The impact of the pandemic has considerably changed the working landscape and businesses face further challenges in adapting their working practices as lockdown eases and employees return to the office. Many businesses have had to evolve in order to survive the impact of the pandemic and one result of this may require adjustments to be made to their employee’s contracts.
Most contractual variations are likely to relate to rate of pay, job role, hours of work and working location. As this could result in a fundamental change of terms it is likely that agreement from both parties will be required, otherwise it could be a breach of contract. You should consider the below and seek advice if you wish to alter the terms of your employees’ contracts without their consent.
How do I vary the terms of an employee’s contract of employment?
Before considering how to vary a contract of employment, it is worth recapping what a contract of employment is. A contract of employment sets out the rights and obligations which bind the employer and employee to the contract. The terms of a contract can be:
- express – terms which are explicitly agreed between the employer and employee, either in writing or orally. They can be set out in a letter of appointment, contract, staff handbook and/ or a collective agreement;
- implied – terms which have not been spelled out but which are (a) considered obvious, e.g. the employee will not steal from the employer or that the employer will provide a safe working environment, (b) necessary to make the contract workable (e.g. that an employee employed as a driver will hold a valid current driving licence or (c) the custom and practice of the business or industry which has been adopted over a period of time;
- statutory – rights given by legislation e.g. the right to be paid the national minimum wage or to paid annual leave. Agreements to contract out of statutory terms are normally void under the law.
When it comes to varying terms, the general principle is that an existing contract of employment can only be varied with the agreement of both parties, i.e. you must get the consent of the employee to make the changes to their employment contract. You are likely going to need to enter into a consultation process with the affected employees. You may have a clause within the contract of employment that allows for minor changes, however it always advisable to seek advice prior to making such changes as what might be considered reasonable will vary and you will want to avoid conflict where possible!
Depending on the severity of the change (and the importance to you), you may wish to consider a “sweetener” in return for their agreement to the variation e.g. additional leave (paid or unpaid) or additional pay. As pay rises are a common and standard form of contract variation it may be sensible to try and time other variations for the same time as you give these as the benefit of the increased pay can be used to offset any other contract variations you are looking to implement.
If the employee does not give their consent to the variation, there are two options both of which contain risks of claims being brought against you:
- terminate the employee’s existing contract by giving the required notice and then offer to re-engage the employee on the new terms. This procedure would alter the terms of employment, however by terminating the old contract, you have effectively dismissed the employee and so, subject to them having the relevant qualifying period, they could claim unfair dismissal. Also, if you haven’t followed the Acas Code of Practice on Disciplinary and Grievance Procedures, then the dismissal could be held to be unfair;
- unilaterally vary the employee’s contract terms. The subsequent actions of the employee will determine what the outcome is, but it is important to note that the basic position is that a unilateral change to employment terms made by an employer is a breach of contract.
The employee has three options once you have informed them of the changes:
- they can continue working under these new terms, without objecting. It is likely then that they will be deemed to have accepted these changes in due course by virtue of their conduct and so the employment contract will continue, with the variation; or
- they could refuse to accept the changes and continue working on the old terms (whilst still retaining the right to seek damages for breach of contract and/or a declaration from the court that you must abide by the original terms) (this is often referred to as working under protest. However an employee who continues to work under protest for a long period of time will at some stage be deemed to have accepted the varied terms); or
- they could resign and claim constructive dismissal against you (subject to having the relevant qualifying period), treating the variation as a fundamental breach of contract, thus bringing their employment to an end.
Because of the potential risks of a claim involved in carrying out either of the above options, you should seek further legal advice on your individual circumstances and the risks involved before you take any action.
Further guidance on variation of a contract of employment can be obtained by speaking to our team of Consultants on 01223 855441.
Read more in this series of blogs “Back to work”
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