Performance Bonus paid out more than 5 years later

The Court of Appeal in its Inferior Jurisdiction overturned a decision taken by the Court of Magistrates and ordered the payment of a performance bonus owed by the Transport Authority in Malta to one of its employees.

The employee had originally sued the Transport Authority in Malta for the sum of €9,900 which were owed to him as a performance bonus for the period between January 2013 and December 2013. Plaintiff’s claim arose out of a clause in his employment contract which stated that the employee was entitled to 15% of the gross annual salary as an annual performance bonus. The employee was dismissed and the Authority conceded that 10% of the bonus should be paid whilst a discussion should be held as to ascertain whether the remaining percentage of he bonus was to be paid. In the meantime, the plaintiff was accused with misappropriation, fraud and embezzlement which charges had a negative impact on the Authority although they had happened prior to his employment with the Authority. The performance bonus was never paid.

The Court of Magistrates reasoned that there is an element of discretion involved in the payment of a discretionary bonus such as a performance bonus however since it was clearly stipulated in the contract that a performance bonus was to be paid, the Authority was under an obligation to pay such bonus if the conditions established within the contract for the payment of such bonus had been satisfied. Thus, the Court concluded that should the bonus become payable due to the conditions being satisfied, the Authority would be obliged to pay it.

The Court of Appeal agreed with the Court of Magistrates’ reasoning however further stated that there was proof that the Authority had taken the decision to pay 10% of the performance bonus and a meeting had been scheduled to conduct an appraisal on the employee’s performance in order to ascertain whether the remaining 5% of the performance bonus were to be paid. Such meeting was cancelled once the charges were made against the Plaintiff and thus it was never ascertained whether he was to receive the remainder of the bonus or not. The Court of Appeal held that the charges made against the plaintiff were with regards to a previous employment and that the Authority was bound to only assess the Plaintiff’s performance during the year for which the bonus was to be paid. The Court relied on the principle of equity and decided that 12.5% of the performance was to be paid.

The Maltese Courts have thus made it clear that discretionary bonuses arising out of contractual obligations and which do not result from the Employment and Industrial Relations Act need to be paid if the conditions established within the contract are satisfied.

For further information about how GVZH Advocates can help you with your employment law query, kindly contact us on employment@gvzh.com.mt.

 

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