Lawyer says Minister may not be entitled to force pay cuts

A LEADING employment lawyer has suggested the Minister for Finance does not have powers under legislation which established the State’s bank guarantee scheme to force financial institutions to breach contracts of top-level staff as part of a move to introduce lower pay levels.

In an address to the Round Hall employment law conference on Saturday, barrister Tom Mallon said that as part of the bank guarantee scheme introduced last year, the Government also established a new remuneration oversight commission, known as Ciroc, to examine pay levels in financial institutions covered by the legislation.

Mr Mallon said that this body had recommended an annual base salary for the chief executives of AIB and Bank of Ireland of about €690,000, with lower figures for the other financial institutions.

He said it had also suggested that the remuneration of other executives should be adjusted to take account of the revised salaries for chief executives.

Mr Mallon said Ciroc had suggested that the reduced salaries for executives should have regard for the need for adequate headroom between them and the chief executives in the organisations. Ciroc had also noted that in some situations the base salaries it had suggested might require “the revision of existing contractual arrangements”.

“It remains to be seen what will occur whilst practically all of the chief executives have or will depart and presumably the new chief executives will be recruited on the Ciroc-recommended salary,” Mr Mallon said.

“How can headroom be imposed downwards on other executives without breach of contractual entitlements and rights?” he asked.

Mr Mallon said this was particularly interesting as following the publication of the Ciroc recommendations it had been reported that the Minister for Finance had written to the institutions covered by the guarantee scheme seeking a salary cap of €500,000 or lower, and indicating that any deviation from this should take place only in exceptional circumstances and with his agreement.

“Can the Minister force the covered institutions to breach contracts of employment of individuals?

“In my opinion the legislation does not give him such powers – we must wait and see what happens,” Mr Mallon said.

He also said there was nothing in the legislation that established the guarantee scheme which specifically provided for a power on the part of a covered institution to unilaterally alter the remuneration of an executive.

“It may well be Government policy to drive down remuneration in the covered institutions, but can they force through that policy,” he asked.

Mr Mallon said that it was quite extraordinary that the termination of employment of many of the chief executives and chairpersons of financial institutions that are receiving support under the legislation had not led to any litigation, either at common law or under any statutory provision.