PWD2510

PARTIES:

DIVISION:

SUBJECT:

Appeal of Adjudication Officer Decision No's: ADJ-00051044 (CA-00062532-001)

BACKGROUND:

This is an appeal of an Adjudication Officer’s Decision made pursuant to the Payment of Wages Act, 1991. The appeal was heard by the Labour Court in accordance with Section 44 of the Workplace Relations Act, 2015. 

The following is the Court's Decision:

DECISION:

This is an appeal by Mr O’ Donohoe (the Complainant) against Decision ADJ-00051044 CA-000062532-001 of an Adjudication Officer under the Payment of Wages Act, 1991 (the Act) against his employer My Safe Drive Limited Cameramatics (the Respondent). 

The Adjudication Officer held that the complaint was not well founded and was out of time. 

1 Background

The Complainant commenced employment with the Respondent as Chief Operating Officer (COO) in September 2021 to help grow the business. His package included salary, bonus and significant share options. Arising from professional differences as to focus and strategy of the business, the Complainant exited the business on amicable terms on 5 May 2023. 

The Complainant sought to exercise his share options and purchase shares at a discounted rate at this time. The Complainant transferred €22,704 to the Respondent in July 2023 expecting to receive shares that he values at €225,000. Despite various communications indicating that he would receive these shares on the 11th December 2023 he was informed that he was not considered a good leaver under the scheme and therefore not entitled to the shares. The money he invested plus 10% was returned to him at that point.

The Complainant lodged his complaint with the WRC some eleven months after his employment ended.   The complaint was lodged on 1 April 2024, therefore the cognisable period for the purpose of the Act is 2 October 2023 to 1 April 2024.

2 Preliminary issues

The Complainant sought an extension of time for the lodging of the complainant in line with section 41(8) of the Workplace Relations Act 2015 as he believed there was reasonable cause for the delay in submitting the complaint. The Employment finished on the 5 May 2023 and he was paid three months’ salary in lieu of notice as provided for in his contract of employment. In order for a complaint to meet the time limits set out in the legislation his complaint would have had to be lodged no later than the 4th November 2023.

Towards the end of July 2023, the Complainant sent his Notice of Exercise of his share options and requested the Respondent’s Bank Details so he could transfer funds. At the beginning of August 2023, he received same and transferred funds in the account. Receipt of the money was confirmed on the 14th of August 2023.    During the month of September 2023, he enquired on three occasions about the share certificates as the normal 30-day period had expired. On the 27th September 2023 the Respondent replied as follows “I will get this sorted for you. We are just trying to get a handle on everything in finance currently as both X and Y have left. I will contact Wallace to see if they can get it over to you.”

The Complainant followed up in October and early November and on 2 November 2023 was advised “Apologies Darren- We are just trying to unpick the workings on the cap table that X did- Rose wasn’t involved in any of this and I have been travelling continuously the last while- I will be back in Waterford tomorrow and will get something over to you”.

 A week later the Complainant followed up indicating that if it was not resolved by the end of the week, he would have to consider contacting other directors or his Solicitor.

The Respondent replied on the same day saying he was trying to sort it out and stated “You have paid your money; you have confirmation of receipt. I just can’t send anything until this is sorted- as soon as EY sign off on everything (which hopefully will be in the next week or so) you will have the cert but happy to connect you with Puma or anyone else if you need confirmation of this.” The Complainant again followed up on 4 December 2023 and received a reply advising that it should be sorted by the following Monday or Tuesday.

On 11 December 2023 the Complainant was informed that as per the terms of the share option scheme he was not an eligible person as he was deemed a bad leaver.

Mr Castle BL on behalf of the Complainant submitted that it was only at this point that his client became aware that there was a breach of the Act, and this was after the expiration of 6 months from the date he left the Respondent.

Ms Canty, Solicitor for the Respondent submitted that they were not disputing the sequence of events as outline above. There was a lot going on with the Respondent at that time. It was her submission that the six months for the purpose of the Act should run from 23 July 2023 when he deposited the funds which would mean the six months expired on 22 February 2024 over two months after he had been informed that he was not eligible.

