Complainant

Respondent

Parties

Sarah  Barr

Genzyme Ireland Ltd t/a Sanofi Ireland Ltd.

Representatives

  Self - represented

McCann Fitzgerald 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-00029011-001

12/06/2019

The issue in contention was the eligibility of the Complainant to an end of Year Bonus for 2018. The Complainant had ended her employment with the Company on the 1st February 2019.

The employment began on the 07/11/2017 and ended on the 01/02/2019.

The rate of pay was € 35,000 nett per annum for a 40-hour week.

The Complainant had ceased employment with Company on the 1st February 2019.  She was relocating to Australia. She had given her required notice before Christmas 2018. The Company traditionally paid an end of Year Performance Bonus to all employees. The Complainant had been assessed for 2018 and awarded a score of 5.  In January 2019 as part of winding up her affairs in Ireland she had contacted Ms. AR in the HR Dept who had confirmed that the bonus would be paid.

In March 2019 the Complainant contacted her former Team Leader, Ms. XH, to inquire about her score and when she could expect payment. Ms. XH informed her that she had received a 5 but that as she was no longer on Payroll she would not receive any payment as per Company Policy.

This came as quite a shock and the Complainant again contacted HR. Further correspondence followed. The Company insisted that the Bonus Policy document was clear that if a person was not on the Payroll -had resigned as was the case here – then no bonus was payable.

The Complainant asked for further documents to support the Company position, but none were forthcoming.

It was her firm belief that she had a clear contractual entitlement to be paid her bonus and was referring the case under the Payment of Wages Act ,1991 on this basis.

The Respondent Company operates a Discretionary Annual Bonus scheme – the Individual Variable Remuneration Plan – the IVR. The Plan has been in existence for many years.

Under Clause 6 of the Plan - Subsection dealing with Voluntary Termination – the rule is that “Eligibility depends on local practice”. At the Respondent site in Ireland the local practice has always been that an Employee eligible for a Bonus Payment must be on the active payroll on the date of bonus Payment- generally in mid-April of the following year. The Complainant had resigned in December 2018 and left the site by the 1st February 2019. Clearly, she falls outside of the Custom and Practice rule and is due no payment.  This Policy has been consistently followed for many years. In early 2019 some 7 employees (including the Complainant) left the Company and to date in 2021 20 employees have left before Bonus Pay out date. None of these former employees received any IVR Payments.

In Legal arguments the Respondent pointed to the concept of what sums are “Properly Payable” in this context and by reference to Section 5 of the Payment of Wages Act,1991. This concept would have been raised by the former EAT in Sullivan v Dept of Education [1998] ELR 219 and in a number of High Court cases since culminating in the landmark High Court case of Cleary and Ors v B & Q Ireland in [2016] IEHC 119. In all these cases and in a number of other cases cited the practice of requiring local rule to govern the payment of an annual bonus was accepted and was not deemed to be covered by Section 5 of the Payment of Wages Act,1991. It was deemed that the Contract of Employment allowed by extension or by direct reference the inclusion of the rules of the Bonus Scheme -one of which was the need to be “On the payroll” on Bonus Pay Out date. Accordingly, in this case, the IVR Bonus was not legally “Properly payable” as set out in the Act. It does not fall within the Legal meaning of Wages for the operation of Section 5 of the Act.

Consequentially the long-standing Respondent local custom and practice of a requirement to be “On payroll” on the date of Bonus Pay-out is valid and the Complainant’s claim is not well founded.

3:1:          The Applicable Law and Legal Discussion.

Sections 1 and 5 of the Payment of Wages Act, 1991 applies.

Section 1 under Definitions states

“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

The correct legal interpretation of this definition as regards the inclusion of Bonus payment such as the IVR requires reference to the High Court Cleary and Ors v B & Q Ireland in [2016] IEHC 119 and to considerable Labour Court precedents – especially Bord Gais Energy v Thomas PWD 1729.

A key Legal issue is whether or not the conditions and rules for Payment or non-Payment of a discretionary Bonus such as the IVR was contractually provided for and well communicated to the Complainant. In particular the question of a person, being an ex-employee, who had worked for the relevant period, in this case year 2018 and clearly earned the Bonus being refused payment as they had Voluntarily Terminated is critical.

In the Contract of Employment at Section 5 it states “You will be entitled to participate in a discretionary bonus scheme”

At Paragraphs 58 to 64 of the Cleary case Justice McDermott devotes some considerable space to a consideration of the word “Discretionary”.

