When an employee enters into an employment relationship with a new employer they should be issued with a written contract of employment at the beginning of their employment, setting out the terms and conditions of that employment. Once this contract is signed by both parties it is a binding document and enforceable by a court of law.
Sometimes, during the employment, an employer may want to change one or more terms contained within the contract of employment. The employer may want to change just one employment contract or many employment contracts.
Depending on the extent of change the employer would like to make and the number of employees this affects, this can be a complex task.
The following article explains how an employer can go about changing a contract of employment with one or more of their employees.
Look at the current employment contract
Firstly an employer should check the existing contract which they would like to change and check if there are any flexibility clauses in the contract allowing the employer a degree of flexibility to make certain changes to the terms of the contract.
If the proposed change falls within the meaning of the flexibility clause it is not technically a variation to the contract of employment at all and the employer would simply have to write to the employee to advise them of the change being made. However, the fact that the contract appears to allow the employer to make the change does not mean that the employer has an unequivocal right to make any change they deem fit.
Employers are unlikely to be able to rely on general flexibility clauses to make anything other than reasonable or minor administrative amendments that are not detrimental to the employee.
Therefore with a general flexibility clause the employer would likely still want to consult with the employee and seek their views and agreement to the change before implementation.
Get the agreement of the employee
The easiest and best way to change an employee’s contract is to get the employee’s express agreement to the change or changes.
Without the agreement of the employee, although it is still possible to vary contract, an employer could find themselves faced with potential claims for unfair dismissal or breach of contract. Forcing a change without the agreement of the employee will also likely lead to decreased morale.
Under normal contractual principles, an employee’s express agreement to a change to contractual terms must be given voluntarily and be free from duress.
For the contractual amendment to be binding, the employee must receive some form of benefit in return. In many cases, the employee’s continued employment will be sufficient consideration provided the change will have immediate effect
An employee will be more willing to agree to an amendment if they feel they have been involved in the process from the beginning. Employers should ensure the employee is involved by holding consultations with the affected employees. These can be both group consultations and individual consultations and may involve trade union or other representation where appropriate. The employer should explain the reason for the change or changes and take on board any suggestions which the employees may have. This way the employees are likely to feel more engaged in the process and willing to compromise.
Although an employee’s verbal agreement may be enough to establish a change in contract, it is of course always advisable to get this agreement in writing to avoid any confusion at a future date.
The employer must also provide a written statement detailing the changes to the employee’s written statement of terms and conditions within one month of the change taking effect.
Proceeding without an employee’s agreement
Should the situation arise whereby the employer cannot get the agreement of the employee and they still want to go ahead with the change, they may then want to serve notice to terminate the existing contract and offer the employee re-engagement on the new terms.
It is important to note that this should really be treated as a last resort and should be considered only after full and thorough consultation with employees (and their representatives where appropriate).
If an employer were to decide on this option they would be dismissing the employee. It is therefore important that the employer follows a fair dismissal process and offers the employee the right of appeal against their dismissal.
Following this process may lead to an employee making a claim to an Employment Tribunal for unfair dismissal if they were employed for the two year qualifying period. It would be for the Employment Tribunal to decide whether or not the dismissal was fair or unfair.
The length of notice to provide the employee before the termination of the contract will be set out in the employee’s contract, or it will be the minimum statutory notice period, whichever is the longer.
As a different course of action the employer could decide to unilaterally impose the new contract term without the agreement of the employee. However, in that scenario the employer would not only likely be facing employees with decreased morale and performance but they would also be in breach of contract and they may find themselves facing a claim for breach of contract in the Sheriff Court or a claim for unlawful deduction of wages, unfair dismissal or constructive dismissal in the Employment Tribunal.
If the employer decides to dismiss and offer re-engagement on the new terms to twenty or more employees then there is a legal obligation for them to collectively consult with any recognised trade unions or workforce representatives and to notify the Secretary of State. This process is called collective consultation.
Therefore if the proposed change is likely to mean that the employees’ agreement will be difficult to obtain and that notices of termination may need to be issued to at least twenty employees, the employer should consider commencing collective consultation at the outset of the process. If in doubt, seek legal advice.
How can we help?
We hope you found this article to be of some interest or help.
If you are employer looking for further guidance and advice on how to make a change to an employment contract, we are here to help.
If you are an employee who would like advice regarding a proposed change to your contract, we can help with this also.
Note: This article first appeared on the Moray Employment Law website in January 2018.