An employer is under no duty to protect your personal financial welfare and that is one good reason employees should seek independent legal advice if they feel they have been denied remuneration that is fairly due. A case on this point concerned a senior executive who accused his former employer of trying to wriggle out of an obligation to pay him a $25 million bonus.
The executive worked for 11 years for three companies which he contended were all part of a single corporate group. He was employed by the third company for about 16 months before he resigned on the basis that adequate proposals had not been made for payment of his bonus. Feeling that he had been strung along and badly messed about, he launched proceedings against the employer alleging that it had breached the implied duty of trust and confidence it owed him by failing to pay his bonus.
The employer denied the claim in its entirety. It argued that, on the assumption that he had a bonus entitlement – which was disputed – the obligation to pay it fell upon the two other companies. It had neither assumed, acquired nor guaranteed the financial obligations of the other companies, which were entirely separate legal entities. On that basis, the employer sought summary judgment on the ground that the executive's claim was bound to fail.
Ruling on the matter, the High Court noted that the executive just wanted to be paid what he asserted to be his due and did not mind which company fulfilled the obligation. He contended that the employer could and should have either paid the bonus itself or prevailed upon the other companies to do so. The failure to ensure that his bonus entitlement was honoured was said to have destroyed or seriously damaged the employment relationship of trust and confidence.
The Court observed that judges have in the past consistently rejected the proposition that there is an implied duty on employers to protect the financial welfare of their staff. However, the executive's case that he had been strung along in an attempt to wriggle out of paying his bonus, and that that amounted to a breach of the implied duty of trust and confidence, was neither hopeless nor fanciful. Rejecting the employer's application, the Court found that the case was highly fact sensitive and that a full trial was required to achieve a just resolution.
For advice on any aspect of company law, Contact Roy Colaba and on employment law, Emma-Louise Hewitt e.hewitt@sydneymitchell.co.uk .
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