FW Farnsworth Ltd & Anor v Lacy & Ors

An employee’s acceptance of varied contractual terms may be inferred from conduct only where the conduct is an unequivocal act referable only to acceptance of the new terms. A benefit associated with an employment grade may nevertheless have a contractual source. Voluntarily applying for a benefit expressly provided by a new contract, after reading that contract and without protest or reservation, may therefore amount to acceptance of all its terms, including restrictive covenants. Conduct resulting from a compulsory workplace policy may be insufficient when considered alone.

The claimants alleged that the first defendant, while employed by them, had become bound by a 2009 employment contract containing post-termination restrictions. He had previously signed a 2003 contract without such restrictions and had never signed or returned the 2009 contract.

The issue was whether his conduct, particularly joining a new pension scheme and applying for private medical insurance for himself and his family, objectively demonstrated implied acceptance of the 2009 contract. The issue had been ordered for separate trial because it affected continuation of an injunction restraining him from working for a competing company.

1. The claimants bore the burden of proving that the defendant had agreed to the 2009 contract, expressly or impliedly. Applying the approach in Sallem Khatri v Cooperatieve Centrale Raiffeisen-Boerenleenbank BA [2010] EWCA Civ 397 and Solectron Scotland Ltd v Roper and others [2004] IRLR 4, the relevant question was whether the conduct relied upon was only referable to acceptance of the new terms. The issue was to be assessed objectively, consistently with Ignazio Messina & Co v Polskie Line Oceaniczne [1995] 2 Ll. Rep. 566 and Nazrul Islam v Ali Askar [unreported].

2. The fact that benefits were available to all Grade E employees did not prevent their source being contractual. The 2009 contract redefined the defendant’s employment relationship and expressly provided the enhanced benefits and post-termination restrictions.

3. The defendant’s move to the contributory pension scheme was, viewed alone, insufficient. The evidence showed that the move was mandated for senior management and was not a voluntary exercise of an entitlement under the 2009 contract.

4. By contrast, the defendant voluntarily applied for private medical insurance in the form required by the 2009 contract after reading it, and did so without protest or reservation. That application was an unequivocal act referable only to acceptance of the 2009 contract. His subjective belief that the benefit arose from his grade did not alter the objective legal analysis.

5. The defendant became bound by the 2009 contract from the date of his application for private medical insurance. Counsel were invited to agree the form of order.

The judge also expressed serious reservations about trying a mixed question of fact and law as a separate mini-trial before the overall dispute. That procedural observation was not necessary to the decision on contractual acceptance.