Changing terms and conditions 1: ways of implementing changes
In the first of a series of three guidance Notes, we examine how changes to employees' terms and conditions of employment may be brought about
"The law concerning contractual variation provides the description in legal terms of the balance between managerial prerogative and the rights of employees in relation to the terms on which they work."
(M R Freedland in The contract of employment, Oxford University Press 1976, p.41)
There are a number of reasons why employers may want to change their employees' terms and conditions of employment. They may wish to improve productivity, to cut costs, to be responsive to changing market conditions, and to keep up with the pace of technological change. Changes that employers typically want to implement include full-time or part-time working; weekend or overtime working; variable shift patterns and flexible, annualised or zero hours contracts; reskilling and teamworking; moving employees from one workplace to another; performance-related pay and non-incremental pay and grading structures.
Employees, too, may have reasons for wanting to change their terms and conditions of employment, as may trade unions which are recognised by their employers in respect of them. These include adjusting their hours of work to suit their domestic arrangements (for example, by working part-time or jobsharing); exercising greater control over how and where they do their work (for example, by working from home); and reducing the scope of "managerial prerogative" (that is, their employers' rights to change their working conditions without their consent).
The employer/employee relationship is, therefore, a dynamic one. But a contract of employment is essentially static. Or, as Lord Justice Donaldson put it in Janata Bank v Ahmed: "a creeping variation... is an impossible concept. Either the contract was varied or it was not. Whilst it may sometimes be difficult to say when a contract is varied, there is always a time of variation. The continuously changing contract is unknown to the law."
Against that background, we examine in this article the ways in which changes to employees' terms and conditions of employment may be brought about. In the second and third articles we will respectively consider the consequences of unilateral imposition of such changes by employers, and look at some specific kinds of changes which employers may want to implement.
Changes to an employee's terms and conditions of employment are implemented in the following ways:
Variation or rescission?
A variation of a contract of employment, as a result of which the contract continues in a different form, should be distinguished from a "rescission" of the contract, the effect of which is to replace it with a new one on different terms. In practice, it is often difficult to apply this distinction, which depends on the intention of the parties to the contract. In Meek v Port of London Authority, the Court of Appeal held that there was a rescission rather than a variation when employees were promoted to a higher grade. But that was because they had changed jobs, and it was not as if there had been an automatic pay increase and improvement in working conditions arising out of their original contracts.
The most important practical consequence of the distinction is that, if there has been a rescission, the new contract will not contain all or any of the terms of the old one. In S W Strange Ltd v Mann, a director of the company and the other board members mutually agreed that he be demoted from manager to assistant manager. He had been employed under a written service agreement incorporating a restrictive covenant, and he became employed under a new, oral contract of employment which did not incorporate the covenant or any other terms of the service agreement.
The High Court held: "It was only by the effect of the new oral agreement, which was inconsistent with the continued existence of the service agreement, that the terms of the latter agreement ceased to apply. By entering into the new agreement the parties did not... vary the terms of the service agreement but replaced it; and... the respective rights and obligations of the parties were thenceforth governed by a new contract which superseded the old." The covenant was ancillary to the service agreement and, when the parties mutually agreed on a new contract of employment, they showed an intention not to be bound any longer by the service agreement.
UNILATERAL VARIATION
Where an employer unilaterally varies an employee's contract of employment, presenting the employee with a fait accompli, that will constitute a breach of contract by the employer unless it was allowed by one or more terms, express or implied, of the contract. We will examine the consequences of a unilateral variation of the contract by the employer in part 2 of this series. In this article, we will explain how the employer may be entitled unilaterally to vary the contract, because the change it wants to make to the employee's working conditions is provided for in the contract.
Terms of the contract
The terms of a contract of employment define its parties' rights and obligations. The express terms are those that have been spelt out in so many words, in writing and/or orally. In the absence of a wholly written contract of employment, for which there is no legal requirement and which is unusual, the terms that are written may be found in a number of different documents. The most important of these is usually the offer letter. Others include collective agreements, staff handbooks, and the written statements of employment particulars which employers are required by s.1(1) of the Employment Protection (Consolidation) Act 1978 (the EP(C)A) to give to their employees (see below ).
But not all of the contents of such documents are express terms of the contract. Whether they are or not depends on whether they are appropriate to be, and are, incorporated into the contract. And that, in turn, depends on their content and character, and on the presumed common intention of the parties to the contract when they entered into it. This may be deduced from the surrounding circumstances, including the contents of job advertisements and what was said when the employee was interviewed for the job.
A term may be implied into a contract of employment:
(1)by legislation, such as the "equality clause" which is implied into every contract of employment by s.1(1) of the Equal Pay Act 1970 (the effect of which, insofar as a variation or rescission of a contract of employment is concerned, is set out below); or
(2)by custom and practice (that is, from a well-known, precise and fair custom or usage which is generally adopted in a particular trade, industry or area, or from the way in which the parties to the contract have operated it in practice); or
(3)of necessity, because:
-it is a hallmark, or characteristic, of contracts of employment generally, or of a definable category of such contracts (that is, if the nature of those contracts implicitly requires its inclusion),
-the contract is unworkable without it, or
-it was so obvious that it went without saying, and both parties to the contract would have readily agreed to it had it been suggested to them.
