Glendale Managed Services v Graham and others [2003] IRLR 465

In this recent case the Court of Appeal holds that there is an implied contractual term, if and when the employer intends to depart from the normal situation to inform employees of the departure - here in connection with pay.

The facts in this case were familiar in local government contracting out. Darren Graham and his colleagues were employed by Southend-on-Sea Council in their leisure centres. Their statement of main terms and conditions stated "During your employment with the authority, your rate of pay, overtime and other payments - will normally be in accordance with the National Joint Council for Local Government...

"Any changes that subsequently may be made in your terms and conditions will be separately notified to you or otherwise incorporated in the documents to which you have access."

There was then a TUPE transfer of the leisure centres, from the council to Glendale who became the employer. Thereafter, Glendale did not honour the next two NJC agreed pay increases. Mr Graham and his colleagues supported by the GMB, brought employment tribunal claims for unauthorised deductions in respect of the non payment of the pay rise. The Employment Tribunal upheld the claim. Glendale appealed to the Employment Appeal Tribunal where their appeal was dismissed. So they appealed further to the Court of Appeal.

The Court of Appeal upheld the decision of the Employment Tribunal that Glendale were contractually obliged to pay the NJC rates following the TUPE transfer and that no notice had been given to the employees that Glendale intended to depart from the agreed NJC rates.

The Court of Appeal took a robust view of how statements of particulars should be construed. Lord Justice Keene said "I do not accept that one should construe the wording [of the particulars] as if it were an agreed term in a written commercial contract between two companies. The task of interpretation has to be undertaken bearing in mind that these are the employer's particulars of employment which provide evidence of the agreement between the employer and employee and no more."

The Court of Appeal went on to say that where a contract provides that the NJC rates will normally be paid, there is an implied term in a contract of employment that the employer must inform the employee if and when there is to be a departure from the normal situation. Lord Justice Keene reiterated previous case law "that there will normally be an implied term in contracts of employment that an employer will not treat his employees arbitrarily, capriciously or inequitably in respect of matters of pay. I see that as being simply one part of the more general obligation not to destroy the mutual trust and confidence between employer and employee".

The case has wide reaching implications, not just in the context of TUPE transfers. The introduction of such an implied term could catch employers who change normal pay rise or bonus arrangements without informing employees of the change. Could this also apply to non pay related benefits? On the reasoning of the Court of Appeal there is no reason why it should not have a wider application.