Briefings
Employment: Changing terms & conditions - the pitfalls
In a case reported last week, Robinson v Tescom Corporation, the Employment Appeal Tribunal held that an employer had dismissed an employee fairly after he refused to abide by changes to his employment contract. Unfortunately for Mr Robinson, he got his options mixed up and after telling his employer that he would work under the new terms "under protest", he subsequently insisted on working under his old terms. The case highlights the options an employee has when his or her employer tries to impose new terms and the potential claims that may arise. It also serves as a reminder to employers of the do's and don’ts when changing terms of employment and in this month's briefing we look at some of those issues. We also highlight a recent ECJ case on the protection of female employees undergoing IVF treatment.
Can an employer vary an employment contract?
An employer cannot vary contractual terms without employees' consent, without being in breach of contract. However, before seeking consent, an employer should consider:
- Whether the proposed changes are in fact to contractual terms. This is because, provided there is no breach of the implied duty of trust and confidence, an employer is free to vary non-contractual terms (such as certain policies and benefits that are expressed to be non-contractual)
- Whether the proposed changes are already authorised by the contract. For example, it may be possible to interpret the term to accommodate the change, or there may be an express right to vary the particular term. Care should be exercised since the operation of such flexibility provisions will be subject to the implied duty of trust and confidence.
If the employer cannot rely on the above to implement changes, then it will need to seek employees' consent. Ideally, consent should be given in writing (the contract may in fact require variations to be in writing) and be supported by some consideration (changes to the employees' advantage do not need separate consideration but changes to their disadvantage, particularly when the change does not have an immediate effect, should usually be coupled with at least nominal consideration, such as tying the changes in with the annual pay rise).
In certain circumstances, consent may be implied. This is where an employer unilaterally imposes changes and then relies on the employee(s) continuing working without objection. This is not normally advisable as the courts are reluctant to imply consent unless the changes have immediate effect (such as a change in hours or pay) or unless, in some circumstances, the employee has been told that a failure to object will be taken as consent.
Termination and re-engagement on new terms
An employer should seek express agreement to any contractual changes in the first instance. Where express agreement is not forthcoming, the preferred option for an employer intent on changing terms would in most cases be to terminate the relevant employment contracts and offer the employees employment on the new terms. If so, it is essential that:
- Contractual notice is given (or payment in lieu where appropriate) to avoid claims for wrongful dismissal
- There are sound business reasons for the changes (otherwise the employer will not be able to establish a fair reason for the dismissals).
- A fair procedure is followed before giving notice (to avoid claims for unfair dismissal on procedural grounds). This includes explaining the reasons for and impact of the changes, considering alternatives to changing the terms, giving reasonable notice of the proposed
changes, explaining the consequences of not agreeing and giving employees a chance to have their views heard
- The statutory disciplinary and dismissal procedures are followed (to avoid claims for automatic unfair dismissal and any uplift in compensation as a result).
Remember that where an employer is proposing to terminate the contracts of, and re-engage, at least 20 employees, collective consultation obligations are triggered. This will in most cases involve electing employee representatives with whom to consult and then consulting with them (with a view to reaching agreement) for at least 30 days (or 90 days if at least 100 employees are involved) before giving notice to terminate. Where these obligations apply, the statutory disciplinary and dismissal procedures do not, but otherwise the same requirements apply as above.
It is also worth bearing in mind that where there is an Information and Consultation Agreement in place, where a union is recognised or where the changes concern a pension scheme, there may be additional consultation obligations.
What happens if the employee does not agree to the new terms?
If the employer imposes a change without an employee's agreement (and where there has been no termination and re-engagement as above), the employee has three main options:
- If the change is a fundamental change, going to the root of the contract (such as a reduction in pay or status), the employee may choose to resign and claim constructive dismissal
- The employee may continue to work but make it clear that he or she is doing so under protest. By doing this, the employee will retain the right to make a claim for breach of contract and may also preserve the right to resign and claim constructive dismissal at a later date
- Where the new terms affect day-to-day working arrangements (such as duties or hours of work), the employee may simply refuse to work under the new terms. The employer will then need to decide whether to allow the employee to carry on as before or whether to terminate their employment and offer new employment on new terms.
Female employees undergoing IVF treatment are not pregnant
The European Court of Justice has held that women undergoing IVF treatment, who have had their ova fertilized but not yet implanted, are not ‘pregnant’, and thus are not protected from dismissal by the EC Pregnant Workers Directive.
However, the dismissal of a woman, if related to her treatment, amounts to discrimination on the ground of sex contrary to the EC Equal Treatment Directive, since IVF directly affects only women. Under English law, this decision confirms that it would not be automatically unfair to dismiss a woman on the grounds that she is undergoing IVF treatment (unlike where a pregnant employee is dismissed on grounds of her pregnancy). However, the dismissal may well be discriminatory if it relates to the fact that the employee is undergoing IVF treatment.