Category: Business Law

Liam Doran and employers “breaking the law”

This morning’s Morning Ireland carried a report that some private hospitals are planning to cut the pay of nurses employed by them in 2010. This is not a surprising development, coming immediately after the State has cut the pay of publicly-employed nurses.

Liam Doran of the Irish Nurses Organisation was on the show and was understandably dissatsified that this cut might happen without any consultation or discussion with unions or employees. However, the increasingly bellicose Doran went on to say that the employers, in doing so, would be acting “illegally” and would be “breaking the law”. Is this correct?

Not in my understanding of what the phrases “illegal” and “breaking the law” mean. Murdoch’s Dictionary of Irish Law defines “illegal” as follows:

illegal. Unlawful; contrary to law; in violation of a law or a rule which has the force of law.

The definition of law is, to summarise, the body of rules which are binding on persons but that definition does not encompass private contracts.

Varying an employee’s terms and conditions of employment is a matter of contract between employer and employee. This means, of course, that to vary a core aspect of that contract, such as pay, the agreement of the employee is necessary and unilateral pay cuts are not generally possible.

In reality, many private sector employees (including thousands of solicitors) have had their pay cut, yet we do not see any rash of litigation on the issue. Perhaps some have agreed to the cut as part of a renegotiation package; many others have accepted the necessity of cuts and have acquiesced to unilateral changes.

By imposing a unilateral pay cut, an employer may have breached their contract with the employee. That employee has a range of options available to them (outlined here by Aoife Sweeney of Mason Hayes+Curran). But unliaterally changing the contract does not constitute “breaking the law” or acting “illegally”.

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Ban on upward only rent reviews

Sometimes lawyers defend the unpopular. Defending the right of a landlord to seek an upward only rent review in a lease may be one such occasion. Sandeep Gopalan of NUI Maynooth makes such a defence on valid grounds.

As of 28 February 2010, upward only rent review clauses in commercial leases will not be possible. Section 132 of the Land and Conveyancing Law Reform Act 2009 provides for this in a round-about way which imposes a certain interpretation on any rent review clause, but it amounts to a ban on upward only reviews. The ban is a populist move, but bear in mind that it relates to contracts negotiated and agreed by commercial parties.

It can validly be argued that, during the boom, tenants were in a weaker bargaining position than landlords and were powerless to resist upward only rent reviews. But this is surely true of a range of contractual provisions in everyday agreements in respect of which the law does not interfere.

Sandeep concludes:

“If the state gets into the business of re-writing private agreements, it won’t have time to do much else.

Put another way, why stop with rent review clauses? Why not legislate to ban the variety of provisions which might be unfair to one party or the other?

One wonders what might be next for State intervention in private contracts. Many private individuals are seeking to escape from fixed rate mortgages entered into when rates were far higher than today. Purchasers freely entered into these arrangements, believing them to be better than variable rate mortgages at the time.

Having granted commercial tenants this special legal protection, why not make a similar intervention on behalf of suffering purchasers? Such a move would be fiercely (and fairly) resisted by financial institutions, but the Government would find it hard to justify its rush to action on behalf of commercial tenants while residential landowners suffer under the deal they struck.

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Will business small claims be possible online?

In May, Leo Varadkar (FG/DW) introduced a private member’s bill, the Small Claims (Protection of Small Businesses) Bill 2009, which proposes to make two important changes to the Small Claims Court (“SCC“). The SCC it allows individuals to take a court case, with or without without legal representation, against another party relating to consumer goods or services, damage to property or the non-return of a deposit for a holiday home.

At present, the Small Claims Court (a division of the District Court) will only deal with claims worth up to €2,000 and an indivudal can take a case by paying a fee of only €15. Cases can also be initiated online and the system is particularly suited to online processing as the claimant can, for example, ensure that it has identified the correct person to sue by being referred to the website of the Companies Registration Office to check the business’ details. If the case is contested and is not settled the local District Court Registrar can become involved and try to resolve the matter and if this doesn’t happen the case can go ahead to the District Court itself for a hearing.

In reality, cases rarely reach the District Court and the SCC is, therefore, a great value remedy for consumers which often helps resolve relatively minor issues. The Courts Service has even published guides to the SCC in all major languages.

Deputy Varadkar has made two proposals to amend the SCC and the government has indicated its approval, in principle, to the changes. The first is to increase the maximum value of a claim which can be brought before the SCC to €3,000. The second proposal, which might have been controversial but does not appear to be so, is that small businesses may be permitted to use the SCC to recover debts. The motivation for such a change is the pressure that Ireland’s economic deterioration has put on our small businesses, some of whom may not be in a position to pay legal fees for the recovery of debts. The suggestion is not without merit, but it is an open question as to whether it is appropriate to allow a distinctly consumer-oriented system be used, in some cases, against consumers. It is also unclear as to whether additional resources will be provided to the District Courts to process business SCC claims when, as is likely, small businesses use the system en masse.

The Bill and explanatory memorandum do not state whether it will be possible for business claimants to use the online claims system (and it would not be necessary for this to be stated in the Bill), but if the changes go through there is no reason why this won’t happen.

Deputy Varadkar hoped for the Bill to be back in the Oireachtas in the coming months.

PS. The Bill would appear to be incorrect in seeking to amend Order 53A rule 1 of the District Court Rules as it refers to the version of rule 1 that existed prior to its amendment by the District Court (Small Claims) Rules 2007. Those 2007 rules increased the maximum level of claim to €2,000, whereas Deputy Varadkar’s 2009 Bill still refers to the pre-2007 limit of €1,269.74. It is also notable that the SCC rules are usually amended by way of Statutory Instrument approved by the Minister for Justice, whereas primary legislation is proposed for the new changes.