Seanad Éireann - Volume 118 - 18 February, 1988
Protection of Employees (Employers' Insolvency) Act, 1984 (Amendment Order) Order, 1988: Motion.
Mr. Lanigan Mr. Lanigan
Mr. Lanigan: I move:
That Seanad 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 Seanad Éireann on 27th January, 1988.
Minister for Labour (Mr. B. Ahern) Bertie Ahern
Minister for Labour (Mr. B. Ahern): The main purpose of the Protection of Employees (Employers' Insolvency) Act is 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.
In the administration of the 1984 Act one anomaly has been identified which I consider should be modified. This anomaly 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”.
 That definition is generally satisfactory but it has one effect which was unintended or at least which was not adverted to when the section was being drafted. That is that the benefits of the Act are denied to older employees, specifically those who are over the age of 66 years solely because they are not fully insurable due to their age. This exclusion operates unfairly for over 66s because it deprives them 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. I consider that they should be entitled to payment of those benefits and the order now before the House is designed to achieve this.
The unpaid entitlements of persons over the insurable age limit which it is proposed to protect are as follows: wages, holiday pay, sick pay, awards 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.
As with the original 1984 Act, the order will not confer new entitlements on workers. It will merely ensure that existing entitlements not themselves dependent on the insurable status of workers are honoured. 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.
The change which I am proposing, though beneficial, will affect only a small number of persons. The number of potential beneficiaries will be limited because these will be confined to employees over the age of 66 years who happen to have been in employment where the employer has become insolvent. These 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 costs or potential disadvantages of the extension will be minimal.
The extension of the scope of the Act envisaged in the order was agreed with the social partners in the Programme for National Recovery and I am sure that the House will also agree that if it is fully justified. I commend the order to the House.
Mrs. Fennell Mrs. Fennell
Mrs. Fennell: We welcome and support this measure. In ordinary justice and fairness it is something which should have been rectified some time ago. It is only right and proper that everybody, regardless of age, who is paying social welfare contributions should be protected in all areas in the event of an employer going out of business and leaving them high and dry without jobs. One has to say that while the conditions in this country are not ideal, the provisions which are in existence for employees in the event of employers' insolvency certainly take the blunt edge off losing one's job and enable some cushioning to be given to workers until such time as they get other jobs.
I am sorry the Minister did not tell us how many people we are talking about in this. He mentioned that it is not a large number and I am quite sure it is not. It is possibly related to those people who are over the retirement age but who cannot afford to retire, who need to and must go on working because the provisions they have made themselves are not sufficient. However small it is, we are looking into a future in which that number will get even smaller. I look back in my time over a period when there were older people in jobs. We did not have a crisis; we did not have the difficulties of unemployment we have at present and the pressures that are bringing about a revolution in the workplace. People stayed in jobs and kept in those jobs all the experience, the wisdom and the skills they acquired over the years.
Many of us regret that that time has passed and that we have had this revolution which is forcing workers to give  up their work at an earlier age. I am one of those who believe that, if people want to work and are capable of it, it would be ideal if provision was made for them to stay on in their jobs. The emphasis in recent years has been to get people to retire earlier. We have had social policy and propaganda telling people that it is better for them to retire early and enjoy their money and their old age. There are pre-retirement courses and so on. I am not of the school of thinking which says that you can suddenly switch at 60 years of age from being an active, motivated worker one day to retirement the next day, with all the connotations it still holds. I certainly regret that but one must also accept that we are in a very difficult time in this country and the same applies to other countries.
We have a huge youth unemployment problem and we have to debate whose rights and whose needs are greatest. Is it the needs of the young people who may never have had jobs, the young people who may be trying to establish families? Their need, in the long run, has to come before the need of people who have had a fulfilling and worthwhile work-life and who can maintain themselves through pensions and opt out of the workforce. I still think we have a lot to do to change that twilight time, between the time when we all have very busy lives, highly committed regular days and weeks into the kind of nothingness you can have walking the dog and playing golf. We have to approach that and do a bit more work on it to get people to understand that if it is essential to cut off the work era early then we have to put something else in its place.
