Michelmores, Law, Employment, Solicitor, Lawyer
Tom Stenner-Evans
Posted on 16 Feb 2015

Employment Law Update – Changing Contract Terms / Age Discrimination / New Compensation Limits

Case Update

Changing Contract Terms and General Flexibility Clauses

Norman and others v National Audit Office UKEAT/0276/14

The Facts

The employees worked for the National Audit Office (NAO) and each had an offer letter which contained the following clause:

"The following paragraphs summarise the main current terms and conditions of your employment in the NAO. Detailed particulars of conditions of service are to be found in the relevant sections of the HR manual of the NAO. They are subject to amendment; any significant changes affecting staff in general will be notified by Management Circulars (MCs), Policy Circulars (PCs) or by General Orders (GOs)…"

The relevant section of this clause was that the terms were "subject to amendment". The NAO sought to make changes to the employees' terms, specifically to reduce their sick pay and special leave entitlement. Their union refused to agree the changes and the NAO decided to unilaterally impose them regardless, relying on the clause above.

Employment Appeal Tribunal (EAT) Judgment

Whilst the Tribunal initially held that the NAO could rely on the clause to impose the changes, the EAT disagreed and overturned the decision on appeal. The key factor was that the words "subject to amendment" came "nowhere near" the standard of being clear and unambiguous and established nothing more than the potential for amendment. The EAT also held that the word "notify" had no particular significance and did not establish the right to make unilateral changes.

Tips for Employers

As a general rule, any change to employment contracts must be mutually agreed. This case is a useful reminder that courts will scrutinise contract wording very closely and a right of unilateral variation must be clear and unambiguous. Tribunals will rarely enforce a general clause to vary contractual terms.

Indirect Age Discrimination

Braithwaite and others v HCL Insurance BPO Services Ltd UKEAT/0152/14 and UKEAT/0153/14

The Facts

HCL Insurance had acquired employees on widely varying employment terms following a TUPE transfer, so that there was disparity between its existing staff and the new transferring employees. After suffering financial loss, they decided to harmonise terms and conditions by introducing new employment contracts for staff.  The change put the appellant employees at a particular disadvantage compared to their younger colleagues as they, as older workers, had built up greater entitlements by virtue of their longer service and these more valuable contractual rights were being abolished.

Judgment

The Employment Tribunal agreed that the requirement to sign up to the new terms was a 'provision, criterion or practice' which disadvantaged older workers and so was potentially indirect discrimination. However, it confirmed that this was objectively justified as a proportionate means of achieving HCL Insurance's legitimate aim of reducing staffing costs to ensure its viability going forward. The EAT agreed with this decision and the appeal was dismissed.

Tips for Employers

Employers will need to bear in mind that changing terms and conditions could be potentially discriminatory, depending on the workforce and the effect of the change. In such cases, it will be important to have a clear justification before changing terms.


Legislation Update

New Compensation Limits from April 2015

The Employment Rights (Increase of Limits) Order 2015 will come into force in April 2015 and will increase the compensation limits that apply to a range of employment claims. In particular, the limit on the compensatory award for unfair dismissal will increase from £76,574 to £78,335 and the limit on a week’s pay from £464 to £475.

The new rates take effect where the ‘appropriate date’ (such as the date of termination in an unfair dismissal claim) falls on or after 6 April 2015.