We assume in this article that you don’t recognise a trade union. If you do, you’ll normally be able to agree changes with the union rather than each individual employee, and you’ll face the risk of industrial action if you don’t reach agreement with the union.
The fundamental principle
You can’t change the terms of a contract without the other side’s agreement. That principle applies to commercial contracts (agreements between you and clients or suppliers, for example) and to agreements with your employees. Contracts are made up of legally enforceable promises, so each side knows where it stands. And you’re protected if the other breaks their side of the deal.
But contracts can become outdated. From time to time you’ll have to think about making a few changes.
Some changes will be small and may seem inconsequential. Others will radically affect the employee’s day-to-day work or their entitlements. Perhaps they’ve been promoted, so their contract must be brought in line with their new status and responsibilities. Maybe you are relocating your business. Or perhaps you’re having to look at costs savings and need to cut back on employee benefits.
And there’s always the changing face of employment law to consider, as well as evolving custom and practice.
Step 1: Is the change beneficial to the employee?
There are some changes which you will be able to implement very quickly and without much fuss or disruption. What employee is going to object to a pay rise, for example? Where the employee stands to gain from the change, you’ll probably have an easy ride. By agreeing the change between yourselves, you’ll be able to update the contract by mutual consent – by far the safest and simplest way. It cuts out a lot of technical contractual and employment law issues.
Don’t forget to get the employee’s consent in writing. You’ll need to issue written notification of the change within one month of it taking effect. The easiest way is to simply issue a new contract, or a written addendum, and get it signed by the employee.
Not all proposed changes will be welcomed, and this is where employment law and contract law claims lurk.
Step 2: Check whether you need to change the contract
The wording of the employee’s contract is always the starting point.
Not every change will affect the express, implied, incorporated or statutory terms of the agreement. (This sounds complicated, and it can be, so it’s worth running this past us.) If it doesn’t affect those terms, then great – you should be able to introduce the change without having to get the employee to agree to it.
A word of caution about being too bullish here. Even if the change you want to make isn’t a contractual one (i.e. you are technically able to make it because it doesn’t affect the contract), you still owe the employee – as you do all employees – a duty of trust and confidence. Tell them about the change and why you’re planning to introduce it. Listen to what they have to say; it’s not uncommon for employees to come up with some useful new ideas relating to the change.
Ultimately this all reinforces good employer/employee relations. They’ll respect your honesty and they’ll appreciate that you’ve taken time to explain things to them. At least, that’s the plan!
Step 3: Does the employment contract allow the change?
The contract may contain a ‘variation clause’, which allows you to make certain changes.
But courts are always reluctant to allow employers to use variation clauses in a way which impacts negatively on employees’ rights. The bigger the impact, the more a court will look for a reason to declare the variation clause invalid. So it’s worth checking with us first.
Step 4: Impose the Change
Remember that it’s unlawful – a breach of contract – to change the terms without the employee’s consent. But it’s not that difficult if you know what you’re doing. You have options, but you’ll need to tread carefully.
Option 1 – get the employee’s agreement
You can’t force the employee to agree to the change, so steer very clear of duress. You should consult with the employee. There are obligations to enter into collective consultation – a specific legal process – if the change will affect 20 or more of your employees.
Explain the change and why you want or need to make it. Depending on the effect the change would have on the employee, you might need to think about offering some benefit in exchange for their agreement: a pay rise, a better bonus, or a few days’ extra holiday, for example. If they don’t agree, then they can carry on working under their current status and options 2 or 3 may be considered.
Option 2 – you don’t get their agreement
You can apply these changes without the consent of the employee where the employee (assuming they remain in employment with you) works under the new terms but under duress by making you aware that they are not happy. They do have the opportunity to bring a claim of breach of contract (if they resign) if they do not accept the imposed variation.
Option 3 – you terminate and rehire
You could terminate their employment and immediately look to engage them on new terms. The risk here is that a claim of unfair dismissal is made. This option is rarely applied due to the risks, but where the survival of the business is dependent upon the change then most Judges are going to support management actions.
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