Beware of unintentionally creating the right to a pay increase
Author: Antonia Blackwell
The recent case of Hershaw and ors v Sheffield City Council is a timely reminder to employers to be careful about how and what they communicate to their employees.
We look at the case and consider the learning points to come out of it.
Brief facts of the case
Sheffield City Council (the Council) employed a group of market patrol officers. The Council decided to vary their pay following implementation of a Single Status pay and grading review by the Council. As a result the group of employees accepted the variation (which resulted in lower pay) under duress and raised an internal appeal. However, no outcome to the appeal was ever sent to them and their pay did not change. The group therefore raised a formal grievance.
The grievance was investigated by an HR officer from a team within the Council. Following the investigation, she wrote to the employees setting out the original appeal body's decision to re-grade them to a higher grade resulting in them being entitled to higher pay levels. A separate letter advised of the new increased pay.
The Council then realised that the letter from the HR officer was mistaken and reconvened the appeal panel to determine what had actually been decided. The panel confirmed that what had been decided was in fact a lesser increase than the one the HR officer included in the letter. The Council therefore stated that the letter could not be relied upon as the HR officer did not herself have authority to approve a pay increase.
Although the employees continued to work for the Council their pay remained unchanged and they issued claims in the employment tribunal for unlawful deduction from wages.
The Employment Appeal Tribunal (EAT) decided that the letter from the HR officer did create a contractual right to higher pay and therefore could bind the Council. Although the purpose of the letter had been to record the outcome of the grievance process, the letter set out the Council's pay offer in answer to the grievance and was sent by someone that, viewed objectively, was authorised to make that communication.
The EAT also found that the employees did not have to formally accept the higher pay offer in order to bind the Council - it was enough that they continued to work for the Council once the grievance response had been sent to them. The pay rise took effect the moment that the employees, notified of the pay rise, continued in the work they had been doing previously.
However, the issue of whether the letter was a mistake, and therefore void, has been sent back for a different employment tribunal to consider. Depending on the decision of that new tribunal, the employees may yet lose the potential pay increase.
The case provides a useful reminder to employers to be careful about what and how they communicate with their employees in order to avoid inadvertently creating contractual rights. Managers should be reminded that any promises or commitments they give, whether orally or in writing, which an employee then relies upon by continuing to work, have the potential to bind the employer and should only be made where the employer has given its express consent.