Do you need to make changes to your employee contracts?

As an employer, there may be times when you need to make changes to your employees' contracts of employment. Whether you are looking to update terms related to working hours, pay, job responsibilities, or benefits, it is essential to tread carefully to avoid legal pitfalls. Changes to employment contracts, if not handled properly, can lead to disputes, grievances, and even claims of constructive dismissal. Here’s a legal guide on how to go about making changes to employment contracts.

1. Understand the Legal Framework

Under UK employment law, an employment contract is an agreement between the employer and employee, outlining terms and conditions of employment. These terms can be written, verbal, or implied and are legally binding. The key point to remember is that employers cannot independently change an employee's contract without their consent, unless the employment contract explicitly allows for such changes.

Changes to a contract can be made in a few ways:

Agreement between both parties: The most straightforward way to amend a contract is by mutual agreement.

Variation clauses: Some contracts include a "variation clause," which may allow the employer to make certain changes without the employee’s express consent. However, these clauses must be clear and reasonable.

Implied variation: Over time, the nature of an employee’s work or working conditions may change in practice. However, for such changes to be legally binding, the change must be accepted and agreed upon, either verbally or through conduct.

2. Consultation and Communication

The first step when considering making changes to an employee's contract is to communicate your intentions clearly. Even if the changes seem reasonable or are in line with business needs, you should consult with employees to discuss the proposed changes. This is especially crucial for significant alterations, such as changes to pay, working hours, or job duties.

Employers are legally required to provide employees with a written statement of changes within one month of a variation to terms and conditions. Depending on the nature of the change, you may be required to provide a formal contract update or a separate letter of variation.

3. Obtaining Consent

If the proposed changes are substantial, you will need to seek the employee’s consent. While it is often good practice to get this in writing, consent can also be implied in some situations (for example, if the employee continues to work under the new terms without objection). However, if an employee refuses to agree to the changes, you will need to assess your options carefully.

If consent is not given, an employer could face legal consequences, including:

Constructive dismissal: If an employer imposes significant changes without consent and the employee resigns, they may claim constructive dismissal.

Breach of contract: Unilateral changes to the terms of the contract could be deemed a breach of contract, leading to potential legal action for damages.

4. Consideration of Employee Rights

It is essential to take into account any employee protections before making changes.

For example: If the changes result in a reduction in pay or benefits, this may amount to a fundamental breach of the contract.

Changes that adversely affect an employee's working hours or location might also be seen as unreasonable or disruptive, especially if these terms were negotiated when the contract was first signed.

If an employee is a protected group (e.g., on maternity leave or with long-term illness), special considerations or protections may apply.

5. Alternatives to Changing the Contract

If employees are unwilling to accept the changes, and a mutual agreement seems difficult to reach, consider alternative approaches:

Consulting via a works council or trade union: If there is a union or works council in place, engaging them in discussions about the changes could lead to a smoother process.

Redundancy: In extreme cases, if the changes are fundamental to the role, you may need to consider whether redundancy is an option, though this must be approached carefully, following appropriate consultation and providing redundancy payments where required.

6. Document Everything

Throughout the process, it is important to document all discussions and agreements in writing. Keep records of any consultation meetings, emails, or letters, as this could be essential if disputes arise later. If changes are agreed, ensure that these are clearly outlined in an updated contract or a written statement of employment particulars.

7. Special Considerations for Collective Agreements

If your business is governed by a collective agreement (for example, one negotiated with a trade union), any changes to the employment terms might require negotiation with the union representatives. This means that you could be subject to collective bargaining rules, and independent changes without consultation may not be legally permissible.

Communication and consent are key

Making changes to an employee's contract should never be taken lightly. While businesses often need to adapt to changing circumstances, employers must ensure that any modifications comply with the law and respect employee rights. Open communication, obtaining consent, and following due processes are key steps to minimise the risk of legal complications.

If you are unsure about how to proceed or if you're facing resistance from employees, it’s advisable to seek legal advice from an employment solicitor to guide you through the process. By handling contract changes correctly, you can protect both your business and your workforce, ensuring a positive and compliant working environment.

If you are an employer looking to amend employment contracts and need expert advice, please don’t hesitate to get in touch with myself or a member of the team at Franklins Solicitors on [email protected] or call 01908 660966. We can help you with all legal aspects of managing your workforce.