Perhaps we should look at what is happening in Japan and in China where there is a very interesting movement towards voluntary work by people who are older and who can bring the skills and experience of their work into the training area. It is voluntary work on an unpaid basis. Maybe this is something we should look at. I think we are going to have trouble in the future. I am particularly concerned, given the new emphasis on this voluntary redundancy. This is the new paradise.  People are now being offered substantial sums of money, and a pension in some instances, on which they can just about live. It is very attractive in the short term.
I know the Minister at the moment is engaged in seeking up to 10,000 voluntary redundancies in the public sector. I worry about this a little because I do not think we have looked at the social policy involved in all of this. If you get 10,000 voluntary redundancies of a young age group — I know very young people are taking voluntary redundancy and going into semi-retirement — I wonder what are the implications down the line? Have we any indications as a result of surveys or studies done elsewhere as to what happens to such a group of people? What happens to their family life? What happens to their sense of purpose and sense of self-esteem? Do they go back into the workforce? After two or three years do they join the tail end of the unemployment list again? There is nothing to say that they cannot do this. I am not convinced about this policy.
I am particularly not convinced about it with regard to women workers. This is something which came up when the Irish Congress of Trade Unions Women's Committee were addressing the all-party Committee on Womens' Rights. There is a very disturbing ratio developing in this whole area of voluntary redundancy. Of the workers, who have opted for voluntary redundancy the ratio is nine to one in favour of women. Seventy per cent of the women who jumped at the offer were women with young children. We have a huge number of working women in the age group where they would have young children. They are probably having great difficulties with domestic responsibilities and with child care and they are opting for redundancy as a way out of their problems. I will quote from a letter to The Irish Times of Monday, 15 February, from a woman who has taken voluntary redundancy. She writes to warn other women. She says:
I am very concerned that with apparently attractive lump sums on offer women who find the strain of working  full-time and taking the lioness's share of domestic responsibilities, are opting for the short-term gain and paying the price of long term dependence.
I believe passionately that women will never achieve true independence and freedom, unless we are economically independent.
A word of warning to the thousands of women in the State sector who are currently considering redundancy — they might be tapping their calculators to the tune of “They're playing our Dream”, but should consider the lump sum in the context of an annual salary and not accept it unless they have definite possibilities for future employment.
That is a realistic marker for women. Maybe the temptation is too great but it is something women should look at and examine right down the line because it is short-term gain but long-term dependency.
Not a lot needs to be said on this. We support the motion. We agree with it. I hope that sometime we might have a debate or discussion on the implications of people retiring or taking early redundancy.
Professor Hillery Professor Hillery
Professor Hillery: The vulnerability of employees in insolvencies is all too obvious. This enlightened Act to which the Order refers is concerned with protecting employment-related conditions in the case of legal redundancies. The Act ensures that entitlements like unpaid wages or holidays which are due or other conditions are actually met from the central fund where there is a legal insolvency.
I want to make two points, on the basis that prevention is better than cure. Employers, generally, want to keep their businesses going. Employees also want to see the companies thriving. There are fly-by-nights in existence and the Companies Bill, which is at present before the Seanad, should help to correct that type of situation but, of course, no matter how employers and employees try some  companies fail. I want to make two points in connection with prevention.
One is that unpaid taxes such as PAYE and PRSI can be the very first signal that a company is in trouble and ultimately may end up insolvent. I know from studying experience that the Revenue Commissioners would be doing a favour to employers and to employees and to other stakeholders in companies if they moved for the prompt payment of taxes; in other words, take on the problem much earlier rather than leaving it much later when perhaps companies become insolvent. Then taxes remain unpaid as well as, tragically, people are out of jobs.
My second point is related to another Bill the Minister has before the House at present: it has to do with information disclosure. I want to return to this as a preventive measure as well. Employees, who are the people who end up without jobs when companies close down due to insolvencies, are key stakeholders in any company. They earn their livelihoods from these companies. Almost invariably, they possess expertise which, if called upon by management when they are facing difficulties, could help to rescue the company. After all, who are better positioned to make that type of contribution, even in the narrower sense of saving their jobs? I think that the Worker Participation Bill, which is at present before the Seanad, and subsequently will go to the Dáil, will actually contribute to more involvement by employees in the running of the companies and will lead to greater information disclosure, albeit confined to certain State-sponsored bodies. It is very much a step in the right direction.
