Today we’re reporting that we have just secured a major win for a client at the EAT (Employment Appeal Tribunal) level. This follows on from a separate win for him at the Employment Tribunal level.
Our client (Mr C), a computer systems sales specialist, worked for a massive seller of computer software systems. This is the kind of cloud, webserver and database software that a massive company or a government department like the DWP or DVLA uses to manage its business and interact with us, their customers. They cost millions.
Mr C’s job was to find potential purchasers, make sales happen and shepherd them through the tendering process to successful conclusion. It’s a hugely complicated job, with lots of moving parts. The people who work in these roles have to liaise with dozens of people, understand technical jargon, produce complicated contracts, manage huge projects and often work late nights for months on end. They earn significant salaries, much of it based on commissions and bonuses (there’s no real difference between these two, which together are called incentive).
These commission schemes, by the way, can be enormously complicated, as they aim to incentivise not only sales of software but sales of add-ons and other things such as profits and renewals. Sometimes everyone has a slightly different commission scheme and sometimes there is a HR person whose job it is to understand the schemes and explain them to the salespeople. But this story is about a very simple incentive scheme.
At the start of every year the salespeople are told by letter what their bonus will be and asked to sign and return the letter to show agreement. Mr C and his colleagues did this.
There was a presentation to explain the commission plans. Buried in a footnote on page 42 of a 60-page slide-deck, there was a bonus that Mr C realised would apply to a very large deal he was working on: “A kitty up to 1% can be paid for contributing to deal win based on manager’s approval“. If he made this deal, even just 1% of it would be a very large bonus.
Then, halfway through the year, Mr C’s employer told staff that ‘because of challenges presented by Covid‘ the scheme was changing a bit. You may remember that at that time, a lot of things got blamed on Covid and we don’t know if that was an excuse or not but we can say that the IT industry wasn’t sure if the ban on meeting customers in person would result in a catastrophic downturn or whether the need for more remote working and home shopping would be good for business.
The changed commission plan was that the financial year would be split, with separate targets for each half-year. Same commission, but calculated every six months, with a separate bonus and incentive being payable for each half of the year. For a steady performer, it would make no difference. But it would mean that Mr C, who had already met his annual target in the first half of the year, would lose the benefit of his front-loading. So he told his employer he did not accept that, which was a sensible thing to do. If you are presented with a breach of contract, you don’t want to do anything to suggest that you don’t mind. Even ignoring a breach of contract can suggest you accept it.
He worked on, brought home his massive deal and then his employer initially told him that he had earned his 1% bonus and then it told him that the powers-that-be had decided it would be a much smaller bonus. At that point he resigned, having decided that he didn’t appreciate being messed about.
At the ET we helped Mr C to complain that:
- It was wrong for the employer to change the goalposts halfway through the calendar year
- That was discrimination, since colleagues of a difference race had in some cases not suffered from a change of goalposts
- It was wrong for the employer to go back on its word on the 1% bonus
The employer defended the case on the basis that (as with most commission schemes), there was a lot of discretion reserved to the employer, which could basically decide for itself to change a scheme if it wanted.
This hearing took place three years after his resignation (the wheels of justice turn slowly).
After a week-long hearing the tribunal agreed with Mr C on the first point but not the other two. So that was a decent victory on the incentive payment. When it comes to discrimination claims, a tribunal has a great deal of discretion to decide why a person acted as they did, so there was no appealing that. But on the third point, Mr C was very unhappy because that was the largest part of his claim, by value. And he found it hard to understand the decision, because as most people know, you can’t go back on a deal once it has been agreed.
The reason the tribunal found for the employer on the 1% bonus claim was that it said that the very fact the employer said the powers-that-be had the authority to override the line manager’s approval showed that this must have been part of the bonus rule in the first place. It said:
If this was all that was required to crystalise the entitlement it does not make sense that Mr D is later talking about “the powers-that-be” giving approval. Although the line manager seems to have been willing to give his own approval, he did not think he had the last word.
We thought that what the tribunal had done wrong was to decide the outcome first and then reason back from that decision. Because later talking about “the powers-that-be” is equally consistent with simply going back on your word. The tribunal didn’t really explain why it decided that point in the employer’s favour rather than ours. When looking at the ingredients for the formation of contract we felt that the tribunal may have overlooked the point had to be that the terms of a contract have to be known, in principle, to both the parties at the outset.
And so that is the point we asked the Employment Appeal Tribunal to decide on.
You can only appeal a tribunal decision if it is a question of law. On a question of fact, the tribunal’s decision is final. At the EAT, the employer argued that the decision on the 1% bonus was a question of fact that the EAT couldn’t interfere with. But, they said, if it was a question of law, then they had a sheaf of caselaw to support their case that the original tribunal decision was correct.
Happily, the Employment Appeal Tribunal sided with us in its 22-page judgment, which you can read here.
Employment judges mostly get it right. Therefore appealing a judgment is overwhelmingly unlikely to succeed. Out of every 100 claims appealed, 59% are rejected outright or after another look by the judges, another 15% are withdrawn, leaving about 20 going to a hearing like ours, with only nine of them succeeding.
However, as this case shows, if a party loses at the employment tribunal, finds an appealable point and has the tenacity to pursue it further, there is the chance to turn a bad day into a good one.
Image used under CC courtesy of MoreByLess