Jamaica Bank Staff Win Profit Share Claim

A hotly contested dispute about staff entitlement to a share in profits at one of Jamaica’s largest banks reached its conclusion with a Privy Council decision in December 2023. The Council found in favour of the staff association in a judgment that has significant ramifications for the bank employees and the local community.

From a legal perspective the ruling provides a clear analysis of the way courts interpret employment and other contracts in high profile disputes like this. While the facts of the case are highly technical, centring on taxation and accounting theories as well as complex corporate transactions, the discussion of general contractual principles in a Jamaican context provides a useful guide for employees and employers alike who might be facing disputes over their employment contracts.

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What Was The Dispute Between The Bank And Its Staff About?

As far back as 1980 the National Commercial Bank Jamaica Ltd. (NCB) introduced a staff incentive for those employees represented by the NCB Staff Association. The key term of the profit share was as follows:

“the maximum annual amount to be distributed shall be 6% of the consolidated profits before tax, as agreed by the Auditors before making allowance for the payments under the scheme…as shown in the audited accounts of the immediately preceding year”.

The case between NCB and its staff association related to profit sharing for the year ending September 2002. NCB informed its staff that based on computations done by Auditors (calculated in accordance with the term we’ve highlighted above), no profit-sharing was payable. Despite high profits the NCB indicated that an amount paid to ‘minority interests’ meant that the sum available for distribution to staff by way of profit share fell below the threshold at which the scheme would kick in.

Crucially, if the amount paid to the minority interests had not been paid there would have been a healthy profit share that year. (For 2002 profit before taxation and extraordinary items was just over $2.2 billion.)

In the Supreme Court a clear finding in favour of the bank staff was made:

• The profit scheme formed part of the employees’ contracts of employment
• The deduction made by the Auditors was not consistent with the way the operation of the scheme had been communicated to staff
• A profit-sharing payment was due to staff for year ending 30 September 2002

The Bank appealed to the Court of Appeal where it lost again before taking the matter to the Privy Council.

The Privy Council And Contact Interpretation

When it came to the hearing before the Privy Council the bank didn’t contest the previous finding that the profit share scheme was part of the staff employment contract. It did however argue that the specific term ‘consolidated profit’ contained in the profit share scheme contract had been wrongly interpreted. After lengthy legal argument about the meaning of this term and a detailed discussion on the correct way to interpret contracts like this the decision again came down on the side of the bank staff.

It’s worth looking at the principles the court applied when interpret the profit share contract. The Privy Council made clear:

• It’s the court’s job to find the objective meaning of the language the parties to the contract have used to express their agreement
• When finding the objective meaning the court looks at the factual background known to the parties at or before the date of the contract
• Sometimes more than one meaning might be possible. When this happens the courts should opt for the meaning which is more consistent with business common sense
• Just because the contractual arrangement has proven to be a bad bargain for one of the parties doesn’t mean the court should stray from interpreting the words in a natural way
• The weight to be attached to the precise words used in the contract will vary depending on whether skilled professionals have been involved in creating the contract
• Even where there has been a process of sophisticated professional drafting, the court must consider the possibility that the text of a provision might either be a commercially necessary compromise between parties with conflicting aims or alternatively there could be a failure of communication between the parties. Where there is a failure of communication courts will look at the factual background to the contract and consider how similar provisions in contracts of the same type operate in practice

Why did court find in favour of staff?

These general principles are a useful guide to contract interpretation. Applying them to the NCB case we think the fact that the documentation setting out the scheme was the product of detailed negotiation between NCB officials and the staff association’s officers since at least 1977 was fundamental to the staff’s success. It became clear during proceedings that the people involved in the process included bankers and professionals who were familiar with the presentation of the NCB accounts and general accountancy practices. In addition the documentation was reviewed and approved by the Board of the Bank

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