Changing Employees' Terms and Conditions

I have had a number of enquires recently from clients who want to change their employees' contracts but are unsure if they can, or how to go about it. Changes are required for all manner of reasons; because the contracts are out of date; because someone has been given a pay rise, or because the company is facing hard times and needs to reduce working hours. So what can employers do?

Employers have, in reality, 3 options:

1. To seek an employee’s express agreement to any new terms;

2. To unilaterally impose any changes and rely on the employee’s conduct to establish an implied agreement to the change (i.e. make the change and hope they keep working without objecting to it!); or

3. To terminate an employee’s employment and offer re-engagement on the new terms.

Option 1 is clearly the path of least resistance and therefore the best option. Often, all it takes is a coffee and a chat (followed by, we’d suggest, a letter of variation and the signing of a new contract). But where the proposed changes are likely to be considered detrimental to the employee, a friendly chat is out of the question. So what next?

Option 2 is generally considered the option carrying the highest risk of legal liability. If an employee decides to “work under protest” then they will usually be deemed to remain on their existing terms, and employers need to go back to the drawing board (and likely consider option 3) or risk claims for constructive unfair dismissal amongst others.

Employers often have a term within their employment contracts that allow them to make such unilateral changes. However, recent case law has highlighted the difficulties in that approach. In Sparks v Department for Transport, an employer tried to change the trigger point for sickness absence contained in a contractual Staff Handbook. When the Department for Transport attempted to rely on a variation clause to change the sickness policy, the employees complained and brought Employment Tribunal proceedings. The Employment Judge found in favour of the employees, and singled out the drafting of the variation clause which stated that “detrimental” changes could not be made without the employees or trade union consent. The judge found that the variation clause could not be relied on.

In Norman v National Audit Office, the employer’s Staff Handbook contained a provision stating that employee’s terms and conditions were "subject to amendment". The National Audit Office tried to utilise the provision to change contractual terms regarding sickness. However the Employment Appeal Tribunal found that THE term “subject to amendment” was not sufficiently clear to permit changes to the contract. In addition, as the provision was contained within a non-contractual element of the Staff Handbook and was not a clause in the contract, the employer was unable to rely on it.

Option 3 requires proper consultation (collectively as well as individually, if need be) and a good business reason in order to avoid legal liability. To avoid a breach of contract claim, proper notice should be given to staff to terminate their old employment. Sometimes however, it is the only way that contractual changes can be achieved. Before steps are taken to dismiss, we’d always recommend seeking expert advice.

Actions

1. If you are required to make changes to your contracts, consider whether they are likely to be considered beneficial or detrimental to the employee.

2. If there is a clause in your contract of employment or company handbook entitling you to make changes, treat this with caution and take advice as to whether it is likely to enable you to make the changes you want to make.

3. If you can’t mutually agree the changes with your employee, beware of any employees who “work under protest”, who raises a grievance or who threaten constructive dismissal if you proceed.

4. If you plan to dismiss and re-engage to bring about the changes, ensure you engage in a period of consultation and take professional advice to ensure that you are not exposing the company to unnecessary risk of unfair dismissal and breach of contract claims.

How can you find out more?

If you would like any further information on the issues raised above, please contact Chris Aldridge on 01242 248431 or email chris.aldridge@bpe.co.uk.

These notes have been prepared for the purpose of an article only. They should not be regarded as a substitute for taking legal advice.