Changing employees' terms and conditions

If you want to change the terms and conditions of employment of your staff, perhaps as an alternative to redundancy, you'll need to gain their consent and give them a full consultation. Solicitor Sarah Gudgin outlines the legal implications.

The Problem

In the past two years I have had to make a few redundancies in an effort to cut costs. Business is still slow and I am looking to change the terms and conditions of existing employees rather than make further redundancies, but I am concerned that staff will resist any changes. How can I go about doing this?

The Law

Changes such as a reduction in hours or pay are fundamental changes to employees' terms and conditions. Such changes without the consent of employees will be in breach of contract and potentially an unlawful deduction from wages.

If an employee has one year's employment and resigns in response to a fundamental change they will be able to bring a claim of constructive dismissal. They will also be able to bring a claim for wrongful dismissal and breach of contract.

Even if an employee does not expressly agree to the new terms and conditions but continues to work under the new terms "under protest", they will still be able to bring claims for breach of contract and unlawful deductions from wages (where reduction in pay exists).

In the event that an employee refuses to agree to a change in their terms and conditions then an employer may decide to terminate their employment and re-engage on the new terms and conditions. This is a risky option because employees may refuse the new terms and conditions and bring unfair dismissal claims, (if they have been employed for one year or more). If an employer does not give employees their appropriate period of notice before dismissing them then employees will also be able to bring wrongful dismissal claims.

Where any agreement to a change in an employee's terms and conditions of employment is established, an employer should obtain their agreement in writing within one month of the change.

Expert Advice

The safest way for an employer to alter terms and conditions is by obtaining the agreement of employees, particularly where there are fundamental changes, such as a reduction in pay.

To try and obtain express agreement employers should consult with affected employees to explain the proposed changes and the reasons for the changes. They should clearly explain the changes, when they will be introduced and the reasons for the changes. Any upside for the employees should be highlighted and the likely implications for the business if the changes are not implemented.

Another option, although risky, is for an employer to impose the changes without first obtaining agreement from employees. If employees do not protest, an employer may use employees' conduct to establish their implied agreement. This will happen where an employee continues to work without protest after a change such as a reduction in pay has been introduced.

Another risky option is for an employer to dismiss and re-engage employees on the new terms and conditions. In order to avoid successful claims of wrongful and unfair dismissal an employer must make sure that it gives employees their appropriate period of notice (or pay in lieu), carry out the dismissal fairly and in accordance with any dismissal procedures the business may have.

Checklist

An employer should:

• Assess the relevant terms and conditions.

• Consult with employees to try and obtain their written consent to the changes.

• If this fails, consider imposing changes without employee agreement.

• Or, consider dismissing and re-engaging employees, ensuring that they receive the appropriate period of notice (or pay in lieu) and that the procedure is fair.

Beware

Where proposed changes to terms and conditions may affect 20 or more employees, and dismissal and re-engagement of employees on the new terms is a possibility, an employer should put into place procedures for collective consultation. Failure to collectively consult may lead to awards of 90 days' actual pay per affected employee.

An employer will risk claims of indirect discrimination where the proposed changes impact unfairly on a particular group of employees because of their sex, race, disability, age, religion or belief or sexual orientation. Compensation for successful discrimination claims is uncapped.

contact

http://sgudgin@boodlehatfield.co" target="_blank" rel="noreferrer">Sarah Gudgin is a solicitor at Boodle Hatfield