Our thoughts on the world of employment law - and beyond.

Changes to employment contracts post St Mary’s: can you change an employment contract?

Seeking to vary an employee’s contract can involve technical employment law issues and requires careful management especially if the changes are contentious.  Where they are not contentious (pay increase or promotion spring to mind) then the changes will normally happen by mutual consent and contracts will be updated without much legal or practical difficulty.

In some cases (for example a job description or job title), an employer might be able to interpret the existing terms of a contract in a broad manner and without the need to vary the terms.  In the event of a dispute over interpretation of a contract, Courts generally seek to determine the intention of the parties at the time of entering the contract and any ambiguity is generally construed against the party seeking to rely on it.  If the wording of an employer’s policy in a handbook is in dispute, check whether it even forms part of the contract.  You will not need consent to amend policies that are not part of a contract unless otherwise agreed (for example with a Union).   

Sometimes employment contracts contain ‘flexibility clauses’.  These will either be specific or general. Specific flexibility clauses usually exist in relation to particular issues – eg, where the employee works, what they do and the hours they work.  Employers usually use these clauses to reserve the right to change the contract in certain limited ways without reference to the employee.  The law has developed in two ways to restrict employers’ reliance on these clauses.  First, flexibility clauses are given a restrictive interpretation by Courts;  secondly, the implied terms of a contract may curtail the operation of an express flexibility clause – and statutory considerations may kick in, for example around discrimination.  Some contracts will purport to give employers a general right to make changes to any term of a contract.  It is unlikely that an employer will be able to rely on such a clauses if the changes are to an employee’s detriment. 

In a recent EAT case of Hart v St Mary's School (Colchester) Ltd, a school attempted to rely on a flexibility clause to require a part-time teacher to spread her hours over five days rather than three. The new hours were imposed in reliance on a contractual provision which required the teacher to work at such times as necessary, in the reasonable opinion of the headteacher, for the proper performance of her duties. There was a further clause which stated that, for part-time staff, working hours may be 'subject to variation, depending upon the requirements of the school timetable'.   Despite the wording in her contract, the EAT held that imposing this change was a repudiatory breach of the teacher's contract, and that this clause was not sufficiently clear or unambiguous to allow for unilateral variation to her contract.

So, in cases where agreement cannot be reached or where a flexibility clause or interpretation of a contract cannot be relied upon, the options (each of which involves risk of claim) are broadly as follows:

1          Seek to agree the changes and dismiss those who refuse to agree (leaving an employer open to an unfair dismissal claim).  Redundancy or ‘some other substantial reason (SOSR)’ are likely to be the relevant fair reasons to defending any such claim.   This is never likely to be attractive in employee relations terms and employers understandably tend to treat it as a last resort, but it is a viable option in legal terms provided it is carried out with sufficient care and consultation;

2          Terminate the existing contract and offer re-engagement on new terms (also leaving an employer open to an unfair dismissal claim but the offer of reengagement may mitigate some of the losses). 

3          Impose the changes and leave it to the employee to respond (which leaves an employer open to a constructive dismissal claim).   The employee’s conduct may establish implied agreement to the change. 

In order to minimise the risk of a successful claim, the employer must fully consult with the employee affected to ensure that any other options are fully explored.  Failure to do this will almost certainly result in an adverse finding.

An employee could respond in any of the following ways:

1          By working under the new terms under protest and bringing a claim for breach of contract or unlawful deductions from wages ('standing and suing');

2          If the breach is a fundamental breach going to the root of the contract, by accepting the breach, resigning and bringing a claim for constructive unfair dismissal; or

3          If possible, by refusing to work under the new terms.

Where collective agreements are in place the position may be slightly different especially around agreeing changes which would almost certainly be done with the Union involved rather than on an individual basis; the specific arrangements with any relevant Unions should be checked. 


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