Morgan v. Network Europe Group Ltd

Continued employment does not, by itself, establish acceptance of a unilateral contractual variation. The relevant question is whether the employee’s conduct is only referable to acceptance of the new term. Where the alleged variation requires no response from the employee, continued work remains consistent with the original contract and cannot constitute acceptance by conduct. A term which is not immediately relevant to the employment requires particular care before acceptance can be inferred. An employee’s prompt grievance when the term is first applied may demonstrate non-acceptance. An express variation would arise where the employee signed new contractual terms incorporating the relevant provision.

Mr Morgan appealed against the decision of the Stratford Employment Tribunal, which dismissed his complaint of unauthorised deductions from wages. He had signed an original statement of terms and conditions and later signed an acknowledgement of receipt of a new employee handbook. The new handbook introduced a term permitting lay-off without full pay, beyond statutory guaranteed pay. The Tribunal found that he was bound by the handbook, although it made no finding that he had received or signed a new statement of terms.

The central issue was whether the handbook effected an agreed variation of the employment contract by express agreement or by the claimant’s conduct in continuing to work.

1. Appeal allowed. The Tribunal’s decision was reversed. The EAT substituted a finding that the respondent made unauthorised deductions from wages for the period 27 February to 22 May 2009, subject to guaranteed pay received.
2. Had the claimant received and signed a new statement of terms incorporating the handbook and the lay-off provision, there would have been an express agreed variation, applying the approach in Gascol Conversions Ltd v Mercer [1974] ICR 420.
3. There was no such express variation. The claimant signed only for receipt of the new handbook. The original contractual documents referred to the then-current handbook, which contained no lay-off provision.
4. The correct approach to acceptance by conduct is whether the employee’s conduct is only referable to acceptance of the new terms. Continuing to work may permit an inference of acceptance where the variation changes matters such as pay or duties and the employee works under the change without protest. Where the alleged variation requires no response, inaction remains consistent with the original contract and cannot establish acceptance. The EAT applied the reasoning in Jones v Associated Tunnelling Co Ltd [1981] IRLR 477, as explained in Solectron Scotland Ltd v Roper [2004] IRLR 4.
5. The lay-off term was not immediately relevant to the claimant and had not been specifically drawn to his attention. When it was applied, he promptly raised a grievance. That conduct was consistent only with non-acceptance of the proposed variation, applying Rigby v Ferodo [1988] ICR 29 HL.
6. The parties were directed to agree the amount underpaid within 21 days. Failing agreement, the remedy issue was to return to the Employment Tribunal before a different Employment Judge.

• Employment Appeal Tribunal: Appeal allowed and the Employment Tribunal’s decision reversed.
• Stratford Employment Tribunal: Complaint of unauthorised deductions from wages dismissed in Reasons promulgated on 27 July 2009.