AER LINGUS has commissioned a review into how a controversial restructuring programme in 2008, under which more than 700 staff left to return weeks later on inferior terms and conditions, was put in place.
The review was announced after the company revealed yesterday it is to pay €32.5 million to the Revenue Commissioners as part of a settlement of potential liabilities arising from the so-called “leave and return” scheme.
The airline said in a statement yesterday that the €32.5 million provision related to PAYE, PRSI, interest penalties and related costs arising from payments made to 715 staff under the restructuring programme negotiated at the Labour Relations Commission in late 2008.
The airline will not seek to recoup any of the money from staff who took part in the scheme.
The new review, being carried out by the legal firm McCann Fitzgerald, will look at the role of senior executives at the time as well as the oversight of the deal by the board and its subcommittees and the actions of internal and external auditors. The consultancy firm Deloitte has already been engaged to trace all documentation in relation to the deal.
The “leave and return” scheme was agreed in November 2008 between Aer Lingus and the trade union Siptu, following talks which involved the Labour Relations Commission and the National Implementation Body, the trouble-shooting mechanism under the social partnership.
The scheme was drawn up as an alternative to plans to outsource the bulk of its ground operations at Dublin airport – a move that could have affected more than 1,000 personnel.
The leave and return deal also headed off a potential strike at the airline which could have disrupted thousands of passengers in the run-up to Christmas 2008.
Ultimately under the deal, 913 staff took redundancy with 715 returning to more flexible roles within ground operations on lower salaries.
However, from the outset there were queries raised over whether the scheme represented genuine redundancies which would have allowed the company to reclaim a rebate from the State of several million euro paid out in redundancy costs while the staff would have received generous tax treatment of their lump sums.
Aer Lingus said the restructuring deal was agreed by management on the basis that the severance payments to staff would qualify as a redundancy under the relevant legislation, with related rebates for the company and termination of employment tax relief for affected staff.
However, it said that by late 2010 it had become clear that both the Revenue Commissioners and the Department of Enterprise, Trade and Innovation were seriously questioning this assumption.
“Having reviewed the matter and taken appropriate advice, Aer Lingus concluded that it is in shareholders’ and the group’s best interests to seek a settlement of the matter.”
In negotiations on Wednesday, Revenue confirmed its intention to seek to recover PAYE and PRSI which it considered should have been deducted from termination payments to employees in 2009.
Although settlement negotiations continue, Aer Lingus concluded following that meeting that it should make an exceptional provision of €32.5 million in its financial statements in respect of the likely cost of dealing with this matter. In making this provision, Aer Lingus is conscious of the risk that, in disputing an assessment issued by Revenue, the Appeals Commissioner could impose a higher liability if the case were found against the group.
The company said it was “deeply disappointed and frustrated” at the development. Ryanair, which owns nearly 30 per cent of Aer Lingus stock yesterday said it was “very concerned”.
It posed a series of questions including as to who in the company had been involved in negotiating the deal and which Ministers and civil servants were involved in the discussions.
