ADJUDICATION OFFICER DECISION
Adjudication Decision Reference: ADJ-00004782
Complaint(s)/Dispute(s) for Resolution:
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-00006803-001 | 05/09/2016 |
Date of Adjudication Hearing: 31/01/2017
Workplace Relations Commission Adjudication Officer: Roger McGrath
Procedure:
In accordance with Section 41(4) of the Workplace Relations Act, 2015 following the referral of the complaint to me by the Director General, I inquired into the complaint and gave the parties an opportunity to be heard by me and to present to me any evidence relevant to the complaint.
Background
This complaint was received by the WRC on the 5th September 2016. The complainant had been employed as a senior manager in a multi-national security services company
Preliminary Issue
A preliminary issue was raised by the respondent, namely that I do not have the jurisdiction to hear the claim under section 6 of the Payment of Wages Act 1991.
Summarising the preliminary issue it is the respondent's view that the complainant had entered into a final and binding severance agreement on the 22 December 2015 in advance of his redundancy of 31 December 2015. Clauses in this severance agreement provided:
“3.1 In consideration of the Executive’s agreement to the terms and conditions hereof and (subject to the terms of this Agreement) in full and final settlement, satisfaction, release and discharge of any and all claims, actions or causes of action (to include personal injuries), suits, complaints, contracts, liabilities, agreements, promises, debts or damages, whether existing or contingent, known or unknown, and whether arising under statute, common law, equity or otherwise arising out of the Executive’s employment with the Company or the termination thereof as the Executive may have against the Company or any Associated Company, its or their directors, employees, officers, representatives, agents, successors, shareholders and assigns, the Company shall pay to the Executive the gross sum of €X (the “Termination Payment”) which shall be paid to the Executive in the most tax efficient manner permissible by law but at no extra cost or expense whatsoever to the Company within 14 days of the Effective Date.
3.3 It is acknowledged by the Executive that the reference to statute in clause 3.1 above includes but is not limited to the following legislation:.iii) The Payment Wages Act 1991
The respondent submitted that this severance agreement was entered into only after lengthy negotiations at which the complainant had legal representation. The complainant's legal representative later confirmed, in writing, that his client had taken legal advice on the effect and implications of the agreement prior to his execution of it.
The respondent also submitted that the complainant was paid a substantial ex gratia payment and that his legal fees were covered by the respondent. The complainant was, according to the submission, paid all bonuses due to him.
The respondent contends that the complainant, by entering into the severance agreement, which included the phrase, “all claims….whether existing or contingent, known or unknown, and whether arising under statute…arising out of the Executive’s employment with the Company…” could not take a claim under the Payment of Wages Act.
The respondent also submitted that the requirements set out by Smyth J in the High Court judgment of Stephen Kinsella & Luke Bradley v Sunday World Newspapers Ltd [2007] IEHC 324 for a valid waiver have all been fulfilled in this case.
In summary the respondent's argument was that the severance agreement, entered into after lengthy negotiations and with legal advice bars the complainant from taking a claim under the Act.
In response the complainant pointed out that clause 3.1 of the Severance Agreement (above) contains the phrase, "subject to the terms of this Agreement", and as the matter of bonuses and their payment is covered further on in the Agreement (clause 4), his client may pursue the payment of bonuses; the extent of the waiver is limited.
The complainant also argued that it was understood that more payments would be coming after the termination date, and that one of these payments was the Business Performance Plan bonus. The complainant raised the question as to why, if the respondent did not believe it had to pay the bonus, it had paid half of it.
Jurisdiction
Although clause 3 of the Severance Agreement, Consideration, Waiver and Release, includes a substantial waiver the inclusion of the phrase, "subject to the terms of this Agreement", allows some latitude. Clause 4 of the Agreement, Bonus, explaining the payment of the various bonuses, trumps the limitations imposed by clause 3 in relation to the payment of bonuses and opens the gate for a claim under the Payment of Wages Act 1991. I therefore believe I have jurisdiction to deal with this complaint.
