Contractual Flexibility Clauses Must Be Clear And Unambiguous To Give An Employer A Right To Make Unilateral Changes

In the case of Norman and others v National Audit Office UKEAT/0276/14, the Employment Appeal Tribunal ("EAT") confirmed that flexibility clauses in employment contracts which seek to give employers the right to make unilateral changes to the contract's terms will be interpreted restrictively against employers.

In reaching its decision, the EAT overturned an Employment Tribunal's decision that the National Audit Office ("NAO") had the power to unilaterally vary its employees' contracts in relation to their leave and sick pay terms.

The Facts

Under their contracts of employment, NAO staff had entitlements to 'Privilege Leave' (an additional leave benefit beyond standard holiday entitlements) and generous enhanced sick pay benefits. The NAO sought to reduce those benefits and commenced consultation with the employees' trade union in 2012. That consultation was ultimately unsuccessful in reaching agreement and, in spring 2013, the NAO sought to impose the changes on its employees unilaterally, relying on what it asserted was a clause in the employees' contracts allowing the NAO to make unilateral changes without the agreement of the employees.

The NAO's HR Manual contained two key provisions in this respect. The first (the "Variation Clause") covered changes to terms and conditions of employment and provided that:

Conditions of service are "subject to amendment" Any significant changes will be notified to staff by one of a number of specified methods The second provision entitled "Settlement of Disputes" stated that:

Wherever possible, management and the Trade Union will try to reach agreement before implementing any changes that affect staff Changes to working practices or terms and conditions will not be implemented whilst negotiations are taking place, or whilst the issue is under referral to ACAS, unless management considers this essential to the operation of the NAO The employees sought a declaration from the Employment Tribunal that their terms of employment were unchanged and contained the original Privilege Leave and Sick Pay provisions. However, the Employment Tribunal found in the NAO's favour.

The EAT's decision

On appeal, the EAT disagreed with the Employment Tribunal for two reasons:

1. The Variation Clause was not sufficiently clear and unambiguous to give the NAO a unilateral right to amend the employees' contractual terms.

   The statement that conditions of service are "subject to amendment" did not, when read objectively, give...