Complainant

Respondent

Parties

Ken O'Toole

Tridium Ltd

Representatives

 Not represented

 Sherwin O’Riordan Solicitors

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-00048290-001

24/01/2022

The respondent company was established by the complainant and three colleagues in July 2020.  It specialises in providing managed IT services to clients and the four directors, who were also employees, each held a 25% shareholding.  On the complaint form he submitted to the WRC, the complainant said that he commenced with the company on September 19th 2020 in the capacity of IT director.  His employment was terminated on June 26th 2021. 

Evidence of the Complainant

The complainant said that in September 2020, he was working for another company and he also worked part-time in the new business.  He said that he agreed that he would give up his job and, from mid-October 2020, he worked full-time for the respondent.  He said that the four directors agreed that they wouldn’t take a salary until the business started generating revenue and, when there was enough money, they would be paid.  He said that he was working under the assumption that, by the end of the second quarter of 2021, or, by July 2021, they would all be earning wages.  When one of the directors, Mr Donohoe, joined the company in February 2021, the complainant said he was paid wages.  He said that there had been an agreement that they would all be paid the same wages, but he has not managed to get the minutes of the meeting at which this was agreed.

The complainant was paid wages for the first time in March 2021, an amount of €4,050 gross.  said that he expected to get his wages which were due from October 2020 to February 2021 in July 2021.  In summary, he said that he is due wages for working part-time in September, and for the months of October, November and December 2020, and for January and February 2021.  Based on his gross monthly pay of €4,050, which he earned from March 2021 onwards, he claims that he is entitled to €20,250 in respect of unpaid wages.  He also claims that, at that time of his dismissal, he had not taken any holidays since he started with the company, and that he is entitled pay for 25 days’ untaken holidays.

Cross-examining of the Complainant

Mr O’Riordan reminded the complainant that the directors agreed that no wages would be paid until the company was in a position to pay salaries.  The complainant said that the agreement was that wages would be paid.  He agreed that Mr Donohoe was the first of the directors to be paid in February 2021 and that all four were paid in March.

Mr O’Riordan put it to the complainant that there was no agreement to pay deferred wages, but that the agreement was that no one would be paid until money was available.  The complainant replied that it is his belief that his co-directors received deferred pay.

The complainant said that he was paid some holiday pay, but that he was treated as a part-time, instead of a full-time employee.

In response to questions from me, the complainant said that he started work with the respondent on a part-time basis in September 2020.  He left his job with his former employer on October 18th.  He said that he was prepared to take a risk in the start-up business and he intended bringing in his own clients.  He said that before he became full-time, he had been a mix of being an employee and self-employed.  Since January 2022, he has been self-employed.

Before concluding his evidence, Mr O’Riordan asked the complainant if he worked in his own business while he worked for the respondent.  He replied that he was transferring his clients to the respondent.  Asked if he had any other source of income, he said that he would not answer that question now.

Mr O’Riordan suggested that the complainant had not been candid about what he was doing when he worked for the respondent, and that he did not answer the question regarding other income.

In the respondent’s written submission, I note that the directors agreed that they would not take an income from the company until they could afford to do so.  Correspondence between the directors and their accountant show that it was agreed that they would receive gross pay of €4,050 per month with effect from March 1st 2021.

Mr O’Riordan submitted that the complainant refers to the non-payment of wages from September 2020 until February 2021.  To meet the six-month time limit for making a complaint, he said that his last opportunity to make a claim was August 2021.  Mr O’Riordan argued therefore, that that the complaint is statute-barred. 

With regard to the substantive claim, Mr O’Riordan referred to section 5(5)(d) of the Payment of Wages Act 1991, and the provision for an agreed deduction from an employee’s wages.  He submitted that, as the directors agreed not to take any wages until funds were available, the wages claimed by the complainant are not due.

Case Law

Mr O’Riordan referred to the decision of the adjudicator in the case of Siobhán McEneaney and Xerox Europe Limited, ADJ-00033466, which turns on the time limit for bringing claims.  In this case, the complainant was aware of the breach of the Payment of Wages Act in January 2021 and could have lodged her complaint within six months.  In this case, the adjudicator referred to a decision of the High Court in Health Service Executive v McDermott, [2014] IEHC 331, where Mr Justice Hogan addressed the issue of time limits and the “contravention to which the complaint relates.”  The point here is that, if the complaint relates to unpaid wages over a period of time, then, as long as the complaint relates to a period of six months beginning “on the date of the contravention to which the complaint relates, the complaint will nonetheless be in time.” 

