Bonuses and Settlement Agreements.

Whenever a settlement agreement is offered, there could well be a need to consider any employee bonus entitlement. The following case highlights how bonus entitlements can sometimes be a significant factor.

The case of Marcel Seip v Blackpool Football Club (FC) highlights the importance of certainty of terms in any employee contract.

Footballer, Marcel Seip was awarded over £72,000 in a breach of contract action against Blackpool Football Club after he was not paid a bonus due when the club secured promotion to the Football Association Premier League. Seip, who was on loan from Plymouth Argyle at the time, had been excluded from distribution of the £5.15 million promotion bonus pot by the club’s ‘bonus panel’, who discounted loan players who had left the club at the end of the 2009/10 season.

Bonus schedule and interpretation

The distribution of a central bonus pot amongst the team is common in professional sport, especially football. For example, on a promotion or a cup victory, a bonus pot may be awarded under the contract, with a panel appointed to decide how to divide the bonus monies. These bonuses can extend to millions of pounds and it is important that the contract terms allow the club to distribute the bonus as it intended.

The interpretation of the contract terms is an objective test; the question is not what one or another of the parties meant or understood by the words used, but the meaning which the contract terms would convey to a reasonable person having all the background knowledge (which would reasonably be available to the parties at the time of the contract).

It would therefore be irrelevant if the parties held a differing view of what the bonus entitlement means on the pitch - if a reasonable bystander would conclude the player is entitled to a bonus on the contract terms - that bonus will be payable.

Any ambiguity will be construed against the club (or employer) seeking to rely on the contract terms to deny a player a bonus entitlement.

Entitlement to bonuses should always be checked before any settlement agreement is accepted.

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