And The Law Says

Can a general flexibility clause be used to unilaterally vary a contract?

February 24, 2015

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(Norman and others v National Audit Office)

The appellants worked for the National Audit Office (NAO), and were members of the Public and Commercial Services Union (PCS). A section in the appellants’ employment contracts covered their entitlements to privilege leave (a type of additional leave) and sick pay. The NAO wished to reduce the privilege leave from 2.5 days to 2 days, and reduce paid sick leave from 6 months’ full pay followed by 6 months’ half pay, to 5 months’ full pay followed by 5 months’ half pay. For the reduced paid sick leave, the NAO wished to make this subject to a maximum of 10 months’ pay for sickness absence in any 4-year period.

The NAO sought to agree changes to the appellants’ employment contracts with PCS. When PCS refused to consent to the changes, the NAO implemented the changes without union support, and informed the appellants of the changes by letter and policy circular. In doing so, the NAO sought to rely on a general flexibility clause in the employment contract which stated that their terms and conditions were “subject to amendment” and that any changes would be “notified” to staff, combined with the “settlement of disputes” section of the HR manual which stated that “changes to working practices or terms and conditions will not be implemented whilst negotiations are taking place, or whilst the issue is under referral to ACAS, unless management considers this essential to the operation of the NAO”.

The appellants brought the matter to the tribunal for breach of contract, however, their claim was rejected. The tribunal held that the combination of clause 2 and the “settlement of disputes” section of the HR manual gave the NAP the right of unilateral variation. The appellants then took the matter forward to the EAT.

The EAT allowed the appeal and reinstated the employees’ original terms of employment. It found that the changes were not incorporated into the employment contracts because “subject to amendment” came “nowhere near” the standard of being clear and unambiguous, and established nothing more than the potential for amendment. It also held that the ability to notify changes did not confer any right to make unilateral changes. In addition, the EAT held 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 of condition of service. Even if the wording had permitted the changes to be incorporated into the contracts, the EAT reasoned that the changes were not incorporated on the facts.

Jo Tindall Says: This case serves as a useful reminder of the difficulties in relying on general flexibility clauses to make significant contract changes. Generally, only minor administrative changes and other small changes can be made within the scope of a general flexibility clause.

It is advisable to include specific flexibility clauses where changes may be required to key terms such as hours, place of work or job role. Even then, whilst these are undoubtedly a useful starting point, employers should be aware that they may be limited by the operation of implied terms, such as the obligation not to breach mutual trust and confidence.

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