Written particulars
A written statement of employment particulars provides very strong evidence of what are the terms of a contract of employment, but it does not itself constitute the contract. From the employee's point of view, it is only persuasive, and not conclusive, evidence of the terms of the contract. But it puts a "heavy burden" on the employer to show that the terms of the contract differ from those detailed in it (System Floors (UK) Ltd v Daniel).
The employer may not rely on a right in the statement unilaterally to vary the contract. In Brechin Bros Ltd v Kenneavy and another, for example, two employees' written statements of employment particulars provided that their hours of work were as set out on notices posted on a notice board, and that any change in those hours would be similarly posted. But the EAT held that this provision did not give their employer the right to change their working hours at will: such a right had to be unequivocally contained in their contracts of employment.
Changes under express terms
An express term of a contract of employment allows the employer unilaterally to vary the contract if its wording is wide enough to enable the employer to require a degree of flexibility or mobility on the employee's part, or if it reserves to the employer a right to implement a particular variation of the contract. For example, in Glitz v Watford Electric Co Ltd, the EAT held that a woman employed as a clerk/typist in a small office was contractually obliged to use a photocopier. Even though she had never done so before, and it had not been contemplated that she would have do so at the time she had been taken on, it fell within the ambit of general clerical duties.
And, in White v Reflecting Roadstuds Ltd, the EAT held that an express term of an employee's contract of employment, which reserved to the company "the right, when determined by requirements of operational efficiency, to transfer employees to alternative work", entitled it to move the employee from one department to another. Even though that resulted in his pay being reduced, the decision was reached "responsibly" and the company had "reasonable or sufficient" grounds for its view that the employee had to be moved.
But an employer cannot reserve the right to impose whatever changes to its employees' terms and conditions of employment it might like. In United Association for the Protection of Trade Ltd v Kilburn and others, for example, an express term of employees' contracts of employment reserved to their employer "the right to make alterations" to their contracts. The EAT held that this term did not give the employer a free hand to rewrite those contracts. It did give the employer a right unilaterally to vary them, but this right was limited to "changes of a minor and non-fundamental character".
Changes under implied terms
Implied terms of a contract of employment may allow the employer unilaterally to make and change workplace rules, to introduce new working methods and techniques, and, sometimes, to move the employee from one workplace to another. And, in certain limited circumstances, a term may be implied into the contract so as to vary it.
New workplace rules
One hallmark of contracts of employment generally is that employees must carry out their employers' lawful and reasonable instructions. This implied term entitles an employer to make rules for the conduct of its employees at work within the scope of their contracts of employment (Dryden v Greater Glasgow Health Board). In that case, the EAT held that the Board's introduction of a ban on smoking in all its employees' workplaces did not breach the contract of employment of one of those employees who was a smoker. There was no express or implied term of her contract to the effect that she was entitled to, or would continue to enjoy, some facilities for smoking during working hours.
Where an employer's rules are not terms of its employees' contracts of employment, but merely instructions to them as to how they are to do their work (see Secretary of State for Employment v ASLEF and others (No.2)), the employer is entitled unilaterally to change its rules. And in Cadoux v Central Regional Council, where the council's rules were incorporated into the contract of employment of one of its employees, the Court of Session held that the council was entitled unilaterally to withdraw a non-contributory life assurance scheme provided under those rules. The rules were referred to in the employee's letter of appointment as "[the council's] rules... as amended from time to time", and there was no express limitation on the council's right to amend them. Therefore, they were made unilaterally by the council and it could make such changes to them as it liked.
New working methods
Another general characteristic of contracts of employment is that employees are expected to adapt themselves to new methods and techniques introduced in the course of their employment, subject to three qualifications. Firstly, the particular method or technique must not alter the work which the employees do to such an extent that it is no longer the kind of work which they were employed to do. Secondly, their employer must provide any necessary training or retraining. Thirdly, such training or retraining must not involve the acquisition of such "esoteric" skills that it would not be reasonable to expect the employees to acquire them (Cresswell and others v Board of Inland Revenue).
In Cresswell, the High Court held that the Revenue was entitled to require the civil servants whom it employed to administer the PAYE scheme to do their jobs using computers instead of manually. In the Court's view, their jobs were essentially the same as they were before computerisation. Though partly done in a different way, the job content was not altered anything like enough to fall outside the original description of the employees' proper functions. The Board had also provided the necessary instruction in the use of the computerised system, and there was no suggestion that the employees had found any real difficulty in accepting it and putting it into practice. And asking them to acquire basic skills as to retrieving information from, or feeding it into, a computer could hardly be considered in the slightest esoteric or even unusual.
Mobility
In the absence of a mobility clause in a contract of employment, a term as to mobility "which the parties, if reasonable, would probably have agreed if they had directed their minds to the problem" must be implied into the contract so as to make it workable (Jones v Associated Tunnelling Co Ltd). This implied term will depend on, for example, the nature of the employee's job, the nature of the employer's business, whether or not the employee has ever in fact been moved, and what the employee was told when he or she was recruited.
