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Broken promises — the contract conundrum

By Dermot - 20th Jan 2016

Such has been the changes to the pay and working arrangements of consultants over the past number of years, it is easy to forget how many elements of the consultant contract have not been implemented, despite being agreed all the way back in 2008. The recession meant that increases in pay due in the contract were indefinitely postponed and additional cuts in salaries were implemented through the Financial Emergency Measures in the Public Interest (FEMPI) legislation. These salary cuts have certainly been a significant contributing factor to the number of vacant consultant posts in the public health service, currently in excess of 200 posts.

Now that the country has come back from the edge of an economic precipice, pay increases are very much back on the agenda. This can be seen in the promises to reverse the cuts imposed through FEMPI and the 30 per cent pay restoration to new-entrant consultants.

The recent decision by the Employment Appeals Tribunal (EAT) to award compensation to two consultants for the failure of the HSE to pay them salary increases to which they were entitled under the 2008 contract could be a significant victory for the group, who have believed they have been particularly targeted by the Government on pay issues. It also brings the 2008 contract and the contractual pay increases that never materialised back into the spotlight.

The cases could have grave financial implications for the HSE, which has already stated its intention to appeal the decisions.

<h3 class=”subheadMIstyles”>2008 contract</h3>

The salaries under the 2008 contract were to be as follows:

<p class=”listBULLETLISTTEXTMIstyles”>Type A – public-only: €211,000-€252,000;

<p class=”listBULLETLISTTEXTMIstyles”>Type B – public and private practice on the same site: €197,296-€205,000;

<p class=”listBULLETLISTTEXTMIstyles”>Type B* – public and private off-site: €156,000.

Much of the pay increases promised under Section 23 of the Consultant Contract 2008 were never paid.

It had been agreed that consultants who signed the new contract would receive a 5 per cent increase in salary with effect from 14 September 2007 and a further increase, the level of which would depend upon the individual’s existing and new contract type: Half of this remaining increase was to be paid from 1 June 2008 and the balance from 1 June 2009.

While phase one was paid and phase two was paid six months later in January 2009, phase three was withheld under Ministerial instruction.

The remaining issues of implementation were to be arranged through the Contract Implementation Group comprised of representatives of the IMO, the IHCA and the HSE under the Chairmanship of Mark Connaughton SC.

The IMO made representations to the group on 7 December, 2009. Issues raised included payment of a further 2.3 per cent to reach the full 7.3 per cent salary rise, as opposed to 5 per cent, due from 14 September 2007 to consultants continuing on their existing contracts and retired consultants and back payments of the balance from 14 September 2007 to 1 January 2009 of the 7.3 per cent award due to consultants on existing contracts, as well as retired consultants.

The issue of back payment of premium payments for weekend working from uptake of the contract and back payment of the CME allowance were also raised at the time.

That year, the FEMPI legislation was introduced, applying the 15 per cent salary reduction at the current level of salary, with the IMO pointing out that in some cases consultants were subjected to a pay reduction of 30 per cent from the agreed rate. In spite of continuing pressure from the IMO and the IHCA, the HSE continued to insist that outstanding payments due under the 2008 contract could not be honoured due to budgetary constraints. However, in 2010 the Executive did undertake to write to its then four Regional Directors of Operations, advising that various back payments and medical education allowances that had fallen due should be paid. However, it later transpired that on the basis of an instruction given by the then Minister for Health Mary Harney in late 2010, the HSE determined that salary increases owed under the contract would not be paid.

<h3 class=”subheadMIstyles”>Employment Appeals Tribunal</h3>

Both the IHCA and the IMO took advice about how to proceed in light of the Government’s position. One option available to them was the industrial relations process.

Two IHCA members recently brought cases to the Labour Relations Commission regarding these unpaid salary increases.

The Rights Commissioner ruled against the consultants in the cases, meaning that they came before the EAT.

<img src=”../attachments/7b45961c-f126-4323-a4ef-a5c044b4edcd.JPG” alt=”” /><br /><strong>Mr Anthony Owens, IMO</strong>

Dr Thomas Hogan commenced employment with the HSE in late 1985. Up to May 2010 when he resigned from his employer, Dr Hogan worked as a Consultant Anaesthetist in Connolly Hospital, Blanchardstown. Up to the end of August 2008, he ceased his private practice as a result of signing the Type A contract. According to Dr Hogan, he opted for the contract as it would provide security over income, yet under the expectation that salary increases promised by the employer would be made. Dr Hogan maintained that the contract was between him and his former employer and any difficulties coming from the Ministers for Health and Finance was not his responsibility.

