Recent exceptional awards made by the Workplace Relations Commission ("WRC") highlight the importance of assessing remuneration when making provisions for the settlement of an unfair dismissal claim. Under the Unfair Dismissals Act 1977 Complainants can seek re-engagement, reinstatement or compensation. Typically, compensation is the most common award both requested and made by the WRC. Most practitioners will be aware that the maximum compensation award under the unfair dismissals' legislation is two years' remuneration, which is generally limited to the Complainant's actual loss. If the Complainant has not suffered financial loss, then the WRC only has jurisdiction to award them a total of four weeks' pay.

When advising clients, it is important to consider what payments made to the employee in the course of employment will fall under the definition of remuneration and the extent to which future loss of earnings might be awarded by the WRC depending on the circumstances of the case. Under s. 7(3) of the Unfair Dismissals Act “financial loss” in relation to the dismissal of an employee, includes "any actual loss and any estimated prospective loss of income attributable to the dismissal and the value of any loss or diminution, attributable to the dismissal, of the rights of the employee under the Redundancy Payments Act, 1967 to 1973, or in relation to superannuation". Remuneration includes "allowances in the nature of pay and benefits in lieu of or in addition to pay". Payments which are commonly made to an employee as a matter of course will generally fall under the definition of remuneration. Such assessments must be made on a case-by-case basis.

Recent case law also suggests that the WRC have an increased appetite to make substantial awards to Complainants to penalise poor behaviour in circumstances where it is just and equitable for them to do so where they do not exceed the two-year remuneration cap. The highest compensation award made in an unfair dismissals claim to date was made the case of Gary Rooney V Twitter International Unlimited Company ADJ-00044246/2024 (the "Twitter Case") which is under appeal to the Labour Court. This case is helpful as it provides an assessment as to whether various elements such as bonuses, equity grants and future loss of earnings fall within the definition of remuneration when making an award under unfair dismissals legislation. We have addressed each of these aspects below.

Twitter Case

In the case of Gary Rooney V Twitter International Unlimited Company (ADJ-00044246/2024) the Complainant held the position of Director Source to Pay at the time of his dismissal. The Respondent claimed that the Complainant had resigned by failing to click "yes" on the "Fork in the Road" email proposing substantial changes to the business which could have impacted on the Complainant's terms and conditions. This was disputed by the Complainant. The Complainant allegedly resigned in November 2022 and secured alternative employment in September 2023 on a significantly lower compensation package. In submissions, the Complainant argued his total yearly compensation package totalled €369,937 made up of a basic package €151,225 (including basic salary, health and dental benefits and pension contribution), a performance bonus of 30% of basic salary, impact award and equity grant.  The Complainant claimed the maximum award available to the WRC, two years' remuneration, albeit he was unemployed for a lesser period. Substantive submissions were made by both sides in relation to the calculation of the annual remuneration package for the purposes of making an award under the unfair dismissals legislation and the elements which should be considered in making that calculation. Ultimately, the figure of €363,461 was accepted by the Adjudication Officer as a fair and reasonable estimate of the annual compensation package. For the purposes of calculating the losses attributable to the dismissal this figure was reduced slightly by the deduction of the performance bonus, leaving an overall annual remuneration of €323,560.   An award of €550,131 was made. This award was broken down as follows: full losses from January to July 2023: €188,741, partial losses August 2023 to date of hearing in May 2024 (inclusive): €161,390 and an estimate of prospective future loss future loss: €200,000. This case is currently under appeal to the Labour Court.

Performance Bonus

The question of whether a performance bonus is deemed to be remuneration under unfair dismissals legislation will be dependent on the specific facts of the case. The bonus system operated by the Respondent company required two conditions to be satisfied for the performance bonus to be paid. Firstly, the Respondent company had to meet profitability goals which, if met, would open the bonus pool. Secondly, the bonus to an individual was subject to the employee's manager's recommendation. In determining whether the performance bonus formed a component of the financial loss claimed, the Adjudication Officer considered the following factors:

1. Was a bonus declared? 
2. Was the manner in which the Respondent exercised its discretion under the scheme such that no reasonable employer would have exercised their discretion in that way?
3. Was any aspect of the bonus "earned" prior to the exercise of the discretion and was the bonus payable in whole or in part for such time as it was earned?

Based on these factors and in circumstances where no employees in the organisation received a bonus for the year 2022 (which was not challenged) the Adjudication Officer deemed that the performance bonus did not form part of the Complainant's normal compensation package for the purposes of assessing losses attributable to the dismissal.

Equity grants/deferred cash consideration

The question also arose as to whether the equity grants were " allowances in the nature of pay and benefits in lieu of or in addition to pay". Evidence was provided that where shares were awarded to employees, those shares were converted into cash and their value was paid out to those employees through the payroll. As such, the Complainant argued that equity grants formed part of his compensation package for the purposes of assessing losses attributable to his dismissal. As the equity grant flowed directly from the Complainant's employment and was not subject to other conditions it was determined that the equity grants were benefits within the definition of remuneration and should be considered in assessing loss of earnings.

Future loss of earnings

Historically the WRC have set a high bar for Complainants seeking future loss of earnings in unfair dismissals claims. The Twitter case may represent a willingness to award future loss of earnings where there has been perceived poor conduct by the Respondent employer.

In relation to future loss of earnings, the Adjudication Officer noted that Section 7 conferred "a jurisdiction to award compensation in respect of “financial loss” including any estimated prospective loss of income attributable to the dismissal." The Complainant argued that he would never be able to achieve such a high rate of income from any alternative employment and in those circumstances, the maximum jurisdiction of two year’s remuneration (which in this case would be a sum of €323,560 x 2, totalling €647,120) should be made. Based on the facts and evidence, the Adjudication Officer determined that there was a "probability of a future loss which should be compensated in accordance with the provisions of the Acts, but it seems to me that for that loss ultimately to exceed the maximum jurisdiction is at this stage a possibility but not a certainty". He also indicated that "the difficulty with making an estimate of future loss is that it necessarily involves an attempt to predict the future when a number of factors which are as yet unknown and unascertainable would affect the outcome."

In making an assessment the Adjudicator considered the following factors:

1.    The Complainant's prospects of the Complainant of increasing his income either in his present position or by securing another position.
2.    The fact that the deferred cash consideration which was found to be a component of the loss, was never proposed to be unlimited or indefinite in its duration. 
3.    The risk of global, regional or sectoral downturns increasing the Complainant's potential loss if his current employment was adversely affected.
4.    In noting that the Respondent has shed 50% of its workforce reference was made to potential future losses being reduced if the Complainant's employment with the Respondent, were to become redundant or if his remuneration was reduced. 

As such the Adjudicator made an award of €200,000 under future loss of earnings which he deemed "realistic fair and reasonable" and “just and equitable having regard to all the circumstances”.

The question arising from this case is whether the bar has dropped for Complainants making the case for future loss of earnings in unfair dismissals cases, particularly where roles with an equivalent salary scale are not available in the market at the given time.

Takeaways

• When budgeting for the resolution of unfair dismissal claims employers should have regard to the elements which may fall within the definition of remuneration under the unfair dismissals legislation.
   
• Payments which are commonly made to an employee as a matter of course will generally fall under the definition of remuneration.
   
• When considering bonuses a detailed evaluation should be carried out to assess whether bonuses are likely to be deemed to be remuneration for the purposes of calculating an unfair dismissals award.
   
• When estimating the Complainant's loss of earnings in circumstances where the Complainant has acquired a new role, it is important to factor in any differential in wages, if that information is available.