In the recent case of Paturel v DB Services (UK) Limited the High Court has offered reassurance to employers. Courts will not seek to interfere with the exercise of an employer’s discretion when awarding bonuses, provided that the decision made by the employer is not irrational or perverse.
The claimant, Mr Paturel, was aggrieved that he had only been awarded a bonus of around 1% of the profits which he had generated for his employer, a bank. He compared himself to two colleagues who had received bonuses of 8% and 11% respectively of the profits which they had each generated. In cash terms, the claimant’s bonus for 2008 amounted to around EUR 1.3 million whereas the bonuses of his colleagues were EUR 34 million and EUR 84 million.
Mr Paturel claimed that his employer had breached an express term of his contract by failing to award him a bonus which was “broadly consistent” with his peers. Further, he said the employer had breached an implied term to act in good faith and not irrationally when awarding his discretionary bonus. His claim failed on all counts, principally because his colleagues had a right, unlike Mr Paturel, to receive a bonus based on a formula which was contained within their contracts of employment. The High Court could find no grounds for saying that the bank had acted irrationally or perversely. On the contrary, the bank was contractually obliged to make those payments to his colleagues. All members of the team had suffered some reduction in their bonus that year due to losses made within other areas of the bank’s business.