This country-specific Q&A provides an overview to employment and labour law in Ireland.
It will cover termination of employment, procedures, protection for workers, compensation as well as insight and opinion on the most common difficulties employers face and any upcoming legal changes planned..
This Q&A is part of the global guide to Employment & Labour. For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/index.php/practice-areas/employment-labour-law/
Does an employer need a reason in order to lawfully terminate an employment relationship? If so, describe what reasons are lawful?
Under statute, Irish employees with more than one year’s continuous service (inclusive of their notice period entitlement) are protected against the termination of their employment without fair reason (an “unfair dismissal”). In certain circumstances, the employee does not require one year's continuous service to be protected under statute, for example dismissal by reason of unlawful discrimination.
The following are the potentially fair reasons for the termination of an employment relationship:
- the capability, competence or qualifications of the employee;
- the conduct of the employee;
- the redundancy of the employee;
- the employer being prohibited by statute (whether impacting the employer or the employee) from employing the individual;
- other substantial grounds justifying the termination.
However, employers should be aware that a fair reason alone will not ground the lawful termination of an employment relationship under statute. As well as having a fair reason, the employer must follow a fair and proper procedure before concluding that the employment relationship is to be terminated.
An employee may potentially restrain the termination of his or her employment relationship by way of injunction including where:
- the person purporting to effect the termination does not have the corporate authority to do so;
- the contract is not terminated in accordance with its terms; or
- the right to fair procedures has been breached.
In circumstances where an employee's employment is terminated allegedly on grounds of having made a protected disclosure (whistleblowing), an employee can seek to restrain such termination by way of a statutory injunction if they can demonstrate substantial grounds to contend that the termination of their employment is on grounds of having made such a disclosure.
Under contract, an employer can lawfully terminate a contract of employment by providing an employee with his or her notice entitlement only, in the absence of any reason for the termination. This type of termination is referred to as a “no fault” dismissal. However, the employee may still be protected against unfair dismissal under statute (as explained above) and, even if the employee is not protected under statute, implementing a "no fault" dismissal is not without substantial risk of the employee seeking to restrain the termination by application for an injunction. It is advisable in specific circumstances only once an employer has sought legal advice.
What, if any, additional considerations apply if large numbers of dismissals (redundancies) are planned?
If a collective redundancy situation arises then certain notification and consultation obligations apply. A collective redundancy means dismissal for reasons unconnected to the individual employee (typically redundancy) over any period of 30 consecutive days of at least:
- 5 persons in an establishment normally employing more than 20 and less than 50 employees;
- 10 persons in an establishment normally employing at least 50 but less than 100 employees;
- 10% of the number of employees in an establishment normally employing at least 100 but less than 300 employees; or
- 30 persons in an establishment normally employing 300 or more employees.
In relation to the information and consultation obligations on an employer, the key points are that: (i) consultation with employee representatives should take place at the earliest opportunity, and in any event, at least 30 days before the first notice of dismissal is given, (ii) the obligation to commence consultation also triggers an obligation to notify the Minister for Employment Affairs and Social Protection; and (iii) collective redundancies cannot take effect until 30 days after the date of notification to the Minister for Employment Affairs and Social Protection.
What, if any, additional considerations apply if a worker’s employment is terminated in the context of a business sale?
A termination of employment as a result of a business sale that involves the sale of shares is treated similarly to the termination of employment in the ordinary course. The same requirements arise in terms of ensuring that there is a fair reason for the termination and that a fair and proper procedure is applied. Employees are afforded the same level of protection by statute when it comes to termination in the context of a business sale.
Additional protections do apply to employees who are the subject of an asset sale. The European Acquired Rights Directive was implemented in Ireland by the EC (Protection of Employees on Transfer of Undertakings) Regulations, 2003 (the “TUPE Regulations”).
The TUPE Regulations apply in circumstances of the legal transfer of an economic entity (e.g. an asset sale) ensuring that affected employees are entitled to transfer their employment to the purchaser entity on the same terms and conditions and with their continuity of employment unbroken. While the termination of employment of affected employees by reason of the transfer is prohibited, the TUPE Regulations do permit the termination of affected employees' employment for economic, social or technological reasons, most typically redundancy. The TUPE Regulations also impose certain mandatory information and consultation obligations which are expected to commence at least 30 days prior to the date of transfer, unless this timing is not reasonably practicable.
