Introduction
This article is part two of a two part article. You can read the first here. This second article explains the legal and practical issues which arise when an employer or employee wishes to change (vary) the terms of an employment contract. Article one explains why you might want to change a contract.
Separate principles apply to the variation of terms of employment in connection with transfers of undertakings under the Transfer of Employment (Protection) Regulations (TUPE) 2006. We have two articles on TUPE. Links are at the end of this article.
What is permissible?
Employment contracts may be amended only in accordance with its terms or with the agreement of all parties.
Situations where the contract will not be varied
The contract will not need to be varied if the contract already authorises the change (for example, the contract already contains a flexibility clause), or if the changes comes about which do not vary the contract via an express or implied right of one of the parties.
Changes not authorised by the contract
If the desired change is not authorised by the contract itself, there are three ways to vary the contract of employment:
- express agreement;
- unilaterally imposing the change and relying on the employee's conduct to establish implied agreement;
- terminating the employee's employment and offering re-employment under the new terms.
Express agreement: an express agreement is the simplest and most effective way to vary a contract of employment.
Verbal agreement to the change is sufficient to effect a variation, however, it is always advisable to follow up with written confirmation of the change, especially where the changes relates to a reduction in remuneration. Email is a perfectly adequate method of communication.
Implied agreement: if the employee continues to work within the terms of the varied contract, it could be shown that they accept the new terms. If you are an employee and you oppose the changes, it is important to make clear you are working under protest and that you do not accept the new terms.
If an employee works under the new terms but make clear that they are not accepting the change they do not lose the opportunity to remain in employment and sue you. Unless the employee expressly accepts the employer's repudiation of the employment contract and brings the employment to an end, or the employer's act of imposing the change can be construed as notice of termination of the employment contract, the employment contract will continue and the employer will remain liable for any losses suffered by the employee.
Terminating employment and offering re-engagement on the new terms: where employees refuse to expressly agree to a change, the employer's best option is to terminate the existing contract and offer continued employment under the new terms.
Wrongful dismissal
Provided that you have served due contractual notice on the employee (or bought out the notice period with a payment in lieu of notice), you will not be liable for a wrongful dismissal claim. However, employees may be able to claim constructive dismissal if you state an intention to dismiss on notice at some point in the future.
Unfair dismissal
Even if you offer continuing employment on revised terms, termination of the existing contract will constitute a dismissal in law. Employees will be able to bring unfair dismissal claims in the ordinary way, even if they choose to accept the offer of new employment.
Constructive dismissal
If an employer imposes a change in terms on an employee, the employee may choose to resign and bring a claim for constructive dismissal rather than continue to work under the new terms and bring a claim for breach of contract or unlawful deduction from wages
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