ANALYSIS:Company notified staff of 'leave and return' option without approval of Revenue or minister, writes MARTIN WALL
FROM THE start the concept of the controversial “leave and return” scheme at Aer Lingus seemed highly dubious.
And two years later, with the company now set to pay €32.5 million to settle liabilities for tax and penalties arising from the scheme, serious questions will now be asked about how it was ever approved by management and the board of the airline in the first place.
The basic principles of the scheme were very clear: nearly 1,000 ground operations staff left under a redundancy package with over 700 returning weeks later on inferior terms and conditions.
If the redundancies were considered genuine, the company would recoup millions from the State to cover some of the cost of the redundancy payments while the staff would receive favourable tax treatment on their lump sums.
However, the only apparent precedent for such a development had been a case in Waterford Crystal, where highly skilled glass blowers were let go and returned later to general operative roles.
In the case of Aer Lingus, the staff returned to more flexible roles in areas such as catering, cargo, maintenance operatives and passenger services – all within the general family of ground operations duties.
The direct analogy of the Waterford case would have been if pilots had been let go and brought back as baggage handlers, for example.
The context in which the deal emerged, however, is highly relevant. The company had initially planned to outsource the bulk of its ground operations at Dublin airport and a damaging strike was looming which would have caused huge disruption in the run-up to Christmas 2008.
The deal between Aer Lingus and Siptu emerged following engagement at the Labour Relations Commission and the National Implementation Body.
However, when the company notified staff of the various redundancy options, including the “leave and return” scheme on November 25th, 2008, it did so without apparently getting any concrete assurance that it would be considered acceptable by the Department of Enterprise and the Revenue under the relevant legislation.
A week after the company offered the scheme to staff, a department official wrote to the airline stating that he had been directed by the then minister Mary Coughlan to state that the scheme may qualify under the legislation.
However, the letter was highly qualified and stated that it could not be taken in any way as a commitment.
An Aer Lingus official in a note to other managers on the letter said this appeared to represent “Yes Minister” for “yes to redundancy”.
Highly placed sources said yesterday that the company had not sought specific advice from its lawyers on whether the redundancies would be considered genuine. Neither did the company directly approach the Revenue on the issue.
It would appear that the airline relied on indications or “winks and nods” from persons as yet unknown that the arrangement would be approved.
The review announced yesterday is likely to focus on what was discussed about the arrangement at meetings of the management team and of the board and its subcommittees. It is also likely to look carefully at what, if anything, is recorded in minutes of those meetings.
Sources with an insight into the thinking of the board at the time said yesterday the board had full knowledge of and was fully supportive of the arrangement.
The review may also uncover what contacts, if any, there were between the company and Ministers and senior officials in relation to the deal.
The review is also expected to examine why there was a significant delay on the part of Aer Lingus in answering a series of letters about the deal sent to the company by the Department of Enterprise.
Highly placed sources close to the company yesterday described the handling of the deal as “sloppy”.
The restructuring deal was supposed to have paid for itself in about 2½ years.
The time-frame has now been extended to 10 years.