In the recent case of Wollermann v Fortrend Securities Pty Ltd [2025] FCA 103 the Federal Court found that two former employees classified as  “bad leavers” were still entitled to receive their deferred STI payments.

The case involved former employees of Fortrend Securities who challenged the company’s decision to withhold deferred bonus payments. They argued that this contravened the Fair Work Act which requires employers to pay employees the full amount owed to them for the performance of their work, including bonuses.

The employment contracts included provisions that bonuses would be paid in two equal tranches with the second tranche to be paid six months after the first. The contracts also included a clause that employees would forfeit the deferred element if they resigned or were terminated.

The relevant wording in the contract is set out below:

“ b) … For example, if you are entitled for a bonus of USD1,000 for the month of January, an equivalent of USD500 in Australian Dollars will be paid to you on the fifteenth of February and the remaining on the fifteenth of August after a period of six months.

“ c) If you resign or if your employment is terminated, you will not be entitled to receive the unpaid bonus.”

Fortrend argued that the deferred element was not due until after the seven-month period and would be forfeited if the employee was terminated before payment. This is a typical deferred incentive policy stated in various plan rules and offer documentation.

However, in the Wollermann case the court ruled that the contract clearly outlined when the incentive “will be paid”. That is, once the performance conditions were met, the bonus became payable regardless of termination. The court ruled that any contractual provision allowing an employer to withhold or forfeit a payment already earned is prohibited by the Act and, therefore, invalid.

What is the remedy?

This case highlights the need for boards to ensure their incentive documentation (being incentive plan rules, offer letters, employment contracts and executive service agreements) are carefully drafted to reflect the board’s intentions. This will usually be that payments can only be made once the vesting conditions for the deferred component have been met.

Boards will want to prevent unintended consequences and leave no room for misinterpretation.  The correct incentive plan documentation wording is critical.

For the full case see HERE.

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