Employers will welcome a recent Court of Appeal ruling, which confirms that the Unfair Contract Terms Act 1977 (the 1977 Act) does not apply to contracts of employment.
The court heard the case of a former bank employee whose employment contract stated that he was entitled to bonuses, but such a bonus would not be payable if, on the date of payment of the bonus,
he was not employed by the bank. The employee argued that the contract term requiring him to be employed as at the date the bonus was paid should be struck out for unreasonableness, by virtue of the 1977 Act. This Act applies if a business is dealing with a person 'as a consumer'.
However, in the court's view, it was not appropriate to say that an employee dealt as a consumer with his employer in respect of payment to him for his work, whether by regular salary payments or by additional pay in the form of an annual bonus. Accordingly, the Act did not apply, and the employee's claim failed.
This case reinforces the need for businesses to include clear and straightforward terms in their contracts of employment, as the wording will be taken into account by the court in the event of a dispute.
The court heard the case of a former bank employee whose employment contract stated that he was entitled to bonuses, but such a bonus would not be payable if, on the date of payment of the bonus,
he was not employed by the bank. The employee argued that the contract term requiring him to be employed as at the date the bonus was paid should be struck out for unreasonableness, by virtue of the 1977 Act. This Act applies if a business is dealing with a person 'as a consumer'.
However, in the court's view, it was not appropriate to say that an employee dealt as a consumer with his employer in respect of payment to him for his work, whether by regular salary payments or by additional pay in the form of an annual bonus. Accordingly, the Act did not apply, and the employee's claim failed.
This case reinforces the need for businesses to include clear and straightforward terms in their contracts of employment, as the wording will be taken into account by the court in the event of a dispute.
Immediate
See the full text of the judgment on the BAILII website
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