Abrahall v Nottingham City Council

This Court of Appeal considered whether employees subject to Nottingham City Council's single status pay arrangements had a contractual right to annual incremental pay progression and, if so, whether that right was lost because employees continued to work after the employer imposed a two year incremental pay freeze. The Court held that the relevant contractual documentation (the Core Contract read with the explanatory Booklet and the incorporation of the Collective Agreement/Pay Policy) established a contractual right to progress by one spinal column point each year until the grade maximum was reached. The Council’s argument that paragraph 3 of the Pay Policy and the rubric meant the progression scheme was non‑contractual was rejected in context.

The Council’s separate defence that employees’ continued work without individual protest constituted acceptance of a variation suspending progression was also rejected: the Court held that acceptance by conduct requires that the conduct be only referable to acceptance of the variation and be unequivocal. On the findings, the unions’ protests and the surrounding circumstances made such an inference unavailable. Accordingly the withholding of increments from April 2011 was a breach of contract and the claimants were entitled to arrears.

Background and nature of the claim:

• The claimants were groups of Nottingham City Council employees who alleged unlawful deductions from wages, under Part II of the Employment Rights Act 1996, arising from the Council's decision to freeze incremental pay progression in 2011 (and later extend it for parts of the workforce in 2013).
• The dispute turned on construction of the contractual terms after the introduction of 'single status' (a new pay and grading structure implemented in 2010) and on whether any contractual entitlement to annual increments had been varied by the employees’ conduct after the freeze.

Procedural history:

• At first instance Employment Judge Camp dismissed the lead claimants’ claims (judgment communicated 12 August 2015).
• The Employment Appeal Tribunal (Mitting J, 11 May 2016) allowed the claim for group 1 (those who accepted the variation offered in April 2010) but dismissed appeals for groups 2 and 3 (those re‑engaged after dismissal and those employed after implementation respectively).
• The Council appealed to the Court of Appeal against the EAT's decision on group 1; the group 2 and 3 claimants cross‑appealed. This appeal was heard in December 2017 and determined on 19 April 2018.

Issues framed by the court:

1. Whether the single status contractual documentation (Core Contract, Booklet and incorporated Collective Agreement/Pay Policy) conferred a contractual right to annual pay progression for employees placed on spinal column points within grades.
2. If such a contractual right existed, whether it had been varied by the Claimants’ conduct in continuing to work after the Council implemented the two year incremental freeze from 1 April 2011.

Court’s reasoning and conclusions:

• On contractual construction the Court placed weight on the Core Contract's incorporation clause, the Booklet's clear statements and examples that pay "will" increase by one spinal column point each year until the top of the grade, and the objective context of merging differing pre‑existing arrangements into a single status system. Read in context, the grade/SCP structure necessarily imported an entitlement to annual progression; that entitlement was reinforced by paragraph 3 of the Pay Policy which was incorporated into individual contracts. The Court rejected the Council’s reliance on the omission of an explicit progression statement in paragraph 3 and the placement of progression wording in paragraph 5 as displacing the contractual effect of the progression scheme.
• On variation by conduct the Court emphasised established principles: acceptance by conduct is possible but requires that the conduct be unequivocally only referable to acceptance of the variation. Silent continuation of work can in some circumstances amount to acceptance (particularly where a change has immediate practical effect), but collective protest or other contextual factors can negate such an inference. Applying those principles, the Court concluded that (i) the proposed change was wholly disadvantageous, (ii) there had been strong union opposition and continued collective protest around implementation, and (iii) the employer had consistently maintained that it had the contractual position on its side. The inferences required to find unequivocal acceptance by conduct were not present.
• Accordingly the withholding of increments from April 2011 amounted to breach of contract and the claimants in groups 1–3 were entitled to arrears of pay equivalent to progression that would have been paid had increments been operated.

Wider implications noted: the judgment explains the limits to inferring contractual variation from silence and inaction in the employment context and reiterates that, where variation is to an employee’s disadvantage, an employer should take clear steps if it seeks to treat silence as acceptance.

The Court of Appeal dismissed the Council’s appeal (in respect of group 1) and allowed the cross‑appeals of the group 2 and 3 claimants. The Court held that employees in the groups considered had a contractual right to annual pay progression, and that the employer’s unilateral freeze from 1 April 2011 breached those contractual rights. The employer’s defence that the claimants had accepted a variation by continuing to work was rejected because continued work was not an unequivocal, "only referable" acceptance of the variation in the factual context.

Employment Tribunal (Nottingham) Judgment (Employment Judge Camp) delivered 12 August 2015 — claims dismissed at first instance. Employment Appeal Tribunal (Mitting J) judgment 11 May 2016 — allowed the claim for group 1 and dismissed for groups 2 and 3. Court of Appeal (this judgment) [2018] EWCA Civ 796 — Council's appeal dismissed; cross‑appeals of groups 2 and 3 allowed.