The recent case of Adekoya v. Heathrow Express Operating Co Ltd [2024] EAT 72 has shone a light onto the complexities of providing third-party benefits and the need to ensure contractual clarity to minimise the risks of potential claims for breach of contract. Are your contracts sufficiently clear and what can we learn from Adekoya v. Heathrow Express?
Facts and background
The claimants were employees of Heathrow Express and were entitled to a discount on leisure rail travel as one of their benefits. This benefit was part of a scheme operated by Rail Staff Travel Ltd (RST) and was available to members of the Association of Train Operating Companies. This was clearly stated on the application form for the discount card. The claimants’ employment contracts did not explicitly reference the discounted travel benefit, but they received contract packs that set out the terms and conditions of the travel benefit. Employees who were made redundant with five or more years of service or those that retired could retain this benefit. A reciprocal agreement was in place between RST and Heathrow Express, which noted that the benefit could be withdrawn or amended.
RST subsequently issued a notice to Heathrow Express making a distinction between “safeguarded staff” and “non-safeguarded staff” regarding the eligibility of each for discounted travel benefits upon retirement or redundancy. Only safeguarded staff would retain this benefit. All the claimants in this case were non-safeguarded staff. A year later, they all volunteered for redundancy, ending their employment with more than five years’ service. The claimants brought a claim for breach of contract as they were now unable to use the rail discount benefit due to the change by RST.
The Employment Tribunal’s judgment
At the preliminary hearing, the Employment Tribunal (ET) addressed Heathrow Express’ defences, concluding that the claimants were not contractually entitled to discounted rail travel after termination because the notice had altered the terms to exclude the claimants. The ET also determined it lacked jurisdiction to hear the claims, as there was no outstanding breach at the date of termination. The claimants’ breach of contract claims were dismissed.
The appeal
The Employment Appeal Tribunal (EAT) allowed the appeal, finding that the ET had erred in holding that the reciprocal agreement was incorporated into the claimants’ employment contracts. The EAT determined that the claimants were not aware of the reciprocal agreement and had not agreed to its terms, which meant Heathrow Express could not rely on it to vary the claimants’ entitlement to the travel benefit. Consequently, the EAT upheld the claimants’ right to the travel benefit post-redundancy, as originally provided for in their contract packs.
Key takeaways
The need for unambiguous and explicit contractual terms is evident from this case. Employers should consider express limitations on benefits arranged through third parties to minimise the risks of breach of contract claims. For example, it may be helpful to expressly state in the benefits clause in each contract that any benefit scheme can be amended and withdrawn at any time. Language should reflect that the benefit is sourced from a third party to ensure that employees understand that it is subject to changes. In any case, it is key to communicate that changes to third-party agreements may affect the availability and terms of the benefit to all employees. Further, it is worth including wording in the contract which states that, should the third-party provider refuse, discontinue or vary the benefit, the employer will not be liable to deliver a replacement benefit of the same kind as originally provided. This can be helpful in setting realistic expectations for employees regarding the permanence and availability of a third-party benefit.