At Para 58 McDermott states

58. The financial reality with which the employer was faced led to a review of the bonus scheme. I accept that the employer had a wide discretion under the terms of the contract and scheme to withdraw the scheme which must be exercised reasonably. 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. This imposes a very high onus on an employee who claims that the discretion was unreasonably exercised (per Hedigan J., in Lichters & Hass -v- Depfa Bank plc [2012] IEHC 10).

Underlining by Adjudication Officer

Furthermore, at Para 61/ 62 Justice McDermott comments further

61. However, the use of the word “discretionary” is not always determinative of whether a contractual entitlement arises under a bonus scheme.

62. In Small & Ors -v- Boots Co plc [2009] I.R.L.R 328 a number of warehousemen were in receipt of performance-related bonuses which were not given over a three year period. The employees brought an action for unlawful deduction of wages, claiming a contractual entitlement to the bonuses. Slade J., (delivering the judgment of the Employment Appeals Tribunal) considered the interpretation of the word “discretionary” in bonus schemes as follows in a way which I regard as helpful and persuasive: 

“18. In my judgment the extent of an employer's discretion in relation to a bonus scheme is relevant to the determination of the question of whether, and, if so, to what extent the scheme has contractual content. The Employment Judge erred in failing to determine the meaning of the term ‘discretionary’ in the documentation upon which he relied.

19. As is illustrated by the observation of Potter LJ in Horkulak, the use of the term discretionary in a bonus scheme may be attached to the decision whether to pay a bonus at all, its calculation or its amount. No doubt there are other factors to which discretion may be attached. In determining whether the reference to a discretionary bonus conferred any contractual entitlement, the Employment Judge should have decided to what aspect of the scheme the term discretionary was attached. In the context of this case, the possible interpretations include discretion attached to the provision of an overarching bonus scheme, to a decision each year to operate a bonus scheme, to the method of calculation of bonus or to the threshold which triggers a bonus or to whether and if so what percentage of salary will be paid.”

Slade J concluded that the employment judge had not engaged with the question of whether the employer's discretion had any contractual content and if so what it was, and by regarding the use of the word “discretionary” in relation to the bonus scheme as determinative, I consider that the Tribunal, in this case, made a similar error.

63. The employees worked the relevant period pursuant to the terms of the contract and scheme, thereby accruing a bonus entitlement under the scheme. I am not satisfied that the terms of the bonus scheme properly interpreted, allow for the unilateral withholding of a bonus payment in respect of a period worked by the employee during which the workers had a legitimate expectation that the bonus was accruing and would be paid. I am satisfied that the bonus for August 2011 to January 2012 was properly payable in June 2012 notwithstanding the withdrawal of the scheme in January 2012. I am satisfied that in the circumstances of this case the overall discretionary nature of the bonus scheme does not extend to a withholding of the bonus due, in respect of that period, in respect of which the bonus was quantified and payable under the scheme, subject to compliance with the eligibility provisions. I am satisfied that the contract of employment and bonus scheme must be interpreted reasonably. The discretion to withdraw the bonus scheme at any time, in my view, was always intended to apply in futuro and attached to the conferring of bonuses, as yet unaccrued, under the terms of the scheme. The payment of the bonus crystallised as a contractual obligation once it was “earned” in accordance with the terms of the scheme as operated. I am satisfied that the Tribunal erred in law, in interpreting the discretion vested in the employer to withdraw the bonus scheme at any time as being applicable or attaching to this period.

64. I am therefore satisfied that notwithstanding the employer's difficult financial circumstances in this case, it bore a contractual obligation to pay the 3% bonus accrued to each employee during the relevant six month period and that this was a bonus properly payable as “wages” under section 5(1) of the 1991 Act.

Adjudication Officer underlining

Taking this discussion to the current case crystallises on the point as to whether or not to withhold payment to an ex-employee was “Reasonable”. What is the extent of “Discretionary” as set out in the Contract of Employment and the reference to

“Eligibility depends on Local practice” in Clause 6 of the Scheme Rules.?

Clause 5 of the Contract of Employment as already quoted states that “you will be entitled to participate in a discretionary bonus scheme”.

There is no mention of “being on payroll at time of pay-out” condition.

Clause 6 of the IVR rules states under Voluntary Termination

After December 31st, 2018 eligibility depends on local practices”. “During 2018: Not eligible unless legally required.

