DIY chain found to have unlawfully withheld employee bonuses
The High Court found that a DIY store chain had unlawfully withheld the bonuses of ten employees, accrued prior to their bonus scheme ending.
The ten employees had claimed that B&Q Ireland Limited’s decision to withdraw a winter/summer bonus, as well as a zone allowance paid to employees working in Dublin outlets, was in breach of the provisions of the Payment of Wages Act 1991.
Their complaints had initially been upheld by the Rights Commissioner, but this decision had been overturned by the Employment Appeals Tribunal.
The Tribunal noted that the employees’ contracts had contained a clause that stated that “all bonus schemes are discretionary and are subject to scheme rules. They may be reviewed or withdrawn at any time.”
Thus, the withdrawal of the bonus was not in breach of the 1991 Act.
With respect to the zone allowance, the Tribunal found that the allowance was separate and distinct from the employees’ salary, and could be considered compensation for working in a particular area.
It was found that it had been removed by the respondents in good faith in an attempt to save money, and it was observed that the respondent was in an extremely poor financial situation at the time.
The employees appealed to the High Court under s7(4)(b) of the 1991 Act.
With regards to the bonus scheme, it was argued that they should have been entitled to the first bonus following the decision to end the bonus scheme, as it related to a period of work already done, and therefore the employees had already accrued the bonus at the time the decision was made to withdraw it.
With regards to the zone allowance, the employees submitted that in these cases the zone allowance was an intrinsic part of the wages payable to employees contracted to work at the Dublin outlets.
The High Court identified the law as contained within the Act of 1991 and the Payment of Wages (Appeals) Regulations 1991 (S.I. No.351 of 1991) and the provisions of Order 84C of the Rules of the Superior Courts 1986 (as amended).
It was also noted, following Henry Denny & Sons (Ireland) Ltd v Minister for Social Welfare 1 I.R. 34, that courts should be slow to interfere with the decisions of expert administrative tribunals.
Therefore, the High Court must first scrutinise whether the Tribunal based its determination upon an identifiable error of law or upon an unsustainable finding of fact.
In relation to the bonus scheme, the High Court found that B&Q had the discretion to withdraw the bonus scheme at any time. However, that discretion was always intended to apply to future bonuses, as yet unaccrued under the terms of the scheme.
The payment of the bonus crystallised as a contractual obligation once it was “earned” in accordance with the terms of the scheme as operated, and the Tribunal therefore the Tribunal erred in law, in interpreting the discretion vested in the employer to withdraw the bonus scheme at any time as being applicable or attaching to this period.
Notwithstanding the employer’s difficult financial circumstances in this case, it bore a contractual obligation to pay the employees the bonus accrued during the relevant period prior to the bonus scheme being revoked.
In relation to the zone allowance, the Court noted the case of London Borough of Southwark v O’Brien I.R.L.R .420, which found that a mileage allowance was an expense rather than a payment.
The Court adopted the same interpretation to zone allowance, finding that the Tribunal did not err in law in finding that the zone allowance did not constitute wages.