The High Court has ruled for an employee in a dispute with stockbroking firm J & E Davy over deferred bonuses, finding that a condition attached to earned bonus payments was imposed without his agreement and operated as a restraint of trade.
In a judgment delivered on 26 January 2007, Mr Justice T.C. Smyth found that the plaintiff, accountant and equity analyst Eamon Finnegan, had a reasonable expectation that a bonus would be paid when the firm and his own performance warranted one. The amount remained discretionary, the judge said, but the possibility of a bonus had formed part of the employment arrangement through years of consistent payments.
The dispute concerned bonus sums awarded for work in 1997, 1998 and 1999. The judgment records that the plaintiff objected when parts of his bonuses were deferred and made conditional on remaining with Davy’s, particularly if he left to work for a competitor. The court found he tolerated the arrangement under economic pressure but did not consent to it.
The firm’s evidence was that the deferral scheme was intended to encourage employees to stay and perform in future years. The judge found instead that its real purpose was to create a financial and practical restriction on employees moving to another stockbroker. He rejected the argument that the condition merely discouraged departure and did not restrain the plaintiff’s trade. The court also found no genuine proprietary interest requiring the condition.
The judgment distinguishes the case from an English decision involving a written bonus term known to the employee from the outset. Here, the condition was not brought to the plaintiff’s attention until years into his employment, and its full impact became apparent later. The judge held that the unilateral retrospective change was ineffective in law because it was not consensual and amounted in substance to a restraint of trade.
Finnegan left Davy’s for NCB stockbrokers in September 2000. The judgment says Davy’s refused to pay retained sums when he requested them. The judge considered any payment or premium negotiated with NCB irrelevant to the bonuses already earned at Davy’s. He concluded: “The Plaintiff succeeds.” The supplied judgment excerpt does not state a specific monetary award or set out a separate formal order.