PWD1921

The Complainant was employed from 8 August 2016 by the Respondent as a Business Development Manager, (BDM). The Complainant was notified of his dismissal on 16 June 2017. He appealed this decision and his appeal was heard on 26 June 2017. He was notified that his appeal was unsuccessful on 4 July 2017.

The Complainant was advised that commission payments earned by him, that he claimed to amount to €38,592.55, were not payable as it was provided in his contract that he would have to be serving in the employment on the date that they were due to be paid and, as he had been dismissed, he was not serving on that date.

The Complainant then brought a claim to the WRC under the Act. His claim was rejected by the AO.

He appealed to the Court.

In view of the nature of a disability claimed by the Complainant, the Court agreed to anonymise the names of the parties to these proceedings, in accordance with the Court powers under s. 44(7) of the Workplace Relations Act 2015.

A preliminary issue as to whether the appeal was received in time was dealt with in Determination No. EDA 1913, in which the Court accepted that the appeal should be heard.

Complainant’s Arguments

The Respondent argued that the Complainant was not entitled to be paid commission earned as it was a condition of the Respondent’s rules on commission that the Complainant be in the employment on the date that the commission was due to be paid. However, these rules were set out in a document called ‘Sales Commission and Bonus Scheme’, which was never given to the Complainant. These rules were not in the offer letter of employment, they were not set out in the main terms of the contract and they were not in the employee handbook.

The onus is on an employer to ensure that any such document is brought to the attention of an employee. The Respondent can show no proof that this document was received by the Complainant.

InNoreside Construction Limited v. Irish Asphalt Limited, (2014),the Supreme Court held that, ‘It is difficult to see how one could be bound by terms and conditions which are not contained in a signed contractual document…’ and inJames Elliott Construction Limited v. Irish Asphalt Limited(2014), it was stated that ‘..the party, to be bound, must know what the terms and conditions are…’

The Complainant’s contract states that these terms were attached to the contract but, in fact, they were not.

The date on which the commission became payable in accordance with the Respondent’s rules was the last day of June 2017. The Complainant was notified on 4 July 2017 that his appeal was unsuccessful. InUPC Communications Ireland Ltd v Employment Appeals Tribunal, the High Court held that the effective date of dismissal was after a decision to dismiss is upheld on appeal.

The Complainant had generated €545,000 in sales for the Respondent. He earned his commission and was entitled to be paid.

Respondent’s Arguments

In March 2017, the Complainant received a letter of concern from the Respondent regarding his performance, in which he was advised that if he did not show a significant improvement then he could be liable for further action.

On 21 April 2017, the Respondent became aware that the Complainant had failed to attend two meetings arranged with potential clients. When this breach in procedure was discussed with him, the Complainant contacted his manager, Mr. K, to advise that he had ‘pains in his chest’. The Complainant received a verbal warning, which he did not appeal.

On 9 June 2017 the Complainant was invited to a disciplinary hearing because of his sales performance, having signed deals that represented 43% of his target.

Subsequent to this meeting, the Respondent received a medical certificate for the Complainant, which stated that he was suffering from ‘work related stress’ but went on to state that he was ‘currently fit to work on full duties’.

The Respondent notified the Complainant on 16 June 2017 of the decision to dismiss him and of his right to appeal. This appeal upheld the dismissal decision and the Complainant was notified on 4 July 2017.

There was no deduction from the wages of the Complainant contrary to s.5 of the Act as the money claimed was not ‘properly payable’ to him because they were not ‘payable under his contract of employment or otherwise’ as defined in s.1 of the Act. The Complainant’s contract states explicitly that the contract is ‘subject to the full details contained in the attached ‘Sales Commission and Bonus Scheme Rules’. The rules state that ‘Commission payments on new and renewal business are only paid if the Business Development Executive is in the employment of the company at the end of the calendar month when the commission payment would normally become payable..’

The rules go on to provide that an employee has ‘no claim whatsoever on any commission payments that would otherwise have been generated and paid, if they are not in employment on the date when they would normally have been paid’ and they provide also that ‘payments of commission and bonuses are express contractual terms and therefore are not sums ‘properly payable’ under the contract and therefore are not deductions from pay in relation to s. 5(6) of the Payment of Wages Act 1991’.

The rules provide for commission to become payable once 15% of the contractual fee has been received from clients with 5 year contracts and when 25% of the contractual fee has been received from clients with contracts of less than 5 years’ duration. Only some of the contracts signed by the Complainant had met these requirements, in any event.

The case ofBord Gais Energy v Thomas (PWD1729), involved a similar requirement that the Complainant be in employment on a given date in order to be eligible for a Performance Related Award. The Complainant was not in employment on that date and, as a result, the Court found that the award was not ‘properly payable’. Also in the UK EAT case ofPeninsula Business Services Ltd v. Sweeney (2004) IRLR 49in virtually identical circumstances and applying similar law, it was found that a commission payment was not ‘properly payable’.

The Complainant signed his contract that stated explicitly that the contract included the rules on commission, so that these rules formed part of his contract as provided by s.5 (1)(b) of the Act. His prior written consent was given, as required by s. 5(1)(c) of the Act.

As 27 other BDMs had signed the commission rules, it is quite incredible that the Complainant states that he was not aware of them.

Notwithstanding all of the above, the terms were so well known that they satisfy the implied terms test set out inO’ Reilly v. Irish Press Ltd (1937) 71 ILTR 194.

Witness Evidence

The Complainant.

The witness put his submission into evidence.

Under cross examination and questioning from the Court, the witness acknowledged that he was the BDM with the highest basic salary and that he was the first BDM in Ireland to have a company car.

The witness stated that commission had not been discussed at his job interview.

Although his contract made reference to the commission rules, the witness stated that he had never received them. He acknowledged that he had signed both the offer of employment and the contract, both of which referred to the rules but he never received them. He stated that he had signed and returned everything received by him. He confirmed that he had never requested a copy of the rules.

The witness stated that the rules had never been discussed in his period of training.

Under cross examination, the witness stated that he had made enquiries about a car when offered the position but had not raised the issue of commission as the offer referred to a car allowance, while he needed a car.

Mr K

Mr. K gave evidence that he had been Head of Sales for the Respondent at the relevant time and had been the Complainant’s manager and mentor.

The witness described how he noticed ‘a dip’ in the Complainant’s sales figures in March 2017 that led to him issuing a letter of concern, which he described as a ‘flag’ to an individual. The subsequent non-attendance of the Complainant at pre-arranged meetings led to a verbal warning but, he said, at that point he still believed that the Complainant would make a good BDM.

The witness stated that between March and June 2017, the Complainant’s performance ‘dipped’ again. This led to the disciplinary meeting on 12 June 2017, subsequent to which he took the decision to dismiss the Complainant.

The witness said that he had considered imposing a lesser penalty but had chosen not to do so due to the scale of under performance.

Mr. F

Mr. F gave evidence that he was the Group Sales Director of the company and that he had conducted the appeal. He had significant experience of similar appeals and he had overturned dismissal decisions in the past.

The witness stated that he had concentrated in the appeal on identifying if the Complainant had a plan to turn his circumstances around. He was not satisfied on that point and he felt that the Complainant was inclined to blame others for his situation.

He said that he would expect that the Complainant would generate 4 deals per quarter but his actual figure was 4 deals in 9 months and there was no clear plan on the Complainant’s part to address this despite his assertions about his ability to sell.

The witness stated that for a number of reasons he would always prefer not to dismiss an employee. While he considered alternatives, in the circumstances he felt that dismissal was the best option.

Ms. M

Ms. M gave evidence that she worked in recruitment in the company and had interviewed the Complainant and had referred him to Mr. F for final interview. She stated that when he was offered the job, she advised the Complainant of the commission structure because she knew that this can make it impossible for some people to take up the role as the company requires 9 monthly payments from new clients before commission can be paid to BDMs in the tenth month. Because the Complainant impressed at interview and had been a high earner in his previous job, he was offered an enhanced salary at the outset to cushion the impact of this structure, with provision for the basic salary to be reduced after his first year.

Upon his appointment, the Complainant would have been sent a suite of documentation with all the company’s policies, including the policy on commission and the acceptance note at the end of the contract signed by the Complainant made reference to acceptance of this policy. The witness said that the only query from the Complainant was with regard to a company car and this was provided for him subsequently.

Under cross examination and questioning from the Court, the witness acknowledged that she had no physical evidence that the Complainant had received the commission policy document. She could not say definitively that she had drawn the Complainant’s attention to the requirement to be in the employment of the Respondent at the date when the Commission was due to be paid but she noted that this was a term of the commission rules as set out in the rules document.

Mr H

Mr. H gave evidence that he was the Associate Director of Services.

