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Executive Matters

Bonus disputes
Executive Matters

Executive MattersIssue 1 | April 2017

Date
13 April 2017

Mark Levine Partner

Beth Leng Managing Associate

April is the time of year when most staff receive their annual bonus. For many, a bonus payment represents a significant and essential part of their remuneration.


Bonus disputes

April is the time of year when most staff receive their annual bonus. For many, a bonus payment represents a significant and essential part of their remuneration.

The large majority of bonus schemes are discretionary which gives the employer a wide remit as to whether awards are made, at what level and in what form.

Meeting criteria might be dependent on the achievement of the individual, the performance of a team or whether or not the company as a whole has met its targets. Very often, and even if the normal criteria are met, these schemes will reserve the right of the employer to decide whether bonus payments are actually made at all. Inevitably, this can lead to disputes.

In the summer of 2008, the Bank where Matthew Jordan worked was put up for sale. When the news broke, key members of staff began leaving the Bank. In order to stabilise the workforce, the Bank made certain and unique promises in respect of the bonus pool and its allocation at year end therefore fettering its usual wide discretion.

Once the sale was complete, the new owners reneged on these promises. Matthew and a group of his colleagues approached Mishcon de Reya to take on the Bank and fight for payment of the bonuses that they were owed. Click here to read external coverage of the case.

Matthew talks about his experiences in taking on the Bank and winning.

TAKING ON THE BANK – WHAT IT MEANT FOR ME

  1. Why did you decide to take on the Bank?

There were two reasons. First and foremost, the Bank made us a promise, and then broke that promise. In summer 2008 as the Bank was placed up for sale, several key staff – particularly in my department – made the decision to leave. The Bank decided to put in place a guaranteed minimum bonus pool in order to stabilise the workforce. This was widely publicised in order to encourage staff to stay.

After the Bank was sold in January 2009, the new owner cancelled the guaranteed bonus pool and only allocated a small fraction of it. We felt outraged that the Bank had had the benefit of the promise i.e. the stabilisation of the workforce – and then attempted not to honour its commitment to pay the staff. The second reason, needless to say, is that many of us needed the income. We had worked hard all year and were, by then, being made redundant. 

  1. Did you have any particular doubts or worries going into the litigation?

We were all concerned about the prospect of losing the case. We did not come to the decision to fight lightly. Personally I was very close to the case and to the legal team: I felt I had sufficient knowledge of the legal points on which we would fight to be confident of success.

A further consideration was adverse publicity. Bankers were already very unpopular by 2009. We were concerned about having our personal details flashed across the front of the tabloid press! In fact the media gave us a very reasonable hearing – they seemed to understand that this was a case about broken promises rather than a case about "greedy bankers".

  1. When you issued the claim did you think you would end up having to take it all the way to Court?

Sadly yes, because it was political. The Bank had just gone bust and been bailed out by the taxpayer. In light of that it did not want to pay the bankers unless it was forced to by the Court. It even appealed to the Court of Appeal unsuccessfully.

  1. What was the attitude of your former colleagues towards you after you issued proceedings and after you won?

They were extremely supportive. Many could not join our fight for various reasons but when we finally won the case, 4 1/2 years later, I was inundated with congratulatory phone calls and emails from former colleagues.

  1. Did you always think you would win?

Yes. 

  1. Was it worth it?

It was most definitely worth it, but it was a long process. We had a big group, with pooled costs and the benefit of after-the-event insurance cover for legal fees. We also had a great legal team supporting us and we got the right result.