The pitfalls of employers relying on variation by conduct

11 May, 2018

In a recent ruling, the Court of Appeal has provided guidance in determining whether an employee, who works on without protest to an unlawful contract variation by an employer, has agreed to the new terms.

The case concerned a decision by Nottingham City Council to impose a two year freeze on incremental pay progression, shortly after it had transferred staff to a ‘single status’ pay scheme which provided for such annual pay increases. Several hundred employees brought proceedings in the Employment Tribunal for unlawful deduction from wages, arguing they had a contractual entitlement to such increases.

The Court first established that the employees had a contractual entitlement to the incremental pay increase and that the pay freeze therefore amounted to a breach of contract. The next issue considered was whether the employees had affirmed the variation of the contract by their conduct; they had remained silent and no industrial action was taken.

The Court ruled in agreement with the Employment Tribunal’s decision that despite their silence, no agreement to the contract variation could be inferred. The decision was based on the following three principles:

  1. There must be a clear unequivocal act from which one can infer that the claimant had accepted new terms.
  2. Protest at a collective level can potentially offset any inference that may otherwise be drawn from an employee working on without protest.
  3. The amount of time that has passed from when the employer implemented the variation may be a factor in the Court’s decision.

These principles will act as a useful tool for determining whether an employee who works on without protest is agreeing to new terms imposed by an employer. Employers must therefore be careful when implementing contractual variations, particularly when the change is unfavourable to the employee and no express agreement has been obtained. A simple passage of time and apparent lack of protest may not be sufficient for the variation to be effective.

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