Sinead Likely
Solicitor

The End of Leave and Return schemes?

Since its implementation in 2008, the so called “leave and return” scheme brokered between Aer Lingus and the trade union SIPTU, following talks which involved the Labour Relations Commission and the then National Implementation Body, has been the subject of much controversy and speculation regarding whether the redundancies effected as part of that scheme were valid redundancies within the meaning of the Redundancy Payments Acts 1967-2007 (the “RP Act”) which could consequently entitle Aer Lingus to a redundancy rebate and would entitle the employees to generous tax treatment of their lump sums.

As part of the scheme, which came about as alternative to the airline’s original plan to cut nearly 1,300 jobs through outsourcing, redundancy and early retirement, nearly 1,100 Aer Lingus staff were made redundant and received generous redundancy packages of nine weeks pay per year of service.  Approximately 715 of those employees were subsequently re-hired by Aer Lingus a short time later, but to   new positions on lesser terms and conditions. The view taken by Aer Lingus and SIPTU at the time was that, because the employees left and then returned after a period of four weeks had passed to completely new roles, and because they all had to compete for these roles, their employment had terminated and the dismissals amounted to genuine redundancies within the meaning of the RP Acts entitling both the airline and the employees to treat the dismissals as genuine redundancies, with all that that entails.

It was thought at the time that this could herald the beginning of many similar schemes in the future. Indeed, it was not the first of its type, with a somewhat similar deal having being reached between the then Waterford Crystal company and the then ATGWU union in 2006, part of which involved the redeployment of some highly skilled workers into more general operative roles. That particular scheme was approved by Revenue at the time.

However, when in late 2010 a further similar scheme was proposed by the Dublin Airport Authority, and  was rejected by the Revenue Commissionerson the basis that the redundancies were not genuine because the employees were returning to work in a subsidiary of the Authority, the previous scheme carried out by Aer Lingus came back into the spotlight.

This prompted an investigation by Revenue into the Aer Lingus scheme from which it emerged that neither Revenue nor the Department of Enterprise, Jobs and Innovation had actually approved the scheme in 2008. Following its investigation, Revenue concluded that the dismissals were not genuine redundancies within the meaning of the RP Acts.  Aer Lingus ultimately settled the matter for €29.5m in respect of PAYE, PRSI, interest, penalties and related costs arising from the scheme. Following its settlement with Revenue, Aer Lingus also confirmed it would not pursue the €5m rebate from the Department.

The issue for consideration in the Aer Lingus situation was whether the “leave and return” employees could be considered to have left the airline, before re-applying for the new positions, which required them to do significantly different work as had been found to have been the case with the previously approved Waterford Crystal deal. With respect to the Aer Lingus scheme, Revenue was clearly not convinced.

Revenue's clear stance in the Aer Lingus situation will certainly raise alarms bells amongst both employers and employees considering negotiating, or who may already have participated in, similar schemes.