Complainant

Respondent

Anonymised Parties

A Settlements Manager

A Financial Services firm

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-00028619-001

23/05/2019

The complainant asserts that he is due bonus payments of €6,300 and that their non-payment is a contravention of the Payment of Wages Act. The respondent asserts that the bonus payments were no longer properly payable because it invoked the disciplinary procedure in relation to an incident.

The complainant outlined that he was withheld two bonus payments arising from the 2016 and 2017 financial years, which were due to be paid in 2019. He stated that he met all the conditions, including the performance criteria and not having tendered his resignation.

The complainant outlined that he was accused of breaching procedure in respect of the incident of the 19th December 2018. He outlined that a subsequent investigation concluded that there was no breach of procedure. He had not been in the office at the time of the incident. There had been a security update of systems, but this led to a system in another department becoming disconnected. There was a loss of connection for 10 minutes. The complainant outlined that he had followed procedure, but the procedures did not account for a new system in the other department. The complainant said that following this, he wrote a new start-up procedure.

The complainant outlined that his explanation was corroborated by the Risk Manager. There was no disciplinary finding made against him. He said that the introduction of the new system was a success, and this identified an error in checking systems.

The complainant outlined that he was seeking the payment of his bonus payment for two years.

In reply to the respondent, the complainant said that he had not been given advance notice of the meeting of the 22nd January 2019. The day of the adjudication was the first time he had seen minutes from the meeting. He said that he asked to make his case in the informal process and there was no opportunity to appeal. He said that the investigation cleared him and there was no warning of the consequences of the disciplinary intervention. He said that he was only informed of these consequences when he sought payment of his bonus. He said that only paragraph 2.1 of the disciplinary sanction was read out at the meeting.

The respondent outlined that it did not pay the deferred incentive payment as the complainant did not satisfy the conditions. It submitted that the monies were not, therefore, properly payable. It stated that the management of the system that disconnected was part of his role and he had one person reporting to him.

The respondent said that it was an investment firm managing $15 billion. It is regulated by the Central Bank as a method investment firm per Directives 2017/563 and 2014/565. Article 9 (3) of Directive 2014/565 sets out some of the obligations and scrutiny under which the respondent operates. Article 9 also provides for remuneration policy which must encourage responsible business conduct. Article 27 of Directive 2017/563 requires that the remuneration policy include fair treatment and quality of services. This shows that a significant amount of thought must go into the remuneration policy. The respondent was also cogniscent of EBA guidelines regarding remuneration.

The respondent said that it applied these Directives via its two remuneration policies. The March 2019 policy provides for variable remuneration includes risk management and conformance with policy. This highlights the principles applied by the respondent even after the complainant handed in his notice. The respondent confirmed that the September 2017 remuneration policy was in place at the time.

The respondent outlined that there were three teams including the back office/settlements team. The job of back office was to ensure that the details provided by the trading desk match the details provided by the counter-party. The respondent had very specific procedures that must be followed on a daily basis.

The respondent stated that the complainant was on annual leave on the 19th December 2018. The complainant’s reportee emailed to say that the system was working. The new system included a dual check, i.e. sending a dummy message and checking that the two systems were connected. In this case, only the second check was carried out and the dummy message would have showed that the systems were actually connected. An investigation found that there was a breach of procedure. The board found that the Risk Manager’s assessment was not sufficient, and the matter was re-investigated.

The respondent outlined that following the board meeting in August 2018, it asked the HR Manager to email all to remind that a breach of procedure will lead to disciplinary action. The respondent refers to 4.1 “breach of procedures … lead to a financial or reputational loss”. It submitted that clause 2.1 provides that matters may be resolved informally. The respondent took the view that the complainant had breached procedures in respect of the December 2018 incident but decided to deal with it informally.

The respondent pointed to the minutes of the meeting of the 22nd January 2019 regarding the breach of procedures. The respondent hoped that this would end the matter. It stated that the relevant date for the payment of the deferred incentive compensation award was the 31st January 2018. It submitted that the engagement of the disciplinary process meant that the complainant was no longer entitled to the bonus. The complainant could have appealed this through the disciplinary process.

The respondent outlined that it heeded the advice of the Central Bank, especially the obligations ensuing from the Markets in Financial Instruments Directive. The respondent submitted that a named manager (the complainant’s line manager) devised the two-stage test before the incident occurred. The respondent stated that the breach was that the person manning the desk on the day had not been instructed to send the dummy message prior to confirming that the system was working.

The respondent outlined that it recognised that this was a stressful time for the complainant but said that it did not do anything to add to this. It said that the incident would be stressful. It stated that the issue to be investigated was a net point as the back office sent the email to say they were connected when they were not. It outlined that the trading desk traded 800 million that day and there was a time without a connection to the back office. It outlined that the complainant was asked to stay on when he handed in his notice. It outlined that the complainant’s line manager moved roles because of the incident, but that it did not conclude that the line manager had breached procedures.

