In my previous piece I wrote about Redundancy Planning.
The aim being to help organisations, who were having to reduce headcount, with some practical guidance on how to manage that process.
In this piece I want to look at how we should go about changing terms and conditions if, for example, we want to ask employees to work fewer hours on reduced pay or to change their pattern of work.
This may be in conjunction with the tapering furlough scheme but is more likely to apply when that scheme is coming to an end and we need to plan for permanent changes to contracts of employment.
If we want to change a contract of employment, how do we do it?
We have 2 options:
- Impose the change unilaterally;
- Try to agree the change with affected employees. If they won’t agree, terminate their employment.
Two initial points
If want to change terms and conditions after a TUPE transfer there are additional issues for us to consider.
Namely, can we validly make the required changes, even by agreement, if the employees have come across to us via TUPE?
In short, we can make binding changes in certain circumstances and, in any event, we can make changes (regardless of TUPE) if there is a contractual right to do so.
If we may have to dismiss 20 or more people at one location because they refuse to agree to proposed changes we must follow a collective consultation process.
Normally, we will wait to see how many refuse before starting what is a pretty onerous process.
It is rare that 20 or more employees at one location will refuse to agree to an employer’s proposals for change.
Look at the contract of employment.
Does it give us the right to make the changes?
Clauses that allow us to make changes fall into two categories:
- General Flexibility Clauses
These clauses give us a general, quite vague, power to vary the terms of the contract.
Employers read this type of clause as “I can do anything I want”.
Employment Tribunals read this type of clause as “You can do very little because the wording is not specific enough”.
This type of clause will only allow us to make minor changes unilaterally.
For example, changing our health care provider where there is no reduction in benefits.
- Specific Flexibility Clauses
These clauses give us a right to make specific changes.
For example, the right to change hours of work in any day or week and to change pay commensurately.
An important point to note.
These clauses will be interpreted very strictly by the Employment Tribunals and Courts. You will only be able to rely on such a clause if it covers the specific change you want to make
Procedure to follow if we have a Specific Flexibility Clause
If we can rely on the clause because it is very specific we still need to follow a consultation process before we impose the change.
Why do we need to consult if we have a clause in the contract which permits us to impose the change without agreement?
The implied term of mutual trust and confidence.
If we just impose the change, without consultation, that will be a breach of that term.
It could lead to the employee resigning and bringing a claim of constructive unfair dismissal
So, let’s consult, and try to reach agreement
What does consultation procedure involve?
At least one meeting with the employee.
We explain the reasons for the change.
Listen to their concerns and try to answer their questions.
Consider whether there are any ways in which we can help them adjust to the change.
For example, if hours of work and pay are to be reduced, do we need to give them some time to adjust their childcare arrangements, look for other work to fill the lost hours etc?
If we can agree the change, write to employees to confirm the new arrangements.
They should sign and return a copy of the letter.
We might want to sign the letter as a Deed to make doubly sure it’s binding.
If we can’t reach agreement and we have a specific clause in the contract and we are confident that the clause covers the change we want to make, we can impose the change unilaterally.
Write to the employee to confirm the changes and the date on which they take effect and refer to the specific clause in the contract on which we are relying.
Procedure to follow if we do not have a Specific Flexibility Clause
We go through the same consultation process as outlined above.
Try to reach agreement.
What if employees won’t agree?
Can we just impose the change anyway?
That would be a bad idea.
If we can’t reach agreement and we do not have the right to impose the change, and yet we do impose the change, that will be a breach of contract
The employee may resign and claim constructive unfair dismissal
Alternatively, they may work under the new terms, under protest, and bring a claim for unlawful deductions from wages (or breach of contract in the Courts) if the change means they are worse off financially.
The better option, although still not ideal, is to terminate the employment of employees who will not agree to the changes.
We will have to follow a process similar to a disciplinary process and, when we meet them, explain that most/all people have now agreed and we are giving them one last chance to change their mind.
If they still refuse to agree to the changes, we will write to terminate their employment and give them the right to an appeal.
They may bring a claim of unfair dismissal
We should be able to defeat any such claim if we have followed a proper consultation and then termination process, and if we have sound reasons for needing to make the changes
Practical tips for agreeing the change
- It’s a selling exercise. Choose the right person to deal with it.
- Incentives. Can we offer any? Anything at all we can offer will make our proposals more palatable.
- Remember, the stronger the reasons for needing to make the changes, the more likely it is that people will agree.
Normally, people will be willing to agree changes, if the alternative is redundancy.
- Give people time to get used to the idea. Give them plenty of notice.
- Keep on top of the process. Don’t let it drift.
- Plan it properly before you start including preparing letters and notes for meetings.