Changing Terms and Conditions of Employment

2020 has been unprecedented in a number of ways. We are all adapting to new climates and conditions so, in this months article, we attempt to discuss everything you need to know or consider when “Changing Terms and Conditions of Employment”.

As things begin to stabilise and we reach a ‘new normal’ many employers are starting to think about the medium and long term future of their workplace and how this operates most efficiently and effectively.

It is important to remember that any change can require amends to terms and conditions of employment. Where this is required, it is important to follow a robust process in order to ensure the changes are effective and to minimise any legal risks from making the change.

If you find that your business requires and advice or support, check out our HR Support services or HR Strategy & Planning. There is also some advice from the UK Government and that can be found on this link:

https://www.gov.uk/your-employment-contract-how-it-can-be-changed

Contracts of employment

Contracts of employment are legally binding agreements. Employers can make changes to the contract of employment where:

    1. There is flexibility in the contract of employment that allows the change
    2. The employee agrees to the change
    3. Employee representatives agree to the change (in some circumstances)

Where a contract is changed without the employees’ agreement, the employer will be in breach of contract. Therefore, the safest way to make changes to contractual terms and conditions is to reach agreement with the affected employees.

Employers can enforce changes, by terminating one Contracts of Employment and issuing a new one, however, this constitutes a dismissal in employment law and this should therefore be a last resort.

Flexibility in the contract of employment

Many employers build flexibility into their contract of employment to enable them to make changes without obtaining agreement from the employee. This can be in relation to a specific clause, for example, mobility or a general contract clause.

However, when relying on flexibility clauses within the contract of employment, the clause must be clear and unambiguous and employers must crucially exercise this flexibility in accordance with the principles of mutual trust and confidence, which is implicit in and fundamental to the employment relationship.

Flexibility clauses do not give employers a blanket right to very the contract of employment, however, they may make it easier to implement changes when they are required. Even where there is a flexibility clause we recommend employers consult with employers prior to deciding to make any change.

What if there isn’t a flexibility clause in the contract of employment?

Where there is no flexibility clause, the employee would need to agree to the change, unless the contract is terminated and a new contract offered (see section below: what if we can’t reach agreement with employees).

Why is the change required?

Implementing changes to terms and conditions of employment can be difficult and may have a negative impact on employee relations. It is important that the change is necessary and based on a sound business reason.

Being able to demonstrate a sound business case for the change may also assist with obtaining employees’ agreement to the changes required.

Consultation

Where a change is straightforward and has a minimal impact on employees, the consultation process can be simple: taking the form of a brief conversation with affected employees, and then confirmed in writing.

Where changes are fundamental to the contract of employment and are likely to have a negative effect on employees, a more robust consultation process will be required.

The consultation process should include:

– The reason the change is required
– Answer any employee concerns about the change
– Consider alternatives to the change proposed
– Will any compensation be offered to implement the change?
(sometimes employers ‘buy-out’ terms and conditions of employment)

Where agreement is reached, it should be confirmed in writing to employees and they should sign to confirm their agreement to the change. It is important to take notes of all consultation meetings. Where an employer intends to impose the changes even if agreement cannot be reached, it is recommended that they follow the redundancy consultation process. This may lead to the requirement for collective consultation.

Collective consultation

If 20 or more employees are to be dismissed at one establishment within 90 days or less for not agreeing to new terms and conditions, the employer must consult collectively.
Collective consultation must last for at least 30 days where between 20 and 99 employees are affected, or for at least 45 days where 100 or more employees are affected.

The consultation period must be completed before any dismissal takes place.

Where employers do not collectively consult, they may be liable for up to 90 days’ pay as compensation for each affected employee.

Consider alternatives

Where employees suggest alternative options during the (individual or collective) consultation process, they should be comprehensively considered and responded to.

Notice periods

Where a change to terms and conditions is required, as much notice as possible should be given of the change. We recommend that a minimum period of one month is required in most cases.

What if we can’t reach agreement with employees?

You will find that whilst changing terms and conditions of employment you will not always reach agreement with your employees.  If an employer cannot reach agreement with their employees about a change to terms and conditions of employment, as a last resort they can terminate the contract of employment and issue a new one.

When doing this, the greater of statutory or contractual notice must be given to the employee. The new contract should begin when the current contract ends.

Doing this eliminates the risk of a breach of contract claim, as the contract of employment has been terminated lawfully, however, there is a significant risk of unfair dismissal claims.
Employees who choose to accept the new contract of employment can also claim unfair dismissal in relation to the previous contract.

To defend unfair dismissal claims, the employer must be able to demonstrate a fair reason for dismissal, and that it acted reasonably in all the circumstances.

Therefore, when considering this option employers should ensure:

    1. They have done everything possible to reach agreement
    2. Whether the changes are absolutely necessary
    3. The risk and costs of legal action

When taking this course of action, employers must:

    1. Follow a fair dismissal procedure
    2. Give employees notice
    3. Off the right of appeal against the decision to dismiss
    4. Ensure the changes only commence once the existing contract has ended and the new one begun
    5. Maintain continuity of service for the employees (assuming there is no break in service)

The fair reason for dismissal in these cases is usually ‘some other substantial reason’ (SOSR), and to demonstrate they have acted reasonably, the employer must demonstrate they have a good business case for making the changes, also that the consultation process was fair and thorough.

Confirming the changes to terms and conditions of employment

When changing terms and Conditions of Employment, it is important to confirm any changes to terms and conditions of employment in writing. Where an employees’ previous contract of employment was issued before 6 April 2020, the new information must include the new information required from that date.

We can offer advice on Change Management should you need it?

Legal risks

Where an employer is in breach of contract, employees can take a claim in an Employment Tribunal for breach of contract, constructive dismissal and/or unlawful deductions from wages if they suffer a loss as a result of the change. Employees can also claim if collective consultation has not taken place where required.

What if there has been a business transfer (TUPE)?

Employees who are part of a business transfer are afforded additional protection under TUPE legislation.

Please contact us for more information if employees affected by a change to terms and conditions of employment have been part of a business transfer.

Summary

We strongly recommend that employers:

    1. Ensure they have a clear business case for any changes
    2. Establish a plan for all eventualities, what if agreement is reached? Is the business prepared to terminate contracts and re-hire on new terms and conditions of employment?
    3. Plan the implementation of any changes thoroughly
    4. Undertake individual and collective consultation as required
    5. Confirm any changes in writing and obtain employees signed agreement to the changes
    6. Implement the changes

We hope we have answered or given you ideas around the topic: Changing Terms and Conditions of Employment

Contact Us

For further information, advice or support in changing contracts of employment, please contact us at rachel.wade@opthr.co.uk.

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