G Thom v Hobart Real Estate Partners Limited

This appeal concerns whether an employment tribunal had jurisdiction under section 13 of the Employment Rights Act 1996 to hear a claim for an unlawful deduction from wages in respect of a discretionary ‘‘performance fee’’ or ‘‘profit share’’. The tribunal construed the relevant contractual clause (clause 6.2) and concluded that it afforded the employer a discretion may receive to pay a minimum 10% but left key terms (the percentage and the method of calculation) to negotiation for each project. Because the parties did not agree the terms for the Worship Square transaction and the contract did not supply a method to calculate an ascertainable sum, the asserted entitlement was an unquantified and unidentified sum and therefore not "properly payable" wages under ss.13 and 27 ERA 1996. The Employment Appeal Tribunal found no error of law in that reasoning and dismissed the appeal.

The appellant, a director employed as Asset & Development Manager, claimed that she was owed a performance fee or profit share in respect of the disposal of property known as Worship Square. She relied on clause 6 of her contract of employment and on email exchanges in which the respondent’s directors appeared to allocate a 10% profit share. The claimant brought an unlawful deduction from wages claim under section 13 ERA 1996 after the respondent received sums on disposal and she was made redundant without receiving any performance fee.

The employment tribunal (Employment Judge Heath) framed the preliminary and substantive issues around jurisdiction under ss.13 and 27 ERA 1996, interpretation of clause 6.2 (which stated the claimant "may receive a minimum 10%" and that terms and percentage would be negotiated and agreed in advance of each project), and whether any entitlement was an identifiable, quantifiable sum. The tribunal found the clause created a limited discretion for the employer and that the March/April 2019 emails did not produce an agreement fixing the multiplicand or method of calculation for Worship Square. It concluded that, in the absence of agreement, any right was discretionary and did not amount to a legally enforceable, quantifiable entitlement to wages.

The appellant appealed to the Employment Appeal Tribunal contending the tribunal erred in finding no identifiable or quantifiable sum and that the 10% had been unilaterally declared and therefore could not be withdrawn (relying on authorities about declared bonuses). The EAT considered the statutory scheme (ss.13 and 27 ERA 1996) and authorities on interpretation and discretionary bonuses. The EAT held that the tribunal correctly construed the contract, correctly concluded there was no agreement as to the calculation of any performance fee for Worship Square, and properly determined there was no sum that was "properly payable". The appeal was dismissed.

The appeal is dismissed. The Employment Appeal Tribunal upheld the employment tribunal’s construction of clause 6.2 and its conclusion that the claimant had not established an identifiable, quantifiable sum "properly payable" as wages under ss.13 and 27 Employment Rights Act 1996 because the terms and method of calculation for any performance fee were not agreed and the clause left the matter to negotiation and the employer’s discretion.

This is an appeal to the Employment Appeal Tribunal against the Employment Tribunal judgment of Employment Judge Heath (final hearing June 14–16, 2021; judgment and reasons sent 10 September 2021). The EAT decision is reported at [2023] EAT 37.