Contract of Employment: Variation of a discretionary bonus

In Bluestones Medical Recruitment Ltd v Swinnerton UKEAT/0197/18/BA Mr Swinnerton made a claim for unlawful deduction from wages after he was not paid a bonus he claimed was due to him. His contract stated any bonus was discretionary but he claimed that when he had been promoted to General Manager there had been a further agreement. He was to be paid a monthly bonus based on the company’s profits and he would become a shareholder. Bluestones argued that the bonus remained discretionary as  once Mr Swinnerton became a shareholding director he was to be paid the money by way of a dividend. This had not yet occurred and so the money was to be advanced by way of Director’s loan, which he was to repay from his dividends. However, Mr Swinnerton was suspended, Bluestones stopped paying his bonuses and he was then dismissed, all prior to him becoming a shareholder.

At first instance the tribunal concluded this was an unlawful deduction of wages. However,  the EAT found the tribunal hadn't adequately identified the legal mechanism through which the contract was changed or what the new contract required. This failure also meant it was not possible to conclude whether the payments should be classified as loans rather than deductions from wages. The EAT therefore remitted the case to a fresh tribunal.

Published: 29 April 2019

Article Sections: Contractual Documentation | Payments during Employment

Tags: bonus, discretionary


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