I move: "That the Bill be now read a Second Time."
One of the distressing features of the present recession has been the number of companies which have been forced to cease trading because of insolvency and the consequent loss of employment involved. To lose one's job is a traumatic experience at any time. It is more unacceptable still when one's employer simply goes out of business and is unable to pay even the most basic entitlements. We have all heard of the sad cases where workers who suddenly found themselves out of a job went to collect their wages only to be told that there was no money in the kitty to pay them. There have been cases too where workers were given cheques which could not be honoured. I sometimes wonder about the degree of consideration which some employers give to the welfare of their workers when financial difficulties loom. Most employers, I am sure, take all the steps necessary to protect their workforce in such situations. Equally I am sure that there are other employers who afford a low level of priority to the just claims on them by their employees. When workers enter into a contract of employment with an employer and give of their labours to that employment we must accept that, by so doing, they build up rights and entitlements. The Bill before the House gives further formal recognition to this fact.
This Bill is designed to protect workers' entitlements in regard to wages and other matters and to ensure that these are paid in situations where employers become insolvent. My approach to this Bill has been directed towards protecting workers to the greatest extent practicable in insolvency situations. The existing redundancy payments legislation provides a degree of financial compensation for those losing their jobs and this Bill will ensure that this compensation is complemented by protection for the employee of his normal entitlements in regard to wages, minimum notice, holidays and similar payments.
While workers already enjoy priority in respect of certain claims under the Companies and Bankruptcy Acts in winding up and bankruptcy situations, these priorities afford little or no protection in cases where there are no assets available for distribution or where assets are inadequate. Even where adequate assets are available, people often have to endure long delays, sometimes as long as 18 months, while the liquidator or receiver is attempting to dispose of these assets and then they must take their place in the queue behind financial institutions and other secured creditors. This Bill guarantees the payment, subject to certain limits, of workers' outstanding claims and, as such, it represents a major advance in the area of worker protection legislation.
The Bill will also give effect to the provisions of an EEC directive which contains measures to protect workers in insolvency situations. Workers have been entitled to claim for the benefits set out in the directive as from 22 October 1983 and I am providing in the Bill for the payment of claims relating to pay in insolvency cases arising on or after that date. What I mean is that it is from the time a receiver or liquidator was appointed on 22 October or any date subsequent to that the entitlements and rights come into effect within this legislation.
The Bill contains detailed provisions in section 1 to cover the various types of insolvency situations which can arise. It also outlines the criteria to be used to determine when an employer will be regarded as being insolvent. As the date of the insolvency will be of vital importance for the calculation of amounts due, the Bill specifies, in section 4, the date on which an employer will be regarded as having become insolvent. Section 4 will also enable me to specify by regulations the circumstances in which employers who are of a class or description specified in the regulations are to be taken to have become insolvent. This provision will enable me to cover situations which might arise where no formal winding up or bankruptcy proceedings are initiated. Tragically in many cases that is what happens. Companies literally disappear and employers do not turn up.
The EEC directive to which I have referred requires the setting up of a fund — referred to in the directive as a guarantee institution — which will guarantee the payment of employees' outstanding claims relating to pay and I propose to extend the existing redundancy fund to meet this requirement. In my view this is the simplest and most satisfactory way of doing so. The extended fund will be known as the Redundancy and Employers' Insolvency Fund and this retitling is provided for in section 2 of the Bill. The redundancy fund is financed by way of contributions from employers, including the Government in its role as an employer and this will continue to be the case with the extended fund. The increase of .49 per cent in the employers' PRSI contribution rate, announced in the budget includes provision to cover the anticipated expenditure in insolvency cases. It is difficult to predict what the expenditure from the fund in respect of the claims covered by this Bill will be, but the income of the combined fund should be adequate to meet liabilities under the Redundancy Acts and this legislation for some time to come. Given that workers are unlikely to be in a position to continue to work for long periods without remuneration, I consider that in the majority of cases, claims in respect of ordinary pay should not be substantial. The experience in the United Kingdom, where a similar fund is in operation, has been that the major items of expenditure are in respect of minimum notice and holiday pay.
