ADJ-00019238

Complainant

Respondent

Anonymised Parties

A Project Manager

A Utilities Company

Representatives

  Geoff O Sullivan

 Donal Murphy, Head of IR.

Jennifer O Keeffe, Head of HR.

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-00025109-001

18/01/2019

This case involves the circumstances around the payment of a personal bonus. The Complainant in the case has submitted that on March 1, 2018 he was underpaid by way of bonus to the tune of €5,000.00. The Respondent has contested this.

The complainant was received by WRC on 18 January 2019. This raises the immediate question of statutory time limits. The Complainant has submitted arguments on reasonable cause to extend the time limit into the Section 41(8) domain of the Workplace Relations Act 2015. The Respondent has contested this.

This claim has previously been raised before the WRC Inspectorate and the Complainant presented for hearing in the company of several “co -complainants “. I explained that the complainant was tied to one person, i.e. the complainant and he was permitted to have a support person in attendance. This was acceptable to the Respondent and the case progressed on that basis.

Both parties made written and oral submissions. 

The Complainant is a Project Manager who has worked with the Respondent Utilities business since November 1995. He currently works as a Project Manager on a 35-hour week. The Respondent employs approximately 1600 employees.

The Complainant is one of 7 members of staff involved in a claim to address a shortfall in a Performance Related Award for the year 2017. He speaks today in his own case.

By way of background to the case, the complainant referred to two Labour Court recommendations from 1999 and 2002, which recommended that a framework should be agreed on the introduction of performance appraisal at the company.

Preliminary Issue on Time Limits:

On 25 January 2019, in response to the WRC notification of claim being outside the statutory time limits, the complainant argued that he was seeking a relaxation of the time limit for reasonable cause.

The Complainant submitted that since the matter of underpayment of his pay award first arose in March,2018, he had made every effort to have the issue resolved in a timely manner. The Complainant detailed a chronological series of events from 23 March 2018 – 21 January 2019.

 When internal procedures had not affected a resolution, the complainant referred the complaint to the WRC Inspectorate on 12 October 2018, believing this was an obligatory precursor requirement to Adjudication. He had since been dissuaded from that view by the WRC Inspectorate. The Complainant lodged the instant complaint on 18 January 2019 and hoped the complaint would be accepted for Adjudication.

Substantive Case:

The Respondent operates a common universal Performance Management Process for all employees in each of the business units. This results in the payment of a Performance Related award (PRA) being paid to employees. This amounts to core pay and is referred to as “pay at risk “. It is not a bonus. The Complainant exhibited an Employment Agreement which confirmed an annual salary review. Section 8.2 has relevance in this case.

The Company may determine, at its sole and absolute discretion, that the Company pay you in respect of any year of your employment hereunder a non-pensionable performance related award of an amount up to 15% of base salary.

This was linked to criteria established by the company and linked to personal and corporate performance targets. There was a further link to being present in the workplace as a precursor to receipt of the award.

The Complainant submitted that the Respondent acted outside of the agreed standard operating process for assessing his performance in discounting downwards the 2017 award. The Complainant contended that the Respondent was fully entitled not to accept the senior management team’s recommendation for the Business Unit he was aligned to but disputed that the criteria was arbitrarily changed.

The Complainant introduced the divisor Matrix which leads to the award calculation. This consisted of three measurables.

 In January 2017 the complainant’s individual scorecard was agreed and signed off by the line manager. A mid-year review followed and culminated in an end of year agreement on overall individual performance rating based on an assessment of performance in completing objectives against the agreed targets.

The Complainant contended that the 2017 process was not based on the agreed established process and not universally applied. He submitted that in November 2015, the Respondent confirmed that a single business unit multiplier existed for all and should not have been stratified to .8 and .6. The Complainant went on to point to a table presented by the company which referred to the Business Score on the Complainants project as 88% for 2017.

In March 2018, the complainant was informed that while most of his Project area would be party to an .8 multiplier for calculation of the award, he and his six colleagues would be party to a .6. This followed a decision of the Remuneration subcommittee.

