Variations of contract

19 June 2018

How easy is it for an employer to impose a pay freeze?

In Abrahall v Nottingham City Council, the Court of Appeal decided that a group of employees had not 'agreed' to a pay freeze when they continued to work without protest afterwards. In 2011, the Council imposed a two year pay freeze (meaning that the employees would not receive annual increments under the pay scale to which they were contractually entitled). The recognised unions unequivocally objected, but did not take action. Two years went by before the Council announced a decision to extend the pay freeze. At that point, employees brought claims for unlawful deduction from wages and a declaration that they were still entitled to annual increments.

The Court of Appeal decided that the employees had not accepted the earlier pay freeze. Despite working for two years without protest, the trade union had protested on behalf of employees at the time of the pay freeze. The Court also noted that the employees had continued to work when the contractual change was of no benefit to them. The Court concluded that the employees’ actions did not show 'unequivocal acceptance' of the change. It was common ground that the employees had, by continuing to work, lost their right to treat the contract as repudiated, but it did not follow that they had agreed to the variation or waived their right to sue for the shortfall.

This case shows how complex the process of changing terms and conditions can be, particularly in relation to pay. Employers should remember that the safest way is to get an employee's express written agreement to any proposed changes.

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