Employee

Employer

Anonymised Parties

A Business Development Manager

A Scaffolding Company

Representatives

 Not represented

Loughlin Deegan, Byrne Wallace Solicitors

Act

Dispute Reference No.

Date of Receipt

Dispute seeking adjudication by the Workplace Relations Commission under section 13 of the Industrial Relations Act, 1969

CA-00044238-001

19/05/2021

The employer is the Irish-registered branch of one of the companies in an international group that manufactures and supplies scaffolding systems for the construction industry.  The employee is a sales and marketing executive and he commenced on April 14th 2020 as a business development manager for the company’s web-based sales platform.  He reported to the sales manager and his annual salary was €47,000.  For a variety of reasons, including industrial action at the company’s Dublin facility and the effect of the Covid-19 pandemic on the construction industry, the employee was given notice in November 2020 that his employment would be terminated at the end of the year.

This is a dispute about the failure of the employer to pay the sales commission that the employee expected to be paid, and which he claims is due to him in accordance with his contract of employment.

In the documents he submitted in advance of the hearing, the employee included a copy of his contract.  Under the heading, “Commission,” is the following statement:

“You commission structure shall be as company policy performance based and will be discussed with you and your line manager periodically,  As product lines as added and removed to the company portfolio commissions me be revised as required (sic).”

By November 2020, when he was given notice of the termination of his employment, the employee had not received any commission in respect of his performance since he commenced six months previously.  When he gave the employee notice that he was finishing up on December 30th, the sales manager told him that commission would be paid in his final salary.  At the hearing, the employee said that he ran a report which showed that web-based sales for the UK and Ireland from the date he commenced on April 14th 2020 to the end of November 2020 amounted to just over €700,000.  On the basis of his manager’s commitment to him that he would receive 1% of web-generated sales, and, based on a sales report he generated at the end of November 2020, he calculated that he would receive approximately €7,000 in commission. 

Also included in the employee’s documents is a copy of an email dated Monday, December 7th 2020 from the sales manager to the employee.  The sales manager confirmed that he spoke to a person in the accounts department and informed her that the employee had not received any commission and that a payment would be included in his final wages in December.

The employee received his final payslip on December 18th.  It was apparent from this that no commission was paid.  He contacted his manager and was informed that the payment was waiting to be approved by the accounts department. 

The employee finished up before Christmas 2020, with no commission being paid.  At the end of January 2021, he contacted the sales manager.  While he said that he would “chase up” the commission payments with the accounts department, in mid-February, the sales manager advised the employee to contact the accounts department himself.  On February 17th the financial controller wrote to the employee and informed him that he would not be paid any commission.  A copy of the email from the financial controller was included in the employee’s submission:

“The company’s position is that no commissions are payable.  Although your appointment contract refers to the potential for commission payments, it made any such arrangement specifically subject to agreement between you and your manager, and no formulae or other metrics were ever agreed in writing.  Thus it is not possible to evidence any basis on which commission payments may be due and payable, so we are regretfully unable to make any such payment.”

The employee replied with a copy of the email sent to him by his manager on December 7th 2020, in which he confirmed that commission would be paid.

At the hearing, in response to a question from me, the employee said that he was responsible for approximately half of the sales from the date he joined the company on April 14th 2020, to the end of the year.

Having made no progress through his own efforts, on May 19th 2021, the employee requested an investigation by the WRC and a recommendation regarding how this dispute might be resolved.    

Mr Loughlin sent a submission to the WRC in advance of the hearing on this matter, in which he outlined the company’s difficult trading environment from the time the employee joined the business in April 2020.  He said the “extraordinary impact” that Covid-19 has had on the construction sector,  coupled with a strike that lasted for six months resulted in the closure of the company’s manufacturing business and the loss of 15 jobs in October 2020.  There were job losses also in marketing and management and manufacturing is now done overseas.

Mr Loughlin said that the employee was employed to develop the company’s web-based platform.  He referred to the clause in his contract regarding commission which is also copied in the previous section:

“You commission structure shall be as company policy performance based and will be discussed with you and your line manager periodically,  As product lines as added and removed to the company portfolio commissions me be revised as required (sic).

Mr Loughlin said that the “disjointed language” in this clause reflects the fact that it was “prepared during a time of extraordinary upheaval” shortly after the onset of the Covid-19 pandemic and the commencement of industrial action at the company’s production facility.

Despite their joint best efforts, the employee’s job wasn’t viable and he was given notice in November 2020 that his contract would terminate at the end of the year.  At the start of his employment, while it was anticipated that a commission structure would be developed, this was never agreed between him and his manager and it is the employer’s case that he has no contractual entitlement to such payments.  While the employee’s line manager attempted, in good faith, to get approval for the payment of commission, he had no authority to grant commission retrospectively.

The company’s objective now must be to preserve jobs and the payment of commission would be inconsistent with this priority.  At the hearing, the financial controller said that total web-based sales from April to November 2020 came to €556,964 and that the 12-month figure is €602,254.

In conclusion, Mr Loughlin said that the employee’s manager approved the commission payment after he was given notice of the termination of his employment, but that this manager did not have the final say on the matter.

It is evident that the employee was issued with a contract of employment which includes a provision for the payment of commission.  The contract provides that commission is performance-based and that it will be discussed periodically with the employee and his line manager.  I disagree with Mr Loughlin’s argument that the commission is not a contractual entitlement.  It is eminently clear that, in his contract of employment, the employer intended the employee to be paid commission, based on his performance.  It seems to be to be entirely unfair that the employee should suffer because his manager did not ensure that he had approval before he gave a commitment for a payment which is provided for in the employee’s employment contract.

The responsibility for discussing the structure of the commission system lies with the company’s management and not the employee and it is my view that the employee should not be penalised for the failure of his manager to agree the basis on which commission is to be paid.  In the end, when his employment was terminated, the sales manager informed the employee that commission would be based on 1% of web-based sales. 

At the hearing, the employee said that he was responsible for approximately half of the sales generated during the time he worked with the company.  The final figure from April to November 2020 was just under €557,000.  It is my view that, if the employer had engaged constructively with the employee regarding a performance-based commission structure, his commission would have been contingent on the proportion of the overall sales generated by him, and not total sales.  In his evidence, he said that he was responsible for half of the total sales, and that his colleague was responsible for the other half.  On this basis, he was responsible for generating sales in the region of €278,500.

I have taken account of the difficult trading conditions experienced by the employer during 2020; however, it is my view that the employee’s contract is clear in its intention that the payment of commission is one of the terms of his employment.  It is my view that the employer should pay him commission based on 1% of the sales he generated between April 14th and mid-December 2020.  I have reached this conclusion because of the statement in his contract which refers to “you[r] commission structure” which will be performance-based.  I am also influenced by the fact that, when he was given notice of the termination of his employment, the employee’s line manager confirmed in writing that commission would be paid, although I accept that he agreed that it was to be based on total sales.

To resolve this dispute, I recommend that the employer pay the employee a sum of €3,000, reflective of approximately 1% of the sales he generated for the company in 2020.  I further recommend that this sum is treated as a termination payment, which is not subject to deductions of tax or PRSI. 

Commission payment