Commission or bonus schemes are common in many industries, allowing employees to see their hard work reap specific rewards. It's almost as common for employers to try to limit their obligations to pay commission or a bonus to a person when their employment has terminated when payment is due. But a recent Employment Appeal Tribunal decision in Peninsula Business Services Limited v Sweeney provides valuable lessons for employers on how to ensure that clauses in commission or bonus schemes allowing the withholding of payments in these circumstances are valid and enforceable.
The facts: On 19 October 1998, Peninsula wrote to Mr Sweeney offering him a job as a sales executive. The letter set out basic terms and conditions of employment and stated that the offer of employment was conditional upon Sweeney signing Peninsula's standard contractual terms, which included the rules of its commission scheme. Although those documents were not enclosed with that letter, Peninsula said that Sweeney could inspect these documents at their business address by arrangement, if he so wished. Sweeney wrote back to accept the offer of employment and signed the rules of the commission scheme about a week after his employment started.
The rules of Peninsula's commission scheme stated that commission was payable at the end of the calendar month following payment to Peninsula by its customer of 25% of their total fee. Section B of the rules, headed Employees Leaving the Company, stated that if the contract of employment was terminated either by Peninsula through dismissal or by the employee through resignation, special rules would apply.
Commission payments would only be payable if the sales executive was still in employment at the end of the calendar month when the commission payment would normally become payable (except where the company had dismissed the sales executive as a result of redundancy or retirement).
Section B then confirmed, in a separate paragraph, that it was an express provision of the contract that an employee had no claim to any commission payments that would otherwise have been payable if they were not in employment on the date when they would normally have been paid. Finally, Section B emphasised that as the non-payment of commission and bonuses were contractual terms, these amounts were not "properly payable" under the contract and, therefore, did not amount to unlawful deduction from wages for the purposes of the Employment Ri