ADJ-00006952

Complainant

Respondent

Anonymised Parties

An eLearning Specialist

An Energy Company

Act

Complaint/Dispute Reference No.

Date of Receipt

Complaint seeking adjudication by the Workplace Relations Commission under section 6 of the Payment of Wages Act, 1991

CA-00009460-001

01/02/2017

The Complainant commenced employment with the Respondent on 1^st September 2000 and gave his notice of resignation on the 9^th December 2016 to exit on the 06^th January 2017. Throughout his career with the Respondent he had benefited from an Annual Bonus – the Performance Related Awards (PRA). The Respondent refused to pay him the 2016 Bonus.

The Complainant worked diligently during 2016 and was assured that all his ratings were “exceed expectations”. It is discriminatory not to pay him his 2016 Bonus particularly as fellow staff members who are recruited or retire during the year or are on extended sick leave   are given their pro rata Bonus payment.

In addition the Respondent was slack in their operation of the Scheme during 2016 in regard to setting objectives for the Complainant in a timely manner.

In summary the Complainant worked for the full year of 2016 and contributed to its success. To refuse to pay him his 2016 bonus because he has resigned effectively form an early January 2017 date is discriminatory and a breach of the Payment of Wages Act, 1991.

The Respondent submitted in both written and oral evidence the following points

The Bonus referred to, the PRA, did not form part of the Respondent’s wages as provided for under the Payment of Wages Act,1991

The non-Payment of the Bonus does not constitute a defined “deduction” as provided for under the Payment of Wages Act, 1991.

Accordingly the Respondent has made all correct legal payments without any illegal deductions as defined under the Payment of Wages Act, 1991.

The Complainant’s Contract and Terms and Conditions of Employment clearly state that the payment of the Bonus is at

the sole and absolute discretion of the Company

and that

your eligibility for such a PRA payment in any year shall be considered and determined in accordance with the criteria established by the company.

All the extensive information briefings and supporting documents clearly state that staff member must be an employee at the date of the Bonus Payment which is normally in February.

The Complainant decided to resign in December and exit in January. He cannot now plead ignorance of the terms of the PRA Scheme as a justification for a payment to him.

The situation of staff retiring is unique to the Retirement situation and does not give an argument to justify payments to staff who resign voluntarily.

3:1     Pertinent facts from the evidence

The Complainant could not have been unaware of the rules of the PRA Scheme (the necessity to be an employee on the usually February Bonus Payment date) – they are not unique to the Respondent Organisation. They may well seem unfair and arbitrary to him but they are clearly set out in all the Information Documents and Briefings. It can be argued that they formed part of his Contract of Employment.

By resigning on the 9th of December 2017 he must have known that he was putting himself outside the terms of the PRA scheme.

3:2   The Payment of Wages Act, 1991 considerations.

As regards whether or not the Bonus is “wages” has to be seen against

Section 1 Interpretation.

“ wages”, in relation to an employee, means 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, and

( b) any sum payable to the employee upon the termination by the employer of his contract of employment without his having given to the employee the appropriate prior notice of the termination, being a sum paid in lieu of the giving of such notice:

At first glance it would appear that a Bonus is “wages” and is protected against Deductions by the Act.

Section 5 of the Act considers “deductions”

( 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.

In the case in hand the question of the Bonus was clearly part of the Employee’s terms and Conditions. The extensive briefings and explanatory documentation point to this. The Employees were invited to “opt in” or “opt out”.

By “opting in” there was a clear understanding that you were accepting the rules of the scheme which included a normal pay out date of February of the following year. I would consider this situation to be covered by 5:1 (b) and (c) above.

Accordingly by resigning in December and existing in January it can be argued that the Complainant falls outside the terms of the PAR Scheme , agreed when a staff member such as the Complainant “opted in”, regarding being an employee at the date of the payment.

However before coming to a final conclusion note has to be had of the considerable Legal Case law in this area.

3:3     Case Law and Precedents

In regard to the legal position the Bonus was at the “sole and actual discretion of the Company” and “determined by the criteria established by the Company”.

The key discretionary issue here is the requirement to be an employee on the Bonus Payment date.

Legal references and considerable discussion of the issues involved here are in

Bonus Points: Employer’s discretion in the determination of Bonus payments by Ryan and Ryan in Commercial Law Practitioner 2007,14(8) 166-171

A recent Irish High Court case Cleary and others v B&Q Ireland Limited [2016] 27ELR 121 is also worth noting.

In summary the legal Authorities tend to the view that where a bonus in discretionary ,as in this case, the Respondent employers have to exercise their discretion in a fair and equitable manner. It is accepted in all the cases that there is no definitive definition of “Discretionary” and the cases have to be seen on their merits alone.

A key point that appears to link the cited cases is the question as to whether or not the bonus has actually been worked for in the relevant period i.e. does the employee qualify for the bonus save for the exercise of managerial discretion in the interpretation of the rules of the Scheme.

Paragraph 63 of Cleary and others v B&Q Ireland Limited [2016] 27ELR 121 is quoted below

3. *137 by the employee during which the workers had a legitimate expectation that the bonus was accruing and would be paid. I am satisfied that the bonus for August 2011 to January 2012 was properly payable in June 2012 notwithstanding the withdrawal of the scheme in January 2012. I am satisfied that in the circumstances of this case the overall discretionary nature of the bonus scheme does not extend to a withholding of the bonus due, in respect of that period, in respect of which the bonus was quantified and payable under the scheme, subject to compliance with the eligibility provisions. I am satisfied that the contract of employment and bonus scheme must be interpreted reasonably.* The discretion to withdraw the bonus scheme at any time, in my view, was always intended to apply in futuro and attached to the conferring of bonuses, as yet unaccrued, under the terms of the scheme. The payment of the bonus crystallised as a contractual obligation once it was “earned” in accordance with the terms of the scheme as operated. I am satisfied that the Tribunal erred in law, in interpreting the discretion vested in the employer to withdraw the bonus scheme at any time as being applicable or attaching to this period.”

*Adjudicator highlight.

In the quoted case above by McDermott J there is extensive reference to a range of precedent cases in Ireland and the UK. The summary view that I took was that Discretion needed to be exercised equitably and reasonably. One of the key determinants being whether or not the bonus had been actually earned.

In the case in hand the 2016 Bonus had been earned – the evidence pointed to the fact that the Complainant had achieved a satisfactory performance rating and in keeping with previous years was entitled to a bonus.

The other factor considered by the Authorities was the contractual situation of the Bonus –in the case in hand I took the view that there was sufficient linkage to the main contract of employment to justify the view that the bonus had a contractual basis and qualified for payment once “earned” i.e. the employee was there for the qualifying period - in this case the year 2016.

3:4     Summary Conclusion

Having considered all the evidence presented both orally and in writing and referencing the legal authorities above I came to the view that the withholding of the bonus was an overly rigorous interpretation of the Respondent’s discretionary powers. Discretion has to be employed equitably –the Complainant had been in the employment for all of 2016 and by any normal standards of reasonableness had worked satisfactorily for the bonus.

There was no suggestion made that he was leaving to join a competitor or any other matters save the date of the resignation that would strengthen the argument against payment.

The fact that the Bonus is paid pro rata to retiring employees and employees on long term sick leave I also found persuasive in the Complainant’s favour.

Accordingly I find that the non-payment of the 2016 bonus was an improper deduction under Section 5 of the Payment of Wages Act, 1991.

I direct that the Bonus be paid as soon as is practicable following the publication of this Adjudication decision.