The adjudicator in the McEneaney case also referred to the decision of the Labour Court in the case of Elsatrans Limited v Joseph Tom Murray, PWD 1917, where the Court found that when part of a complaint in relation to the non-payment of wages is referred outside the time limit, the entirety of the complaint is rendered out of time.  

Evidence of Mr James Donohoe, Director

Mr Donohoe did not accept that there was an agreement to pay wages which had been “deferred” from prior to March 2021.

Cross-examining of Mr Donohoe

The complainant referred to what he said was an agreement to pay wages for February 2021, but Mr Donohoe did not accept that there was such an agreement.  He did not agree either that the directors intended to pay wages deferred from September 2020 at the end of June or in July 2021.  In June 2021, Mr Donohoe said that the directors were paid €4,050.  The complainant asked him about a payment of €20,000 paid to each of the remaining three directors in July 2021.  Mr Donohoe confirmed that this was paid and he said that it was a bonus, and not back-pay.  He said that it was for “work put in.”

In response to further questions from Mr O’Riordan, Mr Donohoe said that, in July 2021, when €20,000 was paid as a bonus to him and his colleagues, the complainant had left the company.

Evidence of Mr Orvar Bjarnason, Director

Mr Bjarnason said that there was never an agreement to pay wages at a future date which were not paid before March 2021.  In late June or early July 2021, they “landed a big client” and they were in a comfortable position to pay a bonus.  He said that this was not agreed before the client was taken in and the payment of the €20,000 bonus was not related to wages.

Addressing the issue of unpaid holidays, Mr Bjarnason said that they asked their accountant to calculate the holidays due to the complainant at the termination of his employment.  He was issued with a payslip, with details of holiday pay.  A copy of a document with details of holiday pay was submitted in evidence and this shows that the accountant calculated holidays due to the complainant as if he was a part-time worker, based on 8% of 22 hours per week from October 2020 until the end of February 2021.  He was considered to be a full-time worker from March 1st to June 26th 2021.  The accountant calculated that he was entitled to €2,148.10 holiday pay, based on 86.2 hours’ holidays not taken.

Cross-examining of Mr Bjarnason

The complainant put it to Mr Bjarnason that he was working full-time from October 2020.  Mr Bjarnason said that it was his belief that the complainant “was not working full days.”

Referring to the new client brought on board in June or July 2021, the complainant asked how long it took for the company to be paid by this client.  Mr Bjarnason said that an invoice was sent on day one and it took 30 days to be paid.

The Relevant Law

Section 5(6) of the Payment of Wages Act 1991 (“the Act”) addresses the circumstances in which wages which are properly payable are not paid:

“(6) 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.”

It is apparent therefore that, if I find that wages that were “properly payable” to the complainant were not paid, I must conclude that there has been a deduction from his wages.  Section 5(1) of the Act provides that, apart from tax, PRSI and USC, unless there is a provision in an employee’s contract of employment to deduct wages, without the employee’s written consent, a deduction may not be made. 

The Facts

The undisputed evidence is, that when they set up their new company in July 2020, the directors agreed that they would not take wages until they had an income from the clients with whom they were contracting to provide an IT service.  In February 2021, one of the directors received a month’s pay of €4,050 gross and from March 2021 onwards, they were all paid this amount monthly. 

On June 26th 2021, the complainant was dismissed.  In July, the remaining three directors agreed that they would each be paid €20,000 as a bonus.  The evidence of one of the directors was that the funds for this payment came from the signing on of a new client. 

Findings:  Deduction from Wages

No evidence was submitted to show that the directors agreed that wages from September 2020 until February 2021 would be deferred and paid at a later date; the evidence was that wages would be paid when funds were available.  It is apparent that funds were available in February 2021 and from March 2021, all four directors were paid monthly wages of €4,050, although one director was paid in February.  At the hearing, I was informed that, in July 2021, additional funds became available when a new client came on board and the three directors who were employees on that date agreed that they would be paid €20,000 each.

