Company ordered to pay CIO’s retention bonus

Introduction

In a recent Victorian Court of Appeal decision, an employer was ordered to pay almost half a million dollars in unpaid entitlements to an employee following a restructure.

Factual Background

Mr Stevens entered into an arrangement with the employer on October 2011 which entitled him to shares in the company.  The share value was equivalent to 12 months’ salary. Under the arrangement Mr Stevens accrued the shares if he remained in continuous employment with the company from 1 September 2011 to 1 September 2013 (the retention bonus) or he was made redundant.

In August 2012, new management took over the employer. The new Managing Director and CEO, Mr Bruce Dixon, had several meetings with Mr Stevens in relation to a restructure of his role and the possibility of his role being made redundant. Much of what transpired during those discussions were disputed during trial.

The key contention made by Mr Stevens was that during the discussions, an agreement had been reached between him and Mr Dixon that if Mr Stevens’ position was to be made redundant, Mr Stevens would be paid the retention bonus, with the bonus being paid in cash rather than in shares as the company was no longer listed on the stock exchange. The company contended that no agreement was reached with Mr Stevens.

At first instance

At trial, the trial judge generally preferred the evidence of Mr Dixon over that of Mr Stevens and held that there was no agreement between the parties in relation to the retention bonus and that Mr Stevens had not been made redundant instead finding that any reference to “redundancy” in Mr Steven’s exit documentation was an attempt by the Company to obtain a taxation advantage for Mr Stevens.

On Appeal

Mr Stevens appealed the decision. On appeal, the Court of Appeal held that the trial judge erred in finding that Mr Dixon had no knowledge of Mr Steven’s employment entitlements and it could not be sustained on the evidence. This evidence showed that Mr Dixon was aware of two other employees who had similar retention bonus arrangements, Mr Dixon had been informed by the HR Manager that Mr Stevens had a similar bonus arrangement prior to the meeting and that such a discussion was recorded on a contemporaneous agenda document by Mr Stevens.  The Court of Appeal on a review of the evidence also found that the trial judge’s finding that no agreement had been reached to pay the retention bonus in cash was “glaringly improbable” or contrary to “compelling inferences”.

It was on this basis that the appeal was allowed and the employer ordered to pay to Mr Stevens his retention bonus.

Lesson for Employers

Whilst this case turned primarily on its facts, it is always recommended that employers keep contemporaneous file notes of any conversation with an employee that may have an effect on the terms and conditions of their employment. This may be as simple as sending an email to the employee after the conversation summarising the discussion or alternatively sending yourself an electronic memorandum if the discussion is for your eyes only.

If you would like to know more about this case or employment agreements generally, please contact National Workplace Lawyers on +61 2 9233 3989.

National Workplace Lawyers

Note — this is for information purposes only and does not purport to be comprehensive or to render legal advice.