Employers should think twice before withholding discretionary payments from dismissed staff 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 performance bonus despite the fact he earned the bank £6m in profits that year.
The High Court allowed Stephen Clark’s breach of contract claim, saying employers must exercise their discretion “rationally and without perversity”.
The case follows Clark v BET, in which a dismissed chief executive was awarded £3m damages after his employer refused to pay a discretionary bonus. The court held that employer must exercise their discretion in good faith.
The latest case puts paid to the notion that employers can avoid paying entitlements by describing them as “non-contractual”.