Changing Contracts

It is a long held principle that the terms of a contract cannot be changed unless all of the parties to that contract, are in agreement. However, where contracts of employment are concerned, this principle may not hold true. Any employer wishing to change the terms of the contracts it has with its employees, may also be able to do so with or without the agreement of the individual employee.

An employer can always change the terms of a contract of employment if the employee agrees to those changes being made.  Generally the employee's agreement is obtained by use of a financial inducement or an increase in other benefits.  In cases of this nature, the agreement of the employee should be obtained and noted in writing.

Alternatively an employer may change the terms of a contract of employment, without the employees consent.  In doing so the employer may be committing a fundemental breach of the contract of employment, allowing the employee to bring a complaint to the Employment Tribunal of constructive unfair dismissal or even discrimination, if the actions of the employer are in anyway discriminatory.  If, however, the employee takes no such action, and continues to work as before under the new terms of employment, then it is likely that the employee will be viewed as accepting the changes that have been made.

In situations where the employee does not accept the changes that have been made by the employer, the employer has a third option available to them.  The employer may dismiss those employees, and then re-engage them under the new terms of employment.  This action will generally amount to a dismissal of the employee, allowing the employee to claim that they have been unfairly dismissed.  However, the employer may have a defence to such a claim, if the employer can establish that the changes were for a genuine business reason, that proper notice was given and that the changes were reasonable in the circumstances.  If the employer can demonstrate that these elements exist, then any dismissal of the employee, will be considered as a fair dismissal.

Any employees that accept the offer of re-engagement, will of course not be entitled to bring claims of unfair dismissal against their employers.

It will be noted that of the three options open to the employer, the option of least resistance is making the changes to the contract of employment with the agreement of employees.  This is generally easily obtained by offering a relatively modest inducement such as a small bonus payment.  In situations where the body of employees are split between accepting or rejecting any changes, the employer can adopt more than one approach.

Where an employee is contemplating making changes to a contract of employment, careful consideration should be given as to the nature of the proposed changes, and their likely affect on the workforce.  Even relatively minor changes, can have a major effect on the productivity and behaviour of the workforce.

Any employers considering making changes to their existing contracts of employment should seek expert legal advice.  For more information please contact Pengillys LLP Specialist Employment Team on 01305 768888.