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Contractual terms between employer and perk provider couldn’t be used to end perk for employees
Adrian Fryer
Employers often provide benefits to employees which are not directly administered by the employer themselves. They use third-party providers instead. Private Health Insurance and Company cars are good examples of this. The employer will state in the employment contract that the employee is entitled to the named benefit. The employer will then have a separate commercial agreement with the benefit provider which facilitates this. The employee will not be party to this agreement and will often be entirely unaware of it.
A recent Employment Appeal Tribunal case looked at whether the terms of a commercial agreement between an employer and a third-party benefit provider could have a direct impact on the employees themselves.
In Adekoya v Heathrow Express Operating Company, the Claimants were offered a discounted travel card when they started work for the Respondent. The card was issued under the Association of Train Operating Companies Agreement (ATOC Agreement). The ATOC Agreement stated that, if they were made redundant after five years or more, they would get lifelong travel benefits. The travel benefits were operated by the Rail Delivery Group, a third-party provider separate to the Respondent. The Rail Delivery Group had a separate Reciprocal Agreement with the Respondent giving them access to the travel benefits.
The Rail Delivery Group told the Respondent that they were no longer going to provide lifelong travel benefits to employees made redundant after five years. The Respondent did not inform the Claimants of this at the time. The Claimants (who all had over five years’ service) were all offered, and accepted, voluntary redundancy.
Following their redundancy, the Respondent refused to honour the lifelong travel benefits. The Claimants claimed breach of contract.
The tribunal, at first instance, found that the ATOC Agreement formed part of the Claimants’ employment contract with the Respondent. It also held that the Reciprocal Agreement between the Respondent and Rail Delivery Group was also incorporated – even though they were not a party to it. The Reciprocal Agreement included the right of Rail Delivery Group to withdraw the benefit. The tribunal held that this term also gave the Respondent the contractual right to remove the benefit from the Claimants.
The EAT disagreed with this conclusion. The Claimants did not know about the Reciprocal Agreement. It was not in their contracts or in the ATOC Agreement. Its terms were not, therefore, incorporated into the Claimants’ contracts and could not be relied upon to remove the travel benefit.