ADJ-00032510

Complainant

Respondent

Parties

Arlene  Vithaldas

UCC Academy DAC

Representatives

Peter McInnes McInnes Dunne Solicitors

David McCarroll Ronan Daly Jermyn Solicitors

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-00043086-001

16/03/2021

The Complainant is employed as CEO of the Respondent company, which is one of several wholly owned subsidiary campus companies of University College Cork (UCC). The Respondent company was established by UCC with the objectives of supporting the creation of international structures for overseas offices and, more generally, the delivery of UCC’ s strategic goals. The Complainant commenced employment with the Respondent on 14 January 2014 and worked under a series of fixed term contracts until March 2019 when the Respondent deemed her to be a permanent employee. The Complainant’s salary is €9333.33 per month. The Complainant asserts that she is entitled to an annual bonus payment of 10% of salary but that in the financial year for 2020 she only received 4% of salary, in breach of the bonus scheme policy as operated by the Respondent. She claims that the outstanding sum of €6,512.00 is properly payable to her under section 5 of the Payment of Wages Act 1991. The Respondent refutes the complaint and asserts that they were fully within their rights to apply a level of discretion to the considerations of the Complainant’s bonus, as expressed in the Complainant’s written contract. 

The provisions of the Performance Management Policy (the “Policy”) deals with how performance is evaluated and rewarded.  The policy states that where an employee achieves a rating of “3” or above, as it is accepted the Complainant has done every year, including the year in question, they are entitled to receive their full bonus. Not only does the wording of the Policy make this clear, but it is also how the Policy has been consistently operated by the Respondent, including for the financial year in question, for every employee of the Respondent except the Complainant.

The Respondent accepts that the Complainant was not the subject of any performance management process at any time during the relevant period. In fact, she has never been the subject of any such process during her period of employment. She was, and is, as an employee of the Respondent, subject to all employment related policies and procedures introduced by the Respondent, including the Policy.

The Complainant submits that even though the Respondent argues that the adverse consequences of the COVID-19 pandemic justified the withholding of the Complainant’s full bonus entitlement, that the Respondent, under the Complainant’s leadership, performed relatively well in spite the impact of the pandemic. In contrast, most eligible employees had received their full bonus payments. Furthermore, the Respondent’s international teams’ bonus were paid in full in January 2021, after the decision not to pay the Complainant’s bonus.

 The Respondent’s annual payroll amounts to approximately 1% of the university’s total staff costs. The bonus for eligible employees is about 8% of the Respondent’s overall annual compensation cost.  The Complainant presents these figures to show a full perspective on the position adopted by the Respondent that it was necessary to save 4% of a bonus pool, which is 8% of the Respondent’s overall compensation cost, which is 1% of the university’s annual overall compensation cost, to address the adverse impacts of the COVID-19 pandemic. The Complainant submits that, were it necessary to make savings by cutting staff bonuses, cuts should have been made across the board instead of singling out the Complainant.

 The Complainant submits that, even if the Respondent had the “free hand” it claims, the exercise of any discretion to withhold part of the Complainant’s bonus was an unreasonable exercise of that discretion having regard to the financial position of the Respondent and the insignificant impact of the Complainant’s bonus on that financial position.

Legal Argument:

 Section 1 of the Payment of Wages Act 1991 defines “wages” as follows –

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’s claim for her full contractual bonus clearly falls within the definition of “wages” in the 1991 Act.

The Complainant submits that, having been awarded an annual performance rating of at least 3, she became entitled to receive her full contractual bonus of 10% of her salary, a sum of €6,512.00.  The Complainant contends that this payment was “properly payable” to her in accordance with the provisions of Section 5 (6) of the 1991 Act and that the Respondent’s refusal to pay the full bonus amounts to a deduction prohibited by Section 5 of the 1991 Act.

 It is wrong for the Respondent to assert that the Adjudication Officer cannot look beyond the contract of employment in circumstances where the Respondent took the decision to implement the Policy. The Respondent’s assertions that the relevant provisions of the Policy are only engaged where there is a performance management issue that is being formally managed is demonstrably incorrect. The relevant provision of the Complainant’s contract is contained at clause 7 of the most recent contract. It states the Complainant is entitled to –

“b) An annual performance related bonus of up to 10% of your gross annual salary may be payable to you, subject to your annual review and as notified to you by the Chairman.”

The Policy sets out the Respondent’s annual review process. It cannot be credibly contended that the annual review process, as set out in the Policy, is irrelevant to the level of bonus payable.

