Wednesday 17 March 2004

Implied Terms - Financial Advice to Employees

Judgment was handed down yesterday by the Court of Appeal in Crossley v Faithful & Gould Holdings Ltd.

Mr Crossley was a senior executive who qualified for benefits under a long-term disability scheme. He decided to retire from the company on health grounds, not knowing that he had to remain employed to receive the LTDS benefits. His employer assisted him with the medical retirement process, including drafting letters for him, but failed to advise him that medical retirement would mean he lost the (substantial) benefits under the LTDS scheme and the insurer would be entitled to stop payment (which it did).

The High Court dismissed his claim, finding there was no implied term that the employer should warn him of the effect of resignation upon his LTDS.

The Court of Appeal dismissed the appeal (and, therefore, Mr Crossley's claim). Following the House of Lords decision in Scally v Southern Health & Social Services Board, and the more recent Hagen v ICI Chemicals, the Court held that there is no general obligation on an employer to exercise reasonable care for the employee's economic well-being save in very specific circumstances (as set out in Scally). The Court thought the decisive point was that Mr Crossley had access to his own financial advisor who could have explained the effect of resignation to him, had he asked.

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