Bonus Discretion Post-Braganz

Saturday, June 17th 2017

Posted By: Cindy Mahoney

The manager who decided that the benefits should not be payable relied upon a report that had been prepared to investigate the incident for the purpose of recommending improvements to BP’s systems.

That report concluded that suicide was a possible reason for the disappearance but that adverse weather conditions could also have been responsible. The wodow’s claim for breach of contract succeeded at first instance but was reversed by the Court of Appeal. The supreme court allowed the appeal and reinstated the original decision that the death in service benefits were payable.

The Supreme Court’s decision was significant because it carried public law concepts regarding the scrutiny if administrative decisions into the employment area. It held that there is an Implied term in employment contracts that a contractual discretion must be exercised lawfully and rationally “in the public law sense” and consistently with its contratual purpose.

The full implications of the Supreme Court’s dcision have yet to be larified. However, there have already been two cases in which claimants have introduced.

The rational exercise of discretion involves the application of two principles: (i) the decision-maker muse take into account relevant factors and ignore irrelevant factors, and (ii) the decision must not be so outrageous that no reasonable decision maker could have come to that conclusion.

cases concerning the exercise of an employer’s discretion in respect of discretionary bonus payments have tended to focus on the outcome rather than the process, with employees arguing that the decision itself is so unreasonable that no reasonable employer could have reached it.