an employee may well be reasonable in resisting pay cuts, but that does not automatically make it unreasonable to dismiss and re-engage them

Posted on October 26, 2011 by Martin Malone

In these continuing hard times, with profits squeezed and businesses facing collapse, it is becoming increasingly common to consider salary reductions as a cost saving exercise. Although some consider it a risky option, given the prospect of employment tribunal claims for unfair dismissal and breach of contract, it is well established that dismissal for refusal to accept a change of contract terms is potentially fair (as "some other substantial reason" for dismissal), and will actually be fair if the employer acts reasonably in deciding to dismiss. Such fairness, of course, calls for genuine efforts to negotiate the changes before resorting to giving notice of dismissal and offering re-engagement on new terms.

Two recent cases have reiterated this general principle and made certain aspects of it very it clear Continue reading →

pay cuts and dismissal

Posted on August 14, 2011 by Martin Malone

In the current economic climate, it is an unfortunate fact of life that employees are facing numerous constraints concerning pay and benefits. Pay freezes are commonplace and several councils have made the news by requiring employees to accept pay cuts or face dismissal. As a general principle, the unilateral imposition of material contract variations which are detrimental to employees can entitle the affected employees to resign and claim breach of contract and constructive unfair dismissal.

In a decision which will be welcomed by employers, the EAT has recently clarified that when deciding whether or not dismissal of an employee for refusing to accept a pay cut does constitute “unfair dismissal”, the question to be considered is NOT the reasonableness of the stance adopted by the employee. Rather it is whether the employer acted reasonably in dismissing the employee for refusing to do so. Continue reading →

newsletter – pay reductions

Posted on November 23, 2010 by Martin Malone

Especially when times are tough, employers sometimes seek to impose wage reductions or other substantial adverse changes to terms of employment of staff. Of course from an employment law point of view there is generally no problem if the employees concerned agree, however reluctantly, to accept the change(s) – which of course they may well do if the alternative is likely to be redundancy and accepting the change is the lesser of two evils.

An employee who does not agree adverse change(s) of any significance which are imposed anyway will be entitled to resign and bring a constructive dismissal claim (which may be a claim for unfair dismissal or breach of contract or both). As a general rule compensation awarded in that type of situation will be less than it might otherwise have been on the basis that by rejecting the offer of continued or renewed employment the employee had not done everything that he or she could reasonably be expected to do to mitigate his or her loss.

However a recent case has shown that employers must not just assume that compensation will be reduced in such circumstances.

A Mr Banks won a constructive unfair dismissal claim against his then employer, Bloxwich Fencing Ltd. Bloxwich appealed to the EAT. One ground for appeal was that the tribunal had not reduced the compensation it awarded for the unfair dismissal to take account of the fact that Bloxwich had offered to reengage Mr Banks, albeit on worse terms than those on which he had previously been employed. Bloxwich argued that this showed that Mr Banks had failed to take reasonable steps to mitigate his loss and that therefore compensation should be reduced.

The EAT dismissed this argument. The EAT found that on the facts of this particular case relations between Mr Banks and Bloxwich Fencing had deteriorated to such an extent that it had been open to the original tribunal to conclude that it was not reasonable to expect Mr Banks to go back to work for them. That was enough to dispose of the employer’s argument.

For those who may want to read a transcript of the full judgment it is available here – Bloxwich Fencing Ltd v Banks, EAT.