Complainant’s Submission and Presentation:
The complainant provided a detailed written submission.
In the submission the complainant states that he is seeking payment of a deduction from his bonus that occurred on 31 March 2016. According to the complainant he was, on that date, entitled to be paid a bonus in the sum of €30,000 (gross) in respect of his work during 2015. The complainant alleges that the respondent deducted 50% of that bonus from the payment that was made, such that the complainant was paid only €15,000 (gross).
The submission states that the complainant was entitled to three different bonuses in respect of 2015. These were; the “Business Performance Plan” (“the BPP”), the “Management Incentive Compensation Plan” (“the “MICP”) and the “Extra Sales Incentive Compensation Plan” (“the ESICP”).
The complainant was paid in full in respect of the MICP and the ESICP. The deduction of €15,000 to which this complaint relates was a deduction from the BPP bonus payment.
The submission goes on to outline the complainant's employment with the respondent; the complainant was employed by the respondent and its predecessor companies between 1991 and 2015. Between 2000 and 2015 he served as Managing Director of the respondent (“the Irish role”). The complainant’s role changed to “Service Business Director, Europe” (“the European role”) during 2015. The respondent made the complainant redundant with effect from 31 December 2015.
The context for the complainant taking up the European role was as follows. During a period commencing from late 2014 and ending with the end of his employment, the complainant developed a project for the respondent known as the “Service Initiative”. The complainant implemented the Service Initiative in a number of companies in the Group, each of which was based in a different European country. The Service Initiative was designed to significantly increase the profitability of those companies. This initiative was one that he had previously implemented in the respondent’s Irish business. The Service Initiative was designed to result in significant increases in the respondent’s profitability and of the profitability of the respondent’s associated companies in other European countries.
According to the submission so successful was the complainant’s initiative that, in a process that started in late 2014, the complainant was persuaded by the respondent to take up the European role. The nominal starting date of his new role was 1 July 2015 but the complainant had commenced work in relation to that role well before that date. The complainant’s new role was to give him a Europe-wide focus. However, the complainant and the respondent agreed that, in addition to his Europe-wide responsibilities, the complainant would retain aspects of the Irish role for a period of months. The fact that the complainant retained aspects of the Irish role was clearly demonstrated by the fact that (by agreement with the respondent) he retained the title “Managing Director Ireland” until 31 December 2015.
Although he was not formally “confirmed” in the European role until 1 July 2015, it was clearly understood between the parties for a period of months prior to that date that he was moving to that new role. His move from the Irish role to the European role was not a single event that occurred on 1 July 2015. The complainant had been conducting elements of the European role long before that date and he retained aspects of the Irish role well after that date.
The fact that the complainant had been in effect carrying both his former role and his new one for quite some time was partially compensated by the respondent by means of a back-dated salary increase.
For reasons unrelated to the complainant’s performance (which continued to be exemplary) the respondent made the complainant redundant with effect from 31 December 2015.
As part of his remuneration package in the Irish role, the complainant received a bonus under a scheme entitled “Business Performance Plan” (“the BPP”).
On 14 May 2015, during the period when the respondent was aware that the complainant’s role was about to change, the respondent wrote to the complainant congratulating him on his selection for participation in the Business Performance Plan (BPP). The letter went on to provide in considerable detail the amount of bonus that would be payable under the BPP and the targets which would need to be met in order to render the complainant eligible for such bonus payments.
The complainant's submission contends that the complainant’s participation in the BPP in 2015 was never to be pro-ratated from a full-year payment to a half-year payment. His participation in that scheme related to the full year. His earning potential was to be based on a full year target, leading to a full year bonus payment.
The complainant's view is that when his role changed (as confirmed in the letter of 1 July 2015) he became entitled to two new bonuses, namely the MICP and the ESICP, in addition to the BPP. The parties expressly agreed that, for 2015, the complainant would continue to be entitled to receive a bonus under the BPP in addition to his eligibility for MICP and ESICP. This agreement is reflected in the letter of 1 July 2015 which includes the following sentence, "It should be noted that there will be no change in your 2015 bonus scheme.”
