ADJUDICATION OFFICER DECISION

Adjudication Decision Reference: ADJ-00003971

Complaint for Resolution:

Venue of Adjudication Hearing: Lansdowne House, Lansdowne Road, Ballsbridge, Dublin 4

Date of Adjudication Hearing: 21/11/2016

Procedure:

The aforesaid complaint under Section 6 of the Payment of Wages Act 1991 was received by the Workplace Relations Commission (hereinafter ‘WRC’) on 7^th July 2016. In accordance with Section 41(4) of the Workplace Relations Act 2015, the Director General referred the complaint to me for adjudication. I proceeded to hearing on 21^st November 2016, inquired into the complaint and gave the Parties an opportunity to be heard and to present any relevant evidence. The Complainant represented himself. IBEC represented the Respondent, and the Director and two HR Representatives attended on its behalf. All oral and documentary evidence presented before and during the hearing have been taken into consideration along with relevant legal provisions and law.

Complainant’s Submission and Presentation:

The Complainant complains that on his resignation from employment with the Respondent on 26^th February 2016, it failed to pay him an agreed bonus of €3,750, contrary to Section 6 of the Payment of Wages Act 1991. He gave evidence confirming the following background to his complaint:

The Complainant commenced employment with the Respondent on 21^st January 2008 as an Accounts Administrator, and subsequently as a Telesales and Internet Manager on 28^th November 2011 following an internal competition. This entailed a salary increase and payment of a performance-related bonus of up to €5,000 per annum. He was furnished with a new contract of employment for this position, also confirming continuity of employment from the date of commencement. Although a signed copy of this contract was not to hand, a copy was furnished at the hearing and the Complainant accepted that he had received and signed that contract. Under the heading: ‘Remuneration/Benefits’ with a sub-heading: ‘Bonus’, the contract stated: “You will be eligible to participate in the bonus scheme as the Company may implement from time to time (for employees at your level). The terms and conditions of any scheme will be determined by the Company in its discretion and any scheme may be amended or terminated by the Company at any time. You will qualify for inclusion, post probation, for a bonus of up to €5000 per annum. This bonus will only be achieved if the key performance targets and objectives set by your Manager are met to the satisfaction of the Company. The bonus is payable in May each year. Termination of your employment by either party prior to 1^st May each year will not qualify for payment of bonus.”

Deviating from the term: “The bonus is payable in May each year.”, this bonus was in fact paid quarterly until 2014, each amount being determined by the sales-related targets reached. The Complainant earned and received a bonus payment on most quarters since he took up that position.

During an annual review in October 2014, the Complainant asked for and was granted a raise in his salary from €32,000 to €35,000. At this meeting, his Manager, also the Director, informed him that his bonus would now be paid annually and not quarterly. This did not concern him at the time as he was content with the salary raise and considered the bonus as a form of saving. He was never informed that the Respondent would be relying upon the bonus clause in his 2011 contract for the payment of bonuses going forward. He was not furnished with an updated contract or an amendment, confirming the salary increase or the change in arrangement for payment of bonuses.

During the Complainant’s annual review circa October 2015, he was informed by his Manager that his earned bonus for the intervening period was agreed at €3,750. At the material time, he was not informed that this bonus would only be payable if he remained in the Respondent’s employment until at least 1^st May 2016, some seven months thereafter and this was not put in issue.

The Complainant confirmed that in early 2016, he received and accepted a better job offer from another employer and handed in his notice dated 25^th January 2016 to the Respondent. He said that he had always enjoyed a good working relationship with the Respondent and his Manager and had no issue with extending the four weeks’ notice period to five weeks to suit the Respondent when requested and he left on 26^th February 2016. It was during this notice period that he was informed that he would not be getting his agreed bonus payment. The issue came to light after he had sought to discharge work-related course fees (which the Respondent had paid on his behalf but had become repayable upon his leaving his employment) against the outstanding bonus. He accepted that under the terms of a signed written agreement, he was obliged to repay 75% of the cost of the course, having terminated his employment later than 6 months but within 12 months of the course completion, amounting to €2,964. He has not repaid these monies to date pending the outcome of this complaint. When he referred the matter to HR, the HR Manager produced an unsigned copy of his 2011 contract highlighting the term in the bonus clause: “Termination of your employment by either party prior to 1^st May each year will not qualify for payment of bonus.” Overall, the Complainant contends that he had previously been paid the bonus quarterly. This process had been changed, directly affecting him without any notice or written confirmation of the terms of the new arrangement. The Complainant seeks payment of the outstanding bonus from the Respondent.

