Varying the terms of an Employment contract

Finding work enjoyable has numerous benefits for both the employer and employee and when achieved often forms the basis for a long-term relationship. Naturally over the course of this relationship there may be a need to amend the contractual terms that underpin it. This article therefore provides a brief overview of the possible methods of varying the terms of an employment contract and some key points to consider:

1. By Express agreement

Throughout the lifespan of the employment relationship there may be various changes requested by either party. The employee might want to start earlier or the employer might want to change the location of the work. These types of changes are best implemented by discussion and agreement, sometimes through a consultation process depending on the scale of the changes. The amendments agreed should be expressly confirmed in writing, either by issuing a new contract or a letter confirming the amendments agreed.

Where consultation is required, employers should explain their reasons behind making changes, listen to and consider alternative ideas from employees, and actively work to resolve concerns. Additional requirements apply where bigger numbers of employees are affected (see collective consultation below).

2. Authorised changes

There may be specific rights reserved in the contract of employment for the employer to make small adjustments should they be required. This is often referred to as a ‘variation’ or ‘flexibility’ clause. Employers are reminded to check what can be changed, whether notice is required to be given to employees, and whether a specific process needs to be followed.
This would still be subject to a requirement to act reasonably, so will often still require consultation and consent (see comments above).

3. Implied agreement

Some changes are obviously going to be accepted by the employee, such as pay rises, and these variations can be achieved by unilaterally imposing the change and relying on the employee’s conduct in accepting the updated terms to establish implied agreement to variation.
This should not be used where the change is considered detrimental as it could give rise to a fundamental breach of contract entitling the employee to resign and claim constructive unfair dismissal.

4. Terminating the original contract and offering re-employment

Where a number of changes or updates are required, it can be necessary to issue completely new contractual terms. Employers should seek agreement to these changes in the first instance through a consultation process.
If agreement cannot be reached and the changes are reasonable, it may be possible for the employers to serve notice to terminate the employee’s employment and offer re-employment immediately on the new terms to take effect on expiry of the notice period.

It is important that this step is taken only after consultation to limit the risk of unfair dismissal claims because where employees do not accept the new terms, their employment would end on expiry of their notice period and the reason for their dismissal would be “Some Other Substantial Reason”. This should mean an unfair dismissal claim would be unlikely to succeed, providing the process and changes were reasonable, although this can be further avoided by seeking agreement to the changes or agreeing compromises where possible.

Collective consultation

Please be aware that if you are looking at making changes to a large workforce and potentially 20 or more employees could be dismissed and re-hired, then the additional collective consultation requirements should be followed, which may involve employee or trade union representatives. We would recommend you seek specific advice in these circumstances.

Confirming the changes of an employment contract

In all cases, once the changes have been agreed or authorized, the employer must update the terms of the contract and write to their employees within a month to highlight changes made. This also applies to changes made to terms and conditions that are not contained in the contract, for example in relation to sick leave, and employees should be told where to find the changes.
Employers should also keep in mind that employment law changes regularly and there are often new statutory requirements for employment contracts. For example, there are a number of new requirements for the contents of employment contracts since 6 April 2020 which you can find out here.

If you are considering changing the terms of your employment contracts on an individual or collective basis, it is important to be aware of the issues highlighted and seek advice where necessary. If you would like to discuss what options are available for you and your business, please contact our employment partner Julie Taylor by emailing her or by calling the employment team on 01635 508112.

Our Varying the terms of an Employment contract Team

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