Ridgway v JP Morgan Chase Bank National Association

Contractual deferred-compensation provisions are applied according to their proper meaning. “Job elimination” concerns the complete disappearance of the employee’s former role, rather than merely the loss of that role by the employee or the offer of a less preferred position. A constructive dismissal will not arise where the employer offers suitable alternative employment and does not breach the implied term of trust and confidence. A broad contractual discretion over bonuses is unlawful only if exercised irrationally or perversely; the claimant faces a high threshold. A formal appraisal is unnecessary unless the contract requires one.

The claimant, a senior bank trader, claimed damages after resigning following a sabbatical. He alleged that his employment had ended involuntarily through job elimination, that the Bank had constructively dismissed him by offering unsuitable alternative employment, and that deferred compensation had consequently been forfeited contrary to contract. He also challenged a nil discretionary bonus for the part of 2003 worked before his sabbatical.

The central issues were the meaning of job elimination and voluntary termination under the stock-plan agreements, the Bank’s entitlement to require a release concerning the deferred compensation, and whether the bonus decision was irrational or perverse.

1. Deferred compensation. The claimant’s former role as Head of the Options Desk had not been eliminated. The desk continued to operate, its workload and staffing had not materially diminished, and another employee was performing the managerial role. Properly construed, “job elimination” in the agreements referred to the complete disappearance of the former role. The statutory concept of redundancy did not extend the contractual term, and the claimant was not redundant in any event.
2. The Bank had not breached the implied term of trust and confidence. It genuinely sought to retain the claimant and offered a proprietary-trading role with the same reporting line, salary structure, terms and potential for incentive compensation. That role was suitable alternative employment. The claimant’s refusal to consider it did not amount to constructive dismissal.
3. The claimant’s resignation therefore constituted a voluntary termination under the agreements. The Bank was entitled to require, as a condition of retaining the relevant stock options, a release agreement including a provision dealing with his claim to the RSUs. The alleged oral assurance that the Rule of 45 would not apply was rejected on the facts, and the issue of reliance, uncertainty and ostensible authority did not arise.
4. Nil bonus. The sabbatical letter entitled the claimant to be considered for a discretionary bonus but did not guarantee an award or require a full formal appraisal. The Bank’s discretion was subject to rationality and the claimant faced the high threshold identified in Commerzbank AG v Keen (2007) IRLR 132. The decision-makers considered the claimant’s trading loss, his limited contribution to the desk’s profit and the absence of special factors warranting an award. A nil bonus was neither irrational nor perverse.
5. Both the Deferred Compensation Claim and the Nil Bonus Claim failed. The action was dismissed.