The 12-month scope of client’s bonus potential under the BPP for 2015 is distinct from his bonus potential under the MICP. The respondent wrote to the complainant on 1 July 2015 outlining the complainant's entitlements under the MICP programme, which indicated it would be pro-ratated for 6 months.
It is the complainant's contention that these two letters make it clear that the complainant’s earning potential under the BPP was in respect of the full year 2015, whereas his earning potential under the MICP related only to the second half of 2015.
The complainant worked on that basis. Notwithstanding that his new role was a challenging and time-consuming role, he continued to carry out duties in respect of the Irish role, including in relation to client relationship management and sales.
In summary, throughout 2015 the complainant worked very hard to ensure that the targets under the BPP were all met, such that he would earn the full bonus amount payable.
When the respondent decided to make the complainant redundant with effect from the end of 2015, it is the complainant's view that the parties expressly agreed that the termination of the complainant’s employment would not affect his entitlements under the rules of the bonus schemes that applied to him.
The complainant has received the appropriate bonus payments under the 2015 MICP and the 2015 ESICP. However, the complainant did not receive the appropriate payment under the 2015 Business Performance Plan (BPP). The complainant received only 50% of the payment due to him under the BPP, in the following circumstances.
The respondent notified the complainant by letter of its intention to pay certain amounts under the BPP and the MICP in a letter dated 8 March 2016. The ESICP had been fully paid out prior to that date.
This letter, the complainant contends, appears to have been written on the assumption that the complainant was entitled to the BPP bonus in the first half of 2015, and the MICP bonus in respect of the second half of 2015. That was not the case. The complainant was entitled to the BPP bonus in respect of the entire of the year 2015, and in addition was entitled to the MICP bonus in respect of the six month period from 1 July 2015 through 31 December 2015. He was therefore very surprised to receive the letter from the respondent dated 8 March 2016.
The respondent, it is alleged, had decided to unilaterally cut the complainant’s BPP bonus payment in half, to €15,000. The respondent had no legal right to do so. The complainant pointed out to the respondent the extent of the respondent’s error. Notwithstanding these clear communications, on 31 March 2016, the complainant received a payment purportedly in respect of the BPP, and in respect of the MICP. It was clear that the respondent had paid the complainant only 50% of his entitlement under the BPP.
The complainant's solicitor contacted the respondent on this matter but no agreement was reached and the matter was referred to the WRC
In conclusion the submission states that the complainant believes that the respondent's contractual obligation to pay a full year’s bonus in respect of the BPP is clear. The respondent made a commitment to do so. Even when the complaint changed roles during the year the respondent confirmed in writing that despite the change in the complainant’s role during 2015 “that there will be no change in your 2015 bonus scheme.” The complainant relied on this agreement by doing not one job but two jobs for much of 2015.
The complainant believes that now that the complainant has left the respondent’s employment, the respondent wants to renege on the agreement that it reached with the complainant. There is no basis for the respondent to renege.
The complainant submits that the deduction of €15,000 from the BPP bonus was a deduction precluded by section 5 of the Payment of Wages Act 1991 and requests that the respondent be directed to pay the complainant the rest of the bonus that he believes he is owed.
In direct oral evidence the complainant stated that he was never told that he would only get the BPP bonus for six months. He was never told he would not get the two bonuses at the same time. What he was doing was unique within the organisation. That after July he worked closely with the new Managing Director for Ireland and supported him in the transition. He also had a role in the investigation of a new acquisition, which ultimately did not come to fruition. The complainant had never been under the impression that he would not get both bonuses. He stressed that he had played a very important role in the company's success.
