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Feature – Changing employees’ contracts without the risk of a claim

It is always worth reviewing employment contracts on an annual basis to ensure compliance with current legislation, 2013 in particular has seen a number of unprecedented changes to employment law so now would be a good time for businesses to carry out a review.

Care does need to be taken when changing terms and conditions however, and it is worth noting that the law prevents employers from making unilateral variations to employment contracts without the consent of their employees.

If a business needed to impose a reduction in pay, for example, without their employees’ consent, they could face claims for constructive unfair dismissal (based on employees having the relevant qualifying period of employment) or the affected employees could continue working ‘under protest’ and pursue a claim for unlawful deductions from their wages.

Businesses can protect themselves from the risk of a claim being made against them by having the appropriate consultation and open communication with employees. Explaining the current position of the business and the need to change their terms in order to meet genuine business needs can go a long way in avoiding Tribunal claims.

Employers may also wish to emphasise that they have undertaken a review of all contracts of employment having regard to the changes in employment law since the contracts were first drafted. Clearly, if employees can be persuaded to agree to the proposed changes, they are less likely to feel alienated and would have no grounds to pursue a claim.

Where the changes may be viewed as being detrimental to the employees of a business, certain benefits can be introduced (for example an increase in holiday entitlement) as an incentive for them to agree to these. This can be particularly important where new restrictive covenants are introduced, as the introduction of new post termination restrictions may be unenforceable if they are not accompanied by new benefits or increased remuneration.

In the current climate, employees may be more likely to agree to changes such as a reduction in pay and other conditions if the realistic alternative is redundancy. If employees are reluctant to agree to amendments in their terms and conditions, businesses would have the option of terminating their existing contracts of employment (by giving the appropriate contractual periods of notice) and then offering continued employment on the basis of the new contractual terms.

Clearly however, there is a risk in taking such a course of action, as employees may be able to pursue claims for unfair dismissal arising out of the termination of their old contracts, even if they continue in their roles pursuant to the new terms.

In order to defend such claims, an employer would have to demonstrate genuine business needs for making the significant changes to terms and conditions and show that it had engaged in genuine and meaningful consultations with staff, carefully balancing the advantages to the business with the disadvantages to employees.

By following the correct procedure in managing these situations, business owners have a better chance of engaging employees and avoiding alienation. This is certainly a safer option than unilaterally imposing new terms or a pay cut and hoping for the best.

Ends

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