'Despite what the tabloids will have you believe, not every banker will be laughing all the way to the bank with a bag full of bonus cash this year-end.

In fact, as a result of the financial crisis, some of the industry's most senior bankers are not laughing at all. Rather, they are smarting at being laid-off, and struggling to find new employment opportunities. 

And, even for many of those lucky enough to have kept their jobs, bonus time will come as a disappointment. The perennial problem, of course, is that banking bonuses are generally 'discretionary' in nature - and, in difficult times, that discretion is exercised much more vigorously. And problems can arise when bonuses are awarded inconsistently, or with a lack of transparency. Bonus case law in respect to discretionary bonuses has, however, generally established that the decision to exercise a bonus cannot be made in such a way which could be deemed 'perverse' or 'irrational'.

Whilst the evidential burden on the employee in these cases is high, there have nonetheless been a number of situations where bankers have managed to successfully challenge their employer's decision not to pay them a bonus. And the case of Keen v Commerzbank has provided bank employees with interesting ammunition - the right to request an employer to give reasons for the exercise of the discretion to withhold a bonus. The case is also interesting in that it further establishes that the discretion regarding distribution of bonuses must be applied in a consistent manner.

The request for the bank to explain the reason why the bonus was withheld from the banker may be put to the employer using the bank's internal grievance procedures. This could provide the banker with an interesting tool, as the response to the request could determine whether or not he (or she) should bring proceedings against the bank for recovery of the bonus.

Banks use a number of excuses not to pay bonuses to employees. For example - 'it's been a bad year', 'you were no longer employed when the bonuses were awarded', 'your performance was not good enough', 'nobody else was paid a bonus this year', 'your performance was good, but the bank as a whole has not done well', etc. It is important, however, for the employee to go behind that, and he (or she) must insist that a thorough investigation is undertaken in relation to any grievances raised regarding the bonus. The employee should ask for disclosure of all the relevant papers in accordance with the Data Protection Act, and also consider making an application for Pre-Action disclosure in advance of any proceedings. 

The banker must then consider any evidence obtained from the firm, to see if it provides arguments that the discretion regarding the payment of bonuses was not carried out consistently, or to establish if there was no other unlawful reason for the withholding of the bonus eg discrimination . The banker should particularly look for a lack of transparency, objective criteria or any breach of bonus scheme guidelines. 

Bonus decisions need to be transparent, consistent and justifiable by reference to objective criteria, or scheme rules. And banks who don't operate in this manner are simply asking for trouble'.

Sharokh Koussari is a Partner at Howard Kennedy

s.koussari@howardkennedy.com

www.howardkennedy.com

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