So sang Simon and Garfunkel in The Boxer, continuing perceptively “All lies and jest. Still a man hears what he wants to hear and disregards the rest”.
Never was this more true (OK, save for small children and sweets) than in relation to positive noises made by employers to staff about “looking after” them if they stay with the employer in troubled times. Employees can sometimes hear only the upside and not little words like “discretionary” or “subject to” or “conditional upon”. Equally, however, employees in troubled times sometimes hear only those words and consequently form the view that the upside promise will never be fulfilled. As a result, the motivation or retention effect hoped for is lost and the assurance is ineffective. Foreseeing this latter risk, the employer may soft-pedal on the caveats and conditions, doing all it can to make those promises appear real to the employees.
Such was the problem in last week’s “bankers’ bonus” case, Attrill & Others –v- Dresdner Kleinwort, a £40million claim for bonuses allegedly promised but then withheld when the extent of the employer’s financial woes became clear. Despite the “greedy bankers” overtones to the press coverage, the Attrill case was a very simple contractual dispute at its heart – were the representations made to the bankers by DK sufficiently clear and unequivocal to (a) override the notionally discretionary nature of the bonus scheme and (b) become contractually enforceable?
Very much paraphrased, the High Court found that in troubled waters DK had wanted to retain its best people, people who could and possibly would otherwise abandon ship. It had said all the usual things about looking after them if they stayed, but that did not provide the degree of security or certainty the at-risk population were thought to need. As a result, DK management made more specific commitments which were argued by the employees to be akin to a statement that “If you stay at least until x date and perform to y level we will pay you at least £z”. There were no relevant conditions or caveats to that commitment, such as DK remaining solvent, making profits of not less than £xxx, not being taken over, the markets not falling over, etc.
The claimants did stay until x date and did perform to y level, and so on any view kept their side of the bargain. The question was then whether those commitments by DK were as clear as the claimants argued or were closer to a “look after you” sentiment. On the facts – these cases are all very fact-sensitive – the Court held that the statements made were precise enough to be enforceable, and that the bankers’ squandering their resistance by not leaving when they could have done constituted acceptance of and valid consideration for that offer.
The devil is of course in the detail of those conditions – as employer, ensure that you have thought ahead to as many eventualities as you can, to every set of circumstances, almost however doomsday, that would lead you not to want to honour that upside promise. The courts will not imply in such terms later merely because they would have been a good idea or because you are sure that is what you intended at the time, or that is what market practice would dictate. If the payout would vary for any reason then the contract or offer needs to say so and the burden is squarely on the employer to make sure that it does.
What we are left with for employers is a simple message in two parts
1. Do not make assurances to staff which go beyond the equivalent of “we will look after you”, “it will all be fine”, “you won’t regret it”, etc, OR
2. If you have to make such reassurances as a condition of retaining or securing key staff, then make sure that any applicable conditions or caveats are clearly stated at the same time (you will not be able to add in such caveats later as that would be an attempt to vary unilaterally a contract already made), ideally in writing.