SENIOR hospital consultants and managers may be forced to personally pay back tens of thousands of euros in salary 'top-ups'.
The HSE has ordered that around 150 of these high-earners should have their allowances stopped as part of a crackdown on unauthorised payments to employees in certain HSE-funded hospital and disability agencies.
And a strongly worded circular from the Department of Health has warned that any overpayment which was not sanctioned should be recouped "as expeditiously as possible".
The department's assistant secretary, Frances Spillane, spelled out the instruction in a circular, saying any "overpayment in remuneration made by the HSE or a Section 38 provider should be recouped".
Section 38 agencies are hospitals and disability services which are funded by the HSE but have their own independent boards.
The HSE has rejected the majority of the business cases submitted for allowances worth a combined €1.6m which were made by the hospitals and agencies in the wake of the top-ups controversy.
The allowances ranged from less than €1,200 to more than €50,000 for one consultant in St James's Hospital.
The HSE turned down the application for €30,000 to continue to be paid to Lorcan Birthistle, chief executive of Our Lady's Hospital for Sick Children in Crumlin.
It also rejected a business case for the Master of the Rotunda, Sam Coulter Smith, who is being paid an extra €20,000 from non-public funds.
The hospital had sought permission to pay him up to €25,000.
It said that 36 payments should cease and be subject to further review.
The circular from assistant secretary Ms Spillane was originally sent last September, but a department spokesman did not retract its instructions last night, and would not be drawn on how far it will push to recoup the money.
He said the HSE was "continuing the process of bringing Section 38 agencies into compliance with public pay policy as requested by the department last year".
"The HSE has written to all the agencies concerned asking them to respond in writing by May 16, setting out the course of action they intend to take to give effect to decisions of its review panel. The department will continue to work closely with the HSE on this issue."
But the HSE has now left itself open to a raft of possible legal actions, which experts say they have no chance of winning after it ordered health agencies to effectively tear up employees' contracts.
The internal review of top-ups instructed hospitals and charities to axe the "offending" payments to staff within the next four months.
The HSE wrote to the agencies telling them it was their responsibility, as employers, to end the payments to senior staff by whatever means necessary.
It suggested agreement should be first sought but if this was not possible, more "direct changes" should be imposed on employees.
This includes immediately terminating existing contracts and replacing them with new deals minus allowances.
Acknowledging the difficulties arising from such measures, the HSE told agencies to get legal advice before forcing employees to accept new contracts. The head of the Law Department in NUI Maynooth, Michael Doherty said it would be "very unlikely" the HSE would win if the move was challenged in court.
"Seeking to re-employ someone on a contract with altered terms and conditions, I really don't see how that is legally possible," he said.
He added: "They are basically saying, 'we'll tear up your contract and start again unilaterally', which on the face of it would be a breach of contract law."
Mr Doherty said even employees who did not have additional payments written into their contracts may be able to claim the top-ups became part of their contracts in an "implied sense".
He said recouping retrospective payments would be an "open-and-shut case" which the HSE would not win in court.
"I don't see how you could possibly recoup them unless it was obtained in some unlawful manner but there is no suggestion of that," he said.
Public Accounts Committee chairman John McGuinness said the HSE was facing a "legal minefield" by forcing state agencies to tear up employee contracts.
"While we may address the issues at the Public Accounts Committee but it is another issue for the HSE to row back on these individual arrangements between the employee and the employer and I'm sure the employee in these situations will rely on their contract," he said.
"It's shocking management on the part of the HSE to allow this grow out of control."
Mr McGuinness said the axing of certain payments may even have implications for people who were not included.