Employees taking any benefits offered out of an employment contract are bound by the contract rules high court

by duncan12 on November 6, 2012

  • SumoMe

For employees who take up a benefit offered specifically to a person in their position in the company, they will be held to the terms of their employment contract, even if they had not signed any formal contract.

The High Court ruled that if an employee were to use a benefit, which was offered under their contract, it was implied that they had given their acceptance to the employment contract and were bound by its terms.

The case involved FW Farnsworth, a subsidiary of Northern Foods, which took former employee Paul Lacy to court because it wanted to impose the post-termination restrictive covenants that appeared in his contract.

Lacy was promoted in 2009 and given a new contract, which included the provision of private medical insurance (PMI) for himself and his family, a benefit that was not available to him in his former role. He did not sign and return the contract to his employer.

When he chose to leave the company to work for a competitor, his company wished to prevent him by using the contract terms, but Lacy argued that he was not bound by the terms because he did not sign it.

However, Lacy had applied for the PMI for himself and his family. The judge concluded this showed an implied acceptance of the contract from the date of his application for PMI onwards.

An employment law solicitor, an expert from a employment law firm and an expert in employment related matters, suggested that employers should still ensure contracts were signed by employees to ensure there was no confusion on both the part of the employee and employer.

She added that although the employer’s argument around implied acceptance of the new terms was successful in this case, this should not be relied on by employers as a matter of course, because arguments such as this were notoriously difficult to win.

Employers would be much better off ensuring that they get the appropriate contractual documentation in place and get it signed by employees at the time the promotion takes effect, so that there can be no doubt as to the employee’s understanding and acceptance of the terms the employment lawyer said.

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