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EVERYDAY LAW: Employer and employee contract

Cecil McCarthy

EVERYDAY LAW: Employer and employee contract

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An employer is not allowed to unilaterally alter fundamental provisions of a contract of employment except where the contract contains provisions which permit the employer to vary the terms without the employees’ consent.

In the absence of such provisions, the employer should seek the consent of the employee. This is especially recommended where the alteration is to the employees’ disadvantage.

The issue of variation of contractual terms where there was a power to vary reserved in an employee handbook was discussed in the English case of Bateman and Others vs Asda Atores Ltd. [2010].

In that matter, Asda Stores wanted to ensure that staff were employed on the same pay and work structure and this meant that those on the old regime had to transfer to a new one.

Some 9 330 employees agreed but some did not; and when the new regime was imposed on them, six brought claims for unauthorised deductions from their wages contrary to the Employment Rights Act 1996.

Asda Stores contended that they were entitled to impose new conditions because the staff handbook stated that 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”. The handbook also provided details of pay and other conditions of employment.

The conditions in the staff handbook were incorporated in the claimants’ contracts of employment.

The Employment Tribunal held that the above provisions permitted Asda Stores to impose the new regime without obtaining further consent from the employees.

The claimants appealed to the Employment Appeals Tribunal (EAT), contending that Asda Stores could not rely on the conditions in the staff handbook and that they required the consent of all employees.

The EAT agreed with the Employment Tribunal that an employer could reserve to itself the contractual power to vary terms in a contract of employment without consent by reserving the ability to change a particular aspect of the contract unilaterally.

The EAT approved the following statement of Lord Woolf in the case of Wandsworth London Borough Council vs D’Silva [1998]:

“The general position is that contracts of employment can only be varied by agreement. However, in the employment field an employer, or for that matter an employee, can reserve the ability to change a particular aspect of the contract unilaterally by notifying the other party as part of the contract that this is the situation.

“However, clear language is required to reserve to one party an unusual power of this sort. In addition, the court is unlikely to favour an interpretation which does more than enable a party to vary contractual provisions with which the party is required to comply.

“If, therefore, the provisions of the code which the council were seeking to amend in this case were of a contractual nature, then they could well be capable as the counsel contends. In relation to the provisions as to appeals, the position would be likely to be different.

“To apply a power of unilateral variation to the rights which an employee is given under this part of the code could produce an unreasonable result, and the courts in construing a contract of employment will seek to avoid such a result.”

The EAT held that the language used in the handbook clearly showed that Asda Stores was entitled to unilaterally alter the contents of the handbook.

It further held that the language conferred two rights: the right to change the handbook, and to introduce new policies.

Cecil McCarthy is a Queen’s Counsel. Email: [email protected]