EAT decision that Asda was permitted to rely upon a provision in its employee handbook which reserved the right to vary contractual terms in order to introduce a new pay structure, without the need to obtain the express consent of those employees affected by the change.

The EAT held that the words used in the handbook showed clearly that Asda was entitled to unilaterally change the contents of the handbook. The wording was clear and conferred two separate rights: one related to the handbook; the other was to introduce new policies. No consent was required since Asda’s right to review clearly entitled it to change the handbook content unilaterally. That power was not limited to non-contractual policies since the handbook included contractual matters such as pay and hours of work.

Implications

Employers would be ill-advised to use this case as authority to reduce pay (or perhaps other fundamental terms of employment) in reliance on a clause such as the one used by Asda in its handbook, particularly if the changes are likely to be detrimental to the employees or result in financial loss. In practice, employers should still consult its employees about any change in pay structure, because failure to do so is, more often than not, likely to be in breach of the mutual term of trust and confidence.

Asda was perhaps fortunate in that the employees did not claim breach of mutual trust and confidence in this case because, if they had, the decision of the Employment Tribunal and the EAT may well have been very different.

However, that being said, the decision will be of assistance as a last resort to employers where their normal consultation route has been exhausted and attempts to obtain employee’s consent to the changes have failed, particularly during difficult economic times.

Employers should still, therefore, include widely drafted contractual variation clauses in contracts of employment, in order to provide themselves with the maximum ability to make changes.

Background

Asda employed approximately 18,000 employees under an old pay structure. Following an extensive consultation process, 9,300 employees transferred voluntarily to a new pay structure which Asda was seeking to introduce. The remaining employees chose not to do so and as a result, Asda unilaterally invoked the change. It did so in reliance on a provision contained in its staff handbook reserving the right to “amend the content of this handbook … from time to time to reflect the changing needs of the business…” and a provision which provided that the sections of the Handbook relating to pay and the right to change terms, formed part of the employees’ contracts of employment.

It should be noted that, Asda was keen to ensure that, under the terms of the new pay structure, no employees suffered a reduction in his or her pay and was successful in achieving this.

Employment Tribunal claims were brought by 700 employees of Asda claiming unauthorised deductions from wages, breach of contract and in some cases, unfair dismissal. Six test cases were subsequently heard and dismissed by the Employment Tribunal. The employees appealed to the EAT which held that Asda was entitled to invoke the new pay structure unilaterally.