Be careful what you commit to
Do you ever wonder whether your statements are a binding contractual commitment on behalf of your organisation?
Do you ever wonder whether your statements are a binding contractual commitment on behalf of your organisation? In a stark reminder for all HR professionals of the importance of what you say, the Employment Appeal Tribunal in the case of Hershaw –v- Sheffield City Council has upheld a breach of contract claim based upon a statement made by an HR consultant in a grievance appeal. This applies even though the consultant did not have the power to make such a commitment under the Council’s own processes.
A group of market patrol officers employed by the Council raised pay complaints which were heard under the Council’s grievance procedure. The grievance appeal was heard by an HR consultant. In her outcome letter she decided that the officers should be paid at grade 5 instead of grade 3. The Council subsequently argued that the decision was wrong and that the officers should have been graded 4. The consultants brought breach of contract claims relying upon the grievance appeal outcome. In the Employment Appeal Tribunal hearing the council endeavoured to argue that: the HR consultant did not have the authority to increase their pay to that level; and that they could withdraw the offer to pay more because the officers had not actively ‘accepted’ the increase in pay. The EAT rejected these arguments.
The EAT Judgment is very clear in finding that the commitment in the grievance appeal was potentially contractually binding and is something upon which the employees could rely. As the HR consultant was considering a grievance appeal she was acting as the employer and was not acting in a personal capacity, accordingly she was someone able to provide an authoritative answer to the grievance which was then legally binding on the Council.
The EAT has also found (perhaps unsurprisingly) that an employee does not have to actively formally accept an offer made to improve their terms. It was felt to be artificial to suggest that a pay rise required acceptance. Where an additional benefit is offered to an employee, with no apparent downside, the contract is taken to have been changed for the future and the employee is taken to accept that offer by continuing to work.
What does this mean for me?
Be very careful what you state when you make commitments on behalf of the business. In particular in documents produced as part of internal procedures, commitments made by any employee (including any HR professional) will bind the business irrespective of whether that individual has the power (internally) to do so. The EAT were not interested in arguments around actual authority under the Council’s rules, what they focused on was the HR consultant’s role. In this case that role in hearing a grievance appeal clearly presented that person as making decisions on behalf of the council. The same will be true of any person making a decision as part of a grievance or other internal process.
We do also sometimes see problems arise for employers where managers and others are held to have committed the business to pay an increase or to provide some other benefit. This Judgment reinforces the fact that where such a commitment is made it is binding, it doesn’t need the employee to do something else to make that so.
Do be careful when making grievance decisions, particularly those which impact upon pay and reward as you are likely be make a legally binding commitment on the organisation’s behalf. However there is one glimmer of hope contained in this Judgment where any such commitment is made in error (and obviously so). The EAT have not ordered the Council to pay the increased amounts, they have sent the case back to a new Tribunal to decide whether there was genuinely a legal mistake. That is, even though the HR consultant was able to bind the company, if the officers understood in the full context that what was being said was a mistake then it may not be binding. The example given by the EAT is the secretary to the boss who writes a letter to an employee who had previously earned £400 per month recording a proposed pay rise to £4,500 per month rather than £450 per month, that employee would know that this was simply an error and that would not be legally binding. Although you do not want to find yourself relying on such an argument, the Council will presumably take the opportunity to argue that these officers knew that they were not genuinely being increased to grade 5.