An insurance broker has been told he must repay a bonus advance of £500,000 after the Court of Appeal ruled his employment ended the day before his contract stipulated, not the day after.
James Craven, who was hired by insurance firm JLT Speciality, was paid the bonus on the condition that he did not leave the role on or before 31 December 2016.
He subsequently handed in his notice on a date that would have ended his contract before 31 December 2016. After JLT wrote to accept his resignation and said his employment would end on 1 January 2017, it then wrote a follow-up letter confirming that his last day would be 31 December 2016 and asking for Craven to pay back his bonus.
Craven did not pay his bonus back under the advice from his solicitor that an apparent change in the date made the contract unenforceable.
But the Court of Appeal ruled the date of 1 January 2017 – as per JLT’s first letter to Craven – was not the last day of his employment but the first day on which he would be free to work for someone else, and therefore did not constitute a change to the contract.
Craven was hired by JLT under an “Executive Employment Agreement” in May 2005, which was subsequently amended in March 2012 to state that Craven’s employment would continue unless terminated “by either party giving to the other 52 weeks’ written notice, provided that any such notice given by [Craven] shall not expire before 31 December 2016”.
Following this amendment, Craven also received a £500,000 “bonus advance”, which was repayable if he resigned “on or before 31 December 2016”.
On 23 September 2015, Craven wrote to JLT giving “notice to resign with effect from today’s date”, to which JLT replied on 29 September that his resignation was accepted, and his employment would end on 1 January 2017.
The court heard JLT sent further correspondence stating Craven’s “final date of employment is 31 December 2016”, and the bonus advance was due to be repaid by 7 January 2017.
On 5 January 2017, Craven told JLT that his solicitors advised him the “terms of the bonus repayment and the purported variation are not enforceable and amount to a penalty in law”.
As the bonus advance had not been repaid, JLT issued tribunal proceedings on 5 May 2017.
A High Court Judge dismissed the proceedings, saying there were “very real prospects of [Craven] succeeding in his primary defence that the repayment provisions have not, in fact, been triggered”.
JLT then challenged the decision and brought the case before the Court of Appeal.
The company contended Craven triggered the repayment obligation by “[resigning] on or before 31 December 2016” when he sent his letter on 23 September 2015.
Craven’s representation said it was “strongly arguable” that “resigns” referred to the “date on which employment is in fact terminated” instead of the date on which resignation notice is given. He argued that Craven giving “notice to resign” on 23 September would be “of no significance” on that basis.
He also argued the clause could be interpreted as applying “only to a resignation that took effect before” 31 December 2016, and not to a “cessation of employment on that very date”. He said there was “scope for argument” that Craven’s employment came to an end on 1 January 2017 rather than the day before.
However, the Court of Appeal ruled in favour of JLT, rejecting the argument that their letter dated 29 September meant Craven’s employment ended on 1 January 2017. The court ruled Craven was liable to repay the bonus advance as his employment came to an end on 31 December.
Paul Holcroft, associate director at Croner, said this case should serve as a reminder on the importance of drafting employment documents clearly and unambiguously.
“Not only will this help managers, and the employee themselves, understand what terms apply to their employment, it can help clarify what happens once they give notice or their employment ends,” Holcroft said.
Victoria Albon, associate at Dentons, said employers should carefully consider the wording of any employment contracts.
“JLT should have been clear as to which date Craven’s employment terminated by using language such as ‘your last day of employment with us will be 31 December 2016’,” she explained.
Albon added Craven could have been clearer by questioning the 1 January 2017 reference and making it clear “much earlier” he did not believe he had to repay his bonus.