Respondent’s Submission and Presentation:

Detailed submissions and supporting documentation was furnished on behalf of the Respondent, and the Director (Complainant’s Manager) and two HR Representatives attended to clarify any issues arising. Most of the factual background as outlined above was not in issue. However, the Respondent’s Representative confirmed its reliance upon the bonus clause contained in the Complainant’s 2011 contract of employment as set out above to contend that as he had left before 1^st May 2016, he was not entitled to payment of a 2015 bonus. The Respondent also accepted that the bonus in question fell within the definition of ‘wages’ under the Payment of Wages Act 1991.

The submissions outlined the Complainant’s working history with the Respondent as set out above, and emails were submitted confirming the agreed bonus structure upon the Complainant taking up his new role as a Telesales and Internet Manager on 28^th November 2011. In addition to his €32,000 salary, he could earn up to a €5,000 bonus. It was confirmed that up until 2014, the bonus was paid in quarterly instalments. Under this scheme, the Complainant received bonus payments amounting to €1,500 in 2012, €4,000 in 2013 and €1,000 in 2014. During his performance review in October 2014 with his Manager, the Complainant was informed that the frequency of bonus payments would be amended and would now be paid on an annual basis going forward. This change applied to all eligible staff and was not specific to the Complainant. Furthermore, the Complainant was aware that annual bonus payments are made in May of each year in respect of the previous year for all eligible employees. With this change of terms, the Complainant received a pay rise and his bonus structure changed to the objective based measure used for all senior personnel in the company. A document used to discuss this with the Complainant was furnished. It was also accepted that during the Complainant’s last performance review circa October 2015, it was agreed that he had earned a bonus to the value of €3,750, which the Director would bring to the board for approval in line with the internal procedures for bonus sign off. The bonus would have been payable in May 2016.

However, the Complainant tendered his resignation on 25^th January 2016, giving a month’ notice in line with his contract. As per the bonus clause contained in his 2011 contract providing: “Termination of your employment by either party prior to 1^st May each year will not qualify for payment of bonus.”, he was not entitled to payment of the bonus payable in May 2016. In response to the Complainant’s contention that he was not given any notice of a restriction on him leaving the Respondent for a period of seven months at his performance review circa October 2015, it was submitted that as he had not handed in his letter of resignation at that stage, there had been no question around payment of the bonus. It would also have been assumed that he was familiar with the bonus clause in his contract of employment. The Complainant completed an exit interview without raising or addressing the matter internally prior to leaving the Respondent. The Director had also requested the Complainant to stay with the Respondent until 4^th March 2016 as it was a crucial time for the business, being peak season. He had informed the Complainant that if he stayed on for the additional time, he would seek to get approval for the premature payment of the bonus. Unfortunately, he declined to remain with the Respondent and left as per his letter of resignation.

The Respondent’s submissions also referred to outstanding fees for the work-related course that had become repayable by the Complainant to the Respondent under a written agreement, and to an exchange of emails confirming that prior to his departure the Complainant had sought to offset this against the bonus in question. A signed written agreement between the Parties for the repayment of the monies in monthly instalments was also furnished. Notwithstanding same, the Complainant had not complied with this agreement and had not made the repayments to the Respondent.

