A letter from an HR Consultant to an Employee can bind an Employer

In a recent case in the Employment Appeal Tribunal the question of whether an HR consultant could legally bind an employer to contract terms with employees has been decided.

The Facts

In this case the employer, Sheffield City Council, undertook a review of employees pay and grading structure. As a result of the review the employees in this case had their pay changed to their detriment. Needless to say they were not happy about this and although they accepted the new salary structure they did so under duress. They expressly reserved their employment rights in respect of the change and appealed.

The appeal hearing took place in March 2011 and the outcome of the appeal was that their pay remain unchanged from the new structure, but crucially this decision was not communicated to the employees.

Having not received the appeal outcome and still with a reduction in pay the employees raised a grievance in August 2011.

The Council handed the grievance to an HR officer to investigate and liaise with the employees about the outcome. The HR officer duly did this by letter in October 2011. She notified the employees that they would be on grade 5 instead of the previous grade of 3, this meant that their pay would be increased.

In January 2012 another HR officer wrote to the employees to tell them the amount of their pay on grade 5. When the employees pay did not actually change they notified the Council who noted that their had been a mistake in the letter sent in October 2011. As a result the Council’s appeal panel reconsidered the issue in March 2011 and concluded that the employees should actually be on grade 4!

The employees made a claim in the Employment Tribunal claiming for unlawful deductions from their wages in respect of the difference in pay from grade 5 to what they actually received from the Council.

The Law

Employees have protection under UK law from unauthorised deductions being made from their wages. There are set circumstances when an employer can make legitimate deductions.

If an employee believes that unlawful deductions have been made from their wages they can apply to the Employment Tribunal for repayment of the wages from their employer.

The Decision

The key question in this case was whether the letter from the HR Officer in October 2011 contained contractual terms which the employees could rely on, and whether the HR Officer had authority to bind the Council to a pay variation.

The Employment Appeal Tribunal (EAT) decided that the letter did have contractual effect and could be relied upon and in reaching the conclusion stated:

“Where an additional benefit is offered for the foreseeable future to an employee, with no apparent downside, the parties will be taken to have agreed that henceforth that is to be a term of the contract, and the employee will readily (and usually) be taken to have accepted it as such, merely by his continuing to work. Nothing formal is required by way of acceptance.”

In deciding that the HR Officer did have the authority to bind the Council the EAT concluded that as she was asked to deal with the grievance, which was about pay, and communicate the response to the employees, the Council had made it clear that that she could provide an authoritative answer to the grievance.

The information supplied to the employees by the HR Officer created an amendment to the employees terms regarding pay.

Points to note

This is a useful reminder that if you employ someone internally or externally to deal with your employee issues you should ensure that they run any correspondence by you before sending to the employees.

If you want to find out more about this case you can read the full details at www.bailii.org/uk/cases/UKEAT/2014/0033_14_1607.html. The full case name is Hershaw and others v Sheffield City Council.