The Complainant received a gross award of €6,341 with an individual performance rating of “partially meets expectations “on a Multiplier of .6. The Complainant contended that the Business Scorecard recorded 90% and he had expected an award of €10,000 gross.

The Complainant joined his colleagues in complaining on 28 March by way of the informal grievance procedure. The Respondent did not address the complaints stating that the complaint was outside the scope of the grievance procedure.

On May 17, 2018, the Respondent issued a previously unseen document on Performance Assessment related to the complainant’s project. It generated two-unit scores for the project in management and staff categories. It appeared to assess projects, but this conflicted with the already completed individual performance ratings.

The Complainant activated the formal grievance procedure in June 2018. He exhibited an array of documents for the purposes of the hearing which he argued confirmed that the complainant had not been party to the usual annual measurement tools for the application of the award .The Respondent had not flagged that anything different had occurred and the complainant contrasted this by exhibition of subsequent documents  for 2017 year ,which declared an actual score of 90% for his project .

The Complainant argued that the Units scorecard was required by the Board on a quarterly basis and 2017 was no different to any other year. He submitted that the award was crystallised and locked down as a contractual obligation once his personal scores were objectively assessed by the complainant’s managers. These scores were based on the personal performance objectives which he had achieved.

The Complainant disputed that the Respondent discretion to make the award transcended this. The Complainant argued that the Respondent should not be permitted an unfettered discretion in making these awards. He pointed to an inequity where he had been singled out for a negative inconsistently applied adjustment. He has been unable to source the required detail on the Business Unit Multiplier relied on by the Respondent.

The Complainant confirmed that an earlier incident of a universal withholding of the payment of this award had subsequently been amended to a 33% across the board payment to all. He was unable to put a chronology on this.

The Complainant sought payment of the shortfall in the pay award.

The Respondent outlined that they wished to rebut the claim on both the preliminary and substantive grounds advanced.

Preliminary Issue: Time Limits

The Respondent submitted that the claim is out of time and thus statute barred. The Complainant had been notified of the pay award in March 2018. Taking the complainants case at its height then the date the complainant was advised that the “internal procedure” to the extent that one was appropriate to be applied was “exhausted” on 3 September 2018. The Complainant waited until 18 January 2019 to lodge his claim 4 months later.

The Respondent did host a visit from the WRC Inspectorate, no issues were identified, and the file has been closed. The Respondent submitted that there was no basis for application of reasonable cause to this series of events. Were the WRC to grant an extension of time, it would render statutory time limits as meaningless. Ignorance of the law should not count as a defence.

The Respondent referred to several precedents where the higher courts had explored applications for extension of time by reasonable cause.

Department of Finance V Impact [2005]16 ELR “explain and excuse the delay “

Irish Rail V Stephen Lynch UD/18/22   8-month delay after date of dismissal not reasonable cause in line with the seminal case of Cementation Skanska v Carroll

A Bank v A Worker EDA 104, “irreducible minimum requirement “of reasons which both explain and excuse the delay.

The Respondent was certain that the Grievance Procedure was not empowered to address the issue raised by the complainant. This had been the case from the outset.

 The Complainant had joined a Trade Union within the evolution period of this complaint and this action should have informed him of the statutory limitations on a claim such as this.

Arguments on the substantive case:

 The Respondent confirmed that they operate a Performance Reward Model calculable by a defined matrix.

The Respondent submitted that the complainant had engaged with the Management Team regarding his dissatisfaction on receiving a lower pay award. These discussions did not resolve the issue.

The Respondent confirmed that the Complainant submitted a formal grievance dated 8^th June 2018. He was invited to a meeting on June 28 to discuss the matter.

The Respondent wrote to the complainant on June 22, 2018. He was advised that the Company grievance procedure did not cover compensation and benefits. The Respondent confirmed that the calculation of the award was at managements discretion.

The Respondent also addressed the Pay Progression issue raised by the complainant and confirmed that consultation and negotiation on pay progression occurred with collective partners. This did not automatically apply to the unrepresented party.

