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Employment Law

Legal guidance - compliance - software

23 FEB 2015

General flexibility clauses and the right to unilaterally vary employment contracts

General flexibility clauses and the right to unilaterally vary employment contracts
Jessica Ryan
Solicitor, Veale Wasbrough Vizards

The case of Norman and others v National Audit Office  demonstrates the limitations of general flexibility clauses within employment contracts, as well as the importance of clear and unambiguous contractual drafting.

The National Audit Office (NAO) wished to change some employee benefits. It attempted to agree the changes with staff, in consultation with the union. When discussions failed, NAO implemented the changes unilaterally, seeking to rely upon:

- its standard offer letter, which stated that "the terms and conditions of your employment… are subject to amendment; any significant changes affecting staff in general will be notified …" (Flexibility Clause), and

- its manual, which provided that NAO would, where possible, reach agreement with the relevant union before implementing any changes affecting staff, unless "essential to the operation" of NAO (Manual Wording)

The affected employees claimed breach of contract, arguing that NAO had no right to impose the unilateral variation. The Employment Tribunal (ET) rejected the claim, holding that NAO was entitled to rely upon the Flexibility Clause to vary staff contracts.

The Employment Appeal Tribunal has now overturned this decision, finding that:

- the Flexibility Clause was not clearly and unambiguously drafted and as such did not confer the clear right to make unilateral variations to staff contracts

- the Manual Wording was not properly incorporated into the employment contracts, and

- in any event, the unilateral change was introduced out of frustration with the union, and not because the change was truly essential to NAO's business operation.

Best practice

As we reported last week, a well drafted flexibility clause provides a good starting point from which to manage expectations surrounding proposed changes to employee terms.

However, unless a proposed change is minor, a flexibility clause alone is unlikely to be sufficient justification for the imposition of a unilateral change and a full consultation procedure should be followed.

Employers may sometimes feel frustrated by a union's response to a consultation procedure. In NAO's case, this frustration may have led to the unilateral imposition of the change, and the resulting legal challenge.

In order to reduce this risk, employers could consider consulting directly with staff at the same time as collectively consulting with the unions. This may help demonstrate that agreement was sought through a variety of avenues before the change was introduced.
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