August 2008

Case 1 (Commercial)

A man employed by a dealer group as Body shop Manager at one of their branches brought a claim in the County Court against his employers.

In a contract of employment between the two parties, it was an express term that the Claimant was entitled to commission on terms as notified to him by the Defendant from time to time. Further, the Claimant asserted that it was an implied term that the Defendant would at no time exercise any discretion that they might have in relation to commission payments in ‘an irrational or perverse manner’.

Subsequently, the Claimant received notification of a new commission scheme in which it was an express term that payment was not subject to a cap on the bonus available. Three months later the Claimant was notified that the bonus scheme was being withdrawn.The Claimant’s profit plan for the quarter was over £30,000.

The Claimant achieved profits of over £60,000, thus entitling him under the new scheme to a potential bonus of over £30,000 in total.

The Defendant failed to pay the Claimant all or any part of the bonus due.

Further, it was claimed that the Defendant was in breach of the implied term of the contract in that they promised adherence to a particular scheme and then sought to retroactively alter that scheme, and that they exercised their discretion in relation to the bonus payments in an irrational and/or perverse manner.

The Defendant averred that there was no implied term in the Claimant’s contract of employment, and that they were entitled to alter the commission structure at any time. Further, the Defendant claimed that it was an express term of the contract that the bonus could be altered at any time, and that such alterations could have a retrospective effect, as had been the custom and practice throughout the Claimant’s employment. The Defendant further averred that they notified all employees that the bonus scheme was inaccurate and that the commercial decision had been taken to alter it. All the employees had accepted this notification, except for the Claimant.

The Defendant was ordered to pay three quarters of the Claimant’s bonus in full and final settlement of the claim. There was no order as to costs.

Case 2 (Employment)

This was a claim of unfair dismissal primarily surrounding a particularly knotty problem which has concerned tribunals for many years; namely, whether an employee resigned or was dismissed.

The Claimant in the case had worked at a garage for 35 years as a motor technician. Throughout these years the Claimant had worked for the same owners. In September 2006, however, the company was sold and in May 2007 the new owners, intending to expand the business, offered the Claimant promotion to a management role at new premises. Although the Claimant was initially enthusiastic, he subsequently got cold feet, worrying that it would mean leaving the people he had worked with for so many years. The Claimant was advised by his lawyer that in reality he had little choice, since his employment contract contained a mobility clause, and the owners in any event convinced him that it would be wise to accept the promotion.

In early November 2007, when he moved to the new site, the Claimant made an offer to one of his fellow workers to join him in a business he was considering forming. Although his colleague declined, it was a clear indication that the Claimant was serious about this idea, and the Tribunal did not consider that the proposal was unrealistic.

The Claimant was immediately unhappy in his new position. He did not know any of the staff and the work was limited. He therefore went further in attempting to establish his own business, contacting VOSA with the view to obtaining approval for an MOT business at a new site which he had viewed. On 19 November he spoke to his employers (Respondents) about his intentions, indicating that he would be leaving.

It was clear to the Tribunal that the Claimant’s plan to set up his own business was not a pipe dream, and that he had taken considerable steps towards setting up his own business. The Tribunal therefore accepted that he had informed his employer that he intended to quit, particularly since it was clear from other employees that he had also been quite openly discussing his intentions with others.On 23 November 2007 the Claimant met and discussed the terms of his leaving with his employer, who gave him a letter in which he gave the Claimant one month’s notice. The Tribunal considered this to be an important piece of evidence because the contract showed that the notice period required for an employee to give was one month, whereas the notice period which the employer would have been required to give under section 86 of the Employment Rights Act, was 12 weeks. The Tribunal was satisfied that the employer knew this. The employer, as a gesture of good will and in recognition of the Claimant’s long standing service, provided an extension of a further month to 31 January 2008.

The Tribunal found that if the Claimant had already given a valid notice with an ascertainable termination date, then it would not have been a matter for the Respondent to extend that date. The true situation, as they found it, was that at that time, although there had been a clear indication that the Claimant was leaving, the date had not been fixed, and that therefore 31 January could properly be regarded as a proposed finishing date put forward by the Respondent.

Further, the Respondent did not want the Claimant to work his notice period due to a potential conflict of interest in relation to existing customers, and the next day, a Friday, the Claimant collected his tools and returned his keys and van. The Tribunal found that there could therefore be no doubt in either parties’ minds that the Claimant’s employment was to come to an end at a date in the future and that from then on he would be on garden leave. The only question would be whether that termination had already taken place or was awaiting the end of notice period.

Over the subsequent weekend, the full implications of his actions would appear to have dawned upon the Claimant. He realised that he had nothing to fall back upon since his new business had not yet started. He therefore contacted his solicitor who advised him to raise a grievance which was forwarded in a letter; “ I would like to formally notify you that I did not resign and had no intention of resigning verbally or by any other means”.

There followed a grievance hearing in which the Claimant’s grievance was rejected because the Respondent said that the Claimant had definitely resigned. On 31 December the Claimant’s pay was stopped. The Respondent did not pay the further month’s good will payment, as they considered the Claimant’s subsequent actions had destroyed the goodwill that had existed.

The conclusion of the Tribunal was that there was no notice given on 19 November, although what was given was a clear decision to leave. That was confirmed on 23 November, with an agreed notice terminating on 31 January. Therefore the Claimant’s employment ended on 31 January.

The Tribunal was in no doubt that if there had been a dismissal it would have been unfair, but their conclusion was that since there was no dismissal there could be no unfair dismissal.

The claim was therefore dismissed.

If you have any questions or comments relating to these cases, please contact Adam Cox .