While I am talking about State-sponsored bodies, it seems to me that if employees of Irish Shipping knew the score about that troubled company they could have contributed valuable insights into how the company might have been saved. I recall at the time that company went into liquidation speaking to a staff representative in Irish Shipping who was in the dark about the charters that had been entered into, and felt that he, in  common with many other employees, could have come up with a range of ideas to help rescue the company and keep it open. Today's order has a much narrower focus. I welcome this extension of the provisions of the main Act to this small number of people. The cost will be minimal, and the order corrects an anomaly that was there up to the present time. I warmly welcome the order and support it.
Mr. Ferris Mr. Ferris
Mr. Ferris: I welcome the Minister's return to this House with a second piece of progressive legislation. This order deals with previous progressive legislation which was initiated by the Minister's predecessor, Deputy Ruairí Quinn, following a directive from the Community to legislate in this area where people were disadvantaged in the event of their employers, whether by accident or otherwise, getting into financial difficulties, being declared bankrupt, or being taken over by liquidators or receivers. We extended a welcome to that legislation which ensured that the most vulnerable people in the closure of a company, the employees, were protected. I agree with Senator Hillery who said they are usually the biggest losers in a situation like this and that if they were afforded the opportunity they probably could make a major contribution by way of sacrifices and giving advice to ensure that the company remain in business.
However, the Act conferred on employees the first choice of compensation in the event of a company going to the wall. Heretofore, agencies like Fóir Teoranta, the financial institutions, the banks, the Revenue Commissioners and all other vested interests were always the first to benefit but this legislation thankfully, put workers in their rightful place.
From the experience I have had in having the Act applied to certain employees who found themselves in this predicament, I am glad to say the liquidators and receivers used the Act very efficiently and fairly, and the fullest cooperation was always forthcoming from  the Department of Labour, the co-ordinating Department which paid the cheques through the receiver or liquidator to the employees and later realised whatever assets were available. That was a tremendous plus for the employees who had contributed to their company by their work, the sweat of their brow, who paid their taxes, PRSI and other funding, which were not always handed over to the Department of Social Welfare, the Revenue Commissioners, or the Department of Labour.
The Minister's order addresses one of the anomalies in this area, that is, private pension rights. Some employees paid into pension funds but, unfortunately, at the date of liquidation some employers, I would suggest, absconded with those funds or used them for cashflow purposes instead of investing them in pension funds. Perhaps the Minister would confirm that employees' unpaid pension contributions — covered in the additional list of categories — are private pension arrangements with companies and if a company goes into liquidation those pension rights will still be the employees' legal entitlement. I am aware of at least two companies which, since this Act was introduced, used the employees' pension funds for other purposes, and we had the greatest difficulty in trying to ensure that the employees got their fair entitlement.
The Minister is extending this order to people over the age of 66. This, of course, applies in the private sector because only the private sector retain people of this age, and older. These people could no longer be insurably employed, but they can and do make a major contribution to some companies. It is a welcome fact that many companies request such people to stay on because of their wealth of experience and knowledge. Anything which ensures that those type of employees are covered is to be welcomed. I also welcome the fact that the Minister thought fit to bring this order before the Houses of the Oireachtas as to ensure that people in this category, a limited number but still with rights, are protected. If I have any worry about the operation of the Act — and I make this comment from  experience — as is it when the Act is applied to companies.
To give the Minister an idea of the problem that can arise I give the example of Ballingarry Mines. Their fortunes have fluctuated over a number of years. They were bankrupt or went into receivership or liquidation despite the assistance given by Fóir Teoranta and others. On the last occasion I was involved in negotiations to ensure that the employees received their rights under this Act. The moment the employees got their rights a new operator of Ballingarry Mines could treat the coalfield as a green field and would have no obligation to the redundant employees who are experts. These employees have given all their lives to the company and, in many cases, their health has suffered. They have been excluded from compensation retrospectively for diseases contracted underground. I am worried that, in the event of new operators coming into the field they may not employ any of the local experts because, to all intents and purposes, legal and labour law, etc., there is no obligation on them to use the experts who are out there waiting in the knowledge that £30 million worth of assets are under the ground and capable of being mined successfully to the advantage of the economy, and definitely to the advantage of the Ballingarry coalfield area, which is decimated as a result of the closure of the mines.
