Flexibility clauses – how effective are they?

Nowadays it is fairly common to see a ‘flexibility clause’ in employees’ terms and conditions of employment. The idea of these is to give the employer the ability to make changes to the terms where necessary. However, in the recent case of Norman and others v National Audit Office, the Employment Appeal Tribunal (EAT) looked at how effective such clauses are in practice and when employers can rely on them to make changes without agreement from employees.

The general rule with any contract is that a change to the terms can only be effective when it is agreed by both parties, and that is still the case with employment contracts. However, in the 2010 case of Bateman v Asda (covered in our previous article here) the EAT found that Asda could rely on a flexibility clause in their staff handbook as a basis for introducing contractual changes. That case was undoubtedly influenced by the fact that before relying on the clause Asda had engaged in a lengthy period of consultation to try to agree the changes before resorting to imposing them via the clause.

In the Norman case, the NAO tried to introduce changes which included reducing the amount of sick pay. The wording of the provisions they relying on was found not to be sufficiently clear as to amount to a flexibility clause, and it used language like ‘notify’ which indicated only that employees would be informed about changes, not that the employer had the right to make them without consent.

The NAO had also relied upon a clause dealing with how disputes should be resolved, which the NAO said showed that they had followed the right process by trying to agree the changes with the union and then, when that failed, implementing them. However, the dispute resolution section only allowed unilateral changes where it was ‘essential to the operation of the NAO’ and the EAT found that the changes did not meet this test.

The 80 employees who had brought claims therefore succeeded in their claims for breach of contract and the EAT restored their original terms and conditions.

So where does this decision leave other employers and their flexibility clauses? In reality it will be very unusual for employers to be able to rely solely on a flexibility clause if the changes being made are to their employees’ disadvantage. They are more likely to be successfully used for less significant changes.

It is important to remember that if you do try to rely on a flexibility clause, it will be carefully examined in Tribunal and there is a risk it will not be effective, so it is generally best to try and consult and agree changes first where possible. As the Bateman v Asda case showed, in order to successfully rely on such a clause, the wording must be ‘clear and unambiguous’, which means more than just saying that the terms are subject to change or that employees will be notified of any changes.

If you would like to talk through a situation you are dealing with, or if you need advice on any aspect of employment law, please contact any member of the Pure Employment Law team (01243 836840 or [email protected]).

Please note that this update is not intended to be exhaustive or be a substitute for legal advice. The application of the law in this area will often depend upon the specific facts and you are advised to seek specific advice on any given scenario.