In responding to the single question as to whether the model used by the Respondent for the payment of commission was compliant with the Payment of Wages Act, the witness drew attention to two cases. Firstly,Peninsula Business Services v. Sweeney (2004) IRLR 49,a case in the UK which considered the operation of commission payments following termination of the employment relationship. In that case the UK EAT decided that such payments were not ‘properly payable’ under the terms of the applicable Act, which was virtually identical to the Irish Act. The second case referred to wasBord Gais Energy Ltd v. Thomas (PWD1729)in which case the Labour Court found that an award was not ‘properly payable’ in respect of a Performance Related Award scheme, which required that to qualify for an award the employee had to be in the employment on the date of payment, as the employee, having left the employment, did not meet the criteria to be eligible for the scheme.

The Applicable Law

Payment of Wages Act 1991

Definition

“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 of employment 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:

“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 of employment 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:

Regulation of certain deductions made and payments received by employers :-

5.—(1) An employer shall not make a deduction from the wages of an employee (or receive any payment from an employee) unless—

(a) the deduction (or payment) is required or authorised to be made by virtue of any statute or any instrument made under statute,

(b) the deduction (or payment) is required or authorised to be made by virtue of a term of the employee's contract of employment included in the contract before, and in force at the time of, the deduction or payment, or

(c) in the case of a deduction, the employee has given his prior consent in writing to it

Voidance of certain provisions in agreements.

11.— A provision in an agreement (whether a contract of employment or not and whether made before or after the commencement of this Act) shall be void in so far as it purports to preclude or limit the application of, or is inconsistent with, any provision of this Act.

Deliberation

The Complainant argued that, as his dismissal only took effect after his internal appeal was not upheld, he was in employment until 4 July 2017 and, therefore, he was in employment, as required by the Respondent’s rules on commission, on the last day of June and, as a result, the commission due to him should have been paid.

The Complainant cited the case ofUPC Communications Ltd vEmployment Appeals Tribunal and Ann Marie Ryan (2017) IEHC567in support of this proposition. In fact, in that case, the High Court determined that the plaintiff had sought the wrong remedy in seeking a Judicial Review of a decision of the Employment Appeals Tribunal. Of more significance is that in the course of that judgement, the High Court referred to the principle established in the UK case ofJ Sainsbury Ltd v Savage (1981) ICR 1, which held that the contract of employment terminated on the date of the original decision to dismiss but that the contract could be ‘saved’ if the subsequent appeal was successful. This reasoning was applied subsequently in the case ofWest Midlands Cooperative Society v Tipton (1986) ICR 192.Mr. Justice McDermott did go on to observe in theUPCcase that the Irish Employment Appeals Tribunal was not bound by such precedents in another jurisdiction and nor is this Court. However, in dealing with the facts of the instant case, the Court is satisfied that the Complainant was dismissed prior to the date on which his commission was due, by the letter issued to him on 16 June 2017.

Another argument made by the Complainant was that he had earned his commission and that the Act protects employees from having unlawful deductions made from their earnings. The Court gave close and detailed consideration to this point. However, it is a fact that under the Act there is express provision in s. 5 that allows for an employee to ‘contract out’ of their entitlements under the Act and that fact cannot be ignored by the Court.

It is not in dispute that the Complainant signed a contract that had an express provision that the terms of the contract included the Respondent’s rules on commission. Nor is it contended by the Respondent that these rules provided that to qualify for payment of commission, the Complainant had to be in the Respondent’s employment on the date that the payment was due.

The only issue in dispute is whether the Complainant had ever received a copy of the rules in question. While noting that the Respondent is unable to state with any certainty that these rules were provided to the Complainant, the Court is of the view that as the Complainant signed a contract that made express reference to the rules, (that were said to be attached to the contract), there was some onus on him to ensure that he was familiar with those rules. Indeed, the letter of acceptance signed by the Complainant states explicitly, directly above the applied signatures;

‘I accept this offer of employment in accordance with the provisions set out above and in the attached Sales, Commission and Bonus Rules’.

The Court is not satisfied, in the circumstances, that the Complainant can rely on an argument that he did not receive the rules and that, as a result, they do not apply to him. Rules that were part of his contract and which he accepted, so clearly, as being part of his contract cannot be disregarded by the Court.

Therefore, as provided by s.5,(1)(b) of the Act, the deduction is authorised by the Complainant’s contract and, indeed, by his signed agreement as per s.5(1)(c) of the Act. S.11 of the Act is not applicable.

Having considered all arguments put to it, the Court is of the view that the Complainant’s rights under the Act were not breached.

DETERMINATION:

The Court upholds the decision of the Adjudication Officer.

Signed on behalf of the Labour Court



Tom Geraghty
DC______________________
31 July 2019Deputy Chairman



NOTE

Enquiries concerning this Determination should be addressed to David Campbell, Court Secretary.