Taking the views of Justice McDermott above how reasonable was it to withhold payment for a 2018 bonus for which the Complainant qualified.?

Justice McDermott allowed for the, in the Cleary case, the August 2011 to January 2012 Bonus be paid as it had been clearly worked for subject to “compliance with the eligibility provisions”.

The Complainant satisfied all the necessary criteria save the “Being on Payroll” in April 2019.

Supportive of the Respondent view is Labour Court decision PWD 1729 Bord Gais Energy v Thomas.

The Respondent in the Bord Gais case in support of their argument cited Sullivan v Department of Education [1998] 9 E.L.R. 217 where“payable” was defined to mean “properly payable” and argues that the PRA Bonus only became properly payable if you were still in employment at the time of payment or were covered by one of the exemptions in the scheme.

They distinguished this case from the case of Cleary & Ors v B&Q LTD [2-16] 27 ELR 121 on the basis that the Respondent in that case was relying on a general variation clause whereas in this Bord Gais case the Complainant did not meet one of the criteria of the scheme.

The Court noted that there was no dispute on the facts of this case. Both parties accepted that one of the criteria attaching to the PRA scheme was, that to benefit you must be in employment at the payment date. Nor was it disputed that the Complainant’s contract set out the circumstances in which the PRA became payable including the following phrase

“…your eligibility for such a PRA payment in any year shall be considered and determined in accordance with the criteria established by the company”.

The question that arose is whether, or not the PRA payment was properly payable to the Complainant. In considering that question the Court placed considerable weight on the fact that the Complainants contract sets out the eligibility requirements for payment of the PRA 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.

In the case in hand the employment contract, read narrowly, does not specifically identify any eligibility criteria and the Complainant was clearly of the view, reinforced by her conversation with the HR Agent in January that she was due her bonus even after leaving the employment. In her Oral evidence the Complainant made it she was never aware of the “Being on Payroll” clause of the IVR. Her evidence was clearly given and reflected her overall professional background.   The HR Agent in evidence gave a much more nuanced view of this conversation and did not agree with the Complainant’s interpretation.

The question then arises as to whether or not the IVR Scheme formed part of the Contract of Employment. It is not mentioned in the Contract although it might well be deemed to be covered by a concept of subsidiarity.

If deemedpart of the Contract, then Section 5 (1) (b) applies and the Complainant case falls.I did not find that the evidence supported this view as strongly as believed by the Respondent and certainly raised doubts regarding the “Reasonable Discretion” argument.

It is acknowledged that a view in favour of the Complainant might well be contrary to accepted and current Company practice but having carefully read the IVR Plan it is a Performance Related Plan. Performance merits a reward. It is not an overt Retention of Employees instrument.

The introductory paragraph states

“Your individual Variable Remuneration (IVR) aims at rewarding your contribution to achieve our annual objectives as a Company. It represents a significant component of your total compensation package.”

The Plan also states that Employees eligible for the 2018 IVR Plan must be “on the payroll of Sanofi or a subsidiary on the 31st December 2018”

3:2         Summary and role of legal precedent from Labour Court .

In final summary and much influenced by the Cleary case and the views of Justice McDermott there is certainly a good case to come to the conclusion that the non-payment of the 2018 IVR bonus by reason of the “On Payroll” clause was an unreasonable exercise of Employer discretion. The Bonus had been worked for and was, it could be argued, due to the Complainant for her good efforts during 2018.

However, as the Labour Court in PWD 1729 Bord Gais Energy v Thomas and other closely allied cases has ruled that a Being on Payroll clause is validI have to defer to this Precedent.To depart from this precedent at Adjudication officer level would require a very high bar of differentiation between this case and the precedents. Justice McDermott at Para 58 as quoted above states

This imposes a very high onus on an employee who claims that the discretion was unreasonably exercised (per Hedigan J., in Lichters & Hass -v- Depfa Bank plc [2012] IEHC 10).

In reviewing all the evidence and reading all the documentation I cannot find sufficient differentiation of such a magnitude to allow a departure by an Adjudication Officer from the Labour Court ruling.

Custom and Practice regarding the rules of the IVR, especially the Being on Payroll clause, over many years, in the Respondent Company was well know and had to be deemed to have a Legal standing in terms of individual employee Contracts.

Accordingly, the IVR Bonus is covered by Section 5(1)(b) of the Payment of Wages Act,1991 and the non-payment was not an improper deduction.