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Hewetts Legal Corner - April 2014 #8

How easy is it to vary an employee’s contractual terms?

It is not unusual for an employer to want to make changes to an employee’s terms and conditions of employment however employers need to be aware that changes cannot simply be imposed. Even with the inclusion of a Clause permitting variations to be made, employers do not have carte blanche to make any changes they want, when they want. 

How can changes be made?
An employer essentially has three options when it comes to making changes to an employee’s terms and conditions of employment:-

1. Seek the employee’s consent to the changes;
2. Terminate the existing Contract of Employment and offer to re-engage the employee on new terms; or
3. Impose the changes unilaterally.

What is the best approach?

Ideally, the employee’s consent should be obtained before any significant changes are imposed. Sometimes this will be easy to achieve for example when an increase in the employee’s pay is being made. If fundamental changes are being proposed, it would be in the employer’s best interests to ensure that the employee receives something in return to encourage the employee to accept the changes.
In addition, it is imperative for the employer to hold consultation meetings with the employee(s) to discuss the proposed changes. To a large degree the employer will have to ‘sell’ the changes. Further, it is important to explain why the changes are necessary. Often, accepting the changes will be the less of two evils for the employee.

What if the employee is not agreeable to the changes?
If the employee is not agreeable to the changes then the employer should think very carefully before deciding how to proceed because of potential legal repercussions.
If changes are imposed without obtaining the employee’s consent then the employee could assert that a fundamental breach of Contract has been committed, resign and bring a costly constructive dismissal claim against the employer.
Whilst an employer can terminate an employee’s Contract and seek to re-engage him/her on new terms, this approach carries risks. This is because a dismissal will have effectively taken place and the employee could seek to bring an unfair dismissal claim against the employer as a result.

Implied agreement to the changes

If the employee does not wish to accept the changes but continues to work within the terms of the varied Contract the employee should make it clear that they are working under protest/under sufferance and that they do not accept the new terms. If not and they continue to work under the new terms, the employee is at risk of being held to have impliedly agreed to the changes. The longer the employee works under the new terms, the stronger the argument will be that they have accepted the changes through their course of conduct.

Recording the changes

If an employee consents to the changes being made then the changes should be set out in writing. At the very least, a letter of variation setting out the changes to the employee’s existing terms and conditions of employment should be sent to the employee. Ideally, the document should be signed by the employee and on behalf of the employer to help demonstrate consent to the changes. Further, the letter setting out the changes should be appended to the employee’s existing Contract of Employment.

What happens if the employee does not sign the document varying their Contract?

If the employee does not sign the document varying their terms and conditions of employment but continues to work for the employer under the new terms then there is an argument to say that the employer has impliedly accepted the changes in any event. This argument is not particularly clear cut so employers should try to obtain the employee’s signature to the document varying their terms to evidence their acceptance of the same.

Practical tips for agreeing the change

During a consultation meeting with the employee(s) the employer should:-

1. Explain why the changes are is necessary. Often these will be linked to the employer’s financial situation or as a result of an internal restructure.
2. Do all of the changes have to be implemented at one time? It may be possible for the employer to get the employee(s) may be more open to agree changes being implemented over time.
3. Can staff be offered any incentive to help them accept the changes? Sometimes, offering an additional benefit in return for a detrimental change being made to the Contract is a good way of obtaining the employee’s agreement to the changes. The benefit does not necessarily have to be a financial one and employers should consider if there are any other ways to encourage their staff to consent to the changes being proposed.
4. The timing of the proposed changes is also important. The employer should therefore think about when to introduce a change. If changes are being sought at a difficult time for employees (perhaps for example because they have been working longer hours than normal) they are going to be less happy about the changes to their terms and conditions of employment.

If you would like to discuss any aspect of employment law please contact Sally Morris, Head of the Employment Division at mfg Solicitors LLP on 01905 610410.


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