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Re-organisations and reductions in pay

10 May 2013

Sometimes, as part of a reorganisation, an employer may want to re-grade staff, and reduce pay under the new grading structure. Employees can be understandably reluctant to agree.


In Sandford v Newcastle Upon Tyne Hospitals NHS Foundation Trust in the EAT this January, the Trust had re-banded a number of posts, under which Mr Sandford went down one level in the pay-structure. Mr Sandford refused, even though he was offered two years pay protection. The Trust then terminated his old contract on notice, and offered to re-engage him on the lower band but without the pay protection. Mr Sandford refused and left, claiming unfair dismissal.


The Trust successfully relied on the catch-all ‘Some Other Substantial Reason’ defence. Even though consultation could have been improved upon, the dismissal fell within the band of reasonable responses and was fair. The EAT concluded that the Trust had carried out the exercise required by s S98(4) of the Employment Rights Act and upheld the decision.


The Sandford case reminds us that employers can force through, sometimes painful, reorganisations and re-grading, without being obliged to pay redundancy to employees who don’t agree. However it is vital to carry out full individual and group consultation where appropriate before imposing such changes on staff.


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