But the implied term need not always give the employer the right to move the employee: it may simply be that the employee is entitled to remain at his or her particular workplace (Aparau v Iceland Frozen Foods plc). In that case, the EAT declined to imply into a shop assistant's contract of employment a term that her employer could move her to another shop within reasonable travelling distance of her home. By contrast, in Courtaulds Northern Spinning Ltd v Sibson and another, the Court of Appeal implied a term into an HGV driver's contract of employment that his employer could instruct him, for any reason, to work at any place within reasonable daily reach of his home.
Implied variation
A contract of employment may be varied by implying into it a term requiring the employee to work in the way that he or she has regularly worked in practice over a number of years. But, as the EAT observed in Horrigan v Lewisham London Borough Council: "It is fairly difficult, in the ordinary way, to imply a variation of contract, and it is very necessary, if one is so to do, to have very solid facts that it was necessary to give business efficacy to the contract [that is, to make the contract workable], that the contract should come to contain a new term implied by way of variation."
In Horrigan, the EAT held that the fact that a driver had regularly worked as much voluntary overtime as was necessary to finish his daily rounds, over a period of 10 years, was not sufficient to imply into his contract of employment a term that he was obliged to work overtime.
RESTRICTIONS ON UNILATERAL CHANGES
Express terms of a contract of employment purporting to allow the employer unilaterally to vary the contract may be limited by their lack of certainty, the rules for construing contractual terms, the employee's personal circumstances, and implied terms. And terms of that kind implied into the contract may be restricted by other implied terms. We now consider each of these restrictions in turn.
Uncertainty
In Polymer Products Ltd v Pover, an express term of a driver's contract of employment provided: "You will be offered continuity of employment at any new location, with new duties, relocation allowance, and salary all to be mutually agreed." The EAT held this to be too vague to be enforceable: it was merely an "agreement to agree".
By contrast, in National Coal Board v Galley, the Court of Appeal held that a term of a collective agreement incorporated into a colliery deputy's contract of employment, which required him to work "such days or part days in each week as may reasonably be required by the management", was not too vague to be enforceable. The Court said: "In this contract the parties have expressly provided that reasonableness shall be the test. The fact that it is difficult to decide in a given case should not deter the court from deciding what is a reasonable requirement by [an employer] in the light of the surrounding circumstances."
The Court went on to hold that, although the employee had already worked 11 shifts on 11 consecutive days, he could reasonably be required to work a 12th day before having two days off: he was not being required to work longer hours than his colleagues, who had also worked around six shifts per week on average before the collective agreement was made, and no circumstances had supervened since then to make a six-shift week "unreasonable" (judged by the agreement itself, by what the employees covered by it had been doing before, and by the needs of the work that they were doing).
Rules of construction
According to one of the rules for construing contractual terms, any ambiguity in an express term will be construed against the employer and in favour of the employee. In Haden Ltd v Cowen, for example, an express term of a regional surveyor's contract of employment required him to perform "any and all duties which reasonably [fell] within the scope of his abilities". The Court of Appeal held that this term did not entitle his employer to transfer him to any job as a quantity surveyor within its organisation: it only entitled his employer to require him to perform any duties within the scope of his capabilities as a regional surveyor.
Another rule of construction is that every word of an express term must be construed in conjunction with the words that accompany it. In Baynham and others v Philips Electronics (UK) Ltd and others, for example, an express term of some of the companies' employees' contracts of employment provided: "The company shall be entitled to vary this contract from time to time with your consent which shall not unreasonably be withheld. In particular, your specified duties and job title may be changed whenever reasonably required by the change of circumstances of the company or yourself, which may involve working for the company or any subsidiary or associated company in the United Kingdom, or in such other places as may be agreed."
The High Court held that this term was not apt to cover a right to vary the employees' contracts so as to modify their right to private medical insurance cover after they retired, being a right which had accrued when their contracts had come to an end. The term's second sentence helped to identify the sort of matters to which it was intended to apply, namely, changes to the employees' duties or job titles. A clear express term would be needed to vary accrued contractual rights after the termination of the employees' contracts.
Personal circumstances
In Kenwood Ltd v Austin, an express term of the contracts of employment of all the company's employees reserved to it the right "to rearrange" their hours of work "to meet the requirements of the business". The EAT held that this entitled the company, "within certain limits", to change its employees' shift patterns and, "in appropriate cases", to require them to work on the night shift. But it did not entitle the company to require a 58-year-old quality control inspector with 19 years' service to work on the night shift, having regard to her particular personal circumstances and record. She was very good at her job and highly regarded by the company; she had never worked on the night shift; she was not in good health; and she had adjusted her domestic arrangements to suit her shift pattern. As regards other employees, the EAT said "it would depend on the circumstances."
