Ex Gratia Payment or Contractual Entitlement?

Ex Gratia Payment or Contractual Entitlement? 

Many employers will agree to make an ex-gratia payment to an employee to reflect a particular change in circumstances, reward good behavior or excellent performance. In some instances, that payment may be compensation for a detriment suffered.

For many employers, making an ex-gratia payment comes with significant concerns. In general, they are worried that the payment may be construed as a contractual entitlement or set a precedent for other employees.

This issue was recently debated in the Workplace Relations Commission case of A Storeman/Driver -v- An Employer (ADJ-00015110).

Background

In short, in order to facilitate a reasonable accommodation to a short-term incapacity, the employee was transferred to an alternative location. in recognition of the inconvenience caused by this transfer, he was paid a public transport allowance of €44 per week. 

The employee claimed this became an essential feature of his contract of employment, whereas the employer counter argued that the payment was only ever a temporary arrangement, which would cease when the employee returned to his original location.

Reasoning of the WRC

Having carefully considered the parties submissions, the WRC found that the employer offered the employee a temporary position to facilitate his return to work on modified duties. The employee accepted this temporary move. The employer clearly outlined to the employee that “in addition due to the unique circumstances in this case (without precedent) will receive the fixed payment of 44 euros per week which is the public transport rate to travel to [Location B]”. 

It was clear that this payment was offered as a gesture of goodwill and was not an entitlement. Neither the employee nor his representative questioned that at the time.

Having considered the submissions of both parties and for the reasons stated, the WRC did not recommend in favour of the employee.

Conclusion 

The employer, in this instance, had copious correspondence which clearly indicated that there was never an intention to make the allowance afforded a permanent feature of the employment relationship. It was clearly articulated that this payment was made as a gesture of goodwill and would not set a precedent for the employee concerned or other employees.

Should an employer find themselves in a comparable situation, it is critical that the intention of the employer is clearly set out to the employee concerned, in order to avoid or defeat a similar claim. 

Further Information

For further information, please contact the author of this article, Barry Crushell.