What, if any, is the minimum notice period to terminate employment?
Minimum statutory notice periods apply to all employees who have completed 13 weeks of continuous service with an employer. The duration of statutory notice required will depend on the length of service of the employee. Currently, the following minimum notice periods apply:
- For an employee who has worked for between 13 weeks and up to two years: one week's notice.
- For an employee who has worked for between two years and up to five years: two weeks' notice.
- For an employee who has worked for between five years and up to ten years: four weeks' notice.
- For an employee who has worked for between ten years and up to 15 years: six weeks' notice.
- For an employee who has worked for 15 years or more: eight weeks' notice.
The employment contract can provide for longer notice periods but cannot provide for periods shorter than the statutory minimum. If there is no express notice provision in the employment contract, the courts may decide that the employee has the right to a reasonable notice period as determined in the specific circumstances of the employee.
Is it possible to pay monies out to a worker to end the employment relationship instead of giving notice?
Yes. When included in an employment contract, a pay in lieu of notice clause (PILON) provides an employer with the right to make a payment to an employee in lieu of the employee working for either some or all of the duration of the notice period. If not provided for as a matter of contract, a PILON provision may be agreed between the parties prior to and at the point of termination. However, if agreement is not reached, an employee is legally entitled to work out their notice period (subject to any garden leave provision) and to challenge any purported termination that does not permit them to do so.
Can an employer require a worker to be on garden leave, that is, continue to employ and pay a worker during his notice period but require him to say at home and not participate in any work?
Yes, if the employment contract provides the employer with this power. However, it is possible for an employee to argue that any such provision is unlawful by reason of being in restraint of trade, for example, if the effect of complying with the garden leave provision would deskill him or her.
Does an employer have to follow a prescribed procedure to achieve an effective termination of the employment relationship? If yes, describe the requirements of that procedure or procedures.
An employer must follow a fair and proper procedure to effect the termination of an employment relationship. What constitutes a fair and proper procedure will normally be a matter of contention between employer and employee.
The general principles of a fair procedure include, but are not limited to:-
- being informed in writing of the detail of the allegations against the employee;
- access to documentary evidence pertaining to the dismissal;
- an entitlement to be accompanied to meetings;
- affording employees an opportunity to respond to allegations against them;
- compliance with the principle of proportionality.
A recent High Court case stated that employees have the right to be legally represented and to cross examine witnesses if there is a risk of termination of the employment relationship.
Depending on the reason for the dismissal, there may be additional requirements as part of the procedure to ensure that the termination is effective. By way of example, a termination for poor performance will normally be preceded by an employer having placed an employee on a performance improvement plan, failure of which could ultimately lead to the invoking of a disciplinary procedure.
Employers are required as a matter of law to provide employees with the terms of any procedure that might result in dismissal (i.e. a disciplinary procedure) no later than 28 days after the entering into the employment contract.
If the employer does not follow any prescribed procedure as described in response to question 7, what are the consequences for the employer?
If the employer does not follow a fair and proper procedure, the employee could apply to the High Court for an injunction restraining the termination of his or her employment relationship.
A failure to follow a fair and proper procedure can result in an employee bringing a successful unfair dismissal claim (and or equality claim depending on the circumstances) against the employer. The Workplace Relations Commission hears such claims and can award remedies including compensation of up to two years' remuneration (limited to actual financial loss), reinstatement in the employee’s old role or re-engagement of the employee in a new role in the employer entity.
In circumstances where an employee can link the failure of the employer to provide a fair and proper procedure to one of the nine protected discrimination grounds, the employee could arguably obtain a compensatory award for both the discriminatory treatment and the termination itself.
How, if at all, are collective agreements relevant to the termination of employment?
Collective agreements are not pervasive across the Irish labour market. Nevertheless any collective agreement that has agreed terms regarding termination of employment should be adhered to by an employer in order to avoid an application for an injunction restraining the termination and indeed to avoid any potential industrial action.