A contrasting case is Express Lift Co Ltd v Bowles, concerning an implied term of a "mobile" employee's contract of employment which obliged him to work wherever in the UK the company required him to. The EAT held that, in the absence of any evidence that this obligation was subject to exceptions in special circumstances, it could not be construed as having contemplated such exceptions. Nor could a term to that effect be implied. Therefore, the fact that the employee's wife was seriously ill did not entitle him to refuse to move from Nottingham to Scotland.
Implied terms
A term may not be implied into a contract of employment if it would contradict or conflict with one or more of the contract's unambiguous express terms (that is, if contractual effect could not fairly be given to both or all of them). In Rank Xerox Ltd v Churchill and others, for example, a mobility clause in six secretaries' contracts of employment provided: "The company may require you to transfer to another location." The EAT held that this entitled the company to move the secretaries from London to Marlow. The words of the clause were simple, clear and unambiguous, and there was no room for any implication which would restrict it to a reasonable daily travelling distance.
By contrast, an express term of a contract of employment that gives the employer a discretion to vary it may be limited by implying into the contract a term that controls the exercise of that discretion, such as the characteristic implied term that the employer will take reasonable care not to injure the employee's health.
In United Bank Ltd v Akhtar, a mobility clause in a bank clerk's contract of employment empowered the bank to transfer him to any of its places of business in the UK, and gave it a discretion to pay him a relocation allowance if it did so. The EAT held that the clause did not entitle the bank to move the clerk from Leeds to Birmingham at short notice, and without any financial assistance, because the exercise of the bank's discretion was controlled by three implied terms of the contract.
The first implied term was that the bank had to give the clerk reasonable notice of the move. The second was that the bank had to exercise its discretion to pay him a relocation allowance in such a way as not to make it impossible for him to fulfil his contractual obligation to move. And the third was that the bank would not, without reasonable and proper cause, conduct itself in a manner calculated or likely to destroy or seriously damage the relationship of confidence and trust between employer and employee. The latter is an overriding obligation, which is independent of, and additional to, the literal interpretation of anything that the other terms of a contract of employment allow the employer to do.
Implied terms of a contract of employment purporting to allow the employer unilaterally to vary it may also be limited by other implied terms of the contract. In Dryden v Greater Glasgow Health Board, the EAT said: "it is necessary to exercise caution before holding that there are implied contract terms which restrict the employer's power to control what happens in the workplace by making, and altering from time to time, rules for the conduct of the work and the employees." But it added: "It may not be difficult to envisage an implied term to the effect that the employer will not change the rules of the workplace in a way which adversely affects an employee or group of employees without reasonable notice or without consultation or, perhaps, without some substantial reason."
And, in Prestwick Circuits Ltd v McAndrew, the Court of Session held that "the implied right to order a transfer from one place of employment to another must be subject to the implied qualification that reasonable notice must be given in all the circumstances of the case."
NON-CONTRACTUAL BENEFITS
At common law, an employer is entitled, on giving reasonable notice, unilaterally to reduce or modify, withhold or withdraw such pay (for example, bonuses or commission) or fringe benefits (for example, private medical insurance cover and subsidised loans) of an employee as are genuinely discretionary or ex gratia. But merely describing them as such does not mean that they are not contractual. That depends on, for example, how regularly and frequently in practice the employer pays, say, bonuses, and on the basis on which a fringe benefit is provided, and its nature.
In Baynham and others v Philips Electronics (UK) Ltd and others, annual information sheets issued to "higher grade" employees during their employment stated that those of them who were members of a private medical insurance scheme, operated by an insurer on behalf of the companies, would continue to be covered by it after they retired for the rest of their lives. And the same commitment was made to all those employees when they retired.
The High Court held that the companies were not entitled, after the employees had retired, unilaterally to replace the scheme with an inferior one to which the employees had to contribute for the first time. The employees' continued membership of the scheme did not fall within a clause of their contracts of employment, headed "Additional discretionary benefits", which read: "You will be informed separately about your eligibility for any of the additional benefits the company may choose at its discretion to offer to some or all of the employees in the higher grade."
That clause was to be read simply as descriptive of the fact that additional benefits might be given to the employees which the companies were not bound to offer them. And the nature and contractual significance of the private medical insurance cover depended on the information sheets, which set out the relevant terms of the employees' contracts of employment. The sheets referred to the employees being "entitled" to that benefit, and they became part of the employees' contracts by their continuing to work for the companies.
The High Court also held that the benefit, although unusual, is and was by no means unique. Its provision was neither so rare nor so generous as to have been unlikely to have been intended or understood to have contractual effect, and the fact that it had become far more expensive to provide than was originally envisaged could not affect its contractual nature. Nor was it too uncertain to be enforceable: the cover to which it entitled the employees was at the same level as would from time to time be equivalent to the level prevailing at the time they retired.
Unlawful deductions
Even if a component of an employee's remuneration is genuinely non-contractual, it seems that its non-payment or a reduction in it may still amount to a deduction from the employee's wages contrary to s.1(1) of the Wages Act 1986. In Kent Management Services Ltd v Butterfield, the EAT held that the company's failure to pay one of its employees the commission he had earned under a scheme which was described as discretionary and ex gratia amounted to such a deduction.
