Bonus while under notice

Back
Date:
06 Aug 2010

an employee was entitled to receive a bonus although he was under notice of termination and had been released from the duty to work when the decision to pay out a bonus was made. so the danish high court ruled.

An employee was entitled to receive a bonus although he was under notice of termination and had been released from the duty to work when the decision to pay out a bonus was made. So the Danish High Court ruled.
 
Employees are entitled to receive a bonus if their employer has created a legitimate expectation of a bonus. As a result, the employer cannot decide at a later point only to pay out bonuses to employees who are not under notice.
 
This case concerned a small manufacturing company where pay was negotiated collectively each year between management and employees. In 2007, the employees accepted to forgo a pay rise in return for a bonus based on company performance. No written agreement was made.
 
Before the payouts were made, one of the employees was given notice and released from his duties for unwillingness to cooperate. One week before his notice period ended, bonuses were paid out to the other employees. The employee believed that he was entitled to receive a bonus in the same way as his colleagues, despite having been released from the duty to work. The employer, however, believed that it was under no obligation to pay any bonus to an employee under notice.
 
Legitimate expectations had been created
The Court held that the employee was entitled to receive a bonus in the same way as the other employees, among other things because there was such a connection between the absence of a pay rise and the bonus payments that all employees covered by the pay negotiations had a legitimate expectation of a bonus (subject to the company's performance). Since the decision to pay out a bonus had been taken while the employee in question was still employed, he could not be denied a bonus simply for being under notice and having been released from the duty to work.

 

Norrbom Vinding notes

  • that the case illustrates the restrictions that employers face with regard to applying new bonus criteria once the employees have a legitimate expectation of a payout on the terms and conditions that have already been communicated to them.