The Respondent met with the complainant on two occasions to discuss the application of the award and confirmed that the 91% attainment figure had been amended by a Higher level of Management and was not the correct multiplier. The Respondent asserted that the payment made was made to the complainant in accordance with his contract of employment and the Company Rewards Model.

The Respondent submitted that the variation in multiplier from the propose 91% proposed on the Business Unit Scorecard was an exercise of discretion provided for in the contract, where all proposals on performance related awards are subject to company approval. This is what occurred in this case.

The Respondent, in relying on Sullivan V Dept of Education [1998]9 ELR 217, disputed that a deduction had been made to the complainant’s wages. He was not paid less than the amount of his contractual entitlement

The Respondent outlined both aspects of the annual performance award and the basis on which pay progressed at the company for the complainant.

1 Performance award (annual) – variable or at risk, based on a percentage of base pay linked to successful achievement of business and individual performance objectives.

2 Pay Progression:   matrix, percentage increase to base pay linked to position within range and performance rating.

The Respondent submitted that the complainant is eligible for a maximum 15% target performance related award as set out in section 8.2 of the contract of employment. The Respondent holds an overarching discretion over this payment.

The Complainant had initially received a” partially meets” rating for calendar year 2017. This was amended on appeal to” fully meets expectations”  

The Respondent outlined that each business unit’s performance is assessed against an annual score card. These cards are then submitted for approval to the Company leaders. The Project on which the complainant was a participant was found to have had a shortfall in performance covering the year 2017.

Senior management determined that the complainant as part of a Management Grouping scored an approved 60%

Remainder   of Staff on the Project scored an approved 84%.

The Respondent recognised that the Senior Managers had the most influence over performance and differentiated from the Remaining staff on the project.

The Respondent set out a Calculation of the Performance Related Award:

 Potential 100% of award at “Fully Meets” evaluation. = €17,613.90. The Business Unit Performance was then applied at 60% and the Complainant received an annualised award of €10,568.34.

Performance Related Bonus: € 6341.00   and €4227.33

The Complainant also benefitted from the application of a 2.5% increase in Salary.

The Respondent confirmed that all sums payable to the complainant were paid. The payment of a lesser amount than that desired by the complainant cannot ground a complaint under Section 5 of the Payment of Wages Act, 1991 and must fail.

Preliminary Issue: Time Limits

I have considered both parties presentations on this issue. The claim before me was received by the WRC on 18 January 2019. It refers to alleged deduction in wages of March 1, 2018. However, during the hearing, the complainant produced a letter date 20 March,2018 from the Respondent which confirmed that payment was made on March 30, 2018. The date of the alleged deduction.

Section 41(6) of the Workplace Relations Act 2015 requires that a claim is submitted before the expiration of 6 months of the date of contravention. Section 41(8) permits an extension of time by a further six months if the Adjudicator finds that the failure to present the complaint was due to reasonable cause.

The Complainant advanced reasons to justify the application of reasonable cause. The Respondent advanced very cogent reasons that time should not be granted on this occasion. For my part, I have considered the test set down by the Labour Court in Cementation Skanska V Carroll, WTC 0338:

The Court asks that the claimant shows that there are reasons which both explain and afford an excuse for the delay. This excuse must be reasonable and applied to the facts and circumstances known to the complainant at the material time. A causal link must be established between the circumstances cited and the delay to satisfy the Court as a matter of probability , that had those circumstances not been present he would have initiated the claim in time .The Court also advised to consider the length of the delay .Finally, the Court should consider whether the respondent has suffered prejudice by the delay and whether the complainant has a good arguable case .

There is now a firm obligation on the complainant to meet this test. The Complainant has argued that he was immersed in localised disputes resolution attempts until he made the ill-fated referral to the WRC Inspectorate in October 2018. Once he learned that this was not the correct forum for his intended complaint on 17 January,2019, he mended his hand by way of the January 18 referral. The Respondent has contended that the complainant has strayed considerably outside the statutory time limits in his referral.

