FULL RECOMMENDATION
PARTIES : NHC CONSTRUCTION LIMITED DIVISION :
SUBJECT:
This is an appeal by NHC Construction Ltd., ‘the Respondent’ of a decision by an Adjudication Officer, ‘AO’, under the Payment of Wages Act, 1991. Mr. Mathews, ‘the Complainant’, started to work for NHC Construction Ltd. in 2014, initially on a part-time basis. He left the employment for a few months and resumed working part-time for the Respondent in January 2015. It is common case between the parties that he commenced full-time work for the Respondent in May 2016 and was made redundant in March 2020. The Complainant received an annual bonus of 10% of the Respondent’s profits. These were paid in December of each year following receipt of the accounts for that year up to 31 May. The Complainant lodged a complaint under the Act with the Workplace Relations Commission on the basis that he should have received a pro-rated proportion of his bonus for 2020 when he was made redundant in March 2020. The AO upheld the complaint. The Respondent appealed to this Court. SUMMARY OF RESPONDENT’S ARGUMENTS: It is accepted that the Respondent paid a bonus to the Complainant each year of 10% of the company’s profits. The accounting period was 1 June to 31 May each year and, following receipt of the accounts, the bonus was paid in December. However, it is incorrect to say that this was paid without variation as in December 2019, the Complainant was paid an additional sum of €12000 following a demand from the Complainant for additional payment. The Complainant’s claim, that was upheld by the AO, is for a sum of €5000 being 25% of the 10% of profits that he estimates for the relevant financial year, in the region of €200,000. In fact, the company’s profits were €31,352 so that even if the Court was to uphold the complaint, the maximum share that could be claimed is €783.80. In any event, the claim does not fall within the cognisable period under the Act. The relevant period is 31 October 2019 to 30 April 2020 when the complaint was lodged. There was no entitlement for the Complainant to receive a payment in respect of the June2019-May 2020 financial year within that period. If there was any entitlement to a profit share, it arose only in December 2020. Such profit share cannot be claimed on a pro-rated or estimated basis. There is no basis for claiming that €5000 was ‘properly payable’ to the Complainant during the cognisable period. The Complainant seeks to have a pro-rated profit share entitlement implied into his contract of employment for that financial year. The two tests for implied terms are that of the ‘officious bystander’, seeShirlow v. Southern Foundaries Ltd. 91939) 2K B 206,whereby an officious bystander, if shown a term that should have been, self-evidently, written into a contract would exclaim ‘oh, of course. This test was expanded upon inSweeney v. Duggan (1997) ILRM 221, in which it was held that an implied term must be necessary to give effect to the contract. The second test is ‘custom and ‘practice’, seeO’ Reilly v. Irish Press,and is a term that is so notorious, so well-known and acquiesced in that it can be taken as a term of the contract. The Complainant has shown no basis for an argument that there is an implied contractual entitlement to a pro-rated profit share on an estimated basis beyond bald assertions of entitlement. SUMMARY OF COMPLAINANT ARGUMENTS: Details are provided to the Court to show payments to the Complainant of 10% of company profits in the form of profit share bonuses. The Respondent does not dispute that these payments were agreed. The only point at issue is the entitlement to receive a pro rata payment for service in the first 3 months of 2020. The bonus was paid without variation in each of the previous four years. It is part of the wage package. It was not subject to any specific performance criteria. An additional €12000 was paid in December 2019 due to the calculation producing a lower than expected figure. When making the complaint, a profit figure had to be projected in order to calculate entitlement. There is now a more definite figure on which to base a calculation. WITNESS EVIDENCE: Mr. Niall Healy: Mr. Healy is the owner of the respondent company. The witness outlined how he had set up a business while in his 20s and how he had taken on the Complainant, whose brother was a friend of his, to do part-time work for the company, while the Complainant was in college. The witness said that when the Complainant left to go to the U.S. in 2015 there was no discussion about him returning to the company, that it was all a bit ‘ad hoc’ and that there had not been any bad blood. He said that, at the time, they were friends. While he had not been given any choice about the Complainant’s departure, it was not for him to seek to stop him. The witness said that the Complainant had requested a P45 for tax purposes when he left the company in 2014 but made no such request when leaving in 2015. The witness said that there was not a job awaiting the Complainant’s return from the U.S. The witness said that he made a ‘leap of faith’ in providing the Complainant with a full-time job after the Complainant completed college. The witness said that the Complainant was the only employee to receive a profit share. The witness said that he saw this as a means of tying the Complainant to the company from year to year. It had never been paid weekly or monthly and was only paid after the profits were identified in the annual accounts. Those accounts up to end May 2020 showed much lower profits than the previous year due to Covid and to the fact that the witness had down sized the business, shut the Dublin office and had just retained some good customers. The witness said that he had paid an additional €12000 to the Complainant at the end of 2019 somewhat ‘under duress’. Under cross examination, the witness denied that he knew that the Complainant would be returning to the business before he left for the U.S. In response to questions from the Court, the witness accepted that there was no employment contract in place for the Complainant, there was no letter of resignation and that there was nothing in writing to assist the Court. The witness said that he believed he would have paid the Complainant for any outstanding annual leave before he left for the U.S. He stated that the Complainant left of his own accord. The witness said that he had agreed to pay the bonus to the Complainant on the basis of a full year’s service, that he had to be in employment at the end of the year to qualify and that if the Complainant left the employment in the course of the year, no bonus was payable. Mr. Shane Mathews: Mr. Mathews is the Complainant. The witness confirmed that the contents of his submission were the truth to the best of his