Good faith and employee communications — landmark ruling in IBM UK Holdings Ltd and IBM UK Ltd v Dalgleish and others

Employers undertaking pension scheme benefit change processes need to give careful consideration not only to the detail of member communications but also to the overall impression they give and to member expectations that could be created by those communications, in light of the High Court’s significant new decision in relation to technology giant IBM.

The judgment considers, we believe for the first time, the understanding that a hypothetical reasonable member might take from different types of communication, including a webcast. This is a significant issue: even if statements are technically correct, they may combine or be presented in a way that creates inaccurate impressions or expectations. This may then give rise to a breach of the employer’s duty of good faith in exercising its powers under a pension scheme, and/or to a breach of the employer’s duty of mutual trust and confidence, which is implied in all employment contracts.

The detailed analysis in this case of different types of member communications and of the weight and meaning that should be attached to them by the court (in the role of a hypothetical reasonable member) will be critical in designing and testing future communications about benefit change exercises, in terms of both accuracy and overall message….

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