25 April 2018
When an employer unilaterally varies the contract of employment, an employee has a number of options. The employee can choose to accept the change and move on, in which case the change will alter the terms of the contract. The employee can refuse to accept the change. In the absence of the contractual right to change the terms unilaterally, any attempt to do so is likely to fail. What happens if the employee remains silent? In the law’s typical fashion, the answer is that “it depends”. It depends on the context and what the employee said and did when faced with the changes.
This issue was recently considered by the Court of Appeal in Abrahall v Nottingham City Council. In 2011, the Council decided to impose a two year pay freeze. This suspended the usual incremental pay progression that staff had enjoyed. The relevant trade unions opposed the Council’s approach. The Council claimed that there was no alternative (since if the proposal was not implemented, a number of redundancies would be required). The Council proceeded with its decision not to implement any pay progression. The unions advised the Council that they vehemently opposed the pay freeze in the course of discussions, but no formal dispute or grievance was raised. Two years later, the Council imposed another pay freeze. This time a number of employees argued that they had the contractual right to a pay increase and so the failure to implement it amounted to an unlawful deduction. Claims were accordingly raised.
Initially, the Employment Tribunal dismissed the claims. While there was a degree of complexity in terms of the contractual position, since there were different groups of staff, the Employment Tribunal determined that none of the employees had a contractual right to a pay increase and so the claims were dismissed. In any event, the Employment Tribunal considered whether the employees had in any event agreed to the change to their contract by continuing to work after the Council had implemented their decision. The Tribunal identified the relevant question as whether in the particular circumstances of this case, continuing to work amounted to an unequivocal acceptance of the proposed variation to the contract. The Tribunal concluded that there was nothing in the employees’ actions or inactions that could have resulted in agreement – impliedly or expressly – to the change to their contract.
The legal issue
The matter ultimately ended up at the Court of Appeal which had to consider the question of whether or not the employees had implicitly accepted the Council’s unilateral change to the terms and conditions. The Court of Appeal did not consider this a particularly easy question to determine in the circumstances, but the legal analysis is helpful.
Both the Claimants’ and Respondent’s extreme positions were rejected. Thus, for the Claimants it was argued that continuing to work following a contractual pay cut could never constitute acceptance of the change. That was rejected given the authorities in this area which have, on occasion, held that it is possible for such conduct to result in an implicit acceptance of the change. Equally, however, the Respondent’s argument that continuing to work following a unilateral change to the contract should always amount to acceptance, was rejected. The Court noted that the question as to what inferences can be drawn depends on the particular facts in each case.
The Court stated that any inference that is being deducted must arise unequivocally. This means that if continuing to work could give rise to an inference of refusal to accept the change on the facts, it could not be treated as acceptance of the altered position. The Court stated that the full factual background should be considered and protest or objection at a collective level could potentially by itself indicate that there was no acceptance of the change to the contract. The Court did consider the authorities in this area which suggested that after a “period of time” an employee may be taken to have accepted the changed contractual position (in the absence of express rejection). The Court noted that it is difficult to identify the precise point in time when acceptance arises and that this is likely to be arbitrary.
The Court looked at the facts of the case. It emphasised that contractual issues depend on objective conduct looked at within the context of each case. The Court found the issue to be challenging given the fact that the unions had made no significant continuing objection to the pay freeze – formally or informally. The Court would have found it far easier had the unions’ refusal to accept the Council’s decision been made clear at the point the Council implemented their decision. For example, the employees could have formally stated that the Council’s attempt to change their contract unilaterally was not accepted and that the decision to continue to work was not to be taken as acceptance of the position. That did not happen. However, given that the variation was wholly disadvantageous to the employees, that it was implemented unilaterally by the Council and the unions had protested, the Court decided that it was difficult to see how the Claimants’ continuing to work could be taken as an unequivocal acceptance of the position.
In these cases, the first step is for employers to consider the contractual position carefully. This can be complex and will depend upon the source of contractual terms (and potentially the subsequent conduct of the parties). It is better to seek legal advice at the earliest opportunity to ensure that the full contractual position is considered and a strategy is developed. The next step is to identify whether the proposed action would amount to a breach of contract or not. Consideration needs to be given to the options open to the employer in the particular circumstances. It may well be possible to reach agreement with staff to alter the contractual position, but if not, care is needed since, as the above case shows, silence does not necessarily imply consent – even two years down the line. Beware!
As ever, give your BTO employment law expert a call to help you navigate the issues in this area.
The full judgment can be read here: Abrahall v Nottingham City Council
Contact: David Hoey, Partner firstname.lastname@example.org T: 0141 221 8012