The EAT pointed out that "wages" means any sums payable to an employee by his or her employer "in connection with his [or her] employment" (that is, sums that both parties reasonably contemplated would in ordinary circumstances be payable), and include any emolument referable to an employee's employment "whether payable under his contract or otherwise" (s.7(1)(a) of the Act). But, significantly, the EAT did not refer to s.8(3) of the Act. That provides that the amount of any shortfall in "wages" will be treated as a "deduction" only where it was "properly payable", suggesting that there must be a contractual obligation to pay the relevant sum.
COLLECTIVE BARGAINING
Collective bargaining is the process by which an employer, or an employers' association, and one or more trade unions recognised by it negotiate, amongst other matters, employees' terms and conditions of employment. The proportion of employees in the UK who are covered by collective bargaining has declined substantially in recent years. According to the latest Workplace industrial relations survey, that proportion was only 54% in 1990 as compared with 71% in 1984. And, because most employees outside the scope of that survey were not covered, the terms and conditions of employment of only a minority of employees in the UK are in fact jointly negotiated by employers and unions.
While representatives of unions generally negotiate employees' terms and conditions of employment as their union's agents, there is no reason why, in a particular case, they should not do so as the employees' agents. But such an agency does not stem from the mere fact that all the employees are members of the union. It must also be supported in the particular case by the creation of some specific agency, and that can arise only if the evidence supports the conclusion that there was one (Burton Group Ltd v Smith).
Incorporation of terms
Tribunals and courts are reluctant to find such an agency, preferring to find that terms of collective agreements have become incorporated into individual contracts of employment. On the one hand, a collective agreement will be presumed not to have been intended by its parties to be legally binding and enforceable unless they agreed in writing to the contrary (s.179 of the Trade Union and Labour Relations (Consolidation) Act 1992 - the TULR(C)A). On the other hand, its terms will be legally binding on, and enforceable by, the parties to a contract of employment if they are appropriate to be, and are, incorporated, expressly or by implication, into the contract.
Variations of a collective agreement which is incorporated into a contract of employment are not necessarily also incorporated into the contract. But both parties to the contract will be bound by such variations if the contract expressly incorporates the agreement "as amended from time to time", "for the time being in force" etc. And the employee will be bound regardless of whether he or she personally agrees to the variations or is a member of any trade union which is a party to the agreement.
If, however, the term of the contract incorporating the agreement does not expressly provide for its variation, then neither party to the contract will be bound by variations of the agreement unless these may be incorporated into the contract by implication. And that depends on the presumed, common intention of the parties to the contract at the time they entered into it. The next two cases illustrate how variations of a collective agreement may be incorporated expressly and by implication into a contract of employment.
In Higgins v Cables Montague Contracts Ltd, the preamble to a written statement of employment particulars given to an HGV driver by the company under s.1(1) of the EP(C)A read: "The basic terms and conditions of your employment by [the] company are in accordance with, and subject to, the relevant provisions of the collective agreements currently in force" and made between the company and the TGWU. The EAT held that this was an express term of the employee's contract of employment, and that it incorporated a collective agreement made between the company and the TGWU, while the employee was on holiday, the effect of which was to reduce his wages by 20%. Therefore, he was bound by the reduction.
In Arthur H Wilton Ltd v Peebles and others, three thermal insulation engineers employed by the company, which was a member of an employer's association that negotiated wages for thermal insulation engineers with the GMB, had been paid at the rates agreed between the association and the GMB for at least 20 years up to 1991. The EAT held that it was an implied term of the employees' contracts of employment that their wages were in accordance with the rates agreed from time to time between the association and the GMB. Therefore, the company's failure to pay the employees the wage increases for 1992 and 1993 negotiated between the association and the GMB was a breach of contract.
Where a collective agreement is incorporated into a contract of employment, expressly or by implication, the employer cannot lawfully vary the contract by unilaterally varying or terminating the agreement, or - if the agreement was made by an employers' association to which it belongs - by withdrawing from that association. In these circumstances, the contract will remain as it was unless and until its parties vary it by mutual agreement (Robertson and another v British Gas Corporation).
Complications arise where an employer or an employers' association negotiates with more than one trade union. If the employer or the association and a majority of those unions negotiate a variation of a collective agreement which one union rejects, then employees of that union will not be bound by the variation (Miller v Hamworthy Engineering Ltd). And, in Tucker and others v British Leyland Motor Corporation Ltd, a county court held that a term of employees' contracts of employment, requiring them to take public holidays in accordance with certain collective agreements, was subject to a written assurance given to them by management that public holidays would not be transferred without the agreement of all the trade unions concerned. Therefore, the employees were not bound by a transfer of public holidays agreed by a works committee representing only a majority of those unions.
A final point to note is that a collective agreement may contain a status quo clause, the effect of which is that - where there is a dispute between the parties to the agreement over a change to employees' pay and conditions - the position prior to the change is preserved until the disputes procedure under the agreement has been exhausted.
