international employment law firm alliance L&E Global

Norway: Court of Appeal Ruling Regarding Bonus Agreement

The case concerned a department manager who entered into a bonus agreement with an employee on behalf of the employer. The employer maintained that the manager did not have the authority to enter into the agreement on behalf of the employer, thus rendering the bonus agreement invalid. The question for the Court was whether the manager possessed the required authorization to enter into a legally binding bonus agreement on behalf of the employer.

The crucial point for the Court of Appeal was whether the employee had indeed been given legitimate expectations that the manager had the authority to enter into the agreement. The Court noted that the manager was the employee’s direct superior and had played a central role in the hiring of the individual, in addition to conducting all salary negotiations with the employee. Furthermore, it was indicated in the employment contract that a final bonus agreement would be established subsequently. Contrasting this with the manager’s previous position as the managing director of an independent sales department within the company, where he held complete personnel responsibility, the Court concluded that the employee indeed held justified expectations regarding the manager’s authority to enter into the agreement.

In its assessment, the Court also emphasized that the employer had not prepared instructions or guidelines clarifying the authority of the department manager. Through the hiring process, coupled with the manager’s position as a superior, the employer clearly and unequivocally authorized him to act as the employee’s superior. Furthermore, there was no written documentation regarding the manager’s specific leadership competence, which could have clarified his authorities, thus providing both him and the employee with clarity regarding what may potentially fall outside his powers. Nonetheless, the Court noted that the consequence of such ambiguities in responsibilities represents a risk that the company is closest to bearing.