Former NTUC Income consultants take union to court over new contracts

CORRECTION (5pm 27 March 2013. Restated headline and first paragraph to make it clear the court case is against SIEU, not NTUC Income)

One year after NTUC Income “reclassified” its 660-strong army of consultants as “agents”, some of those affected are taking the company's union to court.

Namely, they say they were not given the information they had sought from the company with regards to their tax and CPF matters; that they were not given any alternatives in the change of their employment status; and that the company had employed “strong-arm tactics” to get them to sign on to the new arrangements.

Lim Paw Seng, Ng Kee Wah and Tan Huan, who had worked for NTUC Income for an average of 17 years each, are unhappy that their concerns have been dismissed, and remain unresolved despite their one-year effort to seek resolution. The three men are not the only ones affected by the changes who are unhappy.

The three men are asking the court to direct the Singapore Insurance Employees Union (SIEU), which had represented the employees in negotiations with NTUC Income on the change of employment status, to refer the dispute to the Industrial Arbitration Court.

Alternatively, to order that the Grievance Procedure under Clause 7 of the Employees Collective Agreement be restored for a resolution of the dispute.

How it all started

It all started in March last year when NTUC Income changed the way it classified its financial consultants (FCs) to bring it more in line with industry practice. The new relationship was designated as principal-agent, instead of employer-employee. This means the FCs would effectively have their employment status terminated.

Mr Ken Ng, senior vice-president of the group’s life insurance sector, said last year that “the lack of clarity surrounding the contractual relationships caused confusion over the consultants’ income tax liabilities and had resulted in incomplete declarations.”

“We have decided to help put our financial consultants on a sound footing by first clarifying that they are self-employed and second, by helping them to bear any back-taxes due,” Ng was reported to have said. A report by The Straits Times added that “benefits will be fully preserved, including entitlement to long-service awards and flexible benefits.”

The paper also reported that “NTUC Income said that around 70 per cent of its agents have accepted the changes and signed the new contracts.”

However, some of the former consultants, who had been with the company for almost 20 years, now dispute these.

The FCs were first informed about the changes at a General Meeting on 17 January 2012. The meeting was called by the SIEU, which itself is under the umbrella of NTUC.

“At this meeting we were informed that our company, NTUC Income, had inadvertently under-declared our income in the course of filing our tax returns with the Inland Revenue Authority of Singapore for possibly the past twenty years,” the men said in their affidavit, filed in the courts on Wednesday. Besides being a breach of the law, the under-declaration also “resulted in errors in [their] Central Provident Fund contributions.”

In order to rectify the errors, they say that the president of SIEU, Terry Lee, told them that “the only solution” to the accounting error was to change their employment status, from employees to Independent Contractors.

“This change of status would effectively terminate the employment of all 660 FCs, making us self-employed insurance agents,” the men said. The FCs raised many questions about this sudden change of status but they were not provided satisfactory answers. A further meeting was thus scheduled.

On 19 January, they were told by NTUC Income management that they (the FCs) “were in non-compliance with laws and regulations regarding taxation and CPF contributions.”

The men asked for details of this non-compliance but these were not forthcoming. They also asked if a change in their employment status was the only option to correct the accounting errors. “No [other] options were presented by the management as having been explored or considered,” the men said.

Total liability amounted to S$5 million

A month later, on 22 February, the FCs met with the senior management of NTUC Income. Again, they were told that they were in breach of tax laws and CPF commitments “simply because [they were] classified as employees for NTUC Income.”

They were told that the total liability incurred by the 660 FCs and NTUC Income amounted to some S$5 million, an average of approximately S$7,575 for each FC. “The FCs were told that NTUC Income would pay the total debt as a ‘gesture of goodwill’”, the affidavit said.

As under-declaration of an employee’s income is an offence under the Income Tax Act, the FCs again asked for details so that each one would know his legal or tax/cpf liabilities.

“The FCs were told that was not possible,” the men said, “but that NTUC Income would divide the accounting into 2 groups of FCs – high and low production – and produce a Case Study explaining when and how the accounting mistakes had occurred.”

“We have no copy of this Case Study,” the men’s affidavit said, “because it was never distributed to the affected FCs.”

A week later, 18 FCs met with SIEU president, Terry Lee, again, to inform him that their grievances have not been addressed by the SIEU as per required under the union’s constitution.

They also requested that each FC be allowed options on their employment status, or in resolving the matter. Some of these FCs have been with the company for decades, for example, and it would be hard for them to re-start their careers as self-employed agents. Others may be willing to have their employee status terminated but may want certain compensations.

“The employees did not accept that there should have been no choice in how the issue would be addressed,” they said, “and as SIEU members and delegates of long-standing, we did not accept that we would have no role in how the transition should be made.”

On 9 March, the promised Case Study was finally shown to the FCs. However, the men said it did not shed light on the accounting issue; that the proposed change in employment status would only partially resolve the accounting errors; and that the termination of employment, without retrenchment benefits or retirement options, was not the only feasible solution to the matter.

