Discretionary payments

Case 1: The facts

Steven Horkulak, a senior managing director, successfully brought a claim of constructive wrongful dismissal on grounds of bullying and abusive behaviour by his company's chief executive.

Horkulak was awarded damages, including a sum to reflect his loss of a discretionary annual bonus that was provided for by a clause in his employment contract. However, his employer argued that he should not have been awarded this sum, because the bonus was discretionary and there was no guarantee that he would have received it.

The ruling

The Court of Appeal held that, although the amount of the bonus was not fixed in the contract, it was clearly part of the remuneration structure paid to motivate and reward the employee.

There was an implied contractual term that the employer would exercise its discretion to pay the bonus genuinely and rationally, so Horkulak was entitled to recover payment of the bonus in the sum that he was likely to have received if his employment had continued.

Horkulak v Cantor Fitzgerald International [2004] IRLR 942