One of the first things you learn at Law School is the key principles of the law of contract. I can remember our tutor pointing out time and time again (we were slow learners) that we had failed to answer the questions correctly because we had not first asked whether there was a valid contract. Contracts, very basically, exist when one party offers something – a car, a book, a job – to another party who then accepts it. It is then pretty much accepted that the parties agree terms upon which the car will be sold or the job performed. Until recent times it was also pretty much accepted that one party could then not unilaterally vary the agreed terms. Terms could be changed, provided the other party agreed to them.
In Wandsworth London Borough Council v D’Silva [1998] IRLR 198 the principle was established that an employer could reserve the right unilaterally vary a contractual term. However, the implication was that a variation clause capable of having unreasonable results is likely to be subject to restrictive interpretation by the courts.
That, it seems to me, has been turned on its head following the decision of the Employment Appeal Tribunal in Bateman & Others v Asda Stores [2010] EWCA Civ 80.
In August 2007 some of Asda’s employees were working on a pay structure called “standard rate”. Asda wished to amend the contracts to bring them onto the more up-to-date structure known as the “top rate”. This would have brought them into line with their colleagues.
Extensive consultation followed. About 9,300 employees transferred voluntarily and about 8,700 transferred involuntarily. Asda maintained that they could change the contracts without agreement because the staff handbook stated that the Company:-
“reserve 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”.
Following this, six test claimants brought claims for unlawful deductions form wages.
The Tribunal stated that the first issue for them was whether Asda needed the consent of the employees to make amendments having regard to the wording of the handbook.
The Tribunal held that the Handbook permitted Asda to make the changes and therefore it was not necessary for them to consider the remaining issues (implied/explicit consent & whether an unlawful deduction had been suffered).
The central question according to the Tribunal was whether the new regime could be introduced without obtaining consent of the employees.
The Claimants argued the following points: -
a) The power to vary was limited to non-contractual policies.
b) Any proposed variation to pay would require consent
c) Therefore, on the facts Asda did not do what was allowed by the variation clause.
d) The fact that Asda never acted expressly stated that they were exercising their right in accordance with that clause supported the Claimants’ interpretation of it.
The Tribunal accepted that Wandsworth established the principle that an employer can reserve the right to unilaterally vary a contractual term.
They also found that in certain cases a unilateral variation may break mutual trust and confidence, by being applied capriciously or unfairly; or by being introduced without consultation. However, it was found that those issues not relevant to the present case.
The tribunal held that consent was not required.
The Claimants appealed and put forward the following arguments: -
That the Tribunal had failed to apply the proper principles of construction set out in Investec Compensation Scheme Limited v West Bromwich Building Society [1990] 1 WLR 896 – the relevant meaning is the meaning that the document would convey to a reasonable person. They also referred the Employment Appeal Tribunal (EAT) to Autoclenz Ltd v Belcher [2009] EWCA Civ 1046 – proposition that sometimes it is necessary to consider whether the written contract represents the true intentions of the Parties. The argument was that the employees could not conceivably have intended to leave to the unilateral discretion of Asda the right to reduce pay, increase or decrease hours, cut holidays – without the need for consent or indeed notice. The submission was rejected on the basis that no evidence was put before the Tribunal to justify such a finding.
Had Asda intended the wording of the handbook to have the meaning found by the Tribunal then , in order to maintain its duty of trust and confidence, it should have brought home to the employees what that clause really meant. That submission was rejected because before the original Tribunal the Claimants had expressly conceded that there was no issue in respect of trust and confidence.
The final argument, and the one I find most compelling, was that the Tribunal was wrong to find the words in the handbook were “clear and unambiguous”. The power to review, revise, amend or replace did not apply to terms and conditions but merely permitted alterations to the contents of the handbook.
The EAT held that the relevant paragraph conferred two rights on Asda. They were to: -
(i) Review the contents of the handbook
(ii) Introduce new policies
“Contents” of the handbook included sections entitled “my pay”, “sick pay” and “my hours of work” all of which changed under the new regime.
The EAT concluded that the relevant wording of the handbook was clear as showing that Asda was entitled to review and to change the contracts of its employees without obtaining prior consent.
The decision appears to make it plain that a carefully worded clause in a staff handbook can enable an employer to make fundamental changes to the contract.
That to me ignores some of the special features of an employment contract. In particular a prospective employee is often handed a contract – terms are not usually negotiated. Indeed, often the staff handbook is provided once the job has been accepted. There is, in short, no equality of arms. When the job market is weighed heavily in favour of the employer this is even more so. Is it really fair to then allow an employer to effectively make any changes to the contract that he sees fit? I think not. We have supposedly moved away from the old concept of master and servant. With this decision I am not so convinced that we have.
Some people have suggested that the case is very specific to its facts. In particular, the issues that the claimants did not offer any evidence to support. However, it seems to me that when advising employees in a similar situation the advice has to be that there is a very real risk that a Tribunal will find that their employer can, without their consent, reduce their pay, increase or decrease their hours or otherwise make key changes to the terms and conditions of their employment.
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