Norman & Anor v National Audit Office (Contract of Employment : Implied Term/Variation/Construction of Term)

An employer may reserve a contractual power to vary employment terms unilaterally, but the reservation must be expressed in clear and unambiguous language. A statement that terms are subject to amendment, coupled with a mechanism for notifying changes, does not by itself identify the mechanism of amendment or authorise change without employee consent.

Collective bargaining machinery is not ordinarily incorporated as an individual contractual term merely because an employment contract refers to an HR manual. Even if a limited contractual power to implement change pending agreement were incorporated, it could be exercised only in the specified circumstances. An employer cannot rely on that power where the requisite circumstances were neither relied upon nor established.

The appellants were employees of the National Audit Office. Their appointment letters referred to detailed conditions in the HR Manual and stated that those conditions were subject to amendment, with significant general changes to be notified through circulars and individual changes notified separately.

Following unsuccessful negotiations with the trade union, the employer reduced paid sick leave and privilege leave. The employees made a reference under sections 11 and 12 of the Employment Rights Act 1996, contending that the changes were ineffective because they had not consented to them.

The Employment Tribunal held that clause 2 of the appointment letters reserved a unilateral power of variation and declared that the amended particulars formed part of the contracts. The employees appealed. The central issue was whether the contractual documents clearly authorised the employer to make these changes without agreement.

1. Appeal allowed. The Employment Tribunal erred in construing clause 2 of the appointment letters as a reservation of a unilateral power to vary contractual terms. The question was one of objective construction. A contractual power of that unusual kind required clear and unambiguous language.

2. The words that the conditions were subject to amendment, followed by provisions for notification through circulars or individual notice, did not satisfy that requirement. They established only that amendments might occur and how employees would be informed of them. They did not identify the mechanism by which an amendment could be made, still less permit amendment without the employee’s consent. The fact that notification would in practice be given by the employer did not alter that conclusion.

3. The Tribunal considered that the collective bargaining and dispute-settlement provisions in chapter 17 of the HR Manual were not incorporated into the individual contracts. They described collective machinery rather than individual terms and conditions. In any event, even if the provision allowing management to implement change during negotiations where essential to the operation of the employer had been incorporated, the employer had not relied on or established that condition. The changes were presented as a response to an impasse in negotiations.

4. The Employment Tribunal’s declaration was quashed. Pursuant to section 12(2)(c) of the Employment Rights Act 1996, the Appeal Tribunal substituted the former particulars: six months’ full sick pay followed by half pay, subject to the stated four-year limit, and two full privilege days plus one half day.

• Employment Appeal Tribunal: allowed the employees’ appeal, quashed the Employment Tribunal’s declaration, and substituted the prior contractual particulars under section 12(2)(c) of the Employment Rights Act 1996.
• Employment Tribunal, London (Central): on 13 February 2014, with written reasons sent on 25 April 2014, held that clause 2 authorised unilateral variation and declared the amended sick-pay and privilege-leave particulars to be incorporated into the contracts.