Ridgway v JP Morgan Chase Bank National Association, High Court
What is the extent of an employer's discretion when making bonus decisions? We already know that discretion is not completely unfettered, and that employers must not act in a way that is irrational or perverse when making bonus decisions. But does that authorise an employer to award no bonus whatsoever?
Background
In Ridgway v JP Morgan, the High Court decided that the bank was entitled to award a 'nil' bonus to a trader who had spent most of the bonus year on sabbatical.
Mr Ridgway, who headed up the bank's options desk, took an unpaid sabbatical starting in April 2003. One of the terms of the sabbatical agreement was that Ridgway would continue to be eligible for a discretionary bonus for the year ending December 2003. At the end of the bonus year, the bank awarded Ridgway a nil bonus.
On his return from sabbatical, Ridgway's previous job was unavailable, and he and the bank failed to agree on an alternative role for him. Ridgway resigned and claimed constructive dismissal. He claimed compensation for his bonus on the basis that the bonus decision was irrational and perverse, as well as compensation for stock awards that he lost as a result of resigning.
Decision
The High Court dismissed all of Ridgway's claims. In relation to the bonus claim, it followed the guidelines for the award of discretionary bonuses set out in the recent Court of Appeal decision of Commerzbank v Keen. In Commerzbank, the Court of Appeal said the hurdle is set very high for an employee to show that a bonus decision is irrational or perverse. However, the Court of Appeal also said an employer must identify the reason for a bonus award and the decision maker.
The High Court said the bank had been entitled to award Ridgway a nil bonus after taking into account the fact that he had been on sabbatical for most of the bonus year. The bank had also taken into account the fact that Ridgway had been making a loss when he went on sabbatical, that his 'add-on' contribution was very limited, and that there were no other factors to justify awarding a bonus.
The court endorsed Commerzbank and said the task of proving irrationality or perversity in the exercise of the bank's discretion to award a bonus is a "daunting one".
Key implications
Following the Commerzbank and JP Morgan decisions, courts will be reluctant to intervene in bonus decisions except in exceptional cases. However, bonus decisions are subject to challenge where the decision appears irrational and/or where the decision-making process is not transparent. Employers should be mindful of the following when making discretionary bonus decisions:
Properly and fully consider whether to award a discretionary bonus and, if so, the amount of the award.
Ensure the decision-making process is transparent and provide reasons why the bonus was assessed at the level it was so that the employee has an understanding as to how the figure was reached.
Tell the employee who made the bonus decision.
Review bonus wording to ensure it provides the level of discretion required (subject, of course, to the legal limitations set out above).
By Judith Harris, professional support lawyer, Addleshaw Goddard
Employers' Law
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Article by : http://www.personneltoday.com
Showing posts with label labourLaw. Show all posts
Showing posts with label labourLaw. Show all posts
Saturday, July 28, 2007
Ownership of contacts lists after employment has ended
PennWell Publishing (UK) Limited v Isles
Who owns a contacts list maintained by an employee in Outlook on the employer's computer system? In PennWell Publishing (UK) Limited v Isles, the High Court decided that the list belonged to the employer, despite the fact that it contained personal contacts and contacts that the employee had made before his employment had started.
Background
Mr Isles, a journalist, was employed as a publisher and conference chairman for PennWell. During his employment, he created and maintained a contacts list on PennWell's Outlook system, which included personal contacts, journalistic contacts and contacts that he had made before his employment started, as well as business contacts that he developed in his role with PennWell.
After Isles left PennWell to set up a competing business, it discovered that he had downloaded the entire Outlook contacts list from his work laptop.
Isles's contract stated that all documents used during employment belonged to the company and had to be returned before he left.
PennWell applied for an injunction for the return of the contacts list. Isles argued that most of the contacts on the list were personal to him.
Decision
The High Court had to decide whether the contacts list belonged exclusively to either PennWell or Isles or whether it was jointly owned by both.