For my part I noticed that the payments at the heart of the case were made in two phases the first performance award was made at the end of March and the second at the end of May 2018. The internal disputes resolution framework had been commenced by the complainant from March onwards. This was crystallised in the June 8 formal grievance. I was struck by some inconsistency in the events which followed. It seems that the complainant was provided with the grievance procedure by way of email dated June 22, 2018. This was followed almost immediately by a formal letter distancing the grievance procedure from the resolution of the complaint. However, no other mechanism took its place. What followed were two meetings in June and September which did not resolve the situation.

I have reviewed the grievance procedure submitted

This grievance procedure may not be utilised to appeal against overall policy or operational business decisions

Appeals relating to Performance Management ratings should be raised under the Performance management process

I was also struck by the content of the Policy statement:

The Respondent is committed to providing an environment where every employee should feel free to raise issues and problems arising in the workplace and can expect managers to make sincere efforts to give correct and full explanations and answers.

The respondent permitted the application of the informal grievance procedure and refused to advance on the formal grievance procedure. This is an inconsistent approach. I have noted that the complainant did spend a considerable period aligned to local resolution methods. I accept that he recorded an immediate disquiet in response of his underpayment. He has demonstrated a concerted resolve to seek a resolution.

However, I found that he was not provided with an alternative procedural pathway when the Respondent decommissioned the Grievance procedure. I can accept that this amounted to a partial reason for the delay.

However, there is a pronounced delay in the complaints journey and eventual arrival to the WRC in January 2019 outside of the dispute’s resolution framework of the company.

 The referral to the WRC Inspectorate was clearly a big mistake and ought not to have happened. I did not have the benefit of sight of this complaint.  I noted that the complainant advised the respondent of his intention to flag the issue with his Union in September 2018.The Complainant has never advanced that he has been represented by a Union either internally or before the WRC. I see this a moot point.

 I must consider that the complainant was a lay litigant and look at events through that prism. The Complainant did not present a copy of the complaint made to the WRC Inspectorate. However, I accept he made the complaint in October 2018 which delayed the processing of the instant complaint. I note the Reference number cited for this complaint which differs from that assigned at adjudication. It is regrettable that the Complainant did not utilise the WRC Information Service at this juncture.

I have identified that the complainant was somewhat restrained in seeking to resolve the matter internally when the grievance procedure was removed from the mix and not replaced with any tool for resolution outside two meetings in June and September 2018. I have identified a very high level of procedural containment in this regard.

He stayed at the table until September at which point he ought to have actioned his stated intention before the correct aspect of the WRC Adjudication services rather than WRC Inspectorate. I have decided that this was an honest mistake on the complainant’s behalf.

 I note that the Respondent did not mention limitations of time when he first stated his intention to move efforts of resolution externally. The Respondent agreed to respond and engage in the proposal to move matters to the WRC on 3 September 2018.The Respondent is bound to have a higher knowledge of this area of employment law. To that end, I cannot see how a decision to extend the time would be detrimental to the Respondent.

I have taken account of the Labour Courts analysis on “exceptional circumstances “in the case of Gaels coil Thach an N-og and Joyce Fitzsimons -Markey, EET 034. While I realise that it is a different test to the instant case, I found the following extract to be meaningful and applicable here. This case involved a circuitous route in complaint submission and permitted an extension of time on “exceptional circumstances”

This is pre-eminently a question of fact and degree. Each case must be on its own circumstances and the improbability of any two cases falling under the same set of circumstances makes it unlikely that the decision in any one case can be more than a rough guide to the decision in another. Whilst the Court has considered the earlier decisions to which it was referred, they are of limited assistance since the circumstances of neither of them correspond to those of the instant case.

I have reflected on the request to extend time. I have identified that the lack of a veritable internal mechanism to resolve the complainant’s concerns acted as an impediment to a much earlier resolution of this matter. This was not aided by the subsequent referral to the incorrect body. However, in all the circumstances, I consider it equitable and the right thing to do to extend time in the case as I find that the complainant has explained and excused the delay and he has a good arguable case. I have not identified that the Respondent has been disadvantaged by the delay.

