High Court finds company underpaid employees and created contract designed to avoid employment law obligations

About this case:

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In the three linked sets of proceedings, 27 Portuguese nationals sought damages for alleged breaches of their employment contracts with RAC Eire, during a period in 2007-2009 during which they worked on a construction project.

Under the terms of the contract, the plaintiffs were entitled to remuneration in accordance with the Construction Industry Registered Employment Agreement, which was subjected to deductions under clause 7 of the contract, to account for the provision by RAC Eire of accommodation, meals and laundry services.

The plaintiffs claimed that RAC Eire had failed to pay them for all the hours they worked, and that they had breached an implied term of the contract that the accommodation, meals and laundry service that the defendants were to provide would be of a reasonable standard, and that the specified deductions made from the plaintiffs’ pay in recognition of the provision of those services were to be fair and reasonable.

While RAC Eire recorded in daily log sheets that employees worked from 8.30-6pm, Monday to Thursday, from 8.30am to 5pm on Fridays, and from 8am until midday on Saturday, evidence was brought that the defendants had been convicted for falsifying daily log sheets in 2011.

The evidence of the plaintiffs was largely consistent in establishing that, during the plaintiffs’ time in employment on the project, they generally worked from 7am until either 7pm or 8pm on weekdays and from 7am until anywhere between 4pm and 6 pm on Saturdays, although occasionally certain plaintiff employees worked even longer hours.

Mr Justice David Keane came to the conclusion that the defendants engaged in the systematic and deliberate under recording of the plaintiffs’ hours of work, leading to the underpayment of their wages in breach of their contracts of employment.

The defendants attempted to argue that after July 2008, the plaintiff’s working hours returned to normal; however this was dismissed by the judge.

In relation to deductions, it was noted that deductions were made from the pay of the plaintiffs in respect of board, lodging, and laundry, as well as under the heading “benefit-in-kind.”

A very significant portion of the evidence at trial was directed towards the issue of whether the accommodation was of a reasonable standard or fit for purpose and whether the defendants’ deduction of €17.50 per day was fair and reasonable.

Evidence was given by an independent expert consulting engineer retained by the plaintiffs, and an environmental technician employed by the defendants at the material time.

The accommodation was criticized for being overcrowded, for having insufficient sanitary arrangements, and for lacking the provision of potable water. Evidence was heard of sewage overflows, external refuse bins overflowing and vermin.

The judge found that “the accommodation provided was, sadly, of a deplorable – perhaps even, a dangerous - standard. In the circumstances, I do not believe that any deduction from the plaintiffs’ wages for its provision was justified. It follows that the plaintiffs are entitled to recover those deductions in full.”

However, the complaints with regards to the food were dismissed, with the judge finding that the board provided was of a reasonable standard, and that €15 per day each was a fair and reasonable deduction from the plaintiffs’ wages for the board provided to them.

While the laundry service was also described as reasonable, it was noted that varying and significant deductions for laundry services were consistently made from the plaintiff’s wages on a basis that was never explained to them. In addition, two individuals had deductions made despite not using the laundry service.

The defendants conceded that the laundry was never weighed and did not adduce any evidence to explain the basis upon which they purported to make deductions from the plaintiffs’ wages for the provision of a laundry service, the value of which they were contractually required to calculate and apply solely by laundry weight, when no laundry was ever weighed.

As a result, the deductions were not made in accordance with the terms of the contract of employment between the parties and were not fair and reasonable. Therefore, the plaintiffs were entitled to recover those deductions in full.

The deductions for benefit in kind were described as being for the provision of a private vehicle. Yet, no evidence was brought to suggest that such vehicles had been made available, and therefore the deductions were found to be wrongly made and therefore recoverable.

The judge also noted that the plaintiffs had been required to sign a contract at the airport on the way to Ireland, but that this was written in English, which they could not understand. Instead, they had come on the basis of an oral contract, which was substantially different.

The judge concluded that the written contracts were created for an unlawful purpose: to conceal from the relevant authorities that the company did not intend to comply with the requirements of Ireland’s employment law and public procurement law.

The judge observed that when this concern had been raise, the defendants had suggested that in circumstances where neither the plaintiffs nor the defendants had raised any issue on the lawfulness of the written contracts of employment, it was not open to the Court to do so.

However, this was not accepted. The judge cited Starling Securities Limited v Francis X. Woods & ors, High Court, unreported, May 24, 1977 which stated that, once clear evidence of illegality has been introduced at trial, the Court was not at liberty to ignore it.

Despite this finding, the judge found that the contract was enforceable for the purposes of the proceedings, citing Whitecross Potatoes (International) Ltd v Raymond Coyle ILRM 31.

The judge therefore ordered damages for breach of contract, plus payment by the defendants of interest at the specified rate on the whole of the sum to which each plaintiff is entitled as damages for breach of contract for the whole period between the date upon which each plaintiff’s cause of action accrued and the date of the present judgment.