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Chambers & Partners
15/10/2004

Farell Matthews & Weir v Nina Hansen

Uncategorized

Employment Appeal Tribunal

Once an employee had entitlement to a non-contractual discretionary bonus, it became a wage properly payable to her under the Employment Rights Act 1996 s.13(3). The proper interpretation of s.27(3) of the Act was not that it applied to all bonuses but only to non-contractual bonuses to which no legal entitlement or liability arose. However, when they were paid they were treated as payable and deemed to have been a legal entitlement. The appellant solicitors' firm (F) appealed against a decision that the wages of the respondent former salaried partner (H) were unlawfully deducted under the Employment Rights Act 1996 s.13 and that H had been constructively dismissed. H had been informed that she would receive a bonus for a fixed sum to be paid in 12 monthly instalments as long as she did not give notice to terminate her employment. Further there was to be an immediate payment of a sum in respect of three months. Subsequently, F confirmed the bonus but stated that if notice was given, either way for any reason, no further payments would be made with immediate effect. H indicated that she was not prepared to accept the conditions attached to the bonus and resigned. Consequently F withheld the remainder of the bonus. F submitted that the tribunal had erred (1) in concluding that the non-contractual discretionary bonus fell within the meaning of 'wages' under s.13 and s.27(3) of the Act and had failed to deal with its argument to that effect in its decision; (2) in concluding that H had been constructively dismissed.

Held: (1) H's bonus, once she had entitlement to it, became a wage properly payable to her under s.13(3). The proper interpretation of s.27(3) was not that it applied to all bonuses, but only to non-contractual bonuses to which no legal entitlement or liability arose. When they were paid they were treated "as payable", and deemed to have been a legal entitlement, New Century Cleaning Co Ltd v Church (2000) IRLR 27 applied. Whilst the tribunal should have expressly considered F's argument on s.27(3), it would have made no difference had they done so as the  argument would have, if correctly considered, failed. (2) The tribunal had correctly set out the relevant law and the unreasonableness of the conditions attached to the bonus was not the only basis for the finding of breach of implied term of trust and confidence. The findings made by the tribunal had not been perverse. The tribunal did not apply a reasonability test or in any other manner direct themselves incorrectly in relation to their finding that there had been a breach of the term of trust and confidence. In the circumstances the tribunal's finding as to constructive dismissal could not be criticised.

Appeal dismissed.

Ian Scott represented the Appellant.

[2005] IRLR 160
matthews.pdf

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