A bonus owed in full when personal KPIs were never set: Cristiano v Air Malta

An employer that promises a bonus against personal targets, and then never sets them, cannot use its own omission to refuse payment. In Cristiano, the First Hall of the Civil Court awarded a former head of human resources the maximum bonus for every period in dispute. It rejected the argument that, as the officer in charge of performance management, he was to blame for his own targets never being set.

The contracts and the claim

Roberto Cristiano worked for Air Malta from January 2015 to May 2019, first as Chief Officer Human Resources and, from January 2018, as Chief Officer People and Performance. Both contracts contained a performance bonus: up to €10,000 a year under the first and €20,000 a year under the second, payable if and to the extent that relevant key performance indicators were met.

The KPIs were to be set by the company, after consulting him, on a fair and reasonable basis before the start of each financial year. The first contract added that the final decision on the KPIs rested with the company. In both contracts the bonus appeared under the heading “Salary”.

He was paid a bonus for the 2017/2018 financial year only. He claimed €33,333: €10,000 for 2016/2017, €20,000 for 2018/2019 and €3,333 pro rata for April and May 2019.

The airline’s two defences

Air Malta argued first that Cristiano, as the officer responsible for human resources and later for people and performance, was himself responsible for applying the company’s performance-management policy. It would be absurd, it said, for him to complain of a failure that fell within his own remit.

Its second defence relied on a performance bonus policy in force since 2012. Under that policy no bonus was paid unless the airline’s own corporate KPIs (earnings before interest and tax, cost per unit and punctuality) reached at least 92% of target. Only then did personal performance become relevant. The company’s figures showed that this bonus gate was missed in 2016 and 2017 and met in 2018, the one year in which Cristiano was paid.

No personal KPIs were ever set

The facts were largely undisputed. The company did run a two-level bonus policy, and the corporate threshold was missed in the years the company said. But no personal KPIs had ever been set for Cristiano. His successor described the contractual mechanism of targets set before the year, an assessment and then payment, and confirmed that it simply never operated. The chief financial officer could not say whether KPIs had been set for him, and the company secretary’s evidence produced none.

Running appraisals is not setting your own targets

The Court held that the first defence confused two different things: Cristiano’s departmental responsibility for administering performance management for the workforce generally, and the company’s separate contractual obligation to set his own KPIs. That obligation could not be delegated to him. An employee cannot be expected to evaluate his own performance, still less to fix unilaterally the targets against which his bonus would be measured.

The clause said the KPIs “shall be set by the Company”. Cristiano reported directly to the chief executive, and whoever was responsible for his targets, it was not him. The defence was rejected.

The policy gate was not part of his contract

The bonus clause made no reference to the company policy, to any corporate objective or to a bonus gate. It made payment depend only on personal KPIs for the individual officer.

The Court contrasted its own earlier judgment in Vella v Air Malta, where one bonus clause tied the bonus to the employee’s participation in the company’s annual performance-management process. That wording was capable of bringing in the policy and its gate. Cristiano’s clause had nothing equivalent. It was an autonomous entitlement, subject only to personal KPIs to be set by the company, and not linked to the airline’s results. The missed corporate targets were therefore irrelevant.

Nor did it help Air Malta that 2018 was both the year the corporate targets were met and the year Cristiano was paid. No personal KPI exercise had been carried out that year either, so the coincidence supported his case as much as the airline’s.

The employer’s own failure decided the case

Following a consistent line of judgments against the same employer, the Court held that it was for Air Malta to show that Cristiano had not met his personal KPIs. That burden assumes the KPIs were set in the first place. The airline brought no evidence that they were set for any period in dispute, let alone that he missed them, and he had generally been regarded as performing well.

An employer that prevents the mechanism on which payment depends from operating cannot rely on that failure against the employee. The Court referred to article 1060(1) of the Civil Code, under which a condition is treated as fulfilled where the party bound by it has prevented its fulfilment. Because no assessment was ever possible, and that was attributable exclusively to Air Malta, the maximum under each contract was due for each period. The Court awarded €33,333 with interest and costs.

Significance for executives and employers

For an executive, the case shows how much turns on the wording of the bonus clause. The questions are who sets the targets, by when, against what, and whether a company policy or corporate threshold is written into the contract or only exists alongside it. Where the employer was to set personal targets and never did, the claim may be to the maximum, not to a discretionary amount. These questions belong in an exit review before any settlement figure and release are agreed, and in an incoming executive review before the contract is signed.

For an employer, a bonus clause tied to personal KPIs is a liability that grows each year the KPIs are not set. Senior HR and people officers are no exception: their targets must be set by someone above them in the hierarchy. If the bonus is meant to depend on a company policy or bonus gate, the contract has to say so.

The judgment is at first instance and may be appealed. It concerns these clauses and an undisputed absence of personal KPIs. It does not decide that the maximum bonus is due whenever appraisal records are thin.

If you are an executive with an unpaid or disputed bonus, see bonus, shares and options. If you are an employer reviewing incentive terms during a restructuring, see workforce restructuring. To discuss a specific situation, send a confidential enquiry.

Related: Vella v Air Malta · Plan rules · Exit review