Verbal assurances and employment contracts - which takes precedence?

Dec 22, 2014

The Employment Tribunal has overturned an employment tribunal decision and held that an employer did not breach the employment contract by not increasing an employee’s salary. The tribunal had wrongly construed the pay progression clause, which expressly stated that there was no obligation to increase the salary. Although the Human Resource manager had commented during the initial interview that the employee's pay would be increased to the top of the scale if her performance was satisfactory, the EAT held that this had been superseded by the entire agreement clause in a written contract of employment and as such did not have any legal effect.

Mrs Earle was recruited by EHRC. She was disappointed with the starting salary and before she received the formal offer letter, was reassured by the Human Resources Officer that she would not remain on this salary for long and would quickly move up the scale. She was told that it was policy for all new recruits to start at the bottom of the salary scale but that her salary would increase subject to satisfactory performance.

However, upon receiving the contract of employment, the terms for progression expressly stated that there was no obligation on the employer to grant progression, and provided not that progression was solely dependent on performance but "included" performance.

"Progression through the salary range will be reviewed annually on or around 1 October in each year until the maximum of the range for your role has been reached. Any progression review will include an assessment of your performance during the preceding 12 months. There is no obligation on the EHRC to increase the level of your basic salary at a review. Any increase awarded in one year will not create any right or entitlement or set any precedent in relation to subsequent years.”

When the 1 October came, The EHRC was subject to severe financial constraints arising from a tightening of Government funding, and did not award the claimant (or anyone in her position) either progression or a progression review.

Mrs Earle’s contract also contained an ‘entire agreement’ clause, causing the EAT to conclude that the EHRC was not in breach of contract by not awarding Mrs Earle with a salary increase. The EHRCs power under the contract was described as ‘discretion’. While the EAT recognised that in some circumstances, as in
Dresdner Kleinwort Ltd v Attrill (2013), oral assurances should be construed as being within the terms of the contract and can “overrule/define the discretion supposedly contained in the written terms of the contract”, the EAT ruled that in this situation this was not the case.

Even if the verbal assurance had amounted to a prior contract, this would have been superseded by the entire agreement clause unless it could be said that the written contract had not reflected the true intention of the parties and what had actually been agreed.

When recruiting, employers should be cautious when giving verbal assurances to prospective employees so that they reduce the risk of later submissions claiming that they relied on these initial assurances.

In order to avoid these situations, employers should always ensure that contracts of employment contain an entire agreement clause, which will generally be effective to confirm that the contract of employment supersedes all previous oral or written agreements.

If you would like assistance in drafting an employment contract or would like to have your employment contracts reviewed and updated, please contact a member of our Employment Team on 01279 755777.

Gary Smith

About the author

Gary Smith

Gary joined Nockolds in 2007 and is a Partner in our Employment Law Team. Before joining the firm Gary studied law at the University of Kent. ...

View Profile »

« Back

No articles available