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Imposition of new terms was a dismissal

Posted on 16th February 2009
HR practice

Employers should be very careful in how they express themselves in correspondence to employees in which they try to obtain their consent to a change in terms and conditions of employment.

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they had been dismissed immediately before being re-engaged on new less favourable terms

Darby v The Law Society of England and Wales

Background

The claimants, Mr Darby and Ms Still, were senior employees of the Law Society. As senior employees they had the benefit of each being provided with a leased car by the Law Society. In 2006 the Law Society tried to remove this benefit (which the employment tribunal later found was a contractual benefit) by making a number of attempts to obtain the employees' agreement to new terms of employment which excluded the provision of a leased car.

On 31 January 2006 the Law Society wrote to the claimants and informed them that up until the end of 2008 they could either keep their leased cars or alternatively take a cash allowance. The letter stated that after 2008 their entitlement to either would cease. This was followed up with a letter enclosing new terms and conditions of employment to take effect from 1 May 2006, which repeated the two options of keeping the car or taking a cash allowance. On 10 May 2006 the claimants both reluctantly signed up to the new terms. They subsequently brought unfair dismissal claims in the employment tribunal.

The employment tribunal found that the claimants had not been dismissed because their employment contracts had been varied by their acceptance of the new terms, rather than being terminated. The claimants appealed the tribunal's decision.

The decision

The EAT held that Mr Darby and Ms Still had been dismissed and upheld their appeal. It found that they had been dismissed immediately before being re-engaged on new less favourable terms on 10 May 2006.

The EAT considered the employer's intentions to have been clear, being that if the employees did not accept the new terms before the expiry of the deadline imposed in its correspondence their dismissals would take effect without re-engagement. This was largely due to the use of the word 're-engagement' in the employer's letter, which the EAT held could only be interpreted to mean the termination of the contract followed by entering into a new contract. Under section 95(1)(a) Employment Rights Act 1996 the termination of a contract of employment by an employer constitutes a dismissal.

The EAT made its decision based on how the Law Society's correspondence would be understood by a 'reasonable' recipient and it maintained that such a reasonable recipient would find the message contained in the correspondence to be clear: either accept the new terms by the deadline (being midday on 10 May 2006) or do not accept them, but if they are not accepted by the deadline the effect would be for the employees to be dismissed without being re-engaged.

The case will now be remitted back to the employment tribunal to consider whether the dismissals were fair and to determine whether the unfair dismissal claims will succeed.

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