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Can an employer change Contract terms?

Whether it is due to new legislation, business re-design or for more often, financial reasons, there are some situations when employers wish to change or amend the terms to the already-agreed employment contract.

Some of the most usual changes are regarding the employee’s working hours or rates of pay often as a result of the employer attempting to reduce financial outgoings, with one of the largest overheads being staff.

There are three ways in which an employer can safely make contractual changes, without the risk of a breach of contract claim.

  1. If the employee is in agreement with the change;
  2. If the contract has a ‘variation’ or ‘flexibility’ clause which allows for the employer to make amendments; or
  3. If the law changes requiring a change to contract terms.

As with all good employer and employee relations, clear and effective communication is paramount and can prevent and resolve numerous problems for both parties.

With any mention of change, this is even more important to reduce confusion and uncertainty.

Therefore, it is useful if the following points are discussed between the employer and the employee:

  • What the changes involve and the reasons for the proposed change.
  • The timeline of when the changes are to be introduced.
  • Any benefits to employees from the change.
  • Any detriment to the employer if not actioned.
  • An explanation of any alternatives to the proposed changes that have been or will be explored.
  • Any issues/concerns/questions the employee may have.

If there is no variation clause in the contract, the change to be made is not a legislative update and the employee is not in agreement, the employer should  fully consult with the employee, resulting in either an agreement being made or at least a compromise.

Arriving at either of these could prevent other possibilities such as; the employer continuing with the change, resulting in potential constructive unfair dismissal claims if the employee decides to then resign, or if the employee continues to work, ‘under protest’, not accepting the change, then makes a claim for breach of contract.

The employer could also give the employee new contract terms to agree to, after giving notice to terminate their old contract. This could again lead to claims of unfair dismissal.

In the event that employers are considering giving notice and offering to reinstate employees in order to effect a change to contract terms they will need to consider and follow the statutory code of practice on fire and re-hire

Whilst there is no standalone claim that can be made for a failure the code is admissible in evidence in proceedings before a court, employment tribunal or the Central Arbitration Committee, and any provision of the code which is relevant to those proceedings must be taken into account by the court, tribunal or committee.

In addition, if an employee brings certain types of employment tribunal claims, then the tribunal can:

  1. increase any award it makes by up to 25%, if the employer has unreasonably failed to comply with the code, or
  2. reduce any award by up to 25%, where it is the employee who has unreasonably failed to comply.

If you are in a situation where you want to make changes to employee contracts or you are an employee whose terms are being changed then we can help you.

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The information contained in this blog post is provided for guidance and is a snapshot of the law at the time it is written. It is provided for your information only and should not be used as a substitute for obtaining legal advice that it specific to your particular circumstances.

The guidance should not be relied upon in any decision making process. It is strongly recommended that you seek advice before taking action.


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