At a glance
- The Court of Appeal (Court) ruled that an employer was bound by a bonus agreement that the employee had entered into with a head of a department.
- The Court found that the employee could reasonably believe that the head of department was authorised to enter into this agreement on behalf of the employer.
- The court also emphasised that the employer had not issued any instructions or guidelines clarifying the authority of the head of department.
The Court considered whether an employer was obligated by a bonus agreement which was established by the head of a department with an employee. The employer argued that the agreement was null and void as the head of department did not have sufficient authority to bind the employer to such an agreement.
However, the Court ruled in favor of the employee, concluding that the employee had a reasonable expectation that the department head was authorised to make such arrangements, and that the employee had acted in good faith.
In its assessment, the Court also emphasised that the employer had failed to provide any instructions or guidelines that clarified the department head’s authority, consequently misleading the employee.
Takeaways for Employers
Employers cannot rely on bonus agreements being invalid if they are made with employees by unauthorised individuals. The deciding factor should instead be whether the employee can trust that the person is authorised to conclude such an agreement. This assessment will therefore depend on the facts of each individual case.
It is essential that the competencies of senior staff members- such as departmental heads - is clear to employees, to prevent claims arising from agreements that the employer did not intend to enter into.
