The Impact of Redundancies in the Irish Tech Sector

Organisations across Ireland are continually reviewing and restructuring their businesses with a view to cutting costs. When employers consider minimising costs, they often consider job cuts and we have seen this significantly throughout Ireland, in particular within the tech sector.

Redundancy Payments Acts

Under the Redundancy Payments Acts 1967, ‘redundancy’ is defined as the dismissal of an employee, not related to the employee concerned, but due to ‘wholly or mainly’ other various factors, such as the employer has ceased to carry on the business, or the employee’s role has ceased or diminished in the business.

Tech Sector in Ireland

In Ireland, there has been a significant increase in the number of redundancies within the tech sector and, according to Eurofound, Ireland accounts for the largest proportion (around 40%) of all redundancies in the tech sector in the EU. Eurofound said “it is not surprising since most of these tech companies’ European or EMEA headquarters are based in Ireland.”

Between January and May 2023 alone, there have been more than 2,300 redundancies within the Irish tech sector including Amazon, Google, Indeed, Meta, Microsoft, X (formerly known as Twitter), Zendesk and many more.

On RTÉ’s Morning Ireland, Una Fitzpatrick, the Director of Technology Ireland, recently said the reason for the redundancies is a result of “global economic factors that are now impacting both the wider indigenous and FDI tech sector.”

It is lawful for companies to restructure and reduce their workforce, however they have a legal obligation to conduct redundancies in a transparent and reasonable manner and comply with laws on collective redundancies and unfair dismissals.

Employee Guidance

Redundancy by its nature should be impersonal and important points for employees to be aware of are as follows:

• Employers are legally obliged to conduct redundancy processes in accordance with natural justice and fair procedures. A fair process usually includes discussion around the need for redundancy, pooling employees who occupy the same or similar roles, the application of objective selection criteria and consultation with the potentially affected employees.
• Employers have an onus to find another suitable position within the organisation for its employees. Employees should ensure that their employer has taken reasonable steps to meet this requirement.
• Employees may be eligible for a tax-free statutory redundancy payment for every year of service (per Section 7 of the Redundancy Payment Act of 1967) if he/she has worked in the organisation for two years (104 weeks) and is found to be redundant.
• It is very common for employers to offer an enhanced ex-gratia payment in exchange for the employee signing a severance agreement (waiver and release of claims). It is important for employees to obtain independent legal advice prior to signing any such document.
• In order for a severance agreement to be binding, employers recommend and usually insist that employees take independent legal advice and very often contribute toward the employee’s legal fees in this regard.
• There is no contractual or statutory obligation on employers to offer an enhanced ex-gratia payment and therefore employers have discretion when determining the ex-gratia payment.

Severance Agreement

A ‘Severance Agreement’ is an agreement that is signed by an employee to waive his/her rights to pursue any legal claim against that employer under the legislative acts listed within the said agreement.

It is critical that the employee obtains independent legal advice to discuss their legal rights and entitlements, prior to signing a severance agreement. If the employee signs the said agreement without obtaining legal advice, then there is a risk that the employee cannot take legal action against their employer in the future.

The Workplace Relations Commission (“WRC”) and the Labour Court highlight the importance of ensuring employers properly and fairly carry out redundancy processes. The WRC has made significant awards of compensation against employers where they conducted the redundancy in an unfair and disrespectful manner.

Conclusion

Employers should ensure fair procedures are implemented at each step when implementing redundancies. Employees should take legal advice regarding their employer’s redundancy process before signing a severance agreement, which is relevant in light of the recent developments in the Irish tech sector.

Further Information

For Employment advice or for further guidance on the above matter, please contact Marc Fitzgibbon, Head of Employment or Nikita Kelly, Employment Solicitor.