Changes to Employment Contracts

An employment contract is a legally-binding agreement between an employer and an employee. It can be either written or verbal and describes the tasks that the individual is expected to perform, how they will carry them out and the rewards (in terms of money and other benefits) that they will receive in return.

These details are often referred to as a worker’s pay and conditions. Since April 2020, employees and workers must be provided with a written statement of particulars of employment (often called a ‘section 1 statement’) before their employment starts.

An employment contract usually comes into force as soon as an individual starts work for the employer – and can apply even sooner in some situations.

An employment contract may include:

Express terms – these are key aspects of the contract and refer to an employee’s salary and working hours.

Statutory terms – these are requirements that are part of employment law (e.g. entitlement to the national minimum wage) and apply even if they are not specifically mentioned in the employment contract.

Implied terms ­­– these are terms which may not be explicitly written in the contract but which will apply nonetheless. It includes terms implied by statute (e.g., the right to be paid at least the National Minimum Wage) and terms implied by common law (e.g., a duty to obey lawful and reasonable orders). Any implied terms which are particularly important to the employer (such as the implied duty of confidentiality) should be expressly included in the contract so that they can be tailored to the employer’s needs.

Incorporated terms – these are parts of the agreement mentioned in other communication channels (e.g. intranet site) that form part of the contract.

Restrictive covenants ­– these may prohibit an employee from behaving in a certain way, even after they have left the company (e.g. an accountant who leaves a large firm to set up their own practice may be forbidden from carrying out work for clients of his former company for a set period). Restrictive covenants can be open to challenge if they are deemed unreasonable and so it is recommended that employers obtain advice from a solicitor before including them in a contract.

There are a number of circumstances that may prompt an employer to seek to change a worker’s employment contract:

These include:

New terms and conditions: The company may wish to provide new benefits to workers – for example, in terms of maternity and paternity arrangements or an enhanced redundancy scheme – and wish to see these reflected in employment contracts.

Legal obligation: new laws may make it necessary to alter someone’s terms of employment. For example, health and safety legislation may mean that a construction worker now needs to undergo specific training or gain a particular qualification in order to operate a piece of machinery.

Changing nature of the role: most jobs change over time as technological innovations and new working practices are introduced to keep a business competitive. A logistics company, for example, may want an individual to use a new piece of software which will increase the efficiency of its transport fleet.

Reorganisation: in order to remain financially viable, a company may need a worker to carry out new tasks. e.g. a local paper may ask a news reporter to also cover sports fixtures at the weekend. Alternatively, an office worker may be asked to move to a new location following a merger with another company.

Adapting to customer needs: the expectations and requirements of customers change over time and the company may wish to amend employees’ contracts to reflect this. A high street store, for example, may want its staff to work more flexible hours so that it can offer late-night shopping once a week.

We have seen above that an employer may believe they have a valid reason for seeking to change employment contracts.

It is important to remember, however, that a contract of employment (whether written or verbal) is a legally-binding agreement. Any employer wanting to alter that agreement should:

• take expert legal advice before making any decision
• be able to demonstrate that the proposed change is reasonable and necessary
• consult with the worker(s) concerned (either face-to-face or via a trade union or other representative)

We shall look below at the potential risks of an employer not acting in an appropriate way in terms of changing a contract of employment.

Changing an employment contract can have adverse consequences for a company both from a legal perspective and in terms of trust. These include:

Employment tribunal claims

An employee who feels that changes have been imposed on them without their consent may take formal action either over breach of contract or constructive dismissal (if they feel that the proposed amended contract, or the way in which it was imposed on them, makes their position at the firm untenable).

Relationship with employees

A contract of employment is not only a legal agreement; it is also an expression of trust between a company and its workers. Any suggestion that an employer has sought to introduce change without proper consultation is likely to erode this trust. Over time this could result in employees operating to lower standards, harming the business in terms of productivity and profitability.