In response to a clarification sought by the Court Ms Canty confirmed that she was not saying that the Complainant was still an employee at that stage.  The employment relationship ended on 5 May 2023.

No submission was made for the basis of selecting the July date and or how that could comply with the legislation nor was any caselaw submitted supporting the contention that the time limits would commence at a date beyond the end of the employment.      

3 Conclusion of the Court on the Preliminary Matter

The Court in the case of Cementation Skanska (Formerly Kvaerner Cementation) v Carroll Determination WTC0338 established the test for deciding if an extension should be granted for reasonable cause. The test was set out in the following terms: -

It is the Court's view that in considering if reasonable cause exists, it is for the claimant to show that there are reasons which both explain the delay and afford an excuse for the delay. The explanation must be reasonable, that is to say it must make sense, be agreeable to reason and not be irrational or absurd.

In the context in which the expression reasonable cause appears in the statute it suggests an objective standard, but it must be applied to the facts and circumstances known to the claimant at the material time. The claimant’s failure to present the claim within the six-month time limit must have been due to the reasonable cause relied upon. Hence there must be a causal link between the circumstances cited and the delay and the claimant should satisfy the Court, as a matter of probability, that had those circumstances not been present he would have initiated the claim in time. The length of the delay should be taken into account. A short delay may require only a slight explanation whereas a long delay may require more cogent reasons. Where reasonable cause is shown the Court must still consider if it is appropriate in the circumstances to exercise its discretion in favour of granting an extension of time.

Here the Court should consider if the respondent has suffered prejudice by the delay and should also consider if the claimant has a good arguable case.

The Complainant submitted that he only became aware of the fact that he was not getting the share option after the expiration of the six-month period and on that basis, he believes that he has demonstrated reasonable cause which explains the delay. It was not disputed between the parties that the Complainant was only told on the 11 December 2023 that he was not receiving the shares, and it was only at that point that his money was returned to him.  The correspondence opened to the Court for the period between his employment ending and the 11 December 2023 did not indicate that there might be an issue.

Taking all of the above into account the Court determines that in the circumstances of this case the Complainant has demonstrated reasonable cause for the delay in lodging his complaint. He only became aware that he may have a cause of action on 11 December 2023 which was after the expiry of the 6 month period provided for in the Act.

4 Summary of Complainant submission in respect of the substantive issue.

Mr Castle BL on behalf of the Complainant submitted the employment commenced on 11 June 2021 and that he was employed as the Respondent’s Chief Operating Officer. He was paid a salary of €115,000 plus a quarterly performance bonus of €6250.

The contract also made provision for a monthly mileage claim of €500 and ESOP allocation of 0.5% per annum for the first three years, allocated on the successful completion of each year and a Management Incentive Plan based on an exit event. The Complainant did not receive the terms and conditions of the ESOP until February 2023. On instruction he back dated his signature on the ESOP documents.

The Complainants employment ended on 5 May 2023 and a financial package was agreed.  At that time the Complainant indicated by email that he wished to preserve his rights to exercise his share options. On 26th July 2023 the Complainant wrote to the Respondent to indicate that he intended to exercise his option to purchase shares and requested the bank account details of the Respondent so he could transfer the appropriate funds. The details were provided, the funds transferred, and the Respondent acknowledged receipt of the funds.

The Complainant was not provided with the Shares Certificate. He followed up on a number of occasions with the Respondent requesting same.  On 5th December he was informed that it should be sorted by the following Monday/ Tuesday.

On 11 December 2023 the Respondent wrote to the Complainant and informed him that he was not eligible to exercise a share option and that his funds would be returned with compensation.

Mr Castle BL submitted that the Respondent accepted consideration for shares and confirmed in writing that the agreement was complete, and the certificate would issue. He referred to section 1 of the Act which defines wages and submitted that the inclusion of the words “ or any other emolument, referable to his employment, whether payable under his contract of employment or otherwise” means that after the exercise of a share option, the shares would form part of the Complainant’s emolument.

