Broadly speaking, there are three options for an employer who wants to make changes to employment contracts, which are:
- Obtain employees’ agreement to the change
- Give notice to terminate the current contract before re-engaging on new terms
- Unilaterally changing the contract without agreement from employees
Assuming that employees don’t resign in response to a unilateral change, an employer using this last option will often rely on employees continuing to perform their jobs as their implied acceptance to the change. However, a recent decision by the Court of Appeal has cast some doubt on the extent to which acceptance can be implied in this way.
Changes To Employment Contracts
Abrahall and others v Nottingham City Council and another
This case arose out of a new pay policy that Nottingham City Council (the Council) had introduced which, according to the Court of Appeal, gave employees a contractual entitlement to an annual pay rise. Shortly after the new pay policy was introduced the council announced a 2 year pay freeze. During this time there was no industrial action and none of the affected employees raised a grievance about the freeze. It was not until the Council proposed an extension to it that the unions raised a collective grievance on behalf of the employees and a tribunal claim was made for unlawful deduction from wages.
The Council’s defence to the claim was that by continuing to work for two years under the pay freeze and not raising an objection to it, the employees had accepted a variation to their contractual right to an annual pay rise. However, the Court of Appeal did not agree with this and awarded the employees back pay for what they should have earned during the two years had it not been for the pay freeze. They also set out some guidance as to when acceptance to a variation of contract is likely to be inferred, including:
- The issue should be determined objectively.
- Acceptance of a variation of contract should only be inferred where an employee’s conduct allows no other reasonable explanation save for acceptance.
- Where the variation is wholly disadvantageous to the employee, acceptance is less likely to be inferred.
- Collective protest (by a union for example) may suffice as objection to the variation even if the individual employees themselves say nothing.
- An employer’s reliance on inferred acceptance will be weakened where the employer represented that there was no variation of contract and thus that acceptance was unnecessary.
Comment
The fact that the employees in this case were awarded back pay despite having raised no objection over the two years, may come as a surprise to some employers and serves as a useful warning to employers, considering making changes to contracts of employment, to think carefully about how to go about doing so.
How Nelsons Can Help
For further information on making changes to contracts of employment or any other HR employment law issue, please contact our employment law specialists on 0800 0241 976 or via our online form.