Changing terms and conditions: General flexibility clause could not be relied on to unilaterally vary employment - DAC Beachcroft

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Changing terms and conditions: General flexibility clause could not be relied on to unilaterally vary employment

Published On: 17 March 2015

Changing terms and conditions: General flexibility clause could not be relied on to unilaterally vary employment

The appellants worked for the National Audit Office (NAO) and were members of the Public and Commercial Services Union (PCS). Their offer letters stated that "detailed particulars of conditions of service are to be found in the relevant sections of the HR manual of the NAO. They are subject to amendment; any significant changes affecting staff in general will be notified by Management Circulars (MCs), Policy Circulars (PCs) or by General Orders (GOs), while changes affecting your particular terms and conditions will be notified separately to you" (our emphasis).

Certain sections of the HR manual were incorporated into the contracts, including one titled "Settlement of disputes" which, in brief, stated that union agreement would be sought before implementing any changes which affect staff, unless management considered this essential to the operation of the NAO. Another section dealt with the appellants' entitlements to privilege leave (a type of additional leave) and sick pay.

The NAO wished to reduce privilege leave from two and a half to two days. It also wanted to reduce paid sick leave from six months' full pay followed by six months' half pay to five months' full pay followed by five months' half pay (subject to a maximum of ten months' pay for sickness absence in any four-year period).

The NAO sought to agree changes with PCS. When PCS refused to consent to the changes, the NAO implemented the changes without union support and informed the employees of the changes by letter and policy circular. In doing so, the NAO sought to rely on what it regarded as a general flexibility clause highlighted above, in combination with the "Settlement of disputes" section of the HR manual.

Test cases for breach of contract were bought by the affected employees seeking to assert that their existing terms and conditions should remain unchanged. The tribunal found in favour of the NAO, holding that the combination of the general flexibility clause and the "Settlement of Disputes" section of the HR manual gave the NAO the right of unilateral variation.

The EAT overruled the tribunal's decision finding that the term did not enable the employer to vary the contract unilaterally: the term was unclear and ambiguous.  The EAT found that the "Settlement of Disputes" section of the HR manual was not capable of being incorporated into the contracts because it was not a particular  condition of service, relating to the collective bargaining structure. The EAT reinstated the employees' original terms of employment.

What this means for employers:

As we have already seen any purported right to vary a contractual clause will be scrutinised carefully by the courts. This case illustrates that terms and conditions stated to be "subject to amendment" will not give an employer a unilateral right to vary terms. Neither will a statement that employees will be notified of any change. Employers can continue to use general flexibility clauses to make reasonably minor and administrative changes, or to vary contractual provisions to make legislative changes with which the employer is required to comply.

Norman and others v National Audit Office UKEAT/0276/14

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