The Respondent submits that the Complainant had been well aware that the payment of his bonus had changed from a quarterly to an annual basis from circa October 2014 and he had not objected, hence there is no dispute as to the change of terms of payment. It refutes the Complainant’s contention that he was unaware of the terms of the bonus clause in his 2011 contract in circumstances where he was clearly aware of his salary and notice period under the same contract. As the Complainant had left his employment with the Respondent in February 2016, three months before the bonus payment became due, he did not qualify for payment as per the terms of the clause. It was further contended that the matter in dispute was not his knowledge or otherwise of the scheme but the fact that he does not wish to discharge the debt owed to the Respondent. Given that the Complainant was not entitled to payment of the bonus under the terms of his contract, which are clear, there was no bonus against which to discharge the monies owed to the Respondent.

Findings & Conclusions:

It is necessary to examine the facts giving rise to this complaint in light of the relevant legislative provisions. Section 1 of the Payment of Wages Act 1991 defines ‘wages’ in relation to an employee as including: ”…any sums payable to the employee by the employer in connection with his employment, including- (a) any fee, bonus or commission, or any holiday, sick or maternity pay, or any other emolument, referable to his employment, whether payable under his contract of employment or otherwise,…” As confirmed on behalf of the Respondent, there is no issue that the bonus in dispute falls within the definition of ‘wages’ for the purposes of referring a complaint to the WRC under Section 6 of the Act. Nor is there any issue that this complaint has been brought within the six-month time limit from the date of alleged contravention as required by Section 41(6) of the Workplace Relations Act 2015. The complaint arises from Section 5(1) of the Payment of Wages Act 1991 which provides: “An employer shall not make a deduction from the wages of an employee (or receive any payment from an employee) unless- (a) the deduction (or payment) is required or authorised to be made by virtue of any statute or any instrument made under statute, (b) the deduction (or payment) is required or authorised to be made by virtue of a term of the employee's contract of employment included in the contract before, and in force at the time of, the deduction or payment, or (c) in the case of a deduction, the employee has given his prior consent in writing to it.”

Firstly, it is regrettable that the Parties find themselves before the WRC and unable to resolve this matter in circumstances where they had previously enjoyed a good working relationship which appears to have turned sour when the Complainant resigned his position for a better job offer. Consequently, issues that are irrelevant to this complaint have been raised and aired at the hearing. It appears that the Complainant refused to accede to his Manager’s request to remain on two extra weeks during peak season because the Respondent refused to write the course fees owed off against his anticipated bonus. These subsidiary issues perhaps explain how this dispute came about but the repayment of the outstanding course fees is a matter for another forum. The crux of the issue for my determination is whether the Respondent was entitled to withhold payment of the bonus agreed during the Complainant’s last performance review circa October 2015 to be valued at €3,750. In this respect, I consider the applicable provision to be Section 5(1)(b) of the Act which would permit such a deduction if “…the deduction (or payment) is required or authorised to be made by virtue of a term of the employee's contract of employment included in the contract before, and in force at the time of, the deduction or payment.” The Respondent contends that the 2015 bonus became unpayable because the Complainant left his employment before 1^st May 2016 when it became payable. In this respect, it relies upon the wording of the bonus clause in the Complainant’s last written contract of November 2011 and in particular, the term that: “Termination of your employment by either party prior to 1^st May each year will not qualify for payment of bonus.”

It is therefore necessary to assess whether the aforementioned bonus clause was in force at the time of the withholding of the bonus payment. There is no dispute that the contract containing the bonus clause which the Respondent seeks to rely upon was entered into by the Parties in or around November 2011. Nor is it in dispute that the Respondent deviated from the term in the clause providing that: “The bonus is payable in May each year.” and from 2011 until 2014, it is common case that the bonus was paid quarterly without any objection from the Complainant. This arrangement appears to have reverted back to payment on an annual basis for all eligible staff around the same time that the Complainant agreed an increase in his salary in October 2014. In fact, the original bonus clause allowed for such variations providing: “The terms and conditions of any scheme will be determined by the Company in its discretion and any scheme may be amended or terminated by the Company at any time.” It is unclear as to whether there was an annual payment made in 2015 in accordance with the new arrangement but nothing turns on this. The Respondent did not proffer any evidence confirming that at any stage including the Complainant’s final performance review circa October 2015, was he verbally advised that the Respondent was reinstating the original wording of the clause. There are no references to this change in the documentation used/generated during the various reviews. Nor did the Respondent confirm in writing the terms of the new bonus payment arrangement including reversion back to the wording of the original bonus clause, or the changes to the Complainant’s contract made in October 2014.