Dr John McDermott commenced employment at Connolly Hospital in Blanchardstown as a Consultant Endocrinologist in January 2007. In July 2008, he received a letter from the hospital manager, which stated the hospital was authorised to present him with the new contract options. An incentive to sign the contract at an early stage was offered, which involved the back-dating of the contract to June 2008. Dr McDermott understood from the letter and the enclosed documents that the contract was approved.

He opted for the B* option and met with management and HR and signed the contract on the 26 September 2008. Dr McDermott understood that the contract was approved and as no reference to further ministerial sanction was made, he expected the correct payments would be received. In 2009, the salary arrangements were partially implemented.

Under cross-examination, Dr McDermott did not accept that it was custom and practice that ministerial sanction was required after the signing of the contract. He explained that he had shown a degree of patience by waiting until 29 June 2011 to make this claim under the Payment of Wages Act.

In both cases, the HSE argued that the process which the doctors agreed to was part of an exercise to identify the numbers who would sign up in order to establish the funding which the organisation would require in implementing new contracts. The HSE HR representatives believed that consultants were aware that Ministerial sanction was required and they expected that the medical organisations had informed their members of this requirement.

According to the representatives, it was never contemplated that ministerial sanction would not follow.

The HSE representatives stated that public sector finances at the time were of huge concern to the Government and it was not in a position to dispute that with the Minister.

In Dr Hogan’s case, the Tribunal stated its first duty was to decide whether the salary payable regarding the contract of 4 September 2008 is properly payable.

“The contract is quite specific and in the preamble, advises the employee of the documentation which should be considered as forming part of the contract and states that the documentation ‘will embody the entire understanding of the parties in respect of the matters contained therein’,” according to the Tribunal ruling.

<blockquote> <div> <p class=”QUOTEtextalignedrightMIstyles”>The <strong>Medical Independent</strong> has confirmed with a source close to the HSE that losing these cases would make them liable for anything from €160 to €300 million, with the initial figure of €100 million reported in the media being a ‘significant under-<br /> estimation’

</div> </blockquote>

“The Tribunal heard that the appellant gave up his private practice, as he believed it was a requirement of the contract he was entering into with the HSE and also was induced to do so by virtue of the salary on offer. It is conceivable that the appellant would have formed a legitimate expectation on entering into the contract that the salary would be paid. Issues around legitimate expectation are not a matter for the Tribunal. That said, the specific nature of the contract both in terms of its obligations vis a vis the appellant and the respondent, does, in the Tribunal’s opinion, assist the Tribunal in determining whether the salary outlined in Clause 23 of the contract renders such payments properly payable within the meaning of the Payment of Wages Act.”

The Tribunal also stated it was helpful that all parties are satisfied that the FEMPI legislation does not apply in these circumstances.

While the Tribunal accepted that the Health Act has, in Section 22, a requirement for Ministerial approval of terms under a contract, the notion that an employee must assume or is deemed to be on notice that approval and consent is absent at the time of entering into a contractual obligation was not accepted.

“It was always open to the respondent to specifically set out any or all qualifications, be they statutory or otherwise, it wished or indeed was obliged to insert into the contract and/or the contract documents which it furnished to the appellant prior to the execution of same,” according to the Tribunal.

“In this case, the respondent did not do so and stated that because the appellant was a doctor, that he must have a working knowledge of the Health Act of 2004 and must have been aware that further consent of the Minister for Finance was needed. A close examination of the relevant section would not lead anyone to believe that the said consent would or could be retrospective. In fact, the phraseology of the said section obliging the respondent, with approval and consent of Ministers, ‘determine’ the terms and conditions of a contract, leads to a contrary belief that one would assume that this exercise was completed pre-contract. Indeed, if contracts are entered into by the HSE in advance of the relevant approval and consent, such practice is hardly sound on many fronts.”

The Tribunal stated that the logical conclusion of the HSE’s argument in this case is that it entered into contracts in 2008, none of which had the approval under Section 22(4) of the Ministers, or certain sections of the contract were approved whilst other significant parts were not.

“It would be reasonable to assume that the respondent, on producing a very detailed contract with three distinct options for consultants, namely contract type A, B and C as defined in the contract, would prior to being furnished to any party for signature, have by implication the Ministerial approval, as provided in the Health Act,” according to the Tribunal.

