Whether an employee continuing to work following a contractual pay cut constituted acceptance of the variation to their contract depended on the circumstances of the case


Re: Abrahall & Ors v Nottingham City Council & Anor [2018] EWCA Civ 796

In this case “Nottingham City Council, together with a company owned by it to which some of its employees had been transferred under TUPE, decided not to award so-called incremental pay increases to their employees over the following two years; and a similar decision, albeit affecting fewer employees, was made in 2013. Several hundred affected employees have brought proceedings in the Employment Tribunal for unlawful deduction of wages under Part II of the Employment Rights Act 1996, on the basis that they had a contractual entitlement to such increases. The claims of six such employees were chosen as lead cases. They were intended to cover five groups whose circumstances differed in what were arguably material respects”, though this case now only concerned the first three.

The Court dismissed the appeal as regarded group 1 of claimants but allowed the cross-appeals of group 2 and 3 claimants, and as such all of them were entitled to arrears of pay equivalent to what they would have earned if pay progression had been operated in each of the years in which it was frozen.

Sir Patrick Elias, added some observations on the question of variation, stating that “in practice employees will often agree to a variation by conduct. This will readily be inferred, for example, where the change is to the employee’s benefit, such as where he is given a pay increase.  Unless the contract is wholly exceptional, he will not have expressly to confirm acceptance before the increase takes effect … The difficulty arises where the variation is to the employee’s disadvantage, as in this case, and there is either no compensating advantage, or it is being imposed to avoid a potentially worse disadvantage, such as being made redundant … I do not see why in an appropriate case the employee should not be taken to have accepted the variation in order to avoid the risk of redundancy.  If the fear of redundancy can only be avoided by accepting the new terms, it is wholly artificial to treat these as separate and distinct reasons for failing to complain.

It may be said that the employee should never be held to have accepted a variation simply by working without protest under the new terms without more. After all, a party can bring a claim for breach of contract within the limitation period without having to notify the other party that he objects to the breach, and why should this be different?  I think that the answer lies in the fact that the employment relationship is typically a continuing relationship based on good faith, and exceptionally in that context it might be appropriate to infer that a failure to complain about a proposed variation of the contract for the future may be taken as agreement to that variation which prevents it constituting a breach”.

James Laddie QC was involved in this case.