Section 3 provides that the Bill will apply to those in employment which is insurable for all benefits under the Social Welfare Acts. The effect of this will be that the benefits provided for in the Bill will be available to those who are covered by the Redundancy Payments Acts. At present these Acts apply only to persons who work 20 hours or more a week for the same employer, although employers pay contributions to the redundancy fund in respect of people who work 18 hours a week and over. Eighteen hours is also the limit for eligibility under the Social Welfare Acts and this is the threshold I propose to adopt for the purposes of this Bill. I have also provided in the Bill at sections 11 and 12 for the reduction of the thresholds operated in a number of other pieces of worker protection legislation to 18 hours. These changes involve a reduction from 20 hours in the case of the Redundancy Payments Acts and from 21 hours in the Minimum Notice and Terms of Employment Act, 1973 and the Unfair Dismissals Act, 1977. These changes will secure the harmonisation of the eligibility thresholds for protection under the various Acts. The changes are also in line with present trends in European Community labour practice.
Since the circulation of the Bill there has been some criticism of the fact that it will apply only to those who work for 18 hours or more per week and it has been suggested that, as a result, the Bill might not meet with the requirements of the EEC directive. During the negotiations on the directive in Brussels most member states took the line that they should be in a position to exclude certain categories of workers from its scope where the protection proposed would be unnecessary, impractical or impossible to administer. The basic approach adopted by this country was to exclude workers not covered by the Redundancy Payments Acts. Because of difficulties in agreeing on exclusions it was decided to provide for these in an annex to the directive rather than in the body of the directive. Among the categories whose exclusion is provided for in the case of this country are persons who normally work for less than 18 hours a week for one or more employers and who do not derive their basic means of subsistence from this work. As I mentioned already, 18 hours is the eligibility threshold under the Social Welfare Acts and I feel that it would be impractical to operate a lower threshold for the purposes of the directive. In my view payments should be made from the fund only to workers whose employers pay contributions to the fund on their behalf, that is those who are fully insurable under the Social Welfare Acts. I am taking power in the Bill, however, to enable me to extend the protection being provided to cover other categories of employees should I consider this to be desirable at a later stage.
Sections 5 and 6 outline the payments which will be made from the fund. While the EEC directive refers specifically to outstanding claims relating to pay, it allows member states freedom to adopt their own definition of this term. I am providing in the Bill for the payment of claims in respect of the following: wages, arrears of statutory minimum wages, holiday pay, payments on foot of company sick pay schemes, entitlements under the Minimum Notice and Terms of Employment Act, 1973, the Anti-Discrimination (Pay) Act, 1974, the Employment Equality Act, 1977, the Unfair Dismissals Act, 1977, and outstanding contributions to company pension schemes. A limit of eight weeks will operate in the case of wages, holiday pay and amounts due under company sick pay schemes. This is fully in line with the terms of the EEC directive. The directive also allows member states the option of setting a ceiling on the weekly amounts which will be paid. As the measures provided for in the Bill are tied in, in many ways, with the Redundancy Payments Acts, I propose to limit the amount of payments, where these are related to wages, to the amount provided for in the Redundancy Payments Acts. At present this limit is £211.54 a week. I will of course be keeping the limit under review — the Bill gives me power to revise it and also to vary the period of weeks in respect of which payments will be made. A limit of 12 months contributions will operate in respect of unpaid contributions to company pension schemes. The payments which I am providing for in the Bill go further than the requirements of the EEC directive in a number of areas — for example, payments relating to company sick pay schemes, unfair dismissals and pension contributions. I regard this extension of the basic requirements of the directive as essential in the context of the needs of the Irish working people.
In order to ensure the smooth operation of the provisions of the Bill I am providing that the officer appointed in connection with an employer's insolvency — for example, a liquidator or receiver — will be required to supply certain information and perform certain duties in relation to the amounts being claimed by employees or by those competent to act on behalf of a pension scheme. These duties will mainly involve certification that amounts claimed are due and arranging for the completion of various forms. These forms are referred to in the Bill as prescribed forms and will be set out in regulations which I will be making when the Bill has been passed.