MUTUAL AGREEMENT
The parties to a contract of employment may vary it at any time during its subsistence by mutual agreement. According to the NIRC in Sheet Metal Components Ltd v Plumridge and others: "This happens whenever there is an increase in rates of pay or a promotion." The employee's agreement may be express (whether written or oral) or, as we will explain in part 2 of this series, implied from his or her conduct.
If the employee's agreement is not in writing, and the implementation of the variation will amount to a "deduction" from his or her "wages" within the meanings of s.8(3) and s.7 of the Wages Act 1986 (see above), then that will be contrary to s.1(1) of that Act unless one or more terms of the employee's contract of employment (or a statutory provision) allowed the employer unilaterally to make the deduction.
If the employer merely puts in front of the employee a document which excludes a term of the contract, and asks him or her to sign it, that cannot amount to a variation of the contract by mutual agreement so as to exclude that term. The failure to give the employee any notice that the term is going to form no part of his or her new contract of employment is, in effect, a unilateral variation of the contract - if it is a variation at all - which will not be binding on the employee (Hawker Siddeley Power Engineering Ltd v Rump).
In Stepney Cast Stone Co Ltd v Macarthur, the EAT held that an employee who agreed to the terms of a pension scheme which reduced the pensionable age from 65 to 62 was not to be taken to have automatically agreed to such a reduction in the normal retiring age under his contract of employment. If the company had intended by the pension scheme to reduce the normal retiring age, it should have made it clear to the employee that in agreeing to the terms of the scheme he was agreeing to such a reduction.
The terms of a written agreement to vary a contract of employment should also be made clear. If, for example, such an agreement is expressed to supersede all pre-existing agreements and arrangements relating to the employee's employment, but does not deal with the basic terms on which he or she is employed, then it will merely supersede those agreements and arrangements insofar as they dealt with the matters specifically referred to in it (Allen v Marconi Space & Defence Systems Ltd).
Where there has been an oral agreement to vary a contract of employment, the fact that current members of management were unaware of it, and would not have sanctioned it had they known about it because it was against company policy, is not inconsistent with such an agreement having been made (Simmonds v Dowty Seals Ltd) . But, without evidence of some discussion between the parties to the contract about a variation of it, the fact that the employer has given the employee a written statement containing details of the variation - in compliance with s.4(1) of the EP(C)A (see box ) - is not compelling evidence of an oral agreement between the parties to vary the contract (Jones v Associated Tunnelling Co Ltd).
Finally, the fact that the employee has expressly agreed from time to time to vary the contract does not mean that he or she is under an obligation to continue to do so at the employer's request (Trevillion v The Hospital of St John and St Elizabeth).
Consideration
Strictly speaking, an agreement to vary a contract of employment is not binding on, or enforceable by, either party to the contract if it was made exclusively for the benefit of only one of them (that is, if the agreement is not supported by "consideration" on both sides). But courts have been adept at finding ways around this principle. In Norbrook Laboratories Ltd v Smyth, for example, the High Court in Northern Ireland held that an employee was bound by his undertaking not to disclose his employer's confidential information simply because his employer would not have continued to employ him had he refused to sign it.
In practice, an employer will often try to persuade its employees to agree to a variation of their contracts of employment by offering them some financial inducement. It may, for example, make a pay rise conditional on the employees' agreement. And that will not amount to a breach of contract by the employer if, as is invariably the case, increases in the employees' pay are discretionary. Nor will it contravene s.146(1)(a) of the TULR(C)A where the pay rise was conditional on the employees' acceptance of "personal contracts" in place of collectively agreed terms and conditions of employment.
That provision says: "An employee has the right not to have action short of dismissal taken against him as an individual by his employer for the purpose of preventing or deterring him from being or seeking to become a member of an independent trade union, or penalising him for doing so." But, in Associated Newspapers Ltd v Wilson and Associated British Ports v Palmer and others, a majority of the House of Lords held that "action" does not include "omission". Therefore, withholding pay rises from trade union members who refused to accept "personal contracts" in place of collectively agreed terms and conditions of employment, while giving them to others who did not refuse to do so, did not contravene s.146(1)(a) - whatever the purpose of that "omission".
Duress
If an employee unwillingly agrees to a variation of his or her contract of employment which is to his or her detriment under the threat of dismissal, or of some other illegitimate pressure being applied, then he or she will have done so "under duress" (that is, because he or she was given a choice between two evils). In these circumstances, or where the employee was simply threatened with dismissal unless he or she agreed to the variation, the employee will be treated as having been constructively dismissed if he or she promptly resigns after the threat has been removed, or after it was made. Alternatively, if the employee carries on working without objection, he or she will eventually be treated as having impliedly, and willingly, agreed to the variation (see part 2 of this series).
The question which an industrial tribunal has to answer is: "Did the employer and the employee freely and voluntarily agree to vary the contract of employment?" And it will be slow to find that there has been a consensual variation where the employee has been faced with the alternative of dismissal, and where the variation has been to his or her detriment (Sheet Metal Components Ltd v Plumridge and others).
