If an employment contract states that it can be varied only in writing, what happens if you agree to vary it but don’t write down that variation? The law may have just changed…

Recently, I represented a senior executive who argued that he had entered into a binding agreement with the CEO of his business that he could remain employed until a particular date (when some shares were due to vest) and then leave.  The CEO reneged on that deal and sacked him with immediate effect.

The solicitor for the employer sought to dismiss my argument that there was a binding agreement by pointing out that my client’s employment contract stated that no amendment would be valid unless it was in writing and signed by both parties. I replied that he might want to read the 2016 case of Globe Motors Inc v TRW Lucas Variety Electric Steering, in which the Court of Appeal commented that it was always open to parties to make and unmake their agreements and to waive compliance with particular provisions. If any other clause in a contract could be waived or amended, why not the one which said that amendments had to be in writing?

Like most disputes, my particular case did not get to court but settled on very satisfactory terms. This was lucky for my client because, in a case this year, Rock Advertising Ltd v MWB Business Exchange Centres, the Supreme Court held that, where a contract contained a ‘no oral modifications clause’, any oral modification would be ineffective unless recorded in writing.

Of course, this does not necessarily mean that oral agreements between employers and employees made regardless of such clauses will never be binding. The employee may be able to argue that there was a separate (or, as we lawyers say, a ‘collateral’) contract regarding the term in question. Alternatively, where an employee has relied on an assurance from an employer, the employer may be ‘estopped’ from disregarding its promise. Finally, where an employer refuses to honour an oral agreement, an employee might claim a breach of the duty of mutual trust and confidence, leading to a claim of constructive dismissal. All three approaches, however, will have more rigorous tests than simply showing that the parties orally agreed to vary the contract.

The Rock Advertising decision has the potential to create strange situations, because people working together will inevitably agree to change their relationship from time to time (pay, working hours, duties, location, job titles etc) and neglect to write it down. Unscrupulous people may even try to exploit this.

For employers there are two lessons:

1) consider including a clause in contracts of employment requiring that any variation be in writing. Previously, in light of cases like Globe Motors, such clauses might have been regarded as pointless but, in light of Rock Advertising, that is no longer the case; and

2) record all changes in writing – unless you are unscrupulous and want to wheedle out of whatever you have just agreed orally!