“Accordingly, the Tribunal is satisfied that the salary as outlined in the contract to include the scales were properly payable within the meaning of the Payment of Wages Act.”

The second matter the Tribunal considered was whether an unlawful deduction has occurred, as outlined in Section 6 of the Payment of Wages Act.

The Tribunal stated the Section is very clear that any deduction must have the consent of the employee and that consent must be furnished in writing.

“The only documentation furnished to the Tribunal that is executed by the parties concerning the salary of the employee is the actual contract. There is no provision in the contract that the Tribunal can find which allows for the employer to deduct the salary. The deductions being complained of were not allowances or expenses but are clearly outlined in the contract as salary… Consequently, the Tribunal is satisfied that the deduction was unlawful within the meaning of the Payment of Wages Act and that the appellant’s appeal from the Rights Commissioner should be allowed.”

In terms of awards, the Tribunal decided that in respect of the claim from June 2009 to September 2009, the HSE should pay Dr Hogan an amount of €37,989 and from December 2009 to January 2010, an amount of €61,887, bringing the total amount to €99,876.

The Tribunal reached the same determination in Dr McDermott’s case and decided to award him €14,000.

‘’The IHCA welcomes the Employment Appeals Tribunal decisions on the cases taken by two of its members,” according to a spokesperson for the Association.

“The salary underpayments, the subject matter of their claims, are separate from the FEMPI salary cuts that were imposed on consultants, like other public servants.”

<h3 class=”subheadMIstyles”>Ramifications</h3>

As the cases could set a precedent for more consultants to go through the industrial relations process to get monies owed to them, the HSE is challenging the decisions through the High Court. Also of concern to the HSE are the imminent High Court hearings of approximately 200 consultants, comprising members of both the IHCA and the IMO, who are arguing that the 2008 contract has been breached. It is also understood that several hundred IHCA members have filed or served summonses against their employers and the State for breach of their contract.

In the context of ever-worsening fiscal figures, the IMO decided not to actively pursue the HSE for breach of contract when it first emerged that the Government had informed the Executive that the money owed to consultants should not be paid.

However, in the context of the time constraints arising in law and the improving economy, the IMO decided to take legal counsel on the advisability and practicability of pursuing a legal case to recover the monies that had been withheld, after which it decided to actively support consultants going to the High Court. 

The <strong><em>Medical Independent</em></strong> (<strong><em>MI</em></strong>) has confirmed with a source close to the HSE that losing these cases would make it liable for anything from €160 to €300 million, with the initial figure of €100 million reported in the media being a “significant underestimation”.  It is as yet unclear how these court cases will proceed.  The High Court is likely to require the relevant parties to select a group of the cases to be heard initially, as it would be impractical for all the cases to move through the court at the same time. Also, the effect of the EAT appeal, which is also going to the High Court, albeit through a different process, on these cases is also worth observing.

The IMO has stated that the results of the EAT Tribunals do not necessarily have a wider application than to the individuals concerned.

“It has long been our position that the money has been withheld improperly, but in and of themselves these awards, which are going to be appealed anyway, of course the money should be paid, but I am not sure given the legislation at play it would automatically follow that it would happen,” Assistant Director of Industrial Relations with the IMO Mr Anthony Owens told <strong><em>MI</em></strong>.

“Our position is that it should be of course, but given the fact that these cases were taken by named individuals, citing specific time periods, they may just apply to those individuals for those time periods. The IMO case is seeking full compensation for all monies withheld, going back to the point in which they were withheld as opposed to a specific six-month time period.”

Should the HSE lose these initial cases, it is likely it would decide to go to the Government and seek permission to negotiate with the representative bodies to seek a settlement. Should negotiations occur, the IHCA’s policy of not binding its members to a collective agreement could prove challenging. But all these possibilities are conjecture at this point.

Mr Owens said that the failure of the HSE not to pay money owed through the 2008 Consultant Contract should not be forgotten in the midst of the cuts that took place to public service employees in subsequent years.

“The key thing to remember is that it took a number of years to negotiate that particular contract and when one side walks away from their obligation so quickly after the number of years that went into negotiating it, it does send a very, very negative message,” maintained Mr Owens.

“We would certainly be of the opinion that as a consequence of that negative message and other negative messages subsequently, it all makes it very difficult to recruit and retain consultants in the Irish system. While you might argue that it is a long time ago, it is part of a tapestry of broken agreements and dishonoured contracts.”

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