During the course of business, employers occasionally need to change employees’ terms of employment. Pay rises are one reason this may need to be done. In addition, changes to contracts of employment driven by the business’ needs can be necessary, and employers need to ensure any changes are binding and lawful.
Varying employees’ contracts of employment can carry a number of risks for employers, and it is important that legal advice is sought to avoid falling foul of the law.
Changing an employee’s terms of employment is not straightforward, and carries significant risks for employers. Open and honest communication with employees, explaining the business needs behind the imposition of such changes can, however, go a long way to getting staff on side.
Contractual Terms: Express, Implied or Incorporated
Employers need to consider whether the proposed changes involve altering the employment contract, being careful to identify the difference between contractual terms, and other non-contractual benefits – such as the provision of hot drinks – or internal polices that are not binding upon either party.
Once the contractual terms have been identified, the employer needs to work out whether they are express, implied or incorporated.
- Express terms are those which have been agreed explicitly between the parties, whether in writing or orally.
- Implied terms are simply deemed to exist and typically come about as a result of workplace tradition or custom.
- Incorporated terms are deemed to exist due the operation of law – for example if an employer tried to pay less than the minimum wage, the employee would still be entitled to the minimum wage.
The employer then needs to confirm whether it can legally make the change. The employment contract may include a specific term allowing changes or it may be drafted widely enough to allow the change. It could include a general right to alter any terms.
It’s worth noting that any flexibility in the contract will operate against the employer, and will be viewed restrictively by a court, if called upon to interpret. In addition, any changes made under a flexibility clause will only be enforceable if the changes are minor and not detrimental to the employees affected.
Enforcing Changes in Employment Contracts
Once the employer has identified its position under the contract, it needs to consider how to implement the changes. There are three options available at this point: obtain express agreement, impose the change and secure the employee’s implied agreement, or fire the employee and re-engage on the new terms. Once this has been agreed, the method of implementing the change needs to be decided.
One of the options available to employers is to set up a clinic to provide consultation for employees on the changes. Farleys’ employment solicitors can provide advisory clinics at employer organisations for the purposes of providing independent Employment law/HR advice to employees when varying contracts of employment.
