Complainant

Respondent

Anonymised Parties

A Supply Chain Manager

A Company

Representatives

Donncha Kiely BL instructed by Eoin Murphy Solicitors.

Darragh Whelan, IBEC Executive.

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-00020906-001

31/07/2018

This case concerns the non-payment of an annual bonus on leaving employment in Spring 2018. The case was first scheduled for 15 November 2018 and was postponed when the complainants Solicitor submitted that the complainant had not been properly notified of the hearing.

The hearing resumed on 20 August 2019 with all parties in attendance. Both parties were represented, the complainant by Donncha Kiely, BL and the Respondent by Darragh Whelan at IBEC. Both parties made helpful written and oral submissions.

The Complainant worked as a Supply Chain Manager, on a full-time basis from January 2014 to March 2018 following which, he joined a new Company.

The Complainant submitted that he was entitled to receive the agreed amount sanctioned from the maximum of the percentage calculation of 10% bonus on his €66,000 salary, applicable to the calendar year of 2017. This was due for payment in March 2018. The Complainant resigned on March 2, 2019.

Counsel for the Complainant outlined that the complainant had been wrongly refused payment of this amount on the basis that he was no longer employed on the date of the actual payment of the bonus in March 2018.

He submitted that the complainant’s contract of employment did not provide for an express term covering non-payment of bonus, neither was there any other collateral contract in existence between the parties.

Counsel for the complainant disputed the Respondent reliance on an overarching liability for the complainant to repay college tuition fees and argued that this was a separate and distinct issue to that of payment of wages a recoverable, if desired at an alternative forum.

Evidence of the Complainant:

The Complainant outlined that he had held another Management position  at the Respondent company prior to the position of Supply Chain Management. He recalled that he was promoted during his first year of employment, which he understood disentitled him to a bonus. He submitted that he received bonus payments during his employment as:

2015   €60

2016   €1400

2017   €4,014.23

2018     no payment received

He could not recall ever seeing an information document on payment of bonus and was not involved in the day to day calculation of bonus. He had not been informed prior to leaving that bonus payment was contingent on live employment. He understood that the bonus was to be paid at the maximum of the 10% allowable to the remaining 7 or 8 Senior Managers. He understood that he was the sole manager excluded from that field. He had not experienced any set backs in his performance ratings and he understood that he had parted on good terms with the respondent.

He secured an opportunity with another company and was unable to defer his start date without risking the job offer. The Respondent told him that they would see what might be done to keep him at the company

During cross examination, the complainant confirmed his organisational awareness of the bonus in a company of 85 Operators, where Bonus was paid in different tiers of staff operatives and Management. He did not recall two of these workers leaving employment without payment of bonus. He submitted that he was not privy to these leavers’ conversations. Different people may have had different arrangements. He had some understanding that people had left without repaying fees.

He confirmed that he had attended Senior Managers Meetings and he understood that the objective of the bonus payment “was to make things better for Operatives “He had no recall of the bonus being questioned during his tenure, perhaps it had been queried privately with Mr A?

The Complainant confirmed that he had not raised a grievance in pursuit of the bonus payment.

In Legal argument, the Complainants representative cautioned that there was no legal basis upon which the Respondent could imply a term into the complainant’s contract of employment which provides for the non-payment of a bonus earned, simply because he no longer worked there.

In referring to Malcom Rutherford v Seymour Pierce ltd [2010] IRLR 606, English High Court found that a term could not be implied into a contract as “it was not necessary for the contract to operate satisfactorily “

In relying on the Irish High Court decision in Finnegan V J and E Davy, unreported 26 January 2007, the Court held that a contract of employment would be disturbed by an unlawful unilateral change if an express term was permitted to be imposed. The awareness of a practice did not amount to an implied contractual term:

“ The attempted amendment of the terms of employment and bonus scheme were in my judgement as a matter of fact unilateral and while effective in practice as a matter of fact, in that they were withheld, were ineffective as a matter of law , not only because they were not consensual ( even if perforce the Plaintiff had to abide or tolerate them) they were made without notice much less notice in writing and if not overtly stated to be a contract in restraint of trade was in effect such “

Counsel argued that the Respondent had an opportunity to set out clearly the terms and conditions it wished in the contract of employment. On this occasion, there was no provision available to introduce a restrictive clause to separate the complainant from his duly earned bonus.

