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In Hershaw and ors v Sheffield City Council, the Employment Appeals Tribunal has held that rates of pay set out in a letter had contractual effect. The letter was from an HR consultant who had investigated a grievance about employees’ pay.

Pay review

The claimants were market patrol officers employed by Sheffield City Council. Following a review of its pay and grading structure, the council sought to vary the claimants’ pay to their detriment. The claimants accepted the terms “under duress”, expressly reserving their rights and appealing the decision under the council’s procedure.

Raising a grievance

The claimants appeal was heard in March 2011 but the decision was not communicated to them and their pay remained unchanged. A grievance was raised in August 2011.

An HR consultant was appointed by the council to investigate the grievance. She had no authority to make a decision about the claimants’ pay but was authorised to communicate the outcome to them.

On 10 October 2011, the HR consultant wrote to the claimants, advising them that the appeal panel concluded they should be placed on a grade 5, having previously been on a grade 3. The claimants were subsequently advised by an HR officer that this meant their pay would be £19,370 per annum. Despite this, the claimants’ pay did not increase.

The appeal panel reconvened after realising that a mistake had been made by the HR consultant in her letter of 10 October 2011. It decided that, in March 2011, it had actually concluded that the claimants should be on grade 4, rather than grade 3 or 5.

Unlawful deduction of wages

The claimants issued proceedings for unlawful deductions from their wages. Their claims were dismissed by an employment judge on the basis that the letter of 10 October 2011 was not a contractual document and that the HR consultant did not have authority to bind the council to a variation of pay. There was no consideration of whether a mistake had been made or the extent to which the claimants had been aware of it.

Employment Appeals Tribunal

Following an appeal by the claimants, the Employment Appeals Tribunal held that the letter of 10 October 2011 did in fact have contractual effect. The EAT further held that 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 the benefit becomes a term of the contract and the employee will be taken to have accepted the term merely by continuing to work.

One issue in the case remains outstanding; whether the amended contract was void for mistake. This issue has been remitted to be considered by a fresh tribunal.

The lessons from Hershaw following this decision is that employers should ensure that correspondence relating to an employee’s grievance accurately reflects the decision of the grievance panel, in order to minimise the risk of being bound by unintended contractual terms.

For more information about this decision or to discuss how the issues raised in this article may affect your business, contact Lyons Davidson’s employment team.