Failure to carefully consider the wording in an employee’s bonus clause could be costly, as an employer recently found out.
The employee had a contract which entitled her to a bonus if she exceeded her target. Her contract stated that the sales director could cap her bonus at 100% of her salary, although this could be done “by exception only…”
After achieving sales of more than double her target, the employee was entitled to a bonus of £163,503. However, her employer capped her bonus at 100% of her salary, which was £38,000.
The employee brought a breach of contract claim in the High Court, which went to the Court of Appeal, where it was held that the words “by exception only” were vague and uncertain, and that the employer could only cap the bonus in exceptional circumstances.
The Court held that there were no exceptional circumstances in this case so the employer was in breach of contract and liable to pay the full commission.
Indeed, it would be perverse if achieving outstanding sales could constitute exceptional circumstances which would deny the employee the reward promised for exceeding her target.
GX Networks Ltd v Greenland