Employee’s Terms and Conditions

Changing employee’s terms and conditions

Employers need to be careful when seeking to change employee’s terms and conditions of employment because, without their express agreement, it could give rise to a claim for constructive dismissal.  That said, the law also recognises that business circumstances can arise making it difficult to honour certain contractual obligations and that it would be more preferable to make changes to contracts than lose members of the workforce through redundancy. When contemplating changes to terms, advice should always be sought.  

When proposing to change terms and conditions, it is first necessary to determine where the contractual terms are located.  They may be:

• expressly stated in a written contract;
• incorporated into a contract through collective agreements;
• incorporated by express verbal agreement (but not recorded within the contract); or even
• implied into the contract through conduct or custom and practice. 

Changes authorised by the contract

An employer should check whether the contract of employment authorises a change to its terms.  

It may be possible that the term itself is sufficiently broad to allow the change.  This option often arises in relation to job titles and descriptions where the contract contains a flexibility clause allowing for the employee to carry out other duties that would be expected of somebody with their job title.

There may also be a mobility clause which allows the employer to change the work location (but these do need to be exercised moderately).

The contract may give a general power to vary the terms of the contract.  However, tribunals are usually reluctant to allow changes pursuant to such clauses unless the drafting of them is sufficiently clear.  In practice, such clauses are only relied on to make minor or administrative changes.

Changes not authorised by the contract

Where the change is not authorised by the contract there are 3 ways in which the employer may vary the contract:

1. Seeking the employee’s express agreement to the new terms; 
2. Unilaterally imposing the changes and relying on the employee’s acquiescence to show implied agreement to the changes; 
3. After seeking agreement through consultation, terminating the employee’s employment and offering to re-employ them on new terms. 

Express agreement

An employee’s agreement must be voluntary and whilst it is sufficient to obtain verbal agreement, it is preferable to secure written agreement.

Unilateral imposition of the change

If the employee does not accept the change, it is not advisable to just impose the change anyway without any consultation as this could result in a constructive dismissal claim. But if an employer does so, it is incumbent on the employee to either (i) resign and allege constructive dismissal or breach of contract; or (ii) make it clear that they are working on under protest (which will preserve their legal rights).  If however, the employee continues to work without challenge, then over time they will be deemed to have impliedly agreed to the change and can’t subsequently seek to challenge it.

Terminating the contract and offering re-engagement on new terms

This is a step that should only be taken after there has been a full and meaningful consultation process with the employees, where the employer has conveyed the genuine business reasons underpinning the changes and sought to come to some compromise with staff as to the proposed changes.  Only once that process has been exhausted can the employer contemplate terminating the employment of the dissenting employees.  Where that is the case, it is absolutely essential that the dismissal is accompanied by an offer to re-engage under the new terms.  This is a risky approach but is often the only commercially viable option.

Provided that there was a genuine business reason and a full and meaningful consultation process took place, the employer is likely to have a good defence to any unfair dismissal claims and will be able to argue that the dismissal comes under the category of ‘some other substantial reason’ as a fair reason to dismiss under the Employment Right Act 1996.

Even if a tribunal finds a dismissal to be unfair, the employer may be able to demonstrate that the employee failed to mitigate their loss by refusing to accept re-engagement on the new terms.

Collective consultations

Note that, where the employer is proposing to change the terms of 20 or more employees, they will be required to collectively consult with the staff, which will mean appointing employee representatives and consulting via them, or through any recognised union where appropriate.