Complainant

Respondent

Anonymised Parties

A Senior Accounts Manager

An   Accountancy Firm

Representatives

The   Complainant attended in person and was not represented

The   Respondent attended in person and was not represented

Act

Complaint Reference No.

Date of Receipt

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

CA-00010367-001

23/03/2017

The Complainant was employed by the Respondent as a Senior   Accounts Manager from 5^th May, 2015 until 28^th   February, 2017 when he voluntarily left his employment. The Complainant claims that the Respondent   made an unlawful deduction from his wages contrary to Section 5 of the   Payment of Wages Act 1991 in relation to the alleged failure to pay a bonus.

The Complainant confirmed at the oral hearing that the   elements of his original complaint under the Payment of Wages Act 1991 in   relation to the alleged unlawful deductions concerning training expenses and   sick leave were withdrawn. Accordingly, the only issue for decision relates   to the claim by the Complainant that the Respondent made an unlawful   deduction from his wages contrary to Section 5 of the Payment of Wages Act   1991 in relation to the alleged failure to pay a bonus.

The Complainant was employed by   the Respondent as a Senior Accounts Manager from 5^th May, 2015   until 28^th February, 2017 when he voluntarily left his employment. The Complainant submitted that his salary   was €45,000 per annum, and in addition, he was contractually entitled to an   annual bonus of €10,000 per annum, payable at six monthly intervals, subject   to the achievement of targets.  

The Complainant submitted that he was due to receive a   performance bonus amounting to €2,340 for Quarter 4 of 2016 based on his   performance levels for 2016 which was payable in the January, 2017 salary   run. The Complainant claims that the Respondent   has unlawfully withheld the payment of this bonus to him and he contends that   all other staff members in the office received their Q4 2016 bonus in the   January 2017 pay run. The Complainant   submitted that he had a contractual entitlement to this bonus and claims that   the Respondent’s Director, Mr. A, acknowledged his entitlement to the bonus   for the relevant period both verbally and by way of e-mail on 7^th   February, 2017.

The Complainant refutes the Respondent’s contention that   he breached the terms of his contract of employment by failing to give the   required period of notice prior to the termination of his employment. The   Complainant claims that the Respondent’s decision to withhold the payment of   this bonus on the grounds of this alleged breach of the notice requirements   in his contract amounts to an unlawful deduction contrary to Section 5 of the   Payment of Wages Act 1991.

The Complainant submitted that he resigned from his   position on 28^th February, 2017 and despite several requests by   him the Respondent has failed to discharge its obligation to pay the   outstanding bonus payment to him.

The Respondent submitted that it   withheld the payment of the bonus to the Complainant on the basis that he   knowingly breached the terms of his contract of employment and failed in his   duty and responsibility as a senior manager and shareholder of the business.   The Respondent submitted that although the payment of this bonus was   initially approved it was contended that the Complainant’s subsequent action   in withdrawing his labour earlier than he was contracted for was reckless and   caused significant damage to the business. The Respondent contends that by his   insistence in tendering, and then applying, an incorrect notice period for   his employment that the Complainant has behaved disingenuously.

The Respondent’s Director, Mr. A,   gave evidence that the franchise for the business transferred to his company   in 2016 and as part of the change contracts were re-issued, without material   change, to all staff existing staff members, including the Complainant, to   reflect the new employer details. These new contracts were issued to all   staff in April, 2016 and immediately thereafter it was discovered that an   administrative error had been made at Head Office and that all staff   contracts had been incorrectly drafted stating 2 weeks’ notice rather than   the correct 4 weeks as per the previous contracts. The Respondent submitted that once this   error was discovered, the Complainant in his capacity as Senior Accounts   Manager, issued an e-mail to staff drawing their attention to this error and   indicating that the 4 weeks’ notice requirement would remain in effect. The Respondent contends that the   Complainant was fully aware of the requirement to give 4 weeks’ notice prior   to the termination of his employment.

The Respondent submitted that the   Complainant was fully aware of what his contractual notice period was and   what his obligations were at the time as a manager and shareholder of the   business. The Respondent contends that   in withdrawing his labour a week early that, at a minimum, materially damaged   the business through the opportunity loss incurred in that final week to the   company. The Respondent submitted that by its calculations the Complainant’s   early withdrawal of labour cost the business a minimum of €3,000 in revenue   based on the industry accepted multiple and his historic performance.

The Respondent submits that it   was entitled to withhold the payment of the bonus to the Complainant based on   the aforementioned circumstances and it is denied that this amounts to a   contravention of Section 5 of the Payment of Wages Act, 1991.

The Law

Section 1 of   the Payment of Wages Act provides for the following definition of “wages”:

                “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.”

Section 5(1) of the Act provides:

“(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.”