 The contract also refers to the Respondent’s bonus scheme. Clause 7 d) of the contract, on which the Respondent seeks to rely, makes express reference to the provisions of the bonus scheme. It cannot credibly be contended by the Respondent that the section of the Policy entitled “Bonus Scheme” is to be ignored.  The Complainant acknowledges the Respondent has an express contractual right to withdraw the bonus scheme. It has not sought to exercise that right. It is submitted that this right can only be exercised in consultation with employees given that it relates to a material term and condition of employment.

The Complainant does not disagree with the terms of the authorities cited by the Respondent. All can easily be distinguished from the instant case if regard is given to the provisions of the Policy.

 The Policy places express limits on the contractual discretion on which the Respondent seeks to rely. Those limits were freely and willingly self-imposed by the Respondent. It cannot now seek to avoid the consequences of its own decisions. By implementing the Policy, and by operating it consistently, the Respondent willingly fettered the contractual discretion in the contract.

 The Complainant has demonstrated that, even if the Respondent was entitled to have regard to any issues, bar those laid down in the Policy, including unforeseeable events such as the COVID-19 pandemic, the effects of the pandemic on the Respondent were thankfully less severe than might have been feared.

 The Complainant has also demonstrated that the actual effect of withholding her full bonus was of no consequence to the Respondent on financial grounds and that the exercise of whatever discretion reposed in the Respondent to refuse to pay the full bonus on financial grounds was impermissible and unreasonable.

The Respondent has a staff of just over 50 employees including the Complainant who operates as the Respondent s Chief Executive Officer.  Whilst the Respondent has a turnover of in excess of €3m, the services it provides and the income deriving from those services all essentially come from its parent, University College Cork (UCC), together with some smaller ancillary third-party income mostly through relationships with other UCC subsidiaries and stakeholders.  The extent and level of UCC s draw down of the Respondent s services is by far the largest driver of turnover and profit within the Respondent company.

The Respondent submits that it exercised a clear and express contractual right of discretion in respect of the level of the Complainant’s bonus payment for the year 2019/2020. The relevant provisions are set within the Complaint s permanent contract of employment at Clause 7 of the Employment Contract which states: -

a) You will be paid a gross annual salary of 110,000 to commence from 1 October 2018, payable monthly in arrears into a nominated Irish Bank account of your choice on or before the last day of each calendar month. Your salary will be paid net of any lawful deductions in respect of income tax, social insurance contributions, the universal social charge and any other contributions required by law.

b) An annual performance related bonus of up to 10% of your gross annual salary may be payable to you, subject to your annual review and as notified to you by the Chairman.

c) Where a bonus is payable, the amount of the bonus will be communicated to you within two financial years which is 30 September and, where payable, will be paid to you within three months of the end of the financial year through the usual payroll process and subject to all deductions required by law. You must be in employment, and not serving notice of termination of employment howsoever arising, at the time the bonus payment falls due for payment.

d) The bonus scheme is entirely at the discretion of the Company and may be withdrawn by the Company at any time without notice to you. The payment of a bonus in a particular year is not a guarantee of a bonus payment in subsequent years.

e) Your remuneration will be subject to annual review by the Company. Increases in remuneration are not automatic and are at the entire discretion of the Company. The level of any increase, where awarded, in any given year will not influence or set a precedent in relation to future years.

f) By signing this contract of employment, you agree to the Company making deductions from your salary in respect of sums that may be payable by you to the Company from time to time.

The Respondent also operates a Performance Management Policy (the Policy) the stated scope of which is to address issues of misconduct, lack of capability or inappropriate actions. Within that context it does of course state that poor performance can impact on levels of bonus paid. However, the Complainant was not at this time being subjected to any performance management process, nor had she been notified of the application of the Policy to her to address any performance management issues. The Respondent asserts that the Complainant seeks to pluck out from the Policy one line and phrase in an attempt to wrongly categorise bonuses as being subject solely to deductions arising because of the application of a performance management process. The Respondent submits that such reliance on the Policy is entirely misconceived and runs at complete odds to the clear, unambiguous terms of the full discretion set out within her contract of employment as it applies to the consideration of any level of bonus. The Respondent submits that the Policy which was introduced in August 2018 for staff is not relevant to the claim at hand. The Complainant’s bonus scheme is administered by the Board whilst the Policy is administered by the Complainant in her role as CEO. The arrangements for the personal bonus scheme of the CEO were in place in a number of her contracts prior to 2018 therefore it is clear that the bonus referred to in her contract is not the Policy referred to by the Complainant.

Legal Submissions:  

 In Coindealbhain (Inspector of Taxes) v- Mooney, 1990 1 IR 42, Justice Blaney stated that “where an agreement creating the relationship in writing between the parties is expressed in writing… the entire agreement between the parties is to be found in the writing so it is the unique source of their relationship; it follows that it is from its terms alone that the nature of the relationship can be determined”.