Although by July 2021, the complainant was no longer an employee, it is my view that he remained subject to the directors’ agreement that wages would be paid when funds were available.  The description of the €20,000 as a “bonus” is, in my view, a deceit and it is also my view that the availability of the funds facilitated the payment of wages which were not paid in the early months of the business starting up.

I find therefore, that, as the directors agreed that wages would be paid when funds were available, the significant increase in revenue in July 2021 meant that, in that month, wages were properly payable to the complainant in respect of the period from September 2020 to February 2021.

This complaint was submitted to the WRC on January 24th 2022, and is therefore within the six-month time frame from July 30th 2021, the last Friday of July, which I understand was the day on which July wages were paid.  I therefore reject the respondent’s assertion that the complaint was submitted outside the statutory time limit.

As a company director, the complainant was exempted by section 3(c) of the Organisation of Working Time Act 1997, from the provisions regarding maximum weekly hours or the maintenance of records of hours worked.  In his evidence, he was less than forthright regarding his earnings from other sources.  As he declined to state that he had no other earnings, I must assume that he had some other earnings and that he spent some of his time doing other work while he was employed by the respondent.

As a company director, the complainant was responsible for managing his own hours.  He produced no evidence of the hours he worked from September 2020 until June 2021, apart from stating that he worked part-time until he resigned from his old job in mid-October 2020.  In the absence of any records and, based on the complainant’s failure to corroborate the respondent’s assertion that he did other work while he was employed by them, I have decided to assume that, for the first four weeks of his employment, he worked for three days per week, and from October 18th 2020 until June 26th 2021, he worked for the respondent for four days per week.

The complainant’s monthly wages of €4,050 from March 1st 2021 is equivalent an annual salary of €48,600.  Based on the standard method of calculating a daily rate of pay (annual salary ÷ 232), his daily rate was €210.

To reach a conclusion regarding wages due from September 21st 2020 to February 28th 2021, I have estimated the days that the complainant worked as follows:

September 21st to October 16th 2020: (4 weeks x 3 days = 12 days) x €210 = €2,520

October 19th 2020 to February 28th 2021: (18 weeks x 4 days = 72 days) x €210 = €15,120

From this calculation, I find that the total gross earnings deducted from the complainant’s wages in July 2021 was €17,640.

Findings:  Holiday Pay

This complaint was submitted to the WRC on January 24th 2022.  In accordance with the six-month time limit prescribed at section 41(6) of the Workplace Relations Act, I can consider a complaint regarding holiday pay from July 25th 2021.  Section 2 of the Organisation of Working Time Act 1997 (“the OWT Act) provides that the “leave year” is any year beginning on April 1st. 

Section 23 of the OWT Act 1997 sets out the provisions regarding holiday pay at the cessation of employment: 

(1) (a) Where -

(i) an employee ceases to be employed, and

(ii) the whole or any portion of the annual leave in respect of the relevant period remains to be granted to the employee, 

the employee shall, as compensation for the loss of that annual leave, be paid by his or her employer an amount equal to the pay, calculated at the normal weekly rate or, as the case may be, at a rate proportionate to the normal weekly rate, that he or she would have received had he or she been granted that annual leave. 

(b) In this subsection -

‘relevant period ’ means -

(i) in relation to a cessation of employment of an employee to whom subparagraph (i) of paragraph (c) of subsection (1) of section 20 applies, the current leave year[.] 

The remainder of this section applies to the termination of employment due to illness and is not relevant to the complaint we are considering here.

As the complainant’s employment ended on June 26th 2021, at the date of his termination, he worked for the respondent during the current leave year from April 1st until June 26th 2021.  I find therefore, that his claim for holiday pay for the period from September 2020 until March 31st 2021 is out of time.  From the evidence submitted by the respondent, he received pay for holidays not taken between April 1st and June 26th 2021, and his claim in respect of this three-month period is not upheld.

I decide that this complaint is well-founded and that the respondent made an illegal deduction from the complainant’s wages in July 2021 of €17,640.  In accordance with section 6 of the Payment of Wages Act, as amended, I am required to direct the respondent to pay compensation as a net amount.  Based on my estimation that he was subject to a deduction of 35% in total for PAYE, PRSI and USC, I direct the respondent to pay the complainant compensation of €11,500.

Deduction from wages