We have in the past reported on a number of cases where companies were unable to change the terms of their employment contracts. Here we give you a guide to how you can.
1: First check whether your contract gives you the right to make the change.
But note that:
- Generally, courts will be unlikely to allow companies to rely on any general flexibility clauses
- Any ambiguity in the flexibility clause will be interpreted against the party relying on it (the employer in this case)
- The clause will need to be exercised in a reasonable way
- The more detrimental the change to the employee, the less likely the employer will be able to rely on it
2: Where changes are not authorised by the contract, what are your options as a business?
Your three broad options are:
- Obtain agreement
- Impose the term and hope that employees do not object
- Dismiss, and offer re-employment on the same terms
We will take these options in turn.
3: Obtain agreement.
This is the best option and you should always start here. From a practical point of view you should:
- Prepare for the possibility that agreement will not be reached: bear points 4 and 5 below in mind
- Be careful to explain good sound business reasons for any proposed change
- Try to offer some benefit in exchange for the change. Where there is no deed, consideration is vital for a change to be effective. Where the change is immediate (different hours, for instance) consideration can be found in continued employment. However, consideration may be harder to find where the effect of changes will be in the future, for instance with mobility or non-compete clauses.
4: Make the change and hope employees do not object.
Making the change unilaterally will put the business in breach of contract. However, the employee may continue working under the contract for enough time for their agreement to the change to be legally implied.
Where this happens, employees have the following options:
- Working under protest. They can do so for some time, in which case their breach of contract claim will generally be preserved, and losses accumulate over this time.
- Bringing a breach of contract claim. This would usually only be for money, but proceedings for injunctions and declarations of breach of contract are also an option.
- Resigning and claiming constructive dismissal. Any change that goes to the heart of the contract will give the employee the option to say that they have effectively been dismissed. If the proper process has not been followed, and there is not a good business reason for the change, this would likely be an unfair dismissal situation.
So bear point 5 in mind before embarking on this option, and assume the worst.
5: Terminate the employment and offer re-engagement on the new terms.
Provided a proper process of consultation has been followed, and there are sound and non-discriminatory business reasons for the change, it should be possible to fairly dismiss an employee for ‘some other substantial reason’. Giving contractual notice will limit the employee’s losses.
Offering immediate re-employment on the new terms will also potentially have the effect of reducing the employee’s losses if they were to succeed in a claim.
Where 20 or more employees are dismissed for this reason, collective consultation and statutory notification will apply. Businesses should bear this in mind while they are seeking agreement to any changes, and consider the election and consultation of representatives at an early stage.
The Tribunal will look at the following in deciding whether the dismissal was unfair or not:
- What are the reasons for the change, and the employee’s reasons for rejecting it? Were the business reasons good and sound?
- Was the employee was given reasonable warning, and a clear explanation of the changes?
- Has an impact assessment (on employees) has been undertaken?
- Were employees invited to agree to the change voluntarily? How many agreed?
- Was a genuine consultation process followed?
- What did the union, works council or equivalent say?
6: General pointers.
With any proposed contractual changes, also watch out for the following:
- You may have good, sound business reasons for the changes, but are they unwittingly discriminatory? For instance, it has been established in case law that a mobility clause can be indirectly discriminatory against women, in which case employers will need to legally justify putting this in place.
- Special consultation processes should be considered not only where over 20 employees are likely to be dismissed, but also where there is an information and consultation agreement in place, and where the proposed changes affect pensions.
- Where any of the terms being changed need to be included in the statutory statement of terms, the employer must provide a further written statement within a month of the change taking place.
If you would like to make changes to your employment terms, or are on the receiving end of proposed changes, let us know. Our experts would be delighted to help.