Bonus payment victory of £1.2 million
Gannons won a £1.2 million settlement for a former employee following a dispute over a bonus payment.
Our client was a banker. He was entitled to a substantial bonus payment after a successful year. The bank, however, attempted to deny his right to a bonus by changing his contract. We advised our client not to sign the new, less favourable contract. Following his refusal to sign, the bank made him redundant in order to avoid making the bonus payment. We then pursued and won a settlement for our client in court.
After receiving an initial briefing from our client on his circumstances, we immediately advised him to refuse signing the acceptance letter altering the terms of his bonus payment. This is because they were unfavourable for him.
The bank had offered our client a new contract in March 2018. This contract stated our client would receive a performance related bonus payment. In July of the same year the bank subsequently offered our client new terms.
New Contractual Terms
The new contract terms effectively rescinded our client’s substantial bonus payment, which he earned on the basis of his performance that year. The bank stated outright that the performance related bonus payment for 2018 “will cease with immediate effect”. It was to be replaced with an unspecified bonus payment which was payable at the bank’s discretion.
Following our advice, our client did not sign the new contract rescinding his bonus payment. He was not pressed to do so and continued to work as before. In October 2018 he expressly stated that he had never agreed to the change and that he remained entitled to the performance related bonus payment. He was dismissed as redundant on 12 January 2019 and the bank refused to pay the performance related bonus payment for 2018.
Negotiations on the bonus with the Bank
The bank had decided not to settle this case for political reasons. They feared the repercussions from other employees if they caved in. Whilst they failed to communicate this stance directly, it become apparent over the course of the discussions that this was the case.
From the beginning, we advised our client on the implications of litigation and costs. We explained to our client that if he won he would recover most of his costs. This was a risk and care was taken to work through the full potential exposure on a worst case scenario so that our client was prepared.
High Court bonus claim
We took the case to the High Court to claim our client’s bonus payment. We aimed to reduce costs and quickly resolve the case. Hence we applied for the matter to be dealt with summarily, without the need for a full trial, on the grounds that the bank had no arguable defence to the claim.
In the first instance the judge ruled that the matter would have to go to a full trial. In his view the bank could reasonably argue that there was no entitlement to the performance bonus payment. This was on the basis that the March contract had stated that the bonus could be removed at any time. Furthermore it could be argued that our client had accepted the variation to his entitlements by continuing to work without complaint. Naturally we appealed this judgement.
Appeal of the bonus decision
Agreeing with our analysis, the Court of Appeal ruled the contract wording gave our client a clear entitlement to the performance related bonus payment for 2018. They found that the wording stating that his entitlement could be removed at any time was ineffective.
The Court of Appeal stated:
“If banks decide to reward their employees by means of purely discretionary bonuses then they should say so openly and not seek to dress up such a bonus with the language of entitlement qualified by a slight phrase which does not make it absolutely clear that there is in fact no entitlement at all. If you are to give with one hand and take away with the other, you must make that clear.”
Further findings at the Court of Appeal
As the changes to our client’s bonus entitlement had not yet taken effect simply by acting as he had before did not mean that the bank could argue that he had impliedly accepted new terms.
The court awarded our client his bonus entitlement of £1.2 million. Additionally, because we had offered a tactical settlement at an early stage, he got interest at a very high rate on his bonus payment plus his legal costs.
A highly experienced, tactically astute yet practical litigation lawyer, Alex has 30 years experience in resolving disputes.