Changing Contractual Terms

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July 4, 2016
Contracts of Employment
July 4, 2016
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Usually, the employer and employee both need to agree to any contract changes. But an employee can insist on a change if they have a legal right to it.

Employers

Must get an employee’s agreement if they want to make changes to their contract.

Employers should:

  • consult or negotiate with employees or their representatives (eg from a trade union or staff association)
  • explain the reasons for changes
  • listen to alternative ideas from employees

You may also want to talk with workers, asking them about their future plans. With older employees this can include talking about their thoughts on retirement and their options for staying in the job, eg changes to their role, hours or working pattern.

Employees

Explain to the employer why they want to make the changes. Employees can insist on a change if it’s covered by a statutory right – eg not working on a Sunday.

Making changes

Once employers have agreed on changes with their staff, they need to:

  • update the terms of their employees’ ‘written statement’ of employment conditions
  • write to their employees within a month to tell them exactly what has changed

If an employer changes terms and conditions that aren’t in the written statement (eg the right to sick leave), they should tell their employees where to find information about the change. This could be in a company handbook, noticeboard or intranet site.


Flexibility clauses

Flexibility clauses are terms in a contract that give employers the right to change some conditions of employment, eg relocation.

Employers can only use flexibility clauses to make reasonable changes.

Example
An employer couldn’t use a flexibility clause to insist on an employee moving to another country to work with 1 week’s notice.


Changes of employer

If the name of a business changes or there’s a new employer but no other changes in terms and conditions, the employer doesn’t need to issue a new written statement. They still need to write to their staff about the changes within a month.

Some matters can be changed without the agreement of the employee: examples include non-contractual policies where these have been carefully drafted and where they clearly state that there is no intention for them to be incorporated into the contract such as those detailed in the employee handbook.

However, employers should treat variations of the contractual terms cautiously as some changes may be considered to be a fundamental breach of contract that would allow an employee to resign and bring an employment tribunal claim.

An employer can try putting an express term into the contract which states that a particular term is variable. Whilst such clauses may encourage the employee to assume that the changes are permissible even an express clause will not guarantee that the employer can significantly vary a contractual term.

Employers who do wish to alter the terms of an existing employment contract have three main options:

  1. Agree the changes with the employee after consultation. A small incentive may be offered to encourage acceptance. This is the safest course of action.
  2. Make any changes unilaterally. Even where there is a pressing business need to impose the changes, this may be risky. In some circumstances the employer may assume acceptance if the employee continues to work without objection. However, the employee may choose to continue to work, but do so under protest and bring an action for breach of contract.  Alternatively, the employee may resign and bring a claim for constructive unfair dismissal and/or wrongful dismissal.
  3. Terminate the employee’s contract by notice and offer them re-engagement on new terms and conditions. An employer may consider this option where changes cannot be agreed and where it appears too risky to impose the changes unilaterally. The employer must then offer re-engagement on the new terms immediately. Employers should be aware that in legal terms  this may be considered to be a redundancy dismissal, so they should follow any rules around collective redundancy and consultation time limits. This course of action is not without risk: the employee may claim breach of contract or unfair dismissal, although any compensation will be limited as the employer is offering re-engagement.

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