The general position in employment law is that an employer may not vary an employee’s terms and conditions without first obtaining the employee’s express consent to the variation. However, a recent decision by the Employment Appeal Tribunal has held that, in circumstances where the employer expressly reserves the right to unilaterally alter specific aspects of employees’ contracts of employment, such a variation can take effect without employees’ consent being sought.
In the case of Bateman and Others v ASDA Stores Limited ASDA found itself in a position where it had two separate pay regimes in place and it wished to standardise the regime across the business by amending the contracts of approximately 18,000 staff nationwide. ASDA carried out an extensive consultation process, during which 8,700 employees voluntarily transferred to the new pay regime. At the conclusion of the consultation process those employees who had not consented were transferred involuntarily to the new pay regime on the basis that ASDA’s staff handbook, which was incorporated into the employees’ contracts of employment, contained a clause whereby ASDA “reserved the right to review, revise, amend or replace the contents of this handbook, and introduce new policies from time to time reflecting the changing needs of the business.”
Six test claimants issued Tribunal proceedings, alleging that they had suffered an authorised deduction from wages as a result of having been involuntarily transferred to the new pay regime. ASDA justified its decision by relying on the provisions of the staff handbook. The Tribunal accepted that employees’ pay is fundamental to an employment relationship and that, where a significant change to contractual terms as to pay is proposed, the consent of the employees affected should ordinarily be sought. However, the Tribunal further found that, notwithstanding this general principle, employers may reserve the contractual right to vary the terms or to change important aspects of employees’ jobs irrespective of whether the employee consents but that, where such a provision exists, it will be subject to close scrutiny to ensure that any unilateral changes made fall within the perimeters of the employer’s reserved powers.
The Tribunal held that ASDA had reserved its right to unilaterally amend employees’ contracts in the staff handbook. This handbook identified certain sections, including pay and the variation clause, as being contractual. The Tribunal considered that the changes made to employees’ contracts i.e. the amendment of their pay structure fell within the clear power reserved by ASDA and was a change necessary due to the “changing needs of the business.” The Tribunal also held that there was no breach of the mutual obligation of trust and confidence by ASDA and accordingly dismissed all of the Claimants’ claims.
On appeal, the Employment Appeal Tribunal (“EAT”) upheld the decision of the Tribunal. Specifically, it held that the clause in the staff handbook on which ASDA had relied was clearly drafted without ambiguity and that there was therefore no requirement for the clause to be construed in favour of the Claimants. It also rejected the Claimants’ assertion that, on entering the contract with ASDA, they had not fully understood or expected that ASDA would be able to unilaterally reduce their pay or change their hours of work in the future. On appeal the Claimants also alleged that there had been a breach of trust and confidence by ASDA. However, as the Claimants had conceded this point at first instance, the EAT rejected this argument and the Claimants appeal was dismissed.
This decision should not be seen as giving free rein to employers. Any clause reserving the right to make unilateral changes must be contractual and should expressly set out the precise circumstances where the employees’ consent will not be required. Any changes subsequently made must fall within the ambit of the provisions to be valid. In addition, it should be noted that ASDA was not in breach of the mutual obligation of trust and confidence in this case largely due to the extensive consultation it carried out which lasted for several months. Should an employer fail to consult with employees and simply impose the change of terms and conditions it is likely to be found to have acted in breach of contract.
