Dáil Éireann debate -
Wednesday, 24 Feb 1988

Vol. 378 No. 4

Protection of Employees (Employers' Insolvency) Act, 1984 (Amendment Order) Order, 1988: Motion.

Minister for Labour (Mr. B. Ahern)

I move:

That Dáil Éireann approves the following Order in draft:—

Protection of Employees (Employers' Insolvency) Act, 1984 (Amendment Order) Order, 1988,

a copy of which Order in draft was laid before Dáil Éireann on 27th January 1988.

The purpose of this order is to rectify an anomaly in the provisions of the Protection of Employees (Employers' Insolvency) Act, 1984. As the Dáil will be aware, the main purpose of the 1984 Act was to implement an EC Directive designed to preserve certain statutory and other contractual entitlements of employees which are unpaid because their employers have become legally insolvent. The Act enables these existing entitlements to be paid from the Redundancy and Employers' Insolvency Fund. It does not confer any new or additional benefits on employees.

The anomaly which the order is intended to rectify arises from the provisions of section 3 of the Act which limits payments from the fund to employees who are employed in employment which is "insurable for all benefits under the Social Welfare Acts, 1981 to 1984". Administration of the Act has identified one small category who were excluded from benefit because they are not fully insurable under the Social Welfare Acts solely on age grounds.

These are persons over the age of 66 years who because they are not fully insurable are excluded from the protection of the Act. The exclusion means that over 66s are deprived of access to the Redundancy and Employers' Insolvency Fund even for payment of basic benefits directly related to their employment which are not dependent in any way on insurable status. This was not adverted to at the time the legislation was drafted and the order now before the House is designed to enable them to benefit.

As with the original 1984 Act, the order will not confer any new entitlements on the beneficiaries. It will merely have the effect of ensuring that they receive existing unpaid entitlements not themselves related to or dependent on insurable status from the Redundancy and Employers' Insolvency Fund. These entitlements are as follows: wages, holiday pay, sick pay, award under the Minimum Notice and Terms of Employment Act, entitlements under the Anti-Discrimination (Pay) Act, entitlements under the Employment Equality Act, statutory minimum wages under the Employment Regulation Order, court awards for wrongful dismissal at common law, and unpaid pension contributions

The persons covered by the order are persons who would normally have been long-standing contributors to social insurance during a life-time of work and it is fair and reasonable that they should not be deprived of basic benefits under the Act solely on age grounds. The proposed order will have retrospective effect to insolvencies of employers which occurred on or after 22 October 1983, which is the effective date of application of the Act. This will enable my Department to make appropriate payments in those cases which have come to notice since the Act came into force.

The change which I am proposing, though of real benefit to the individuals concerned, will affect only a small number of persons because of the two conditions which require to be fulfilled. First, it will be limited to employees over the age of 66 years, that is, past normal retiring age and, secondly, the person concerned will have to have been in employment where the employer has become insolvent. The costs of the extension will be minimal in relation to the total assets of and payments from the Redundancy and Employers' Insolvency Fund.

The extension of the scope of the Act envisaged in the order is among the specific measures agreed with the social partners in the Programme for National Recovery and I am sure that this House also will agree that it is a desirable measure. Accordingly, I commend the order to the House.

Mr. Birmingham

Losing one's employment in any circumstance is a traumatic experience and that is exacerbated if at the time of losing one's employment one finds oneself denied even the minimal entitlements which one had a certain expectation of obtaining under arrears of wages, sick pay, holidays, and so on. For those reasons the previous Government brought before the House the Insolvency Bill to ensure that people who, through no fault of their own, found themselves caught up in an insolvency situation when their place of employment closed down would receive basic entitlements. The Insolvency Act was designed to give effect to the European Community Insolvency Directive. It is fair to say that, when the measure was being prepared and, indeed, when it was going through this House and the other House, no one adverted to the fact that persons over 66 might find themselves excluded because of the test of full insurability. The Minister has moved promptly and wisely in deciding to rectify this anomaly and we are happy to support it.

