Austerity pay freezes imposed on hundreds of local authority workers amounted to a breach of their contracts for which they are entitled to be compensated, the Court of Appeal has ruled in a case that will send shockwaves through government.
The case concerned a city council and a company that it wholly owned that had, over a two-year period, ceased awarding incremental pay increases to their employees as part of a nationwide austerity drive. Backed by their trade unions, a large number of employees launched proceedings and six lead cases were selected in order to represent the differing positions of various groups of workers.
The employees’ complaints that unlawful deductions had been made from their contractual pay were initially dismissed by an Employment Tribunal, but one of the groups subsequently succeeded before the Employment Appeal Tribunal. The council and its subsidiary, and the unsuccessful workers, appealed and cross-appealed respectively against the latter ruling.
In allowing the cross-appeal, the Court found that all the employees concerned were, as a matter of contract, entitled to pay progression and that the failure to award them incremental pay rises breached their contracts. Their trade unions had initially objected to the pay freeze and the fact that the employees had continued to work without formal complaint or taking industrial action did not mean that they had implicitly consented to a variation of their contracts.
The Court noted that the reason for the workers’ failure to protest may well have been fear of redundancy and that the variation contended for was entirely to the advantage of the employers, with no compensating advantage to the workers. The ruling meant that the employees were entitled to arrears of pay equivalent to that which they would have received if pay progression had been implemented in each of the years during which their pay was frozen. The council and its subsidiary’s appeal was dismissed.