The Employment Appeal Tribunal has held that an employer could rely on a variation clause to impose changes to employees' pay without obtaining the employees' express consent to those changes.
An employer cannot usually unilaterally impose changes to an employee's terms and conditions of employment without the employee's express consent. However, this case confirms the position that where the employer has relied on a variation clause which was clear, unambiguous, and covered the changes made, the relevant contractual term could be unilaterally varied.
However as the right to impose changes to contractual terms will depend on the wording of the variation clause, the nature of the changes and the conduct of the employer in seeking to impose those changes, legal advice should still be sought by employers who are contemplating changing their employees' terms and conditions of employment.
The EAT noted that even with a variation clause, if an employer acts unreasonably, arbitrarily or capriciously in imposing the changes this can amount to a breach of the implied term of trust and confidence, which would entitle the employee to resign and claim constructive dismissal. However, Asda had not acted in this way and instead had tried to obtain the voluntary consent of employees to the changes through an extensive consultation process and had tried to ensure that the changes to the pay structure did not result in a reduction in pay for the employees
In the case of Bateman v Asda Stores Limited, Asda wanted to harmonise their employees' pay structures. There were two pay structures, an old regime called "Standard Rate" and a new regime called "Top Rate".
Asda commenced an extensive consultation process with its employees over its aim that all staff be employed on the "Top Rate" pay structure. 9,300 employees transferred voluntarily to the new regime during the consultation process. However a significant minority (8,700) did not consent. Therefore Asda imposed the new pay structure on these employees without their consent. In doing so, Asda relied on a variation clause in its staff handbook (which contained employees' contractual terms and conditions of employment as well as non-contractual staff policies). The clause read "(Asda) reserves the right to review, revise, amend or replace the content of this handbook…to reflect the changing needs of the business".
700 employees brought claims to the Employment Tribunal complaining of unlawful deduction from wages, breach of contract and some of unfair dismissal. This case was a test case brought by 6 of those Claimants. The majority of the Claimants had not suffered any financial loss as a result of the new pay structure.
The Employment Tribunal dismissed their claims and held that the wording of the variation clause allowed Asda to introduce the new pay structure without obtaining the consent of the Claimants. The Claimants appealed.
The Employment Appeal Tribunal (EAT) upheld the Employment Tribunal's decision. It ruled that whether an employer can unilaterally impose changes to an employee's terms and conditions of employment will depend on the wording of the variation clause. In this case the Employment Tribunal had been right to conclude that the clause did cover the particular changes made by Asda to the employees' terms and conditions of employment.
The EAT acknowledged that if an employer acts unreasonably, arbitrarily or capriciously in imposing the changes this can amount to a breach of the implied term of trust and confidence, which would entitle the employee to resign and claim constructive dismissal. However it noted the Employment Tribunal had found in this case that there was no suggestion Asda had acted in an unreasonable, arbitrary or capricious way in imposing the changes.
The EAT also recognised that if an employer introduced a change to an employee's terms and conditions of employment without notice, or warning, or without consultation, this too could breach the implied term of trust and confidence. However the Employment Tribunal had found in this case that Asda had consulted with its employees and given them several months warning about the changes.
Finally the EAT held that Asda's right to "review, revise, amend or replace" was not limited to the non-contractual policies contained in the staff handbook, and did include contractual matters such as "pay" and "hours of work" which the new pay structure changed.