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Changing terms without consent: Ruling makes it possible

22 April 2010

Like most types of contracts, employment contracts can usually only be varied by consent.

In Bateman v Asda Stores Ltd the Employment Appeal Tribunal (EAT) had to consider whether a general clause purporting to give Asda the right to change terms and conditions allowed it to introduce a new pay scheme.

Background to case

Asda wanted its entire store staff to operate under the same pay structure. This meant altering the terms and conditions of 18,000 staff. Following extensive consultation, 9,300 employees agreed to move to the new structure – the remaining employees had their terms unilaterally changed. Seven hundred employees brought Employment Tribunal (ET) claims for unlawful deduction from wages, breach of contract and, in a few cases, unfair dismissal.

Tribunal’s findings

At the ET, Asda contended that it was entitled to alter contracts in this way because its staff handbook stated that Asda ‘reserved the right to review, revise, amend or replace the contents of this handbook, and introduce new policies from time to time reflecting the changing needs of the business’. The handbook contained a specific section on pay and referred to the old and new pay structures.

The ET confirmed that whilst a variation of contract usually requires the consent of both parties an employer can reserve the right to unilaterally vary contractual terms even in the event that employees suffer some financial loss as a result provided that the employer takes steps to ensure that mutual trust and confidence is not breached.

The ET therefore held that the wording of the staff handbook permitted Asda to impose its new pay and work structure without obtaining consent. As Asda had extensively consulted with its employees prior to imposing the changes, the ET found that no breach of mutual trust and confidence had taken place. It also found that, since there was a clear and unambiguous power to vary contractual terms to reflect the changing needs of the business, the imposed changes were permitted.

Appeal

The employees appealed to the EAT, arguing that Asda could not rely on the conditions in the staff handbook to justify imposing the new regime and that Asda required the consent of all employees. The Claimant's appeal was rejected.

The EAT held that a broad contractual right to alter terms and conditions of employment in line with business needs as contained in Asda's staff handbook can permit an employer to make unilateral changes to contractual terms, including rates of pay and hours of work, without the need for the express consent of employees, provided that the changes are properly implemented and the employer acts properly in accordance with the implied duty to maintain trust and confidence.

Practical impact

Historically, clauses conferring a general right to vary have been considered to have limited value. This case however suggests that provided the wording is sufficiently wide and provided an employer has followed due consultation it may be possible for employers to rely on such clauses to make significant changes to terms and conditions even where those changes relate to arguably the most important clause of all – pay!

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