Construction of Salary Increase clause in contract

Thanks to Barnaby Large of No.18 Barristers Chambers for preparing this case summary.

Should an assurance of guaranteed incremental pay increases subject to performance contrary to absolute discretion in a written contract bind an employer?

No, on the facts, held the EAT in the Equality and Human Rights Commission v Earle.

The Claimant was employed by the Respondent as a senior legal policy adviser. The parties' written contract gave a base starting salary and a higher figure representing the top salary for the position with a chart including five points showing an incremental rise from base to top salary.

Clause 5.3 provided for annual salary review with the possibility of increase on assessment of the previous year's performance but providing no obligation on the Respondent to increase salary.

The employment tribunal found one of the Respondent's staff authorised to discuss salaries assured the Claimant her salary would increase yearly subject to satisfactory performance. The employment tribunal found this to be a contractual arrangement relying on Atrill v Dresdner Kleinwort rather than 'puff'.

The EAT overturning the employment tribunal's decision, applying Autoclenz v Belcher and Commerzbank v Keen, the question was 'What had been agreed between the parties?', whilst remembering employment contracts are relational. Viewed in context, any earlier understanding between the parties could not overrule a discretion contractually agreed.