Abrahall & Ors v Nottingham City Council & Anor (Contract of Employment)

A valuable contractual entitlement in an employment contract is not removed by obscure or indirect language. Contractual variation must be construed objectively against the relevant factual matrix, including the existing contract and documents supplied with the proposed variation.

Where employees accept revised terms which promise annual incremental progression, a later collective agreement or incorporated policy will not displace that entitlement unless it does so clearly. Continued work after an employer's unilateral pay freeze does not, without clear and unequivocal assent, amount to acceptance of an adverse contractual variation or waiver of a claim for the shortfall.

The Respondents introduced new single-status pay and grading arrangements for their employees. Most employees accepted the proposed variation under option 1. Others accepted dismissal and re-engagement under option 2. The arrangements used spinal column points and described annual progression within each grade.

After the Respondents froze annual increments from April 2011, employees claimed unlawful deductions from wages under Employment Rights Act 1996, contending that they retained a contractual right to annual increments. The Employment Tribunal dismissed all claims in a reserved judgment sent on 14 August 2015. The employees appealed and the Respondents cross-appealed on contractual variation.

The central issues were whether the contractual and collective documents conferred or removed an increment entitlement, and whether continued work after the freeze amounted to agreement to vary the contracts.

1. The appeal was allowed for group 1 claimants and dismissed for groups 2, 3 and 4. Employees who accepted option 1 retained, or acquired, a contractual entitlement to annual increments up to the maximum point in their grade. The Respondents' pay policy and collective agreement did not clearly remove that entitlement.

2. For existing administrative, professional, technical and clerical staff, the varied contract had to be construed in its factual setting. Their existing contracts expressly provided annual increments. The single-status booklet supplied with the offer also represented that all employees would gain a spinal column point annually. Clear language was required to remove that valuable right. The incorporated pay policy did not achieve that result. Its provision concerning persons newly starting in a grade concerned the timing of first increments and did not govern employees transferred into the new structure on 1 November 2010.

3. Manual workers accepting option 1 also obtained the entitlement. Their acceptance expressly covered the booklet, whose unqualified statement and example promised annual progression. A contrary construction would also risk defeating the equality purpose of the single-status arrangements.

4. By contrast, employees accepting option 2 did not accept the booklet or a term conferring annual increments. The standard contractual documents and incorporated materials did not create such a right. Employees recruited after 1 November 2010 could have no greater entitlement.

5. The Respondents' cross-appeal on variation failed. Ordinary contractual principles apply to employment contracts. Silence and continued work can establish a variation only where they provide a clear and unequivocal indication of agreement. The unions' protests and industrial-action steps showed the opposite. Employees might lose the right to terminate for a repudiatory short-payment breach by continuing to work, but that did not mean that they accepted a disadvantageous variation or waived their claim for the shortfall. The absence of written particulars under Employment Rights Act 1996 section 4 reinforced that conclusion.

• Employment Appeal Tribunal: Allowed the employees' appeal for group 1 claimants, but dismissed it for groups 2, 3 and 4. Rejected the Respondents' cross-appeal on variation.
• Employment Tribunal: In a reserved judgment sent on 14 August 2015, Employment Judge Camp dismissed the claims of all four groups.