Crossley v Faithful & Gould Holdings Ltd
Court of Appeal
Citations:  EWCA Civ 293;  4 All ER 447;  ICR 1615;  IRLR 377; (2004) 148 SJLB 356;  CLY 1203.
The claimant was a long-standing senior employee and director of the defendant company. He sought to retire early on medical grounds. His contract with the defendant provided that he was entitled to 6 months fully paid sick leave. Afterwards, his payment was at the defendant’s discretion. The claimant was also a member of the defendant’s disability scheme. This entitled him to benefits if he became incapacitated by illness, but only if he remained in the defendant’s employment. The claimant was unaware of this caveat.
The parties discussed the terms of the claimant’s retirement. Before they reached any definitive agreement, the claimant sent a letter to the defendant stating that he would be retiring as an employee and director due to continued ill-health. After a year, he sued the defendant for failing to advise him that if he had stayed in employment, he would gotten better benefits. He alleged that this put the defendant in breach of implied terms in their contract.
- Was there an implied term in the parties’ contract requiring the defendant to safeguard the claimant’s economic wellbeing?
- Was there an implied term in the parties’ contract requiring the defendant to warn the claimant as to the economic consequences of retiring?
The Court of Appeal held in favour of the defendant.
- The courts will not imply a duty to safeguard employee’s economic wellbeing into every employment contract as a matter of law. In the circumstances, no such term should be implied into the present contract.
- To establish an implied term to warn about the financial consequences of retiring, the claimant had to establish the test set out in Scally v Southern Health and Social Services Board  3 WLR 778. They failed to establish the third requirement. The terms of the insurance and sick pay schemes were terms which the claimant could be expected to be aware of without the defendant bringing it to his attention. As a director, the claimant should have been familiar with those terms. He also had access to advice about the scheme.
This Case is Authority For…
The courts will only imply a term to safeguard an employee’s economic wellbeing in limited circumstances.
Whether it is ‘necessary’ to imply a term in law into a contract turns on whether it ‘obviously makes sense to imply such a term into a contract of employment on wider policy grounds.’ This turns on ‘questions of reasonableness, fairness and the balancing of competing policy considerations’. This form of necessity is therefore distinct from the idea of necessity used when implying terms in fact.
Factors which were relevant to whether a term should be implied in law in this case included:
- The breadth of the proposed term;
- The burden it placed on the employer;
- The fact that the employee could have easily and reasonably sought advice elsewhere.