Whether an employer threatens to dismiss an employee summarily or with due notice is, it seems, irrelevant. In Greenaway Harrison Ltd v Wiles, the EAT held that a telephonist, who resigned after the company told her that it would give her a month's notice if she refused to agree to work a different shift pattern, was constructively dismissed. One month was the length of notice that she was entitled to receive to terminate her contract of employment, but the threat of dismissal still amounted to a repudiatory breach of contract by the company.
Dismissal and re-engagement
Where an employee refuses to agree to a variation of his or her contract of employment, and his or her employer still wants to implement it, there are basically two courses of action available to the employer. It may either unilaterally vary the contract, presenting the employee with a fait accompli (see above), or give the employee notice to terminate the contract and offer to re-engage him or her under a new one, on different terms, which takes effect immediately after the notice expires.
The second course of action will not constitute a breach of contract by the employer so long as the length of the notice is at least equivalent to that which the employee is entitled to receive to terminate the old contract. But - and whether or not he or she accepts the offer of re-engagement - the employee may complain of unfair dismissal to an industrial tribunal (assuming he or she qualifies for, and is not excluded from, the right to do so), because he or she will have been "dismissed" within the meaning of s.55(2)(a) of the EP(C)A. We will consider the issue of whether such a dismissal is fair or unfair in part 2 of this series.
In some situations, an employer's attempt unilaterally to vary an employee's contract of employment may in fact amount to a dismissal of the employee and an offer to re-engage him or her under a new contract of employment on different terms. In Hogg v Dover College, for example, the head teacher of the college wrote a letter to the head of its history department telling him that he was no longer department head, that he would continue to be employed on a part-time basis, and that he would be paid half his full-time salary. The EAT held that the effect of the letter was to dismiss him, constructively if not summarily, and to offer to re-engage him under a totally different contract of employment.
Conversely, an employer's attempt to dismiss an employee and to offer to reengage him or her under a new contract of employment on different terms may in fact constitute an attempt unilaterally to vary the employee's existing contract of employment. In Burdett-Coutts and others v Hertfordshire County Council, for example, the council wrote a letter to six of its employees informing them that some of their terms and conditions of employment would be changed in 12 weeks' time. The letter was also expressed to be "formal notice" of the changes, none of which was provided for in the employees' contracts of employment.
The High Court held that the letter was an attempt by the council unilaterally to vary the employees' contracts of employment, and that it was not entitled to do so. Although the minimum length of notice which the employees were entitled to receive to terminate their contracts of employment was 12 weeks, the letter could not be construed as a notice to terminate those contracts at the end of the 12 weeks and an offer to re-employ them from that date on the new terms set out in the letter.
DIVISIBLE CONTRACTS
Where an employee is employed under a contract of employment which is divisible into a main contract and a supplemental or collateral one, either the employee or his or her employer may terminate the latter by reasonable notice without thereby terminating the former.
In Land and another v West Yorkshire Metropolitan County Council, for example, two firefighters were employed by the council for 40 hours a week on "whole-time duties" and had been performing "whole-time/retained duties" when they were off duty. The latter were subject to a supplemental agreement, under which the firefighters were paid a retaining fee for being on call and an attendance fee when they were called out to deal with an emergency. After the council gave them three months' notice of a unilateral variation of their contracts of employment so as to exclude the supplemental agreement, they complained of unfair dismissal, while continuing to perform their "whole-time duties".
The Court of Appeal held that the firefighters were not dismissed, constructively or otherwise. Their contracts of employment were divisible into two parts, one of which related to "whole-time duties" and the other to "whole-time/retained duties", and there was no reason why the second part could not be terminated separately from the first. The council was entitled to terminate the second part by reasonable notice, which it gave, without affecting the first part, because the firefighters could do likewise. Their "whole-time/retained duties" had no connection with their "whole-time duties", being both voluntary and performed at a different location, and the supplemental agreement said nothing about their duration.
Ways of implementing changes: main points to note
Changing terms and conditions and the right to equal pay
If, following a variation or rescission of a contract of employment, any term of the contract becomes less favourable to the employee than a term of a similar kind in the contract of employment under which an employee of the opposite sex is or was employed, or the contract does not include a term benefiting that other employee and included in his or her contract, then the contract will be treated as so modified as not to be less favourable, or as including such a term, if:
(Section 1 of the Equal Pay Act 1970)
Mobility clauses and sex discrimination
A variation of a contract of employment so as to include a mobility clause, or its replacement by a new contract including such a clause - let alone invoking such a clause - may amount to unlawful indirect sex discrimination against the employee. In Meade-Hill and another v The British Council, a majority of the Court of Appeal held that the inclusion of a mobility clause in the contract of employment issued to a married woman when she was promoted, which obliged her to work wherever in the UK her employer might in its discretion require, was capable of constituting "indirect sex discrimination" against her, within the meaning of s.1(1)(b) of the Sex Discrimination Act 1975 (SDA), contrary to s.6(1)(b) of the SDA (which, in Lord Justice Millett's view, outlaws direct and indirect sex discrimination against employees in the terms on which they are offered promotion, as well as against job applicants in the terms on which they are offered employment).
