Nobody likes change. However, sometimes it is unavoidable; particularly in the context of the employment relationship, where it may become necessary over time to update employees’ contracts – for example, to reflect changes to employment benefits offered by the employer. We have the following tips to try and ensure the process of implementing such changes runs as smoothly as possible:
1. Contractual flexibility? – the first port of call should be to check employees’ contracts of employment to establish whether there is any contractual flexibility in relation to the proposed changes (for example, a contractual mobility clause). If so, it may be that further specific consent will not be required from employees. However, we would recommend proceeding with caution even if there is flexibility – such a contractual right would still be restrictively interpreted and would need to apply specifically to the proposed change, which in the majority of instances may be unlikely to be the case. The underlying principle to bear in mind is that an employer should not unilaterally change terms and conditions of employment, as they are likely to be at risk of claims for breach of contract and/or constructive dismissal.
2. The discretionary debate – many employers hold the mistaken belief that because a benefit is labelled “discretionary” (most often in the context of bonus schemes), employees have no contractual right to that benefit and the employer can therefore remove it without consultation or consent. In actual fact, if the benefit has been provided as a matter of course during employment, employees may well be in a position to argue that, as a result of custom and practice, they have a contractual right to such benefit. Alternatively, even if there is no express or implied contractual right to the benefit, employers should not exercise their discretion perversely.
3. Communication – employers would be well advised to spark off the process of change by holding a group meeting with the affected employees to fully explain the reasons behind the changes. It would also be a good idea to follow up such a meeting with a written explanation of the proposed changes. Ensure that absent employees (including maternity leavers or long-term sick employees) also receive notification of the proposed changes. Employees are more likely to appreciate why the changes are necessary and accordingly will be less likely to withhold their consent, if they are kept fully informed. Similarly, employers should consider explaining the alternative to the proposed change to employees, particularly if that would involve removing the benefit in question altogether. If employees are made aware of a less desirable alternative, they may consider the proposed change to be the best of a bad bunch.
4. Consultation – if employees are not prepared to consent to the changes straight away, they should be given the opportunity to put forward their views. This could either be by holding an individual meeting with each employee (which they may specifically request in any event), or by asking employees to set out any issues they have in writing. You may find that employees put forward alternative suggestions to the proposed changes which are also acceptable to the company. In any event, if the employees are actively involved in the process, it is more likely that their consent will be forthcoming.
5. Timing – the timing for implementation of changes to terms and conditions can often be crucial in securing consent. Employees are likely to be far more amenable to proposed changes if they are offered some form of “sweetener” at the same time, for example, where the changes are implemented around pay review time, or new bonus arrangements are introduced at the same time. A further factor to consider is whether it is possible to space out the changes, rather than impose them in one batch. If more significant changes are implemented under transitional arrangements, this may be more acceptable to employees and less unsettling than sudden change.
6. Consent – unless the changes are particularly minor (for example, minor updates to an employee handbook, where the handbook provides for flexibility in relation to such changes), or are truly discretionary, it would be advisable to seek express written consent to the majority of changes. If employees refuse to consent, but continue to work for the company over an extended period of time, it may be possible to argue that they are “deemed” to have accepted the new terms and conditions. However, this is a risky route and one to avoid where possible – there is no set time which needs to have passed before an employee would be deemed to have accepted; and the courts have held that in certain circumstances, an employee could not be deemed to have accepted a specific term or amendment until it became relevant. By way of illustration, reducing entitlements under a sick pay scheme would not become relevant to an employee unless they became sick.
7. Last resort – as a final option, if consent to the changes is not forthcoming following a process of communication and consultation, employers could consider dismissing the employees and re-engaging them on the new terms and conditions. A clear issue with this option is the fact that it would amount to a dismissal for the purposes of employment legislation and employers would therefore need to demonstrate both a fair reason for the dismissal (most likely to be “some other substantial reason” where there are cogent business reasons for implementing the changes) and follow a fair procedure (which, as a minimum, would include the statutory dismissal procedures), in order to minimise the risk of unfair dismissal claims. A further reason to tread carefully arises if there are more than 20 employees who would possibly be dismissed and re-engaged, because the collective redundancy consultation obligations may apply (along with the obligation to notify the DTI). If this were to become relevant, you should consider seeking advice to assist you with steering through the collective consultation minefield.