Transcription

• Speaker #0

  Today in the Indicator HR and Employment Law podcast, we're discussing the judgment in the case of Chandrashekarappa and Wipro Limited, in which the Employment Appeal Tribunal was asked to consider where an employee meets the terms for entitlement to a discretionary bonus, whether the employer could retrospectively move the goalposts to reduce the amount payable under the discretionary bonus scheme, and whether the employee was entitled to claim the unpaid portion of the bonus as an unlawful deduction from wages claim. In this case, C worked in a sales role for a multinational technology company. Sales staff benefited from financial incentives under a variable pay plan, VPP. In March 2020, C attended a VPP presentation concerning the introduction of a new kitty bonus, which was payable on up to 1% of the revenues from certain new business based on approval from a sector lead within the company. At the time, C's line manager said that if he secured a new contract with John Lewis Partnership, he would receive his kitty bonus, and that this would make him one of the employer's highest-paid staff globally. The contract with John Lewis was signed in June 2020, and C's line manager put C forward for entitlement to the discretionary kitty bonus. In due course, the sector lead approved C's line manager's proposal that C should receive the full 1% from the first year's revenue from the John Lewis contract. However, some time later, the sector lead sought to add two new requirements for payment of the kitty bonus as it applied to C, the first being that approval from higher up the management chain would be needed to pay the bonus, and the second being that there would be a cap of $150,000 applied to the kitty bonus payable to C. This was the first C, or his line manager, had heard of these bonus conditions. The employer subsequently limited the kitty bonus paid to C to $150,000 and he brought an unlawful deduction from wages claim for the unpaid balance. The Employment Tribunal dismissed C's unlawful deduction from wages claim. The Tribunal accepted the employer's argument that there was no legal entitlement created at the point at which the sector lead had first approved the bonus in full , and that there was no entitlement until the actual declaration of a lower bonus based on the application of the cap. As C had been paid that lower bonus, his unlawful deduction from wages claim was dismissed. C appealed, arguing he was entitled to a far higher bonus than he had been paid. The Employment Appeal Tribunal upheld C's appeal. The Tribunal erred in law in treating the sector lead's view that further approval was required from higher up the management chain as determinative of the question of C's entitlement to the kitty bonus, and by concluding that the $150,000 cap on the bonus payable could belatedly be introduced by the employer. On a correct analysis of the factual and legal position, the employer had put forward terms under which a discretionary kitty bonus would be awarded, and C had satisfied the terms for entitlement to the bonus in securing the John Lewis contract. It was not open to the employer to then move the goalposts by attaching further conditions to the bonus entitlement after the original terms had been outlined to C and after those terms had been satisfied. The Employment Appeal Tribunal substituted a decision that C was entitled to 1% of the John Lewis Year 1 revenue, less the $150,000 already paid. The decision is a salutary reminder that even where a bonus is expressed to be discretionary, any conditions for entitlement or payment should be clearly set out in writing. The Employment Appeal Tribunal noted that, although the presentation slides used when the kitty bonus was explained to staff said the written bonus policy took precedence, no such bonus policy was ever entered into evidence. Once the conditions for any bonus are met, it is not possible for the employer to change its mind and introduce new conditions seemingly to limit the overall amount payable. Look out for further episodes in this series to stay up to date on all things HR and employment law related.