Given the economic uncertainty the country is facing, it is not surprising that more of our employer clients are approaching us than at any time we can recall in the past few years for assistance with changing employees’ terms and conditions of employment.
These may be specific changes, such as to hours or remuneration packages, or more general amendments to ensure that employee contracts are appropriate to the size or structure of the business following any major organisational changes, or indeed future-proofed against challenging times.
In the event that such changes need to be made, then unless the change proposed is one that can be made in accordance with an express clause in the employees’ contracts, there are a number of questions employers should ask themselves in order to: (a) comply with their legal obligations; and (b) maintain a healthy relationship with the workforce. We look at some of the main points about who needs to be consulted with below.
How do we tell affected employees about a proposed change to terms and conditions?
The first stage is usually to make a presentation to all employees who may be affected by the proposed change. We recommend doing this as early as possible to ensure that affected employees are provided with adequate warning of the proposed change.
This presentation would generally include:
- details of the proposed change including drawing out any potential benefits for employees;
- the business reasons for making the proposed change so that employees understand the company’s position and the likely implications if those changes are not implemented;
- summary information about any alternatives that have been considered to the proposed change why they have been discounted;
- the proposed timing for implementing the change, including timeframes for any suggestions that employees may have for the company to consider as an alternative to the proposed change;
- a copy of the proposed revised terms of employment; and
- inviting any questions from affected employees on the proposed new arrangement.
You should ensure that employees are given time to consider the proposed change and revised terms, ahead of agreeing (or not) to the new terms and conditions. You should also make it clear that a consultation process may need to be undertaken if some affected employees do not agree to the proposed change.
Do we have to individually consult with affected employees?
If the change that you are making is one that is clearly allowed by an express term of the contract, then you don’t need to consult with employees and may decide to proceed by simply informing the employee about the change. However, even if the change is allowed by an express term of the employment contract, where the change will be detrimental to the employee (and in this context, ‘detrimental’ should be considered through the eyes of the employee concerned), it is sensible to consult with them about the change rather than simply imposing it.
When should we consult employees?
If any employees affected by a change disagree with it after it has been proposed, the employer will be required to consult with those employees individually about the proposed change. Failing to do this and instead seeking to impose the contractual change would risk giving rise to allegations of breach of contract, employee grievances and possibly also to employee resignations and claims of constructive unfair dismissal.
Individual consultation is straightforward where no collective consultation needs to take place, as the employees can be consulted with separately about the proposed change with a view to seeking their agreement or where this has not been possible the changes are affected by other means.
Even where collective consultation is required (which we will be addressing in a forthcoming article), then unless you have collective bargaining arrangements with a recognised trade union and provisions in its employment contracts that employees are deemed to accept any employment terms collectively agreed between you and the trade union, you will still need to consult employees individually about the change.
This is particularly important where you may ultimately decide that you need to secure the contractual change by way of a ‘dismissal and rehire’ process. This is because if any unfair dismissal claims arise following a dismissal in that situation you will need to be able to show that you followed a thorough and fair process before reaching the decision to give notice of termination of employment (and offer of reemployment) to the employee concerned.
You should look to meet with any dissenting employees at least twice to expressly seek their agreement to the change – the first meeting to explain the situation and take any questions, with the second meeting to listen to, consider and respond to any representation the employee has once they have had time to reflect on the proposed change. Only after this would it be sensible to begin considering employment-ending options and it is best not to rush the process if it can at all be avoided.
Effective consultation is important (obviously) from an employee engagement perspective, although the main purpose of it is to try to obtain the employee’s agreement to the change. However, consulting effectively is also important to reduce the risk of successful unfair dismissal claims by any employees who are not prepared to accept the change. Not only does an employer need to have a potentially fair reason to dismiss (a dismissal because of a need to change terms and conditions will usually be a dismissal for ‘some other substantial reason’ or ‘SOSR’), it will also need to follow a fair process in doing so. A failure on either front could result in a successful claim for unfair dismissal and an order to pay compensation to the individual concerned.
The minimum generally required to constitute a fair SOSR process is that the employee should be made aware in advance of any meeting that they may be dismissed and should be allowed to make representations, which is essentially the core purpose of consultation. It is important to remember that this should not be a ‘tick-box’ exercise, but a genuine effort at a discourse with a view to reaching an agreement.
Do we have to collectively consult as well?
In short, maybe.
Not if the proposed change affects fewer than 20 employees at any particular establishment.
Where the proposed change does affect more than 20 employees at one establishment, it’s also not necessary if after making your initial announcement to employees and initial meeting with them it becomes clear that all or most of the employees concerned are likely to be willing to accept the change (i.e. fewer than 20 will object).
However, collective consultation is necessary if your proposed change to employment contracts affects more than 20 employees at the same establishment and if, after making your initial announcement to employees, it becomes clear that more than 20 are not prepared to agree to the change.
It’s also needed if you have collective bargaining arrangements in place with any trade union.
It is key to consider at an early stage whether this might apply, as collective consultation is held through representatives who may need to be elected, which takes time and should therefore be accounted for when planning the timing of any proposed changes.
Our view is that if your proposed contractual change affects more than 20 employees, you should plan from the outset that collective consultation could be needed, and factor this into your timeframes.
Failure to collectively consult when the duty arises can result in protective awards being made to employees (up to 90 days’ actual pay for each affected employee), as well as possible criminal sanctions for failing to notify the Secretary of State, where applicable.
Therefore, if notices of termination may need to be issued to at least 20 employees, you should consider making arrangements for collective consultation, as well as notifying the Secretary of State at the start of the process.
It is important to bear in mind that even where there is a requirement to collectively consult, you still need to consult with employees individually.
What happens if the affected employees are members of a trade union (or other employee representative body)?
If there is a collective agreement which affects the employees’ contracts, the relevant collective bargaining process must be followed. As tempting as it may be, in this scenario you should not make offers to individual employees seeking their agreement to new employment contract terms until the collective bargaining process has been completely exhausted (including any dispute resolution process in the collective agreement).
While the collective bargaining process is still ongoing, offering packages to individual employees may be seen as an inducement which, if accepted, would cause the ‘prohibited result’ of the changes being agreed otherwise than in accordance with the collective agreement, and interfering with the rights of union members to have their terms determined through representatives. This could give rise to a Tribunal claim of ‘unlawful inducement’ under the Trade Union and Labour Relations (Consolidation) Act 1992.
Where a claim is successfully brought in relation to the above, the employment tribunal must award a mandatory award (currently of £4,554) to each employee who received an unlawful inducement. This could easily become a very large sum.