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Brigden v American Express Banks Ltd [2000] IRLR 94 High Court
The High Court has ruled in this case that Contracts of Employment are covered by the Unfair Contract Terms Act 1977. The Unfair Contract Terms Act prevents unreasonable attempts to restrict liability by making the offending clauses in contracts unenforceable.
The effect of this decision would be that an employee could, potentially, rely upon Section 3 of the Act which would give protection in three situations.
1 A clause in an employment contract entitling an employer not to perform all, or any, of the employers contractual obligations would be unen- forceable unless it was reasonable;
2 A clause in an employment contract entitling an employer to render a contractual performance substantially different from that which was reasonably expected of him would be unenforceable, unless it was reasonable; and
3 A clause in an employment contract which, when the employer is in breach of contract, excludes or restricts any liability of the employer in respect of the breach unless it is reasonable.
This may have far reaching implications for employees in controlling exemption and exclusion clauses in contracts of employment. It has been suggested that this could apply to unreasonable application of mobility and flexibility clauses, changes to hours and job descriptions and even the operation of performance and merit pay systems. This may be how the case law will develop in future cases. However, the limitations of this case are illustrated by the fact that although Mr. Brigden succeeded in establishing that the 1977 Act applied, he actually lost his case.
The clause he was challenging in his contract, allowed the employers to pay him pay in lieu of notice if he was dismissed within the first two years and excluded him from the right to use the disciplinary procedure. The Judge held that this was not a contract term excluding or restricting the liability of the employers, nor was it a clause that entitled the employers to render a contractual performance substantially different from what was reasonably expected. It just set out the employee's rights in such situations. And the Judge went on to say that even if it did exclude or restrict the performance of the contract he would have held that it was reasonable. Therefore, the judge would have allowed the employer to rely on the clause even if it had come within one of the three categories where the Unfair Contract Terms Act bites.
The case therefore creates another weapon or argument on behalf of employees but its effectiveness will only be judged after further litigation. For now, it may be a better argument in negotiations than in the courts. But it is a big step forward to establish the principle that the Unfair Contract Terms Act 1977 applies in employment contracts. The next step is to give force to what that means in practice.