Changing terms of employment

A contract consists of express terms, which have been explicitly agreed between the parties, and terms that are implied, for example through custom and practice or Statute.

A contract can only be amended in accordance with its terms or with the agreement of the parties. Not all changes require the contract to be amended, some are just changes in practice.

Some terms are not part of a contract, for example, benefits that are stated to be non-contractual and “policies”. Although a policy can become contractual through custom and practice.

There may be a contractual right to vary the terms of the contract. However such ‘flexibility clauses’ are given restrictive interpretation by the Courts.

If an employer is proposing to alter an existing contract and there is no contractual right to make such a change, the Employer could:

1. Get the employee’s express agreement to the new terms, preferably in writing.
2. Unilaterally impose the change and rely upon the employee’s conduct to establish their implied agreement to the new terms. However, silence may not be sufficient to indicate implied agreement especially if there is no immediate impact on the employee. Imposing a change may be a breach of contract. The employee could comply with the new terms but work ‘under protest’, or if the change is fundamental, resign and claim constructive dismissal or refuse to work under the new terms.
3. Terminate the existing contract and offer continued employment on the new terms. Although this avoids the risks involved in unilaterally imposing a change on an employee, the employee may still be able to claim:

• Wrongful dismissal, unless the employer gives the appropriate period of notice or Payment in Lieu of Notice;
• Unfair dismissal, unless an employer can establish a potentially fair reason for dismissal and show it acted reasonably in deciding to dismiss the employee for failing to agree to the change.

An employee’s refusal to agree to a change to its contract will usually amount to ‘some other substantial reason for dismissal’ and may be deemed a ‘fair reason’ for dismissal if the employer can show there is a sound business reason for the change and that it acted reasonably by following a fair procedure. An Employment Tribunal will look at factors such as whether the employer consulted with the employees over the change with a view to getting their agreement, the reasons why the employee rejected the change and whether the majority of employees accepted.

Before making changes to an employee’s contract it is important to take professional advice to take steps to avoid an employee being able to make a claim.