The only problem I have is that the legislation removes any obligation from any new employer to consider employing local experts. There would be nothing to stop them importing expertise from Wales, South America, or any other part of the world to carry out the expert work in Ballingarry simply because the employees had all their rights met. There would be no moral or legal obligation on them to take account of that. However, that is for another day.
Hopefully an employer will soon appear on the horizon and we will be able to convince him that there is a case to be made for the re-employment of the experts who live in the mining area,  people who know nothing else but mining, and who are prepared — and were prepared on the last occasion — to make sacrifices, to work for nothing, in the interests of the mine owner. Hopefully a new mine operator will take that into account and will not let the workings of this Act preclude him for employing local people.
I welcome the fact that the Minister thought it necessary, even for a limited number of people, in justice to extend the order to ensure that these people are covered. Hopefully, too many people will not have to avail of this Act to ensure that their entitlements are protected. In other words, I hope we do not have too many more liquidations, voluntary or otherwise, and that companies in this area, particularly with the National Development Corporation, will have an opportunity to survive in the economic climate the Government are trying to survive in.
Mr. Mulroy Mr. Mulroy
Mr. Mulroy: I warmly welcome and support this Order known as the Protection of Employees (Employers' Insolvency) Act, 1984 (Amendment) Order, 1988. When the principal Act was enacted it received broad support and was welcomed at the time, and rightly so, as a very necessary protection for employees in the cases of company insolvencies. The Bill was introduced to comply with an October 1983 EC Directive. It was designed to give workers protection in the event of companies being wound up or going into liquidation in regard to the payment of wages, arrears of statutory minimum wages, holiday pay, payments on foot of company sick pay schemes, entitlement 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 and outstanding contributions to companies' pension schemes. The payments, I understand, are restricted to eight weeks in the case of wages, holiday pay and amounts due under sick pay schemes. This is in line with the EC Directive. I believe it is correct and right that this protection  should be extended to employees who have reached the age of 66 years and are still in employment.
In view of the large number of insolvencies in the past five or six years, this legislation was most opportune and went a long way to alleviate the traumatic experience of individuals being made redundant, not alone for the worker but also for the family. All too often in the past, workers were not provided for in the event of companies going into liquidation, many of the companies having failed in their basic responsibility to make the necessary PRSI and pension payments on behalf of their employees. Many of these companies which I would refer to as fly-by-night operators, all too often fold their tents and disappear overnight leaving behind a trail of unpaid creditors, broken investors and disenfranchised workers, only to appear a short time later flying a different flag and often operating out of the same building.
The Companies (No. 2) Bill, 1987, which is at present in Committee Stage in the Seanad, will deal adequately with fraudulent operators and will give the necessary protection to employees. This is to be welcomed. In regard to insolvency generally, it is my belief that the whole area of preferential status should be carefully examined and consideration given to small companies. I am not suggesting that they be given preferential status but that preferential status, as we know it, should be downgraded. I would pose the question: why should the Revenue Commissioners who have a public duty to collect unpaid taxes within a reasonable time, be given this preferential status in the event of all outstanding taxes?
When a company get into trouble the first thing they usually do is to stop paying and making the necessary tax returns. They use these taxes as cashflow to continue to finance the company. In many cases they are trading fraudulently — sometimes for five or six years. When eventually the Revenue Commissioners put them into liquidation and a receiver is appointed, there is very little left for the unsecured creditors. They get  nothing. Yet the Revenue Commissioners have this preferential status and they are looking for all the outstanding taxes. I believe — and we should address this in the Companies (No. 2) Bill — that this preferential status for the Revenue Commissioners should be restricted to, say, two or three tax periods retrospective to the date of liquidation. Any outstanding taxes apart from that should be made accountable. If they allow the company to trade fraudulently for four or five years they should be made accountable and there should be an investigation as to why the taxes were not collected.
I believe also that we have to address ourselves to the great problem of unemployment. PRSI, as we know it, is a tax on employment. An employer who gives somebody a job at £200 per week has to pay the Government £25 PRSI for the privilege of giving that person a job. That was fine in good times, when price was not a factor, when it was a case of supply and delivery, and there was plenty of opportunity, but in these days that is a very important factor in the case of competitiveness. It is not helping to create the environment for investment that is so necessary if we are to tackle this problem of unemployment.
