Employers should think twice before withholding discretionary payments or
benefits from dismissed employees following the award of £1.3m damages to a
former equities trader.
In Clark v Nomura International, the bank dismissed the employee for
misconduct and refused to give him a discretionary performance bonus, despite
the fact he earned the bank £6m in profits that year.
The High Court allowed Clark’s breach of contract claim, saying employers
must exercise their discretion rationally and without perversity. It was
"irrational" not to pay a bonus to such a successful trader, it held.
The case follows that of Clark v BET, in which a chief executive who was
dismissed summarily was given £2.85m damages after his employer refused to
compensate him for missing out on bonuses and pay rises. Here the court held
the employer must exercise its discretion in good faith.
The latest case adds weight to the notion that employers cannot avoid paying
entitlements merely by describing them as "non-contractual".
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"It provides further encouragement for staff to bring claims for being
denied any entitlements in their package which are described as
discretionary," said Gareth Brahams, senior employment solicitor at Lewis
Silkin.
"Bonuses and pay rises are the obvious examples but this also applies
to all other discretionary benefits. Any employer arguing that it was
contractually entitled to deprive an employee of a discretionary benefit when
the rest of the company received it faces an uphill battle."
