Blackadders LLP
Search
Close this search box.

Latest news

Say what you mean: restricting contractual benefits and the contract of employment

June 14, 2024

The recent case of Adekoya v Heathrow Express Operating Co Ltd [2024] EAT 72 provides an important reminder to employers to make sure that the terms of individual employment contracts reflect exactly how entitlement to that benefit will operate in practice.

Background

Mr Adekoya and his colleagues were employed by Heathrow Express Operating Co Ltd (“Heathrow Express”), who operate the Heathrow Express train service. Heathrow Express is a member of the Association of Train Operating Companies (ATOC) (now the Rail Delivery Group (RDG)). Membership of ATOC provided certain benefits which could be made available to employees, one of which was the provision of discounted rail travel on other ATOC members’ services.

One of the benefits Mr Adekoya and his colleagues were entitled to receive under the ATOC scheme was a 75% discount on leisure rail travel. The discount travel scheme was operated by Rail Staff Travel Ltd (RST).

The claimants’ contracts of employment did not contain an express clause providing for this benefit or for any of the other benefits ATOC membership provided. However, as part of its induction pack for new employees, Heathrow Express issued a document (the ATOC document) which included Heathrow Express branding listing all the ATOC benefits that staff could benefit from. This document of itself did not outline any limitation on the availability of these benefits, indicate they were provided at the discretion of Heathrow Express or include any ability for Heathrow Express to withdraw the ATOC benefits.

The ATOC document stated that staff who retired or were made redundant with five or more years’ service were eligible to retain the travel benefit after the termination of their employment.

Completely independent of the contract, ATOC document and other information provided by Heathrow Express to its staff, was an agreement in place between it and RST which allowed RST to withdraw the travel benefits it provided at any time. In May 2019, RST indicated it would only continue to provide the 75% discount on leisure travel to former employees of Heathrow Express who had the required 5+ years’ service and (of new) where those staff had commenced employment with Heathrow Express on or before 31st March 1996. These would be deemed “safe guarded staff”. Employees whose employment only commenced on or after 1st April 1996 would no longer be entitled to this benefit following on from the termination of their employment (“non-safeguarded staff”).

The claim

Mr Adekoya and the other claimants volunteered and were accepted for redundancy in 2020. All of the claimants in the case had 5+ years’ service but all commenced employment with Heathrow Express after 1st April 1996. As such, they were non-safeguarded staff. In confirming the arrangements that would apply to their redundancy, Heathrow Express advised the claimants that they would be losing their entitlement to the 75% discount on leisure rail travel.

As a result of Heathrow Express not providing this benefit, claims of breach of contract were raised by Mr Adekoya and his former colleagues.

The tribunal’s decision

The key matters that the tribunal had to determine were whether:

  1. the claimants had a contractual right to receive the benefits provided for in the ATOC document and,
  2. if so, did Heathrow Express have the contract right to withdraw that scheme pursuant to the RST amending the scope of the benefit and removing this from non-safeguarded staff.

At the Employment Tribunal, it was found that the ATOC document was sufficient enough in its terms to amount to a document whose terms ought to be incorporated into the employees contracts of employment. As such, it conferred real contractual rights on the claimants. However, the tribunal also proceeded to state that Heathrow Express’s agreement with RST which saw the 75% rail discount removed from non-safeguarded staff was also part of the claimants contracts and, as such, when RST advised Heathrow Express of this change, this acted to modify the claimants contracts and remove the benefit from them as they did not meet the new qualifying conditions.

The claimants appealed against the finding that the RST agreement was incorporated into their contracts and, as such, when the RST withdrew the benefit in May 2019, Heathrow Express could rely on that to cease to provide the benefit to Mr Adekoya and his colleagues.

The EAT noted that it is in principle possible for a contract of employment to provide that the provision of a benefit, which is dependent on the support of a third-party provider for the continuation of that provision on current terms, is contingent on the benefit itself continuing to be supported by the third-party provider in the same way. However, for this to apply, the contract of employment itself must expressly allow for it.

However, in this case the claimants were not party to the RST/ Heathrow Express agreement and reference was not made to it in the claimants’ contracts or the ATOC Agreement. The claimants had not been provided with a copy of it and did not know of its existence. As such, it could not be said that the right of withdrawal was a term incorporated into the claimants’ contracts and Heathrow Express had no contractual entitlement to simply disapply the scheme in reliance on the RST withdrawing this in May 2019.

What can we learn from this decision?

The key message from this case is that when providing for benefits in a contract of employment, care and attention must be paid to the wording used to ensure that the extent and limitations of when any benefit would fall due are clearly set out. It will rarely (if ever) be possible for an employer to rely on some other document or contract relating to a 3rd party as justification to remove or limit a benefit if it is not referred to the in the contract of employment or the employee has not been notified clearly that this will apply to them.

While Mr Adekoya’s claim related to a travel benefit and that may seem a fairly niche point, the principles applied in the case would apply equally to any benefit which amounts to a contractual right, including:

  • Private medical insurance
  • Permanent health insurance
  • Income protection
  • Company car

To avoid claims for breach of contract, employers that provide contractual benefits with the support of a third-party provider should ensure that there is unambiguous and express communication to employees of the limits of the employer’s commitment to provide that benefit by reference to what has been agreed with the third-party provider.

If you have any questions on this or on any other area of Employment law, please get in touch with the Blackadders Employment team, working in Aberdeen, Dundee, Edinburgh, Glasgow and across Scotland.

The opinions expressed in this site are of the author(s) only and do not necessarily represent the opinions of Blackadders LLP.

Copyright

Privacy statement

Make an enquiry

Blackadders LLP will use this information to deal with your enquiry. Our Privacy Policy explains how we take care of your information.

Request a call back

Blackadders LLP will use this information to deal with your enquiry. Our Privacy Policy explains how we take care of your information.

Website search

Register for updates

Blackadders LLP will use this information to deal with your enquiry. Our Privacy Policy explains how we take care of your information.

Request a home report for

Say what you mean: restricting contractual benefits and the contract of employment

Blackadders LLP will use this information to deal with your enquiry. Our Privacy Policy explains how we take care of your information.

Request a viewing for

Say what you mean: restricting contractual benefits and the contract of employment

Blackadders LLP will use this information to deal with your enquiry. Our Privacy Policy explains how we take care of your information.