Discretionary Bonus as Implied Terms

Discretionary bonus paid every year becomes implied terms of employment

Ravendran A/L Suppiah And Malaysian Assurance Alliance Berhad (Award No.: 411 OF 2015)

Background of the case The Claimant claimed he was constructively dismissed by the Company by not paying his bonus for the year 2007 which he claims was contractual. The Claimant has always been receiving his bonus but despite meeting his target in 2007 he was not paid 2 months bonus which the Claimant claimed he was entitled to.

The Company on the other hand submitted that the yearly bonus was at the discretion of the Company and was not contractual. The provision for bonus is only provided for in the Company's handbook which is not a collective agreement. The Claimant was a Manager and therefore not among unionised employees and his term of employment was governed by the employment agreement and the Company's handbook.

Evaluation and findings of the Court

To this Court's mind, if the bonus has always been paid then it has become something to be expected by the employee especially after the employee who has done what is expected of him such as achieving the target and good performance when performance was one the aspect considered for bonus. The word discretionary appears to only refer to the amount but the Company has impliedly promise to pay. Especially so in this case, when the Claimant has always received his bonus. The Company, when they did not pay the bonus appears to have breached the implied term where the bonus has become an entitlement and part of the remunerations.

The Company has not given any reason for the non-payment of the bonus to the Claimant for the year 2007. If the Company was transparent enough they may have a valid reason either the performance of the Claimant was not satisfactory or the Company was under severe financial restraint or anything else. But no reason was given by the Company to the Claimant following his queries and no reason was given in this Court other than saying the bonus was non-contractual and at the discretion of the Company. Based on the above reasons, this Court holds that the non-payment of bonus for the year 2007 was a fundamental breach of the contract as it concerned remunerations and the Company evinced an intention not to be bound by the contract of employment as far as the Claimant is concerned when they did not pay bonus in this case. Therefore, the Claimant was constructively dismissed

The Court ordered the Company to pay the Claimant RM120,428.00 being backwages and compensation in-lieu of reinstatement.