The director outlined that the meeting of the 22nd January 2019 took place to say that the breach of procedure had led to the initiation of the disciplinary process. She outlined that the line manager felt that there was a breach of procedure and emphasised the importance of the back office. The respondent confirmed the seriousness of the issue. She outlined that the complainant was advised of the next steps, but the respondent did not want to issue a formal warning. She outlined that she met the complainant on the 4th February 2019 where she explained that the respondent had to apply the disciplinary process for the breach of procedure. They asked the complainant to reconsider his resignation and he mentioned wanting a pay review. The complainant said that he would come back to her if he changed his mind.

This is a complaint pursuant to the Payment of Wages Act. The complainant asserts that he is entitled to bonus payments accrued in 2016 and 2017, which were to be paid out in instalments over three subsequent years. The respondent asserts that the complainant became disentitled to the bonus payments during this period. It asserts that the claim is not well-founded as the bonus payments were not properly payable.

The bonuses confirmed to the complainant, subject to conditions

On the 20th December 2016, the respondent wrote to the complainant to confirm that his salary would be €40,000 from 1st January 2017. The respondent also stated that it awarded the complainant a conditional incentive compensation amount of €10,000. This was to be paid in three instalments (€4,000 on the 31st January 2017, €3,000 on the 31st January 2018 and €3,000 on the 31st January 2019).

On the 16th January 2018, the respondent wrote to the complainant and stated that the conditional incentive compensation to be awarded was €11,000. It was to be paid in three instalments (€4,000 on the 31st January 2018, €3,300 on the 31st January 2019 and €3,300 on the 31st January 2020).  

Both pieces of correspondence set out four conditions, which are to be met on the date each instalment is due. The conditions are:

“a) you continue to be employed by the company

b) you have not given notice of the termination of your employment

c) you have received a ranking of 5 or above in your most recent performance appraisal

d) You have not been subject to the company disciplinary’s procedures in the preceding 12 months.”

The remuneration policy

The September 2017 remuneration policy states “Incentive-based remuneration consists of a discretionary bonus scheme to motivate and reward employees. It is awarded in a manner, which promotes sound risk management and does not induce excessive risk taking by ensuring an appropriate balance between fixed and variable remuneration. In general, bonuses awarded are partially deferred, with 30% being deferred for one year and 30% being deferred for two years. Payment of the deferred amounts is then subject to various continuing conditions.”

The March 2019 remuneration policy includes the stipulation that “Consideration of award recipients performance including whether the employee made a contribution to the firm’s performance, the employee’s risk management and other behaviour including how the employee complied with the firm’s policies including the Conflicts of Interest Policy and Code of Conduct and Ethics; and any other contribution that the employee may have made to the performance of the firm.”

The disciplinary procedure

The respondent circulated the disciplinary procedures on the 2nd August 2018; this was acknowledged by the complainant on that day. The relevant parts of the policy state as follows. Clause 1.1 states “The Company’s disciplinary procedure is designed to help and encourage all employees to achieve and maintain appropriate standards of conduct, attendance and job performance. The aim is to ensure consistent and fair treatment through the operation of fair procedures. This procedure is not contractual, but is intended as a statement of current Company policy, taking into account the Code of Practice on Disciplinary Procedures of the Labour Relations Commission as may be amended from time to time. The Company therefore reserves the right to amend the procedure as necessary.”

Clause 2.1 states “The Company will attempt to resolve any complaint in an informal manner by way of private discussion between the employee and his/her immediate supervisor. However, where such discussion fails to adequately resolve the issue or where the matter is deemed as gross misconduct, the Company’s disciplinary procedure will be invoked.”

Clause 2.3 provides “At every stage in the procedure the employee will be furnished with details of the allegation(s) or complaint(s) against him or her and will be given the opportunity to respond fully to such allegation(s) or complaint(s) before any decision is taken. Where considered necessary by the Company, details of the allegation(s) or complaint(s), including witness statements, may be provided in writing to the employee in advance of any disciplinary meeting.”

Clause 2.6 stipulates “A copy of the Company’s written record of any disciplinary action taken will be supplied to the employee concerned on request.”

At clause 4.1, the procedure defines “gross misconduct” as including “serious negligence or breach of procedures which has or could potentially lead to a financial or reputational loss to the Company or our clients, damage or unauthorised compute access…”

Clause 5.1 provides for an appeal against any “disciplinary sanction” imposed on the employee.

The incident of the 19th December 2018

Between 6 and 8.30am on the 19th December 2018, the respondent applied security updates to IT services listed in the email of the 18th December. Within two minutes of the email, the complainant had the foresight to ask “Will this affect the [other IT system]?” The reply from the IT manager was “No [the complainant] it shouldn’t effect it. We are not patching the [other IT system’s] servers.”

The incident of the 19th December 2018 arose from applying security updates. As outlined above, the patching had the effect of disconnecting the settlements IT infrastructure from an IT system in another department. In the email of the 20th December 2018, the respondent CEO stated “Back office changed procedure NOT TO CHECK [the other IT system] working before trading – we traded 850 million with no back office. [The complainant] told [his reportee] just to send email to trading as its not necessary to check it actually works as its ‘automatic’! Was this an unauthorised change or breach of procedure they amount to the same in my view?”