No case law was opened or cited by either Party at the hearing. However, common law allows for a written contract to be changed by subsequent mutual agreement from both parties, whether oral, written or by conduct. Based upon the evidence of both Parties, I am satisfied that by virtue of their conduct, the original bonus clause was varied by way of mutual agreement such that payments were made quarterly from 2011 until 2014. This was instigated by the Respondent and acceded to by the Complainant. I am also satisfied that in or around October 2014, the bonus arrangement was adjusted again by way of oral mutual agreement such that payments would be made annually. Again, this was instigated by the Respondent and there was no objection to the new arrangement by the Complainant. However, and taking the Respondent’s evidence at its height, I am not satisfied that the Parties mutually agreed to reversion back to the original terms of the bonus clause including that: “Termination of your employment by either party prior to 1^st May each year will not qualify for payment of bonus.” The Respondent produced no evidence confirming that reversion back to the original terms had been communicated to the Complainant either orally or in writing. I find that having resiled from the original terms of the bonus clause by its own conduct, the Respondent cannot now unilaterally seek to rely upon same. Therefore, the original bonus clause cannot be held to have been in “in force at the time of the deduction or payment”, as would have been required to withhold the bonus payment under Section 5(1)(b) of the Act. For these reasons, I am also satisfied that having been informed that he had earned a bonus to the value of €3,750, the Complainant was entitled to payment of same, whether it be at the time of leaving, when approved by the board or on 1^st May 2016. There was no suggestion that approval of bonuses by the board was anymore than a rubber-stamping exercise or that the board had not approved any bonuses for the period in question. Nor was there any evidence that any comparable situation had arisen before the instant case. I am also cognisant that it was the Director himself, a person with considerable authority, who confirmed the value of the bonus earned in question. He also appeared to have some discretion in terms of approval, having indicated that he could seek approval for the premature payment of the bonus if the Complainant had stayed for the additional period requested. Based upon the final email exchange between the Parties, I am also satisfied that the Complainant had raised non-payment of the bonus as an issue before leaving his employment when seeking a set-off against the course fees. Given that this matter is simply one of contractual interpretation, nothing turns on this or the fact that he did not refer to the matter in his exit interview, or otherwise raise a grievance internally. It also follows that whether or not he was aware of the precise terms of the bonus clause is irrelevant.

Decision:

Section 41(4) of the Workplace Relations Act 2015 requires that I make a decision in relation to this complaint in accordance with the relevant redress provisions under Schedule 6, specifying the following under Section 6 of the Payment of Wages Act 1991: “A decision of an adjudication officer under Section 41 of the Workplace Relations Act 2015, in relation to a complaint of a contravention of Section 5 as respects a deduction made by an employer from the wages of an employee or the receipt from an employee by an employer of a payment, that the complaint is, in whole or in part, well founded as respects the deduction or payment shall include a direction to the employer to pay to the employee compensation of such amount (if any) as he considers reasonable in the circumstances not exceeding- (a) the net amount of the wages (after the making of any lawful deduction therefrom) that- (i) in case the complaint related to a deduction, would have been paid to the employee in respect of the week immediately preceding the date of the deduction if the deduction had not been made...” For the reasons outlined above, I am satisfied that this complaint is well founded and accordingly, I direct the Respondent to pay the Complainant the sum of €3,750 (net of any lawful tax related deductions properly confirmed in an amended P.45) within 42 days of the date hereof.

Dated:   7^th February 2017