UK: Bonus decisions - Wednesbury unreasonableness test is relevant

Last year's Supreme Court ruling (see here) that employers may be required to consider all relevant factors and discount irrelevant ones (the public law concept of "Wednesbury unreasonableness") when reaching factual decisions (Braganza) opened up the possibility that this duty might apply to other employer decisions, such as whether an employee is a 'good leaver' or some types of bonus decision. This argument was attempted in the recent case of Patural v DB Services (UK) Ltd, where a banker sought to attack an employer's decision to award him a smaller bonus than two colleagues who were entitled to a guaranteed bonus.

On the facts the claim could not be substantiated, but it is of interest that the High Court accepted that Braganza has imported public law concepts into the law on employment contracts. Although the court did express caution about this development, noting that private employers do not necessarily have the same duties as public authorities to act in the public interest, this is unlikely to be the last we see of such arguments. Employers should consider carefully what factors are relevant to such decisions, in addition to ensuring that they act in good faith and that the decision itself is not capricious or irrational.