One of the employment law questions I am most often asked is whether an employer can insist on changing the terms of an employee’s contract of employment. I considered the law concerning the imposition of pay cuts in October 2011. The general principle is that a variation in contract terms which operate to the detriment of the employee is prima facie unfair and can lead to claims for damages for breach of contract and compensation for constructive unfair dismissal. The standard answer is that unilateral changes may be imposed as long as there is a genuine and compelling business reason to do so. In Garside & Laycock v Booth Mr Booth was the only one of 86 employees who refused to accept contract changes. The Employment Appeal Tribunal held that it was highly relevant that most staff had accepted the change. The decision also confirmed that the business reason for the change did not need to be vital to the survival of the business.
There are numerous ways in which employers can implement changes. One is to reserve within the contract of employment the right to vary employment terms to the extent required. This may avoid a claim for damages for breach of contract but can still leave the employer exposed to unfair dismissal claims. By far the best approach is to seek to vary terms by consent after negotiation. Indeed, any changes imposed without adequate negotiations will almost certainly be unfair. Some employers seek to assist the negotiating process by offering a “sweetener” such as a one off payment.
Another approach is to terminate employment and offer re-engagement on new terms. This has become increasingly popular but no-one should be under ay illusion that it is a soft option. There is still the risk of facing claims for unfair dismissal on the termination of employment.
Earlier this year the Employment Appeal Tribunal revisited the issue. In General Vending Services v Schofield Mr Schofield was asked to agree a pay reduction of £5000 along with changes to sickness and holiday pay as part of a reorganisation. He was one of five of some 35 employees who refused to agree to the changes. He was a technician who dealt with the maintenance and repairs of coffee machines in cafés. The employer wanted to win new business in the “roast and grind” sector which required prompt repairs. The maintenance and repairs team was therefore restructured to provide for quick call outs with technicians provided with all necessary tools for on site repairs. There would be weekend working in order to provide quick repairs. Part of the process involved grading employees according to their skills.
At his employment tribunal Mr Schofield was one of five claimants. The other four failed but he succeeded because changes in holiday and sickness pay had a particular impact on him (he had a poor sickness record). He was awarded compensation of £43,452.