Changing the terms of employment contracts

An employer may wish to vary the terms of the contract because of changed economic circumstances, a reorganisation of the business, or to use new technology. Possible areas of variation could include pay rates, hours or days worked, duties, supervisory relationships or place of work.

 

Equally, an employee may want to request changes to their contract, for example to reduce their hours of work.

 

It is preferable for any agreed changes to be recorded in writing, but verbal agreements are valid.

 

An existing contract of employment can be varied only with the agreement of both parties. Changes may be agreed on an individual basis or through a collective agreement (i.e. agreement between an employer and employee representatives, such as a trade union).

 

Sometimes difficulties can arise because a change has been imposed by the employer without the employee ever expressly agreeing the change. Agreement can however be “inferred” from the way the parties behave. So if an employer reduces an employees rate of pay, and the employee continues to work for some weeks without objecting to the reduction, the employee may, by their behaviour, be regarded as having agreed the changes to their contract. Even where the employee has objected if they continue working after a period of time they may be regarded as having agreed to the change.

 

Variation/ flexibility clauses

A written contract may contain express terms (usually called ‘flexibility clauses’), which allow an employer to make changes in working conditions. For example, the contract may allow the employer to change the employees place of work, or their job duties. Employment Tribunals will examine these carefully to make sure that they allow the employer to make the changes they are proposing.

 

Even where the contract allows the employer to change the terms of the contract the employer will normally still need to give sufficient notice of the change and act reasonably in imposing the change.

 

Refusal of the employee to accept the changes to the contract

Contracts can only be changed by agreement so an employee can refuse to accept the change.

 

When an employee refuses to agree changes, an employer may:-  

  • impose the changes and force the employee to continue under new terms
  • dismiss the employee

 

Imposing changes of contract

If an employer imposes changes upon an employee the employee is forced into deciding what action to take.

 

An employee must respond quickly where the employer tries to impose contract changes unilaterally; otherwise he or she may be taken to have agreed the change by continuing to work (see above).

 

Where the changes involve a reduction in pay, the employee may be able to bring a claim in the Employment Tribunal for unauthorised deductions from wages.

 

More information on unauthorised deductions from wages

 

Often however the changes do not affect pay but, eg, involve hours of work or job duties. Where an employer imposes those changes an employee’s only option will be to resign and argue that they have been constructively dismissed ((ie that they were in effect dismissed by the employer because they resigned because of the employer’s breach of contract) and that the dismissal was unfair. An Employment Tribunal would have to consider the same issues as above in deciding whether the “dismissal” of the employee was fair.

 

Further information on constructive dismissal

 

Dismissal of the employee for refusing to agree changes

An employee may (provided they meet the qualifying criteria) claim that they have been unfairly dismissed.

 

The tribunal would consider all the circumstances of the case in deciding whether or not the dismissal was in fact unfair. These would include the employer’s reasons for wishing to vary the terms and conditions - overriding business considerations, for example, might make the dismissal fair - and the employee’s reasons for opposing the variation. If the employer’s needs outweigh the employee’s reasons for resisting, the dismissal will be fair. It is important to realise that in some cases an employer will be able to show that it was fair to dismiss an employee for refusing to agree changes to their contract.

 

Further information on unfair dismissal

Fact sheet: Changing the terms of employment contracts
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