July 24, 2014

Implied term regarding pay increases was a contractual obligation

On the 1st April 2000 a number of employees transferred from ITS Limited to CSC Limited under TUPE. Obviously the employment contracts transferred, the terms and conditions of which provided for an annual salary review and although not stated, all employees received pay increases at least in line with the retail prices index subject to satisfactory performance. However it was extremely rare for an increase not to be awarded even though it was subject to satisfactory performance. When a number of employees did not receive a pay increase in line with RPI following an agreement reached between CSC Limited and the union (which, it transpired, was not recognised to conduct pay negotiations on behalf of the employees) they brought claims for unlawful deduction from wages on the basis that there was a contractual obligation to award them annual RPI increases.

Although the Tribunal found that, on the evidence, it could not say that prior to the transfer from ITS Limited these was a contractual obligation to award annual pay increases in line with RPI, this crystallised post transfer and CSC Limited believed it was legally obliged to award the employees a pay increase of at least this amount. This had been communicated to the employees and they all expected this to happen, as it had done over a substantial period of time. The employer’s conduct in conveying to the employees that they could be entitled to expect an annual increase in this way, giving rise to an expectation on the part of the employees, caused the increase to become an implied term through custom and practice.

This legal update is provided for general information purposes only and should not be applied to specific circumstances without prior consultation with us.

For further details on any of the issues covered in this update please contact Gemma Ospedale, Partner in Employment on 020 7583 2222.

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