A contract of employment sets out the rights and duties of the employee and can be written, oral or implied by a course of dealings. Providing employees with written contracts of employment is not only a legal requirement (must be provided within 2 months of starting) it is also vital to protect the business against acts/omissions of employees, for example including confidentiality clauses, restrictive covenants etc.
Possible Reasons for a Change in the Contract of Employment:
A change in the contract of employment might be necessary for many different reasons, perhaps business reasons such as a change in an employee’s pay, working location, hours/days of work, or performance reasons such as a lack of productivity, a reward for achieving goals, new responsibility, promotion, or as a result of new legislation.
Steps an Employer Should Take:
- Refer to the Contract of Employment:
The starting point should be whether the proposed change(s) are authorised by the contract. Does it include ‘variation’, ‘flexibility’ or ‘mobility’ clauses to enable you to make reasonable change(s)? If it does, then your problem is solved straight away.
- What if the Contract of Employment does not Permit the Change(s)?
You are left with 2 fundamental options:
- unilaterally make the change(s) and see how employees react. They may accept the change(s) by not raising objection or by working in accordance with the new terms, however this is a risky approach as employees may reject the change(s) and resign in response to the unilateral change(s) and pursue a constructive unfair dismissal claim;
or
- consult with employees about the change(s) and obtain their consent prior to making them. This is a safer route, although if employees refuse to agree under any circumstances to the change(s), the only options are to back down or dismiss and offer re-engagement on the new terms. The latter approach could result in unfair dismissal claims.
Assuming you proceed with obtaining consent…
- Consider a Presentation:
It is advisable that a presentation takes place to clearly communicate to the employees why the change(s) are necessary. The proposed change(s) might then be perceived by employees as the lesser of two evils (the alternative being e.g. redundancies) and therefore reduce the likelihood of resistance.
- Consult with Employees:
The employer should also consult with the affected employees (and where proposing to dismiss as redundant 20 or more employees within a period of 90 days or less their Trade Union/elected representatives) throughout.
- Record Everything in Writing and Seek Agreement:
Ongoing discussions and consultation should be recorded in writing to affected employees and a deadline should be set out for obtaining written agreement to the proposed change(s).
If the change(s) are agreed to, again it should be documented in writing and communicated to the employee requesting signed confirmation from them. If the change(s) are not agreed further meetings should be held to discuss the employee’s refusal and a written notice of termination of employment should be sent confirming the reason for termination being not agreeing to a required change(s) to the employee’s contract of employment and offering re-engagement on the new terms. You must clearly ensure you have a very good business reason for the change(s) to be able to successfully defend any unfair dismissal claims at Tribunal.
Practical tips for Employers:
• Check if the contract permits the variation first and if not seek consent of the employee to the change(s)
• Clearly communicate with the employee throughout the process as to why the change(s) are necessary
• Consider whether the change(s) have to be implemented at once? Should transitional arrangements be put in place to make the ultimate change easier
• Can staff be incentivised to accept the change? Offering an additional benefit at the same time may make the detrimental change more palatable in the eyes of the employee
• Consider the timing of the change(s). If wages are to be reduced following an annual review would it be a good time to introduce an improved performance-based commission to soften the news for the employee and assist with the bottom line?
• Try not to overly formalise the consultation. Keep meetings as relaxed as possible and make it feel like the change(s) are not a big deal
• ‘Sell’ the change(s) to the employee as best you can
• Obtain written evidence of the employees’ agreement to the change(s) to avoid any future argument that consent was not provided
• Finally, if you want to force the change(s) through despite employees not agreeing then ensure you have a very good business reason for them!
If you would like to find out more about how to manage contract changes you can join other HR Professionals at our popular quarterly HR and Employment Seminars. Please contact Tom Evans on 0151 230 1217 or tom.evans@dtmlegal.com for more information.
