The issue of bonus payments is one which often gives rise to disputes between employers and their employees. There are many ways in which bonus clauses can cause difficulties and result in litigation. In this article Einde O’Donnell, Associate Solicitor at LK Shields, focuses on the payment, or non-payment, of a bonus during periods of maternity leave.  This is a complex area that can result in significant financial exposure for employers if they get it wrong.

Bonus Entitlements and Maternity Leave

Under the Maternity Protection Acts 1994 to 2004, employees on maternity leave or additional maternity leave are entitled to all rights as if they were still at work, other than the right to remuneration. The first question which needs to be considered is whether bonus payments come within the definition of “remuneration”.

Lewen v Denda, [1999] E.C.R. I-7243

The rationale adopted by the ECJ in the case of Lewen v Denda, [1999] E.C.R. I-7243 is relevant in this regard.  In essence, the ECJ set out two distinctive types of bonus payments.  This classification impacts upon the manner in which employees’ entitlements to bonus payments can be treated while they are on maternity leave.

It follows that the reason why a bonus payment is paid is the crux of the issue for the following reasons.

• If a bonus is payable for an employee’s performance while at work, and forms part of an employee’s normal remuneration and salary, then based on the reasoning in the Lewen case it would seem to fall within the ECJ’s narrow definition of pay meaning that it can be refused to employees who are not achieving the required performance because they are on maternity leave or additional maternity leave.  However, a point to note is that an employee’s entitlement to a “performance” bonus does not simply cease because they happen to be on maternity leave when the bonus is payable and rather employers must pay a pro rata amount to reflect the proportion of bonus applicable to the time when the employee was at work.
• If the bonus is not related to the employee’s individual performance but rather some other criteria such as a loyalty bonus; or because of company profits; or for flexibility in relation to restructuring; or as a bonus due to a firm transferring locations; or any benefits payable to employees solely because of their ongoing status as employee; then it would appear on the basis of the decision in the Lewen case that bonus payments such as this would not fall within the ECJ’s narrow definition of pay. Therefore, it would be discriminatory on the grounds of gender to deny such bonus payments to women who are on maternity leave or additional maternity leave.

The distinction between “performance" bonuses and bonuses related to factors other than performance is an important one for employers to be aware of. Whether or not a bonus can be withheld depends on the rationale for providing the bonus and the structure of the bonus scheme. 

Bonus Clauses and Rationale for Payment

When deciding whether to make bonus payments to employees who are on maternity leave, the first issue which needs to examined is the manner in which the bonus clause is structured and the rationale behind it. In essence, if a bonus is payable for an employee’s performance while at work, it probably can be withheld from employees who are not achieving the required performance because they are on maternity leave or additional maternity leave.  However, if a bonus is not related to the employee’s individual performance, but rather some other criteria, such as a loyalty bonus, then it is likely that it would be discriminatory on the grounds of gender to deny such bonus payments to employees who are on maternity leave or additional maternity leave.

Given the significant financial exposure that can arise for employers under the Employment Equality Acts 1998-2015 and/or contract law if bonus payments during maternity leave are not applied correctly, all employers are advised to draft/review their bonus clauses/schemes to ensure that they are clear and concise in their wording in relation to the basis upon which a bonus is awarded.