The terms governing the consideration of the Complainant’ s bonus is expressly laid out in written agreed form and those provisions are clear and unambiguous as to their meaning and effect. The Respondent asserts that it is incontrovertibly the case that the bonus is discretionary in nature, wherein it is provided within her contract that the bonus scheme is entirely at the discretion of the Company. The Respondent argues there is simply no basis to claim that an expressly discretionary bonus can be deemed to be properly payable at a maximum level (or indeed at all) each year. It is the case that there were extraneous circumstances impacting on the Respondent arising from the Covid 19 pandemic, such that its parent, UCC, had to provide added support to allow them to reach a break-even position for the year. The Respondent a company owned by UCC, with by far its overwhelming level of revenues emanating from UCC (or other UCC affiliates), now in receipt of added support provided by UCC to reach breakeven position. The Respondent contends that it was entirely reasonable in such circumstances for the Respondent to exercise the discretion expressly reserved by it in terms of the level of any bonus being considered.

 The Respondent relies on Jim Devlin v Electricity Supply Board (EAT PW550/2011. In that case, after first addressing the fact that such contractual discretion although it may seem absolute, is not unfettered and must be exercised reasonably and in good faith assessed the non-payment of a 2010 bonus (provided for within the contract as discretionary) and determined that it was satisfied that in light of the financial circumstances in which the respondent found itself, that its decision not to pay the 2010 bonus was not an unreasonable exercise of its discretion . The non-payment was therefore not upheld as a contravention of the 1991 Act. In the instant case, it is submitted that the non-payment of a full level bonus by what is to a large extent a publicly funded body, who had to be supported by UCC just to break even is not – in the wider context of the Covid 19 pandemic - an unreasonable exercise of the Respondent s discretion.

 The Respondent also relies on the Labour Court case of Student Housing Operations Ltd T/A Aparto Ltd T/A Aparto  v O’Brien PWD2019 27/04/2020). In that case Ms O Brien was also eligible to participate in a discretionary bonus scheme and claimed non-payment of the bonus (in addition to other alleged deductions) as a contravention of the 1991 Act. The Court considered the various discretionary provisions and determined that Ms O’Brien was unable to demonstrate to the Court that, notwithstanding the bonus provisions in her written contract of employment, she had a contractual entitlement to a bonus payment. The Respondent in the instant case, when one reads the plain, unambiguous contractual terms of the bonus submits it is undeniably confirmed to be a discretionary bonus and thus, here too, the Complainant ought to be deemed unable to demonstrate a contractual entitlement to the bonus.

The Respondent cites the Labour Court case of The Institution of Engineers of Ireland / Engineers Ireland v Richard Seaver (PWD177 24/03/2017). In that case, in considering a claim under section 5 of the 1991 Act for the total non-payment of a bonus, the Court determined as follows: -

In deciding not to pay any bonus or bonuses of a particular level management was exercising its discretion under the terms of the contract of employment. Any expectation and the amount, if any, paid by the Respondent was not lawfully payable within the meaning of the Act and cannot amount to an infringement of section 5 as claimed in this case.

The Respondent submits that in the instant case, the Complainant, like in Seaver is wrongly seeking to appeal the level of bonus which was lawfully paid to her, because of a difference between her expectation and the amount actually paid by the Respondent. The Respondent relies on Seaver to support the legal proposition that a deficit arising from her unmet expectation does not and cannot translate to that sum being lawfully or properly payable. As such, it cannot be construed as a deduction within the meaning of the Act.

 The Respondent submits that this is not a claim in respect of the complete non-payment of any form of bonus or payment in respect of the Complainant s annual review. The Respondent did not exercise its full available discretion to pay no bonus. It had that authority contractually reserved. Thus, the discretion that was exercised was in fact quite measured. The Respondent asserts that the

Complainant was seeking payment at the review in December of a full level, 10% discretionary bonus, which would have been €11,000.  The Respondent applied a 2% salary increase which was backdated to apply from October 2020 which was acknowledged as being unexpected by the Complainant. The value of that was significant backpay for a number of months in 2020.

The Applicable Law:

 Section 1 the Payment of Wages Act (the Act) 1991 Act defines wages as follows:

“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.”

 Section 5(6) of the Act provides:

“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 therefrom 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 such deductions as aforesaid) are paid to the employee

then, except in so far 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 the occasion”.

The fundamental question that has to be decided if whether the 10% percent of salary maximum bonus ought to be deemed properly payable under the Act, as argued by the Complainant, or whether the 4% that was actually paid by the Respondent was a lawful and reasonable exercise of a discretion which was allowable under the Complainant’s contract, as contended by the Respondent.

