Employment - Case Law Update

PUBLISHED: 14th August 2023

The Workplace Relations Commission (“WRC”) recently awarded a former CEO, Mr Mario Kistner (“MK”), €133,800 in compensation for constructive dismissal and non-payment of wages by his former employer, Suirsafe Technologies Limited (the “Company”). 

The compensation award is one of the largest awards made by the WRC in a case of this nature.

Background

MK was employed as CEO by the Company, a supplier of medical clothing, since 1 February 2021.  He was also a director of the Company’s other related entities.  MK experienced no difficulties in his employment until April 2022, when he was informed by two shareholders that it was not possible for them to invest further capital in the Company, and they were unable to say when this issue would be resolved.  The shareholders expressed their hope that the Company would continue to function and avoid insolvency, despite lacking crucial funding.  MK was not paid any salary from 1 May 2022, and in mid-May 2022 he was unilaterally demoted to the role of COO.  Despite not consenting to these changes, MK complied in the hope that the shareholders would invest funds into the Company. 

As a result of the issues, MK resigned on 23 May 2022 and agreed to work his contractual notice (six months), on the assumption that he would be paid his salary during this time.  However, on 6 June 2022, he was given an ultimatum to either continue working for the Company without a salary until it became profitable, or resign with immediate effect. 

MK resigned with immediate effect on 13 June 2022 and submitted a complaint of constructive dismissal to the WRC under the Unfair Dismissals Act 1977-2015.  MK contended that he met the test for constructive dismissal by acting reasonably in all the circumstances and because the conduct of his employer was such that he had no option but to resign.  MK also brought a claim for unpaid wages (for the period 1 May 2022 to 13 June 2022), which he alleged were due.

Outcome

The WRC found as follows:

• the Company had undermined the core of the contractual relationship and acted in significant breach of contract by not paying MK during the notice period, and expecting him to work for six months without pay.  

• MK was left with no other option but to resign in circumstances where his trust and confidence in his employer had been broken beyond repair.  MK had attempted to raise his concerns with the shareholders during his employment, but it was evident that they were not willing to engage with him on any level. The WRC also noted, among other things, MK’s unlawful and unwarranted demotion and the Company’s clear disregard for any of his contractual rights. 

• In the circumstances, MK was entitled to immediately terminate his employment without having to invoke the Company’s grievance procedure.

MK succeeded in his claim for unfair dismissal and was awarded six months’ salary (equivalent to €108,000 gross).  MK was also awarded €25,800 in respect of his claim under the Payment of Wages Act after it was found that he was properly entitled to his wages for the period they were not paid (namely from 1 May 2022 to 13 June 2022).

The Company did not attend the hearing.

Regarding the duty to mitigate financial loss by taking steps to secure new employment, MK secured new employment on 1 January 2023.  However, MK informed the WRC that, while he had approached prospective employers from the date of his termination with the Company, prospective employers were unwilling to hire him due to a six-month notice period in his contract.  This reasoning was accepted by the WRC. 

Key Takeaways for Employers

The decision in this case is an important reminder of the principles that will be applied by the WRC in the context of constructive dismissal claims.

The burden of proof in constructive dismissal claims, which is very high, lies on the employee.

Constructive dismissal claims frequently fail in Ireland because employees are unable to reach the high threshold of proving the unreasonableness of their employer’s conduct and that their resignation was reasonable in all the circumstances.  Constructive dismissal claims also often fail because employees fail to exhaust all internal avenues (such as invoking the grievance procedure). 

The decision in this case is a rare example of a successful constructive dismissal claim where the employer’s conduct was considered to be so unreasonable that the employee could not be expected to tolerate it and the employee was therefore entitled to resign despite not having exhausted internal procedures before doing so. 

For more information, please contact Colin Gannon or any member of our Employment, Pensions and Employee Benefits team.

*The article was first published in Legal Island.