In Bateman and others v Asda Stores Ltd, the Employment Appeal Tribunal (EAT) upheld an Employment Tribunal’s decision that Asda was entitled to introduce new pay terms without its employees’ consent because it could rely on a statement in its staff handbook reserving a right to make unilateral variations to the terms of its employees’ contracts of employment.

What happened in this case?

Asda decided that all store staff should be on the same pay structure. This meant staff on the old pay structure (approximately 18,000) needed to have their pay terms changed to fall in line with the new pay structure applicable to the vast majority of store staff. Prior to imposing the changes, Asda commenced an extensive consultation process after which 9,300 employees on the old pay structure voluntarily agreed to move to the new structure, whilst the remaining (approximately 8,700) employees had their pay terms unilaterally changed. Asda sought to ensure that no employee suffered a reduction in pay as a result of the new structure. To justify imposing this change without consent Asda, relied on a provision in the staff handbook which included the following wording under the heading “Your Contract”: “The Company reserves the right to review, revise, amend or replace the content of this handbook, and introduce new policies from time to time to reflect the changing needs of the business…” The handbook also provided that some sections of it, including sections relating to pay and right to change terms, formed part of the employees’ contracts of employment. 

After imposing the changes, 700 employees brought Employment Tribunal claims for the unlawful deduction of wages (under section 13 of the Employment Rights Act 1996), breach of contract and, in a few cases, unfair dismissal. A selection of six test cases were taken to the Tribunal at which the employees’ arguments were three-fold: (1) Asda could only vary non-contractual policies; (2) changes to pay required the consent of the affected employees; and (3) the fact Asda had entered into a consultation process (rather than impose the changes which the staff handbook purported to allow), suggested Asda itself viewed the wording as not permitting a unilateral change and requiring the employees’ consent.

The Tribunal acknowledged that the introduction of the new pay structure was a matter of fundamental importance to the employment relationship and that in light of the significant changes to the employees’ contractual terms as to pay, Asda was required, on ordinary principles, to obtain the employees’ consent. However the Tribunal decided that the conditions in the staff handbook were incorporated into the employees’ contracts of employment and the wording of the staff handbook was clear and unambiguous and therefore permitted Asda to reserve to itself the contractual right to vary terms in the employees’ contracts of employment without their consent.

The employees appealed to the EAT but their appeal failed.

The employees argued that the Tribunal had failed take into account the background of the affected employees (such as the fact that most were not well-educated, and some not even literate or numerate and thus they could not have expected that their contracts permitted Asda to reduce their pay or change their working hours without their consent) and that the Tribunal had failed to appreciate that Asda’s duty to maintain trust and confidence required it to explain to the employees what the provision meant. The EAT rejected these arguments. As regards the background of the affected employees, this was not an argument put forward at the Tribunal hearing and it was accepted at that hearing by all parties that the handbook should be construed on an objective basis; and that no evidence was produced at the Tribunal hearing to support arguments being raised at the EAT concerning the employees’ limitations. Furthermore, the employees had expressly conceded at the Tribunal hearing that there was no issue in relation to a breach of trust and confidence in Asda imposing the new terms, and thus the Tribunal made no finding on that issue, hence there could be no appeal on it.

Next, the employees argued that the Tribunal had reached a perverse decision that the wording in the handbook entitled Asda to impose the new regime without the employees’ consent. However, the EAT rejected this argument, holding that the wording of the provision was wide enough to cover the changes to the pay structure and was clear and unambiguous so as to allow Asda to make the changes unilaterally without obtaining the employees’ consent.

Lastly, the employees argued that the Tribunal had failed to construe the provision as against Asda which was seeking to rely upon it (in accordance with the legal “contra proferentem” rule). However the EAT rejected this argument stating that as the EAT agreed with the Tribunal’s finding that the wording was clear and unambiguous, no “contra preferentem” issue arose.

What this decision means to employers

It is important to note that the EAT acknowledged and accepted that Asda had taken steps to ensure no employees suffered a reduction in pay as a result of the change in pay structure. This decision cannot therefore be seen as authority for employers to reduce pay unilaterally in reliance on a clause such as the one used by Asda in their staff handbook. The change imposed by Asda related to its pay structure and the EAT said that Asda did not need to consult employees as it was entitled to change the handbook terms unilaterally without consent. In practice, however, an employer would be best advised to consult its employees about any change in pay structure or pay working practices, because failure to do so is, more often than not, likely to be in breach of the mutual term of trust and confidence, notwithstanding any clause in the handbook. This would give the employees the right to resign and claim constructive dismissal as well as right to claim unlawful deduction of wages and breach of contract for any loss suffered. The way in which the Asda case was litigated leaves some questions over whether even consulting employees in this way would have been enough in other circumstances. Asda did consult the employees but as the arguments put forward by the employees regarding their background and trust and confidence were not made at the Tribunal hearing, we cannot be sure what the EAT would have decided if they had done so. The failure of the employees to raise these arguments before the Tribunal meant the EAT felt it was unable to consider them on appeal.

Subject to these doubts, it could be said that this decision may be of assistance as a last resort to an employer who wishes to make changes to the pay structure and working practices in light of their changing business needs where the normal consultation route has been exhausted and attempts to obtain employee’s concurrence with the changes have failed, particularly during difficult economic times. Until it is successfully appealed or overruled, the case provides authority for employers to change contractual terms of the staff handbook without the express consent of the employees concerned provided the wording used in staff handbooks is clear and unambiguous, and if the employer ensures trust and confidence is maintained throughout the process.