Employment Law Speed Read – 20/05/19
20th May, 2019
In the case of Bluestones Medical Recruitment Ltd v Swinnerton, the Employment Appeal Tribunal (EAT) considered the approach that should be taken when determining whether a discretionary bonus can be varied to create a contractual bonus.
The Claimant, Mr Swinnerton, was employed by Bluestones Medical Recruitment Ltd (Bluestones) in a number of junior roles. His contract of employment provided for a non-contractual discretionary bonus. Mr Swinnerton was promoted to the role of General Manager in April 2015 and it was intended that he would receive a monthly guaranteed bonus based on the company’s performance. The intention was for Mr Swinnerton to become a shareholder and that his bonus would be provided by dividends, but until this was put in place, the bonus payments would be made as a Director’s loan.
Before he was made a shareholder, Mr Swinnerton was suspended and subsequently dismissed for gross negligence relating to dishonest and fraudulent activity by former employees of Bluestones. Mr Swinnerton was not paid a bonus during his suspension. He brought claims against Bluestones for unfair dismissal and unlawful deduction of wages.
The Employment Tribunal (ET) rejected Mr Swinnerton’s complaint of unfair dismissal but upheld his claim for unlawful deduction of wages in relation to his unpaid bonus. The ET found that the method by which the sums were paid to Mr Swinnerton did not detract from his entitlement to it. The ET held that Mr Swinnerton had a contractual entitlement to receive a bonus by virtue of Bluestones’ custom and practice of paying him a bonus from his appointment of General Manager in April 2015.
Bluestones appealed claiming the ET failed to make the relevant findings of fact or carry out the correct assessment to support any conclusion that the discretionary nature of Mr Swinnerton’s bonus entitlement had been varied. Bluestones also argued that the ET failed to have regard to the unchallenged evidence of the loan payments made to Mr Swinnerton and raised the question of whether the ET had jurisdiction to determine Mr Swinnerton’s claims, as the protection under the Employment Rights Act 1996 (ERA) does not extend to loan payments.
Employment Appeal Tribunal
The EAT allowed the appealed and found that the ET had failed to make the necessary findings of fact or carry out the requisite assessment to support its decision that Mr Swinnerton’s entitlement to a bonus had arisen by virtue of custom and practice.
In addition, the EAT held that the ET failed to make a finding on the nature of any variation to the agreement between the parties when the Claimant was promoted, which was fundamental to determine whether the payments to the Claimant were a loan and whether they were excluded from the protection of the ERA. The claim was remitted to a fresh ET, considering the “fundamentally flawed” approach by the ET in this case at first instance.
This case serves as a reminder of the importance in ensuring that any variations to an employment contract or bonus practices are made clearly and in writing.
If you have any questions on the above and how it will affect you, please do not hesitate to get in touch with a member of our employment team.