In a ruling that could impact bonus payments, the Court of Appeal has rejected an appeal by a City firm accused by one of its brokers of holding back part of his bonus.
The court upheld earlier employment and employment appeal tribunal rulings which found that Tradition Securities and Future (TS&F) had acted unlawfully by withholding £92,571 from broker Alexandre Mouradian’s July-December 2006 bonus, paid in 2007. TS&F withheld the payment to cover what it said were the costs of running a bonus pool that involved Mouradian and three colleagues.
Mouradian, whose basic salary was £300,000, was entitled to the bonus payment from the pool, which was worth £1,429,000 after TS&F had deducted costs. His colleagues were paid £100,000 each and he got the remainder, worth about £1.2m.
The basis of Mouradian’s case was that the costs were not stated in relevant contracts. Lord Justice Hooper, presiding, said that if the costs not identified in the contract had not been deducted, Mouradian would have been entitled to another £92,571.
The court dismissed TS&F’s challenge to the earlier rulings.
TS&F is expected to appeal. It said: “The only thing so far decided is that the employment tribunal should hear Mouradian’s case. None of the merits of the claim, which will continue to be resisted, have yet to be considered or decided.”
The judgment leaves Mouradian, who still works for TS&F, free to continue his case at tribunal.
Sarah Henchoz, associate at Allen & Overy, commented: “The case may well impact an employer’s ability to restrict future bonuses where these bonuses are based on a set formula and the employer seeks to deviate from it.”
But, she added: “It is unlikely this case will affect the majority of employees’ bonuses where they are wholly discretionary and not subject to any specific formula.”
Zoe Wigan, partner at Beachcroft, said: “Employers need to take care that the allocation of a bonus pool, and its apportionment, will withstand scrutiny, whether by disaffected employees, the courts, in the employment tribunal or possibly even regulators.
“Where costs have to be assessed and deducted before determining the distribution of a bonus, it is equally important to make a careful determination of the sums. Gone are the days when a rough and ready approach can be taken.”