A bank trader has lost his bonus dispute claim.
During the recruitment process, he was allegedly told that his bonus would never be less than five per cent of the profits he earned. His contract said that a portion of his discretionary bonus would be determined in a manner broadly consistent with his peers. So when he was awarded a bonus equal to one per cent of his profits earned, whilst his colleagues were given bonuses equal to eight and 11 per cent of the profits they earned, he brought a bonus pay dispute claim.
The bank trader’s claim was, however, struck out.
He alleged that the bank breached his contract by saying his bonus would be broadly consistent with his peers and awarding their bonuses irrationally. This was dismissed because his contract only specified that a “portion” of his incentive award would be determined in a consistent manner with his peers and because his peers’ contracts were written differently.
The contracts of the bank trader’s peers included a set formula for awarding them bonuses, included so the bank might retain their services. In other words, these colleagues had a contractual entitlement to their discretionary reward, whereas the bank trader who made the claim did not.
It was decided that the employee did not have a “reasonable expectation” to receive a bonus as large as that of his colleagues despite the indications of bonus sizes at interview stage.
Slater and Gordon senior employment lawyer Harriet Bowtell, said:
“This case demonstrates why it is so important to get it clear in the employment contract before employment starts how and on what basis a bonus will be awarded.
“In this case, the employee understood that he had been told that his bonus would not be less than five per cent of the profits he earned. However, this was not written in his contract and in the end the bank trader wasn’t able to rely on this discussion, which took place before his contract was signed.
“Employees would be wise to seek advice on the terms of their contract before they agree on it, particularly where there is much at stake.”
Discretionary bonuses constitute a complicated area of employment law. If you want to dispute your bonus award you should seek legal advice first.”
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