Changing Contract Terms
As businesses are changing, adapting, and trying to cope with the constant ups and downs since Covid hit in March 2020, they are seeking ways to make reductions in costs, and one of the biggest overheads for many employers is staff. There is however a balance between making cutbacks and retaining good quality staff for the future, when (fingers crossed) we can get back to some sense of normality.
As a result of this balance employers are trying to strike, we have been asked on numerous occasions recently, can an employer change an employee’s contract terms?
The most frequent change employers want to make is to reduce employee hours, which in turn reduces pay, and several have asked if they can move an employee from a guaranteed hours contract to a zero hours contract.
How easy is it for an employer to make a change in contracts
If the change is agreed by the employee, then it can be very easy.
If the change is one covered for in the employment contract already then it can be simpler to make the change.
The problem arises where an agreement cannot be reached, and an employer needs to force the change.
This is known as a unilateral change to contract terms.
What does an employer need to do if an employee refuses to agree to a change to their contract terms?
If this is not possible then the employer has a couple of options:
1. Make the change anyway
Assuming it is a change that can be made without action from the other party.
For example, in the case of reducing hours, the employer just rotas the employee for less hours, or tells them to come in at a different time.
The risk of this is that the employee resigns in response to, what is possibly going to be, a fundamental breach of the contract and they can then make a claim for constructive unfair dismissal
An employee may also ‘stand and sue’, that is they may remain employed and work to the new terms but make a claim for breach of contract or in the case of a reduction in wages, unlawful deduction from wages.
2. Give the employee notice to terminate their employment on the current terms and offer to re-engage on the new terms.
The risk with this is that the employee (if they have been employed for at least 2 years) could make a claim for unfair dismissal. This is the case even if they accept the new employment contract and are reinstated as an employee.
It could also give rise to a claim for statutory redundancy pay if the change means that the previous job was redundant.
Advice for employers
If you need to make changes to contract terms it is important to seek advice and approach the process carefully. Advice is important not only to avoid finding yourself defending claims in the Employment Tribunal but also to ensure that, as far as possible, you can reach agreement with the employee.
Changes can be made and it may be that you decide that the need to make the reductions outweighs the risk of litigation, but there are always ways in which we can help you to reduce the risk to your business.
Advice for employees
You do not have to accept a fundamental change to your employment terms if you do not wish to, and you should not feel pushed to do so. However, given the current economic situation of many businesses and the uncertain future and correspondingly job market, it may be better to engage with your employer and seek to reach a compromise.
For example, if your employer says they need to reduce your hours by a certain amount but when you do the figures it would leave you significantly out of pocket and unable to pay your own bills, it is important to speak to your employer and explain why you object to the change. Open a dialogue where you can try to compromise. This is much better than finding yourself out of work, out of income and with the prospect of fighting an unfair dismissal claim for the next 12 months.