Employee Handbooks and Unilateral Contractual Variations

12.3.2010

The Employment Appeal Tribunal (EAT), in Bateman and others v Asda Stores Limited upheld a previous  Employment Tribunal decision that Asda could legitimately introduce new pay terms without the consent of its employees by relying on a statement in its staff handbook that reserved the right to make unilateral variations to the terms of its employees’ contracts of employment.

The case

Asda wanted all store staff to be on the same pay structure. This meant that it was necessary to change the pay terms of nearly 18,000 employees so that they fell in line with the new pay structure applicable to the vast majority their staff.

Asda initiated a consultation process prior to imposing the changes.  9,300 employees who were paid according to the old structure moved to the new structure voluntarily. The remaining employees, however, had their pay terms unilaterally changed.

To justify the imposition of change without consent, Asda pointed to a provision in the staff handbook which read:

 “Your Contract”: “The Company reserves the right to review, revise, amend or replace the content of this handbook, and introduce new policies from time to time to reflect the changing needs of the business…”
The handbook also stated certain sections of it, including those relating to pay and the right to change terms, formed part of the employees’ contracts of employment.

Six test cases were eventually taken to the Tribunal

The employees argued at this stage that: (1) only non-contractual policies could be varied; (2) consent of the affected employees was required for changes to pay ; and (3) having entered into a consultation process (rather than immediately imposing the changes) Asda had effectively admitted that the wording  did not permit a unilateral change and required consent.

The Tribunal acknowledged that ordinarily, obtaining employee consent would be required as the introduction of a new pay structure is a matter of fundamental importance to the employment relationship.
However the Tribunal held that the conditions in the staff handbook were incorporated into the employees’ contracts of employment. The wording of the staff handbook was in its opinion clear and unambiguous and this allowed Asda to reserve the contractual right to vary terms in the employees’ contracts of employment without their consent.

The employees appealed to the EAT

It was argued by the employees at the EAT that the Tribunal ought to have taken into account that most of the employees were ill-educated, even illiterate and innumerate. They could not have anticipated Asda reducing their pay or changing their working hours without their consent. Asda therefore had a duty to maintain trust and confidence and ought to have explained what the provision meant.

These arguments were rejected by the EAT.

The background of the affected employees was not an argument put forward at the initial Tribunal hearing thus no finding on that issue had been made and consequently there could be no appeal on it.
The EAT held that the provision was wide enough to cover the changes to the pay structure. The wording was clear and unambiguous permitting Asda to enforce changes unilaterally without obtaining the employees’ consent.

Implications of the decision

When analysing this decision it important to note that Asda had taken steps to ensure no employees suffered a reduction in pay as a result of the change in pay structure and this was duly noted by the EAT.
Consequently, this decision should not be viewed as authority for employers to unilaterally reduce pay in reliance on a clause such as the one found in the Asda staff handbook.
Asda imposed a change related to its pay structure and the EAT held that it did not need to consult employees as it was entitled to change the handbook terms unilaterally without consent.
In practice an employer would still be best advised to consult its employees about any change in pay structure or pay working practices. Notwithstanding any clause in the handbook, failing to do so is, more often than not, likely to result in a breach of the term of mutual trust and confidence.
Such a breach entitles the employees to resign and claim constructive dismissal as well as unlawful deduction of wages and breach of contract for any loss suffered.
Provided the wording used in staff handbooks is clear and unambiguous, and the employer ensures trust and confidence is maintained throughout the process, unless successfully overturned, the case provides authority for employers to change contractual terms of the staff handbook without the express consent of the employees concerned.

This bulletin is for general guidance purposes only and should not be used for any other purpose.
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