Complainant

Respondent

Anonymised Parties

Sales Representative

Wholesaler

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-00013974-001

15/09/2017

Complaint seeking adjudication by the Workplace Relations Commission under section 13 of the Industrial Relations Act, 1969

CA-00013974-002

15/09/2017

Complaint seeking adjudication by the Workplace Relations Commission under section 13 of the Industrial Relations Act, 1969

CA-00013974-003

15/09/2017

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

CA-00013974-004

15/09/2017

The complainant is employed as a Sales Representative by the respondent having commenced employment in September 2015. The respondent supplies non-food goods to supermarkets. The complainant has a basic salary of €30,000.00 per annum and the complaint / dispute is in relation to the status of a bonus scheme operated by the respondent and the manner in which management dealt with a grievance raised by the complainant in this regard.

The complainant’s pay in 2016 and early 2017 consisted of basic pay plus bonus payments achieved by reaching targets.

The respondent then changed elements of the bonus scheme and removed premium accounts from the complainant without agreement.

These changes made reaching target figures unachievable and consequently the complainant’s pay has been significantly diminished.

The complainant raised the issue as a grievance but management’s response was dismissive and the matter was unresolved.

The complainant has been paid in accordance with his contract of employment.

The respondent operates a discretionary bonus scheme and the complainant has been paid in accordance with that scheme.

In December 2016 the sales team were advised that there would be changes to the bonus scheme resulting from the introduction of new products and no issues were raised at that time by any of the team.

Accounts were removed from the complainant as part of a reorganisation of customer accounts but the complainant was allocated replacement accounts which would enable him to reach targets.

The management responded promptly to the complainant’s grievance and met with him in this regard.   A review of the complainant’s accounts led to a proposal to allocate additional accounts to him in September 2017.

The present operation of supplying non-food goods to supermarkets is a new venture for the respondent and commenced in September 2015. The complainant joined the respondent about this time and was initially based in their Western Region, transferring to the Leinster Region in November 2016.   At the start-up the sales staff were on basic salary only but there were discussions at that time about reviewing sales incentives and in January 2016 the respondent introduced a target based bonus scheme. The details of the scheme were outlined in an email dated 31 January 2016 effective from 1 January 2016. The complainant stated that he had acquiesced to a suggestion that he work the first three months on basic only but it had been agreed at the time that the bonus scheme set out in the email would be implemented after the three months.

In December 2016 there was a meeting attended by management and the sales staff. The respondent contends that in discussing future sales growth and new product lines it was clearly stated that the bonus scheme would have to be reviewed and that no one raised an objection in this regard. The complainant on the other hand is adamant that changes to the bonus scheme were not discussed.

There was a reorganisation of accounts in February 2017 which resulted in some accounts being taken from the complainant. On 3 April 2017 an email was issued by the Financial Controller the subject of which was “Q1 Review”. In the email it stated:

Please find attached Q1 ’17 sales gross sales summary.

We have not achieved our quarterly target. Based on this, the current bonus structure is not sustainable going forward.

The previous target was based on our original business model.   However as you know, the model has changed with the increased product range. There is an expectation that sales volumes would increase substantially.

The email went on to outline the changes to the scheme with targets being increased.

The complainant states that this was the first he knew of any change to the bonus scheme and that the direct result of this was to reduce his capacity to earn a bonus payment.   The complainant was unhappy with developments and on 17 July 2017 wrote to management setting out a number of grievances. The issues raised include the loss of accounts, the change in the bonus scheme, car allowance / mileage and toll charges. The Financial Controller responded to the issues two days later and in relation to the bonus scheme stated that it had been discussed at the December meeting. A meeting took place with management to discuss the issues. The complainant was unhappy with the manner in which the meeting was conducted and eventually he terminated the meeting. The outcome of the meeting from the perspective of management was set out in an email dated 4 August 2017. As regards bonus payments it stated:

Issue surrounds the number of stores in your present area which you claim makes it unlikely to achieve your monthly sales target now that the store roll-outs have been primarily completed. This is based on your notes of 36 stores in total and you are going to forward me the list of those 36 stores.

We’re going to have a meeting with (manager) to discuss increasing your store allocation. You have not been targeting B or C stores as you have not received the trade show list (for B).

Proposed meeting on Wednesday 9th after (manager) returns from his holidays to address the above, I am provisionally suggesting 4PM in our offices.

In September 2017 the complainant was allocated a number of new accounts.

The complainant lodged his complaint form with the WRC on 15 September 2017. Four complaints are listed. Complaints Nos. CA-00013974-001/3 are complaints under the Payment of Wages Act, 1991 and Complaints Nos. CA-00013974-002/4 are disputes under the Industrial Relations Act, 1969. The complainant accepted that 003 and 004 are duplicates of 001 and 002 respectively.

Payment of Wages Act, 1991.

The contract issued to the complainant on 4 September 2015 and signed by him refers only to the basic salary and the fact that it would be reviewed in January 2016. There is no mention of a bonus or incentive scheme.   Another paragraph deals with expenses.   In the Act the definition of wages in Section 1(1)(a) includes the following:

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…

Section 5(6) states:

Where –

(a)    the total amount of any wages that are paid on any occasion by an employer to an employee is less than the total amount of wages that is properly payable by him to the employee on that occasion (after making any deductions therefrom that fall to be made and are in accordance with this Act), or

(b)    none of the wages that are properly payable to an employee by an employer on any occasion (after making any such deductions as foresaid) are paid to the employee,

then, except in so far as the deficiency or non-payment are attributable to an error of computation, the amount of the deficiency or non-payment shall be treated as a deduction made by the employer from the wages of the employee on the occasion.

