New Zealand Law
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If this is a term of the contract it should be enforceable, but the discretion clause may be the factor against this. No doubt this why they have included the clause, no use as an escape when they don't want to pay. I am not aware of any specific cases on this type of clause, but there is a balance between the duty to treat employees with good faith and the right to use the discretion. You have nothing to lose by claiming a personal grievance to at least the mediation stage, so I suggest you tell them you intend doing so, and does this change their position. You could then decide if you want to spend the time on a mediation, and at a mediation, get a sense of the strength of their case, at relatively low cost.
Good faith in this context means they must treat you fairly and evenly compared with other employees. If there wasnt the discretion clause you would have a strong case. Mediation is useful because if they refuse to settle, then you dont have to take this further and they cannot seek costs against you. But often they will make offers to make you go away.