As both a married woman and a secondary earner, the employee could not in practice comply with a requirement that she work wherever in the UK her employer might direct. And, given that a higher proportion of women than men are secondary earners, a higher proportion of women than men would find it impossible in practice to comply with a direction of their employer which involved their moving house.
But the significance of the Court of Appeal's decision in this case should not be overstated. All that the employer had to justify was its need to be in a position, if circumstances so required at any time in the future, to direct an employee in the employee's grade to work elsewhere in the UK - even if he or she could not in practice comply with such a direction. And, even if the mobility clause could not be justified in its existing form, it would be justifiable if it were to be modified so that it would not be invoked where the employee was unable in practice to move.
Written statement of changes in particulars
Whenever there is a change to any of the terms and conditions of employment, details of which are required to be included or referred to in a written statement of employment particulars which an employer is obliged by s.1(1) of the EP(C)A to give to an employee, the employer must at the earliest opportunity - and, in any event, no later than one month after the change - give to the employee a written statement containing details of the change (s.4(1) of the EP(C)A).
Where the change is in terms and conditions of employment relating to sickness absence, sick pay, pensions, or disciplinary rules, such a statement may refer the employee to the provisions of some other document which he or she has reasonable opportunities of reading in the course of his or her employment, or which is made reasonably accessible to him or her in some other way. And such a statement may refer the employee to the law or to the provisions of a collective agreement for a change in the length of notice which he or she is obliged to give or entitled to receive to terminate his or her contract of employment (s.4(3) of the EP(C)A).
CASE LIST
Allen v Marconi Space & Defence Systems Ltd 31.1.80 Court of Appeal
Aparau v Iceland Frozen Foods plc 9.11.95 EAT 196/93
Arthur H Wilton Ltd v Peebles and others 19.9.94 EAT 835/93
Associated British Ports v Palmer and others [1995] IRLR 258
Associated Newspapers Ltd v Wilson [1995] IRLR 258
Baynham and others v Philips Electronics (UK) Ltd and others 7.7.95 High Court
Brechin Bros Ltd v Kenneavy and another 18.10.82 EAT 373/82 and 374/82
Burdett-Coutts and others v Hertfordshire County Council [1984] IRLR 91
Burton Group Ltd v Smith [1977] IRLR 351
Cadoux v Central Regional Council [1986] IRLR 131
Calder and another v Rowntree Mackintosh Confectionery Ltd [1993] IRLR 212
Courtaulds Northern Spinning Ltd v Sibson and another [1988] IRLR 305
Cresswell and others v Board of Inland Revenue [1984] IRLR 190
Dryden v Greater Glasgow Health Board [1992] IRLR 469
Express Lift Co Ltd v Bowles [1977] IRLR 99
Glitz v Watford Electric Co Ltd [1979] IRLR 89
Greenaway Harrison Ltd v Wiles [1994] IRLR 380
Haden Ltd v Cowen [1982] IRLR 314
Hawker Siddeley Power Engineering Ltd v Rump [1979] IRLR 425
Higgins v Cables Montague Contracts Ltd 10.3.95 EAT 564/93
Hogg v Dover College [1990] ICR 39
Horrigan v Lewisham London Borough Council [1978] ICR 15
Janata Bank v Ahmed [1981] IRLR 457
Jones v Associated Tunnelling Co Ltd [1981] IRLR 477
Kent Management Services Ltd v Butterfield [1992] IRLR 394
Kenwood Ltd v Austin 5.8.92 EAT 388/90
Land and another v West Yorkshire Metropolitan County Council [1981] IRLR 87
Meade-Hill and another v The British Council [1995] IRLR 478
Meek v Port of London Authority [1918] 2 Ch 96
Miller v Hamworthy Engineering Ltd [1986] IRLR 461
National Coal Board v Galley [1958] 1 All ER 91
Norbrook Laboratories Ltd v Smyth 30.9.86 Northern Ireland High Court
Polymer Products Ltd v Pover 5.6.81 EAT 599/80
Prestwick Circuits Ltd v McAndrew [1990] IRLR 191
Rank Xerox Ltd v Churchill and others [1988] IRLR 280
Robertson and another v British Gas Corporation [1983] IRLR 302
Secretary of State for Employment v ASLEF and others (No.2) [1972] ICR 19
Sheet Metal Components Ltd v Plumridge and others [1974] IRLR 86
Simmonds v Dowty Seals Ltd [1978] IRLR 211
Stepney Cast Stone Co Ltd v Macarthur [1979] IRLR 181
S W Strange Ltd v Mann [1965] 1 All ER 1069
System Floors (UK) Ltd v Daniel [1981] IRLR 475
Trevillion v The Hospital of St John and St Elizabeth [1973] IRLR 176
Tucker and others v British Leyland Motor Corporation Ltd [1978] IRLR 493
United Association for the Protection of Trade Ltd v Kilburn and others 17.9.85 EAT 787/84
United Bank Ltd v Akhtar [1989] IRLR 507
White v Reflecting Roadstuds Ltd [1991] IRLR 331