Court can decide amount of bonus where there has been an inequitable exercise of employer’s discretion.

The plaintiff worked in a major bank – the defendant – as Managing Director from January 2010 until the end of September 2012. It was agreed by contract that the plaintiff would participate in the bonus system and/or in a deferral plan. On the basis of this agreement, the plaintiff received an achievement bonus of 200,000 EUR for the business year 2009 as well as 9,920 EUR for the business year 2010. However, the plaintiff didn’t receive any bonus or payment under the deferral plan for 2011, but other employees did, even though the amounts paid were significantly lower when compared to what had been paid in the previous year. The plaintiff sought payment of a bonus for the business year 2011, asking for the level of bonus to be set by judicial assessment. However, the plaintiff indicated that he was seeking payment of at least 52,480 EUR. The Labor Court (Arbeitsgericht) awarded the plaintiff a bonus of 78,720 EUR. On appeal, the State Labor Court (Landesarbeitsgericht) dismissed the claim on the grounds that the plaintiff had not provided sufficient evidence to enable a judicial assessment. The plaintiff’s appeal before the Federal Labor Court (Bundesarbeitsgericht) was successful.
The Federal Labour Court (Bundesarbeitsgericht) decided on 03 August 2016 (10 AZR 710/14) if an employer reserves by contract a right to decide on the amount of bonus entitlement at its reasonable discretion, such a decision can be subject to full judicial review. If the bonus decision does not demonstrate a reasonable exercise of discretion, it is non-binding. Then the amount of bonus may be settled by the court on basis of the factual information submitted by the parties. In such cases, there is no burden of proof in the procedural sense. It should not prejudice the employee if an employer who is entitled to fix the bonus level does not provide evidence on certain matters. The bonus will be settled by the court on the basis of the information which is on record, such as the amount of the bonus paid in previous years, economic indicators or the result of a performance assessment. A judicial decision on the amount of bonus would only not be possible in an exception cases where there was no evidence available on any of these matters. However, this was not a case where such an exception would apply. The case was referred back to the State Labor Court (Landesarbeitsgericht) for the determination of the bonus amount.