Complainant

Anonymised Parties

An Operations Manager

Representatives

Denise Kelleher, Denise Kelleher Solicitors

Rory Treanor and Sarah Treacy, Peninsula Business Services

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-00017934-001

14/03/2018

This case surrounds a complaint regarding a non-payment of annual bonus during sick leave in December 2017. The Respondent has disputed the claim. The case ran over two hearing days where the complainant was represented by his Solicitor, Denise Kelleher and the Respondent by Rory Treanor and Sarah Tracy at Peninsula.

The Company name was amended on consent on the first day of hearing.

Both parties made helpful oral and written submissions.

The Complainant was contacted by a recruitment Agency in May 2016 to attend for interview for Operations Manager at the Respondent Healthcare company. The position of Operations Manager was advertised at €65,000 per year which was subsequently amended to €75,000 with an annual €10,000 bonus. The Complainant accepted the offer and commenced work on 11 July 2016.

The Complainant completed his probation period and settled into his new working life. During May 2017, the complainant began to experience” a cooling “towards him from his Manager. the Complainant was met by a list of problem issues which he refuted at the time.

The Complainant also noticed reciprocal changes from others within the Management Team. The complainant described a deterioration in his working relationship with Mr A, the Line Manager which culminated in the complainant being forcibly directed to leave his office. The Complainant sought support from Human Resources but was disappointed in their approach. The Complainant was placed on sick leave due to work related stress. He received salary until the end of August 2017.

He was subsequently invited to a Disciplinary hearing on 15 August, delayed through illness. The Complainant submitted that he had been prevented from having his solicitor in attendance at this meeting and attended with the support of his wife.   On 14 August, the complainant lodged a grievance against Mr A but felt unable to progress the complaint.

The Complainant received a written warning of 12 months duration because of the Disciplinary hearing. The Complainant submitted that he had declined participation in a pro offered welfare meeting in late September 2017.

The Complainant submitted that he had not been informed that his annual bonus was to have denied him before the deadline of December 16, 2017. The Complainant raised the issue with the company on 19 January 2018 . In response, he was informed that he had not reached the performance matrix and management had exercise their discretion in withholding the bonus . The Complaiannt took issue with this and submitted that the non-payment of the pro rata bonus of €5,800 constituted his rightful bonus payment and this had been unjustly withheld from him.

He had made reasonable efforts to have it paid to him before he referred the case to the WRC. He argued that nobody at the company had included him in the decision making surrounding the bonus payment in December 2017. He sought payment of the 58% pro rata bonus @€5,800 as his financial loss which was intensified by his period of illness which was also unpaid.

The Complainant held the position of Operations Manager from July 11, 2016 to May 17, 2018 at the Respondent Healthcare Company. The Company denied that non-payment of bonus constituted an illegal deduction of wages and put forward a comprehensive outline on the circumstances which led to the declaration of bonus by the Board in December 2017 and the reasons for the complainant’s omission from the payment which they attributed to the provisions of Section 5(1) of the Act.

The Respondent operates a large-scale Healthcare Company their representative outlined that the Complainant had co signed an agreement with his Manager on 31 March 2017 which constitute the terms and conditions for bonus payment .50% of bonus was payable on the company achieving 100% of its annual profit and 50% payable on focus parameters. The agreement also contained a rider:

If employment ceased during the financial year, no pro ration of annual bonus will apply. Bonus will be paid at management discretion. Should an employee be subject to any performance/disciplinary related issues during the year, this will be taken into consideration when reviewing bonus at year end and may result in bonus not being paid in full.

The Respondent reflected that the complainant had made a positive start with the company, but problems emerged in 2017 which while brought to the claimant’s attention were not heard by him. This resulted in a confrontation with his line manager/ Director of the Company which led to a Disciplinary process and final written warning on 21 August, upheld on appeal.

The Respondent submitted that Management had exercised a discretion in relation to the payment of bonus to the complainant and had consciously omitted him due to performance and disciplinary issues. He had not met his Key Performance Indicators for the year or part thereof.

The Respondent explained that some controversy and lack of transparency surrounded the furnishing of medical certificates on the complainant’s behalf and this also caused unease in the company during this same period. The Respondent recalled that a significant investment in company time had been allocated to supporting the complainant.

The Respondent confirmed that they responded to the complainant query regarding his non-payment of bonus on 25 January 2018 by means of offering a clear explanation. Furthermore, they offered the complainant an opportunity to discuss the matter on his return to work but he was dismissed in May 2018. The Respondent confirmed that they undertook a further review of the non-payment of bonus in February 2018 and re-affirmed the company position on non-payment of bonus.