Absenteeism

Workers who feel they have been unfairly treated may take more sick leave than before – either as a form of retaliation or because they are experiencing high levels of stress as a result of the change. Once again, this is likely to have an impact on the company’s operations and make it more difficult for them to fulfil customers’ requirements on time and to the required standard.

Industrial action

Following on from the above point, disaffected workers may choose to show their opposition to the changes in an overt way by staging strikes and causing serious disruption to the employer’s activities. Such action may be either formally organised by a trade union or an example of a so-called wildcat strike where a group of workers decide to protest of their own accord.

Increased staff turnover

Rather than staying at the company and protesting about the contract changes, workers may in time opt simply to find alternative employment. The increased staff turnover which results can make it difficult for a company to operate efficiently as more time, money and effort has to be dedicated to recruitment and training, while new colleagues may take some time to operate as productively as those they have replaced.

Accusations of discrimination

All organisations are legally obliged to provide equality in the workplace. A company could be accused of ignoring its responsibility to promote equal opportunities if the changes it introduces disproportionately impact  a particular sector of its workforce. For example, should an amended contract of employment oblige staff to work outside of normal hours at short notice, those with care commitments could struggle to cope with the new arrangements.

Reputational damage

All of the above points, particularly when combined, have the potential to affect the way a company is perceived externally. For example, an employer which is seen as treating its employees unfairly, experiences frequent industrial action, receives negative publicity regarding employment tribunal verdicts and struggles to fulfil customer orders due to staff shortages is likely to have a poor reputation. This in turn will make it even more difficult to attract good staff and build up a stable customer base. The long-term damage caused by this is likely to offset any short-term advantages that resulted from introducing the changes to contracts.

We have seen above that any attempt to arbitrarily change employment contracts is likely to have serious repercussions – financially, operationally and reputationally.

Any employer looking to amend workers’ terms of employment must act with great sensitivity and understanding.

By acting in an appropriate manner, the company increases the chances of the employees agreeing to the changes.

Should the issue still result in an employment tribunal, the employer will have a stronger defence if they can show that they have acted reasonably.

Take legal advice

Ideally the company will have taken legal advice long before the need to alter contracts arose – and have a robust procedure in place on how to engage with workers.

If this is not the case, the employer should seek guidance from an employment law solicitor as soon as possible.

Consult with workers

It is vital that the employer consults with workers (and their trade union or other representative if they have one) before any decision is taken.

The company should explain:

• the nature of the proposed changes
• the reason they are taking place
• when they will take place
• how the organisation can reduce any inconvenience that they may cause

Be prepared to compromise

As in any negotiation, some give and take on both sides might be required. Employees are likely to be more sympathetic to a proposed change if the business is offering something in return. In the earlier example of the newspaper reporter being asked to work at the weekend, his employer might be able to offer extra payment or time off in the week as compensation.

Employers should be prepared to listen to individuals’ concerns and explore ways of making the new arrangements work for everyone. The proposed changes are likely to get a better reception from employees if the company has been proactive in identifying ways it can minimise any problems.

Give plenty of notice

It is important to give workers as much notice as possible of the proposed changes so that they can make any necessary arrangements.

What is considered reasonable notice will vary from case to case. Someone with childcare responsibilities, for example, may need a considerable amount of time to put plans in place if they are going to have to work flexible hours in the future.

Conversely, an individual who is being asked to work from a new location closer to their home may find it easier to make the adjustment and not require so much notice.

Changing terms and conditions of employment is an issue that needs to be approached with great care and sensitivity.

Handled correctly, such a change could provide employees with improved working arrangements, enable the company to take advantage of technical innovations and ensure it remains competitive and sustainable in an evolving marketplace.

An employer who acts inappropriately in terms of amending contracts of employment, however, may create an atmosphere of mistrust and resentment, a working environment typified by low productivity and high staff turnover, and a poor reputation among potential employees and customers alike.

It is vital, therefore, to obtain professional advice before making any attempt to amend employment contracts.

At Wilson Browne, our team of employment solicitors have a wealth of experience in advising organisations over all matters surrounding changes to