Valid or Void? Varying employment contracts – case law update

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Posted in:HR and Employment|December 18, 2014 | Join the mailing list

An employment contract, like any contract, is an agreement between two parties. When it comes to varying the contract, the parties can expressly (either in writing or verbally) or implicitly, by their actions, agree to variations.  However, the question
is then, is the variation valid? Two recent cases look at that question and provide a reminder and update on the law in this area, with practical implications for employers.

In the case of Wess v Science Museum Group, the EAT held that an employee had impliedly accepted a variation to her employment contract by continuing to work without raising any objections to the variation of the contract by her employer, the Science Museum
Group.

Ms Wess was given, but did not sign, an amended contract which included (amongst other things) a reduction in the notice of termination that she was entitled to receive from her employer, from 6 months to 12 weeks. However, Ms Wess did not raise any objections
with her employer about this change and continued to work for the Science Museum Group for nine years.

These cases always depend on the precise facts, but generally where an employer unilaterally imposes a new term which does not have an immediate practical effect for the employee (like a change to their notice period), then even if the employee has continued
to work without objection to the new term, tribunals will not often find that the employee has impliedly accepted it.  The EAT in the Wess case reiterated that principle, the judge stating that “if it does not have any immediate, practical impact upon the
employee, why should they raise the challenge?”  

However, Ms Wess did not only have her notice provisions amended.  Her employer provided her with an entirely new package, including a new job description and new handbook, and it offered her continued employment only on those terms.  Some of the terms impacted
on Ms Wess immediately and she expressly raised an objection to part of the new package, but didn’t make any express objection to the changes to her terms and conditions, including the new notice period.  Further, the EAT confirmed that she could be expected
to have regard to the detail of the terms and conditions and to raise queries if they arose – she had previously held a trade union role.  It held that she had accepted the variation to her contract by continuing to work to the new contract for nine years
without objection, knowing that the notice period had changed.  Interestingly, the EAT also said that a change in notice period can have an immediate impact on employees, upon job security, which can have a real and practical importance for an employee.  

The second new case on variation is about consideration.  Re-use Collections Limited v Sendall involved an employee (Mr Sendall) who originally had only a verbal contract of employment, which contained no restrictive covenants. Subsequently, Re-use Collections
Limited attempted to vary Mr Sendall’s employment contract by inserting non-solicitation and non-dealing restrictive covenants into a new written employment contract, which Mr Sendall signed.

Crucially, the High Court found that Mr Sendall was offered nothing by way of consideration for this variation. That is to say, Re-use didn’t provide any benefit to Mr Sendall in return for placing additional obligations on him in the form of restrictive covenants.
Although there was a pay rise and a benefits package provided to Mr Sendall at around a similar time as the variation, the Court found that they did not constitute consideration because they weren’t conditional upon him agreeing to the restrictive covenants. 
The Court also did not accept that Mr Sendall’s continued employment was consideration for the variation, because there was no evidence that his employer would have terminated his employment if he didn’t accept the variation.

Consequently, the Court held that Re-use could not rely on and enforce the restrictive covenants it had sought to insert into Mr Sendall’s contract. Kim Freeman-Smith had this to say about the decision: “It is a timely reminder that when it comes to varying
employment contracts, some real monetary or other benefit must be given to an employee in return for their agreement to the changes and that benefit must be offered on the basis that the employee only receives it if they agree to the variation.  It also goes
to show that an employee’s continued employment is not a sort of “catch all” form of consideration – there has to be clear evidence that the alternative to a new contract would be termination.”

For more information about any of the above or for practical commercial advice on this or any other aspect of employment law, please contact
Kim Freeman-Smith of the Berg Employment Team on 0161 833 9211 or email her at
kimf@berg.co.uk.

Follow us on Twitter: @Berg_HR

(The information and opinions contained in this article are not intended to be comprehensive, nor to provide legal advice. No responsibility for its accuracy or correctness is assumed by Berg or any of its partners or employees. Professional legal advice should
be obtained before taking, or refraining from taking, any action as a result of this article.)

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