Complainant

Respondent

Parties

Brendan  Harrington

KCI Manufacturing Unlimited Company

Representatives

  Francis Drumm BL

Jacob and Twomey Solicitors LLP

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-00058219-001

10/08/2023

The Complainant commenced employment with the Respondent on the 19 January 2009. He filed his complaints the subject of this decision on the 22 August 2022.  He ultimately resigned on the 16 March 2023.

The facts of this complaint are similar to the complaint filed under ADJ-00040422.  The difference relates to the year the bonus was due to be paid.

At the time of his resignation, his role was that of Global Manufacturing Manager. His basic annual salary was €162,654.77. In addition, he received bonus payments, pension contributions, stock options, car allowance and other benefits.

The Respondent is an Irish Registered company with an international parent company.  In 2019 its parent company was acquired by 3M.  This did not involve a change of employer for the Complainant and TUPE did not apply. 

 This complaint was brought under the Payment of Wages Act 1991. In the Complaint form, the Complainant set out that on the 23 February 2023 he did not receive €39,186.07.

The Complainant set out that the Respondent had not paid him the monies due to him since 23 February 2023. This complaint form was filed on 10 August 2023.

In his submission he set out that his complaint related to the Respondents unilateral alteration to his  terms and conditions of employment without consultation and agreement by altering his pay.

The Complainant gave a figure for his 2019 total package in US dollars as $282.9k.  How this was calculated or broken down was not explained sufficiently for me to understand. 

The Complainant explained that prior to the takeover by 3M of the Respondent in addition to his annual salary he received a 30% bonus.  Therefore, his bonus due to him based on his 2022 salary of € 162,654.77 was €48,796.43.

He submitted that 3M unilaterally amended his salary only paying a smaller bonus of €9,610.36 leaving a shortfall or deduction of €39,186.07.

The Respondent’s case is that in the Complainant’s original KCI contract of employment dated December 2008, it specifically provided at clause 7(v) that the company

“Reserves that right to alter, adjust or terminate any bonus scheme as they deem necessary”

The Respondent submitted that following the acquisition of KCI by 3M in 2019, a series of steps were taken to integrate KCI into the 3M group of companies. New employment contracts incorporating these new, improved benefits packages were offered to all KCI employees in 2020.  It set out that the Complainant was the only employee of the 461 employees on site who did not accept the new contract offered by the company in 2020.

It submitted that the Complainant’s benefits package was improved to bring it into line with 3M packages and those of colleagues on-site (save for his pension arrangement and car allowance which remained unchanged). The KCI bonus scheme was discontinued and no further bonuses were paid to anyone under that scheme.

The Respondent provided me with a table setting out the changes to the Complainant’s term of employment. It submitted that the changes were to his significant advantage in that:

1.        His guaranteed basic pay increased from €137,394.42 (2020) to €162,654.77 (2022);

2.       A significant proportion of what had been variable and discretionary bonus was now locked into guaranteed basic salary;

3.       He was afforded valuable RSUs; and

4.       He was afforded a significant increase in paid annual leave.

The Respondent set out how it found the Complainant’s submission difficult to understand. It highlighted how the complaint was that the Employer “unilaterally amended the Complainant’s salary by increasing his base pay” (emphasis added) despite having accepted that increase and making no effort to return the additional monies, whilst on the other, he claimed that he should have been paid this new increased rate of basic pay plus a bonus under the old KCI bonus scheme (that no longer existed). The Respondent described this as an “a-la-carte approach to his benefits” and pointed out that the Complainant happily mixed and matched to suit himself to come up with the bonus shortfall. 

The Respondent submitted that the Complainant benefitted from an increased basic salary from April 2021 onwards and that his bonus payment for 2022 (as paid out in February 2023) resulted in a total basic payment of €172,265.13 which was an increase of his 2020 total basic payment of €159,612.10. In those circumstances, there was no deduction from his pay within the meaning of the Payment of Wages Act 1991.

Section 5 of the Payment of Wages Act 1991 sets out

5. Regulation of certain deductions made and payments received by employers

(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.

My role is to decide based on the evidence presented to me what bonus was properly payable to the Complainant firstly and based on that finding if there was a deduction from same. I have considered the evidence presented to me by both sides.  For simplicity I have ignored the award of Restricted Stock Units in my deliberation or decision making. 

The Complainant was offered revised terms of employment in June / July 2020 in the form of a Personal Impact Statement prepared by HR supplemented with an employment contract dated 31 July 2020.  The Personal Impact statement identified the overall remuneration package that the Complainant was on with KCI package and what changes were proposed with the 3M package from 1 October 2020.  It went into detail in terms of base salary, bonus treatment in terms of Bonus percentage, target amount, Annual Incentive Pay percentage and Annual Incentive Pay amount.   

