Employment bonuses are common, but often not without conditions. Bonuses are often awarded under the condition that they must be repaid to the employer should the recipient leave their role within a certain timeframe of the bonus being paid. These are referred to as ‘clawback’ arrangements.
In Steel v Spencer Road LLP (t/a The Omerta Group), the High Court recently considered whether such clawback arrangements could be considered an unreasonable restraint of trade.
Mr Steel’s employment contract provided for a discretionary bonuses on the condition that the sum must be paid back if he, or Omerta, gave notice to terminate his employment within 3 months of him receiving the bonus.
Mr Steel raised a dispute when he resigned a month after receiving a bonus of £187,500 and was asked to reimburse the sum. He refused, claiming that the 3-month period needed to secure his bonus combined with the 3-month notice period after resigning, meant that he could only keep his bonus if he worked at the firm for another six months which was an unreasonable restraint of trade.
Omerta sought to recover the bonus as a debt by serving a Statutory Demand upon Mr Steel and Mr Steel in turn applied to the Insolvency and Companies Court (“ICC”). The ICC dismissed Mr Steel’s claim and he appealed to the High Court.
The High Court dismissed Mr Steel’s appeal and held that the terms were tied to his bonus, he wasn’t being stopped from working elsewhere, and he would just have to repay the sum if he wished to do so before the end of the 6-month period.
As an employer, being able to provide a bonus to your hard-working team is a privilege, and a great way to show appreciation for what they do. However, it is crucial to ensure the conditions around any bonuses are comprehensive and drafted by an expert, to avoid any tricky situations.
If you have found yourself in a difficult position due to your employment terms and conditions, our team of experts are on hand to provide comprehensive legal advice, so you can focus on running your business.
Call Bromleys today on 0161 330 6821 or email bromleys@bromleys.co.uk to speak to a member of our employment team.