Evalue Ltd v Seaton

An employee cannot establish a contractual entitlement through custom and practice where the asserted term is inconsistent with an applicable express term, unless a contractual variation is established. A regular history of payments does not itself establish such a variation, particularly where the payments are equally consistent with the express performance-based scheme.

A bonus described as a target, capable of being more or less than that target according to individual and unit performance, does not confer an entitlement to a minimum sum. An express condition excluding eligibility while an employee works out notice also prevents a claim for bonus for that period.

The Employment Tribunal upheld the employee's claims for unlawful deductions from wages. It held that, through custom and practice, she had a contractual right to an individual performance bonus equal to 30% of salary. It also held that bonus remained payable while she served notice.

The employer appealed. It contended that the Tribunal had failed to construe the full bonus clause in the employee's 2005 contract, which remained applicable following a transfer under Transfer of Undertakings (Protection of Employment) Regulations 2006. The central issues were whether a guaranteed bonus could be implied consistently with that clause and whether bonus was payable during notice.

1. Appeal allowed. The Employment Tribunal's decision was set aside and the unlawful-deduction claims failed. There was no viable claim to remit.

2. For a claim under section 13 of the Employment Rights Act 1996, the unpaid sum had to be wages properly payable. That depended on whether the employee had a contractual right to the asserted bonus.

3. The Tribunal erred by construing clause 4 of the 2011 contract without considering the full terms of clause 7 of the 2005 contract. The earlier clause remained in force after the transfer. Clause 4 did not purport to vary it and instead referred back to the previous target-bonus arrangement.

4. Properly construed, clause 7 entitled the employee to participate in a performance-bonus programme, not to a fixed minimum bonus. The actual bonus could be more or less than target, depending on individual and unit performance, and was payable only if earned. The language of target, eligibility and performance was inconsistent with an entitlement as of right to 25% or 30% of salary.

5. The proposed implied term was therefore impermissible. Applying [2013] IRLR 800, custom and practice cannot imply a term inconsistent with an express contractual term unless the contract has been varied. Repeated payments did not establish variation and were at least equally consistent with operation of clause 7.

6. Clause 7 also expressly made eligibility conditional on not working out notice on the last business day of the calendar year. The employee consequently had no right to bonus during her notice period.

7. A possible claim that the employee was not considered for a discretionary bonus before notice was served was not an ascertainable unlawful-deduction claim. It could instead be pursued in the civil courts as a breach-of-contract claim.

• Employment Appeal Tribunal: allowed the employer's appeal and set aside the Employment Tribunal's judgment.

• Employment Tribunal: Employment Judge Hill, sitting alone, upheld claims for unlawful deductions from wages in a judgment promulgated on 9 January 2017.