While the Complainant was not happy with the proposed changes to his renumeration package, he accepted that his overall renumeration package had increased and his basic salary increased to €162,654.77 in 2022.  This change resulted in a smaller bonus paid to him of €9,610.36.  However, his preference was to remain on the percentage bonus target that was applied previously by KCI of 30%, rather than receive an increase in his base salary with a smaller bonus as occurred in the 3M alignment process. His view was that over time, a percentage bonus would be better for him rather than a fixed increase in salary.

My first role is to decide based on the evidence presented to me what wages were properly due to the Complainant. I have considered the evidence presented to me by both sides.  I have ignored the award of Restricted Stock Units in my deliberation or decision making as this was not focused on during the hearings. 

The Complainant was offered revised terms of employment in June / July 2020 in the form of a Personal Impact Statement prepared by HR, supplemented with an employment contract dated 31 July 2020.  The Personal Impact statement identified the overall remuneration package that the Complainant was on with KCI package and what changes were proposed with the 3M package from 1 October 2020.  It went into detail in terms of base salary, bonus treatment in terms of Bonus percentage, target amount, Annual Incentive Pay percentage and Annual Incentive Pay amount.   

While the Complainant was not happy with the proposed changes to his renumeration package, he confirmed in evidence that despite being provided with payslips, he only became aware in April 2023 (prior to the first hearing date) that his base salary had increased by circa €22,000.00 per annum from 1 April 2021 and further increased in 2022 and he was paid the increased salary every month.  He accepted that his overall renumeration package had increased, however his preference was to remain on the KCI bonus scheme, rather than receive an increase in his base salary as occurred in the 3M alignment process. His view was that over time, a percentage bonus would be better for him rather than a fixed increase in salary.

The Complainant’s contract of employment provided when he joined in 2008 set out at clause 7(v) that he was entitled to be included in the KCI Manufacturing bonus scheme as operated on the date of joining the Company or subsequently revised………… The Company reserves the right to alter, adjust or terminate any bonus scheme as they deem necessary (emphasis added).  The Respondent relied on this in his case. 

The Complainant on the other hand relied on clause 28(iii) of the same contract of employment regarding change to terms of employment which set out

You will be given not less than one month’s written notice of any significant changes which may be given by way of individual notice to all employees.  Such notice will be deemed to be accepted unless you notify the Company of any such objection in writing before the end of the notice period. (emphasis added).

Changes to employees’ core terms of employment occur frequently in practice.  Wages and other benefits increase, and this is usually accepted without issue.  An employer cannot make changes to core terms of employment contracts unless:

(a)there is a change in the law; or

(b) a contractual provision exists that allows for variation; or

(c) both parties consent to the change.

The legal maxim of “it is for the parties to strike a bargain; the judiciary serve merely to enforce it” applies in this case. 

While there is tension between both clauses, Clause 7(v) as a contractual clause, gave the Respondent the right to revise, alter, adjust, or terminate any bonus scheme as it deemed necessary.  This was specifically set out in the contract and was inserted specifically rather than a reliance on clause 28.  Therefore, I give this clause preference and find that the bonus changes were covered by this clause as opposed to the terms of clause 28.  This agreement was set up when the parties entered their employment relationship.

Putting this to once side, I also looked at whether both parties consent to the changes implemented and find that the proposed contractual changes were communicated with the Complainant through the Personal Impact Statement in July 2020 and revised contract of employment in July 2020.  I accept the evidence of the HR Manager that the Respondent went through a process with the entire staff on site (including the Complainant) and engaged and consulted with the entire staff in advance of the implementation of the change to the 3M benefits.  She described how the KCI bonus ceased in 2020 following “lots of steps and conversations” and “communication sessions”.  The Respondent provided the reasoning behind the variation (globalised payroll system) to the Complainant, and I note that he was the only member of staff who didn’t sign the contract at the end of the process. I note that the Complainant was paid his 2020 bonus in February 2021 and went onto his new salary from the 1 April 2021.  This payment was accepted by the Complainant, and he didn’t dispute it. He only complained in relation to the bonus calculation paid out in February 2022 which was one part of the revised terms and conditions set out in the Personal Impact Statement.  While it would have been preferable for the Complainant to expressly consent to the changes introduced, the fact that he continued to work and accept changes introduced by the new contract in April 2021 indicated his acceptance of the new contract.  His ignorance of the increased wages paid to him for such a long period of time cannot be understood when he was provided with payslips.  I find that it is not open to the Complainant to pick and choose what part of the remuneration package he wanted and to accept and/or reject especially when the implementation resulted in a net increase in financial terms for him.  In this regard, I have looked at the compensation package as a whole. 

For these two reasons (variation clause and consent) the bonus claimed by the Complainant cannot be claimed to be properly payable to him.

This complaint is not well founded.

Deduction.  Wages properly payable.  Bonus calculation.