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Consultation and the implied term of trust and confidence

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Thanks to Michael Reed, Employment Legal Officer at the Free Representation Unit, for preparing this case summary.

Can a simple employment law point be extracted from a gargantuan pensions judgment with 1597 paragraphs (plus 5 annexes)?

No, according to the judgment in IBM UK Holdings Ltd v Dalgleish. The judgment demonstrates that employers who hold themselves out as maintaining high ethical standards may find courts considering such statements in the context of the implied term of trust and confidence.

IBM wished to alter its pension arrangements: closing the defined benefit scheme (including freezing the pensionable salary of members of that scheme) and restricting early retirement.

The majority of the case is about the pension law implications. But Mr Justice Warren also considered whether IBM's failure to consult properly was a breach of the contractual term of trust and confidence.

He concluded that IBM's employees were entitled to expect consultation in accordance with IBM's statements of principle. There were expressed in virtuous terms: 'Never make misrepresentations...Honesty based on clear communication is integral...'

Mr Justice Warren concluded that IBM had failed to consult openly and transparently. Management mislead the members; failed to disclose their true motives and did not consult with an open mind. This, particularly in the context of IBM's statements of principle, was a breach of the implied term of trust and confidence.