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Employment Contract: Bonus clause

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Did a clumsily worded resignation acceptance letter vary the termination date by agreement?

No, held the Court of Appeal in JLT Specialty v Craven.

Craven and JLT entered into an agreement which provided that Craven's employment would continue unless terminated earlier "by either party giving to the other 52 weeks written notice, provided that any such notice given by the Executive shall not expire before 31 December 2016". Craven received a £500,000 "Bonus Advance" which was repayable if he resigned "on or before 31 December 2016".

On 23 September 2015, Craven gave "notice to resign with effect from today's date". JLT replied on 29 September "your resignation is accepted and your employment will end on 1 January 2017". JLT sent further correspondence stating "your final date of employment is 31 December 2016" and the Bonus Advance was due to be repaid by 7 January 2017. Craven's employment ended and he declined to repay the Bonus Advance, in part as it was a 'penalty clause'. JLT applied for summary judgment unsuccessfully and subsequently appealed.

The Court of Appeal, rejected an argument that the agreement had been varied by JLT's 29 September letter such that Craven's employment ended on 1 January 2017. The letter was not an offer; it was not an "expression of willingness to contract on specified terms". C did not accept that 'offer' by continuing to work under the agreement. The parties conduct was "explicable by their existing rights and obligations".

The court went on to hold that the Bonus Advance was repayable as employment came to an end on 31 December 2016 such that JLT were entitled to summary judgment. It declined to decide whether "resign" meant the act of resignation or the date the resignation takes effect. It also avoided the question of whether the repayment obligation was a penalty clause, presumably because Craven did not pursue that argument before.

Thanks to David Leslie of Lyons Davidson for preparing this case summary.