I have accepted the request to extend time in accordance with Section 41(8) of the Workplace Relations Act 2015 and I find that I have the jurisdiction to proceed to the substantive issue.

Substantive Case:

 The case now to be decided involves the complainants stated claim for €5,000 in an alleged deduction in wages following the completion of the respondent performance related award for 2017, payable during 2018. The Respondent has submitted that the claim is groundless as on this occasion the Respondent Management team exercise the discretion permitted to them via the complainant’s contract of employment and declared the payment to be made.

The Complainant has submitted that this is not a bonus payment case and is referred to as “pay at risk “in the company documentation. However, I note that the award is non-pensionable and paid in a different manner to pay for the complainants contractual 35 hr week. The Complainant quotes from the High Court case of Cleary V B and Q [2016] IEHC 119 in part 4 of his submission. This is the seminal case on the treatment of bonus in an Irish employment law context.

The Respondent has called this a performance award in the employment contract and it is aligned to a maximum amount of 15 % of base salary dependent on personal and corporate performance targets. Eligibility is linked to presence in the workplace and a disciplinary free zone. I have established that while the award is paid through salary, it is dependent on an elaborate system of measurement involving a myriad of matrices before ultimately being approved by the Respondent leaders.

I have found that this payment can be referred to as a bonus payment for the purposes of Section 1 of the Act. I note that the Performance Award   has been the topic of several Labour Court Hearings for the Respondent and Unions. I did not have the benefit of the Framework identified in these documents. Neither did I have the benefit of the Union Agreement relied on by the Respondent.

Section 5(6) (a) of the Act provides that 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 on that occasion, the amount of the deficiency or non-payment shall be treated as a deduction in wages.

The Complainant has relied on Section 5(1) of the Act, where the employer was not entitled to make a deduction from wages. the Respondent has disputed that a deduction was made as the complainant has not established that the full payment was properly payable in accordance with the Act. The Respondent discretion declared the award at €10, 568.33 for 2017 and this concluded matters.

I have read section 8.2 of the contract which delineates the potential for the complainant to receive a maximum of 15% of base salary in award terms on an annual basis. I accept that this is a perennial award outside of the one-year variance where the bonus was withdrawn and reinstated universally.

I am satisfied that the complainant was directly employed by the Respondent and disciplinary free at the time of bonus declaration in March 2018.

I am satisfied that the Respondent has discretion in payment of the bonus. However, the way that discretion was exercised will be a key consideration in the case.

I want to take a moment here to consider how bonus has been addressed through jurisprudence. At first off, it is not my role to usurp the discretion permitted to the Respondent in calculation of the bonus. In an English Court of Appeal case of Commerzbank AG and Keen [2007] IRLR  132, CA where a Manager had been made redundant in June 2005, he sought payment of a discretionary bonus on leaving and on quantum for 2003 and 2004 payment of bonus. In finding for the Employer in a Commercial Court setting Mummery LJ made the following statements:

Employment relationship: trust and confidence

 Although this case has been brought in the Commercial Court, presumably on account of the fact that lots of money is being claimed from a bank, it is an employment dispute about payment of additional wages for work done by an employee under a contract of employment. It will be instructive to see how far the jurisdiction of the Commercial Court extends into the area of wage disputes between employees and their employers.

  The employment relationship contains implied duties which do not normally feature in commercial contracts sued on by business men in the Commercial Court or in the exercise of public law discretions challenged by citizens in the Administrative Court. Employment is a personal relationship. Its dynamics differ significantly from those of business deals and of State treatment of its citizens. In general there is an implied mutual duty of trust and confidence between employer and employee. Thus it is the duty on the part of an employer to preserve the trust and confidence which an employee should have in him. This affects, or should affect, the way in which an employer normally treats his employee.

  Consistent with this duty an employer ought to supply an employee with an explanation of the reasons for the exercise of a discretion in respect of additional pay. Unless there is a good reason to the contrary the explanation ought to be given by the person(s) responsible for the decision affecting additional pay.

