Case law update: A blow for Boots - unilateral change to pay rates was unlawful

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In the recent case of Blow and others v Boots, an employment tribunal (ET) ruled that Boots’ unilateral decision to reduce Sunday and bank holiday working pay premiums for the claimants was a breach of contract amounting to an unlawful deduction from wages.

Background

Where an employer changes a term of the employment contract by unilateral variation, it will be in breach of contract. If the change results in a reduction in pay, the employee may be able to bring a claim for unlawful deduction from wages.

The Facts

Certain Boots employees were, from October 2000, paid double time for Sunday and bank holiday working. Boots decided that, from 1 June 2011, the premiums for these employees should be reduced from double time to time-and-a-half. The company provided business rationale for this and informed all affected staff of the change by letters dated 1 April 2011. Employees raised (unsuccessful) grievances and a number of claims for unlawful deductions from wages followed.

Decision

The ET ruled that Boots’ unilateral decision to reduce the premium pay rate for the claimants constituted an unlawful deduction from their wages. In coming to this conclusion, it considered the following issues:

Was the payment of double time for Sunday and bank holiday working discretionary or contractual?

Only if the double time payment was contractual could the claims for unlawful deductions from wages succeed. If the payment was discretionary, then Boots had the right to unilaterally remove it and there would be no unlawful deduction.

The ET found that the payment had become a contractual term. Payment of the premium rates was a consistent practice, which was never departed from until Boots’ decision in April 2011 to change it. There was no written statement that the payment was discretionary and Boots did not behave in a way which showed that it was.

Did Boots have the right to unilaterally vary the pay premiums?

Where an employer has validly reserved the right to vary a particular term of the contract, i.e under a “flexibility clause”, there is strictly no change in the terms of contract (and no potential unlawful deductions claim).

The ET found that Boots did not have the right to change unilaterally the Sunday and bank holiday premiums. The company sought to rely on certain flexibility clauses in its Staff handbook relating to employment terms and policies. However, referring to previous case law, the ET found that the language used was not clear enough to cover changes to the premiums.

Had the claimants, by continuing to work for Boots, impliedly accepted the change to pay premiums?

Where an employer unilaterally varies terms of employment and the employees continue in employment without registering any protest, it may be able to rely on their “implied agreement” to the changes. Employees would not then be able to claim for unlawful deductions from wages.

The ET rejected the argument that the employees had impliedly agreed to the change, despite the fact that they had continued in employment and had even received certain compensatory payments as a cushion for the loss of the double time. It was not possible for Boots to rely on implied agreement where the employees had made clear statements objecting to the change and had brought grievances against the company.

Comment

ET decisions are not binding on other ETs. However, this case provides a useful illustration of how ETs will approach the lawfulness of an employer’s attempt to change employment terms. Changing terms by unilateral variation can be a high risk strategy, unless the term that you are changing is non-contractual or the change is authorised by the contract. As well as claims for breach of contract and unlawful deductions from wages, it can give rise to claims for constructive (wrongful and/or unfair) dismissal and discrimination, and there are likely to be employee relations issues.

The issues surrounding unilateral changes to employment terms are considered in more detail in the newly launched EEF Changing terms and conditions toolkit. The toolkit also considers the other ways in which you may make changes to employees’ terms, i.e by obtaining employee agreement or, where you cannot do this, by way of dismissal and re-engagement. The toolkit explains the legal issues to be aware of and provides practical guidance and key tools, including a strategy planner, sample project plans and template letters.

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Media Team 020 7654 1576

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