The High Court said that where an address list is contained in Outlook or a similar software that is part of the employer's e-mail system and backed-up by the employer, the database or list belongs to the employer and may not be copied or removed in its entirety by employees for use outside or after employment. The High Court said that it would be "highly desirable" for employers to publish e-mail policies to communicate this to employees. While PennWell had an appropriate e-mail policy, the policy had not been effectively communicated to Isles and, therefore, PennWell was not entitled to rely on it.
Had Isles maintained his list of contacts as a separate, private address book, he would most likely have been entitled to that list. The court distinguished between contacts developed for the purposes of employment, where removal of contact information would be detrimental to the employer, and other contacts that an employee might keep for career purposes.
The court concluded that the list belonged to PennWell, but that Isles could copy from it his journalistic contacts and those made before his employment started.
Key implications
The confusion over ownership of the contacts lists that led to this case coming to court highlights the need for clear policies on ownership of contacts information. Employers should as a minimum:
Review e-mail policies to ensure they clearly identify what information is considered to belong to the employer, and confirm that it may not be removed or copied.
Communicate e-mail policies to all existing staff and bring these to the attention of new employees.
Ensure that confidentiality and return of property provisions in contracts cover contacts information and state what information will be protected/must be returned after employment.
Consider giving employees the option of a personal contacts folder to maintain contacts that are personal and/or those that pre-date employment.
Judith Harris, professional support lawyer, Addleshaw Goddard
HR : http://www.personneltoday.com
Who owns a contacts list maintained by an employee in Outlook on the employer's computer system? In PennWell Publishing (UK) Limited v Isles, the High Court decided that the list belonged to the employer, despite the fact that it contained personal contacts and contacts that the employee had made before his employment had started.
Background
Mr Isles, a journalist, was employed as a publisher and conference chairman for PennWell. During his employment, he created and maintained a contacts list on PennWell's Outlook system, which included personal contacts, journalistic contacts and contacts that he had made before his employment started, as well as business contacts that he developed in his role with PennWell.
After Isles left PennWell to set up a competing business, it discovered that he had downloaded the entire Outlook contacts list from his work laptop.
Isles's contract stated that all documents used during employment belonged to the company and had to be returned before he left.
PennWell applied for an injunction for the return of the contacts list. Isles argued that most of the contacts on the list were personal to him.
Decision
The High Court had to decide whether the contacts list belonged exclusively to either PennWell or Isles or whether it was jointly owned by both.
The High Court said that where an address list is contained in Outlook or a similar software that is part of the employer's e-mail system and backed-up by the employer, the database or list belongs to the employer and may not be copied or removed in its entirety by employees for use outside or after employment. The High Court said that it would be "highly desirable" for employers to publish e-mail policies to communicate this to employees. While PennWell had an appropriate e-mail policy, the policy had not been effectively communicated to Isles and, therefore, PennWell was not entitled to rely on it.
Had Isles maintained his list of contacts as a separate, private address book, he would most likely have been entitled to that list. The court distinguished between contacts developed for the purposes of employment, where removal of contact information would be detrimental to the employer, and other contacts that an employee might keep for career purposes.
The court concluded that the list belonged to PennWell, but that Isles could copy from it his journalistic contacts and those made before his employment started.
Key implications
The confusion over ownership of the contacts lists that led to this case coming to court highlights the need for clear policies on ownership of contacts information. Employers should as a minimum:
Review e-mail policies to ensure they clearly identify what information is considered to belong to the employer, and confirm that it may not be removed or copied.
Communicate e-mail policies to all existing staff and bring these to the attention of new employees.
Ensure that confidentiality and return of property provisions in contracts cover contacts information and state what information will be protected/must be returned after employment.
Consider giving employees the option of a personal contacts folder to maintain contacts that are personal and/or those that pre-date employment.
Judith Harris, professional support lawyer, Addleshaw Goddard
HR : http://www.personneltoday.com
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