High Court rules benefit take up seals employment contract

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

The High Court ruled that if an employee uses a benefit, which is offered under their contract, it is implied that they have accepted that contract and are 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 convenants 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.

Subsequently, he chose to leave the company to work for a competitor, which the company wished to prevent 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. 

Charissa Upton, senior associate at law firm Charles Russell, said that employers should still ensure contracts are signed by employees to ensure there is no confusion on both the part of the employee and employer.

She added: “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 are 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.” 

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