As COVID-19 continues to frustrate the efforts of businesses to resume normal life, many companies are facing challenges with bringing their employees back to work. As an alternative to redundancy, some employers may choose to retain staff but reduce their pay, hours or benefits. However, this is not a simple process and is likely to involve amending employees’ terms and conditions of employment.
Identifying contractual terms
An employee’s terms and conditions of employment may be express, implied or incorporated from other sources, for example, a staff handbook. To change a contractual term of employment without the consent of the employee would amount to a breach of contract, in which case the employee could:
- work under the new terms under protest and claim for breach of contract or unlawful deductions from wages arising from the changes; or
- resign and claim constructive dismissal, if the breach is sufficiently fundamental. Most changes to remuneration would be considered fundamental; or
- refuse to work under the new terms (if this is possible, for example if there is a change to hours of work).
Therefore, it is vital that an employer identifies the correct terms and conditions, and where they’re located.
- Express terms can be agreed orally or in writing, and are commonly found in offer letters, written contracts of employment and written statements of particulars.
- A term may be implied into a contract where it is obvious that both parties would have considered it as such. For example, a duty of mutual trust and confidence between employer and employee.
Does the employee’s contract permit flexibility?
It may be possible to amend a particular term if an employee’s contract explicitly gives the employer this power. For example, a clause may allow an employer to alter an employee’s shift pattern, or place of work. Employers should be careful, however, as courts often interpret such provisions strictly and any ambiguity, particularly if the change is to the employee’s detriment, may result in a breach of contract by the employer.
Employers should be particularly careful when trying to reduce an employee’s salary, as this is considered a fundamental part of the employment relationship. This includes bonus schemes and entitlement. On the whole, flexibility clauses, purporting to give the employer the right to change any term of the contract, are only likely to be appropriate for implementing minor and/or non-detrimental changes.
The safest way to vary employees’ employment terms (particularly where it is to the employees’ detriment and especially where it concerns pay and benefits) is by agreement, preferably in writing. However, there are some situations where even agreed variations may be challenged and, in these situations, employers should take legal advice.
Where an employer is seeking to vary an employee’s employment terms, they should:
- Consult – either individually or collectively. This is particularly important where there is a recognised trade union.
- Allow time for consideration – if the change is to the employee’s detriment, an employee should be given some consideration for the change to terms and conditions. If the change has immediate effect, and the employee continues to work and abide by the change, this may be taken to be implied consent.
Dismissal and re-engagement
If an employee refuses to agree to a change, the employer could terminate the existing contract and offer continued employment under new terms. However, particular care should be taken as the employee may have a claim for unfair dismissal resulting from the termination of the existing contract.