Despite the Bank's handbook making it clear that the amount of any bonus award was at the "absolute discretion" of the Bank, the Court ruled that oral assurances about the minimum bonus pool, that were made by the CEO at a "town hall" meeting, overrode the provisions in the handbook and were contractually binding on the Bank.
What facts did the Court rely upon?
The Court looked to the common law contractual principles for guidance and placed importance on the following:
The announcement about the minimum bonus pool was an offer capable of acceptance, and the Bank had waived any requirement for the employees to respond as there was no downside for them and, given that the promise related to a pool, it was not consistent with individual acceptance being required.
Although not every detail of how the pool would be allocated was communicated, there was certainty of the size of the pool and there was a statement that it would be dealt with "in the usual way", which the Court held was sufficiently clear that the new term could be incorporated into the contract.
The purpose of the announcement was scrutinised by the Court and they considered it pertinent that the offer was intended to stabilise the workforce and incentivise employees to stay at the Bank in a difficult climate. In reliance on the announcement, bankers who may otherwise have left potentially turned down other offers of employment to stay at the Bank.
The announcement was made within the context of an employment relationship, which is an existing contractual agreement between the parties. The Court suggested that, in these circumstances, there was a strong presumption that any promises made were intended to be legally binding.
What are the implications of this case?
It is not likely that this judgment will have an effect on existing policies or require amendments to written documents that are already in place, as the bank's documentation was robust in this case.
However, it has certainly put a renewed focus on the risks associated with making group announcements and/or oral promises to individuals, particularly when communicating messages that are intended to incentivise or provide security to employees.
What are the practical action points to take away?
In order to protect itself from falling into a similar trap as Commerzbank, an employer should consider the following:
When advising employees of rights or benefits orally, such communications should be undertaken with care and clarity, so as to ensure that it is clear exactly what is being offered and what conditions (if any) attach to the potential rewards.
Any such oral promises or announcements should go through the same internal sign off protocols as a contractual change that is made in writing.
Managers should be made aware of the risks of over-committing to employees and making promises that the employer cannot or does not intend to keep.
If in doubt, such agreements should be recorded in writing, so that all of the relevant conditions can be included within the documentation.
Of course, taking these steps can come with a downside, as over-formalising announcements and adding in a plethora of provisos to what should be a positive message, can undermine the incentivising effect that such communications are intended to have.
There is no quick fix to avoid that risk, other than the employer satisfying itself in advance that it is in a position to provide the benefits that it is offering, and therefore being able to propose them confidently, without the need for any diluting caveats.
As we have seen in this case, however, making such promises and not following through, can lead to potential claims from employees, whether individually or as a group, so if you are going to provide these types of guarantees, you must be sure you are able to deliver, or face potential financial exposure if not.
Nicky Cranfield is an associate at law firm Fox Williams
