The High Court has ruled against an employee who sued JP Morgan Chase for USD$3.5m in alleged lost incentive compensation. It is the first case to look at the bonus-decision process after guidelines were issued by the Court of Appeal last year.
Daniel Ridgway, a former options trader for the investment bank, took an unpaid sabbatical for the majority of the 2003 trading year. When he returned, his previous role was unavailable, so Ridgway was instead offered a range of alternative roles, none of which he deemed suitable.
After failing to reach an agreement with JP Morgan Chase, Ridgway resigned and claimed constructive dismissal. He then pursued a claim for compensation for the unvested stock options that he lost as a result of resigning, and compensation for the nil bonus he received for the year he spent mainly on sabbatical.
The High Court rejected all of Ridgway's claims, stating that he had forfeited his stock options by refusing to return to work despite being offered alternative roles within the organisation.
It also ruled that the company had followed a fair bonus assessment process and was entitled to award Ridgway a nil bonus after taking his personal circumstances into account.
Jonathan Exten-Wright, a partner at law firm DLA Piper, said: "It means City employees beware, because this is a high hurdle to overcome."
However, he added employers would be unwise to believe they could get away with awarding nil bonuses too often, and instead should examine each situation, taking it on a case-by-case basis.
"Employers should definitely take some comfort from this case, but they shouldn't drop their guard," he said.