Author: Madeleine Mould
Contracts of employment are binding on both parties but, if changes need to be made by the employer, what is the best way to do this? Usually the first step is to seek employees' agreement. If no agreement can be reached, the employer can attempt to impose changes unilaterally (risking constructive dismissal and breach of contract claims) or dismiss employees and offer them re-engagement on new terms and conditions (risking unfair dismissal claims). If an employer chooses to impose changes unilaterally, it is not always clear when an employee can be taken to have agreed.
Facts
In Abrahall & Others v Nottingham City Council & Anor, Nottingham City Council (NCC) sought to align the contracts of office workers with those of manual workers into a single status and grading system. This included standardised "spinal column points" whereby pay would increase annually until the employee reached the top of that grade. Previously, only the office workers had had contractual annual pay progression (largely regardless of performance).
Because not all unions had yet agreed the changes, in March 2010 NCC decided to introduce new contracts of employments. It offered a cash incentive for employees to agree to new terms and conditions which would ultimately incorporate the collective agreement, when reached. Those who did not accept the cash incentive/variation were dismissed and offered re-engagement on the new terms and conditions. It was not made clear to the office workers that they would be losing contractual annual pay progression in signing the new contract and the language of the accompanying explanatory booklet suggested that annual progression up the spinal column would be automatic. The collective agreement was then agreed in August 2010, and continued to refer to the spinal column points and automatic annual pay progression.
Shortly after this process, as a result of austerity measures, a pay freeze was introduced for 2 years which meant no annual pay progression. The unions strongly resisted the pay freeze initially but there was not enough support to take industrial action. NCC said that the alternative was compulsory redundancies. When NCC sought to continue the pay freeze beyond 2 years, the unions raised a collective grievance and the employees brought Employment Tribunal (ET) claims, claiming firstly that all employees were contractually entitled to the annual pay progression, and secondly that they were entitled to back pay because they had not agreed to the 2 year pay freeze.
ET and EAT decisions
The ET held that the employees did not have a contractual right to pay increases, but it went on to hold that if the pay increases were contractual, the employees had not implicitly accepted the pay freeze. By contrast, on appeal the Employment Appeal Tribunal (EAT) ruled that the new contracts accepted with the cash incentive were not clear enough to remove the office workers' contractual right to annual incremental pay increases. This had not been discussed with the unions, which of course would have objected strongly. As the purpose was to assimilate the contracts, the manual workers who accepted the changes had also gained the contractual right to annual pay progression. The variation the employees signed referred not only to the contract but to the explanatory booklet, which referred to annual pay progression. However, the EAT had held that those who had been dismissed and re-engaged had surrendered their contractual rights because the contractual documentation was slightly different and did not refer to the explanatory booklet.
