An employer that recently successfully defended an unfair dismissals claim on the grounds of redundancy was still required to pay the former employee a performance-related bonus, despite the employee’s and the company’s poor performance.

A former General Sales Manager, who was made redundant, alleged that she was unfairly dismissed as there was no genuine redundancy and that she was also entitled to her performance-related bonus worth €15,000 per annum, which the employer had refused to pay. The Employment Appeals Tribunal found that she had been fairly dismissed as there was a genuine redundancy situation. The employer was in financial difficultly and it had reduced the number of its full-time employees. However, the employer was still required to pay the employee the outstanding performance-based bonus.

The employer argued that the employee was not entitled to her bonus as she had not performed well and she had not reached her targets. The employer stated that it was industry norm that a bonus payment was only made when specific projects and goals were achieved. It also produced evidence to show that it had never guaranteed a bonus scheme.

The terms of the bonus scheme were to look at sales and agree specific targets. The former employee alleged that no such targets had been agreed. She also informed the Tribunal that she had never been told that the bonus was performance-based or that there was an issue with her performance. She had been praised for the work in the year prior to her redundancy and had received her bonus payment for that year.

The Tribunal found that there was an agreement between the parties that a bonus payment would be made. The employer failed to establish that the bonus payment was conditional and that targets had been agreed. The Tribunal noted that the employer had not raised any issues regarding the employee’s performance during her employment and it had failed to establish reasonable grounds to resile from the agreement to pay the bonus.

This case illustrates that even though an employer may successfully defend an unfair dismissal claim it could still be subject to further and potentially significant claims for monies owed.  In addition, the case illustrates the importance for employers to set out in the clearest terms, the position in relation to a company-wide or individual bonus arrangement.