If employers change employment terms, whether expressly or implicitly, they risk an unenforceable contract or a claim for breach of contract. There is also the risk that restrictive covenants will become unenforceable. We assist employers to successfully alter employment terms. If any claim is made we defend employers and mitigate the costs.
We are always happy to discuss a problem and provide an initial scope and fee estimate. Please do call us.
Reasons for working with us
We are boutique employment law specialists. In real life this means:
- We quickly review employment contracts and pick out risks for the employer.
- We are specialists in dealing with problem areas such as bonus payments, directors, TUPE and the impact of changes on restrictive covenants.
- We have the experience of acting for employees and can help employers avoid claims for unfair dismissal, constructive dismissal as well as discrimination.
- If the matter turns into litigation we have the expertise to field any claim.
- Experience builds a commercial awareness and knowledge in how to apply our skills successfully to get the job done.
Based on questions we are often asked we have set out below some background for employers
Key risks arising upon change to employment terms
Any change to a UK employment contract including bonus terms technically requires the employee’s consent. It doesn’t matter if the employment contract doesn’t specify the condition or benefit. For example, the provision of a subsidised staff canteen could become a contractual entitlement over time even though the employment contract does not specifically mention the benefit of the staff canteen.
Employment contract changed without employee’s consent
If an employer unilaterally changes an employee’s employment contract, without their express or implied consent, this is a:
- Breach of contract which could give rise to a claim of constructive dismissal; and
- Repudiatory breach, possibly which can leave the employer’s restrictive covenants unforceable.
Ideally, employers seek voluntary agreement. This avoids forced changes, redundancies and litigation. The law stops employers using their greater bargaining position to impose contractual variations on employees against their will.
Trap for employers altering bonus terms
Many employers are caught out when relying on an express discretionary bonus clause. Employees have successfully argued that custom and practice over many years has, in reality, resulted in a more narrowly constrained discretion than the employer believed to be the case.
Whether employers can make savings by cutting bonuses depends on the employment contracts’ express terms, and the employer’s custom and practice.
Steps employees can consider
The risk for employers lies in the potential employment law claims arising if the employment contract is changed without consent. Typical employment law claims, depending upon the facts for an employee include:
Work under the new employment terms in protest
Sometimes termed standing and suing. The employee chooses to work under the new terms, but protests, i.e. makes clear they do not accept the terms. Then the employee:
- Tries the new arrangements, for a reasonable period before, perhaps, objecting;
- Has an ongoing claim for breach of contract;
- Can claim for any financial loss;
- Can claim for losses going back six years. Potentially, a significant liability.
Where the change imposed is substantial, the employer may be deemed to have dismissed the employee and re-engaged them on new term. In this situation, the employee may also bring a claim for unfair dismissal.
Claim constructive dismissal and breach of contract
An employee can first resign, then claim constructive dismissal. However, the breach of contract must be a fundamental i.e. goes to the root of the contract.
Refuse to work under new employment contract terms
The employee could refuse to accept the new terms and continue to work under the old terms. This situation is different to where an employee works under the new terms, but clearly protests. Employers have to manage the obstructive employee.
Changing employment contract terms successfully
There are a number of ways employers can successfully change employment terms. The easiest way is to offer an incentive such as a pay rise if the employment changes are agreed. Changes to restrictive covenants are often implemented in connection with a promotion as often the employee will agree to the changes. In other cases employers may have to consider implied consent and other possibilities as discussed below.
Employment terms altered through custom and practice
Custom and practice may be considered to amount to contract alterations. Often employees argue:
- Their job role or working conditions have changed from the contract’s express written terms;
- That in reality, they’ve been doing a different role to that listed in the contract;
- That an initial informal period of partial home working has become a contractual right.
One solution is to draft contracts that allow as much flexibility as possible in respect of working conditions and benefits. Employers can reserve the discretion to make specific changes to particular working conditions and benefits. There are limits and overly generous clauses to protect the employer may be found unenforceable in an Employment Tribunal or court.
Policies and procedures
Staff handbooks, policies and procedures can if appropriately drafted be treated as separate from the employment contract. Separation means that employers can usually change these without breaching the employment contract.
Nevertheless, putting everything in policies rather than the employment contract may not work. In employment law, it’s the substance, not the label, that counts.
Discretionary clauses that allow changes to employment terms
If the contract’s terms authorise the change, it may be possible to:
- Interpret a term sufficiently broadly to accommodate the change;
- Have an express right to change the employment relationship covered by the clause,
- Have a general power to vary the employment contracts terms.
Narrow interpretation for employers
Specific flexibility clauses will be narrowly interpreted by the courts. It is likely that any ambiguity will be decided against the employer.
In practice, employers can rely on general flexibility clauses only for reasonable or minor administrative changes that are not detrimental to the employee. For example, to change healthcare provider, where a specific provider is stated in the contract and the new provider delivers identical benefits.
Changes to employment terms as a result of TUPE
Harmonising employment terms following the transfer of a business to which TUPE applies can be problematic.
Any change will be void if the sole or principle reason for the change is the transfer itself. Changes to employment terms are permitted where:
- The sole or principle reason for the change is an economic, technical or organisational (ETO) reason entailing changes in the workforce; or
- The change is otherwise permitted under the terms of the employment contract; or
- Where the change is not related to the transfer.
Practical steps for employers
One common way to avoid risk for an employer who needs to make changes fairly quickly after the TUPE transfer is to consider dismissing the employee and re-engaging them on the new terms. The employer should enter into a settlement agreement to compromise the automatic unfair dismissal claim arising from the dismissal.