Following the announcements of the UK and devolved Governments of another period of lockdown, employers continue to face very uncertain times. Employers across multiple sectors are having to make some extremely tough decisions in the hope of surviving the coming months and ensuring any kind of viable future. In an attempt to reduce or mitigate against redundancies, one option available is to consider whether certain employees’ terms and conditions can be renegotiated, either temporarily or permanently.
Changes to terms and conditions, such as changes to hours of work, pay or commission structures, can be made for many reasons but are often required due to changes to economic circumstances.
Changes to Employees Terms and Conditions & Options available
In such situations a business or organisation has a few options available:
- To try and obtain an employee’s agreement to the changes. Without agreement an employer would need to dismiss any employees who refuses to agree. This runs the risk of a claim for unfair dismissal and/or breach of contract.
- To terminate the existing employment contracts and offer to re-engage the employee on the new terms. Again, this may result in a claim for unfair dismissal and/or breach of contract, but the offer of re-engagement may mitigate any loss. Depending on the number dismissals, the employer may have collective consultation obligations.
- To force the change and see how the employee responds. This may result in a continuing breach of contract and claims of constructive dismissal.
Express agreement from the employee is the best and safest way to vary an employment contract if that agreement is given voluntarily and has been free from duress.
Employers should obtain written confirmation of the agreement as verbal agreements to vary terms are obviously more vulnerable to being disputed. Such written confirmation is particularly important where the change involves a reduction in remuneration so the employer can successfully defend any claim made for a deduction from wages.
Changes to Employees Terms and Conditions | Consideration
In both England and Wales, even an agreed variation to a contract must be supported by ‘consideration’ in order to make the contract binding. In this situation, consideration, means some benefit must pass from each of the parties to the other. If there is an obvious benefit such as a pay rise at the time of the change that will be the consideration. The absence of specific consideration in exchange for an agreed variation will not always be an issue as arguably the necessary consideration can arise from the employee’s continued employment.
Imposition of the Change
Imposing a contractual change without the employee’s express or implied agreement is in breach of the employment contract with the employee. An employer may argue that the employee has consented to the breach by carrying on working under the revised terms of employment. This approach is risky however as the employee has the following options:
- Work under the new terms under protest and bring a claim for breach of contract or unlawful deductions from wages if applicable.
- If the breach of contract is a fundamental breach of the employment contract, resign and bring a constructive dismissal claim.
- In certain situations, e.g., a change in work patterns or work duties, refuse to work under the new terms.
Terminating employment and offering re-engagement on the new terms
Where employees do not agree to a proposed variation of terms, the employer’s safest option if they wish to move forward with the change is to terminate the existing contract and offer continued employment on the new terms.
This does involve embarking on a consultation process with the employees in question and where the employer is likely to dismiss 20 or more employees, there will be an obligation to consult with employees collectively as well as individually.
By serving contractual notice on the employees or by paying in lieu of notice, following upon the appropriate period of consultation, the employer will ensure it will not be liable for a wrongful dismissal claim. Although the employer will be offering continuing employment on revised terms, as the existing contract is being terminated there will still be a dismissal in law. As a result, employees will be able to bring unfair dismissal claims.
To defend any such claim the employer will need to establish a potentially fair reason for dismissal and show that it acted reasonably in dismissing the employee for failure to agree to the proposed variation of terms.
If an employer has a sound business case for having to make the variations to contract, and an employee refuses to accept the variations, the potentially fair reason for dismissal will normally be ‘Some Other Substantial Reason’.
The employer will need to evidence the business reasons for the variation and show that those reasons were not minor. The assessment of reasonableness requires a balancing of the reasonableness of the employer in dismissing the employee versus the reasonableness of the employee in refusing to accept the change. While dismissing an employee for refusing to accept a change to his or her terms and conditions may be reasonable in the circumstances, it does not follow that the employee’s refusal to accept them is unreasonable.
The factors taken into account in these circumstances include the motives for introducing the changes, an employee’s reasons for rejecting the changes, the communication of the changes and the effects of the changes on employees.
Even if it is the case that the business need for the proposed variation of terms is urgent the employer will still need to be able to show it followed a procedure and consulted with employees in order to prevent unfair dismissal claims.
Wirehouse clients must consult with our HR Advice Team before embarking on any variation process so we can guide you through any pitfalls you need to be mindful of and ensure you have a robust business case and fair process in place to support your proposed actions.
If you are not a Wirehouse client, get in touch with our Employment Law team today for advice and support surrounding any HR issues you need help with.