Originally published May 2010
In the recent case of Khatri v Cooperatieve Centrale
etc. an individual was employed under a written contract which
included provision for a performance-related bonus to be paid each
year-end calculated on the basis of a formula. The claimant
employee was sent a letter containing new contract terms including
a provision that bonuses would now be payable entirely at the
employer's discretion rather than on a performance basis. He
did not sign the letter, nor was he pressed to do so and his duties
did not change. At the year-end he was made redundant and he sought
a swift "summary judgment" in court on the basis of
relevant documents for payment of the (substantial)
performance-related bonus.
The employer argued that the claimant could not be entitled to
judgment for this sum without the court hearing all relevant
circumstantial evidence. Further, it was suggested that the
employee had, by his conduct, accepted a variation of his contract
and that his only entitlement, therefore, was to a discretionary
bonus, which the employer was entitled not to pay.
The Court of Appeal rejected both of these arguments and granted
the employee summary judgment for the full amount of the
performance–related bonus.
Points to Note –
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Where a fuller investigation of the facts would not alter the evidence available and would not therefore affect the outcome of the case, a court may decide a case on documents alone. This case is a reminder that this procedure may be used to enforce rights under an employment contract.
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In most circumstances, contractual variations must be agreed by employer and employee. The employer in this case lost because it had not effectively varied the employee's contract terms. The employer's failure to follow up on their letter was costly.
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The Court of Appeal acknowledged the employer's argument that an employee can be taken to have agreed to a contract variation simply by continuing to work without complaint. However, this can only be the case where the employee accepts, for example, new duties or a cut in pay, without protest. In a case like this, where the employee's conduct was entirely consistent with the original contract continuing, the employer could not argue that he had impliedly accepted the new terms.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