He queried the significance of March as a” cut-off date” and he was informed that applying a pro rata calculation to a bonus payment would be impossible to quantify on a sustained basis.

He concluded by submitting that such a restrictive clause would be manifestly unjust and not required to give proper effect to the complainant’s contract of employment.

The Respondent operates sixteen global manufacturing facilities in five countries around the world. Founded in 1963, it is a market leader in manufacturing solutions for complex and high precision products.

The Respondent disputed the claim in its totality and denied any contravention of the Payment of Wages Act.

The Respondent representative outlined that the complainant had started work as a Warehouse and Logistics Manager on January 20, 2014 and took up the position of Operations Manager in January 2017. He resigned from this position on March 2, 2018 by way of a notice dated February 5, 2018.

Bonus Scheme:

The Respondent operates a company performance related bonus scheme of which any payments arising from that scheme are routinely paid in week 11/12 of each year, following the calendar year of assessment. Originally, the bonus payable was up to 2% dependent on company performance. In 2015, a percentage of bonus was paid as targets were not achieved. Senior Manager bonus was revised to 10% for Senior managers in 2016, but 2.5% was paid as targets were not achieved. 2017 reflected a full payment of 10%.

The Respondent outlined that bonus for calendar year 2017, payable in 2018 was calculated at 6.5% for Managers and while not entitled to this payment, the complainant’s calculation had he stayed in employment would have been €4225.

The Respondent was very clear that employees are required to be in employment on the date that payment of bonus vests.

2012 Payment Vested in Week 9

2013 Payment Vested in week 12

2014 No Bonus paid (all prior to complainants’ employment in 2014)

2015 Payment vested in Week 11

2016 Payment vested in Week 12

2017 Payment Vested in week 12

2018 Payment Vested in week 12 (75% of 10%)

The Respondent accepted that the complainant had worked the full calendar year of 2017, which served as the review period. However, he had left in advance of the payment vesting day in week 12 of 2018.The Respondent submitted that the Complainant was fully aware that his leaving date ruled him out of collecting a bonus payment for 2018. He was requested to defer leaving but refused to do this.

The Respondent also brought the attention of the hearing to the company €7,000 expenditure on a Diploma course undertaken by the complainant at the local University.

This agreement is dated 31 August 2015 between A (the company) and B (the complainant) and is an express written term of the employees’ contract of employment in compliance with Section 5 of the Payment of Wages Act, 1991.

……. if the employee should terminate his employment of his own volition during the training period or within 2 years of the completion of any such training then the following repayment terms will apply:

……

Repayment:

Voluntary Termination within 12-months of training completion                     100% of training costs

Voluntary termination 12-18 months of completion                                               50% of training costs

Voluntary termination     18 -24 months of completing date                                     25% of training costs

…. Under the provision of this agreement, the company reserves the right to deduct the above monies from any monies due to the employee at the times their employment is terminated. If there are insufficient funds available at the date employment I terminated to meet reimbursement of training cots, a repayment scheme will be agreed between A and B, prior to the termination date to take account of the outstanding balance of training costs due.

Evidence of the Site Manager, Mr A

Mr A outlined that the site bonus payment was informed by the corporate body. There were variables in payments to Operatives and Senior Staff. Pay cycles were weekly for operatives and fortnightly for senior staff. The bonus for 2017 had been corporately advised and approved. While there were no individual notifications of bonus, the bonus was divided through service leads. The Respondent submitted an email thread dated 16 March 2018 which confirmed approval of site bonus pay out at 75% Management 100% Employee. The goal was to Pay “no later than the end of March 2018”

Mr A recalled that he enjoyed a very good working relationship with the complainant. He understood that the complainant accepted that bonus would not be paid to him.

During cross examination, Mr A confirmed that the rule of live employment being commensurate with bonus payment was widely known and understood. He agreed that it was not delineated in the written terms and conditions and it had not been raised at interview. Percentages had varied in payment terms, but tenure had not changed as a criterion for payment.,

The Respondent submitted that there was no set of circumstances to allow payment of the bonus to the Complainant. In relying on Board Gais Energy Ltd V Thomas PWD 1729, Labour Court, The Court held that an employee was not entitled to be paid a bonus because the company bonus rules required employees to be employed at the time the bonus was due to be paid.