In cross examination the complainant stated that he had several meetings with the European Director before taking up the European role. Regarding the letter of 1st of July the complainant had not disputed it because it was his view that it referred to the BPP. In response to questions the complainant stated that he now knows that it is not possible to get both bonuses at the same time, that one is local and one European. He also stated that his performance was such as warranted a substantial bonus.
Respondent’s Submission and Presentation:
The respondent provided a detailed written submission.
At the outset the submission outlined the payments which were made to the complainant; €30,000 under the ESICP on 21 January 2016; €15,000 under the BPP on 31 March 2016; and €24,450 under the MICP on 31 March 2016.
The submission goes on to explain the various bonus schemes and how they are applied. In very simple terms, different bonus schemes are attributable to different roles and levels within the Respondent’s business. Employees of the Respondent are eligible for either the BPP/BPP+ OR the MICP:
The BPP is designed for those in management roles in smaller countries. The BPP+ is effectively identical to the BPP except that the BPP+ provides a greater bonus potential (up to 40% of salary).
The MICP is a global corporate scheme requiring US approval which only applies to employees at director level or general managers in bigger countries. The MICP carries different incentives and bonus awards appropriate for that higher level. It provides a bonus potential of up to 40% of salary like the BPP+. No other employees in Ireland were eligible for the MICP bonus at the time of the complainant's eligibility, nor are any employees eligible for the MICP now.
If an employee is eligible for the BPP or the BPP+, they cannot also benefit from the MICP (and vice versa). One of the main reasons for this is that the BPP/ BPP+ and the MICP have equivalent targets. If an employee is promoted and is selected to participate in the MICP, they leave the BPP+ scheme. No employees of the Respondent have ever simultaneously benefited from the BPP/BPP+ and the MICP. It is simply not possible to benefit from both schemes at the same time. The complainant was with the respondent for over 20 years and he was well aware of this practice.
In relation to the specific instance the submission continues with an outline of the respondent's view. Between 1 January and 30 June 2015, the complainant was eligible to participate in the BPP+ in line with his General Manager role. He was moved from the BPP to the BPP+ in May 2015 to enable him to earn higher bonuses despite being ineligible for the MICP. A letter was issued to the complainant on 14 May 2015 clearly stating that he was eligible for a cash award under the BPP+ based on his “current level” (i.e. General Manager). The complainant had no entitlement to benefit from the MICP at this time. All of the respondent’s bonus schemes are issued on an annual basis for the entire calendar year; the May letter related to the 2015 calendar year and was backdated to January.
On 1 July 2015, the complainant was promoted from Managing Director to Service Business Director which was a role with responsibility for service across Europe. An alternative employee was moved into the General Manager role on this date. Because the complainant took up the new Service Business Director role and was now at director level, he was eligible to participate in two bonus schemes; the ESICP and the MICP. He no longer had an entitlement to participate in the BPP+.
On 1 July 2015, two letters were issued to the complainant dealing with his new bonus entitlement.
The first letter confirmed that:
the complainant would continue to be entitled to participate in a Management Incentive Bonus Scheme (being an umbrella term for a number of bonus schemes i.e. the MICP or the BPP+ or the BPP);
he would also be eligible for an additional incentive bonus linked to the achievement of Extra Sales targets in 2015; and a “Special” Service Excellence Incentive (which come under the umbrella of the ESICP); and
there would be no change to the complainant’s 2015 bonus scheme. To be clear, this meant that the complainant’s 2015 targets and thresholds would not change; it did not relate to the schemes in which he could participate in 2015.
The second letter from the Chairman and Chief Executive Officer confirmed that the complainant was selected to participate in the 2015 MICP based on his “current level” (i.e. director level) which was a 6 month pro-rata eligibility; and this MICP bonus scheme “supersedes any previous scheme”.
These letters, according to the respondent, show that the complainant had different bonus entitlements for the first and second half of 2015 respectively to reflect his role change. The BPP+ bonus was based on the 6 month period from 1 January 2015 to 30 June 2015 when the complainant was at mid-manager level (General Manager); this resulted in a payment of €15,000. The 2015 MICP was based on the period 1 July 2015 to 31 December 2015 when the complainant was promoted to director level; this resulted in a payment of €24,450. In addition, the complainant separately received €30,000 under the 2015 ESICP.