knowledge. The witness emphasised that when he left to go to the U.S. in 2015 he did seek permission to do so and it was known by the Respondent that he would be returning to the employment. He stated that the Respondent had long-term plans that involved him and that he had discussed these with Mr. Healy. The witness noted that it was not true to say that the bonus terms had never deviated as in 2016 he had received a bonus of 10% of profits for the whole year although he had only worked for 6 months of the year. Under cross examination, the witness accepted that he had no evidence in writing to support his claim for a pro-rated bonus. It was put to the witness that he was now asserting that he had discussed his departure in 2015 with Mr. Healy but that Mr. Healy had said in evidence that this was not the case and the witness had not questioned him on the matter at that time. The witness said that he was not well versed in these matters. He said that he did not exactly ask Mr. Healy if he could go on holidays, but he said that it was false to claim that there were no plans for his return. It is put to the witness that he assumed he had a right to return but that there was no such arrangement. The witness said that he had a visa for only 90 days and that his return was not an assumption but was definite. In response to questions from the court, the witness referred to his submission in which he said that in 2015 it was always his intention to return and that Mr. Healy had accepted his absence. He noted that he needed to return to college and that he resumed work shortly after his return. The witness said that nobody had done his job in his absence. The witness confirmed that his P45 was given to him in 2014 at his request as he needed it to avoid emergency tax when he took up new employment but that he had not made any request in 2015. THE APPLICABLE LAW: Payment of Wages Act 1991 Definitions
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 (b) any sum payable to the employee upon the termination by the employer of his contract of employment without his having given to the employee the appropriate prior notice of the termination, being a sum paid in lieu of the giving of such notice: Regulation of certain deductions made and payments received by employers. 5.— (1) An employer shall not make a deduction from the wages of an employee (or receive any payment from an employee) unless— (a) the deduction (or payment) is required or authorised to be made by virtue of any statute or any instrument made under statute, (b) the deduction (or payment) is required or authorised to be made by virtue of a term of the employee's contract of employment included in the contract before, and in force at the time of, the deduction or payment, or (c) in the case of a deduction, the employee has given his prior consent in writing to it.
Decision of Labour Court on appeal from decision referred to insection 6] 7.— A decision of the Labour Court undersection 44of the Workplace Relations Act 2015, on appeal from a decision of an adjudication officer referred to insection 6, shall affirm, vary or set aside the decision of the adjudication officer. Workplace Relations Act 2015 41. 6) Subject tosubsection (8), an adjudication officer shall not entertain a complaint referred to him or her under this section if it has been presented to the Director General after the expiration of the period of 6 months beginning on the date of the contravention to which the complaint relates. 8) An adjudication officer may entertain a complaint or dispute to which this section applies presented or referred to the Director General after the expiration of the period referred to insubsection (6)or(7)(but not later than 6 months after such expiration), as the case may be, if he or she is satisfied that the failure to present the complaint or refer the dispute within that period was due to reasonable cause. DELIBERATION: The combined effect of s. 5(6) of the Payment of Wages Act and s.41(6) of the Workplace Relations Act is that the first matter to be considered by the Court is whether it has jurisdiction to hear this complaint. The complaint was lodged with the Workplace Relations Commission on 30 April 2020. The cognisable period of six months, therefore, is from 31 October 2019 to 30 April 2020, (no case having been made under s.41(8) of the 2015 Act). It is the Complainant’s contention that he accrued entitlements to payment in this period. It is contended by the Respondent that the complaint must fail as the bonus in question was not ‘properly payable’ within the meaning of the Payment of Wages Act in the cognisable period. It is common case that, if any bonus payment was due for the period, (which is contended), the payment would have fallen due in December 2020. The question for the Court is whether s.5(6) of the Payment of Wages Act can be interpreted so that it can be determined that the Court has jurisdiction to hear argument in respect of a payment claimed to have accrued within the cognisable period? In this regard, it is notable that the definitions of employees and employers in that Act allow for complaints to be made under the Act even after the employment relationship has ceased. Thus, it would have been possible for the Complainant to make his complaint after December 2020 if he had not received a payment that he believed to have been ‘properly payable’ within the meaning of the Act. In the instant case, no bonus could have been payable to the Complainant within the cognisable period as the agreed arrangement was for payment of 10% of profits and these profits could not have been identified until the accounts were concluded. The accounts produced for 2020 were for the financial year ending on 31 May 2020 i.e. after the cognisable period. The requirement of s.41 of the Workplace Relations Act is that a complaint must be made within 6 months of the contravention to which the complaint relates. While the circumstances ofHSE v. McDermott (2014) IEHC 331are different to those of the instant case, Hogan J. was clear in his ruling in that case that the Court is required to interpret this provision in respect of the Payment of Wages Act in a very strict sense and, indeed, if there are numerous breaches alleged then separate complaints for each 6 months’ period are required. In the instant case, the Court does not believe that it has the jurisdiction to consider a complaint in respect of a payment that was not payable within the cognisable period and that to do so would amount to the Court assuming for itself a jurisdiction that has not been provided to it in law. Accordingly, the Respondent’s appeal must be upheld. FINAL DETERMINATION: The Decision of the Adjudication Officer is overturned.
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