Once agreed, terms and conditions of employment are binding.
Current cap on an unfair dismissal compensatory award is due to increase to £93,878 for dismissals after the 6 April 2022 with a possible basic award of £17,130. Add in notice and the cost of unfair dismissal can get expensive.
The first step in seeking to change terms and conditions is to have a clear and sound business case for the change and to demonstrate that alternatives have been considered. Terms and conditions cannot be lawfully changed without an employee’s consent. However, the law recognises that there may be circumstances where an employer’s wish to make contractual changes is based on sound commercial reasons.
An employer who wishes to make workplace changes should first consider the following:
- Does the required change amount to a contractual change?
Certain changes such as adjusting working hours or pay will invariably amount to contractual changes. Other changes, for example, modifications to policies or workplace rules may not be contractual. Employers may have the right to make such changes without any input from employees. However, it is likely to be good practice to consult with unions or employee representatives, if recognised.
- If the change is a contractual change, does the contract already permit the change?
Some contracts contain “flexibility clauses” which explain the circumstances in which contractual changes may be made.
If the contract does not permit the change, the following are the main options open to an employer:
- Seek employee agreement to the change.
Where a trade union is recognised and employees are covered by a collective agreement, any contractual changes will require union consent. Employees not covered by a collective agreement will need to provide individual consent. It is best to secure this in writing.
- Where agreement cannot be secured, employers might impose the change.
Where the change has an immediate impact (such as a cut in pay) and employees do not protest, they may be taken to have accepted the change by their conduct. However, if employees do object, the company may be liable for breach of contract, unlawful deduction of wages and/or constructive dismissal claims. Employees may apply to the court to prevent the change taking effect. In addition, unilateral imposition of changes may damage industrial relations where a trade union is recognised. This could lead to industrial action.
- Where the change is necessary and agreement cannot be secured, consideration may be given to dismissing employees and offering them reemployment under new terms and conditions that incorporate the desired change.
Employees who qualify may claim unfair dismissal and/or unions may call for industrial action. There will also be a requirement to collectively consult where an employer dismisses and reemploys 20 or more employees.
The risk of successful claims from employees can be minimised if the employer:
- Prepares a sound business case setting out the reasons for the contractual change, demonstrating that it has considered alternatives., and
- Explains the business case and seeks to secure employee agreement through consultation.
The following is a summary of the steps that employers will need to adopt if they wish to re-employ employees on new contracts. It is important to obtain advice before considering such steps:
- Give employees the opportunity to put forward their views and any alternatives and allow employees to be accompanied by a trade union representative or colleague.
- If no agreement is reached, provide the employees concerned with notice of dismissal together with an offer letter enclosing a copy of the new terms and conditions for them to sign.
- Give employees a right of appeal and holds appeal meetings should they exercise that right.
This briefing note should not be relied on as legal advice. The information relates to the UK only. Please contact us for advice on your specific circumstances.
