The authors of the 2016 Duffy-Cahill report on workers' rights in insolvencies have been outlining their proposals for reform to the Oireachtas Committee on Enterprise and Employment. 

Former Labour Court chairman Kevin Duffy and Senior Counsel Neasa Cahill were appointed in January 2016 in the wake of the closure of Clerys to review the employment rights and company law implications where companies separate assets from operations into a separate legal entity. 

However, their recommendations have never been implemented. 

The report has come into sharp focus following the liquidation of Debenhams' Irish operation, where workers have spent the last seven months campaigning for enhanced redundancy payments provided for in a 2016 collective agreement. 

The Debenhams workers have argued that had the Duffy-Cahill recommendations been implemented, they would have been able to secure better redundancy terms. 

Mr Duffy declined to comment on the current Debenhams controversy, and stressed that while high profile cases like Clerys were mentioned in the terms of reference for the report,  it was not based on the facts of any individual company or liquidation.  

Former Labour Court chairman Kevin Duffy

He told the Committee that problems arose where an operating entity subsequently became insolvent and was placed in liquidation.

"The separation of assets from operations may have adverse consequences for employees of the operations entity (regardless of the priority to which they are entitled under the Companies Act 2014)," he added. 

Mr Duffy said situations of insolvency highlighted the "complex interface between company law and employment rights law".

He noted that the authors had been remitted not just to consider new solutions, but to examine whether more effective use could be made of existing provisions. 

Among the issues to be addressed were whether, and if so how, employees "quantifiable pecuniary entitlements" could be ringfenced in the event of the separation of assets from operations.

They were also mandated to assess whether more effective use could be made of existing employment legislation, how employees could negotiate better terms and conditions where the employer separated an asset "of significant net value" from the operations entity.  

The terms of reference also provided for examination of when any new measures to protect employees' interests could be triggered - at the time of the transaction, or at the time of the liquidation - and whether asset transfers should be capable of being set aside.  

Mr Duffy stressed that the report's authors were not asked to take into account considerations of policy or cost, which were beyond their remit.  

The Duffy Cahill recommendations included obliging all employers - including a liquidator who takes over an insolvent company -  to hold a 30 day consultation period prior to redundancies taking effect to maximise the possibility of mitigating the effects of redundancy through redeployment retraining or financial compensation.

 Liquidators are currently exempt from this obligation. 

The maximum redress that an employee could be awarded where the employer fails to consult would be increased form the current cap of four weeks' pay to two years. 

The Workplace Relations Commission and the Labour Court would be able to take into account any prejudice suffered by employees where employers failed to consult in advance of redundancies. 

Duffy-Cahill also recommended that any amount awarded that could not be paid by the employer due to insolvency could subsequently be recovered by the state against any significant assets separated from the employing entity.  

In terms of company law, the report did not propose any amendment to the 2014 Companies Act, but considered possible mechanisms to facilitate and extend the use of the existing provisions in the protection of employees' interests.  

However, Nessa Cahill  noted that many provisions of the Act are either infrequently invoked, "or not invoked at all".  

The authors attribute this to the costs and risks associated with such an application, rather than the formulation of the provisions themselves. 

They raise the possibility of conferring a power on the Minister (as creditor of an insolvent employer due to paying the employee claims through the Social Insurance Fund) to delegate the taking of statutory applications to the liquidator, and to provide funding to the liquidator for that purpose. 

The authors note that Section 608 of the Companies Act provides that when a company is in liquidation, the court can order that a person who appears to have the use, control or possession of a property "of any kind whatsoever" or the proceeds of the sale of that property must deliver that property or pay that sum to the liquidator. 

"This is only possible if it can be shown to the court's satisfaction that the property in question was disposed of and the effect of the disposal was to perpetrate a fraud on the company, its creditors or its members," they stated however.

Sinn Fein spokesperson for Enterprise, Trade and Employment Louise O'Reilly

Sinn Fein's Enterprise, Trade and Employment spokesperson Louise O'Reilly noted that the Duffy-Cahill report had not been implemented four years after its completion, and asked the authors what would be the simplest or quickest way to resolve the issues raised. 

Mr Duffy said the authors had completed the task they were required to do, and thereafter it was a matter for the Minister and the Department as to what would be done on foot of the report. 

However, he noted that the employment law proposals in the report were part of a package that should be implemented in full. He said otherwise it would not make sense and would be "incapable of operation".

Ms O'Reilly also asked Mr Duffy about the protracted Debenhams dispute over redundancy payments, but Mr Duffy said he was not getting into the Debenhams matter.

Solidarity People Before Profit TD Mick Barry raised potential issues similar to those experienced by the Debenhams workers, though without naming that company. 

Ms Cahill said there was no proposal in the report to alter the current order of preferential creditors. 

She said it was not for herself or Mr Duffy to say whether, if the Duffy-Cahill proposals were implemented, they would apply to the set of facts which Mr Barry had outlined. 

Mr Barry also queried what would happen if a section of the business had a valuable online section which was registered in an Irish city, and "more or less overnight over three days" was transferred to the UK.

He asked whether that might be a situation where the separation of assets might come into play.

Ms Cahill said that was not something their terms of reference considered, and said there was a different set of facts.  

Fine Gael TD Richard Bruton

Fine Gael TD Richard Bruton asked what would need to be proved in the courts to prove fraud where an asset was transferred.

He also queried whether increasing the penalties for non-consultation from four to 104 weeks would create a situation where the State would be on the hook, not the company involved in the questionable transactions.

Ms Cahill case law relating to Section 608 of the Companies Act was not entirely clear as to whether some "impropriety" had to be demonstrated. 

Mr Duffy said certain proposals of the report were intended to address situations where the employer sought to shift responsibility onto the State. 

Ms Cahill noted that Section 599 of the Companies Act which dealt with the ability to look to other companies in a group to pay the insolvency debts of a collapsed company did not ever seem to have been invoked.