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05th March 2016

How should an employer make changes to employees’ contracts?

We have already seen two 24-hour strikes by NHS junior doctors, with 3 further walk-outs planned in March and April, in response to proposed changes to their terms and conditions of employment.

From an employment law perspective, these strikes have highlighted that changing the terms of an employee’s contract is not a straightforward task and is certainly not the case of simply issuing new contracts and assuming employees will accept those changes and continue.

Indeed, with the impending National Living Wage (“NLW”) coming in to force on 1st April 2016, many employers in the care sector are considering changes to their terms and conditions of employment to mitigate the impact of the introduction of the NLW and so this maybe a relevant issue for your business.

If the existing contract allows changes to be made to certain provisions of the contract i.e. hours of work, such provision must be exercised reasonably and in good faith. An employer must not breach terms of trust and confidence in the manner in which they implement the flexibility clause. To act reasonably, an employer should give adequate notice and engage in some initial consultation with a view to ironing out any potential personal problems the changes may impose on certain staff.

If there is no such contractual provision allowing the changes you wish to make, or the proposed changes are too wide-ranging/significant to fall within any “reasonable” contractual provision, then there are 3 possible routes to effect change.

Employers are encouraged in the first instance to undertake a reasonable consultation with the staff concerned and seek agreement to vary their terms by consent. This is the preferred approach and the aim is to get as many staff on board with the new changes as possible, and to tackle the resistant few at the end.

Where this route is unsuccessful, the employer has two further options. Change could be imposed unilaterally but employers need to be wary that, particularly where substantial changes are being imposed, they risk claims for constructive unfair dismissal as a substantial change will be a repudiatory breach of contract. The most recent statistics for unfair dismissal awards show an average award of £12,362, with a maximum award of £238,216.

A preferable option following reasonable consultation with affected staff is to terminate their contracts and re-engage them on the new terms, for example as part of a reorganisation or redundancy programme. While this is the safer of the two options, it is again not without risk to the employer. Essentially you are terminating the employment contract and it is up to the employee whether or not to accept the new terms. They may choose not to and may pursue a claim for unfair dismissal.

Further, if more than 20 staff are affected with the proposed termination and re-engagement route, then you will need to engage in formal collective consultation with the Trade Union or elected employee representatives. This must be for a minimum of 30 days for 20-99 staff, and 45 days for 100 staff or more. This is because termination which is not the employees’ fault is classed as a redundancy for the purposes of collective consultation regulations.

As an employer you need to carefully consider what the business case is for making the changes, what the employees’ anticipated reactions are, and how you can sell the situation to employees as either a positive change, or at least the lesser of two evils i.e. better than redundancies. Are there any incentives which can be offered and what input can you encourage the employees themselves to have in the process? You need to try to get the employees to buy into the changes during the consultation with a view to reaching agreement, while at the same time building a background of fair and justified reasons to terminate employment where some or all employees do not agree and the employer is left with no choice but to dismiss and reengage or to impose the changes unilaterally.

The resistance that the Government have been met with is that they are fighting against demoralised workforce of junior doctors. This situation is clearly on a much larger scale than employers seeking to make changes will face, but the basic premise is the same; you need your employees to buy in to the changes and the reasons for them. However minor the changes that are being proposed are, legal advice should always be sought from the outset to minimise the risks to the business during times of change.

*All information is correct at the time of publishing. Use of this material is subject to your acceptance of our terms and conditions.

Katy Parkinson

Napthens LLP – Employment Law Specialist

Katy is one of our Employment Law Specialists from Napthens Solicitors. Read more

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