5. Changes to the contract

There are a number of reasons why the terms and conditions of a contract of employment might change — a routine example is when an employee receives an annual pay rise. However, other changes (such as to working practices or to an individual’s duties) can be more controversial.

As a contract of employment is an agreement made between the employer and employee, any change must be agreed by both parties. If either party tries to impose a change without consent this will be a unilateral variation of contract and the other party will have to choose either to accept or reject the variation. Simply giving notice of a change does not, by itself, immediately make the change enforceable.

However, it is only changes to contractual terms that need to be agreed: for example benefits that are genuinely non-contractual, rather than simply labelled as such, can be changed or withdrawn by the employer. Whether a term is contractual or non-contractual will depend on the construction of the contract which is decided according to the principles outlined in Chapter 4.

In order to validly change a fundamental term to the detriment of a significant number of staff, an employer should enter into a consultation (the general requirements for which are set out below).

Agreed changes

Agreement to a variation in contract can be express or implied. An employee can be pressured into expressly agreeing to a change in their terms either by signing a document (e.g. at the base of a letter from an employer) or by verbally accepting the change, for example by notifying his or her line manager that s/he agrees to the proposal.

If an employee continues in their employment and works under the new terms without expressly agreeing to them, then it can still be implied that they have accepted those terms. This often happens where working practices change over a period of time, even where although each change has been minor, the end result is something very different from that specified under the written contract.

A tribunal or court is likely to accept that continuing to work for a few weeks after the change, having made it clear that they do not accept the terms, does not amount to an agreement. However, it is vital that an employee promptly objects to any unwanted changes that their employer is trying to impose. For example, working under changed terms for two years without seeking any legal remedy is likely to amount to acceptance, as in the Henry case (see page 34).

Where a change is more significant and the employee has managed to register an initial objection to the new terms, the employer’s desired changes may still eventually be implicitly incorporated. In order to prevent this occurring, the employee needs to regularly renew his or her objection (e.g. each monthly pay day) to the change (Burdett-Coutts v Hertfordshire County Council [1984] IRLR 91). Collective legal action (e.g. for unlawful deduction of wages) may well be necessary.

If an employee did appear to assent to the change, s/he may still be able to challenge the amendment to his or her contractual terms. Consider whether the employer validly gave his or her agreement. Where an employer provides employees with no real alternative (i.e. “agree to the changes or be dismissed”), employees may be able to show that they only agreed under duress and that the changes are therefore void (Sheet Metal Components Ltd v Plumridge [1974] ICR 373, Darby and Still v Law Society of England and Wales UKEAT/0447/07, Saminaden v Barnet Enfield & Haringey NHS Trust UKEAT/0018/08).

Changes apparently allowed by contract

Sometimes the contract of employment itself will allow for changes to the terms and conditions. For example, there may be a “flexibility” clause which purports to allow the employer to change the individual’s duties.

In the case of White v Reflecting Roadstuds Ltd [1991] IRLR 331, the Employment Appeal Tribunal (EAT) held that there was no implied term that an employer’s right to move an employee between departments under a flexibility clause had to be exercised in a reasonable way. However, there had to be “reasonable or sufficient grounds” requiring the employee to move under such a term.

The EAT also stated in that case that the implied duty to maintain trust and confidence was “an overriding term” in the contract. If an employer exercises a right to change the contractual terms in a way that breaches this term then this will be a breach of contract. However, a term that allows changes to be imposed by the employer must be clear and specific. An employer will not be allowed to change any terms just by putting a clause in the contract.

A clause in a contract of employment that stated the employer could “make alterations” to the contract did not give the employer the right to unilaterally vary the terms. The EAT held that their right was restricted to changes of a minor and non-fundamental character (United Association for the Protection of Trade Ltd v Kilburn & others EAT 787/84).

One of the most frequently contested terms in a contract is the “mobility clause” (i.e. the location of an employee’s work). There are conflicting decisions on whether it is the term of the contract, or on the other hand, the reality of where the employee has always worked (“the factual test”), which is the dominant issue in determining from where the employer can insist the employee work.

In High Table v Horst [1997] EWCA Civ 2000, the Court of Appeal decided that it was the reality of where an employee works that determines the employee’s place of work, rather than where (under the contract) the employer initially stated that it might end up asking him or her to work. In this case, even though the employees (waitresses) had a broad mobility clause in their contract, the employer was entitled to make them redundant and was not obliged to relocate them to another one of its operations.

However, in Home Office v Evans & Laidlaw [2007] EWCA Civ 1089, the Court of Appeal decided that the contractual clause was the dominant factor in determining where the employees worked. The employed immigration officials didn’t wish to relocate (from the old Eurostar terminus at Waterloo to Heathrow Airport) and preferred instead to be made redundant (and receive a termination payment). The court decided that the employer could, on the basis of the broad mobility clause in the contract, force the employees to move to another location instead of making them redundant.

Even if a tribunal favours the contractual test (i.e. what the usually widely drafted mobility clause permits) over the factual test (where the employee has always worked), it must be applied reasonably. In the case of United Bank v Akhtar [1989] IRLR 507, a requirement for an employee to relocate from Leeds to Birmingham the following week with no relocation expenses was held to be a breach of contract. The employee was, unsurprisingly, simply unable to comply with the sudden change. Also, it may be possible to challenge a change of location on the basis that the way that change is being applied (without flexible working options and so on), amounts to unlawful indirect sex discrimination. For example, on the basis that a woman with caring responsibilities cannot work her usual shifts from the proposed new location.

