Expensive design

Back
Categories
HR News
Date:
22 Jan 2016

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.

By:
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.‎