Generally, a contract may only be amended according to its terms or with the agreement of both parties. Employment contracts are no exception to this basic rule and the law will not allow employers to use their greater bargaining position to impose contractual variations on employees against their will. However, not every alteration to an employment relationship or the way in which an employee works will involve making changes to the employment contract. This is for example the case where the change does not actually affect the contract, or if the contract of employment itself authorises the change.
Many aspects of how businesses are run may not be contained in employees’ contracts of employment, including disciplinary or sickness absence procedures. This leaves employers free to change them as they wish, as long as they don’t breach the implied duty of trust and confidence by for instance removing a significant benefit. Discretionary bonuses, by definition, will have the same freedom, and the same proviso.
In addition, contracts may contain specific variation clauses relating to, for example, the place of work or duties that can be allocated, or a general flexibility clause claiming a right to make changes to any term of the contract. Whilst on the face of it these may provide wide ranging powers, they are unlikely to be effective if they are not carefully worded. This is because courts and tribunals interpret such clauses narrowly – sometimes negating changes due to trust and confidence considerations. Any ambiguity will be construed in favour of the employee.
Not if the proposed change is definitely a variation of their contract. Sometimes approval can be obtained through a collective agreement which is binding on the employees concerned. But otherwise you need the employee’s explicit agreement. This does not have to be in writing but, to avoid potential disputes, it is always wise for it to be so.
Regardless of whether or not your employee makes their position clear, there has to be a specific agreement before the variation will be effective. However, this can sometimes be implied by their behaviour. If the employee does not wish to accept the change but continues to work within the terms of the varied contract, they should make it clear that they are working under protest and that they do not accept the new terms. Otherwise, you could argue that their agreement is implied. If the change is of immediate practical effect such as a cut in pay or a change in working hours or role, and the employee has continued to work without objection, a court is likely to conclude that the employee has impliedly agreed to it. If, however, the change does not have an immediate impact on the employee, for example a new mobility clause that had not been used, then that is less likely.
If no agreement can be reached and you want certainty regarding proposed changes, there is a third option. You can terminate the existing contract and offer continued employment on new terms. However, if you offer continuing employment on revised terms, termination of the existing contract will constitute a dismissal in law and employees will be able to bring unfair dismissal claims if they have 2 years’ service. Whether the dismissal is fair depends on why the changes are needed. In these circumstances employers usually rely on the potentially fair reason known as some other substantial reason (SOSR). As long as the employer has a sound business reason for dismissing an employee who refuses to accept a change, it should be able to establish SOSR. It does not have to be a reason that the tribunal considers sound, but one which a reasonable employer would consider sound. However, a tribunal would always expect there to have been consultation and an attempt to reach agreement first.
An employer considering changing terms of employment in connection with a transfer of an undertaking has to take the TUPE Regulations into account. These changed at the end of January 2014 and the position is different depending on whether the transfer occurred before or after that date. Under the old provisions, any changes are void if the sole or principal reason is the transfer itself or a reason connected with the transfer which is not an economic, technical or organisational reason (ETO) entailing changes in the workforce. With post January 2014 transfers the restrictions are loosened and changes can be made for ETO reasons if the employer and employee agree them.
There are various situations in which you should consult about proposed changes. If the changes affect 20 or more employees and you are considering dismissing and re-employing staff on new terms, the collective redundancy regulations apply. Failing to comply could leave employers open to claims for up to 90 days’ pay. For employers with 50 or more employees where the Information and Consultation of Employees Regulations apply and an information and consultation agreement is in place, the employer may also be obliged to inform and consult representatives with regard to proposed substantial “changes in contractual relations.” Finally, particular proposed changes to pension schemes also require consultation with scheme members and their representatives.