 Like the judge, I am concerned about the lack of direct evidence from any person involved in the exercise of the discretion concerning bonus payments. If the parties have agreed that an employer should have a discretion to decide, by reference to certain factors, whether an employee should be paid additional remuneration by way of bonus for work done under the contract of employment and, if so, how much, the employer is under an obligation to treat his employee fairly in explaining the situation. This would involve making known to the employee, quite apart from any duty of disclosure in litigation, the factors which have influenced the decision, by whom the decision was taken and the reasons for the decision taken

On this point I note that, in response to the letter before action sent by Mr Keen's solicitors on 3 August 2005, the Bank's solicitors supplied explanations for the bonus awards in 2003 and 2004 and, in respect of the non-payment of a bonus in 2005, referred to the termination of his employment in May 2005 and to the specific provisions of the contract of employment requiring employment by the Bank when the bonus is paid.

This decision must be viewed as a guide to how discretion should be exercised in a respectful employment situation where mutual trust and confidence involves both parties. I have emboldened the second last paragraph as it provides a helpful road map to what a reasonable employer is expected to do.

Keen goes on to outline that the complainant requires an overwhelming case to persuade a court that a discretionary bonus was irrational or perverse in an area where so much must depend on the discretionary judgement of the Bank in fluctuating markets and labour conditions.

The Respondent in this case, while anonymised is functioning at an equally high level in fluctuating markets and labour conditions.

In concluding the judgement in Keen, Moses LJ went further in stating that a failure to give reasons or identify a decision maker will not necessarily establish irrationality. He said that an employee must identify some feature of the award or circumstances of its evolution which point to perversity.

I accept that this reference is persuasive in terms of UK origin, I will now turn to a recent Irish High Court precedent in Cleary and ors v B and Q Ireland ltd [2016] IEHC 119, which addressed a claim for denied bonus under Payment of Wages Act, 1991.

Mc Dermott J held that the bonus had been earned in the relevant year referred to in the claim. He said that the decision to withdraw bonus was “always intended to apply in future and attached to the conferring of bonuses, yet unaccrued, under the terms of the scheme.

In the instant case, I did not have the benefit of hearing evidence from the decision makers who varied the business unit matrix for 2017 on submission of the business scorecard of 91% for 2017. I could not identify just how the percentage awards were stratified to .6 for Managers and .8 for staff on the identical project. I found an inconsistency in this regard as I could not cross match it with any terms of the scheme.

I was also drawn to the lack of transparency surrounding the declaration of bonus. In applying Keen to the facts of the case , I have established that the complainant was not treated fairly in receiving a fair explanation for what had occurred by the people responsible for the alteration of the matrix .I found that he was expected to “ abide and tolerate “ the outcome , yet there was no evidence of any parallel performance review or Performance Improvement plan  . In fact, the Complainant succeeded in reversing his personal rating through local appeal to “fully meets expectation “. This points to another inconsistency.

I have tried to analyse the Respondent actions in the declaration of the bonus. I have experienced some difficulty in establishing a rational exercise of their undisputed discretion. I found the continued lack of declared   reasons for the alteration of the Business Multiplier to be lacking in transparency and unsound.

The Complainant was a senior manager of long standing, payment of a performance award is a both a reward and a motivator and I have found that he was subjected to an arbitrary, unreasonable and pervasive application of his performance award in 2017.

 As stated, it was never my intention to usurp the exercise of discretion permitted to the Respondent. However, I have established that there was a distinct lack of transparency and good faith in the calculation of bonus which must render the process as unfair.

I have found that the complainant is entitled to succeed in his claim for an illegal deduction in wages.

Section 41 of the Workplace Relations Act 2015 requires that I decide 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 outlined in the Act.

I have found the complaint to be well founded and I order the Respondent to pay the complainant the €5,000 requested in the complaint form as compensation for the breach of Section 5(1) of the Act .

Treatment of a Performance Award.