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FL Memo Ltd © 2007

Employment  Memo 2007 Newsletter Issue 1

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Employment contract, variation and breach

Terms implied by common law

Mutual trust and confidence

See EM:  ¶1245

Baldwin v Brighton and Hove Council [2007] IRLR 232, EAT

With regard to the duty of mutual trust and confidence, EAT has confirmed that the employer must refrain from conduct “calculated or likely to destroy or seriously damage the relationship of trust and confidence” (see ¶1245 especially Woods v WM Car Services (Peterborough) Ltd). 

Comment: The EAT held that cases which had suggested that an employer was required to refrain from conduct “calculated and likely to destroy or seriously damage the relationship of trust and confidence” (i.e.  cases which imply a two-stage test due to the first “and”) were incorrect.

Unenforceable terms

Unfair Contract Terms Act 1977 (UCTA)

See EM:  ¶¶1340+

Commerzbank AG v Keen [2007] IRLR 132, CA

Where a person deals as a consumer or on the other party’s written standard terms of business, terms excluding or restricting liability for contractual breaches or entitling the seller to perform his contractual obligations in a substantially different way than that reasonably expected of him (or to give no contractual performance at all) are subject to the test of reasonableness (s 3 UCTA 1977).  The Court of Appeal has held that UCTA does not apply to a contract term regarding an employee’s remuneration and considered that previous cases on application of UCTA to employment contracts were not entirely satisfactory and not binding.  The Court firmly held that an employee does not deal as a consumer with his employer in respect of pay for work. 

The Court of Appeal went on to hold that neither does the employee deal with his employer on his employer’s written standard terms of business.  In this case the employer’s business was banking and employee bonus terms could not be said to be standard terms of the business of banking, they were terms of remuneration of certain employees of the bank. 

Comment: Following this decision it is extremely unlikely that UCTA will apply in relation to any aspect of an employee’s contract of employment.  Only if, under the contract of employment, the employer supplies services or goods to the employee for his use, then the employee to whom they are supplied for his consumption could be reasonably be regarded as a consumer of the goods or services supplied and consequently be protected by UCTA.

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