Clear drafting in an employment contract is require for unilateral variation by the employer. In a dispute, decisions often turns on the factual circumstances on a case by case basis and it is down to the construction of the wording relied upon by the employer seeking unilateral variation. On 15 December 2014, the Employment Appeals Tribunal (EAT) overturned the decision by the Employment Tribunal in Norman and another v National Audit Office UKEAT/2014/0276/14/BA, a case concerning a breach of contract by reason of unilateral and non-consensual variations of terms of employment by the reduction of the extent of paid sick leave and a reduction in privilege leave. The Judge at first instance found that an employer could unilaterally vary an employment contract if there were terms in the letters of appointment of the employees, incorporated into the employment contract, that enabled the employer to vary the contract unilaterally such as terms and conditions made "subject to amendment" with significant changes "notified" to staff. The EAT disagreed. On construction of the clauses, the appeal Judge concluded that the wording was nowhere clear and unambiguous as required.

In R. Robinson v Tescom Corporation before the London Employment Appeal Tribunal on 3 March 2008, a manager's terms of employment were varied to the extent that it involved more travelling on business in the course of his employment. The manager believed this was a unilateral variation which was a breach of his contract and he had been dismissed from his original contract of employment. He however continued to work in accordance with his original terms and under protest. A grievance was raised. He was called to a disciplinary hearing and subsequently dismissed for gross misconduct in failing to comply with the employer's legitimate and reasonable instructions. The dismissal was held to be fair by the Employment Tribunal and his appeal to the Employment Appeals Tribunal was dismissed by the Honourable Mr. Justice Elias. The fact the manager had agreed to continue working after the unilateral variation prejudiced his case. He could not continue to work under the new terms, even under protest, and yet insists on working in accordance with the original terms of employment. By doing so, he opened himself to dismissal for gross misconduct. This case must be considered on its facts and should not be taken as authority for an employer's unilateral variation of terms of an employment contract.

On 17 November 2006, the Court of Appeal in London held in the case of Commerzbank AG v James Keen that Section 3 of the Unfair Contract Terms Act 1977 (on liability arising under contract) does not apply to employment contracts as employees do not "deal as a consumer" with their employer. In this case, an ex-employee with a basic annual salary of £120,000 was eligible to participate in a discretionary bonus scheme. The terms stated that no bonus will be paid if on the date of payment of the bonus the employee was not employed by the Bank or if he was under notice to leave the Bank's employment. Mr. Keen was made redundant on 10 June 2005 before the Bank's bonus payment date in March 2006. Mr. Keen claimed breach of contract, under-payment and non-payment of annual discretionary bonuses under the term providing for entitlement to a discretionary bonus. It was claimed the Bank could not rely on the term (under UCTA 1977) which provided that no bonus would be paid if an employee was no longer employed by the Bank. Hence, the employer was in breach of contract and not entitled to exclude or restrict any liability in respect of the breach or to claim to be entitled to render a contractual performance substantially different from that which was reasonably expected of the employer, or in respect of the whole or any part of the employer's contractual obligation, to render no performance at all by non-payment of the bonus.

If you have been unfairly dismissed and deprived of your bonus entitlement just before the date your employer was due to declare and distribute the company bonus or if you believe you were discriminated against in the distribution of bonuses, you may have a claim. To extinguish your right to bring employment related claims, a compromise agreement with terms favourable to the employer, some of which could be penalty clauses and thus unenforceable, may be offered for your acceptance. Contact us for advice on your rights and for independent legal advice on the terms offered to you in a compromise agreement.

If an agency worker were to work for an end-user employer (agency's client) over several periods and then taken on as an employee, would the periods worked as an agency worker count towards the one year qualifying period so as to entitle him or her to statutory protection from unfair dismissal? In the case of Wood Group Engineering (North Sea) Ltd -v- Karen A Robertson, the Employment Appeal Tribunal considered whether there was an implied contract of employment between an agency worker and the end-user employer, when the agency worker was dismissed less than one year after she was taken on as an employee by the end-user. The main legal issue was whether the periods of employment as an agency worker should count towards her one year continuous employment. In this case, there were contractual arrangements and obligations between the agency and the end-user employer and between the agency and the agency worker which governed the relationship between the parties regarding control over the agency worker and mutuality of obligations. The Employment Tribunal at first instance decided there was an implied contract of employment during the period when Ms. Robertson worked as an agency worker because the end-user employer exercised control over her work and there had been mutuality of obligation between the parties. The end-user employer appealed against the decision. On 6 July 2007, the Employment Appeal Tribunal rejected the decision of the Tribunal. It disagreed there was an implied contract of employment given the tripartite contractual agreements and held the period of continuous employment commenced only when the agency worker was taken on as a full time employee and not before. Consequently, Ms. Robertson was not entitled to statutory protection from unfair dismissal, given the facts of her case.

Paid Annual Leave Entitlement

There have been more changes to the Working Time Regulations 1998. On 1 April 2009, the minimum annual paid leave entitlement for full time and part time employees will be increased from 24 to 28 days (pro rated for part timer workers who are entitled not to be treated unfavourably) or 5.6 weeks on the basis of five working days a week. The annual leave entitlement includes public and bank holidays. The law provides for minimum annual paid leave but an employer may increase leave entitlement in its employment contracts. Paid leave entitlement starts to accrue on the date of commencement of employment.

Annual leave accrues even though an employee is on long term sick leave and is absent from work throughout the leave year concerned. Employers are legally obliged to allow an employee on long term sick leave to carry forward accrued annual leave into the following leave year. This raises the question as to the treatment of an employee taken sick over a period whilst on annual leave. The recent view of the European Court of Justice in Pereda v Madrid Movilidad SA (2009) is to treat the period concerned as sick days, subject to the employee complying with notification and evidence requirements of the employer's sick pay scheme or statutory sick pay. The court's decision is legal authority that such an employee is entitled to take an equivalent period of annual leave after he is fit to return to work and, if necessary, such leave may be taken in a subsequent leave year. We recommend employers review and amend their employment contracts and policies accordingly. These changes will affect calculations of payment in lieu of annual leave entitlement that has accrued but untaken on termination of an employee's employment and should be taken into consideration in the terms of a compromise agreement.

Following the ruling by the European Court in May 2014 in the case of Lock v British Gas that commission, which an employee would have earned during annual leave had he or she not taken leave, should be included in the calculation of holiday pay. the Employment Appeal Tribunal handed down its judgment in Bear Scotland v Fulton on 4 November 2014 that UK workers and employees are entitled to be paid a sum of money reflecting non-guaranteed overtime work (required by employer), allowances and commissions as part of their 20 mandatory paid annual leave.

This means non-guaranteed overtime, allowances and commission etc. should be included when calculating the level of holiday pay for the 20 days mandatory paid annual leave under the Working Time Directive only (not when calculating the 8 days of annual leave added by the UK under Regulation 13A of the Working Time Regulations). Uncertainty remains on voluntary overtime which was not considered. At present, the decision:

(1) limits claims for arrears of holiday pay to deductions or a series of deductions. If there is a gap of more than 3 months in any deduction or series of deductions, the employment tribunal will not have jurisdiction to hear the claim for underpayments. (This aspect of the judgment may be subject to appeal to the Court of Appeal).

(2) restricts employees from retrospectively designating which holidays formed part of the 20 mandatory paid leave.