Dundalk regtech start-up must pay €8,000 to co-founder over redundancy

Former CTO told WRC redundancy had been a ‘sham’

Dundalk financial services start-up Gecko Governance has been ordered to pay nearly €8,000 to one of its co-founders, who claimed before the Workplace Relations Commission (WRC) that his redundancy was a "sham".

Former chief technical officer Mark McHugh said he clashed with other founders at the Enterprise Ireland-backed start-up when they switched focus away from governance software for hedge funds in order to pursue blockchain technology and minting a crypto-currency.

The details were revealed at an adjudication hearing last October after Mr McHugh raised complaints under the Unfair Dismissals Act and the Organisation of Working Time Act against Gecko Operating Ltd, with a registered address at the Regional Development Centre of Dundalk Institute of Technology, Dublin Road, Dundalk, Co Louth.

Mr McHugh said he had been involved in a project with one of the directors and met potential clients with him before the company was set up and he became an employee in June 2017. He said he signed a contract of employment naming him chief technical officer that December.

Mr McHugh said the company’s core product was a software package which manages the governance of hedge funds – known in the industry as regtech – and it was his job to as chief technical officer to maintain it.

But he said there were “difficulties” right from the start of his employment, as he felt the sales team wasn’t performing, he lacked the technical experience to make sales to potential clients, and one of his support staff was let go.

He said there was a push in the company to pursue “blockchain technology and the creation of crypto-currency”.

Mr McHugh felt this was an “extremely volatile and legally unsound” venture which went outside their business plan, he said.

He said he was told by another founder at a meeting in January 2018 that the company would not be pursuing blockchain but then discovered emails contradicting that – leaving him with the feeling he was being “sidelined from the business”.

Mr McHugh said that by this time, he was struggling to maintain the original software service because of a lack of resources and his requests for more staff were ignored.

‘Broken down’

By May 2018, he said, his relationship with the other co-founder had “completely broken down”, and after a mediation process he agreed to step down as chief technical officer but stay on as an employee.

The following year, October 2019, the firm’s main client for the hedge fund software gave notice that it would cancel its contract, Mr McHugh told the commission.

Mr McHugh thought the contract could have been saved if the firm had made it a priority.

Then in May 2020, Mr McHugh was told his position was being made redundant. He told the commission however that it was his understanding a new chief technical officer was hired after he was dismissed to fulfil his role.

Solicitor David Montgomery, for Mr McHugh, submitted there was no genuine situation of redundancy and that the process was a "cover" to dismiss his client over interpersonal issues.

He submitted that the procedures were “fundamentally flawed” as Mr McHugh had been offered no right of representation or a right of appeal.

The company argued that the loss of a major contract meant cost-saving measures were necessary to secure the viability of the business.

It was submitted that the company had no need to maintain the software managed by Mr McHugh any longer and had also decided to outsource “the majority of their technical needs”.

It denied unfair dismissal on the basis of a “sham redundancy” and submitted that it was properly carried out.

In his decision, adjudicating officer Brian Dolan said it was "unusual" that a co-founder and shareholder in the company would lodge such a complaint.

Mr McHugh had clearly disagreed with the direction being taken by the firm which ultimately led to management invoking a redundancy procedure, he wrote.

“It appears the complainant, and the complainant only, was considered for redundancy,” Mr Dolan wrote. “No other cost-saving measures or alternatives to redundancy were considered at any point.”

‘Inconceivable’

It was “inconceivable” that a company such as Gecko, involved in providing software to end users, “would not have some role for an employee of the complainant’s talents, especially given that these skills are in short supply in the labour market,” Mr Dolan added.

He said the hiring of a new chief technical officer proved the role was not redundant and that the dismissal was “procedurally and substantively unfair”.

However, Mr Dolan said he heard no evidence of an effort by Mr McHugh to secure new employment and that he had to conclude that he had failed to mitigate his losses – limiting him to an award of just four weeks’ pay.

He ordered Gecko to pay Mr McHugh €5,384.31 for the unfair dismissal.

Mr Dolan also upheld a claim for non-payment of €1,076.80 worth of annual leave entitlements at the termination of his employment and made an order for the payment of that sum and a further €1,500 – bringing the total sum awarded to Mr McHugh in adjudication to €7,961.11.

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