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Issues to consider when changing terms of employment

A checklist of issues to be considered by an employer when proposing to change an employee’s terms of employment.

Is the employer proposing to change a contractual term?

  • Would the proposal affect any express or implied terms of the contract including any term that has been incorporated by virtue of a collective agreement?
  • Does the proposed change relate to a rule, policy or benefit which might be regarded as having contractual effect?
  • If the proposed change does not affect a contractual term, it can be implemented without the employee’s specific consent. However, the change must be made without breaching the employer’s obligation of trust and confidence. Consider carrying out consultation about the change before implementing it.

Is the proposed change authorised by the contract?

  • Is the term in question capable of being interpreted in a sufficiently broad sense to accommodate the employer’s proposal?
  • Does the contract provide for its terms to be varied by a particular collective agreement?
  • Is there a “specific flexibility” clause under which the employer has the right to make changes in a particular area (for example, a change to the place of work) without the employee’s express consent at the time? Can the employer rely on this specific flexibility clause without breaching any implied terms, such as the implied term of trust and confidence?
  • Is there a “general flexibility” clause under which the employer has a general power to vary a term of the contract without the employee’s consent at the time? (Note that only changes of a minor and/or non-detrimental nature may be effected through such a general flexibility clause.)

If the proposed change is not authorised by the contract

  • If the proposed change is to a contractual term and is not authorised by the contract, the employer should consider whether to seek the employees’ prior consent before implementing the change or whether to unilaterally impose the change. (Note that employees may respond to a change that is imposed unilaterally by “working under protest” and/or bringing claims for breach of contract, constructive dismissal or unfair dismissal, or any other relevant claims, such as unlawful deduction from wages.)

Make a presentation to all employees who may be affected

  • This should take place as early as possible to give adequate warning of the proposed change.
  • Fully explain the nature and the proposed timing of the change as well as the employer’s reasons for the change (drawing out any potential upside for the employees and making clear the likely implications for the business if the changes are not implemented).
  • Present the proposed change/revised terms of employment. Explain that the employees should consider the proposed change/revised terms and that there will follow a consultation process to discuss any questions or concerns over the new arrangements.

Commence consultation

  • If 20 or more employees may be affected by the proposed change, and if the dismissal and offer of re-engagement on new terms is a possibility should the employees not consent, put into place procedures for collective consultation. This should include electing employee representatives, if necessary, and notifying the Secretary of State (usually on Form HR1) of the proposed dismissals.
  • Is there a recognised trade union? If so, the employer may need to commence collective bargaining with the trade union.
  • Is there an information and consultation agreement in place? If so, the employer may also need to inform and consult ICE representatives about the proposed change.
  • Does the proposed change affect pensions? If so, the employer may need to consult with active and prospective scheme members.
  • Where 20 or more employees are affected, commence collective consultation with appropriate representatives.
  • After the collective consultation is concluded, and in any event where less than 20 employees are affected, hold individual consultation meetings.
  • Receive employees’ feedback on the proposed change (either directly or through their elected representatives, as appropriate).
  • Note any objections to the proposed change and the reasons for the objections. Consider if the proposed change can be varied to address any concerns raised by, or on behalf of, the employees.
  • There is no legal requirement for employees to be accompanied at individual meetings at this stage.

Hold further collective or individual consultation meetings (as appropriate)

  • Respond to any representations made by the employees or their representatives (as appropriate).
  • Warn employees (or their representatives) that if agreement cannot be reached at the end of the process, the employer may serve notice under existing contracts and immediately offer re-engagement under the new terms. Stress that this is very much a last resort and it is hoped that voluntary agreement to the changes can be obtained.
  • Consider any further representations made at the meetings or subsequently.

Write to employees

  • The letter should set a deadline for obtaining written agreement to the new terms and state that if agreement is not obtained by that deadline, the employer will contemplate terminating their employment and offering re-engagement on the revised terms.
  • The letter should also set a date and time for the employee to attend a meeting in the event that voluntary agreement to the change has not been obtained by the deadline. Notify the employee that they are entitled to be accompanied at this meeting.
  • The letter should repeat the basis for the change that the employer is seeking to make.
  • The letter should also make clear that any decision to terminate the existing contract will be on due notice.

If employees voluntarily agree to the change

  • Ensure that their agreement is recorded in writing within one month of the change taking effect. This will usually be by signature of the revised contract of employment or a side letter amending the contract.

If employees do not voluntarily agree to the change

  • Hold individual meetings:
    • Employees may be accompanied at this meeting.
    • Discuss the employee’s refusal to agree to the proposed change and the risk that the employer may terminate their employment on its current terms. Afford the employee the chance to make representations.
  • Consider any representations made by the employees.
  • Send written notice of termination of employment:
    • If collective consultation has commenced, ensure that this has been concluded before serving notice of termination. Where between 20 and 99 employees are affected by the proposed change, dismissals cannot take effect until 30 days have elapsed from the start of consultation. Where 100 or more employees are affected by the proposed change, the dismissals cannot take effect until 45 days have elapsed from the start of the consultation.
    • Make an offer of re-engagement on the new terms. State that the new terms will take effect on the expiry of the notice period, provided that the employee gives their written agreement to the new terms by a specific date (before the expiry of the notice period).
    • Offer employees a right of appeal against the decision to terminate the original contract.
  • Hold appeal meeting if the employee invokes right of appeal. Inform employees that they may be accompanied at this meeting.
  • Write to employee confirming outcome of appeal and that this is a final decision.

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