Company must compensate employees for breach of contract

Three employees have won claims of unfair dismissal and breach of contract after their employer tried to alter the terms of their pay structure.

The employees worked in insurance and underwriting. They had been headhunted by Neon Management Services Ltd in 2015 because of their successful track record.

Neon was a loss-making syndicate at that time. The employees therefore wished to ensure that their profit commission (PC) would be ring-fenced and based on actual figures rather than estimates.

They believed that this had been agreed, so signed contracts of employment and restrictive covenant agreements. In early March 2018, they were given new employment contracts and the PC was replaced by a discretionary bonus.

This resulted in the bonus pool being £150,000 rather than £500,000.

Neon then refused to pay the new discretionary bonus, or agreed pay rises, until the employees signed the new employment contracts. The new contracts also contained other detrimental clauses and extensive new post-termination restrictions.

The employees resigned. Neon responded by accusing two of them of misconduct for sending confidential information to their private email account. It reported them to their regulator and removed their work from them.

The employees sought damages for wrongful dismissal and declarations that Neon was in repudiatory breach of contract.

The High Court found in their favour. It held that Neon had repudiated two contracts of employment by seeking to impose a new and more detrimental contract, refusing to honour agreed pay rises and bonuses until the new contract was signed, calculating the bonus incorrectly, making unwarranted findings of misconduct against the employees and reporting them to a regulator without investigation or proper foundation.

The employees were therefore entitled to recover their full pay rises and bonuses.

Please contact us if you would like more information about the issues raised in this article or any aspect of employment law.

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