When is an employee not entitled to a bonus?

The case of Hellewell and McArdle v Axa Services Ltd highlighted when an employee (or ex-employee) is not entitled to a bonus – the answer to this being when there is no contractual obligation to do so. The case was heard by the Employment Appeal Tribunal.

Two former employees who had been dismissed for gross misconduct in March 2010 attempted to claim that they were entitled to a bonus payment. Their claims were for unlawful deduction from wages.

In this case, the claimant employees argued that their employers were contractually obliged to give them bonus payments. The Employment Appeal Tribunal disagreed, because of the wording of the contracts. There was no contractual obligation that the employers pay a bonus, but rather the bonus documentation provided for certain conditions to be met before an employee would be considered for a bonus. Secondly, the contract relieved the employers of any obligation to pay bonuses where, as was the case here, employees had committed gross misconduct.

The starting point for any such claim is to examine whether the sum claimed is a sum to which an employee has legal entitlement to. There cannot be an unauthorised deduction when an employer fails to make a payment to which it had no legal obligation to make. The bonus scheme in question specified that bonus would not be paid where there has been a dismissal for gross misconduct at the time the bonus was payable.

The message here is that correctly drafted contractual provisions can be very important when it comes to claims for unpaid bonus payments. If you have any questions about such contractual provisions, please call Lawspeed on 01273 236 236 for advice.

Should the Court look behind the contracts to determine employment status?
Amendments to the Agency Workers Regulations 2010