Breaching the Agenda for Change

Jayne Flint explains how a ruling that a NHS trust breached the Agenda for Change by deferring pay progression in cases of unacceptable sickness absence could have wider implications for the public sector.

In Brent and Ors v Central Manchester University Hospitals Foundation Trust (“the Trust”), the Employment Tribunal held that an NHS Trust breached the terms of the Agenda for Change when it introduced a policy deferring pay progression for a period of 12 months if an employee reached a prescribed number of sickness absences in any 12-month period.

Background

The Agenda for Change regulates the pay grading system for NHS staff (except doctors and dentists). The Agenda was introduced in 1999 to ensure that consistency was implemented throughout the NHS in respect of pay, in particular, that pay complies with equal pay legislation.

Ultimately the Agenda seeks to provide a clear and transparent pay structure. All NHS employees fall within one of nine possible bands within the Agenda for Change, within which each employee’s pay scale sits.

The Agenda for Change is incorporated into the NHS Terms and Conditions Service Handbook which is incorporated into employee’s individual contracts of employment.

The Facts

In October 2009, the Trust brought into force a new policy called the Managing Absence Policy (“the Policy”).

Under the terms of the Policy an employee’s pay progression was deferred for a period of 12 months if an employee was off sick for a certain number of days in any 12-month period (either on four separate occasions or for a total period of 18 days).

83 employees had their pay progression deferred under the terms of the Policy and brought claims for unlawful deductions from wages, claiming that the Policy was in breach of the Agenda for Change, which was incorporated into their terms and conditions of employment.

The Trust maintained that it was free to apply its own standards in terms of managing the performance of its staff, and that this could include the legitimate aim of managing sickness absence, when assessing whether performance was “satisfactory” for the purpose of the Agenda for Change.

Employment Tribunal’s Decision

The Tribunal referred to the terms of the NHS Handbook which states that the only ground for deferral of pay is “significant weakness in performance”. This means performance which “prevents a member of staff from continuing to apply the knowledge and skills specified consistently across a recognised workload.”

The Tribunal considered that the NHS Handbook was very clear on the types of situation which would enable an NHS Trust to defer pay and that the Handbook did not authorise deferral on any other grounds.

There was no section within the Handbook which authorised deferral of pay on the basis of employees’ sickness records. It considered that an employee’s sickness absence record does not necessarily equate to that employee being, or not being able, to apply the relevant knowledge and skills specified.

The Tribunal also pointed to the fact that section 6.26 of the Handbook clearly states that deferral of an employee’s pay progression cannot be implemented unless there has been some prior discussion “about the knowledge and skills that the individual needs to develop and the member of staff has been given the opportunity to achieve the necessary development”. By contrast, under the Policy deferral was automatic upon the requisite number of absences being reached, which was incompatible with section 6.26.

The Tribunal concluded that the Policy and consequential deferral of the employee’s pay progression amounted to a unilateral variation to the terms and conditions of employment and made a declaration of unlawful deductions from wages as a consequence of this variation.

Comment

Although this was only a first instance decision (and so is not binding on other Tribunals) it suggests that local NHS employers will not be able to introduce policies at a local level which override terms and conditions of employment that are agreed nationally.

Potentially, the decision not only affects NHS Trusts but also other areas of the public sector. For example the Local Government “Single Status” pay grading system implements a similar system to the Agenda for Change.

In today’s austere economic climate the public sector is being increasingly pushed to try to find more inventive ways of reducing public spend. While it may be entirely understandable that the Trust sought to “kill two birds with one stone” here by attempting to tackle absence levels while saving money, its actions ultimately resulted in unnecessary litigation.

This case is a warning to all public bodies that they cannot simply override contractually binding terms and conditions of employment by introducing new policies in an attempt to manage staff more efficiently.

Whilst the implementation of any new workplace policy may appear to be legitimate, wider considerations should always be given to the impact of that policy.

Many public bodies will be subject agreements which have been negotiated at a national level. These agreements will generally take precedence and any desired changes will therefore need to be negotiated collectively with trade unions at a national level.

Employers also need to think about whether or not the implementation of a policy will, as in Brent, breach terms in employee’s contracts of employment. Even if the contract purports to give the employer a right to vary contractual terms, the onus will be on it to demonstrate why the variation was justified to meet the needs of the organisation.

Finally, there are also wider implications to be considered, particularly when implementing policies which affect employees’ pay. For example, in this case, the terms of the Policy could also have left the Trust open to claims that it was indirectly discriminating, for example, if disability related absence was not disregarded and had triggered the deferral of pay progression.

Jayne Flint is an employment solicitor at national law firm Shoosmiths.