The Difficulties of Imposing Changes to Terms and Conditions

Two recent cases have considered whether an employer was entitled to impose contractual changes on employees, relying on a contractual right to vary.

In Sparks v Department for Transport, the employee handbook provided that any changes to employees’ terms and conditions should be consulted upon with the union and if no agreement was reached, detrimental changes could not be made. The High Court considered whether the terms of the employer’s absence management policy were contractual and if so, whether the employer could rely on the provision in the employee handbook to change the trigger point for action under the procedure. 

The handbook stated that Part A, which contained the absence management policy, was contractual. The High Court held that despite this, not all of Part A was contractual. Many sections were clearly intended as guidance and were not apt for incorporation. However, the trigger provisions in the absence management policy were sufficiently clear and concise to be contractual and were therefore incorporated into employees’ employment contracts. The employer could only rely on the contractual right to vary if the changes to the trigger points were not detrimental. Unsurprisingly, the High Court rejected the employer’s arguments that these changes were in fact beneficial as employees benefitted from sickness issues being addressed at the earliest opportunity. Instead it found that they were detrimental as employees would face the possibility of formal sanctions at a much earlier stage.

In Norman v National Audit Office, the EAT considered whether the employer could rely on contractual variation clauses in order to reduce privilege leave and sick pay. The offer letter stated that conditions of service included relevant sections of the HR Manual which were subject to amendment. Changes would be notified. The HR Manual also included a settlement of disputes provision which stated that it would try to reach agreement with trade unions before implementing changes and changes would not be implemented whilst negotiations were ongoing, unless management considered them essential to its operations.

The employment tribunal ruled that the two provisions taken together gave the employer the right to unilaterally vary the terms. The EAT disagreed and overturned the tribunal decision. Any right of unilateral variation has to be stated in clear and unambiguous terms. The words “subject to amendment” came nowhere near this standard and established nothing more than the potential for amendment. Nor did the word “notify” establish the right for the employer to make a unilateral change. It did no more than stipulate that employees would be informed of any changes. 

In addition, the settlement of disputes provision was not capable of being incorporated into individual employment contracts and even if it was, it only permitted variations which the employer considered “essential” to its operations. Here the changes were imposed as a result of frustration or an impasse in negotiations and not because the changes were essential to its operations. 

These cases demonstrate the difficulty employers face if they seek to rely on a contractual right of variation to impose changes to terms and conditions. Courts are reluctant to allow employers to rely on such clauses and they will only do so where the clause is drafted in clear and unambiguous terms and the precise changes the employer is seeking to make are permitted by the clause. Even then employers should consult extensively with employees and try to obtain their agreement to the changes in the first instance. Failure to act reasonably when seeking to exercise a contractual variation can give rise to a breach of the implied term of trust and confidence.

Employers should also think very carefully about which parts of the employee handbook are intended to be contractual and which are not, bearing in mind that they will not be able to change contractual terms without the employee’s agreement (unless there is a very clear contractual right to do so and even then it will not be easy).   

Procedural provisions and guidance are not apt for incorporation in any event and will not be contractual even if they are stated to be.