The Respondent outlined the decision-making process which surrounded the annual bonus. A Bonus Review occurs late November, early December annually following which a detailed spreadsheet is prepared annually in relation to KPI attainment. This spreadsheet is submitted to the Board of the company whose role it is to declare the bonus to be paid. On this occasion, the complainant had not completed his KPIs and had been involved in a serious disciplinary issue which nullified his entitling to bonus. The Respondent relied on Section 5(1)(a) in support as the non-payment was permitted by a term of the contract and on 5 (1) (C) where the complainant had preauthorised this on 31 March 2017 by his signature on the KPIs.

The Respondent was very positively disposed towards paying bonus to employees, but the complainant was not entitled to a bonus payment for 2017 on contractual grounds.

This case was scheduled over two hearings as the Respondent requested the presence of the complainant’s line Manager and Company Director. I adjourned the hearing on the basis that

1. The names of bonus recipients were submitted

2. Documentation on the Declaration of the bonus in 2017/Provision for appeal

3 Documentation of the interface of sick leave /disciplinary procedure on payment of bonus

4 Whether the Grievance procedure had been activated in pursuance of the bonus

Any submissions the parties wished to make on caselaw.

I have considered the facts of the case as submitted both orally and in writing.

In the first instance, I found emotions ran very high in the case on the complainant’s side. It was clear to me that he carried a high level of trauma from his perceived work experiences and this served at times to prevent him focussing on the facts of this case and submitting responses which I believed I needed to guide my decision making. I would say that he was overwhelmed by his recall of the period at the centre of the claim. I made it very clear that I was deciding on the matter of the alleged deduction in wages alone.

On the Respondent side, I detected a high level of disappointment also as they genuinely believed that they had operated fairly and reasonably towards the complainant always in the case inclusive of making an income protection payment to the complainant in early 2018.

In seeking to decide whether a contravention of Section 5(1) of the Act has occurred, I first considered the terms of the contract of employment from 2016.

On 20 June 2016 the Respondent forwarded a letter of offer of opportunity to the complainant. This provided a clause on Bonus.

Potential bonus of €10,000 pro rata at year end, based on pre-agreed annual parameters. Please note that if employment ceases during financial year, no pro ration of annual bonus will apply

This was followed by the actual contract of employment where Section 4 on Pay stated:

4(b) €10,000 potential bonus will be paid in line with pre agreed annual parameters at year end.

This contarct was signed by both parties on 28 and   29 June 2016.

The Staff handbook dated 2016 went on to delineate in Section 4.4 on bonus plan :

·         Permanent employees may be eligible for bonus subject to certain conditions Targets/objectives to be agreed with your manager

·         Bonus is discretionary and paid only to employees where the achievements are directly accredited to their activities .

·         Bonus is paid pro rata to the applicable term of employment during the relevant bonus period . If an employee is absent from the company for prolonged periods ( excluding authorised annual leave) that employee will not be entitled to bonus during that time.

·         A bonus will be paid in line with pre agreed annual parameters.

The pre agreed KPI statement of 31 March 2017 has been placed to the fore of the basis for non payment by the Respondent . This document also contains a reference to the impact of any performance /disciplinary issues on bonus as “ this will be taken into consideration when reviewing bonus at year end and may result in bonus not being paid in full “ .

Both parties sought to rely on various aspects of the four listed documents and for my part , at least , I found an inconsistency in the statement of purpose on bonus payment .It is, however of cardinal importance to the case that a substantial bonus amount was declared for employees for the annual year 2017 . The Complainant had been paid an uneventful pro rata bonus for the preceeding year .

The Contract of employment was predicated on both the contract and acceptance of the terms of the handbook.

It is regrettable that staff relations between the complainant, the then fourth highest ranking employee , and the respondent had deterioarated by the time the bonus came up for consideration . By November 2017 , the complainant had been on extended sick leave and was in possession of a fixed written warning ,which he had not appealed outside the company . The Respondent expressed some disquiet that medical certificates accounting for the complainants illness eluded them.

The Complainant has made no claim for his period of absence from August onwards . He has asked that I decide on the period of his actual in house attendance during that year .

Section 1( a) of the Payment Of Wages Act , 1991 provides that wages means any sum payable in connection with employment including a bonus referable to his employment , whether payable under his contract or not .

An employer is prohibited from making a deduction from wages outside circumstances of statute, by a term of the employee’s contract of employment included in the contract or by the employee’s own consent to the deduction.

While I received a very expansive account on how the bonus is declared at the company and I appreciate the pride the respondent expressed in the concerted efforts of staff expended so as to make that generous bonus, I was not satisfied by the information imparted by the respondent on how the complainant’s details were objectively analysed and inputted into the process.

It seemed from the evidence adduced that the complainant was not listed on the spreadsheet which was submitted to the Board for decision making. The Board in whose power the discretion to decide bonus was conferred did not discuss the complainant, his progress, variance from KPIs or his positioning in the Disciplinary process. This was managed at the antecedent stage and I found that this action undermined the undertaking given in the contract, which must in this case by viewed as the presiding document. The bonus was declared in response to the spread sheet submitted.

“The potential bonus will be paid in line with pre-agreed annual parameters at year end “

There were no stated exceptions at that point outside cessation of employment, which, in this case did not come until much later.

In analysing the Bonus Plan in the staff handbook and in particular, “Bonus is only paid to employees where the achievements are directly accredited to their activities “

I noted that I did not have before me any record where performance was actually measured and pronounced as not deserving of the bonus plan prior to or immediately post declaration of the collective bonus in December 2017 .I was struck by how the process was inconsistent with the discussion and payment of the bonus in 2016 where the complainant had €5,000 paid in bonus on 23 December 2016 . The Complainant submitted that this was a great and productive meeting .

I found that best practice was not applied to the complainants interface of sick leave /disciplinary /performance issues and the Bonus Plan . He was not given an opportunity to be heard and I found that the Respondent had unwittingly air brushed him from consideration for bonus . I found no malice in this act but I found that the complainant was unfairly excluded from being heard on his bonus payment ,given that he was   not chasing the full bonus , but 58% based on his attendance .

The KPI document declared a proportionate KPI percentage to task but did not contain a recorded scoring mechanism or a potential to appeal . The reference to disciplinary issues being considered on consideration of bonus was not cross referenced in the contract or the handbook and I found it misleading given that someone could for instance be engaged in a disciplinary which had a favourable outcome. It was insufficiently blended in the company policies. I could not establish where the respondent had measured where the complainant’s achievements were directly accredited to his activities or not. The parallel process of the Disciplinary procedure was in my opinion a separate and distinct process as it clearly had not been mentioned at that juncture that bonus could be or was to be affected in either of the letters from August or September 2017 on appeal.

I have considered the application of the High Court Case of Cleary v B and Q Ireland ltd [2016] IEHC 119, where Mc Dermott J in deciding on whether a claim for a retrospective bonus merit bonus had where was removed corporately prospectively in January 2012, commented:

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, 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.

In the instant case, the bonus was declared corporately in December 2017 and paid in that month. No argument was made on other exclusions to payment to others outside the complainant. It was accepted by both parties that the complainant received nothing.

I was not satisfied with the approach adopted by the complainant in pursuit of payment. I found his emails to be overly challenging and aggressive and did not put him on a favourable level to prompt resolution. He ought to have activated the grievance procedure. Nonetheless, I have found that the complainant had a legitimate expectation that a bonus would be part paid to him for the trading year 2017 and the Respondent has not satisfied my inquiry on how his omission from bonus payment was arrived at outside a unilateral exclusion based on subjective criteria. Given that the parties were in frequent correspondence during this period, I found it unacceptable that the decision to exclude the complainant from bonus was not delineated and explained to him consistent with the timing of the declaration of the bonus. He had the right to be heard as he had been in 2016.

For these reasons, I have found that the Respondent is in breach of Section 5(1) (b) of the Act when the terms of the contract were not upheld on the provision of bonus payment in line with pre -agreed annual parameters. I have established that this amounted to an illegal deduction in wages . I have sought to apply the thinking outlined in Cleary, where Mc Dermot J stipulated that the contract and bonus scheme must be interpreted reasonably.

I have found the claim to be well founded.

Decision:

Section 41 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.

Section 6 of the Payment Of Wages Act , 1991 requires that I make a decision in relation to the complaint in accordance with the relevant redress provisions under that Act.

I have found the claim to be well founded and I order the Respondent to pay the complainant the amount of €5,800 in compensation in respect of the contravention of Section 5(1) (b) of the Act.

Non-Payment of Annual Bonus