In Adekoya v Heathrow Express Operating Co Ltd, the EAT ruled that an employer could not rely on its agreement with the third-party provider of a 75% employee travel discount in order to withdraw that benefit from redundant employees.
As employees of Heathrow Express Operating Co Ltd, the claimants in this case were entitled to a 75% discount on leisure rail travel. This benefit was provided through their employer’s membership in the Association of Train Operating Companies (ATOC) and operated by a third party, Rail Staff Travel Ltd (RST). There was no reference to the benefit in the claimants’ contracts of employment, but the terms and conditions of the scheme were set out in a separate document provided to new joiners, which they were required to sign and date. Those terms stated that staff with five or more years’ service who retired or were made redundant were eligible to retain the benefit for life after termination. A separate agreement between Heathrow Express Operating Co Ltd and RST provided that the travel benefit could be withdrawn or curtailed in certain circumstances.
In 2019, Heathrow Express received notice from ATOC that from May 2019, only staff employed before 31 March 1996 who retired or were made redundant would retain the benefit of discounted travel after termination. This notice was not sent to employees.
All the claimants were dismissed on grounds of redundancy and were informed that since they had commenced employment after 31 March 1996, they would not retain their travel benefit after leaving. They brought claims for breach of contract in the Employment Tribunal.
A preliminary hearing was held to determine whether the claimants had a contractual entitlement to life-long discounted travel. The Tribunal concluded that both the travel discount scheme and the separate agreement between Heathrow Express and RST containing the withdrawal provisions were incorporated into their contracts of employment. The May 2019 notice was therefore a valid variation of the terms of the scheme, and the employees were not entitled to the continued benefit after their redundancy.
Allowing the employees’ appeal, the EAT has now ruled that the Tribunal could not properly have concluded from the evidence that the withdrawal provisions in the agreement between Heathrow Express and RST were incorporated into employees’ contracts of employment. Although employees were aware that their travel benefit was provided by a third party, this did not mean that the provider’s separate agreement with their employer was incorporated into their contracts. The claimants were not party to that agreement, had not been provided with a copy of it, and did not know of its existence. It followed that Heathrow Express could not rely on the withdrawal and curtailment provisions or the May 2019 notice, particularly as it had not been sent to the claimants. The claimants therefore had a contractual right to lifelong discounted travel after termination of employment, and Heathrow Express was in breach of contract when it varied this right.
This case has been remitted to the Employment Tribunal to decide other issues, including whether the claimants had compromised this right through a £750 payment received as part of their settlement agreements.
The EAT’s decision highlights the risk for employers of incurring continuing liability for payment of benefits due to insurers or other third parties varying or terminating their agreements. It is consistent with previous case law, which held that any ambiguity or uncertainty surrounding an employer’s obligation to provide benefits will be resolved in favour of employees. The limitations of any contractual benefits provided by third parties must therefore be clearly and unambiguously set out in documentation provided to employees. For example, employers should include a contractual provision stating that their obligations under health and life insurance schemes are subject to the terms of those schemes and limited to the amounts of any payments made by the insurer.
