The Court of Appeal has awarded Magdalena Glegola €16,818.75 in damages after finding that Ireland failed to provide a procedure required by an EU directive on employee protection when an employer becomes insolvent.
In a judgment delivered on 24 February 2017, Ms Justice Finlay Geoghegan said the State had not correctly transposed Article 2(1) of Directive 2008/94/EC. The court allowed Ms Glegola’s appeal, set aside the High Court order and awarded damages against the State. It did not order payment from the Social Insurance Fund.
Ms Glegola said she was dismissed for redundancy by her former employer, The Metro Spa Ltd, in November 2011. The company’s solicitor said it had ceased trading that month, but it had not entered liquidation because it lacked resources to meet the costs.
A Rights Commissioner made a binding recommendation in October 2012 awarding Ms Glegola €10,000 for unfair dismissal, €5,000 under working-time legislation and €1,818.75 in unpaid wages. The company did not appeal. It was struck off the companies register in October 2013 for failing to file accounts.
Ms Glegola later obtained a High Court declaration that the company could not pay its debts and that insufficient assets were the reason it was not being wound up. She argued that this met the directive’s insolvency test and required the State to pay her award from the Social Insurance Fund. The Court of Appeal rejected that argument: the declaration did not establish that the company’s business had definitively closed, and no winding-up order or liquidator appointment had been made.
The court found that Irish law offered no procedure for a court considering a winding-up petition to make the alternative finding described in the directive: that a business had definitively closed and its assets were insufficient to justify winding it up. The 1984 Employers’ Insolvency Act, meanwhile, treated a company as insolvent for the scheme only in specified circumstances, including a winding-up order or voluntary winding-up resolution.
The court also concluded that the State’s failure was sufficiently serious to justify damages. It was satisfied that, had the required procedure existed, Ms Glegola would probably have been able to prove the business had closed and that its assets were insufficient, and her solicitors would probably have applied within the relevant time. The damages award matched the binding Rights Commissioner award.