Had the complainant not been promoted to director level, he would have received a full year’s payment under the BPP+, being €30,000. Instead, however, the complainant received an additional €9,450 by participating in the MCIP for the second half of 2015. It would be wholly illogical for the complainant to have an entitlement to a full year’s bonus under the BPP+ in addition to a 6 month bonus under the MICP at the same time as the new General Manager for Ireland (who was appointed to his position on 1 July 2015) was entitled to a bonus under the BPP bonus scheme.
In conclusion the respondent submits that it has fully complied with its obligations under the Severance Agreement and its bonus schemes. The respondent is utterly bemused by the complainant’s allegations particularly in circumstances where he received an unusually large termination payment of in addition to bonus payments for 2015 of €69,450.
The European Director gave direct oral evidence. It was his evidence that he never agreed that the complainant could stay on both bonuses; it is either one or the other. The MICP is seen as a big move, a step up. He did not have authority to allow anyone stay on both schemes and that no employee is on BPP and MICP at the same time.
In cross examination the witness agreed that there was nothing in the company handbook stating that you could not get both bonuses at the same time. The witness could not say why there was nothing in writing stating that the BPP would be pro-rated. Regarding the crossover of the Irish and European role the witness stated that after 1st July 2015 the complainant had no role in Ireland.
The HR Director for the company was also called as a witness. In evidence she stated that she had never heard of any employee getting both bonuses. The complainant was on BPP and moved to MICP; one ended and one started.
In cross examination the HR director denied that if you had two roles that it might be possible to get two bonuses. In response to a question as why it was not made clear to the complainant that the BPP would be pro-rated the witness stated that she was not part of that discussion.
Issues for Decision:
Was the non-payment of €15,000, an unlawful deduction from the complainant's pay?
Legislation involved and requirements of legislation:
Section 5 of the Payment of Wages Act, 1991 provides:
Regulation of certain deductions made and payments received by employers.
5.—(1) 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.
Findings
I have considered this matter carefully. It seems to me that an employee with the experience and rank of the complainant must have been, or at least should have been, aware that the BPP bonus and the MICP bonus were mutually exclusive. He must have or should have known that when he took over the position of Service Business Director, Europe, his bonus regime would be amended to reflect his more senior position. That he expected a hybrid scheme encompassing elements of the old and the new to continue, does not seem logical.
The complainant argues that he continued to have a major role in the Irish operations even after the July 2015 changes; he assisted the new Irish Managing Director and was involved in major work regarding an acquisition among other things. During the six months from July to December 2015 he believes he was unique in the company, in essence holding down two substantial roles. I have no doubt the complainant was of great assistance to the new managing director but I cannot believe this assistance was such as to equate to double jobbing and if he was not double jobbing he was not entitled to a double bonus payment (if such was possible), one relating to the Irish operations and one relating to the European operations.
Although the letters of 1st July 2015 are open to interpretation and it could be said they do not make it absolutely crystal clear that the BPP was ending and being replaced by the MICP, it is difficult to believe that anyone, particularly someone at such a senior level with more than 20 years' experience in the company, could interpret them as the complainant claims he did.
In accepting the new role and the benefits attached to it in July 2015 the complainant also accepted the forfeiture of other elements of his contract, such as the BPP. Therefore, as the complainant was not entitled to earn this bonus for the period July to December 2015, the non-payment of €15,000 relating to the BPP for that period is not an unlawful deduction
Decision:
Section 41(4) of the Workplace Relations Act 2015 requires that I make a decision in relation to the complaint in accordance with the relevant redress provisions under Schedule 6 of that Act.
I have decided that the respondent has not contravened Sec 5 of the Payment of Wages Act and therefore the complaint fails.
Dated: 2nd May 2017