Recent decisions from the WRC and the Labour Court offer some clarity on what counts as “remuneration” for the purposes of calculating an award of compensation under the Unfair Dismissals Acts 1997-2015 (“the UDA”). These cases also have direct implications for how employers decide to structure senior employee contracts and incentive packages.

Caroline O’Connell v Lionbridge International Unlimited Company ADJ—00057077 

In this case, the employer conceded that the dismissal was unfair and so, the decision largely focussed on redress. Having regard to the Supreme Court decision in An Bord Banistiochta, Gaelscoil Moshiolog v Labour Court (where the remedy of reinstatement was characterised as “exceptional”), the Adjudication Officer (“AO”) opted to make an award of compensation.  

The AO found Ms O’Connell’s base salary of €275,000 per year, pension contributions, health insurance and mobile phone plan all constituted “remuneration” for the purposes of the UDA.

Bonus: Ms O’Connell’s discretionary bonus did not meet the definition of remuneration, distinguishing between guaranteed contractual earnings and payments contingent upon the exercise of employer discretion. The AO had regard to the fact that: (i) no 2024 bonus had been declared, approved or quantified prior to dismissal, (ii) the scheme was discretionary, and (iii) Ms O’Connell’s expectation of payment arose from historical practice rather than enforceable right and while that expectation may have been reasonable, it does not create a statutory entitlement.

Restricted Stock Units (RSU): The AO did not find that RSUs formed part of remuneration in circumstances where the underlying agreement was with a US entity, rather than Ms O’Connell’s employing entity, who effected the dismissal.

Expenses: Ms O’Connell sought to recover counselling costs and pension advisory fees incurred following dismissal, but the AO found that these personal expenditures fell outside the statutory concept of “remuneration”.

The AO found that loss was limited to a period of 25 weeks before Ms O’Connell secured a higher paid role and accepted that she had sufficiently mitigated her loss during this time, taking into account her “very senior level”.  The employer argued the award should be reduced by the statutory redundancy payment, but the AO refused as there was no risk of double recovery where compensation was in respect of 25 weeks, far below the 104‑week cap. Ultimately, Ms O’Connell was awarded €142,984 – the equivalent of 25 weeks’ remuneration.

X v Gary Rooney UDD2612 

In the WRC, Mr Rooney was awarded compensation of €550,131 for unfair dismissal. Mr Rooney was found to have been dismissed from his position when he did not tick a box in response to the “fork in the road” email sent to X (previously Twitter) employees. On appeal, the Labour Court upheld the unfair dismissal, finding that the 46-hour deadline imposed on employees to “opt in” to remaining in employment, without providing sufficient information and without any contractual or legal basis for treating silence as a resignation was unreasonable. However, the Labour Court reduced the overall compensatory award made by the WRC, excluding Mr. Rooney’s bonus and RSUs.

Bonus: The Court referred to the fact that no bonus pool was formed or funded, and no bonus was paid to any staff that year and so, the discretionary bonus could not be treated as remuneration.

RSUs: Mr Rooney had signed an agreement which expressly stated that RSUs were discretionary and not taken into account for the purposes of calculating severance, dismissal or termination payments.  The Court found that Mr Rooney was bound by these terms, and the RSUs were accordingly excluded from the calculation.

The Court found base salary, pension contributions, health and dental insurance constituted “remuneration” and awarded losses to the date of hearing of €169,417 and prospective losses of €32,041, making a total award of €201,458.

Barry Flannery v Xerotech Limited (In Liquidation) ADJ-00056117 

In this case, Mr Flannery was successful in his claim for constructive dismissal. Mr Flannery’s remuneration package comprised of base salary, company car and health insurance (amounting to €210,086 per annum).

Mr Flannery resigned with immediate effect, and once the AO found his claim for constructive dismissal to be upheld, he was found to be entitled to his 6-month contractual notice pay. Between the date of expiry of the notice period and the hearing (an 8-month period), Mr Flannery suffered continuous loss, and he was contractually prohibited from seeking employment in his field because he was bound by 12 month restrictive covenants/non-compete clauses in his contract.

The AO noted the scarcity of CEO-level positions, combined with the circumstances of the dismissal and the disruption to his career trajectory, made it unlikely that Mr Flannery would secure an equivalent role quickly. Accordingly, the AO considered it reasonable to allow a further 12 months of loss. Citing the WRC decision of Rooney v Twitter International Unlimited Company, the AO emphasised the principle that senior-level employees cannot reasonably be expected to mitigate their loss by accepting roles beneath their level of expertise, responsibility or remuneration.

The AO awarded €420,172, the equivalent of 2 years’ remuneration to Mr Flannery.

Key Takeaways for Employers 

• Bonuses & RSUs: The decisions shed light on the boundaries of “remuneration” for claims under the UDA. Discretionary bonuses and RSUs will not automatically be included in the calculation. However, these decisions are fact specific and largely turn on the underlying documentation and circumstances. Employers should take the opportunity to review the wordings of their RSU and bonus arrangements to ensure their discretion is clear and unambiguous and that employees have acknowledged their understanding and agreement with the terms.  
  
  
• Mitigation: these decisions recognise that senior employees cannot be expected to apply for roles beneath their senior level. This means that financial exposure in a senior level unfair dismissal claim is substantially greater and exits should be managed with legal input from the outset.  
  
  
• Restrictive covenants: while a key component in senior executive contracts, in the event of an unfair dismissal claim, restrictive covenants may extend the period of financial loss for an employee and so, increase the potential financial exposure for employers.