The Relevant portion of the Complainant’s contract dealing with bonus are at paragraph 7 which reads:

b) An annual performance related bonus of up to 10% of your gross annual salary may be payable to you, subject to your annual review and as notified to you by the Chairman.

c) Where a bonus is payable, the amount of the bonus will be communicated to you within two financial years which is 30 September and, where payable, will be paid to you within three months of the end of the financial year through the usual payroll process and subject to all deductions required by law. You must be in employment, and not serving notice of termination of employment howsoever arising, at the time the bonus payment falls due for payment.

d) The bonus scheme is entirely at the discretion of the Company and may be withdrawn by the Company at any time without notice to you. The payment of a bonus in a particular year is not a guarantee of a bonus payment in subsequent years…

The Complainant submitted that the bonus scheme as alluded to in the contract was the Performance Management Policy (the Policy), which she exhibited in detail. The Complainant submits that she was consistently given a score of ‘3’ each year, including the year at issue, which entitles her to a full bonus payment. Furthermore, she claims that she was treated unfairly in that the all the other employees covered by the Policy received their full bonus payment. The Respondent cited a number of authorities to support their case but significantly claimed the Complainant was not covered by the Policy but instead by a scheme that was unique to her role as CEO, and which was administered by the Board. It is clear to me that reference to a bonus was included in the original contract of 2013, and that bonus wording in the contract of 2017 is mirrored in the permanent contract of 2019. However, the Policy was not introduced until 2018. It is apparent that the contractual basis for the Complainant’s bonus was not by reference to the Policy but instead through the customised and unique bonus scheme under the stewardship of the Board. Furthermore, it is clear that the evaluation of staff entitlement for the Policy bonus was a role for the CEO therefore it is not plausible that the CEO self-evaluate in a scheme that she herself administers. I find that the scope of the Policy did not extend to the Complainant but that her bonus was the unique scheme referred to in her contract.

The wording of the contractual discretion enjoyed by the Respondent is unambiguous. Paragraph (d) of the contract above clearly states that the bonus is discretionary and can be withdrawn at any time. The Complainant’s representative made it clear that he did not disagree with the authorities cited by the Respondent other than to argue that regard should be had to the provisions of the Policy. However, as I find that the Policy does not apply I refer to the Labour Court case of The Institution of Engineers of Ireland / Engineers Ireland v Richard Seaver (PWD177 24/03/2017), which was opened by the Respondent.  In that case, in considering a claim under section 5 of the 1991 Act for the total non-payment of a bonus, the Court determined as follows: -

In deciding not to pay any bonus or bonuses of a particular level management was exercising its discretion under the terms of the contract of employment. Any expectation and the amount, if any, paid by the Respondent was not lawfully payable within the meaning of the Act and cannot amount to an infringement of section 5 as claimed in this case.

I am satisfied that that the Respondent had a discretion, but any discretion thus allowed must be exercised reasonably and in good faith. The Respondent cited Jim Devlin v Electricity Supply Board (EAT PW550/2011. That case established that, amongst other things, that a contractual discretion on bonus payment is not absolute. The Employment Appeals Tribunal assessed the non-payment of a 2010 bonus (provided for within the contract as discretionary) and determined that it was satisfied that in light of the financial circumstances in which the respondent found itself, that its decision not to pay the 2010 bonus was not an unreasonable exercise of its discretion. The non-payment was therefore not upheld as a contravention of the 1991 Act. The Complainant submitted that the Respondent company had performed reasonably well under challenging circumstances, but the overarching reality is that the Respondent is a campus company of UCC and that all of its income comes from its parent UCC.  International enrolments were down and expected to end at just 60% of target for the 2019/2020 financial year. The Respondent, in an uncontested argument, submitted that, nevertheless, despite targets not reached, UCC would provide payment to the Respondent to help support a breakeven position. The Respondent also submitted that they had arranged for a promised pay rise for the Complainant in the year in question. The Respondent asserted, on an uncontested point, the Complainant admitted to the Respondent that she was not expecting a pay rise that year. On a further point, the Respondent convincingly argued that it had the discretion to pay no bonus under the contract but elected instead to pay 4% instead of the full 10%. I am satisfied that the exercise of the discretion by the Respondent was reasonable and not unfair.

In conclusion and considering the extensive submissions of both parties in this case, I am satisfied that the Respondent had an allowable contractual authority, which was exercised reasonably and fairly, to pay a discretionary bonus at the 4% level and that such a payment was not an unlawful deduction under Section 5 of the Payment of Wages Act 1991. I find that the complaint was not well founded.       

CA-0043086: I am satisfied that the Respondent had an allowable contractual authority, which was exercised reasonably and fairly, to pay a discretionary bonus at the 4% level and that such a payment was not an unlawful deduction under Section 5 of the Payment of Wages Act 1991. I find that the complaint was not well founded.      

Bonus, Contractual Discretion, Payment of Wages Act 1991.