The power of the employer to unilaterally vary contracts of employment

18 February 2010

The Asda Stores plc (“Asda”) staff handbook provided details of pay and other conditions of employment stating that:

“Your Contract. [A] The letter you received offering you your job (and any subsequent contract change letters), together with the following sections in this handbook, form your main terms and conditions of employment: ... [B] They also constitute your statement of employment particulars which you are entitled to under the Employment Rights Act 1996.”

Asda wanted to place staff on a new pay and work structure (the “new structure”). A small proportion of store staff refused to be placed on the new structure. Asda imposed the new structure on the dissenting staff contending that it was entitled to impose new conditions as the staff handbook contained a variation clause which stated that Asda:

“(C) ... 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 ...”

Some of the dissenting staff (“the Claimants”) initiated Employment Tribunal (“ET”) claims for breach of contract and, in some cases, unfair dismissal. Whilst the Claimants agreed that the conditions in the staff handbook were incorporated in their contract of employment, they disputed that this permitted Asda to impose the new structure on them without obtaining their consent. The Claimants contended that none of the employees expected that the effect of the variation clause in the handbook would be to leave to Asda's unilateral discretion the right to reduce pay and alter conditions. The ET rejected their claim and the matter was appealed to the Employment Appeal Tribunal (“EAT”).

The EAT dismissed the appeal. The variation clause in the staff handbook allowed Asda to make the changes it imposed without obtaining the consent of its employees. Asda’s power to vary the handbook was not limited to “non-contractual policies”, as the Claimants contended, because the power conferred was “... the right to review, revise, amend or replace”.

Silber J, in his EAT judgment stated: "... there are two separate but important rights given to Asda in paragraph C of the Colleague Handbook ... the first is to review etc the content of the handbook and the second right is to introduce new policies ...". Furthermore, there was no breach of the duty to maintain trust and confidence in the way that Asda had unilaterally exercised its power.

Comment

It is a general rule of law that contracts can, usually, only be varied by agreement. However, employment law allows an employer to reserve the ability to change a particular part of a contract unilaterally. Asda’s case was strengthened by the clear and unambiguous phraseology it used in its handbook. If the terms had been couched in phrases that were difficult to understand, the EAT may have claimed that the variation clause was void for uncertainty.