension until age 65. They received the ex-gratia payment as well as their statutory redundancy payments and payments in lieu of notice. Employees who received the ex-gratia payment got €20,992 more in severance payments than persons, like the complainants, who did not receive the ex-gratia. The total cost of paying the ex-gratia payment to the complainants would be about €268,000.
Severance Agreements
The first consideration the Equality Officer had to make was whether or not this case could be heard, in light of the fact that the employees had signed severance agreements, effectively removing their right to take such a claim, and found that "The complainants did not receive anything over and above what they were entitled to by law in return for signing the Declaration. Therefore for lack of consideration alone, the Declaration signed by the complainants does not constitute a valid waiver of rights under the Employment Equality Acts. Therefore I reject the contention of the respondent and find that these claims are validly before the Tribunal." The Equality Officers determination on this is important as it demonstrates that there must be something over an above the statutory entitlement in order to implement a Severance/Compromise Agreement, as they are giving up their rights and should receive consideration for this.
If Discrimination occurred?
the next consideration the Tribunal had to determine was wether or not they were treated less favourably on the grounds of age. Firstly the Tribunal had to decide if this meant equal treatment or equal pay. the Tribunal noted "A severance payment, such as is at issue here, comes within the definition of "pay" as understood in EU law and "remuneration" under the Act. On the other hand it can be argued that the claim is that the complainants were denied the same treatment in relation to redundancies as were offered to other persons, contrary to section 8 (6) of the Act. The complainants are asking that I should order that the calculator for the ex-gratia payment should be applied to them. They are not seeking to be paid the same total remuneration as the named comparators. Indeed no evidence was presented on the total remuneration of the comparators. In my view the claim of the complainants is more appropriately treated as one of discrimination in relation to conditions of employment contrary to section 8 of the Acts rather than a claim of unequal pay. The claim before me therefore is that by not affording to the complainants the same treatment in relation to payment of an ex-gratia severance grant on redundancy as were afforded to employees of a different age, they were treated less favourably on account of their age."
The Tribunal then looked at the discrimination itself and the complainants argue that they were denied the ex-gratia payment because they were aged 61 and over. This is 'a prima facie case of age discrimination' in that it is quite clear that the difference in treatment was on account of their age. The Company argues that (a) the difference in treatment was based on eligibility for an immediate pension and not based on age as such; and (b) the difference in treatment did not constitute less favourable treatment since the complainants' entitlement to an immediate pension more than compensated for the lack of an ex-gratia severance payment, leaving them better off overall than their comparators.
The Equality officer cited Nicholls L.J. in Shamoon v Chief Constable of the Royal Ulster Constabulary stating "there will be cases where it is convenient to decide the less favourable treatment issue first. But, for the reason set out above, when formulating their decisions employment tribunals may find it helpful to consider whether they should postpone determining the less favourable treatment issue until after they have decided why the treatment was afforded to the claimant".
Determination
The Equality officer went on to state that 'in the present case it is helpful to consider first of all the reason why the complainants were treated differently. Was it on grounds of age? If yes, then I shall go on to consider whether the difference in treatment constituted less favourable treatment. If not, then the difference in treatment (be it favourable or unfavourable) cannot constitute discrimination on the age ground. The complainants were treated differently because they, as members of the SR Technics Defined Benefit scheme over the age of 61 were eligible for an immediate full pension. Their age is only relevant because that determines their eligibility for pension. This is confirmed by the fact that members of a different pension scheme, the Irish Airlines Superannuation Scheme, of a similar age to the complainants (i.e. between 61 and 65 years old) were given an ex-gratia payment because, under the terms of their scheme, they were not eligible for a pension until age 65. Therefore I find that the comparators have not established a prima facie case that they were treated differently on account of their age and their claim fails. It is not necessary for me to consider whether or not the difference in treatment amounted to less favourable treatment.'
This case as described at the outset is useful for employers from a point of view of invoking severance agreements and also clearly demonstrating how whilst age might be a consideration in a decision it may not necessarily be the defining issue at hand. The employees' case was not upheld by the Equality Officer and the full case can be found here.