The Government have gone a long way in the past year in addressing the situation generally. Inflation is at an all time low and interest rates have been reduced substantially. This is a help to investors, to people generally and to people who are repaying mortgages. It is going some way to creating the necessary environment for investors. All concerned must play their part, and that includes the Revenue Commissioners who have preferential status. I include also the banks because they very often circumvent this preferential status by insisting on personal guarantees. If you go to a bank now for a loan you will get nothing unless you have collateral. Small investors and small employers often put up their houses as collateral. Banks are making massive profits and, in these difficult times, they  should be called on to make a contribution towards the environment that is so necessary for investors.
I would also like to touch briefly on liquidations and receivers. I question the qualification of receivers. Certainly, they are excellent accountants. They can prove anything on paper. They can do cashflow projections, interim accounts, case studies and reports, but I often wonder have they got the necessary technical expertise when it comes to disposing of the assets of a company, which may have very high technical aspects. Very often liquidators sell off massive technical assets in the field of mechanical and electrical engineering for a pittance without evaluating whether it would be better to retain these assets, taking into account that the IDA have made a massive investment in them, or if it would be better to retain these assets and bring in a firm of specialist consultants who would evaluate how they could be adapted to a future user of that factory. In the Companies Act a case could be made for a Government receiver who would not depend on disposing of the assets, his first thoughts being to pay his own fees. A case could be made for a Government liquidator who would go in and do a proper evaluation of the assets and not quickly dispose of them without doing a proper evaluation.
I welcome this order. The provisions should be extended to people who have reached the age of 66. These people who have contributed all their lives to the social welfare system, are more entitled to this added privilege than anybody else. I am pleased to welcome and support the order.
Minister for Labour (Mr. B. Ahern) Bertie Ahern
Minister for Labour (Mr. B. Ahern): I thank Senators for their contributions. As I said at the outset since we have no statistics it is difficult to know the number of employees over 66 years of age whose of employers have become insolvent. I think we are talking about a very small number of people. Nevertheless, that should not take away from the rights of these people who would normally have worked their  entire lives and have been full contributors to the social welfare system. If we did not pass this order they would be excluded from the benefits I outlined at the start.
Senator Ferris asked about employers' insolvency funds generally. This is financed solely by employers' contributions which are collected as part of the employers' PRSI. The current contribution rate is 0.6 per cent of employees' earnings up to a ceiling of £15,500 and the ceiling was increased in the budget from £15,500 to £16,200 effective from next April. The fund is used to pay statutory redundancy and insolvency entitlements. I was asked what was the expenditure for 1987. In 1987 £4,034,396 was paid to 4,500 employees and 320 employments. As Senators can see, that is a fairly substantial figure. The last speaker mentioned redundancies and in that case the figure would be far greater.
The Act protects outstanding pension contributions both for employers and employees for up to one year prior to the insolvency. The question of employee entitlements would be a matter for the employees, their unions and the trustees of the pension fund. I would agree that it is necessary for people to be vigilant. What Senator Hillery said was true. If people had been more on the ball and had been more aware of the facts over the years some of these disasters might not have happened. Nowadays trade unions, companies and trustees are more vigilant and are using more outside professional expertise to ensure that their investments in their pension funds are properly funded. I know that creates a lot of concern.
This anomaly was highlighted by the people involved in the Department monitoring this Act. While the Act only affects a small number of people — and the section dealing with them is extremely busy — it was still thought desirable that we should pass this order to cover people who were being wrongfully deprived of benefits they had paid for under the 1983 Act. Normally these people would be dealt with when the legislation was being  amended but many small anomalies outstanding in various Bills are never dealt with. Everybody accepts that these anomalies should be corrected. We have all seen several examples of that over the years and the Department of Labour felt that it would be unfair if these people had to wait until then.
I thank the House for its support on this order.
Question put and agreed to.
Seanad Éireann 118 Protection of Employees (Employers' Insolvency) Act, 1984 (Amendment Order) Order, 1988: Motion.