Perhaps I could take advantage of the fact that this is before the House to put some questions to the Minister on the operation of the fund. He may be in a position to deal with them when he replies or, alternatively, he could come back to me on them later. Can he tell us what is the state of health of the fund at present? At what level are claims running under the insolvency measure? He will recall that when the measure was brought before the Dáil people were uncertain of what the level of claims was likely to be. They were uncertain as well as to where those claims were likely to fall most heavily. Would the claims arise most frequently in regard to arrears of wages? There was a belief that that was unlikely to be the case because people, by and large, cannot survive without wages for very long and it was unlikely that arrears would have been allowed to accumulate. There was an expectation that the claims would fall more heavily on minimum notice claims, holidays, and so on. Has the Minister any figures for the volume of claims and the size of individual claims? I ask that because, depending on the answers, we will be in a position to form a view about the adequacy of the fund and what we can do with that fund.

Is it the case that the fund is in such a healthy state that it would be possible to think in terms of extending cover under the insolvency legislation. At the time the insolvency legislation was going through the House there was a widespread desire that moneys from the fund should be available to people working less than 18 hours per week. That was felt not to be feasible at the time and there was a belief that it would open up unquantifiable claims and unquantifiable costs, the effect of which would be to require a very substantial increase in PRSI contributions. With the benefit of some years experience of the measure we should be in a better position to know just what the level of claims is and what are the drains on the funds. When we know what the drains on the fund are we will be in a position to determine how far we can stretch the fund.

I do not want to delay the House because what is involved is essentially a technical measure and it is one which we are happy to support.

Miss Colley

I would also like to welcome the introduction of this order which sets out to correct an anomaly which has arisen over the past few years since the introduction of this Act. It was obviously framed with the idea that it would affect those who normally were working and assumed that those over 66 would not be availing of the provisions of the Act. A small number of people are now in a position where their entitlements are being denied to them. I support the move by the Minister to rectify this situation, thus ensuring that that small number are not treated unfairly and unjustly as a result of some bureaucratic or mistaken assumption at the time the Act was passed.

I note that the order will have retrospective effect to the date of the application of the Act. When replying, perhaps the Minister would indicate how many people that will affect. I am sure the Department have some information on that. The Minister said it was limited to employees over 66 who have been in employment in the firm which has become insolvent. It must be fairly restricted but I would be interested in knowing what numbers are involved. I do not wish to dwell on the matter and I am happy to support this order.

Mr. O'Sullivan

Like other speakers I, too, welcome this order which clears up some of the anomalies which have existed since the passing of the Act. My only regret is that the Minister did not go further and try to clear up some of the other anomalies which still remain. I refer specifically to the position of preferential creditors when a company becomes insolvent. Former employees of various firms have encountered problems as a result of delays in having the affairs of a company tidied up. In Carrigaline, an area with which I am sure the Minister is very familiar, it has taken a number of years to dispose of the property of a pottery business and, as a result, payments have still not been made three or four years after the closure of the firm. I feel the Minister has lost an opportunity but he will no doubt at a later stage have an opportunity to give further consideration to some of the problems which people who have become redundant have encountered.

The order will apply only to persons over the age of 66 years of age and, secondly, before payment can be made a person would have to have been in employment in the company when it became insolvent. It has become commonplace in recent years for a firm in decline to let off workers and a person who may have worked in a firm for 30 or 40 years may have been made redundant prior to actual date of closure. This order does not take such people into consideration. I ask the Minister to give consideration to this matter.

I represent a constituency which has a lot of experience with redundancy. What has been happening is that firms when going into decline have let people go and at the time of closure many people who served the company loyally down through the years were not entitled to full entitlements. This order does not take such people into consideration.

By and large, I welcome this order and the intention of the Minister to rectify an injustice which exists.

Proinsias De Rossa

I, too, welcome the amendment to the regulations. This is an oversight which I certainly was not aware of at the time the measure was going through the House and the Minister is to be congratulated in making this order retrospective to 1983. In relation to that, can the Minister tell us what procedure he and his Department will be using to follow up those who may have been refused at that time or who may not have applied at that time because of the advice they received from Deputies who were aware of the law and who were thereby denied the benefit of the Act? A small number of those who may have been caught in this position may have died since 1983. Can the Minister tell us whether the next of kin will have any rights to the moneys which should have come to them at the time they were made redundant?

