Imposing wage cuts without consultation ‘not reasonable’ – WRC

Employers carried out ‘wholesale’ unlawful pay reductions during Covid, says employment expert

An employer cannot unilaterally impose a salary reduction, says  employment law expert, Richard Grogan.

An employer cannot unilaterally impose a salary reduction, says employment law expert, Richard Grogan.

 

Employers engaged in “wholesale” unlawful reduction of employee wages during the first phase of the Covid-19 pandemic, according to employment law expert Richard Grogan.

Mr Grogan was commenting after the workplace watchdog found a translation and interpretation company applied an unlawful reduction of wages to a project manager/translator during the first phase of the pandemic last year.

In the case, Workplace Relations Commission (WRC) adjudicator Marguerite Buckley said imposing pay cuts, even of a temporary nature, without consultation or consent was “not reasonable”.

In response to the Covid-19 pandemic and a projected reduction of 15-25 per cent drop in revenues, the employer implemented a 60-day, 15 per cent wage cut for its 53 staff here.

In her ruling, Ms Buckley said while she accepted that the employer “experienced difficulties due to the Covid-19 pandemic, I do not accept that the decision to impose the deductions in the complainant’s salary was reasonable and proportionate considering the respondent was a multinational company and the work the complainant was doing was not greatly impacted by the pandemic”.

Complaint

Ms Buckley said the complaint under the Payment of Wages Act was well founded, and directed the employer to pay compensation of €830 for the unpaid wages.

The company told the WRC it did not implement wage reduction lightly. 

In an email to employees in March 2020, the company said: “We need to act proactively to risk preserve cash, protect our company’s long-term health, and, most importantly, wherever possible, retain employees through this difficult period.” 

The company said it was implementing a temporary reduction in pay and the 15 per cent reduction in pay would result in the project manager’s base salary being reduced from €37,852 to €32,174 gross per annum.

The project manager submitted that this was a unilateral decision by the company to which she objected.

She emailed her employer and advised that she did not agree with the pay cut. 

Her position was that in March and April 2020, revenue for her office was higher than expected.

The company told the WRC that while the group lost significant revenue due to Covid-19, by June 2020 the outlook had improved. 

Pay was restored to 100 per cent with effect from June 1st, 2020.

Claims

Commenting on the case outcome, Mr Grogan said: “An employer cannot unilaterally impose a salary reduction. Any pay reduction can only be put in place with the written consent of the employee.

“There was wholesale unlawful wage deductions during the first phase of the Covid-19 pandemic.”

Claims against unlawful wage reductions must be made within six months, Mr Grogan said. “There is no doubt that an awful lot of employees didn’t know their rights.”

The Dublin-based solicitor said there had been a significant number of unlawful pay deduction cases concerning employees on high salaries at professional firms.

“Once a demand letter went in, there was a row back by the employer,” he said.