The Health Service Executive could face a bill for over €100 million after the Employment Appeals Tribunal ruled that it was not entitled to withhold pay rises from hospital consultants which were agreed under new contracts seven years ago.
The 2008 contracts introduced by the then health minister Mary Harney provided for salaries of between €170,000 and €240,000 in return for the consultants accepting weekend work, revised work practices, and limitations on their private practice.
However, while the first instalment of the pay rises was paid the second phase was not, as the HSE argued that it could not afford to do so due to the economic crisis.
In addition, the consultants' salaries were subsequently reduced by 15% as part of the general public service pay cuts.
The EAT cases were taken by two consultants, anesthetist Thomas Hogan and endocrinologist John McDermott, who argued that the HSE had breached their 2008 employment contracts which provided for higher salaries in return for treating more public patients.
Dr Hogan was awarded just under €100,000 in retrospective payments, while Dr McDermott was awarded €14,000, but the bill could be far higher given that almost 2,000 consultants are covered by similar contracts and could be entitled to similar compensation.
If all 2,000 were awarded an average of €50,000, the HSE would face a liability of €100 million, but informed sources have estimated that it could be significantly higher.
However, the HSE has stressed that it will be appealing the EAT ruling immediately.
In a statement, the HSE said: "The HSE set out the position on why the salary increase was not paid to the Employment Appeals Tribunal.
"Taking that into account, and noting the potential costs to the taxpayer, the HSE intends taking the prudent action of appealing the findings of the Employment Appeals Tribunal."
The EAT ruled that the failure of the HSE to pay the outstanding portion of the doctors' salaries was tantamount to an unlawful deduction under the Payment of Wages Act.
Asked about the EAT ruling on consultants, Minister for Public Expenditure and Reform Brendan Howlin said that like all determinations from the EAT or any other labour body, these were matters that would have to be discussed and negotiated.
He said whatever liabilities accrue to the State will be met through negotiation.
Separately, 150 consultants are taking High Court proceedings in a bid to force the HSE to pay the outstanding element of their salaries.
The Irish Hospital Consultants Association welcomed the decision.
It said the salary underpayments, the subject matter of their claims, are separate from the FEMPI salary cuts that were imposed on consultants like all other public servants.
Meanwhile, the Irish Medical Organisation has welcomed the decision but said the planned appeal by the HSE will prolong the process further.
It said it hoped the Department of Health will recognise the obligation of the State to honour contracts and in particular to honour in full the 2008 Consultant Contract.