Mr. Kemmy

I applaud the Minister for introducing this amendment to the Act this morning. It is a civilised and humanitarian gesture and all reasonableminded people would have to support this measure. It is also a good indication that the Minister is responding to the officers of the Employment Appeals Tribunal and his own civil servants who have recognised that this anomaly exists. As Deputy De Rossa has said, this is a measure which everybody should support and approve. It is only right that the people the Minister has described, those over the age of 66, should not suffer from a firm going into liquidation. It is a traumatic experience to lose your job at any age, particularly for someone who has given long and loyal service to a company. People should not be penalised or punished in this way. It is only right that we in this House should take them into account.

I have as much experience as anybody in representing workers before the Employment Appeals Tribunal and workers who have lost their jobs when a company went into voluntary liquidation. Deputy De Rossa asked a good question as to how many people found themselves in the position outlined by the Minister since 1983. I think the Minister's Department should contact them and their families in order to bring this amendment to their notice. That would be a natural follow-on from voting this measure through this morning.

This scheme is often exploited by unscrupulous and ruthless employers. Recently I found this to be so in a few notorious and spectacular cases of abuse in Limerick in that companies closed down and one month later they opened up again as new firms — what a well known magazine in this country calls the Lazarus league. Those people have used public money to enrich themselves. They have gone out of business and the public purse picked up the tab in terms of money not paid, wages, holiday pay, wages due because of minimum notice, redundancy payments and other expenses. Some of these people are very wealthy and they just stepped aside and left the taxpayer pick up the tab. I have seen many cases of extremely wealthy and affluent people exploiting the law in that regard. Perhaps the Minister might take a look at that on another occasion.

Sometimes an anomaly exists at the other end of the scale also. It is not as serious as the one which the Minister has pointed out today but sometimes people do start work at 15 years of age and because you cannot be insured until you are 16 years of age they are not covered by the insurable Act. If a company goes out of business a worker who is under 16 years of age would also lose his or her entitlements. Admittedly, these amount to only a tiny proportion of the workforce because nowadays people go to work at 16 years of age rather than at 15 years of age but in a number of cases people have lost their entitlements in the case of liquidation because they had not attained the age of 16. Perhaps the Minister would also look at that aspect of the problem. The anomaly which the Minister has pointed out today is a far more serious one and far more people are involved but perhaps he may address himself to that minor anomaly and clear it up to some later stage. By and large this is a very good measure and I fully support it.

Mr. Taylor

I would like to make two points on this order moved by the Minister this morning. The first point is a general one. It is welcome that when the law is being changed in this way by a ministerial order the matter comes before the House for discussion so that Members who wish to contribute and make a comment on it may do so and those who are against it if they are minded to do so — which does not apply on this order — have the opportunity to say so. That is the very welcome situation we find ourselves in this morning, where the Minister has proposed what is, in effect, an amendment to the Act and we are discussing here in the House a matter of importance to a very small number of people.

Earlier this morning, a Cheann Comhairle, as you will recall we found ourselves, if I may say so, on a much more important matter of much more general application concerning An Foras Forbartha. I am not going to go into the merits of that case. I just want to draw a comparison between that occasion and the situation we now find ourselves in, where it was not possible due to the procedures which apply in this House to debate that matter. Literally no opportunity was given to discuss, debate or vote on a ministerial order which was being made in regard to An Foras Forbartha, a matter which affects the country at large and all its citizens.

That is a very important matter, yet today we find ourselves dealing with a relatively insignificant matter. There is something seriously wrong with the procedures of this House when that practice applies, and I am sure you, as Ceann Comhairle, would readily agree with that. We ought to look at our procedures and when the law is being changed by ministerial order this House must have an opportunity, in every case, to debate it. When the proposal was brought in by ministerial order, not by an Act of the Oireachtas, to abolish An Foras Forbartha we could not use the procedures of this House to debate such an important matter. Yet here we are discussing a matter of relative insignificance. There is something very wrong with our procedures and it is time we realised it.