Does the employer have to obtain the permission of or inform a third party (eg local labour authorities or court) before being able to validly terminate the employment relationship? If yes, what are the sanctions for breach of this requirement?
No. However, consultation and notification requirements do exist, for example, in collective redundancy situations. Employees impacted by a collective redundancy must be consulted 30 days prior to a termination taking effect and the Minister for Employment Affairs and Social Protection must be informed in writing (please see question 2 above). Employers are liable to a range of fines, depending on the breach for a failure to consult and notify.
What protection from discrimination or harassment are workers entitled to in respect of the termination of employment?
Irish equality legislation provides protection to employees from discrimination. There are nine protected discriminatory grounds, namely: age, gender, religious belief, civil status, sexual orientation, family status, disability, race and membership of the Traveller community. Employees are also protected from any harassment linked to those discriminatory grounds.
A termination by reason of any one of the nine discriminatory grounds will be considered unfair. The compensatory remedy available under statute is up to two years' gross remuneration. This compensation is not limited to actual financial loss on the part of the employee, unlike a compensatory award made pursuant to the unfair dismissals legislation.
What are the possible consequences for the employer if a worker has suffered discrimination or harassment in the context of termination of employment?
An employer could face a discrimination claim for both the act of termination and any discriminatory treatment (including harassment) leading up to the act of termination. Compensation is the most common form of remedy and can be up to two years' gross remuneration for each claim.
If an employee has suffered harassment and suffers physical or mental injury as a result, he or she may choose to bring a personal injuries claim to the Irish High Court. Damages that can be awarded by the Court for such injury are not capped.
Are any categories of worker (for example, fixed-term workers or workers on family leave) entitled to specific protection, other than protection from discrimination or harassment, on the termination of employment?
There are certain categories of employees entitled to specific protection on the termination of their employment. Fixed-term and part-time workers must not be treated less favourably by reason of their work status (unless such treatment can be objectively justified). Employees on maternity leave have the added protection that if they are dismissed while on leave then such dismissal shall be considered void. Additionally, employees on adoptive leave and paternity leave enjoy similar rights in relation to any purported termination of their employment.
While similar protection does not extend to employees on parental leave, force majeure leave or those on carer’s leave, such employees are protected from penalisation for exercising their right to take such leave. An employer is prohibited from penalising an employee for exercising their entitlement to such statutory leave. Penalisation includes, amongst other items, the termination of the employment relationship.
Are workers who have made disclosures in the public interest (whistleblowers) entitled to any special protection from termination of employment?
Employees whose employment has been terminated on grounds of having made a protected disclosure may be awarded up to five years’ remuneration or reinstatement or reengagement. Employees who claim that their employment was terminated for this reason may bring an unfair dismissal case without having completed one year’s service.
Employees who can demonstrate that there are substantial grounds to contend that their employment was terminated as a result of having made a protected disclosure can apply to the Circuit Court for an injunction to restrain the termination pending the outcome of their underlying unfair dismissal claim.
What financial compensation is required under law or custom to terminate the employment relationship? How do employers usually decide how much compensation is to be paid?
In redundancy situations, an employee who has worked for an employer for a minimum of two years is entitled to a statutory redundancy payment calculated according to their length of service and rate of pay. The payment is two weeks' gross remuneration for every year of service plus an additional one week's gross remuneration, subject in each case to the statutory ceiling of €600 per week.
In the case of a mutually agreed exit that does not involve a redundancy, there is no set compensation payable by an employer as a matter of law. However, in order to ensure that an employee waives any and all employment claims he or she might have, employers are generally incentivised to offer an ex-gratia severance payment as consideration for a waiver of such claims. Depending on the particular circumstances of the termination, certain tax reliefs may apply.
Financial compensation for termination is usually assessed by reference to the potential compensation that an employee might receive in the event that they successfully challenge their dismissal. Compensation of up to two years' gross remuneration is available in relation to an ordinary unfair dismissal claim, and up to five years' in the case of a whistleblowing related unfair dismissal. Such compensation is based on actual loss and estimated future loss, and an employee is required to mitigate his or her loss.
