This edition’s FAQ’s address some of the tricky issues that can arise for businesses that want to change their staff’s terms and conditions of employment.
Q1: Can I change my employees’ terms by giving notice?
Q2: Is there a particular time after which it is safe to harmonise terms and conditions following a TUPE transfer?
Q3: Does my business have to collectively consult staff about changing their terms of employment?
Q4: Can I rely on a variation clause in my employees’ contracts to impose the change?
Q5: Do I need to get employees to agree to changes collectively agreed with a union?
Answers
Q1: Can I change my employees’ terms simply by giving notice?
Not normally. Generally, it is only possible to change terms and conditions with the agreement of the affected employees. If you simply give notice of the changes, you will expose your business to risks that disgruntled employees may resign and claim constructive unfair dismissal (they will need 2 years’ service to do this). They may also choose to work “under protest” and perhaps sue you at a later date, or to simply refuse to accept the new terms. Your business will be potentially exposed to financial risk if you adopt this approach as a starting point. If the change you are making is a small one and you have a clause in your contracts stating that you may change terms by giving notice, then there should not be a problem in practice.
Q2: Is there a particular time after which it is safe to change terms and conditions following a TUPE transfer?
No. Changes that are connected to the transfer (such as harmonising terms and conditions) are not enforceable (even if the employees agree to them) whenever they are made, unless:
- The contract of employment expressly permits the variation. This exception is construed narrowly and will only cover changes that are expressly referred to (such as the right to require an employee to work at a different location) rather than general provisions giving the employer the right to make any contractual changes. Any changes that are made must not damage the implied duty of trust and confidence which means they must be reasonable;
-
The change amounts to an ‘economic, technical, or organisational reason’ entailing changes to the workforce (“ETO”) and the employees agree to them. To rely upon this reason for making TUPE related changes, the employer will have to show that the reason necessitated a change in the numbers of the workforce overall (eg redundancies), a change in place of work or a significant change in the job functions or job description of the transferring employees.
In practice, the longer the time between the date of the transfer and the changes, the harder it is for employees to show that the reason for the changes was the transfer, and there have been cases in which changes made 2 years after a transfer were found to be transfer related.
Q3: Does my business have to collectively consult staff about changing their terms of employment?
Only if :-
- You are required to do so, either by a collective agreement or by individual contracts of employment; or
- If you intend to dismiss staff and re-employ them on the new contracts if they will not agree to the changes voluntarily. If this is the case, and this is likely to affect 20 or more employees within a 90 day period at one workplace, you will need to consult with a recognised union or appointed employee representatives. If you do not recognise a union and have no existing employee representatives, you will need to arrange for elections to take place to appoint representatives before you can start consultation. If less than 99 employees are affected, you will need to consult for up to 30 days. This is increased to 45 days where 100 or more employees are affected. Notices of dismissal must not take effect until the end of the minimum period. However, you will also be expected to consult with affected staff individually, once the collective process has been completed and before issuing notices of dismissal.
Q4: Can I rely on a variation clause in my employees’ contracts to impose the change?
You might be able to do so, but this will depend upon the scope of the change you wish to make and whether the written agreement is clear and unambiguous and will allow you to make the specific change.
Generally, the more significant or onerous the change, the more difficult it is to rely on a specific or general variation clause in the contract. So if, for example, your contracts state that you can change any term without agreement, you would not be able to rely on this to reduce pay or benefits, but you could do so to make minor changes such as changing the amount of notice your staff have to give you to book leave.
You are required to maintain the trust and confidence of your employees and this obligation will be implied into their contracts. Even if you appear to have a contractual right to make change, if you impose a change which adversely affects your staff and you do not act reasonably before making it, they could resign and claim constructive unfair dismissal on the basis that you have breached this implied duty (they will need 2 years’ service to do this). Even if, therefore, you have a clearly written clause that expressly permits the change you wish to make, you must make sure that you exercise this reasonably. This might include giving the employee a decent amount of notice, consulting with them, considering their concerns and exploring ways of helping the employee to adapt to the change.
Q5: Do I need to get employees to agree to changes collectively agreed with a union?
If you recognise a union and reach agreement with it, that agreement will bind all employees whose contracts incorporate collective agreements, but not otherwise. Employees do not need to be a union member or even be aware of the collective agreement to be bound by it. That said, it is good practice to advise staff in advance of the negotiations with the union of the issues you are seeking to reach agreement on and to provide details of the agreement reached.
Employment Law Update - February 2016
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