In this article...

• The facts
• The EAT's decision
• What does it mean for me?

Raj Basi looks at the recent case of North Lanarkshire Council v McDonald and anor, in which the EAT considered whether employees’ contracts had been varied to include an implied contractual right to carry out a certain amount of paid overtime each week.

The facts

The two claimants worked for North Lanarkshire Council carrying out emergency repairs to roads and other Council property. At the time of their appointment they were asked to extend their working day by 15 minutes in the morning and 15 minutes in the evening. This amounted to 2.5 hours’ overtime a week, for which they were paid a premium rate.

This arrangement was not set out in the employees’ written contracts. The possibility of overtime had been discussed at interview but the Council was unclear how the new arrangements would work and wanted flexibility, so it did not give any guarantee that the overtime would continue.

The arrangement went on for over a year, during which time there were negotiations with the trade unions about harmonising employment contracts. In the context of these discussions, the claimants argued that their pre-harmonisation pay included overtime pay and brought tribunal claims for unlawful deduction of wages.

The tribunal found that the overtime payments had not been contractual at the time the employment contracts were entered into because of initial uncertainty as to how the new arrangements would work. However, it went on to find that the contracts had subsequently been varied (before the introduction of the new harmonised contracts) so as to include a right to overtime. In the tribunal’s view, the precise date of the variation was difficult to pinpoint but it would have been reasonable to regard the overtime as contractual after a period of one year.

The tribunal’s reasoning was that if an officious bystander were to have suggested that there should be an express contractual provision regarding the additional overtime, the parties would have had no difficulty in agreeing and therefore the provision had been incorporated into the contracts of employment as an implied term. This is known as the “officious bystander” test.

The EAT's decision

The EAT allowed the Council’s appeal and held that there had been no contractual right to overtime before the start of the new harmonised contracts.

It noted that the tests for implying terms into contracts (including the “officious bystander” test) have traditionally only been applied to the construction of the parties’ original contract, not to determine whether the parties have subsequently varied that contract.

The EAT held that, just as a contract can only be entered into by agreement between the parties, so it can only be varied by agreement. It is not enough to say – as the tribunal had done here – that, if the parties had been asked by an officious bystander to vary the contract, they would probably have agreed to do so.

The fact that the overtime had been habitual for a year was not sufficient, in itself, to imply a term into a new contract, let alone imply a variation into an existing one.

What does it mean for me?

This case appears to restrict the scope for employees to argue that an employment contract has been varied by an implied term at some point after it was entered into. In order to accept that the claimants had an implied right to work overtime, the EAT would have required evidence allowing it to infer that the parties had actually agreed to the overtime becoming contractual. Of course, it is always open to employers to include an express term in employment contracts to the effect that any overtime will be offered and/or undertaken on a purely voluntary basis.