Mr Castle BL noted that section 5 of the Act precludes the employer from making any deduction unless provided for in law and that any deficiency in wages would be considered an unlawful deduction. He opened the case of Sullivan v Department of Education [1998] 9 ELR 217 an EAT case that concluded that “if an employee does not receive what is properly payable to him or her from the outset then this can amount to a deduction within the meaning of the 1991 Act.”.

He also opened Cleary & Ors V B&Q Ireland [2014] IEHC 119 where the employer ended a discretionary bonus, and it was held that the bonus that had accrued up until the scheme ended was properly payable and ESB v Christopher Mc Donnell (PTD081)where the Complainant was denied access to the Company ESOP scheme because he was a part-time worker and the Court awarded compensation. 

The Respondent is justifying the withholding of the share certificate because the Complainant was a ‘bad leaver’ as defined by the scheme. It is the Complainant’s position that there is no documentary or evidentiary basis to determine he was a ‘bad leaver’. On 9 August 2024 the Complainant was sent an unsigned document which alleges to be the board meeting in which the Complainant was deemed to be a bad leaver.

It is the Complainant’s submission that his claim is well founded.

5 Summary of Respondent’s submission in respect of the substantive issue

Ms Canty on behalf of the Respondent submitted that the claim is misconceived as it seeks to classify a discretionary equity- based incentive as wages properly payable under the Act. 

It was her submission that share options do not constitute wages within the meaning of section 1 of the Act.

The share options were never properly payable as required by the Act and the Court lacks jurisdiction to grant the relief sought as the Act does not empower the Court to direct the transfer of shares and or trigger an “exit event.”

Ms Canty drew the Court ‘s attention to the fact that it is expressly stated both in the Complainant’s contract of employment and the share option plan that share options do not form part of his remuneration, further confirming that they were never intended to be classified as wages under the Act. The Plan itself is voluntary and there is no obligation on the Complainant to participate.  The right to exercise options is contingent on an employee continuing as an “Eligible Person” and the plan states that the intention is to incentivise eligible persons to remain in the service of the Respondent.

The Complainant in signing the following “ I agree that the Offer Letter, this Acceptance Form and the Rules of the MySafeDrive Limited 2021KEEP Share Option Plan together constitutes the ‘written contract or agreement’ for the purpose of part ( c ) of the definition of ‘qualifying share option’ in Section 10 (1) of Chapter 4 of the Finance Act 2017”   gave his consent to be bound by the rules of the scheme. Once the Complainant left the Respondent, he was no longer an employee and therefore no longer an “Eligible Person.”

Ms Canty submitted that it was important to distinguish between shares which represent actual ownership in a company and share options which provide a contingent right to acquire shares at a set price subject to the conditions set out in the Plan.

In order for a monetary value to accrue under a share option an “Exit Event” must occur. An exit event is defined in the Plan and can mean a sale of all or substantially all of the business and assets, more than 75% of the issued share capital being acquired, a listing or another event determined by the Board. Any payment arising under the Share Option Plan arises from the event that triggers the Exit Event not the Respondent.

The Respondent does not bear any direct financial liability for payments made under the ESOP and therefore it cannot constitute wages.

While an employee the Complainant was an ‘Eligible Person’ as defined by the plan. After he resigned and in accordance with the scheme he was classified as a ‘bad leaver’.  This classification was solely based on the terms and conditions of the ESOP and the legal requirements of the KEEP Scheme. The determination was necessary for compliance with both internal governance and tax obligations. Even if the Complainant had been classified as a ‘good leaver’ he would not have been allocated shares at the time of leaving. Under the terms of the ESOP, all allocated shares remain held in a trust until an Exit Event occurs.

The Complainant would only have had the right to exercise options in the event of an Exit Event. It is the Respondent’s submission that share options being equity-based incentives fall outside the definition of wages. Sullivan v Department of Education examined the meaning of ‘payable’ and refers to “which an employee is properly entitled”. There Complainant had no entitlement under the MySafeDrive Limited 2021 KEEP Share Option Plan.

