Offer letters and Employee benefits: be careful what you write!

Posted Friday 3rd September 2021

In a recent case, the employment tribunal decided that a summary of the documents provided to the employee at the start of his employment, including a ‘summary of benefits’, was that the scheme was a contractual entitlement.

In Amdocs Systems Group Ltd v Langton, the employee was entitled to an ‘escalator’ of 5% per annum on the payments that he received under a long-term sickness scheme, even though it ceased to be covered by the employer’s insurance policy before the employee began to receive payments.

The employee had received an offer letter way back in 2003 with a summary of benefits and a contract. The offer letter and the summary of benefits gave details of income protection payments (IPP) payable under a long-term sickness scheme. An employment tribunal upheld the claim for a 5 % ‘escalator, finding that the offer letter, the summary of benefits and the contract together conferred a contractual entitlement to the escalator.

Employers need to be aware that if there is any ambiguity or uncertainty as to whether the employer’s obligation to provide benefits is to be limited by reference to the specific terms of the employer’s insurance cover, any such ambiguity will be resolved in favour of the employee. To be effective, the limitation of the employer’s exposure must be unambiguously and expressly communicated to the employee, so that there can be no doubt about it.

In this case the summary of benefits had contractual effect. The language used in the summary repeated, unambiguously, the headline terms that appeared in the offer letter and set out precisely the terms of the escalator, including when it would kick in, the annual increase amount, and how long it would continue to apply. If the employer wanted to rely on a term in an insurance policy as qualifying, or cutting back on, the entitlements set out in the documents, then further steps would need to have been taken by the employer to bring those particular terms to the claimant’s attention. The employment tribunal had found that the claimant had not been given, nor been given ready access to, the insurance policy terms, or any other document setting out the specifics of what those terms were. If the intention were that those terms could be replaced by less favourable terms of a replacement policy then explicit language to that effect would need to have been included.

This serves as a warning to employers to check what they say about insurance, in offer letters and in contracts. In the case above, the term had survived a business transfer.  It is also a point for thorough due diligence for employers acquiring employees in a sale or merger.

This article is for reference purposes only. It does not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking or deciding not to take any action.

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