Imposing new terms of employment on employees can arise in a variety of circumstances. The most obvious examples of one that would be uncontroversial and not likely to lead to a challenge would be a pay rise. For more controversial changes though, what should you consider?
Do I have the contractual right to vary the term?
A change which is authorised by the contract is not strictly speaking a variation of the contract, so first of all you should check the employment contract to see what flexibility it contains. It may have a general variation clause or right to make variations of specific clauses already built in and which may allow you to make changes without these having to be discussed or agreed with the employees in advance.
However, the existence of a clause allowing for a variation to be made should still be considered carefully as it doesn’t necessarily give you carte blanche to simply make whatever change you like. Implied terms (particularly the implied term of mutual trust and confidence and of good faith) restrict how employers can operate flexibility clauses. Tribunals will generally interpret these implied terms as meaning that express rights to vary have to be exercised reasonably and with regard to the employee’s personal circumstances.
Widely drafted variation clauses that are intended to capture all and every change (e.g., “we reserve the right to vary this contract on 13 weeks’ notice”) should not be relied on for any contractual changes, particularly any changes that are detrimental to the employee.
Some specific clauses may have a limited flexibility, such as a clause entitling you to require an employee to relocate to a different office. Acting on the basis of a clause like this should be treated with care and not simply imposed on the employee. If you were to do that, then not only might the employee be entitled to resign and claim constructive unfair dismissal, but you might also face a claim of, for instance, indirect sex discrimination if the employee is female and unable to relocate due to child-care commitments.
If an employer is relying on a clause or term in a staff handbook or collective agreement to impose a change, it should ensure that the relevant term is sufficiently clear and incorporated into the employee’s employment contract.
Can I unilaterally impose a contractual change where there isn’t an express term?
Doing this is an option, but a risky one. You could unilaterally impose a change and wait for the employee’s response. If the employee continues to work in accordance with the changed term without objection, the change may well have been impliedly accepted by the lack of any objection to it.
However, the employee could instead treat the imposition as a breach of contract and refuse to accept it. The nature of the change is the most decisive factor in relation to the level of risk involved in imposing it or not. As an example, if the change is positive (such as, an employee is enrolled in a new permanent health insurance scheme) it will seldom be challenged, and the change will be implied that it is accepted. However, if the nature of the change is a detriment to employees, there is a risk of consequences by the affected employees. The most inflammatory changes are usually related to hours of work, pay and benefits, or status and seniority.
What claims could an employee bring if I have imposed a change which is to their detriment?
If the employee considers that the change you have imposed amounts to a fundamental breach going to the root of the contract, they may resign and bring a claim for constructive unfair dismissal (if they have the requisite service to bring such a claim). They should not wait too long after the change has been imposed to do this though, as they may be treated as having affirmed the new contract.
Further, the employee could bring a breach of contract claim in the civil courts if they are still in employment, or either in civil courts or in the employment tribunal if the employment has terminated.
If the change is in relation to pay, such as basic salary, bonus or commission, an employee may also seek to bring a claim for unlawful deduction of wages. They can do this during or after employment, keeping in line with the tribunal time limits.
Are there other consequences of imposing detrimental changes?
In addition to the various claims set out above, imposing a change that is detrimental could also affect relations between you and individual employees affected by the change as well as damage your industrial relations if you have any recognised trade unions.
It could also lead to employees bringing grievances, which would then need handling in the usual way, and may also affect productivity and morale in the workplace.
Imposing a change sounds risky. Is there anything else I should consider instead?
Yes, it is risky, particularly for changes which are clearly to the detriment of employees. Seeking to introduce the change by reaching agreement with the employees (either individually or with union or elected representatives) is a much better option. Failing that, if you really need to have the change in place, you should weigh up the risks outlined above against the risks of proceeding with dismissal and reengagement. We will be looking at these in the coming weeks.