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Good faith and employee/ member communications: the IBM ruling

 

17 April 2014

​It’s not just what you say that counts, it’s how you say it. Following the High Court’s significant new decision in relation to technology giant IBM, employers and pension scheme trustees need to give careful consideration not only to the detail of communications, but also to the overall impression given.

Getting communications right

Spin is an art these days and it frequently finds its way into corporate communication to ‘soften the blow’ or ‘sweeten the impact’. This can give employees or pension scheme members the wrong impression, or create unrealistic expectations. Equally, historic communications may already have created expectations which employers need to be aware of for future reference.

Even statements which are technically correct may be presented in a way which creates inaccurate expectations. Actions which are inconsistent with those expectations may then give rise to a breach of the employer’s duty of mutual trust and confidence, which is implied in all employment contracts. In the context of pension scheme benefit changes, it could also give rise to a breach of the employer’s implied duty of good faith in exercising its powers under the scheme rules, in which case any consequent rule change may not have been validly made.

The detailed analysis in the IBM case of different types of member communications will be critical in designing and testing future communications – for example, Q&As, webcasts, townhall meetings – in terms of both accuracy and overall message.

Trustees should also be aware of the case and examine communications carefully, since they must satisfy themselves that employers are exercising their powers under the scheme rules properly (whether or not trustee consent is required). If an exercise is inconsistent with members’ reasonable expectations, as in the IBM case, then it may be invalid and the rules of the scheme will not have been changed.

Click here to read our summary of key issues in the case; contact us to discuss its relevance to your employee or member communications.

 

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