Changing Employment Terms - Employment Contracts after Lacy

If you have read my last post on Written statement of terms of employment (with or without groans of despair at the Halloween references) you may be interested to know about the recent High Court decision in FW Farnsworth Limited and another v Lacy and others [2012] EWHC 2830.

Here the issue before the High Court was whether by his conduct an employee had implied acceptance of a new employment contract despite him not having signed or returned the contract to his employer.

Briefly, the facts were that after working for his employer for 6 years under a signed employment contract, Mr Lacy was promoted in 2009. He was sent a new contract that contained additional pension and health insurance benefits but also post-termination restrictions, something his previous contract did not contain. He did not sign the new contract. He did not raise any objections to it. He simply filed it away at the bottom of a desk draw. Having availed himself of the health insurance benefits, Mr Lacy later resigned to join a competitor company. His ex-employer sought to enforce the post-termination restrictions in the 2009 contract, which restricted Mr Lacy from working for a competitor and soliciting customers of his ex-employer for 6 months after he left.

The question for you and the Court is: was Mr Lacy bound by the post-termination restrictions in a contract he had not signed? Yes or no?

In making its decision the Court was mindful of the 3 main ways an employment contract can be changed, which are:

  1. With the express agreement of the employee (e.g. by the employee signing a new contract).
  1. Terminating employment and offering re-engagement under a new contract (a tactic not without risks).
  1. Unilaterally imposing the new contract and relying on the employee conduct to established implied agreement to it.

The Court was also mindful of the relevant test, being: is the employee conduct, by continuing to work, only referable to his having accepted the new terms imposed by the employer?

Returning to the question of whether Mr Lacy was bound, the Court said YES. It held him to the post-termination restrictions in the 2009 contract. The Court found that he had read the contract, failed to make any protest and that in applying for the health insurance benefits this was an unequivocal act referable only to his having accepted all the terms of the 2009 contract

An immediate lesson for any employee who is unhappy when their employer tries to change the terms of employment - make it clear that you do not accept the change and that you are working under protest.

An immediate lesson for any employer who asks an employee to sign a new contract make sure you get it signed. 

An interesting point in the above case is that Mr Lacy was only bound by the 2009 contract when he applied for the health insurance benefits, which was some time after he first received it, read it, failed to make any protest and put it in his bottom draw. This is a spooky thought, which tenuous link allows us to refer you back to my blog post Written statement of terms of employment.

If you are an employer or an employee and would like to talk about changing employment terms or post-termination restriction please contact the Emsleys Employment Team on 0113 232 1030 or email employment.law@emsleys.com.

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