An employer whose bonus scheme for sales staff was not tightly worded enough was recently left to count the cost after an appearance in the Court of Appeal.
The employer hired a salesperson on a contract which included bonuses for meeting sales targets. The salesperson generated sales far in excess of what was anticipated and claimed very substantial bonuses as a result.
The salesperson’s contract had a clause which allowed the employer to limit the bonuses paid during the year, but this provision was not invoked during the year, despite the salesperson’s sales figures running well ahead of expectations throughout the period.
The employer sought instead to rely on another clause, which allowed the bonus to be capped at 100 per cent of salary. By concession, the employer did not apply the clause strictly and allowed a bonus of 130 per cent. This, however, was still less than the employee considered was due to her.
The Court of Appeal considered that such clauses could only apply in exceptional circumstances and that the circumstances of this case were not exceptional enough to warrant the application of a bonus cap. In the absence of a more tightly worded capping clause, the bonus, which amounted to more than £100,000, was payable.