How important is the wording of my employment contract?

In the recent New South Wales court case of Byrne v Macquire Group Services Australia Mr Byrne missed out on receiving his profit share bonus due to the wording of his contract.

Background

Mr Byrne began working for the Macquarie Bank in 2001. In 2005, he was promoted to a managerial position. His new remuneration package included a discretionary profit share bonus. The share bonus carried the condition:

If the employee ceases employment with Macquarie, any retained profit share allocation that has not vested to them will be forfeited

In July 2006, Mr Byrne was again promoted, this time to a senior management position in Macquarie’s Hong Kong offices. Although the position entitled Mr Byrne to greater remuneration, he did not enter a new employment contract and was advised that his attendance for work and the performance of his duties would be taken to indicate consent to the new arrangements.

After two years in the Hong Kong role, Mr Byrne’s employment was terminated. He expected to be paid out the profit shares Macquarie had retained from him over the years. However, Macquarie informed Mr Byrne that he would not be receiving the shares because it was the company’s policy that any retained share allocation that had not vested in the employee will be forfeited at the end of their employment.

Mr Byrne alleged that in order for any retained profit share allocation to be forfeited, the condition required the employee to terminate the employment.

Decision

Upon considering the dispute, the court agreed that there were several possible ways of interpreting the condition. The court considered the phrase “if the employee ceases employment with Macquarie” and concluded that it did not require the employee to terminate the employment. The court held that the ordinary meaning of the phrase referred to a state of affairs that might come about, not to who might bring it about. As a result, Mr Byrne was denied the payment.

Lesson

What is gain from Mr Byrne’s situation is that employment contracts need to be clearly worded so that all aspects are clearly known to all parties. At elringtons, we can assist you by drafting precise employment contracts.

For advice, please contact:

Matthew Bridger | e: mbridger@elringtons.com.au | p: 02 6206 1300 http://elringtons.com.au/wp-content/uploads/2011/07/Specialist-accreditaion.jpg