Thank you, Chairman, for the opportunity to make a statement. The committee will have seen my note of 16 November which outlined the discussions, correspondence and general background to Mr. Molloy's severance package. Rather than go through the same details again, I will summarise the main points behind the decision to approve the severance package.
On 25 November 2008, the Secretary General of the Department of Enterprise, Trade and Employment, Mr. Gorman, asked me for a meeting to discuss Mr. Molloy's position. At the meeting, it was clear that the Department and FÁS were seriously concerned that the public controversy about Mr. Molloy would be ended to allow the organisation to deal with the serious problems it faced. The row following Mr. Molloy's interview on the "Today with Pat Kenny" radio show was affecting the work of the FÁS board and management.
Although discussions between the chairman of the FÁS board and Mr. Molloy were still going on that morning, the chairman told the Department that he had informed Mr. Molloy that his position as director general was untenable as a result of the interview, although there had been no formal decision by the board. We understood that during these discussions Mr. Molloy said he was prepared to consider resigning immediately if terms were agreed. He had also made some suggestions about what terms he might find acceptable.
It is important to underline the point that while Mr. Molloy was not being dismissed, his offer to resign followed from the fact that his position was now untenable and was specifically conditional on terms being agreed. While I understood that Mr. Molloy had not explicitly threatened legal action, the threat of legal action obviously hung over those discussions. If he decided not to resign, either because no terms were offered or because he decided to turn down an offer, and the FÁS board wished to terminate his contract, it would have had to initiate a dismissal process which could have been prolonged. If it had concluded with the ending of his contract as director general, he could have sought compensation under the contract or the 1998 severance guidelines or go to court, any of which could have taken considerable time and resources.
The Department of Finance acknowledged that this was an urgent issue, and that the sooner FÁS was in a position to tackle its internal problems, the better. We pointed out that the usual approach in such cases, as set out in the Department of Finance guidelines of 1998, was either resignation by the person concerned, without any exceptional terms, or termination of the contract following a formal decision of the employer. In the case of resignation, the chief executive officer or director general would be entitled to whatever their contract specified. If, on the other hand, the contract were ended by the employer, they would be entitled to whatever terms were in the contract or, if the board and Ministers agreed, to those in the 1998 guidelines. The circumstances of this case, however, did not fit neatly into either category.
Given the special circumstances of the case, we suggested to the Department of Enterprise, Trade and Employment at the meeting that any terms should be informed by the 1998 guidelines, that is, terms which Mr. Molloy might reasonably have been entitled to had his contract been ended by the board. In all our internal discussions after the meeting, the main question for the Department of Finance was the need to strike a reasonable balance between allowing FÁS to deal with its present difficulties as soon as possible and any precedents which might be created by the fact that Mr. Molloy's resignation would not, in the circumstances, be strictly covered by the 1998 guidelines. A decision to refuse sanction for a resignation on special terms could mean that FÁS might not be able to resolve the issue quickly and ran the risk of a drawn-out process which could end in legal action with serious organisational and financial implications for the body. Our conclusion was that, depending on the proposed terms which might result from the discussions with Mr. Molloy, the Department would be prepared to accept a special arrangement in Mr. Molloy's case. Finance approval could be more easily given the closer the terms offered to Mr. Molloy were to those he would have received under the 1998 guidelines if his contract were formally ended by the board.
The committee will have seen the account given in my note of the telephone conversations and e-mails following the meeting. As I pointed out in my note of 16 November, some of the comments in these e-mails were made without knowledge of the earlier discussions.
The final decision to approve Mr. Molloy's severance package was made because the package was broadly in line with what Mr. Molloy would have received under the 1998 guidelines had his contract been ended by the FÁS board. The proposed terms included a payment of six months salary rather than the three months in the contract. I understood that this concession, which was significantly less than was sought originally, had been made to bring the negotiation to a close.
The question of having to seek Government approval did not arise as the superannuation package was not being agreed under the 1998 guidelines letter, although the terms of the package were informed by, and broadly consistent with, the 1998 guidelines.
The legal basis for the package was section 6(3) of the Labour Services Act 1987 which requires the approval of the Minister for Finance and the Minister for Enterprise, Trade and Employment.
The package was approved as an exceptional measure because there was an urgent need to allow FÁS to deal with the serious problems it faced. The director general had been informed that his position was untenable and that his resignation was therefore not entirely at his own initiative. There was a risk that a failure to reach agreement with the director general could lead to a long drawn out process which could take considerable time and resources, following which we would likely have been faced with a settlement not dissimilar from the terms of the 1998 guidelines. The final agreed superannuation package was broadly informed by the terms that the director general would have received had his contract been terminated.