In Flourish v AlienVault Ltd [2016] 27 ELR 15 the Employment Appeals Tribunal considered a similar case in which an employee sought to classify stock options as wages and the Tribunal rejected this argument finding “Giving the words ‘As a separate matter to your employment’ their ordinary literal meaning, the Tribunal finds that the stock options do not form part of the claimant’s remuneration.”

The Complainant’s contract of Employment and ESOP agreement both explicitly state that any share option is subject to Board discretion and does not form part of his contractual remuneration.

Ms Canty also opened to the Court, Dunnes Stores (Cornelscourt) Limited v. Lacey [2007] 1 I.R 478, and Marek Balans V Tesco Ireland Limited [2020] IEHC 55 where the High Court made clear that the Labour Court, when considering a complaint under the Act, must first establish the wages which were properly payable to the employee on the occasion before considering whether a deduction had been made.

It is the Respondent’s submission that share options do not constitute wages within the meaning of the Act and that shares were not properly payable under Section 5 (6) of the Act.

6 Complainant’s evidence

The Complainant in his evidence to the Court stated that he was verbally told on 2 May and in writing on 5 May 2023 that his employment was terminated. He was paid three months salary in lieu of notice. At that point one year’s shares 0.5 percent had vested.

By email of 5 May 2023, he indicated his intent to exercise his share options. It was his evidence that he was open to the business buying them back. 

Under the ESOP he had 90 days to exercise his options, and he exercised it on 27 July 2022. He received a receipt for the money’s he paid and was awarded a Share Certificate. He sent a number of follow up emails looking for the Share Certificate. On 2 November he received an email apologising for the delay and again assuring him that the issue of the Share Certificate would be progressed the following day. 

It was the Complainant’s evidence that on 1 December 2023 he sent an email to Mr O’ Callaghan CEO advising that the Respondent was in breach of the agreement between them in respect of the ESOP and that he was considering consulting his solicitor. On 5 December 2023 he received a further email from Mr O Callaghan indicating that the issue surrounding the Share Certificate would be resolved by Monday or Tuesday of the following week. On 11 December 2023 he received an email from Mr O Callaghan stating that he was not considered an ‘eligible person’ and that he was considered a ‘ bad leaver’.

Up to that point he understood that he was a ‘good leaver’.  It was the Complainant’s evidence that on 14 December 2023 he emailed Mr O Callaghan CEO setting out that he did in fact qualify under the ESOP and requested that the Share Certificate be issued to him within a period of seven days otherwise he would have to refer the matter to his solicitor. No certificate was issued. It was the Complainants evidence that he made a data access request on 1 April 2024 and on 22 July 2024 he received some documents in part compliance with his request. On 9 August he received a document that purported to be minutes of the meeting where it was decided that he was a ‘bad leaver’. 

Under cross examination by Ms Canty the Complainant accepted that he had read and understood his employment contract before signing it. He accepted that his contract states that the share option is not part of his compensatory package.  He accepted that he received the ESOP terms in February 2023. He accepted that the ESOP rules allow the Board to make decisions. He accepted that the ESOP states it is not part of his terms and conditions of employment, and that he signed up to participate in the ESOP on that basis.  He confirmed that in terms of notice to exercise his option he did not submit the option certificate, nor did he enclose an executed nominee agreement in respect of the option as required by the ESOP. The Complainant accepted that he was not told he was a good leaver and that the exercise price he had paid was refunded to him. He accepted that a Board Meeting happened on 6 December 2024 and that there is requirement that the minutes have to be signed.

He also confirmed that he could not point to any clause in his contract or the ESOP that stated that the share options were wages. He did not dispute that shares are subject to Capital Gains tax and not income tax. The Complainant also accepted that the ESOP was voluntary.

7 Respondent’s witnesses.

The first witness for the respondent was Mr O’ Callaghan CEO. In his evidence he confirmed that he was the original founder of the company. He was the point of contact for the Complainant who had full access to all confidential documents four months before joining the firm. He confirmed that he signed the Complainant’s contract.

