Can an employer ever unilaterally vary terms of an employment contract?

Can an employer ever unilaterally vary terms of an employment contract?

Employment contracts, like all contracts, generally need both parties’ consent to effect a variation. However, it is quite common for employment contracts to include “flexibility” clauses which purport to allow the employer to vary some or all of its terms unilaterally in some circumstances. The courts and tribunals have been very reluctant to allow employers to use these clauses and insist that any right of unilateral variation must be stated in “clear and unambiguous” terms.

In one recent case (Norman v National Audit Office) the employer had included a term which simply said the terms in the contract were “subject to amendment” and then provided that any change had to be notified to the employees. The employer wanted to reduce the amount of an additional leave provision by half a day and also wished to reduce sick pay from six months’ full pay and six months’ half pay to five months’ full pay and five months’ half pay. The Employment Appeal Tribunal (EAT) said the words “subject to amendment” came “nowhere near” to the standard of being clear and unambiguous. In effect, the EAT said that terms of a contract can always be amended by agreement but much more than these words was needed to allow an employer to impose a unilateral change.

There are a number of older examples of employers not being allowed to rely upon flexibility clauses. For example, in one case, Land Securities v Trillium [2005], it was held that a clause in a contract which required an employee to perform “any other duties which may be reasonably required of you” did not allow an employer to require the employee to undertake a different job when her role had become redundant. The EAT held that the clause did not mean that a balance had to be struck between the employer’s good commercial reasons for the change and the employee’s rights but rather meant that any change had to be reasonable from the employee’s perspective.

There has, however, been one important case which shows that employers can sometimes succeed when they make unilateral changes. In Bateman v Asda Stores [2009], the contract provided “The company reserves the right to review, advise, amend or replace the contents of this handbook” and this was held to be sufficient for the employer to impose changes in relation to pay after extensive consultation and where only one in six employees were financially worse off because of the change.

Nonetheless, this is rare and the Norman v National Audit Office case is a useful reminder that employers must always proceed carefully and should seek advice if they wish to rely upon a flexibility clause.

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