I suggest that this matter should be raised in the Committee on Procedure and Privileges so that when changes in the law are made by ministerial order Deputies will be guaranteed an opportunity to discuss the matter on the floor of the House, as we are doing today, to vote and comment on it. A ministerial order is law making. Let there be no misunderstanding about that. Far more laws are made by ministerial order than are made in Dáil Éireann — there could be ten times the number made by order. That is a matter which should be looked at, and I want to emphasise that point.

An Ceann Comhairle

In respect of the matter to which the Deputy has adverted, the Chair, the Ceann Comhairle has no function in such matter as the allocation of Government time on the one hand, or Private Members' time on the other. This is a matter for the Taoiseach and the Whips to decide. I am pleased to hear the Deputy say this is a matter which he will refer to the Committee on Procedure and Privileges. Whatever decisions are made in that committee and in this House the Chair will adhere to.

Mr. Taylor

I am commenting on the Standing Orders, the Rules of the House and the way legislation is ordered. Of course, it would not be within your brief to alter that in any way. The point I was making was that that matter should be discussed in the Committee on Procedure and Privileges, and Ministers should not seek to introduce legislation giving themselves powers by ministerial order to amend, vary or alter that legislation in such a manner as denies Deputies the opportunity of debating it. That happened on the Foras Forbartha issue. It is very wrong that Ministers should bring forward legislation giving them powers to do that. Fortunately that has not applied in this case and so we have the opportunity to discuss it here today.

The amendment to this Act is welcome but I want to make a point about the administration of the Act. There is a very serious defect in this legislation which is militating unjustly against a large number of people being able to avail of the intent of the Act. I had hoped the Minister would have dealt with this point by one of these orders before now, but perhaps he will deal with it very shortly.

The defect arises from the definition of the word "insolvency". When a company go into liquidation there is no problem. The employee who has been deprived of his rights under the various Acts listed in the Minister's statement will get his rights. The problem arises when the company do not go into liquidation, when they just cease trading and close down. That is a much more frequent happening than the actual liquidation. There are literally hundreds of companies that simply close down operations, disappear, and do not bother putting the company into liquidation. That is a very common procedure.

The employee in such a company does not qualify or get his benefits under the Act because to qualify the company must go into liquidation. The Minister may say in reply that that is true and if there is a debt owing to this unfortunate employee he can put the company into liquidation. Of course he can. Anybody who is owed a debt by a company can put it into liquidation, but there is a problem. It costs a great deal of money, and requires a great deal of expertise to put a company into liquidation. To expect an employee who has lost his job since the company closed down, and who has been deprived of his rights and benefits under the legislation to be able to undertake the expense to put that company into liquidation is expecting far too much.

My suggestion is that, at the very minimum, if there is an unsatisfied judgment against a company for, say, one month, although it has not formally been put into liquidation, that ought to be deemed sufficient to say the company are insolvent. In fairness, if there is a judgment against the company which they have not paid and it has been registered in the gazette or whatever, that ought to be sufficient to say the company are insolvent and to give the employee the entitlements and benefits for which he qualifies under this legislation but he does not get them because of the formality that the company have not gone into liquidation. This is not a theoretical notion. It affects a very large number of employees. I make a particular appeal to the Minister to look at this difficulty in the administration of the Act and to assure the House that he will take steps to remedy it in the very short term.

Minister for Labour (Mr. B. Ahern)

This is a small but important measure. I wish to thank Deputies from all parties for supporting it. I will deal now with some of the points made on payments. Since the Act came into operation in early 1985 a total of £11 million was paid to approximately 12,000 employees. Payments fall most heavily in the area of minimum notice awards. These payments represent slightly over 60 per cent of all insolvency payments. The fund is used to finance both redundancy payments — rebates and lump sums — and insolvency payments. Deputy Birmingham mentioned the surplus in the fund. At present it stands at approximately £14 million. This is kept under constant review to see if it is possible to reduce the contribution rate — .6 per cent of the employees' earnings up to a ceiling of £15,500 increased to £16,200 with effect from 6 April next.

