Bluestones Medical Recruitment Ltd v Swinnerton

An employee claiming an unauthorised deduction for unpaid bonus must establish a legal entitlement to an identifiable sum. An express term making bonus discretionary may be varied, but an implied term based on custom and practice cannot be found without findings and an objective assessment showing an intention to displace the express term.

The tribunal must determine the terms actually agreed, including whether purported bonus payments were loans or advances. That characterisation may affect jurisdiction because loan advances fall outside the statutory definition of wages.

The Claimant was promoted to General Manager in April 2015. His written contract described bonus as non-contractual and discretionary, but the Employment Tribunal found that he was entitled to 6.5% of business operating profit under an agreement with the Respondent's managing director and by custom and practice.

The Employment Tribunal upheld his unauthorised-deductions claim for unpaid bonus of £4,687.87, while dismissing his unfair-dismissal claim. The Respondent appealed only the deductions decision. It contended that the Tribunal had not made findings capable of varying the express discretionary term, and that earlier payments were loans excluded from wages.

The central issue was whether the Tribunal had adequately established a contractual entitlement to the claimed bonus and determined the true character of the payments.

1. Appeal allowed. The Employment Tribunal's decision on the unauthorised-deductions claim could not stand. It did not make clear findings as to whether the April 2015 arrangement was an express variation that removed the discretionary quality of the contractual bonus provision.

2. If the Tribunal intended instead to find an implied contractual entitlement arising through custom and practice, it was required to make findings and assess the relevant circumstances identified in Park Cakes Ltd v Shumba and Ors [2013] IRLR 800. It did neither. In particular, it did not address the express contractual term, the consistency and publicity of the practice, or whether the practice was equally explicable as the exercise of discretion.

3. The evidence was capable of supporting more than one conclusion. An Employment Tribunal could find that the parties agreed a quantified, non-discretionary entitlement of 6.5% of operating profit. Equally, it could find that payments were advances pending a future dividend arrangement. The EAT could not itself select between those conclusions.

4. The nature of the arrangement was also material to jurisdiction. If the sums were advances under a loan agreement, they were excluded from wages by subsection 27(2)(a) of the Employment Rights Act 1986. The point had been raised late, but proper findings as to the agreement and the character of the payments were in any event necessary.

5. The claim was remitted for a fresh determination by a differently constituted Employment Tribunal. The original Tribunal's approach to this distinct issue was fundamentally flawed, and there was no utility in returning it to the same Tribunal.

• Employment Appeal Tribunal: Allowed the Respondent's appeal and remitted the unauthorised-deductions claim for fresh determination by a differently constituted Employment Tribunal.
• Employment Tribunal, Liverpool: Upheld the Claimant's unauthorised-deductions claim for £4,687.87 and dismissed his unfair-dismissal claim. No citation was stated.