Employer penalised for putting too much detail in its employment contracts
There is a fine line between including enough detail in your employment contracts and including too much.
As an employer, you will likely want to have everything written down in one place, not only for the benefit of your employees, but for your own ease of reference as well.
The difficulty with this is that the more detail you put in your contracts, the more you will be contractually obliged to give to your employees.
A practical example
This is neatly demonstrated in a recent Court of Appeal case, Amdocs Systems Group Ltd v. Langston [2022] EWCA Civ 1027.
In this case, the employee had been presented with a “summary of benefits” attached to an offer letter for his role, and an employment contract, which all referred to a salary protection plan (a.k.a. an income protection scheme) to differing degrees.
In a nutshell, if the employee was away from work on long-term sickness absence, he would be paid his income protection benefits for 52 weeks. Those benefits would then increase in value by 5% each year, representing inflation, until the employee returned to work.
The existence and continuation of this benefit and the percentage increase had been confirmed numerous times in the following years and had even survived a contractual restructure.
When the employee went ill in late 2009, his income protection benefits started to be paid, but these were not increased by 5% each year, despite what was set out in writing in the summary of benefits attached to the offer letter.
The employer claimed that the incremental increase of 5% had been lawfully withdrawn in 2008, before the employee had applied to take those benefits. The employer attempted to rely on a clause in its Employee Handbook, which set out that it “may from time to time change the benefit provider and vary or amend the extent of the cover or the basis on which it is provided”. However, there was no corresponding wording to this effect in the summary of benefits attached to the offer letter or in the employment contract, which were the documents that really counted when it came to interpreting the contract between the employer and the employee.
It was therefore found that the employer had to pay the value of the 5% increment to the employee going back over a period of two years before he had brought his claim.
What can you do?
So, what is the solution for an employer?
Firstly, if you are drafting an employment contract and you want to make it the most complete document you can, ask yourself this simple question: why?
If you are making a short-term promise or a promise that cannot be kept in your employment contracts, the likelihood is that you will be compelled to meet that promise. Therefore, if you want flexibility in your arrangements with your employees, it is best to look outside of your contractual paperwork.
For example, one thing that was highlighted in the Amdocs Systems case was the importance of employee handbooks and, alongside having one, keeping it in a place where employees know how and where to find it.
If you are writing things in your contracts that you might want to update regularly (or at least more frequently than you would ideally like to be updating your contracts), you might want to consider starting or adapting your employee handbook or staff handbook.
Secondly, if you want more control over the contents your contracts, you need to be clear in them.
Before the Court of Appeal heard the Amdocs Systems case, the Employment Appeal Tribunal had held (and the Court of Appeal later agreed) that limiting an employer’s commitments in their employment contracts must be clearly and directly communicated to the affected employees. If this is not done, the contract will be interpreted in favour of the employee and against the employer.
Therefore, employers can very easily find themselves in tricky situations, even if the original intention behind what they wrote in their contracts was well-meaning.
Next step
If you are concerned that your employment contracts might be landing you in trouble, contact us to learn more about our Fixed Fee Employment Contract Review.
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