Law in Practice: changing terms and conditions

Recently, many employers have seen the option of making changes to terms and conditions, either in the short term or permanently, as a way of avoiding redundancies. But how far can an employer go if the employees are unwilling to accept the changes?

Contractual variation clause

The contract itself may include a ‘flexibility’ clause. This may be either a specific clause (for example, allowing for a change of location) or it may be a more broadly drafted clause, which may be too broad to be effective. However, even if there is an express contractual clause that allows for a change to terms, there are limitations that need to be considered. For example, a discrimination claim may arise if the proposed change impacts on a particular employee, or group of employees, in a disproportionate way.

If an employer asks employees to relocate in accordance with the terms of their contract, a greater proportion of women may find it more difficult as more women are not the primary earner. Implementing the clause in these circumstances may be contractually acceptable, but could result in indirect sex discrimination, which would need to be objectively justified.

Any employer that wishes to rely on a flexibility clause must therefore ensure the clause is drafted in a clear and unequivocal way, and that the proposed change is covered by the term the employer wants to rely on.

No contractual clause

Where there is no contractual variation clause, the employer may still implement a change if:

  • the employee expressly agrees
  • the employee, by implication through their conduct, agrees
  • the employer terminates the contract on notice and re-employs the employee on a new contract under the revised terms and conditions.

An express agreement is easy to understand, and the issue is simply ensuring that consultation has been carried out properly.

In terms of implied agreement, if an employer imposes changes to terms and conditions and the employee continues to work for a period of time, and does so without protest, then it could be said that they have agreed to the change. In these circumstances, there would therefore be no breach of contract by the employer. The downside for the employer is that they would have a period of uncertainty while waiting to see what the employee does, and if challenged the employer would need to demonstrate such implied acceptance.

Additionally, the courts are unwilling to find that employees have impliedly consented to a change where the variation does not have an immediate effect on the employee. For example, if a redundancy package is changed, it will not impact on the employee until redundancies are effected. The employee may object at this point, which may be a significant time later, claiming they had never agreed to the change.

If the employee has made clear that they will not agree to the changes, the employer may take the decision to dismiss and re-engage the employee on new terms and conditions. Provided the old contract is terminated on notice, there will be no claim for breach of contract. However, an employee may still claim unfair dismissal if they have more than one year’s continuous employment and an employer would then still have to deal with a claim.

If the employer does dismiss the employee and offers new terms and conditions, the employee can claim that the dismissal was unfair. To defend such a claim, the employer will need to demonstrate that the dismissal was for a potentially fair reason and that it has gone through a fair process. The usual statutory reason in restructuring dismissals will be “some other substantial reason” in making the dismissal. To meet this, the employer will need to show they had a sound business reason for the reorganisation and change to terms and conditions. The employer will not need to show that the business would have failed if the changes had not been made, but the steps must be reasonable in the circumstances.

Implementation of changes

In seeking to implement changes, whether by agreement or otherwise, the first step for the employer to take is to consult with the employees in question. Not only will this help ensure that a fair process is followed, but this is advisable in terms of good employee relations. Employees who feel part of the process are more likely to be willing to compromise. The employer should explain the reasons for the changes and what will happen if the changes do not take place. They should also explain the way in which the changes are to be implemented and allow employees to raise any concerns they have about this, either individually or collectively.

It may also be necessary for the employer to consider collective consultation. Under section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992, collective consultation with employee representatives is triggered where 20 or more employees are likely to be dismissed for a reason not related to the individual concerned. Dismissal and re-engagement will fall within the scope of this provision.

Once consultation has taken place, take care to ensure any changes are appropriately documented and personnel files updated. If there are challenges later as to what terms are binding, variation letters and entire agreement clauses confirming what clauses contain the agreement between the parties will come under close scrutiny.

If the employer does impose changes on the employee and the employee still objects, they can choose to stand and sue, which means, in effect, they stay and work in accordance with the new terms but under protest, and bring an action for breach of contract at the same time. If the employer does not actually dismiss the employee but there has been a fundamental breach of contract, the employee can resign and claim constructive unfair dismissal, but this has the obvious disadvantage to the employee that they will be out of work.

Joanna Wort, professional support lawyer, and Gagandeep Prasad, solicitor Charles Russell

Varying contracts of employment

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