We are living in strange and uncertain times and employers are now required to reconsider their employees’ terms and conditions of employment. Many employers will rightly engage the Furlough Scheme to avoid the need to make redundancies and the Furlough Scheme was designed for that purpose. Some employers will be forced to make redundancies. However, rather than make redundancies or place an employee on furlough there is another option and that is to change an employee’s terms and conditions of employment. There are two ways of doing that:
1. You can try to impose the variation to an employee’s contract.
A contract of employment may contain a clause allowing for a necessary variation. It might be that you wish to impose additional or different duties or even a wage reduction. However, other than in more minor cases, we don’t recommend imposing the change. For example, an employer can easily impose a new policy that may affect an employee in a minor way but imposing new duties or a different wage or commission structure may be riskier. An Employment Tribunal could find that, whilst an employment contract allows for a variation, a term should be implied such that any variation should not take place in an unreasonable way i.e. without proper warning and consultation. If a term is imposed without consultation then there would be a risk of the employee resigning and successfully claiming constructive dismissal.
2. Instead you can seek your employee’s agreement to vary the contract through a process.
You would first ask the employee to agree to the variation following a meeting in which your reasons for requiring the employee to change their contract has been discussed. You would then provide the employee with a new contract containing the variation and would ask the employee to sign that to confirm their agreement. If the employee does not agree to the proposed variation, you would carry out a consultation process during which you would meet with the employee to discuss the proposed variation and consider their response. That process might normally have taken about two weeks to a month but in these unusual times a shorter period may be considered appropriate.
If at the end of that process the employee still didn’t agree to the variation, the employee could then be dismissed for ‘Some Other Substantial Reason’ (‘SOSR’).
SOSR is a potentially fair reason for dismissal under the Employment Rights Act 1996. If an employee was dismissed you must then offer the employee new employment under the terms of the new contract. If they didn’t accept that new employment the employee would potentially have a claim for unfair dismissal. The employee may also have a claim for a redundancy payment by arguing that their employer has a reduced need for employees of a particular kind and so their position was redundant
If it had to consider an unfair dismissal claim, an Employment Tribunal would weigh up your business needs to impose the change against the prejudice to the employee of the proposed variation. The Tribunal would also scrutinise the process in terms of the fairness of the consultation process. Essentially, the Tribunal would have to be satisfied that the decision was a “sound business reason” and not one imposed for a capricious or arbitrary reason. The following factors are likely to be taken into account by the Tribunal:
- Your motive for introducing the change.
- The employee’s reason for rejecting the change.
- Was the employee given reasonable warning of the change?
- Was the reason for the change explained clearly to the employee?
- Did you assess the impact of the change on the employee?
- Did you try to gain the employee’s agreement before imposing the change?
- Did reasonable and genuine consultation take place?
- Did a recognised trade union object?
As these cases always turn on their facts it is important you seek legal advice first before attempting to change terms and conditions.