By contrast, a discrimination dismissal claim can give rise to a compensation award of up to two years' gross remuneration, but such compensation is based on the effect of the discrimination as opposed to actual financial loss. There is also no duty to mitigate such loss. As a consequence, discriminatory dismissal awards tend to be higher than ordinary unfair dismissal awards.
Can an employer reach agreement with a worker on the termination of employment in which the employee validly waives his rights in return for a payment? If yes, describe any limitations that apply.
Yes, and see above at question 15. Employers should be aware that if such negotiations do not take place on a 'without prejudice' basis and if the parties were to fail to reach agreement, then the employee could disclose such negotiations in court as evidence of the employer's predetermination of the disciplinary procedure rendering it an unfair dismissal.
For any waiver to be effective, the waiver must be in writing, be a validly binding contract and the employer must have given the employee at least the opportunity to seek independent legal advice on the effect of waiving his or her rights.
Is it possible to restrict a worker from working for competitors after the termination of employment? If yes, describe any relevant requirements or limitations.
Yes. However, such restrictions are presumed to be unlawful as being in restraint of trade so that Irish courts will only enforce such restrictions if satisfied that the employer has a legitimate interest to protect and the restriction goes no further than is reasonably necessary to protect that interest. This is assessed by reference to a number of factors including the duration of the restriction, its geographical scope and the nature of the business to which it is to apply.
Can an employer require a worker to keep information relating to the employer confidential after the termination of employment?
Yes, an employer can seek to do so by an express contractual term subject at all times to the information retaining its confidential quality and the employee not being prevented from disclosing such information as required by law, for example, in the case of whistleblowing to a relevant statutory regulator. A confidentiality clause is a type of restrictive covenant and must therefore be capable of being considered reasonable with regard to what it seeks to protect. Employers should specify in writing the type of information that that they are seeking to keep confidential.
Are employers obliged to provide references to new employers if these are requested?
Employers are not generally obliged to provide a reference but if a custom and practice exists in the employer organisation whereby employees are provided with references as standard, it may be difficult for an employer to refuse to provide a reference. Where an employer decides to provide a reference, the employer arguably owes a duty of care to ensure that reasonable care is taken in relation to its drafting and in all cases it must ensure that the contents are fair, true and accurate. Employers should remain vigilant that under data protection legislation employees may have a right to obtain copies of any reference created.
What, in your opinion, are the most common difficulties faced by employers when terminating employment and how do you consider employers can mitigate these?
Employers who commence negotiations with an employee for a financial severance package undermine the possibility of pursuing a fair and proper dismissal procedure if such negotiations are not conducted on a 'without prejudice' basis. For this reason, employers should seek legal advice at the earliest opportunity to ensure that such discussions are indeed covered by the 'without prejudice' privilege and that a fair and proper procedure can be relied upon if severance negotiations breakdown.
Employers often expect to initiate and conclude a termination process within a short timeframe that is unrealistic having regard to the requirement to follow a fair and proper dismissal procedure. Where employers take the time to follow a well-considered dismissal procedure, they increase the possibility of finalising a termination efficiently by avoiding threats by employee counsel to apply for injunctive relief. Employers should always be wary that a dismissal may be challenged by way of injunction and so should proceed with caution to ensure that this risk is minimised, if not eliminated.
Before seeking to terminate employment by reason of poor performance, the employer must have followed a formal performance improvement plan (PIP) giving the employee the opportunity to improve with necessary support. Such a PIP may be required to take place over a number of months depending on the individual circumstances of the case. Too often employers seek to deal with poor performance issues informally or simply by commencing a disciplinary process; instead employers should act promptly when identifying performance related issues and instigate a formal PIP.
Are any legal changes planned that are likely to impact on the way employers approach termination of employment? If so, please describe what impact you foresee from such changes and how employers can prepare for them?
As of early 2018 there are no immediate legislative changes planned that will have an impact on the termination of employment in Ireland.
As a result of one High Court case in 2017, employers and their advisors are currently considering the possible entitlement of employees to legal representation and cross examination of witnesses in any procedure leading to termination of employment. This has the potential to create more onerous delays to such procedures.