The complainant has stated that at the time of his engagement it was agreed with him that a bonus scheme would operate after a period of three months and this is generally accepted by the respondent. He further argued that the specific bonus scheme introduced in January 2016 was the one he had agreed to and that therefore it could not be changed in any way without his agreement. There is no documentation to confirm this. The respondent states that the bonus scheme was introduced at the start of an entirely new venture and was discretionary as its operation would have to be reviewed. There is, however, no mention of the discretionary aspect of the scheme in the brief email introducing it. On the balance of probabilities I believe that that the respondent unilaterally designed the scheme in response to a general commitment to have such a scheme in place by January 2016.

During 2016 the complainant twice earned monthly bonuses of €1,000.00 and on another four occasions earned €500.00 per month. No bonus was earned in six months of the year. In December 2016 the respondent claims that because of the introduction of new product lines it was announced that the bonus scheme would be reviewed and that no member of the sales staff objected. The complainant denies that there was any mention of a change to the bonus scheme.   I absolutely accept that the specific changes to the bonus scheme were not discussed. There does, however, appear to have been some discussion in relation to increasing sales targets. Three months went by before management issued their email regarding increasing the targets whereby sales staff qualified for a bonus payment. The initial reaction of the complainant was to query if the March bonus would be paid and it was only later that the issue of changing the bonus and the various other matters became part of the grievance lodged by the complainant in July. It should be noted that for the first four months of 2017 the complainant earned €1,000.00 bonus each month but for several months thereafter did not achieve the target required for a bonus payment.

The issue of bonus payments has come before the Courts. In the case of Finnegan v J&E Davy (2007) the issue was the deferral of a bonus which was not part of a written contract. Smyth J. found that;

“The plaintiff could reasonably expect as a matter of principal built up from a number of years of consistent conduct in the payment of bonuses and the matter of discretion never having been mentioned to him at any stage that some bonus would be payable – the amount only dependent on the trading activities of the firm and his own performance.”

The complainant in the case before me would not have the same service as the plaintiff in the above case. His experience was of earning from nil to €1,000.00 per month. The actions of the respondent did not deprive him of this income. It left him in the same position as before, the amount payable dependant on the trading activities of the firm and his own performance. It is important also to note that the changes in the scheme were not applied retrospectively. As set out in Cleary & Ors. v B&Q Ireland Ltd. (2016), IEHC 119, which dealt with the withdrawal of a discretionary bonus, the High Court (McDermott J.) was clear that money already earned under an existing scheme could not be withheld and stated:

“the overall discretionary nature of the bonus scheme does not extend to a withholding of the bonus due for that period, in respect of which the bonus was quantified and payable under the scheme….. 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 respondent paid the bonus due under the existing scheme.

In summary therefore I find that the changing of the parameters of the bonus scheme as to how it will operate into the future is not a deduction of wages and does not constitute a breach of the Payment of Wages Act, 1991.

Industrial Relations Act, 1969.

It is regrettably clear that the relations between the complainant and management have become more fractious. The root cause would appear to be that the complainant’s belief as to what he was promised when he made the decision to join the new venture has not been delivered on and that a process of chipping away at his benefits has occurred. Since most of these arrangements were in the form of verbal understandings it is difficult for me to say whether or not this feeling is justified.

It is also understandable that a new venture set up by the respondent should go through a period of trying to find its feet in the sector in which it is operating and that it has to be in a position to adapt to new challenges in that regard. It is a relatively small organisation (albeit part of a larger group) employing about 10 staff altogether, including 3 sales staff. It can be difficult in such an environment to deal with staff issues in a non-personal but professional manner particularly if the complaints are in relation to decisions made by management.

The introduction of a sales incentive bonus scheme is very important to the sales staff concerned.   In this particular case, if all targets were achieved it could increase their remuneration package by up to 40%. A brief email is not the best method of introducing such a scheme. Nor is it the best way to change an existing scheme.   The contention that nobody objected to the new scheme has to be viewed in the context that the precise details of the scheme were only announced 3 months later.

The grievance letter from the complainant raised a number of other issues as well as the bonus.   Management did respond within two days to that letter but also took the opportunity to raise counter issues themselves. A meeting was subsequently arranged but it cannot be said that the management team were going to that meeting with an open mind on the matters to be discussed and were effectively investigating a grievance against their own decisions.   There is a fundamental principle that you cannot be a judge in your own cause. The complainant said that he found the atmosphere to be intimidatory and he eventually terminated the meeting. On the positive side it has to be noted that the issue of allocation of accounts was subsequently addressed and in evidence at the hearing the complainant agreed that this had helped that particular situation.

I note that management stated that they hoped to have a positive relationship with the complainant going forward. I believe that in the light of what I noted above it would be advantageous for all parties if an agreed mediator be brought in to assist them in resolving the issues that still exist between the parties. It would also be useful for such a third party to examine HR practices within the company.

Complaint No. CA-00013974-001:

This is a complaint under the Payment of Wages Act, 1991. For the reasons outlined above I find this complaint not to be well founded and it therefore fails.

Complaint No. CA-00013974-002:

This is a dispute under the Industrial Relations Act, 1969. I recommend that an independent, agreed mediator be appointed to assist the parties in resolving outstanding issues between them and that that person also carry out a HR audit within the respondent company to advise on best practice as to how changes impacting on staff are implemented and how the grievance procedure should operate in line with best HR practice.

Complaint No. Ca-00013974-003:

This referral under the Industrial Relations Act, 1969, is a duplication of CA-00013974-002.

Complaint No. CA-00013974-004:

This referral under the Payment of Wages Act, 1991, is a duplication of CA-00013974-001.