Commentary

(b) The irrationality/perversity test

Division BI Pay
| Commentary

(b) The irrationality/perversity test

| Commentary

(b)     The irrationality/perversity test

As noted above, the courts have been prepared to exercise judicial oversight of discretionary bonus decisions through the use of implied terms. As a result of developing case law, it appears that when exercising a discretion with regard to a bonus payment the employer must not act in a manner which is irrational or perverse. Equally, it must not ignore factors that are relevant or take account of irrelevant considerations (see para [34.05] below). The irrationality/perversity test was identified some years ago by Burton J in Clark v Nomura International plc [2000] IRLR 766, QBD and was formulated in the following terms (see [40] of his judgment):

''My conclusion is that the right test is one of irrationality or perversity (of which caprice or capriciousness would be a good example) i.e. that no reasonable employer would have exercised his discretion in this way.''

The irrationality test was initially viewed as an aspect of (or certainly buttressed by) the implied term of trust and confidence and the obligation of 'fair dealing' referred to by Lord Steyn in Johnson v Unisys Ltd [2001] UKHL 13, [2001] IRLR 279. However it has echoes of the Wednesbury unreasonableness test in the public law field, whereby a court will not intervene to quash a public body's decision unless: (1) that body took into account irrelevant factors or failed to take into account

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