Discretionary bonus

Case 6: The facts

Nina Hansen was a partner in a firm of solicitors. Although she had no contractual right to a bonus, she was told that she would receive a discretionary bonus in instalments - but the instalments would stop if she left for any reason, including redundancy. She asked to look at the books to see what funds were available and to assess her risk of redundancy, but the firm refused.

Hansen was unhappy about the way this was dealt with and the conditions attached to payment of the instalments. When the firm refused to change its position, she left and claimed constructive dismissal and unlawful deduction of wages.

The ruling

The EAT held that, when a bonus is non-contractual and discretionary, it becomes a legal entitlement once the employer has made the decision to pay it. Hansen was entitled to the outstanding instalments, and the firm's failure to pay was an unlawful deduction of wages.

The EAT also held that Hansen had been constructively dismissed - the whole manner in which her pay had been dealt with, combined with the refusal to let her see the books in light of the conditions attached to the bonus, amounted to a fundamental breach of contract.

Farrell Mathews & Weir v Hansen UKEAT/0078/04