Profit meant a bonus

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Date:
08 Apr 2010

an employee was entitled to a bonus for the year before leaving - even though it was not set out in the contract. that was because he had received a bonus in all the previous years in which the company had made a profit.

An employee was entitled to a bonus for the year before leaving - even though it was not set out in the contract. That was because he had received a bonus in all the previous years in which the company had made a profit.

An employee was entitled to a bonus for the year before leaving – even though it was not set out in the contract. That was because he had received a bonus in all the previous years in which the company had made a profit.
 
Sometimes, on termination of employment, a dispute arises as to whether the employee is entitled to a bonus for the year of termination or the preceding year. This case before the Danish Western High Court concerned such a dispute.
 
An employee at a timber company left the company immediately after the end of the financial year. It had been a good year for the company and the question was therefore if there was a bonus in store for him. There was no mention in his employment contract of a bonus scheme, but the employee had received a bonus each of the previous years. He therefore sued his employer for a bonus.
 
Legitimate expectation
The Court agreed with the employee, noting that the bonus payouts had not been based on individual performance, but had been awarded when the overall performance of the employees led to a good result for the company. The Court also took into account the employee’s statement that the employer had refused to give him a raise at his salary review 2 years ago because he could not have a raise as well as a bonus.
 
Given the fact that the company’s net result was even better than in previous years, the Court held that the employee had an expectation of receiving a bonus of the same size as his colleagues. The Court awarded him an estimated DKK 61 000 in bonus.

 

Norrbom Vinding notes

  • that the case illustrates the importance of carefully formulating and implementing guidelines for any employee bonus schemes to avoid any doubt about who is eligible and on what terms and conditions, but

  • that, by virtue of s 17 a of the Danish Salaried Employees Act, salaried employees will always be entitled to a pro rata bonus if they leave during a financial year.