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'Lawful but preferably not': Debenhams, Clery's and the future of collective redundancies

Debenhams workers have voted to accept a €3 million package, which will end their industrial action.

Image: RollingNews.ie

Updated May 21st 2021, 12:25 PM

AFTER 406 DAYS on the picket line in the middle of a pandemic, former Debenhams workers have agreed to accept a €3 million Government retraining package to end their industrial action.

It’s not the deal that many had hoped to get but Mandate, the union representing the ex-employees, said it represents the best achievable settlement under very difficult circumstances.

After its UK parent collapsed into administration in April 2020, liquidators were appointed to Debenhams’ Irish arm, which itself had been weighed down by trading losses and restructuring costs in recent years.

So dire were the company’s financial straits in the end that its liquidators said there was no money left to pay workers.

To add to the complication, former employees argued their union had in 2016 negotiated ‘enhanced’ redundancy payments rate of four weeks’ pay per year of service.

Instead, with the Irish company insolvent and unable to pay its debts, redundancies, they were told, would have to be covered by the State’s Social Insurance Fund at the statutory rate of two weeks’ pay per year of service.

In Dublin, Limerick and Cork, Debenhams workers blocked the removal of stock from the company’s stores and warehouses, which they said was being repatriated to the UK parent when it should be put into the pot of the Irish liquidation.

Now, workers and their union say the fight isn’t over — there are still structural issues around collective redundancies that policymakers have to address.

One of their more far-reaching demands has been for the Government to implement legislative changes to protect workers that find themselves in similar circumstances.

Crucially, they want the findings of the 2016 Duffy Cahill Report to be implemented.

They also want Solidarity-People Before Profit TD Mick Barry’s ‘Debenhams Bill’ — which would give preferential creditor status to workers affected by collective redundancies — to be passed by the Oireachtas.

Criminal charges

Commissioned in early 2016 by the then-Minister for Jobs, Enterprise and Innovation Richard Bruton and Minister for Business Ged Nash, barrister Nessa Cahill and then-Labour Court chairman Kevin Duffy were tasked with looking at the existing protections for Irish workers facing redundancy and make recommendations for their improvement.

It was spurred on by the controversial closure and 2015 sale of Clery’s department store in Dublin in which over 450 people lost their jobs.

That followed on from a complex business deal in which the landmark store was bought out of receivership in 2012 by a US vulture fund, Gordon Brothers.

The fund split Clery’s into two separate entities: a loss-making operating company and a property company holding the firm’s valuable O’Connell Street property.

With debts of over €4.5 million at the end of 2014, the operating company collapsed into liquidation the following year, while the property company was bought by an Irish-registered entity, Natrium Ltd, for €29 million.

Backed by a London-based investment outfit and 20% owned by Dublin businesswoman Deirdre Foley, Natrium went on to secure planning permission for a €150 million redevelopment and then flipped it to a consortium of investors for €63 million in 2018.

Meanwhile, with little or no money in the operating company to pay the sacked workers, the State ended up footing the bill for their basic statutory redundancy payments out of the national Social Insurance Fund.

Criminal charges — brought by the Workplace Relations Commission against an assortment of people involved in the deal including Foley for allegedly failing to initiate consultations with employee representatives — were dropped in 2018.

A nuanced approach

In their final report, Duffy and Cahill said that “while the [Clery's] transaction that produced this result may have been lawful, it is difficult to avoid the conclusion that it would be preferable if it were not”.

They recommended a statutory mechanism be put in place to allow for the recovery of transferred assets “where the effect of such disposal was to perpetrate a fraud on the company’s employees”.

Basically, it would allow the department of social protection to demand the return of the asset in a situation where the State has had to cover the costs of statutory redundancies.

It’s unclear whether this would have much application to the Debenhams debacle.

However, former workers have argued that this mechanism have at least made it more difficult for the company to shirk its responsibilities to employees.

Crucially for Debenhams workers, the report also recommended that where agreements for ‘enhanced’ redundancies have been negotiated with workers, they could be treated as preferential creditors in any liquidation process.

This is central to their campaign and Barry’s Debenhams Bill, which was introduced to the Dáil on 12 May.

He wants redundant workers in all circumstances to be treated preferentially, alongside traditional preferential creditors like the Revenue and the Department of Social Protection.

The Duffy-Cahill report gives a slightly more nuanced take.

In the report, the authors said, “We do not express a view on whether employees should be entitled to priority over other preferential creditors with regard to the distribution of the asset or its value.

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However, they conceded that where “enhanced” redundancy packages have been agreed, certain “difficulties may arise”

This, they argued, could be solved by amending the Terms of Employment (Information) Act 1994, so that employers have to specifically outline what payments will be made to the employee if they’re made redundant.

Once this is implemented, Duffy and Cahill said, enhanced packages could then be “included among the preferential payments to which employees are entitled in the context of a liquidation”.

Last week, the Dáil voted in favour of postponing a discussion of Barry’s bill for 12 months.

“Government have voted to postpone a vote on that but we are going to be in constant contact to make sure they look at it,” said former Debenhams shop steward Jane Crowe yesterday.

“Our pickets are finished but we are going into a new chapter now.”

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