Deputy O'Sullivan asked about Carrigaline. I do not have any information on that but I will find out what I can and let the Deputy know. Deputy De Rossa and others asked how many people were involved. It is difficult for us to know but there could be ten, 20 or even more.

This order arose from discussions with the heads of sections in my Department and my officials highlighted some of the anomalies in the Act. Deputy De Rossa was right when he said that many people may have made inquiries but did not necessarily pursue their claims. What we propose to do is to place advertisements in the newspapers to ensure that people who are not aware of the law in this area will be made aware of it. We have already informed the trade union movement of the order so that they can circulate it in their magazines to their own members.

I take Deputy Kemmy's point about insurability. I know that a lot of my own constituents would be in a similar situation, starting a lot younger than the age of 16. A current review of early school leavers shows that the figures tend to go down. It is a matter for the Minister for Social Welfare but I will highlight it to him as it is a relevant point.

The question of informal insolvency raised by Deputy Taylor was discussed in the House and a solution was not found when the 1984 Act was being discussed. I am not a legally minded person so I will not get into a debate with an eminent legal person. We have not found the solution to this and I am not sure if a solution can be found. This has been with eminent legal people for the entire period since I came to office as Minister for Labour. It was something I raised in Opposition and I have tried to grapple with it.

So-called informal insolvency is generally taken to mean an employer who merely ceased trading without any formal winding up. Section 4(2) of the Act enables the Minister to make regulations specifying the circumstances in which employers may be taken to be insolvent. It was clear from the outset that any extension of the Act along the lines suggested would give rise to a range of problems both legal and administrative. Among the points of difficulty were the implications of declaring individual employers insolvent outside the provisions of general laws relating to insolvency. This is one of the big legal difficulties. How can I as Minister for Labour declare an individual insolvent? I do not have the power to do that. I will not argue the legal difficulties; they can be dealt with on another day. Even for the specific purposes of the Acts there are difficulties in identifying cases in which employers' failure to meet commitments to employees is due to their insolvency — an essential requirement of the Act — and there are problems of verification of precise entitlements of employees in a whole variety of circumstances. Despite extensive consideration of the matter a solution has not been found to the difficulties involved. We have not devised a scheme that would be compatible with the basic framework of the Act and at the same time be soundly based legally and administratively. I know the previous Minister, Deputy Quinn, tried very hard to find a solution to this and that the officials have been trying to find a solution over several years. In my era we have been in constant communication with the Attorney General trying to find a solution. We are still trying to find a way but I am nearly at the point where I feel it is unsolvable.

Mr. Taylor

It should not be an insuperable problem.

Mr. B. Ahern

It has proved to be so——

Mr. Taylor

It should not be.

Mr. B. Ahern

——with the legal wizards for the last five or six years. The points that Deputy Taylor made today will be considered as will points that any other Deputy in the House would like to offer. I am not a legally minded person and this is something which is defeating the legal people involved. If there is a way out I will be glad to introduce the order at the earliest date possible. So far, we have not found any solution to this problem despite almost weekly discussions on it.

Mr. Taylor

If the legal brains of the country cannot solve that problem they are not worth their salt.

Mr. B. Ahern

They have been at it for five or six years. I am not giving in and I am not avoiding the issue. If somebody in the House has a contribution which will help——

Mr. Taylor

I made suggestions.

Mr. B. Ahern

——we will certainly consider them and also any suggestions that might be put forward from anybody else. Deputy Taylor was the last speaker and he raised the issue but if any other Deputy is interested in putting forward a view on it, it will certainly be examined.

I thank the Chair and the spokesman for the Opposition parties for allowing this order a speedy passage. We will now be able to get ahead in clearing up the cases known to us and I will lodge the advertisement at an early date.

Proinsias De Rossa

Before the Chair puts the question can the Minister give me any information in relation to the question I put in relation to the next of kin of any person who may have died since 1983?

Mr. B. Ahern

Payments will be made to the estate of the deceased. If any relatives were to apply now we would still be able to pay.

Question put and agreed to.