Category Archives: High Court

Does “Discretionary” Commission Mean Employers Can Pay Whatever They Want?

CommissionSUMMARY: Many employers give their employees discretionary bonuses or commission. However, “discretionary” does not mean that employers can pay whatever amount they choose.

In a recent case, the Court of Appeal agreed with the High Court that the amount of “discretionary” commission paid to an employee should be increased.

This case is a useful reminder that an employer should be able to show that the way in which it has exercised its discretion is not irrational or perverse.

Here are our top tips for employers who want to avoid challenges by employees about how they have exercised their discretion:

  1. Have in place an appropriately worded clause in the contract of employment setting out that a bonus/commission is discretionary.
  1. Consider the reason(s) for the amount of bonus/commission you are giving to an employee.
  1. Record your reason(s) in writing at the date the bonus/commission decision is made so that you have evidence ready in the event of a challenge.  Your record should show why and how you have reached a decision.  Flipping a coin is not a rational decision-making process!
  1. If you want a bonus/commission scheme in place, ensure that this is suitably worded to give you flexibility.  For example, the flexibility to vary or withdraw a scheme can be a useful tool.
  1. If you tell employees there are factors that will be taken into account in decision making (for example, in a commission scheme), ensure these factors are taken into account.  If the factors change, tell employees in advance of them carrying out the work.
  1. Treat staff consistently.  If an employee feels that they have been awarded a lower commission/bonus than others, they may claim this is on the basis of a protected characteristic (such as age, sex or disability).  This could leave an employer facing a discrimination, as well as a breach of contract, claim.

If you follow these tips, you should be able to motivate your workforce with the possibility of a bonus/commission payment, but avoid claims from employees when you want or need to pay less.

Case

Hills v Niksum Inc [2016] EWCA Civ 115

Contact Details

For more details about how to set up and implement bonus or commission schemes please contact:

fgmedia@fgsolicitors.co.uk

+44 (0) 808 172 93 22

This update is for general guidance only and does not constitute definitive advice.

Misconduct & Punishment in Employment

Punishment at workSummary: Disagreement between employer and employee is as old as the very concept of Master and Servant itself. As a general rule, where disagreement ends with an employer forming the view that an ending of the relationship is the outcome it desires, there are some mandatory steps that will need to be addressed.

An employer seeking to dismiss an employee will generally have to consider 2 key areas of law:

  1. the first answers the question, what if anything is owed to the employee as a result of the ending of the employment? – the contractual question;
  2. the second, is the dismissal fair in all the circumstances? – the protection afforded to the employee by Parliament; the statutory question.

The first question is arguably the one to answer. Consider the case of an employer wishing to terminate the employment of an employee for misconduct who has a contract entitling them to 6 months’ notice. Except for where the misconduct is of such an extreme nature that it amounts to gross misconduct, ending the employment without payment is likely to give rise to a successful breach of contract claim.

In a recent case, the High Court decided that an employee who sent a pornographic e-mail from a work account had committed an act which entitled his employer to dismiss him without paying him the 12 months’ notice to which he was entitled. This was in spite of the fact that the sending of the e-mail was discovered some 5 years after it had been sent and only as part of a fishing exercise conducted by the employer, specifically to find a reason to dismiss.

It is extremely important that an employer intending to dismiss in these circumstances does not, after discovery of the conduct, behave in a way that would lead to a view that it had waived its right to dismiss in these circumstances.

By contrast, whether or not the dismissal was fair, in all the circumstances, would largely depend on the procedure leading up to the decision to dismiss. In short, did the employer have a reasonable belief in the guilt of the employee based on the employer having undertaken a reasonable investigation? Finally, whether the decision to dismiss in those circumstances, as opposed to applying some other sanction, was reasonable.

Tackling the risk of a successful unfair dismissal claim is a juggling act requiring an employer to engage in a fair procedure free from bias, permitting the employee an opportunity to properly understand the allegations, to address them and to be accompanied if requested.

Having managed all of that, dismissing the employee as a result of the allegations must, on an objective view, be action that a reasonable employer would take. Applying this thinking to the case mentioned above, while the age of the offence might not matter, particularly if the employer had no knowledge of it, the decision to go on a fishing expedition to find misconduct that would allow an employer to dismiss for gross misconduct and in so doing avoid the obligation to pay notice, may very well be considered unfair. This is so even if in so doing the employer would not be in breach of contract.

Other considerations:

  • Ensure that if contemplating dismissing for gross misconduct, and your policies define types of conduct that you consider fall within that category, the current offence does not fall outside it. In a recently decided case where a tribunal found the dismissal of an employee to be unfair, one of the factors that influenced the finding that the dismissal was unfair was the fact that the employer’s policy stated that the offence which the employee was facing would be dealt with by a maximum sanction of a written warning.
  • Ensure that you follow your own laid down procedures.
  • Ensure your investigation is thorough, including follow up investigations.
  • Ensure the process is well documented including witness evidence and statements.
  • Wherever possible, ensure that each level of the process is chaired by someone different.
  • Permit an appeal.

Above all, obtain proper advice and support.

Contact Details

For more details please contact:

fgmedia@fgsolicitors.co.uk

+44 (0) 808 172 93 22

This update is for general guidance only and does not constitute definitive advice.

Facebook related claims update – balancing freedom of speech with rights to protection against discrimination

Social Media Apps (123ref)SUMMARY: Recently there have been two claims involving postings on Facebook, one in the Employment Appeal Tribunal and one in the High Court. Continue reading