A financial trader alleged that during his recruitment process he was told that bonuses would never be less than 5% of the profits he earned. His contract stated that a portion of his annual discretionary bonus would be determined in a manner "broadly consistent" with his peers and that the employer could take other relevant factors into consideration. In 2008 and 2009, he was awarded bonuses of around 1% of the profits he earned. Two other individuals – whose contracts included a formula to determine their bonus amounts – were given bonuses of 8% and 11%.
The employee claimed damages for the loss of a larger bonus, alleging that the employer had not fulfilled the contractual requirement that his bonus would be consistent with those of his peers, as well as his reasonable expectation of a minimum bonus size of 5% based on pre-contractual discussions. He also claimed that the employer had breached its implied good faith duties in making the awards.
The claims were rejected by the High Court in Paturel v DB Group Services (UK) Ltd and judgment given in favour of the employer without the need for a full trial.
The reference in the contract to a portion of the award being determined in a manner "broadly consistent with peers" meant peers on a similar compensation level, not any peer in the same trading desk. His contract also specifically recognised that other bonuses were guaranteed rather than discretionary, and allowed the bank to take into account any other relevant factors in making his award. The employee handbook listed some of these factors, as well as making it clear that there was no contractual entitlement to a discretionary award.
There had been sound reasons for the decision to award bonuses to the other two individuals on a different basis – they had not been in the discretionary scheme and the employer had used a formula basis in order to retain them.
The employee tried to rely on "unreasonableness", rather than the "arbitrary, capricious or perverse" test traditionally applied in bonus cases. Last year in the Supreme Court case of Braganza v BP Shipping Ltd, this essentially public law concept had been applied for the first time in an employment context in relation to an employer's decision not to pay a widow a death-in-service benefit.
In rejecting this claim, the High Court made the point that public authorities are much more constrained in their decision-making than private employers in terms of having to act in the public interest. In any event, there was no question of the employer here having taken irrelevant considerations into account – the decision to pay the other individuals differently was obviously rational.
As for the claim that he had been told the bonus size prior to his recruitment, this was a "mere expectation". The employment contract expressly superseded prior offers, and was reinforced by the obvious realities of the commercial environment and market practice. No promise about the availability or size of the bonus pool had been made – the contract set out what was agreed.