Daniel Barnett’s Employment Law Bulletin reports:
The company decided that Mr Cavenagh was redundant and summarily terminated his service agreement, which provided for six months of pay in lieu of notice. It subsequently discovered that Mr Cavenagh was guilty of gross misconduct pre-termination and did not make the payment. Had it known about the gross misconduct when it exercised its contractual power, it would have accepted the repudiatory breach of the service agreement and regarded itself as discharged from liability for pay in lieu of notice. The Court of Appeal held that Mr Cavanagh had acquired an accrued right to the payment, as his contract had been summarily terminated under the relevant contractual provision. There was no provision in the service agreement denying him the right to the payment in lieu if the company subsequently discovered that he had committed a prior act of gross misconduct. Nor was there any general principle of contract law barring or extinguishing his right to recover the pay in lieu as a debt from the company. The principle that a claim for wrongful dismissal could be defeated by relying on evidence of misconduct discovered after the dismissal did not provide the company with a defence to a debt claim.
EMPLOYERS CAN RESTRICT WHAT PAY INCREASES COUNT TOWARDS AN EMPLOYEE’S PENSION
28 May 2012
A high court has ruled that employers can ensure that future pay increases are not taken into account in determining what pensions are payable from a defined benefit pension scheme.
Pinsent Mason reports:
However, employers must make sure that they do not undermine the relationship of trust and confidence that exists between an employer and the members of a pension scheme. Background Mr Bradbury, a clarinettist in the BBC Philharmonic Orchestra, was a member of the BBC Pension Scheme. In October 2011, Mr Bradbury was offered a pay increase - but only on the basis that the increase to be taken into account for pension purposes was capped at 1%. Mr Bradbury refused to accept the increase on those terms. He complained to the Pensions Ombudsman, who rejected his complaint. He then appealed to the High Court. The judge decided that, in principle, employers can offer pay increases on the basis that part or all of that increase will not count towards the employee's pension. The law prohibits scheme members from giving up pension rights they have already built up. However, since employees do not usually have a right to future pay increases, that prohibition is not relevant in this case. Mr Bradbury’s claim could succeed if the BBC's offer of a conditional pay increase seriously damaged the relationship of trust and confidence between them. Unfortunately, the judge was unable to rule on this point. It had not been considered by the Pensions Ombudsman, and there was therefore no evidence about the BBC's reasoning in making the conditional pay increase offer. The judge did, however, hint that it would not be "entirely surprising" if the BBC could justify its actions, given the £1.6 billion deficit in the pension scheme as at June 2010. Pinsent Mason comment: This decision will reassure the many employers that have sought to limit their defined benefit pension liabilities by entering into agreements with members that are separate from and outside of the rules of the pension scheme. Although the question of whether the employer acted in good faith remains undecided, the court’s comments suggest that members would face an uphill struggle to win on that point.
CIPP Policy News Journal
12/04/2013, Page 46 of 362
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