The Respondent argued that the bonus was not “properly payable “Sullivan V Department of Education [1998] 9 ELR 217 applied. It would only have fallen for payment in a live employment scenario.

The Respondent fully accepted that it had not operated a policy on the rules of the bonus scheme. This has since been amended. However, in considering contractual terms, they asked the Adjudicator to reflect on the implied terms and unwritten rules of the employment relationship that are not explicitly referred to in a contract or formal policy documents, for instance custom and practice

The Respondent cited O Reilly V Irish Press [1937]71 ILTR 194 which described the practice as having to be:

So notorious, well known and acquiesced in that in the absence of an agreement in writing it is to be taken as one of the terms of the contract between the parties ……It is necessary in order to establish custom of the kind claimed that it be shown that it was so generally known that anyone concerned should have known of it or easily become aware of it

The Respondent submitted that payment was solely dependent on the vestment date with the criteria well established over time. The Complainant had full knowledge of this practice and was bound by this knowledge. His date of resignation placed him outside the vestment date and removed him from the bonus payment. He was also bound by the signed agreement on fees for which he made a mere €759.59 payment on leaving.

The Respondent contended that no breach of the Act had occurred.

I have listened carefully to both parties in this case. I have read both submissions and considered the case law advanced.

The Complainant has stated his claim to payment of a bonus payment which he believes he earned in 2017. He argues that he is not bound by the restrictions of being in live employment now that the bonus was paid. He submitted that he was not in any conflict with the company as his leaving was entirely voluntary and on good terms.

The Respondent does not accept this presentation. The Complainant was not present in the employment on the bonus payment vesting day. They have sought to apply a uniform bonus payment rule to all employees at the company, without exception.

They are clear that the complainant had full knowledge of the practice and was bound by it. The Respondent was pleased with the calculation of the bonus communicated in March 2018, which was higher than previously estimated. The Respondent contended that the complainant had not kept his part of the “Course Support Agreement “at the end of his employment.

I have been asked to consider this case in accordance with the terms of Section 5 of the Payment of Wages Act, 1991.

Section 1 of the same Act provides that:

“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,

The Complainant has submitted that the non-payment of bonus within the same month of his leaving amounted to an illegal deduction in his wages, a point that the respondent has vehemently disputed.

The facts of this case would have been greatly enabled by a contractual clause on bonus payment .I appreciate that the Respondent has since addressed this prospectively .For the purposes of this case , I accept that the Respondent had not drafted a bonus clause in any of the complainants contracts of employment and has instead chosen to rely on the Organisational knowledge of bonus which operated at the company .i.e. that everyone knew that bonus did not fall for payment once an employee left employment . I felt it necessary to probe this premise further.

Bonus payments arise in companies through several routes, sometimes as a welcome on-board gesture, sometimes as personal to holder target-based initiative. In this case the bonus was a Plant bonus for collective past performance in 2017. It was decided external to the plant and applied internally at variable percentage rates to Operators and Management, the complainant was a member of the latter grouping in the plant. It was paid at the end of March 2018, some three weeks after the complainant departed for his new job.

The facts of the case are not at one with Bord Gais, whose bonus scheme was covered by a stated criterion of being in employment on payment date. The parties in that case recognised the contractual terms “criteria established by the company “of the bonus payment. It is distinguished from the instant case in that regard

. In a recent Labour Court case Boston Scientific ltd and Trevor Cotter PWD 1919, the Court considered the discretion applied to the calculation of a bonus payment. In finding against the complainant, the Court determined that the 2016 bonus was not calculated in such an “unfair, unreasonable or capricious manner “such as to give rise to a breach of the Act.

