ADJ-00021376

Complainant

Respondent

Anonymised Parties

A Marketing Manager

A Car Distributors

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-00028073-001

30/04/2019

The complainant joined the company in July 2013 and he resigned to take up a new job on April 19^th 2019.  This complaint, under the Payment of Wages Act 1991, is about the fact that he was not paid his 2018 bonus because he left his job before the pay-out date which was at the end of May 2019.

At the hearing, the complainant said that a bonus payment is included in the definition of “wages” at section 1 of the Payment of Wages Act 1991.  He said that he received a contract of employment in 2013, when he started in the job.  This contract refers to a bonus under the heading of “Remuneration,” and there is no statement that the payment of the bonus is conditional on him being in employment on a certain date.

In February 2014, the complainant said that he received a new contract of employment, which he accepted and signed.  He said that this contract refers to the bonus under a different heading of “Other Remuneration,” and it specifically states that payment of the bonus is conditional on him being in employment on the date of the pay-out.  In his evidence at the hearing, the complainant said that when he signed this contract, he was not informed that he should get independent advice about the contents.  Also, there was no specific reference to the differences in this new contract, compared to the version he signed when he joined the company.

The complainant referred to the High Court decision in the case of Eamon Finnegan and J&E Davy [2008] IEHC 2018.  Mr Finnegan challenged his former employer’s decision defer payment for one year of €40,000 out of his 1997 bonus of €100,000.  Mr Justice Smyth decided in favour of the plaintiff, Mr Finnegan and stated:

“In this case the Defendant sought to unilaterally retrospectively alter the Plaintiff's terms of employment with (however the Defendants may have understood as to encourage loyalty, i.e. to hold on to staff in the future) a provision that was onerous and even if not expressly designed to be a restraint was so in effect. The Plaintiff had committed himself to some six years at least to the Defendants before he was informed even partially of the onerous condition and in my judgement this was unreasonable.”

At the hearing of this complaint, the complainant said that he had a legitimate expectation that he would be paid the bonus he earned for his performance in 2018.  When I asked the complainant why he didn’t stay working with the respondent until the bonus became due, some six weeks after he left, the complainant said that, due to the treatment of him by his line manager, he had to look for another job.  He said that he was suffering from stress because of the issues with his manger and that he had to leave.

Before he left his job, the complainant said that he was informed by the human resources director that two other employees had been paid their bonuses, even though they left the company before the date that the bonus was due for payment.

In her evidence, the HR manager said that new contracts were issued to all employees in the company in 2014.  She said that the bonus was always intended to be a retention tool and this was made clear in the new contracts.  She said that she has no knowledge of a bonus being paid to anyone who left the company before the date of payment in May each year.

The HR manager said that she met the complainant when he resigned and that he was fully aware of the fact that he would not get the bonus if he left before the end of May 2019.

When she was asked how much the bonus was worth, the HR manager said that the complainant achieved 97.75% of his targets in 2018, and, as a result, if he had remained in employment until the payment date, he would have received a bonus of €3,700.

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

Under the heading of “Other Remuneration,” the complainant’s contract of employment states:

“The Company operates a discretionary bonus scheme in which you will participate.  The Company reserves the right to amend or withdraw the scheme at any time.  Any bonus award will be related to both business performance and individual performance in a financial year and will be paid in the second quarter of the following year to those in employment at the time of payment.”

At the hearing, the HR manager said that the bonus is always paid in May.  She said that the company intends the deferred payment to act as an incentive to employees to remain in employment and employees who leave before the date on which the bonus is paid do not get the bonus. 

From a commercial perspective, there is some sense to this approach; and the decision to use the bonus as a retention tool is provided for in the complainant’s contract of employment.  His argument however, is that the contract he received when he joined the company contained no such provision.  He accepted his new contract in 2014, but he claims that he was faced with a “Hobson’s choice” at that stage, and that if he hadn’t accepted the new contract, he may have been out of a job.

I appreciate the complainant’s predicament at the time his new contract was issued, and I assume that he could not have anticipated that he would leave the company with some urgency five years later, thus putting his bonus at risk.  However, as a professional person, it is my view that he could have given some attention to the difference in the bonus clause in the new contract compared to the one issued when he joined the company in 2013.  If he had made known his objection to the bonus being contingent on remaining in employment, he may have been able to negotiate some amendment to his contract, but he did not pursue this course of action at the time.

The complainant left his employment with the respondent on April 19^th 2019, in the full knowledge that, in doing so, he would not receive his bonus.  He claimed that circumstances at work and a difficult relationship with his manager precipitated his departure and that he had no option but to leave when he did.

Legal Precedents

I have considered the precedent cited by the complainant of the case of Finnegan V J&E Davy.  Mr Finnegan’s circumstances were somewhat different from the complainant’s because his former employer proposed deferring 40% of his bonus which amounted to €40,000, whereas, in the case under consideration, the respondent didn’t pay any amount of the bonus of €3,700.  In the Finnegan v Davy case, the issue between the parties was the risk that Mr Finnegan would take up employment with a competitor.  I find that the outcome of this precedent does not apply in the case we are considering here.

Circumstances more closely approximating the complainant’s were considered by the Labour Court in 2017 in the case of Bord Gáis Energy Limited and Niall Thomas, PWD 1729.  Mr Thomas left the employment of Bord Gáis on January 6^th 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.”

Findings

It is clear from the evidence submitted at the hearing that the complainant’s contract of employment contained a provision that the performance-related bonus for a particular calendar year is payable in the second quarter of the following year.  His contract also provides that it is a condition of the payment that the employee who earned the bonus remain in the employment of the company on the date that the bonus is to be paid.  The HR manager produced payslips at the hearing that showed that the complainant was paid his bonus in previous years at the end of May. 

Conclusion

It is my view that the complainant’s contract was clear; it was a condition of the payment of the bonus for 2018 that he remained in employment until the payment date.  When he left his job with the respondent on April 19^th 2019, the complainant knew that he was putting his bonus at risk.  I find that it was not unreasonable for the respondent not to pay the complainant his bonus and his complaint under the Payment of Wages Act is not upheld.

I have decided that this complaint under the Payment of Wages Act is not upheld.