GOOD NEWS ON THE BONUS FRONT- FEBRUARY 2010

BY PHILIP LANDAU, EMPLOYMENT LAW SOLICITOR  AND PARTNER OF LONDON FIRM, LANDAU ZEFFERTT WEIR. 020 7357 9494 pl@lzwlaw.co.uk

If you were expecting a bonus, but were unexpectedly dismissed before it was paid out, a recent court case could act strongly in your favour.

Last week, the High Court ordered Seymour Pierce to pay a bonus of £70k to former head of institutional sales, Malcolm Rutherford.

Rutherford was dismissed in November 2007, allegedly for poor performance, despite being promoted in the five months preceding his dismissal.

The High Court not only rejected Seymour Pierce’s allegations of poor performance, but determined that Rutherford should be paid a £70k for the final quarter –even though he was no longer working for the company when bonuses were paid at Christmas.

This could be a groundbreaking judgement. in

Banks have traditionally been free to add a clause to their contracts stating that individuals must be in full time employment and not under notice on the day that bonuses are paid in order to be eligible for a bonus. As a result, it has been possible to oust employees before bonus day, with it being sufficient justification for non-payment to use the fact that they are no longer employed.

Following the case of  Commerzbank -v- Keene in 2006, employees gained the right to challenge an employer’s discretion to withhold a bonus if it could be shown that the employer had acted perversely or irrationally in failing to pay a higher bonus. But you had to still be employed at the bonus payment date to qualify in making such a challenge.

The effect of the Rutherford case is to bring forward such right of challenge to pre-bonus payment date. The case may even be authority for the right to challenge non-payment of bonuses due to bogus redundancy situations (of which there  are undoubtedly many) and where banks have had an easy ride- as long as the employee is ousted before the bonus payment date of course.

The banks have had their way for far too long in this area and so the Rutherford case is good news indeed.

An employee who wishes to challenge the level of bonus faces an uphill struggle.  The employee will have to prove that the employer failed to exercise its discretion reasonably. In the case

Feel free to contact Philip on pl@lzwlaw.co.uk or 020 7357 9494 for a free consultation on this or any other employment law issue.