GUEST COMMENT: Beware - banks can still get rid of you before bonus time

Bonus time is approaching, but will you be around to see it?

Banks have long been able to absolve themselves of the need to pay bonuses y inserting a clause into contracts which makes payment contingent on continued employment at the payment date.

This remains the case.

A recent Court of Appeal decision in the case of Locke- Candy & Candy, highlighted just how exposed employees are. In this case, Candy & Candy, a property development company employed Mr Locke, a chartered surveyor. Mr Locke's contract included two crucial clauses.

These were:

1) A term which provided for payment in lieu of notice - a 'PILON' clause

2) A clause which stated that he had to be employed by the company in order to receive the bonus.

Under the PILON clause, the company was able to summarily dismiss Mr Locke just 10 days before his bonus became due. Under the second clause, it was able to argue that he was then not entitled to any bonus.

Had he still been employed at the bonus date, Mr Locke would have been due a bonus of 160k. The court case turned on whether the termination payment should have included this bonus, which Mr Locke would have still received had he been asked to work his notice and/or been put on gardening leave rather than being summarily dismissed.

However, by a majority of 2:1, The Court of Appeal held that the employer was within its rights not to pay the bonus.

This is a stark reminder that many banks will choose to avoid making bonus payments by making fast track redundancies for those employees whom they do not wish to retain. In this way, they can ensure those employees are not employed at the time the bonuses are due.

The courts have not shown a willingness to deviate from the harsh contractual realities here, however unfair it may seem to the individual.

Feel free to contact Philip on pl@lzwlaw.co.uk or 020 7357 9494 for a free consultation on this or any other employment law issue.