Section 5(2) of the Act provides: —

“(2)   An employer shall not make a deduction from the wages of an employee in   respect of—

(a) any act or omission of the employee, or

(b) any goods or services supplied to or   provided for the employee by the employer the supply or provision of which is   necessary to the employment,

unless—

(i) the deduction is required or   authorised to be made by virtue of a term (whether express or implied and, if   express, whether oral or in writing) of the contract of employment made   between the employer and the employee, and

(ii) the deduction is of an amount that is   fair and reasonable having regard to all the circumstances (including the   amount of the wages of the employee), and

(iii) before the time of the act or   omission or the provision of the goods or services, the employee has been   furnished with—

(I) in case the term referred to in   subparagraph (i) is in writing, a copy thereof,

(II) in any other case, notice in writing   of the existence and effect of the term, and

(iv) in case the deduction is in respect   of an act or omission of the employee, the employee has been furnished, at   least one week before the making of the deduction, with particulars in   writing of the act or omission and the amount of the deduction, and

(v) in case the deduction is in respect of   compensation for loss or damage sustained by the employer as a result of an   act or omission of the employee, the deduction is of an amount not exceeding   the amount of the loss or the cost of the damage, and

(vi) in case the deduction is in respect   of goods or services supplied or provided as aforesaid, the deduction is of   an amount not exceeding the cost to the employer of the goods or services,   and

(vii) the deduction or, if the total   amount payable to the employer by the employee in respect of the act or   omission or the goods or services is to be so paid by means of more than one   deduction from the wages of the employee, the first such deduction is made   not later than 6 months after the act or omission becomes known to the   employer or, as the case may be, after the provision of the goods or services.”

The issue for decision is whether the Respondent made an   unlawful deduction from the Complainant’s wages contrary to Section 5 of the   Payment of Wages Act 1991 in relation to the withholding of the bonus payment.  

Having regard to the evidence adduced, I am satisfied that   the following key facts have been established in relation to the matter:

•   The Complainant’s contract of employment   contained a term which provided that he was entitled to an annual bonus of   €10,000 per annum, payable at 6 monthly intervals and subject to the   achievement of targets.
•   The Complainant accrued an entitlement to a   bonus in the amount of €2,340 for the final quarter of 2016 having achieved   the requisite performance related targets and this bonus was payable to him   in January, 2017.
•   The bonus entitlement was accrued in respect   of a period of time that occurred prior to the date that the Complainant   communicated his intention to the Respondent to resign from his   position.
•   The Respondent withheld the payment of this   bonus because of a dispute that arose in relation to the minimum period of   notice that the Complainant was obliged to give under the terms of his   contract after confirming his intention to resign from his position.

In the circumstances, I find that the bonus comes within   the definition of wages set out in the Act and that it was properly due and   owing to the Complainant as part of his wages in connection with his   employment at the material time of this complaint.

The question then turns to the issue of whether the   Respondent’s decision to withhold the payment of the bonus because of the   alleged breach by the Complainant of his contractual notice obligations upon   his resignation from the company amounted to an unlawful deduction from his   wages within the meaning of the Act. Subsection   (2)(a) of section 5 of the Act provides that an employer shall not make a   deduction from the wages of an employee in respect of any act or omission of   the employee unless all the conditions specified in subsection (2) are   satisfied and in particular that “the   deduction is required or authorised to be made by virtue of a term (whether   express or implied and, if express, whether oral or in writing) of the   contract of employment made between the employer and employee”.

I am satisfied that the Complainant’s contract of   employment did not provide either, expressly or implicitly, for the   withholding of his annual bonus or any part thereof, by the company in   circumstances where there was a failure by him to adhere to the contractual   notice requirements upon the termination of his employment. I find that the   Respondent is not entitled to rely upon the provisions of Section 2 in   relation to the deduction of the bonus payment as it has clearly failed to   demonstrate that it has satisfied the conditions specified in paragraphs (i)   to (vii) of that provision of the Act.

In the circumstances, I find that withholding payment of   this bonus amounted to a deduction from the Complainant’s pay that was not   authorised and accordingly, the bonus payment of €2,340 is properly due to   him.

I find the   Complainant’s claim under the Payment of Wages Act 1991 is well founded.   Accordingly, I find that, contrary to Section 5 of the Payment of Wages Act   1991, the Respondent made an unlawful deduction from the Complainant’s wages   in relation to the unpaid bonus. In accordance with Section 6 of the Act, I   hereby direct that the Respondent pay to the Complainant the sum of €2,340   within 42 days of the date of this decision.

As this redress is in relation to remuneration, it constitutes   income for the purposes of the Income Tax Acts/PRSI.

Payment of Wages Act – contravention of   Section 5 - bonus payment – complaint well founded