The Court of Appeal has upheld a multi-million-euro award in respect of bonuses promised by Dresdner Kleinwort to a group of bankers in 2008 shortly before its takeover by Commerzbank.
The judgment provides guidance on when promises made during the course of employment will have contractual force.
In particular, the bank's announcement of a guaranteed minimum 400m euro bonus 'pool' was certain enough to create a legally binding commitment to the staff. This reinforces the need for the utmost caution in management statements concerning pay and benefits, even when communicated collectively rather than individually.
Similar cases in future could be affected by EU plans to cap higher-paid bankers' bonuses at a multiple of one times their current salary.
It will be possible to increase the cap to twice their salary with shareholder approval, but at least 25% of any bonus in excess of one times salary must be deferred for five years or more.
Once the legislation is approved, affected financial services businesses will need to make rapid decisions on remuneration policy and revise bonus plans accordingly.
Michael Burd and James Davies, Lewis Silkin LLP solicitors, email: email@example.com