Glendale Managed Services v Graham & Ors

The Court of Appeal considered the construction of a paragraph in written particulars which stated that pay and conditions would "normally" be in accordance with the National Joint Council for Local Government Services "as adopted by the Authority from time to time". The court held that those particulars were evidence of the terms of the contract of employment and that contemporaneous and subsequent conduct was admissible to elucidate their meaning.

Applying established principles of contractual interpretation, the court concluded that the phrase meant that NJC rates would normally be paid without a requirement for a formal prior resolution by the employer, but that the employer retained the power to depart from that norm. Importantly, there is an implied term, on the "obvious bystander" test, that the employer must give notice to employees if it intends to depart from the normal application of NJC rates. Because no such notice was given, the employees were entitled to the NJC pay increases of April 2000 and April 2001. The employer's appeal was dismissed.

Background and parties: The first respondent, Mr Graham, and thirteen colleagues claimed unlawful deduction of wages after their employer, Glendale Managed Services (which had taken over their employment under the Transfer of Undertakings (Protection of Employment) Regulations 1981), did not pay NJC pay increases effective April 2000 and April 2001. The particulars of employment provided by the transferring authority included paragraph 3 stating pay would "normally" follow NJC terms "as adopted by the Authority from time to time".

Procedural posture: The Employment Tribunal found for the employees, construing paragraph 3 to mean NJC increases would normally be applied and that departure required notice; the Employment Appeal Tribunal (EAT) agreed with that construction and refused a full inter partes hearing; the employer appealed to the Court of Appeal.

Nature of relief sought: Complaints of unlawful deduction of wages seeking payment of the NJC increases.

Issues framed by the court: (i) Whether the terms of paragraph 3 incorporated NJC pay awards automatically or only after formal approval by the employer; (ii) Whether subsequent conduct (evidence from a shop steward that increases had been paid in practice without formal adoption) could be used in construction; and (iii) Whether there is any implied contractual obligation requiring the employer to notify employees before departing from the NJC norm.

Court's reasoning and decision: The court emphasised that written particulars are evidence, not conclusive proof, of contract terms. Evidence of the parties' conduct was admissible because these were not purely written contracts. The Tribunal's finding that the transferring authority had, in practice, paid NJC increases without formal resolutions was relevant background under Investors Compensation Scheme and demonstrated the parties' shared understanding. The court held that paragraph 3 did not impose a pre-condition of formal approval for each NJC award. However, by implication and to preserve mutual trust and confidence, an employer who intends to depart from the normal application of NJC increases must inform employees; that implied term met the "obvious bystander" test. Applying those conclusions, the court held the employees were entitled to the April 2000 and April 2001 increases and dismissed the employer's appeal.

Subsidiary points: The court distinguished the EAT decision in Glendale Grounds Management v Bradley (EAT 484/97) on its different wording and treated the contra proferentem point as unnecessary to the outcome. The court also explained the limited application of the rule in James Miller & Partners v Whitworth Street Estates to purely written contracts.

Appeal dismissed. The Court held that the particulars of employment were properly construed as meaning that NJC rates would normally be paid without a requirement of a prior formal adoption by the employer, but that an implied term required the employer to notify employees before departing from that normal practice; because no such notice was given, the employees were entitled to the April 2000 and April 2001 pay increases.

Appeal to the Court of Appeal from the Employment Appeal Tribunal (presided over by His Honour Judge J R Reid QC). The Employment Tribunal originally upheld the employees' complaints; the EAT held the employer could depart from NJC rates only after giving notice and declined a full inter partes hearing. The Court of Appeal ([2003] EWCA Civ 773) dismissed the employer's appeal.