I have been guided by that measurement. I have considered Rutherford and in turn Finnegan, through that lens. I appreciate that a dismissal went to the route of Rutherford and a deferred bonus payment in Finnegan, albeit on a much larger basis than the instant case. However, I note para 24 observation on a “term without saying “

Thirdly, it cannot be argued that this term “went without saying “That is because, in later contracts of employment entered by SPL and other members of their staff, these words have been made an express addition to clause 5. Thus, SPL have seen fit to add an express term to cover the bonus position for those sacked or on notice. That, so it seems to me, is good evidence that unless it was express, this term would not be implied “

This brings me to consider the contract of employment signed by both parties on 19 January 2017. If I am being requested to identify an implied term, it will be based on this contract.

Bonus is listed in the benefit section as “up to 10% performance-based bonus “. I could not establish any set criteria which accompanied the calculation of same. I note that the complainant received a very small bonus payment of €60, which covered the calendar year, 2014. In his own evidence, he expressed surprise at this as he understood that bonus was not payable at year 1. At any rate, the complainant received a bonus payment which covered every year of his employment bar the last, 2017.

I found a lack of clarity in the Organisational awareness of the terms of the bonus scheme. I accept that the Respondent hosted presentations for staff during the year, however, I could not establish a custom and practice on this bonus payment.

I found some guidance on page 9 of the contract in relation to Contractual Notice Requirements:

“ …. Failure to provide the company with notice period as above shall result in any outstanding monies owed to you but not only limited to, earnings for hours worked, overtime, bonus payments and holidays being reduced by the value of notice not worked “

My reading of this statement allows me to conclude that bonus payment was not a stranger to the conclusion of employment. There was provision for it to be considered on reconciling notice to termination of employment. There was no dispute between the parties on the correct notice given by the complainant. I found the above term to constitute an express term of employment which must overtake any proposed reliance on an implied term on custom and practice.

In returning to Finnegan in the High Court, the Court was influenced in finding for the Complainant by the following facts, highlighted by Janice Walsh in Murphy and O Reagan, Employment Law, Chapter 3.

(1)    The rules of the bonus scheme were not in writing and so had to be interpreted through evidence.

(2)    The decision to defer bonus was a unilateral change, without consent

(3)    The deferred element of the bonus was denied as Mr Finnegan moved to a Competitor and was a restraint on trade

Ms Walshe went on to analyse the seminal case on bonus payment at the High Court in Cleary and ors and B and Q Ireland, ltd [2016] IEHC 119. In this case, Mc Dermott J concluded that a discretionary seasonal bonus had been earned and was thus payable.

In the instant case, I would like to apply Finnegan and Cleary to the facts of this case. From the evidence of both parties, I am satisfied that the complainant was listed as a potential bonus recipient for the year 2017 and this was disturbed purely by his mobility to a new firm. He had earned the bonus and was removed in the vesting day payment arrangements. I found this to be unfair and somewhat irrational when considered side by side with his full compliance with the notice requirements.

While I appreciate that the Complainant had some knowledge of the bonus being vulnerable to mobility. I cannot accept that this anecdotal reference trumped the express term in the contract that bonus was to be a consideration at the leaving stage.

On that basis, I have found that the complainant had earned his bonus in 2017 and there was insufficient evidence before me to justify his removal from payment in March 2018 .I have found the actions of the Respondent to be irrational in that regard and most likely were a response to the dissatisfaction at the unexpected departure of a performing Manager .The Respondent did not wish to reward the mobility .All parties suffered in the vacuum of terms of bonus payment not being reduced to writing .

I have concluded that based on the pattern of bonus payment, 2015-2017 coupled with the contractual notice clause which cites a provision for bonus to join a divisor on leaving, the complainant had a legitimate expectation of receiving a bonus payment earned by his fellow managers during the calendar year of 2017. I find that he was unfairly excluded from same to amount to a breach of Section 5 of the Act. The bonus payment, in the absence of more declaratory terms was properly payable to him.

The claim is well founded.

The Respondent has asked that I address the partial repayment of course fees. I find that there was enough contractual provision for the parties to address this during the preparation for the complainant’s departure. The transaction concluded between the parties was not queried or augmented prior to the advancement of this claim. To attempt to do so now raises temporal limitation issues and is misplaced.

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 well founded. I order the Respondent to pay the 2017 Bonus Payment at 7.5% rate within 4 weeks of this decision.

Payment of Bonus