Discretionary Bonuses*

By October 8, 2021Employment Law

Discretionary Bonuses*

This arose in the case of Sarah Barra and Genzyme Ireland Limited. ADJ-00022451.

The Adjudication Officer referred to Section 1 and Section 5 of the Payment of Wages Act 1991. The contract in question stated;

“You will be entitled to participate in a discretionary bonus scheme”. The Adjudication Officer pointed out that the Legal Interpretation of the definitions in section 1 and 5 require reference to the High Court case of Cleary & Others –v- B&Q Ireland Limited in 2016 IEHC119 and to Labour Court precedents especially Bord Gais Energy –v- Thomas PWD1729. In the Cleary case the Adjudication Officer pointed out that Mr. Justice McDermott stated;

“If the discretion is exercised unreasonably the employer will be in breach of contract if no reasonable employer would have exercised the discretion in that way. This imposes a very high onus on an employee to claim that the discretion was unreasonably exercised (for Hedigan J in Lichters & Hass –v- Depfa Bank Plc 2012 IEHC10).

In that case Mr. Justice McDermot stated;

“However, the use of the word “discretionary” is not always determinative of whether a contractual entitlement arises under a bonus scheme. He went on to state;

“In my judgement the extent of an employer’s discretion in relation to a bonus scheme is relevant to the determination of the question of whether, and, if so, to what extent the scheme has contractual content”.

In the particular case Mr. Justice McDermot held;

“I am satisfied that notwithstanding the employers difficult financial circumstances in this case, it bore a contractual obligation to pay the 3% bonus accrued to each employee during the relevant 6 month period and that this was a bonus properly payable as “wages” under Section 5 (1) of the 1991 Act.

The Adjudication Officer held that supportive of the respondent case was the Labour Court decision in PWD1729 Bord Gais Energy –v- Thomas. The Adjudication Officer stated that the respondent in the Bord Gais case in support of their argument cited Sullivan –v- Department of Education 1998 9ELR217 where “payable” was defined to mean “properly payable”.

The Adjudication Officer pointed out that the Labour Court decision in Bord Gais Energy –v- Thomas and other closely allied cases ruled that “being on payroll” clause is valid and that the Adjudication Officer had to defer to this precedent. To depart from the precedent the Adjudication Officer pointed out would require a high bar to differentiate between the case and the precedents. The Adjudication Officer in this case held against the employee.

The reality of matters in cases of discretionary bonus claims is that there will always be an extremely high bar for an employee to get over to be in a position to pursue a claim for a discretionary bonus.

*Before acting or refraining from acting on anything in this guide, legal advice should be sought from a solicitor.

*In contentious cases a solicitor may not charge fees or expenses as a proportion or percentage of any award or settlement.

Richard Grogan

Author Richard Grogan

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