Breach of contract for lack of incorporation of terms

This benefit was supplied to the Respondent under a separate agreement with a third party; called the Association of Train Operating Companies agreement (ATOC Agreement). The ATOC Agreement stated that additional lifelong travel benefits would be provided in the event that the Claimants were made redundant after obtaining five years’ or more of continuous employment, and these benefits would be provided by the ATOC. The ATOC later agreed with the Respondent that they would no longer supply the latter of these benefits for the Claimant, however the Respondent did not inform the Claimants of this at the time. The Claimants, all of whom had been eligible for the benefit, were offered voluntary redundancy, which they accepted.

Following their redundancy, the Respondent refused to honour the benefits, as they had been withdrawn by the ATOC, and the Claimants claimed breach of contract. The Employment Tribunal (ET) initially found that the ATOC Agreement formed part of the Claimants’ employment contract with the Respondent and held that the Reciprocal Agreement between the Respondent and the third party offering the benefits was also incorporated. The Reciprocal Agreement provided the third party with the right to withdraw the benefit. The tribunal held that this agreement also gave the Respondent the right to remove the benefits from the Claimants.

However, upon review of the matter, the EAT disagreed with the ET’s conclusion on the basis that the Claimants had no idea about the existence of the Reciprocal Agreement, and there was no mention of it in their contracts or in the ATOC Agreement. The EAT therefore determined that the terms could not be considered to be incorporated into the Claimants’ contracts and could not be relied upon to remove the travel benefit.

This case highlights the importance of ensuring that employers are open and transparent with employees, and that they ensure that their employees are kept up to date with developments to their contracts and associated benefits, as they occur.

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