Title

Autem vel eum iriure dolor in hendrerit in vulputate velit esse molestie consequat, vel illum dolore eu feugiat nulla facilisis at vero eros et dolore feugait

Why you should have clear employment contract terms

“You should have got that in writing”.

The above often belated advice is normally punctuated by the distinct sound of the recipient ‘kicking themselves’ for not getting an agreement from an employer expressly written out.

While the written contract is often the definitive word on the employer/employee relationship, agreements can still be varied by way of verbal assurances and dependent on how the contract was drafted there can sometimes be scope for argument as to the interpretation of a specific clause.

In the recent Employment Appeals Tribunal (“EAT”) case of Equality and Human Rights Commission v Earle, the importance of clear and unambiguous language in contracts was highlighted as was the danger of those with authority making verbal guarantees to subordinates.

The key question was whether the verbal assurance made of guaranteed incremental pay to an employee was binding upon the EHRC. The initial Employment Tribunal (“ET”) found that as the relative EHRC decision maker was authorised to discuss salaries, a verbal guarantee to the employee, Ms Earle, became a contractual arrangement rather than mere ‘puff’; the EHRC appealed this decision to the EAT.

The EAT found that this guaranteed verbal assurance ran contrary to the employee’s written contract, which provided that such pay rises, while subject to performance, were at the absolute discretion of the EHRC. There was a further clause that provided that reviews were required to be held with Ms Earle and her colleagues in the same role with a view to considering their progression in pay, per the above mentioned clause, with any increases again being at the sole discretion of the EHRC.

The EHRC was under severe financial constraints owing to Government cutbacks and at the relevant time did not award Ms Earle or any of her colleagues either pay progression or a review with a view to the same.

Ms Earle had met the performance criteria for progression in the contract, however the relevant clause stated that such progression was to be assessed on criteria that “included” performance.

While the EHRC was in breach for failing to hold the reviews, the reality of the situation was that the funding difficulties being experienced by EHRC meant that neither Ms Earle nor her colleagues would be progressing that year, as the money was simply not there to do this.

It was found by the EAT that the overarching financial situation of the EHRC was a factor to be included in the decision to offer pay progression. The EAT therefore overturned the earlier decision of the ET, finding that in this context any earlier understanding between the parties could not overrule the total discretion to award pay increases conferred on EHRC by the employment contract.

Conclusion

While the above decision ultimately went the way of EHRC as the employer, it would not have gone as far as an initial tribunal and then the EAT, at significant cost to EHRC, had the decision maker not made assurances that could not be honoured. In addition more precise drafting of the relevant criteria for career advancement for Ms Earle may have assisted in avoiding the situation altogether.

As always if I can provide you with any further assistance on contractual or any other issues, please do not hesitate to contact me for a free consultation on 0113 350 4030 or samira.cakali@scesolicitors.co.uk.


Please note that the information in this blog is to provide information of general interest in a summary manner and should not be construed as individual legal advice. Readers should consult with SCE Solicitors or other professional counsel before acting on the information contained here. 

Samira Cakali

Samira Cakali is a pragmatic and approachable solicitor advocate with extensive contentious and non-contentious experience in the fields of employment law as well as civil litigation, within a range of commercial businesses from SME’s to multinationals as well as senior executives.

%d bloggers like this: