Common Mistakes to Avoid When Making Changes to an Employee’s Contract

The NHS and their dispute with the doctors has been in the news recently and will continue to be in the spotlight until they resolve their dispute regarding the new employment contracts, with the new terms and conditions.

Employers and employees will always enter into agreements at the beginning of their relationship, outlining the terms of the employment relationship. These agreements, called employment contracts, can be either written agreements or verbal agreements, providing important protections to business owners and I would always recommend having a written agreement.

The general rule is that a contract may only be amended in accordance with the terms and conditions of the agreement or with the agreement of both parties. Employment contracts are like any other contract and there are no exceptions to this basic rule. The law will not allow employers to use their greater bargaining power and position to impose contractual variations on employees against their will.

Will all changes be a breach of contract?

It is important to remember as an employer, however, not every alteration or change to the employment relationship or the way in which your employee works will involve making changes to the contract, ie, where the changes do not actually affect the contract or if the contract of employment itself allows the change.

There may be many aspects of how your business is run which will not be contained in a contract of employment, including disciplinary, grievance or sickness absence procedures. This will leave you free to change them as you wish, as long as they don’t breach the implied duty of trust and confidence by, for instance, removing a significant benefit.

In addition, your contracts may also contain specific variation clauses, mobility clause or a general flexibility clause. 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.

Can I make changes to the employment contract if the employee objects?

Should the proposed change be a definite variation of their contract, then the answer would be no as this could be risky, but it would all depend on the circumstances, what the changes are and the reasons behind the proposed changes. Sometimes approval can be obtained through a collective agreement, which is binding on the employees concerned, otherwise, you need the employee’s explicit agreement. This does not have to be in writing and can be by their actions but, to avoid potential disputes, I would suggest getting it in writing.

What happens if my employee doesn’t object, are the changes effective?

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 actions. If your employee does not wish to accept the change but continues to work within the terms of the varied employment contract, they should make it clear that they are working under protest and that they do not accept the new terms. It is important that you try and resolve any objections as these are grievances and need to be dealt with through your grievance policies.

Otherwise, you could argue that their agreement is implied by their actions. If the change is of immediate practical effect, such as, a cut in pay or a change in working hours or role, and your employee has continued to work without objection, a court is likely to conclude that your employee has implied that they 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.

Can I dismiss someone fairly, who is objecting to the changes to the employment contract?

If there is chance of reaching an agreement and you want certainty regarding proposed changes, there is a third option. You can terminate the existing contract and offer continued employment on the 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 will depend on why the changes were needed. In these circumstances you usually rely on the potentially ‘fair reason’ known as ‘some other substantial reason’. As long as you have a sound business reason for dismissing your employee who refuses to accept a change, it should be able to establish some other substantial reason.

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, that’s why consultation is so important.

Consulting with your employee is so important and you should discuss the proposed changes with them, explaining the reasons behind the proposed changes. If this is done correctly it can often deal with any objections and gain the approval with your employee, saving time and money in the long run.

The this article was originally posted on our mian site castleassociates.org.uk

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