Consultation

Changes to fundamental terms (e.g. pay and hours) or changes to any term which could lead to 20 or more individuals correctly asserting that they have been constructively dismissed within a 90-day period, should be the subject of a collective consultation (GMB v Man Truck and Bus Ltd EAT/971/99). A fair consultation (defined in R v British Coal and Secretary of State for Trade and Industry ex p. Price [1994] IRLR 72) involves four elements:

• consultation when the proposals are still at a formative stage (i.e. while the proposed fundamental contractual change is still only a possibility and before the employer has actually taken the decision to go ahead with the change);

• adequate information on which to respond (e.g. sufficient explanation of why the proposed change is necessary and why other alternatives which would achieve the same objective are not favoured);

• adequate time in which to respond (i.e. sufficient time to digest the information presented and for reps to meet with employees and formulate a response); and

• conscientious consideration of the response (i.e. the employer cannot dismiss the employees’ suggestions out of hand: any counter proposals need to be actively considered).

Changes through a collective agreement

Once the provisions of the collective agreement have been agreed, they are contractually binding as long as the terms are incorporated (see Chapter 4).

In the following case, the the union had agreed a “bumping” provision with the employer that allowed them to redeploy staff into different jobs in a redundancy situation in order to retain senior skilled employees.

When an agreement is renegotiated this will usually vary the individual contract. If the employer and employee have agreed to incorporate the terms of a collective agreement “as and when renegotiated from time to time”, then a change to the agreement will lead to a variation of contract. If they have not, then any variation to the terms has to be accepted by the employee.

If an employer withdraws from a national agreement after it has been incorporated this will be a breach of contract. Equally, an employee cannot unilaterally withdraw from the terms once they have been accepted.

Unilateral variation of contract

If the employee does not agree to a change to their terms and conditions of employment the employer may give notice to terminate the employee’s contract of employment and offer a new contract on the revised terms.

In that case, the employee can bring a claim for unfair dismissal. However, the dismissal will not necessarily be unfair — the employer may be able to establish that the dismissal was fair for “some other substantial reason”, which is a potentially fair reason for dismissal under the Employment Rights Act 1996. For further information on unfair dismissal see LRD’s Booklet Dismissal — a legal guide.

Alternatively, the employer may impose the change on the employee by simply announcing a change to the terms and conditions. This will be a unilateral variation of contract and will amount to a breach of contract. In these circumstances the employee has the following options:

• to acquiesce to the breach and carry on working under the revised terms. The employee will be deemed to have accepted the new terms, whether or not they have explicitly agreed to them;

• if the change amounts to a fundamental breach of contract, the employee can resign and claim constructive dismissal (see Chapter 8);

• to refuse to work under the new terms. It is then up to the employer to decide what to do - if they dismiss the employee then the employee can bring a claim for unfair dismissal and/or wrongful dismissal (see Chapter 7 for wrongful dismissal). As with dismissal on notice referred to above, the dismissal is not necessarily unfair but the employer will have to show that they had a fair reason to dismiss and that they acted reasonably in doing so;

• to stay in work but sue for breach of contract. The employee can bring a claim in the civil courts for losses arising from the breach of contract (see Chapter 7). Alternatively, they can bring a claim for unlawful deduction of wages in an employment tribunal. If the employee chooses this option, they must make it clear to the employer that they have not accepted the changed terms and then take action quickly. If they remain in employment without taking any action they will be deemed to have accepted the change to their terms by their conduct; and

• if the new terms are radically different from the old ones, the employee can claim that they have been unfairly dismissed from their original employment and re-employed under a new contract of employment. This is a fairly rare type of claim and there must be a substantial difference in the terms.

In Hogg v Dover College [1990] ICR 39, a teacher was demoted from his position as head of department, put onto part-time hours and his salary was halved. The EAT held that he had been dismissed and re-employed on “wholly different terms”. Hogg was able to claim that he had been unfairly dismissed. The EAT also said that, as an alternative, he could have brought a constructive dismissal claim — he had not affirmed the contract because he was working under an entirely different contract.

The same principle was applied in Alcan Extrusions v Yates and others [1996] IRLR 327. The employer fundamentally changed the shift system, resulting in different hours of work which included working on weekends and bank holidays. This had a detrimental impact on the overtime payments, shift premiums and start-up payments that the employees received, as well as restricting their choice of holidays. The employees continued to work under protest and brought claims of unfair dismissal. The EAT held that the terms under the new system were so radically different that the employees had been dismissed from one contract and re-employed on another. They were entitled to claim unfair dismissal.

Changes through statute

Provisions that are contained in legislation are incorporated into individual contracts of employment. This means that if those provisions change, or a new law is passed, it can change an employee’s contract of employment.

Business transfers

Where a business transfers from one employer to another under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE), the employee’s employment transfers with it on the existing terms and conditions. This can include transfers between the public and private sectors. After the transfer the contract of employment operates as if it had always been with the new employer, so the date of continuous service will start from the same date as it had started with the previous employer. For more information see the LRD booklet TUPE — a guide to business transfer regulations.

Where TUPE applies, employers will be indefinitely prevented from changing terms and conditions (other than principally in relation to private sector employees’ pensions). Specifically, any contractual change that relates to the transfer will be void, although employees are not prevented, if so offered, from picking and choosing between their old employer’s and new employer’s terms (Regent Security Services v Power [2007] EWCA Civ 1188).

While the acquiring employer (transferee) cannot amend the contracts of newly transferred employees in order to harmonise terms with pre-existing employees, changes are permitted if they are for an economic, technical or organisational (ETO) reason. A change may be likely to qualify as an ETO reason if it affects the whole workforce (newly transferred and pre-existing) alike.

In the following case, the EAT’s decision that a change to the shift pattern as a result of a TUPE transfer was unlawful meant that the employee was entitled to more money: