Complainant

Respondent

Anonymised Parties

A Manager

A Healthcare 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-00026452-001

22/02/2019

The complainant voluntarily left her job with the respondent on March 8th 2019.   This is a complaint about the fact that, at the termination of her employment, she did not receive a bonus for the financial year 2018 – 2019.

The complainant worked as a practice manager between two medical practices in Dublin 2. She took up this role in October 2017, having joined the company in a different job in July 2016. When she left the company in March 2019, she expected to receive the bonus stipulated in her contract of employment. A copy of her contract was submitted in evidence and section 4, under the heading of “Remuneration” states as follows:

“You will be eligible to receive an annual bonus of up to 10% of salary. This bonus will be performance related and therefore not guaranteed. Performance will be evaluated on both personal and financial performance.”

The company’s financial year runs from July 1st to June 30th each year. A letter submitted in evidence by the respondent dated November 15th 2018 shows that, in that month, the complainant received a bonus of €1,890 for the 2017-2018 financial year. The amount was shown to be related to a 70% rating for “Operations” and a 56% rating for “Financial.”

Having handed in her notice in January 2019, on February 20th, the complainant wrote to the respondent’s operations director asking when her performance for the financial year 2018-2019 would be assessed. In response, she received a letter from the Head of HR in which she was informed that,

“Performance appraisals within the Group take place in August / September of the year, following the publication of the finances.   As you will have left the business on the 8th March 2019, five months in advance of this assessment, no payment will be made to yourself.”

At the hearing, the complainant argued that there is no provision in her contract of employment or in the company handbook that was in place when she was appointed to her role, for the withholding of a bonus when an employee leaves the business.   She said that no issues were raised with her concerning her performance and she was never the subject of any disciplinary investigation or sanction. The complainant said that she commenced in her role in October 2017 and her assessment for the year 2017-2018 was based on part of the year, from her start date in October 2017 to June 30th 2018. She said that on this basis, there is precedent for an assessment of performance for part of the year. She said that her understanding is that the company enjoyed growth in its finances in 2018-2019. Based on her performance and on the achievement of the company’s growth targets, the complainant concluded that she is entitled to be paid the bonus of up to 10% of her annual salary.

In support of her contention that she is entitled to be paid this bonus, the complainant referred to the Labour Court case of Bord Gáis Energy Limited and Niall Thomas, PWD 1729. Mr Thomas left the employment of Bord Gáis on January 6th 2017. If he had remained in employment, he was due to be paid a bonus in February 2017, contingent on certain performance criteria.   Finding that he was not entitled to the bonus, the Labour Court Chairman, Ms O’Donnell said,

“…the Courtplaced considerable weight on the fact that the complainant’s contract sets out the eligibility requirements for payment of the PRA (performance-related allowance) and that the Complainant confirmed in evidence that he was aware that one of the criteria of the scheme required that he be in employment on the date of payment.”

The complainant argued that her contract contains no such stipulation that she must be in employment on the date that the bonus is due to be paid. As a result, she claims that she is entitled to the amount she would have been paid as a bonus if she had not resigned.

The respondent refutes the claim that there has been a breach of the Payment of Wages Act in respect of the complainant in this case. They argue that she is seeking payment of a bonus that will be evaluated in August 2019, at the end of the company’s financial year, based on personal and financial performance.

In their submission, the company suggests that there were issues with the complainant’s performance that required more than usual attention and supervision. There were financial deficits in both clinics where the complainant worked and strategies were agreed to address these which were discussed with her. When she finished up in March 2019, the full evaluation of this business strategy had not taken place. The respondents disagree with the complainant’s assertion that the practices were achieving their financial goals. For this reason, they argued that there was no guarantee that any bonus would be payable for 2018-2019.

The respondent’s submission states that the bonus for 2017-2018 was paid to the complainant following an evaluation of the practice’s full-year performance, in accordance with the company’s policy. It is the respondent’s view that the complainant’s assertion that a precedent has been set for the payment of a part-year bonus is incorrect, as the bonus was paid at the end of the financial year, at which time, she had been in the role for nine months.

To qualify for a bonus, the employee must be in employment when the full evaluation of the company’s performance has been completed. In 2017-2018, the bonus was paid to the complainant in line with the company’s policy. However, the performance appraisal process for 2018-2019 had not yet begun and will only be carried out in June and July 2019.

The company’s position is that no monies were deducted from the complainant and that it has applied its policy fairly across the board.

At the hearing, the HR business partners referred to the provision in the “Conditions of Employment” document which provides that no payment of bonus will be made in circumstances where an employee is not employed at the time of the pay-out. They said that this is a “living” document and regular changes and amendments are made to various sections. This addition to the bonus provision was added in January 2019.

The Relevant Law

This complaint was submitted under the Payment of Wages Act 1991 (“the Act.”) Section 1 of the Act sets out a 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 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.”

It is apparent therefore, that a bonus is included in the definition of “wages” and the failure to pay a bonus may be considered to a breach of section 5(6) of the Act:

“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 therefore 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 deductions as aforesaid) are paid to the employee,

then, except insofar as the deficiency or non-payment is 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 that occasion.”

Contractual Provisions

The complainant’s contract of employment states plainly,

“You will be eligible to receive an annual bonus of up to 10% of salary. This bonus will be performance related and therefore not guaranteed. Performance will be evaluated on both personal and financial performance.”

At the hearing, the HR business partners said that it is custom and practice for employees who leave before the date on which the bonus is paid, not to receive the bonus.  

From a commercial perspective, there is some sense to this approach; however, from a contractual perspective, there is no provision not to pay a bonus to an employee who leaves before the payment date specified by the company. If the complainant had known that she would not get her bonus for 2018-2019, she may have considered not handing in her notice for another few months, but she was deprived of this option.

Performance Issues

I note the respondent’s suggestion that, for reasons related to her performance, the complainant may not have been entitled to a bonus for 2018-2019 but, at the hearing, the complainant said that there was never any issue raised with her concerning her performance, and when she resigned, her manager asked her to re-consider. In preparation for this hearing, the complainant submitted a copy of her performance appraisal form for 2017-2018, and, apart from a comment that she is inclined towards perfectionism, there was no significant negative comment about the complainant’s performance during the first months of her tenure in the job. In his letter awarding her the bonus in 2018, the director of operations referred to “her valuable input into the Practice” and her “significant positive input” which resulted in a pay-out of €1,890.

I note that in the letter from the Head of HR in which she informed the complainant that she would not receive a bonus for 2018-2019, there is no mention of performance and it is clear that the reason the respondent has decided not to pay the bonus is because the complainant will not be in employment at the end of the financial year.

Legal Precedents

In the case referred to by the complainant of Bord Gáis and Niall Thomas, the Labour Court acknowledged the provision in Mr Thomas’s contract which stipulated that a bonus payment is contingent on the employee being in employment on the date of the pay-out. This is a common provision in bonus policies but, at the time that the complainant was employed by the respondent, no similar restriction was included in her contract or, in the Conditions of Employment document that was available to her.

Conclusion

It is clear from the Act that “bonus” is included in the definition of “wages” set out at section 1.   From the evidence submitted at the hearing, it is my view that, regardless of the custom and practice in the business, the complainant has a contractual entitlement to a bonus, even though she terminated her employment before the end of the financial year.   She retains this entitlement, although she is no longer an employee. It is my view that, at the end of the financial year, when bonuses are being considered for all the respondent’s eligible employees, the complainant’s performance should be reviewed and, depending on the achievement of the financial targets that apply to other employees in her role, a bonus should be to be paid to her, based on her service to March 8th 2019.

I have concluded that this complaint under the Payment of Wages Act is upheld. I decide therefore that, based on the evidence adduced at the hearing, the complainant is entitled to be considered for a bonus when bonuses are being paid out for the 2018-2019 financial year.

Bonus, resignation