It was his evidence that there was no discussion or negotiation around the ESOP terms. Following his departure from the company the Complainant’s initial correspondence was with the then Finance Officer who had copied him as CEO in on the correspondence.

The Finance Officer resigned during this period, and they had to recruit a new one. There was confusion over how the scheme operated as it was relatively new. The determination that the Complainant was to be classed as a ‘bad leaver’ was made in accordance with the scheme and was made by the full Board which consisted of five members.

The Complainant was never told he was a ‘good leaver’ and he did not provide the required certificate when he made his application. The Board agreed when refunding his money to give him an extra 10% as a gesture of goodwill.

The terms ‘good leaver’ and ‘bad leaver’ are terms of the ESOP and not a reflection on the individual. The scheme was introduced as an incentive for long term employees to stay with the Respondent. Under cross examination by Mr Castle BL, Mr O’ Callaghan stated that the rules of the scheme provide that only the Board can determine if someone is a ‘good leaver’ or ‘bad leaver’ as defined by the ESOP.

He also confirmed that the ESOP was a Revenue approved scheme. The Complainant had transferred money into the Respondent’s account before he was told whether he was being classified as a ‘good leaver’ or ‘bad leaver’.  

It was not within his discretion as CEO to issue a Share Certificate or to confirm that the Complainant would get shares. He as CEO cannot allocate shares. The CEO accepted that the matter could have been handled better and in a more timely manner, but they had to have a Board meeting to make decisions relating to shares.

The next witness for the Respondent was Mr Sean Dowling who stated that he was Finance Director with the Respondent since 1 April 2024. He gave evidence in respect of the scheme and stated that share options have no value unless an exit event occurs. It was his evidence that if such an event did happen, the value would only become clear at that time as other options such as convertible loan notes and preference shareholders would have to be paid first.

8 The applicable law

Section 1 of the Act 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

( 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:

Provided however that the following payments shall not be regarded as wages for the purposes of this definition:

(i) any payment in respect of expenses incurred by the employee in carrying out his employment,

(ii) any payment by way of a pension, allowance or gratuity in connection with the death, or the retirement or resignation from his employment, of the employee or as compensation for loss of office,

(iii) any payment referable to the employee's redundancy,

(iv) any payment to the employee otherwise than in his capacity as an employee,

(v) any payment in kind or benefit in kind

Section 5 of the Payment of Wage Act 1991 deals with regulation of certain deductions made and payments received by employers and in particular section 5(6 )states;                

“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,

9 Discussion

Theres is no doubt that this matter could have been handled in a better manner and certainly in a timelier manner. However, that is not the issue before the Court. In cases of this nature the first thing the Court has to establish as set out in Marek Balans v Tesco Ireland Limited [2020] IEHC 55 is that there were wages that were proper payable during the relevant period.  The Act defines wages as “in relation to an employee, means any sums payable to the employee by the employer in connection with his employment”.

The undisputed evidence before the Court was that the Complainant’s contract stated that the ESOP was not part of his compensatory package, and the ESOP agreement stated that it is not part of his terms and conditions of employment.

It was not in dispute that the Complainant signed his contract and signed up to the ESOP scheme albeit after the scheme had commenced. 

The Complainant was a senior employee in the organisation and freely entered into these arrangements. In his evidence to the Court the Complainant also accepted that the ESOP scheme was a voluntary scheme. 

Taking all these facts into consideration the Court finds that the ESOP in this case does not constitute wages as it was not “a sum payable in connection with his employment” it was a voluntary scheme that he opted into. The Court finds that the Complainant has not identified wages as defined by the Act that were properly payable during the relevant period 2 October 2023 to 1 April 2024.

10 Decision

The Court having considered the submissions and evidence of the parties determines that the Complainant has not identified wages that were properly payable during the relevant period and that were not paid. On that basis his claim must fail.

The Appeal fails. The decision of the Adjudication Officer is upheld.

The Court so decides.

	Signed on behalf of the Labour Court
	Louise O'Donnell
AL	______________________
28th March 2025	Deputy Chairman

NOTE

Enquiries concerning this Decision should be addressed to Amy Leonard, Court Secretary.