Veitch Penny LLP - Exeter | Crediton, Devon

Case

Brand v Compro Computer Services Limited
Court of Appeal (16th February 2004)

Issues

(1) Contracts of Employment
(2) Termination
(3) Commission

Facts

Nicholas Brand was employed by Compro as a Sales Consultant. His Contract made reference to a commission scheme based on the achievement of sales targets. Commission was earned by the employee and would become payable when timesheets were submitted. The commission was calculated at the end of the same month and then paid in the payroll at the end of the following month. The Contract stated that “the plan assumes that you remain in full-time employment with Compro at all times in order to qualify for the commission payments”.

Brand was made redundant as of 26th July 2001. He was told that he would be paid up to that date plus one month’s salary as payment in lieu of notice. He was told that he would not get any commission because he needed to be employed by the Company to qualify.

Brand made a complaint to the Tribunal for unfair dismissal, outstanding holiday pay and breach of contract including a claim for outstanding commission for June and July (due to be paid at the end of July and August respectively) and for loss of the opportunity to earn commission for August (which would be payable in September).

At first instance, the Employment Tribunal held that no commission was payable to Mr Brand. As far as the Tribunal was concerned, the Contract was clear as to how the scheme worked and Mr Brand needed to be employed to qualify.

The Employment Appeal Tribunal dismissed Mr Brand’s appeal. He then appealed to the Court of Appeal.

Decision

The Court of Appeal allowed Mr Brand’s appeal. It re-considered the wording of the clause and found that it was far too harsh upon the employee. It found that the clause included no clear words which made it plain that any accrued entitlement to commission was dependent on employment on the date upon which the commission would be paid (as opposed to when it was actually “earned”).

The Court of Appeal noted that such a harsh result was inconsistent with the purpose of the scheme which was to award the employee for achievement of targets set for him by the employers. It would mean that employers would always seek to terminate the Contract of Employment shortly before the commission payment date at the end of the month.

Comments

At first sight, this case appears to contradict the case of Peninsula –v- Sweeney where the Employment Appeal Tribunal upheld a term which provided that if an employee left work he would not be paid any commission due but not yet payable. However, it should be noted that in the Peninsula case, the terms of the Employment Contract clearly stated when the payment of commission crystallised and that such payment was conditional on employment on that date. In this case, those clear terms were absent and the Court made a finding that the right to payment crystallised when the commissions had been calculated and, on the facts of the case, they had been calculated before Mr Brand’s employment was terminated.

Rachel Bickle – Associate Solicitor, Commercial Department at Veitch Penny.
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