- 22 Jan 2016
- Søren Eeg Hansen
A designer, who was a former employee, was not entitled to bonus payouts because of the expenses incurred during her employment which were to be deducted from the bonus.
If it cannot be inferred from a written agreement what rules apply in a contractual relationship, general principles of interpretation provide that the practice established by the parties will apply. That was the crucial principle in this case.
The case concerned a designer who had been employed with a major fashion company for a number of years. According to her employment contract, she was entitled to a bonus, but there was no specification of how the bonus was to be calculated. As a result of financial difficulties, the employer had to let the designer go and the designer then claimed a six-figure amount in bonus.
The parties agreed that the designer had participated in a bonus scheme, but they disagreed as to the calculation of bonus. Statements from the bookkeeping department showed that, in practice, the designer's bonus had been 6% of sales less various expenses. The bonus balance had been negative during her entire employment due to her current expenses. As a result, no bonus had been paid out, and she had been kept informed of this throughout her employment.
Only compensation for failure to provide statement of particulars
In the High Court, the designer argued that she had originally agreed with her former employer that she was to receive 6% of gross sales of the brand. Therefore, no expenses should be deducted in the bonus calculation.
The Court ruled against the designer, but awarded her around EUR 1,350 in compensation for the employer's failure to provide her with a statement of employment particulars. In the absence of a written agreement, the Court based its decision on the parties' statements in court that over the years, the parties had established a practice of calculating the bonus as 6% of gross sales less various expenses. Since the bonus balance had been in the red throughout the entire period, the High Court ruled in favour of the employer.
Norrbom Vinding notes
- that the judgment shows that in the absence of a clear written agreement between employer and employee, the crucial factor will often be the practice established by the parties; but
- that with regard to the provisions of the Danish Statement of Employment Particulars Act, the judgment illustrates that it is advisable for employers to provide their employees with written and clear employment contracts.