For a contract to have effect, one party must make an offer which is accepted by the other. In Hershaw and ors v Sheffield City Council, the Employment Appeal Tribunal (EAT) held that employees do not have to formally accept the offer of a pay rise because by continuing to work, they are deemed to have accepted it.
Basic facts
Following a review of their pay and grading structure in 2009, a group of 12 Council employees appealed against the variation of their pay. Although the appeal panel met and made a decision, the Council failed to notify them of the outcome. In August 2011, they lodged a grievance which was investigated by an HR consultant, Ms Wadsworth. Although she had no authority to make a decision about pay, she was authorised to communicate the outcome of the grievance.
She wrote to the employees on 10 October 2011, stating that the appeal body had decided to upgrade them from grade 3 to grade 5. Another HR Council officer then set out what that would mean in terms of pay in a separate letter. However, the Council then realised that Ms Wadworth’s letter was wrong and after reconvening the appeal panel, it informed the officers that they had only been regraded to grade 4, not 5.
The Council employees lodged a claim for unauthorised deductions from wages contrary to section 13 of the Employment Rights Act 1996.
Tribunal decision
The employment judge held that the letter of 10 October 2011 did not have contractual effect for two main reasons. Firstly the outcome of a grievance was not likely to be regarded as a contractual document, not least because there had been no process of offer and acceptance in order to create a binding variation in pay favourable to the claimants. Nor had they done anything to demonstrate acceptance.
Secondly, Ms Wadsworth only had authority to explain a decision taken by others, not to grant a pay increase.
EAT decision
The EAT, however, said that the employment judge was wrong. The letter of 10 October recorded the outcome of a grievance which had been made to the employer and was answered on behalf of the employer by Ms Wadsworth.
Though not authorised to determine pay, she was authorised to communicate what others had decided. Otherwise, there would have been no point in asking her to deal with the grievance, since it was the outcome of the pay appeal which was at issue. She was acting as the employer’s representative and not in a personal capacity. The effect of the letter was thus that the employer had personally and directly told their employees of a pay rise, and they had continued to work in that knowledge.
So when an employer offers an additional benefit to their employees it should be assumed that it has become a term of the contract in the absence of evidence that they have rejected the offer. The employees do not have to formally accept the offer as they are deemed to have accepted it merely by continuing to work, and it took effect the moment they were notified of it. If the change involved a higher grade with more responsibilities, something more might be required by way of acceptance, but there was no suggestion in this case that the jobs that the claimants were doing had changed. The reference to a change of “grade" referred to a different salary scale, and a different approach to payments, but not additional or more onerous duties.
However, the EAT remitted the issue of whether the employees recognised, or should have recognised, that the letter was a mistake (thereby nullifying the contractual effect of the document) for a fresh tribunal to consider.
Comment
There are a number of authorities which demonstrate that an employee may be deemed to have accepted an unfavourable variation by continuing to work. This is particularly so where the variation has immediate and frequent effect as is the case with pay. The employment judge’s decision, had it stood, would have led to the very strange result that express acceptance is required where the variation is favourable to the employee but not where it is to the employee’s detriment.