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Changing Terms and Conditions of Employment: An Employer’s Guide

Aug 19, 2020

As a result of COVID-19, many employers are considering making changes to employees’ terms and conditions of employment.

To assist, we have put together this guide to explain the legal issues and how to address common problems.

Contractual or Non-contractual Change?

The first point to address is whether a contractual change is actually needed. Sometimes the change an employer wants to make will form part of a non-contractual policy which can then be varied without seeking agreement.

However, some recent case law has highlighted that just because a policy is not contained in an employment contract it does not necessarily stop it from being considered a contractual term. Employers are therefore encouraged to take legal advice before implementing any such change.

Implementing a Contractual Change

If it is a contractual change, it may be permitted under specific clauses contained in the employment contract, for example, a mobility clause to change an employee’s place of work. However, if the contract does not permit a change, or if the clause isn’t sufficiently drafted, the safest route is for an employer to obtain agreement to implement the change.

Express Agreement

Implementing a change by express agreement with the affected employees would normally take effect by an employer writing to employees proposing the new contractual term and asking them to agree. This should be in writing to keep a record of the change.

However, employees may not always be happy to agree to a contractual change. In these circumstances, an employer may have to consider alternatives.

If affected employees are reluctant to agree to a proposed change, the employer may want to consider offering an incentive. For example, in exchange to a variation to contractual hours, the employer could offer an increase in pay or a bonus.

This approach could be effective in getting employees to agree to the change. However, it may not always solve the problem. If an employee is not wanting to engage in negotiation, the employer could instead consider dismissing and re-engaging the employee as explained below.

Imposing the Change

An employer could attempt to impose the contractual change without agreement from the affected employees. This could result in the employees continuing to work under the new terms, in which case the employer could argue the change has been accepted from performance of the contract.

In response to an imposed change, an employee could resign in response and attempt to claim they have been constructively dismissed, or they could signify that they are working ‘under protest’ meaning that they have not accepted the change and reserve the right to bring a claim. Employers considering this route should seek legal advice as to the potential consequences of their proposal.

Dismissal and Re-engagement

Another alternative is, if an employee does not agree to a change the employer wants to make, the employer could consider serving notice to terminate employment and offering re-engagement on the new terms. However, employers should consider the practicality of doing this as it may adversely affect the employment relationship and has potential to result in the employee attempting to bring a claim for unfair dismissal.

There are also consultation obligations to consider. Where an employer is proposing to dismiss and re-engage 20 or more employees, the obligation to collectively consult will be triggered. This means that employers will have to spend time implementing and following a formal consultation process in order to make the change. If an employer is in this position, they should consider taking legal advice to properly consider and discharge their consultation obligations.

Further Considerations  

Before proposing a change, an employer should check that there are no contractual terms contained in other agreements, such as a collective agreement with a trade union, that will need to be considered.

Due to the complexity of changing terms and conditions, the best option from the above with often depend on the business in question, the number of affected employees and the change itself. Employers are encouraged to seek legal advice as to the best option for them, and the potential consequences of any proposed changes.

For further information, or to discuss the issues raised by this article, please contact Herrington Carmichael’s Employment group on 0118 977 4045 or employment@herrington-carmichael.com

This reflects the law at the date of publication and is written as a general guide. It does not contain definitive legal advice, which should be sought as appropriate in relation to a particular matter. 

Darren Smith

Darren Smith

Partner, Employment Law

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