Unlawful COVID-19 pay cut

Employee wins unfair deduction case

With the uncertainity that the COVID-19 pandemic caused for many businesses, some employers turned to pay cuts to avoid having to make roles redundant. A recent Workplace Relations (WRC) adjudication dealt with this subject. It outlined the position which will probably be followed by other adjudicators. The case of A Project Manager/Translator v An Interpretation and Translation Group ADJ-00028367 revolved around an employer implementing a 15% pay cut due to the alledged impact of the COVID-19 pandemic on the business using a variation clause contained in the employee’s employment contract.

The employer’s case

The employer anticipated a 21% decrease in revenue compared to previous years. As a cost saving measure it implemented a 15% wage reduction to all of its employees. It also made use of the Temporary Wage Subsidy Scheme (TWSS). It transpired that it was not eligible for the scheme and had to refund all amounts received under the scheme.

The employer maintained that the employee’s contract of employment had a variation clause in it allowing the employer make reasonable changes to the employee’s terms and conditions of employment. It was argued by the employer that in COVID-19 circumstances the pay cut was reasonable.

The employee’s case

The employee argued that the deductions were not authorised and sought repayment of the deducted amounts under section 5 of the Payment of Wages Act 1991. They had informed the employer of their objection to the deduction and had made an offer to consult with the employer, which was not taken up.

The Decision

The Adjudication Officer found that the employee had a legitimate claim.

A number of factors were taken into account when reaching this decision. The employer’s business fell by 12% , it was also noted that the employer did not meet the elegibility criteria for the TWSS in 2020.

The variation clause does not allow an employer make changes to an employee’s terms and conditions of employment without consent. Variation clauses are intended to facilitate minor non-material changes to reflect changes in law or in a work practice. They do not cover changes to core terms.

The work that the employee was engaged in was not substantially affected by the pandemic.

Compensation awarded was limited to the six month period prior to the submission of the claim to the Workplace Relations Commission.

Lessons to be learned

Do not make deductions from wages without the employee’s consent, which may be express or implied. If ,for example, the employee fails to object to the change after a substantial time period. They are taken to have accepted the change.

Where an employee expressly objects to the change, the employer cannot ingore this.

Exceptional circumstances are not covered by the Payment of Wages Act1991.

Compensation is restricted to actual loss within the six months prior to submission of the claim.

Consent and consultation are the key words here.

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