Ruling on Variations of Contract

Many contracts of employment contain a clause which purports to confer a right on the employer to vary any terms of the contracts at its discretion.  Such widely drafted clauses rarely work in practice as the courts refuse to allow the enforcement of provisions which change the balance of power so fundamentally in the employment relationship.

The Employment Appeals Tribunal (EAT) has recently considered a general flexibility clause within a contract of employment which was relied upon by the employer to vary certain entitlements.  In this case, the employees contracts stated that their terms and conditions were “subject to amendment” and that “any significant changes affecting staff in general” would be notified to them.

The employer sought to implement changes to the employee’s detriment, namely reducing additional leave and company sick pay.  After initial consultation with the recognised union, the employer simply wrote to all employees confirming the changes by letter, relying on the general flexibility clause in the contract.

The employer was perhaps surprisingly successful in the Employment Tribunal but the matter was appealed to the EAT.  The EAT allowed the appeal and confirmed that the unilateral imposition of the changes in the contract amounted to a breach of the employees contracts.

The EAT commented that the flexibility clause in the contract was not clear and unambiguous.  The words “subject to amendment” meant nothing more than there was the potential for amendment.  No particular clauses were detailed or referred to and the inclusion of the word “notify” was of no significance at all and did not establish the right to make unilateral changes to the contract.

The case highlights the importance of specific drafting in the contract of employment in relation to entitlements which the employer may wish to vary.  One common example of where a clause can work in the employers favour, is a mobility clause allowing a company the right to relocate one of its employees within a reasonable travelling distance.  Simply reserving the right to vary any term of the contract, creates ambiguity and uncertainty which will render the clause unenforceable.