New terms

On the same day, NTUC Income distributed copies of the new Financial Consultant contracts to the FCs. This would, in effect, terminate the employment of the FCs as employees of NTUC Income, and “indicate the employee’s consent to act as an independent agent and a non-employed representative of NTUC Income.”

Further, the new contract would end the FCs’ status as SIEU Ordinary Members and render them Associate Members, no longer entitled to the protection of the Employees’ Collective Agreement, which was not set to expire until 30 June 2012.

In March 2012, a meeting was held to discuss the terms of the new contracts. At this meeting, the FCs were told that “the benefits they had received as employees would not change as a result of the termination of their employment contracts.”

“The FCs raised a great number of questions at this meeting,” the affidavit said. However, despite this, the FCs were told that answers would only be given “in the coming days.”

NTUC Income then imposed a deadline of 26 March 2012 for all FCs to sign the new contract.

“[We] were specifically/categorically told by the President of SIEU that if we did not sign the contract to agree to become independent contractors, we would: (a) no longer be represented by the union; (b) lose our licence as Financial Consultants upon crossing the 26 March deadline; and (c) become jobless.”

The FCs said they felt pressured to sign the new contract.

“The manager [of] NTUC Income went so far as taking individual contracts to FCs at their homes to acquire their signatures,” the men said.

As they felt that they had not been given full disclosure on the matters they had raised, and with a looming deadline which could see them lose their jobs and become unemployed, the FCs decided that they would sign the contracts but would add a disclaimer next to their signatures: “Without prejudice to SIEU representation on outstanding issues.”

“The management then removed these signature pages and instructed us that only our signatures would be accepted,” the affidavit said. They were then told that the outstanding issues would be dealt with after 26 March 2012. “NTUC Income required our agreement on those contracts on that date [20 March] in order to resolve its problems with IRAS,” the FCs said they were told.

'Difficult to make them emotionally satisfied'

In August, 8 months after the proposed change was made known to the FCs, a meeting between the FCs and the top management of NTUC Income, including its Chief Executive Officer (CEO), Tan Suee Chieh, was arranged.

“[No] headway was made in terms of rectifying the losses incurred by the FCs as a result of the termination of their employment,” the men said.

In their affidavit, the men presented an email – dated 8 April – which they said was written by Tan to senior officers in NTUC, including Secretary General of the NTUC, Lim Swee Say. The men said Tan wrote:

“We continue to engage them. I think most have accepted and moved on. There [sic] will always feel that they have no choice et al. We will continue to engage them.

“Financially and intellectually, we did all the right things for them and the cooperative. But, it is difficult to make them emotionally satisfied as they have believed themselves to be employees and have their cake and eat it.”

“We believe that the above-mentioned email reflects the disregard with which our grievance has been handled thus far,” the three men said in their court documents.

“Had we not been pressured into terminating our own employment without retirement option or retrenchment benefits,” they continued, “by threats of losing our licence and livelihood to practice anywhere as Financial Consultants, we would not enter into such an agreement.”

Contrary to what was reported in the media, the men say they “have lost a large part of the benefits” which they used to enjoy. Under the new contract, the FCs’ working rights and benefits “changed dramatically”, they said. The affidavit listed 17 of these benefits, comparing the new terms with those under the NTUC Income Employees’ Agreement of 2009. Out of the 17, 13 are removed, and the rest reclassified, or are subject to new conditions.

“We contend that we entered into our recent contracts with NTUC Income as Independent Contractors only as a result of the unconscionable manner in which it was presented to us,” the men said.

“For more than one year now, we have complied in good faith… to resolve the issues… Our efforts have been met with dismissiveness, avoidance and undue delay,” they said in their affidavit.

“We find that by enforcing the decision to terminate our standing as employees and dissolve our Ordinary Membership in the Union, SIEU has entered into a Collective Agreement on our behalf in such a case as it was inappropriate to do so, by virtue of Section 18 of the Industrial Relations Act. We seek the assistance of this Court for a determination of our rights as employees protected by Section 18. We humbly request the determination of the Court on the ambit of our rights under this section.”

Section 18 of the Industrial Relations Act says, among other things, that: no trade union of employees may include in a notice setting out proposals for a collective agreement a proposal in relation to the termination by an employer of the services of an employee by reason of redundancy or by reason of the reorganisation of an employer’s profession, business, trade or work or the criteria for such termination; or the dismissal and reinstatement of an employee by an employer in circumstances where an employee considers that he has been dismissed without just cause or excuse by his employer.

The three men are thus asking the courts to “compel our Union to further our grievance to the President of the Industrial Arbitration Court… so that our matter can be fairly resolved.”

"It is highly unsettling to see how unions in Singapore generally fail to secure adequate representation of rights of their employees,” lawyer for the three men, M Ravi, said. “Singapore employees have virtually no redress under the Industrial Relations Act or the Industrial Arbitration Court if the unions refuse to refer any disputes for their attention. It seems local employees are disenfranchised from the process to appeal for recognition of their rights. The structures in place have effectively taken the employees out of the equation when it comes to negotiating their contracts. The conflict of interest within the Tripartite relationship is worrying."