In the wake of Christmas party season, some businesses may be left dealing with the repercussions of promises made under the influence of alcohol at a Christmas party or festive event. Employment partner Sarah Garth considers if theses promises have any legal weight.
A verbal promise does have the potential to be legally binding. It can have important implications as, if a contractual agreement is not honoured, the team member could potentially claim for unpaid wages or, if they have more than two years’ service, resign and claim constructive dismissal.
In these situations, the promise is often made by a manager or senior person in the company. In order for their promise to be a contractual commitment, it would need to meet a number of legal requirements which are essential for the formation of a contract.
Was the promise made clear and certain?
What exactly was said during the conversation? If it was simply a general comment about a future promotion and an unspecified pay rise, it is likely to be too vague and uncertain to form a binding contractual commitment. However, if the manager was very specific about the new role, the exact amount of the pay rise, and the date it would take effect, this would meet one of the legal requirements for it to be contractually binding.
Does the manager have the authority to bind the company?
This would depend on the management structure of the business and the standard practice for agreeing promotions and pay rises. If it is normal practice for a manager in the business to agree such matters, it is likely that they would have the authority to bind the company.
Did the manager intend for it to be binding?
The main hurdle for many employees in this situation is proving that the manager intended for their comments to be legally binding as opposed to it being a casual conversation. In order for a contract to be formed, both parties must have genuinely intended to create a legal contract.
Generally, when such conversations take place in a social setting outside of work, it can be difficult to prove such a legal intention. There has been case law on this specific point (Judge v Crown Leisure Limited [2005], which involved an employee who was promised a pay rise at a Christmas party. The court found that this was a social conversation rather than a formal commitment and it did not amount to a contractual agreement. The ‘convivial spirit’ of the party was an important factor in the decision.
Whether alcohol is involved is an additional factor which would be considered by a court. If the manager was under the influence of alcohol when they made the promise, a court is more likely to conclude that it was not made with the serious intention of creating a legal obligation.
If a company faces this situation, it should consider what steps could be taken to avoid it happening again. It is advisable to address the specific issue with the manager concerned. The company could also consider introducing additional training for managers generally to remind them not to make any such promises to team members without first going through the correct channels and formally documenting any changes to employment terms.
If you have questions or concerns about promises made at a work event, please contact Sarah Garth.