CIPD: Choosing the right words for contract amendments #HR #Law #Management

CIPD: “Employers can change terms post-appointment with careful drafting. In the case Norman v National Audit Office, the Employment Appeal Tribunal had to decide whether a letter of appointment gave the employer the right subsequently to vary the terms of employment unilaterally.

Under the Employment Rights Act 1996 (ERA), all employees must have a written statement of the terms and particulars of their employment. Where changes are made to the employment contract, the employees affected must be given “a written statement containing particulars of the change”. If an employer fails to provide a statement of the changes, or provides one which is inaccurate or incomplete, an employee may make a tribunal claim, seeking a declaration which confirms the particulars as they stand, or amends them, or substitutes others as the tribunal thinks appropriate.

And case law has established that if an employer wishes to reserve the right to make a unilateral change to employees’ contracts of employment, clear and unambiguous language must be used.

Following a review of their existing terms and conditions, the claimants in this case were informed by letter, and through a policy circular, of reductions in their ‘privilege’ leave from two and a half days to two days, and in their paid sick leave from 12 to four months.

The employer’s appointment letters said that the employee’s conditions of service would be “subject to amendment: any significant changes affecting staff in general will be notified by management circulars … while changes affecting your particular terms will be notified separately to you”.

When the changes to their contracts were communicated to them, neither the unions involved or the individual claimants in the case consented to them, despite extensive consultations and negotiations. Consequently, some 80 employees brought tribunal proceedings against the employer, complaining of breach of contract. They argued that their terms and conditions relating to paid sick leave and privilege holidays remained the same and had not been affected by change.

The employment tribunal ruled that the term in the letters of appointment enabled the employer to vary the contract unilaterally and made a declaration to that effect. The claimants appealed.

The Employment Appeal Tribunal had to decide whether the employer’s appointment letter clearly and unambiguously gave the organisation the right to vary the contracts unilaterally in the way it had.

The EAT, overturning the tribunal’s decision, said the employer did not have this right. In fact, the appointment letters did no more “than simply point out that the clauses can be amended and that, if they are amended, and the changes are significant and of general effect, they will be notified by broadcast methods such as circulars or orders and, if they are in an individual context and of less significance, by specific notification or information.”

The EAT ruled that the wording in the contracts came nowhere near being clear and unambiguous because it said nothing about what the mechanism of amendment might be. Terms could, for example, be amended with the agreement of the employee. All the clause said was that there could be amendments and, if there were, the employee would be notified of them. It did not establish the right for the employer to make changes unilaterally and without the consent of the employee.

The EAT allowed the appeal, quashed the declaration made by the tribunal, and substituted the original terms and conditions in relation to sick pay and privilege days.

The outcome in this case contrasts with the ruling in Bateman v Asda where the relevant words were, “The company reserves the right to review, revise, amend or replace the content of this handbook ….” Those words were decisive when it came to an interpretation of the contract, and they granted the employer a comprehensive right to vary the contract terms.

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