The Bill provides in section 8 that persons who have applied for payments in respect of wages, sick pay, holiday pay or arrears of pension contributions may, within a period of six weeks beginning on the day on which the decision on the application was communicated to them, or if that is not reasonably practicable, within such further period as the Employment Appeals Tribunal considers reasonable, present a complaint to the tribunal that no payment has been made or that any payment made was less than the amount which should have been paid. This appeals procedure will not extend to entitlements under the Minimum Notice and Terms of Employment Act, the Unfair Dismissals Act, the Anti-Discrimination (Pay) Act, the Employment Equality Act or in respect of arrears of statutory minimum wages under the Industrial Relations Acts, as disagreement in relation to the amounts involved is unlikely to arise in such cases. The question of providing for appeals by employers or their representatives was raised in the consultations with employer interests when the Bill was being prepared. While I agree that an argument can be made for providing for appeals by employers or their representatives in order to protect the interests of other creditors, I have decided not to provide for such appeals. A major consideration in arriving at this decision was that to allow for such appeals would cause undue delay in the making of payments to employees and the purpose of the legislation is to protect the interests of working people. If such appeals were provided for, it would be necessary to defer making payments until appeals had been determined or the time for lodging appeals had expired, and the whole purpose of the legislation would have been undermined.
As I mentioned earlier, workers enjoy priority in regard to certain payments when winding-up proceedings are taking place in accordance with the Companies Acts or in bankruptcy situations under the Bankruptcy Acts. I am providing in the Bill in section 9, for the transfer to me of any priorities which exist in respect of amounts paid to the employee from the fund, so that the fund can be reimbursed in cases where money is available on the distribution of the employer's assets. This could take place as late as 18 months after the declaration of insolvency.
The remaining sections of the Bill provide for the production of records and information, offences and penalties for offences, the making of regulations and other standard provisions.
In addition to providing for the protection of workers' claims relating to pay, the EEC directive also imposes an obligation on member states to protect workers' interests in the matter of company pension schemes. I am very concerned that the entitlements of employees under company pension schemes should be protected. As I mentioned earlier, I am providing in the Bill for the payment from the fund of unpaid contributions to such schemes.
I have given very detailed consideration to the question of how workers' rights under company pension schemes could best be safeguarded and have come to the conclusion that it would be unwise to take further action in relation to pension schemes in this Bill, in advance of proposals for a national income-related pension scheme which are at present under consideration by my colleague, the Minister for Social Welfare. As Deputies will be aware, that Minister told the House in December last that it was part of the Programme for Government to initiate a national income-related pension scheme and that proposals in this regard would be published in the form of a White Paper. He said it was the intention that the proposals would include the establishment of a pensions board representative of all the interests involved, including trade union organisations. This board would advise on the standards and conditions which should apply in occupational pension schemes and have the subsequent task of overseeing the development of these schemes in line with whatever standards might be adopted. The Minister also said that it was envisaged that the overall question of security of occupational pension schemes and the protection of benefits against inflation would be among the matters to be examined.
Deputies will appreciate that this is a very complex area and that it is essential that all aspects of company pension arrangements be thoroughly and carefully examined. It is only prudent to have the position researched in full rather than making some hasty provision which might not afford full protection to workers' rights. I consider that the statement by my colleague in regard to a national income-related pension scheme taken together with the conditions and requirements which must be met at present in order that employers and employees can obtain the benefits of the various tax concessions operated by the Revenue Commissioners in respect of contributions to pension schemes, will meet the requirements of the EEC directive in this regard. I will, however, maintain the closest possible liaison with my colleague, the Minister for Social Welfare, in this matter.
This Bill represents a very significant and worthwhile addition to existing worker protection legislation and comes at a time when tragically far too many workers and employers have experienced the traumatic impact of insolvency. I commend the Bill to the House.