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Discretionary bonus not in breach of contract

08 January 2016 #Employment


Clarkslegal, specialist Employment lawyers in London, Reading and throughout the Thames Valley.

In Paturel v DB Services (UK) Ltd the High Court held that an employer’s decision to award one employee a discretionary bonus and two others a larger guaranteed bonus did not breach the employee’s express contractual term to be treated consistently with peers nor did it breach any implied term to act in good faith and in a manner that was not perverse or irrational.  The employee also claimed that the employer’s subsequent failure to provide accurate reasons for the sums awarded was a breach of trust and confidence. 

The High Court cited a number of reasons why it did not consider that the express term had been breached including that the reference to ‘peers’ was not to any peer working in the department but to those at a similar level of compensation.   

In relation to the breach of trust and confidence, the actions complained of occurred after the decision on bonuses had been taken and, therefore, any breach would not have resulted in the loss the employee was claiming (i.e. the loss of his bonus).  In relation to a breach of the other implied terms, the High Court stated that an employee’s expectation of a bonus will not be relevant unless the expectation is ‘reasonable’ which was not the case here.  Further, it concluded that the employer had sound reasons for the different bonuses and that it could not be said to have acted irrationally.  The High Court recognised that the employee would have needed an overwhelming case to persuade it otherwise given that so much depended on discretionary judgment in fluctuating market and labour conditions.

For further information about this or any other Employment matter please contact Clarkslegal's employment team by email at employmentunit@clarkslegal.com by telephone 020 7539 8000 (London office), 0118 958 5321 (Reading office) or by completing the form on this page.

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Louise Merrell

Louise Merrell
Senior Solicitor

E: lmerrell@clarkslegal.com
T: 020 7539 8082
M: 0779 900 7325

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