The Risk Manager submitted his report of the incident to the respondent CEO on the 21st December 2018. This concludes that the reboot following patching caused the other IT system to disconnect. It set out that the previous week, the other IT system was moved to a virtual server as part of mandatory security procedures. It states that this was the first occasion where the issue of connection following a reboot had arisen. It said that this incident highlighted the need for a further check to log into the other IT system to ensure connection. The report concluded “in my opinion, there was no breach of procedure as the Back Office team still checked that [another department] did not display an error as it was ‘Unable to connect to [the other IT system]’, however a deficit in controls has been identified, and more robust checks are required.” It refers to devising updated Back Office procedures, which the complainant said he completed.

There was reference in the evidence to the respondent rowing back from the Risk Manager’s assessment of the incident. There is no evidence of any such alternative report. There was also reference to an alternative procedure being in place prior to the 19th December 2018. Again, there is no documentary evidence to support this. I note that this is an environment where procedure and documentation is understandably important. By comparison, I note the disciplinary procedure was circulated on the 2nd August 2018; the respondent circulated an email on the 17th August to highlight the importance of following procedure and in this case, to acknowledge receipt of a new policy. I note that there is no evidence that the revised procedure was circulated to employees prior to the 19th December 2018. I note that the Risk Manager referred to a new procedure being put in place following the incident.

It follows that there was no breach of procedure by the complainant or by any member of his team. There was a significant change in the IT infrastructure and a security upgrade was carried out to the Back Office functions. This had the unforeseen effect of causing a disconnection between systems and one not readily picked up. The disconnection was identified and rectified. There is no evidence of financial or reputational loss to the respondent. The complainant played a central role in ensuring that it did not occur again by drafting revised procedures.

Whether bonus payments are properly payable

The respondent asserts that the bonus payments were no longer properly payable as it had invoked the disciplinary procedure in respect of the incident of the 19th December 2018. I have found above that the complainant did not breach any procedure.

While the complainant met with the respondent on the 22nd January 2019, it is certainly not clear that this meeting was the invoking of the disciplinary procedure. First, the complainant said that he was not informed that the meeting of the 22nd January 2019 was the invoking of the disciplinary procedure. There is no such notification in the papers. Second, the complainant states that the first he saw of the minutes exhibited by the respondent was the day of the adjudication hearing. There is no evidence of the minutes being circulated to him beforehand. Third, the disciplinary procedure is imbued with fair procedures, for example being presented with the evidence relied on by the respondent. The respondent referred to a procedure devised by the line manager which the complainant did not follow but this was not presented to the complainant before or at the meeting. The respondent did not, therefore, adhere to clause 2.3 of the disciplinary procedure. Fourth, there was no finding against the complainant and no disciplinary sanction imposed. There was nothing for him to appeal, yet this is the basis of extinguishing his entitlement to a bonus. The complainant did not accept that he had breached procedure and it was not clear to him that dealing with the matter informally would impact his entitlement to a bonus. Fifth, there is nowhere a suggestion that the complainant’s actions amounted to gross misconduct, as required by clause 2.1 of the disciplinary procedure.

In Cleary v B & Q Ireland Ltd [2016] IEHC 119, the High Court held that the employer was required to exercise discretion reasonably and ‘if the discretion is exercised unreasonably the employer will be in breach of contract if no reasonable employer would have exercised the discretion in that way.’ The Court held that the discretion to withdraw a bonus scheme could not be exercised when the employee had accrued the entitlement and ‘crystallised once it was earned in accordance with the terms of the scheme as operated.’

I find as fact that the respondent did not invoke the disciplinary procedure in accordance with the procedure. For the reasons outlined above, the respondent did not comply with the disciplinary procedure and did not give the complainant the opportunity to show that the accusation of a disciplinary breach was wrong. I also find that it is unreasonable for the mere invoking of an informal disciplinary procedure to prevent the payment of a bonus where the employee has set out such strong evidence of there being no disciplinary breach. In this case, the complainant presented such a strong rebuttal that there was no finding or sanction against him. His position is corroborated by the unassailable and unassailed conclusions of the Risk Manager.

The complainant resigned on the 4th February 2019 and his employment ended on the 4th May 2019. What is at play are the two bonus payments due on the 31st January 2019 in the amounts of €3,000 and €3,300. Given the above findings, I find that these monies were properly payable to the complainant and their non-payment is a contravention of the Payment of Wages Act. I decide that the complaint is well-founded, and the respondent shall pay to the complainant the sum of these amounts, i.e. €6,300.

CA-00028619-001

I decide that the complaint made pursuant to the Payment of Wages Act is well-founded and I direct that the respondent pay the complainant redress of €6,300.

Payment of Wage Act / bonus / ‘properly payable’

Cleary v B & Q Ireland Ltd [2016] IEHC 119