There are a variety of reasons why employers may be considering changing employees' terms and conditions at the moment: they may be looking at cost saving measures; making changes in connection with flexible furlough or ending furlough leave; or planning how to get employees back to the workplace safely. So what are the key considerations when changing employees' terms and conditions?
Do we need an employee's consent to make a change to their terms and conditions?
This will depend on whether the proposed change relates to contractual or non-contractual terms. There will be more scope to modify non-contractual provisions without consent.
Where the change relates to contractual terms, you may be authorised under the contract of employment to make the change, for example if there is a mobility clause requiring an employee to work from another office or location; or a short-time working clause permitting a reduction in hours and pay.
If this is the case, the change can be made without the agreement of the employee. However, bear in mind that courts and tribunals will interpret such provisions restrictively, particularly the more general variation clauses; and that any flexibility must be operated in a way which doesn’t discriminate or breach the implied term of trust and confidence.
What are the options if there is no right to vary in the contract, or we don't want to rely on a variation clause?
Seek the employee's consent
If you're not relying on a variation clause, the general principle is that changes to terms and conditions of employment should be mutually agreed. Before seeking employee consent, think about:
- the timing of the proposed changes - ensure you allow enough time to engage with the employee beforehand;
- the reasons for the change and the business implications if the change isn't made;
- how best to communicate the proposals, especially to those still working remotely;
- the arrangements for seeking written confirmation that the employee has consented to the changes.
Unilaterally impose the change
If there isn't a variation clause to rely on and you can't get consent, one option is to impose the change unilaterally. However, this is a breach of contract and, therefore, there are a number of other risks with this approach, which include an employee:
- continuing to work under protest and raising a claim for breach of contract or unlawful deduction from wages;
- resigning and claiming constructive unfair dismissal, or;
- refusing to work under the new terms.
There are also discrimination risks where the proposed change may adversely affect specific groups of employees with protected characteristics (e.g. age, sex, disability).
Terminate employment and offer re-engagement on new terms
Where changes can't be agreed and it's not commercially viable to abandon or delay making the change, you could terminate the employee's existing contract and offer continued employment under the new terms. However, this amounts to a dismissal and so you would need to consider the risk of potential unfair dismissal claims for employees with the requisite two years' service. Whether such a dismissal would be fair depends on factors such as the reason for the change; whether reasonable notice was given; and the extent of consultation with the employee.
Additionally, if there is a proposal to dismiss (and then re-engage) 20 or more employees within a period of 90 days or less at one establishment, collective consultation obligations and the duty to notify the Secretary of State will be triggered. Failure to do so could result in a protective award of up to 90 days' actual pay for each affected employee, as well as criminal penalties for failure to notify the Secretary of State.
If there is a requirement to consult collectively (for 30 days if there are between 20 and 99 proposed dismissals; for 45 days if there are 100 or more), this needs to be factored into the timetable for making changes, particularly if representatives have to be elected.
What if there is a collective agreement in place?
If there is an express reference to a collective agreement in the employee's contract, then in general you must negotiate with the trade union (or representative body) in terms of the collective bargaining framework. You can't abandon collective negotiation in order to seek individual deals. If you approach employees directly to obtain their consent in these circumstances you risk unlawful inducement claims being made.
Can we change terms in situations where TUPE applies?
If TUPE applies, employees transfer on their existing terms and conditions (with limited exceptions) with continuous service preserved. Variations to transferring employees’ terms and conditions are void if the sole or principal reason for the change is the transfer itself. This is the case even if the employee agrees to the variation.
You are obliged to provide employees and workers with a written statement of certain terms of their employment, the 'section 1 statement'. There is a statutory obligation to communicate changes to the section 1 statement in writing at the earliest opportunity and, in any event, no later than one month after the change.
Workbox by Brodies users can find detailed information on section 1 statements here.
For more information you can listen to our podcast episode: Changing employee terms and conditions.
Workbox by Brodies users can find detailed information and resources on our dedicated page: Changing / Harmonising Terms and Conditions.
Also feel free to get in touch with your usual Brodies contact, or a member of our employment and immigration team, if you would like to discuss any matters raised in this blog.