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Contract Changes

CHANGES TO CONRACT AND TERMS AND CONDITIONS OF EMPLOYMENT

Problems generally arise when an employer seeks to change for the worse the terms and conditions under which an employee works.     A contract of employment is a legally binding agreement between employer and employee and once in place neither party can alter the terms of the agreement without the consent of the other.    In most cases changes such as a pay rise or promotion will be agreed by the employee but where agreement is not forthcoming forcing through a change in terms and conditions may be a breach of contract.

Difficulties obviously arise where an employee refuses to agree to changes which he/she considers detrimental but the employer believes are required in the best interests of the business.

Where are terms and conditions found?

There are four categories of term in an employment contract :-

express terms

- terms which have been specifically agreed by employer and employee including those in, for example, offer letters, written terms and conditions/contract of employment and any handbook with contractual effect

implied terms - terms which are not recorded in writing but which would be considered to be obvious or are part of the custom and practice of the business or because they are apparent from the way in which employer/employee have acted.    

incorporated terms

- collective and workforce agreements which incorporate terms into individual contracts

statutory terms

- terms derived from provisions contained in statutes affecting the employment relationship, for example, the insertion of an equality clause into every contract of employment by the Equal Pay Act 1970.

How can terms and conditions be varied?

1.      Express clause

- there may be an express clause in the contract allowing the employer to vary but this must be clear and unambiguous.

2.      Consent to vary

- employer and employee may agree to a variation.  For such an agreement to be valid the employee must be aware of the exact nature of the proposed change to be agreed to, must have agreed voluntarily and must have done so before the change takes effect.  

3.      Change by the employer -

if there is no express provision allowing for change and the employee does not agree an employer may seek to unilaterally impose the variations upon the employee.   

 

What can an employee do if changes are imposed unilaterally?

1.      Raise no objection

- if the employee continues in employment without raising objection the employer may argue that by doing so the employee has consented to the change and to the breach of contract.   Courts and Tribunals have stated the need for caution before finding an employee has agreed to a variation by continuing to work where that variation had no immediate practical effect.    If, however, the change is of immediate effect (e.g. a reduction in wages) and the employee continues to work without objection it may be difficult to argue at a later stage that the employee has not impliedly agreed the variation.

2.      Resign and claim constructive dismissal

- Not every minor variation will give the employee this right - it must be sufficiently serious to constitute a "fundamental breach" of the employee's contract.     This is a significant breach which goes to the heart of the contract.  

What can an employer do if the employee refuses to agree the variation?

If the changes required cannot be agreed the employer may give notice of termination to all employees who refuse to agree together with an offer of a new contract of employment to start immediately on all the same terms as the old contract, save for those being changed, to take immediate effect.    

Terminating contracts in this way will constitute a dismissal which may be held to be unfair if a claim is brought by the employee.    In determining the fairness of such a dismissal a Tribunal will consider:-

  • whether the employer reasonably believed/concluded that the proposed changes had advantages
  • whether there was a sound business reason for the changes
  • whether genuine consultation took place with the affected employees
  • whether alternatives were considered
  • the impact of the proposed changes on employees
  • whether the proposed changes were acceptable to a majority of the work force

It is possible that if such proposed changes impact unfairly on a particular employee or group of employees by reason of sex, race, nationality or ethnic origin, disability, sexual orientation or religion or belief a discrimination claim may also be pursued by an affected employee.

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