Changing Contracts of Employment
Businesses operate in an environment where market conditions can change rapidly and where technology can transform working practices. The difficulty for some businesses is that they are stuck with contracts of employment that no longer reflect their business needs. For example, the business may need to make changes to working hours, working practices, job descriptions or remuneration packages. In these circumstances, it is important for Managers and Human Resources Personnel to have a good understanding of the law relating to changing contracts of employment.
The starting point is that some working practices can be changed without the consent of employees. This includes all matters falling within the general description of work rules. For example, employers are generally entitled to introduce new technology, change working methods, bring in new disciplinary rules and introduce policies such as a complete ban on smoking.
Even where the change relates to a more fundamental matter, the contracts of employment may themselves include flexibility clauses. A well-drafted contract of employment will specifically provide for flexibility relating to working hours, job descriptions and place of work. Provided that the employer operates these flexibility clauses reasonably, changes to contracts can be brought about with or without consent.
The most difficult situation is where there are no adequate flexibility clauses. In these situations, the employer must first attempt to make changes by consent. Any change can be made to a contract of employment provided that the employee agrees and it is perfectly ok for the employer to offer financial incentives to agree more flexible contracts. However, at the end of the day, employees cannot be compelled to accept changes to their contract. An employee can simply insist that their contract is honoured and compel the employer to abide by the terms of the contract.
In the above situation, the only legal alternative is for the employer to formally terminate the contract of employment of the employee and offer a new contract on different terms. The employee is not obliged to accept the new contract and there is a serious risk that they will leave and bring a claim for unfair dismissal. However, it is important to appreciate that not all claims for unfair dismissal will succeed.
The Employment Tribunal accepts that changes to contracts (without consent) are some times required for sound good business reasons. Provided that the employer has attempted to obtain consent, and has followed a fair process of consultation with employees, there is a reasonable prospect of persuading an Employment Tribunal that any subsequent dismissal was fair.
In practice, of course, business should not embark upon making fundamental changes to contracts without first obtaining detailed legal advice and assistance in each individual case. However, the general point is that businesses do not need to feel that they are stuck forever with out of date contracts of employment that do not reflect the real needs of the business.
October 2008
This article gives a general overview only and the legal position at the time of writing this article. It cannot be relied upon in any particular case. Specific legal advice must always be considered to include consideration as to whether the legal position contained in this article has changed since going to print. For further information and advice, please contact Paul Archer or Lauren Harkin on 01793 527141 or alternatively by email on Paul.Archer@lemon-co.co.uk or Lauren.Harkin@lemon-co.co.uk.
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