Dismissal for refusing to agree changes to terms and conditions 





In recent years, a growing number of employers are using the tactic of dismissal and re-engagement to force through unwelcome cuts to terms and conditions. To do this, the employer gives notice to end the employment contract while at the same time offering a new contract containing the new, less favourable terms. Threats to dismiss and re-engage generally take the form of a “take it or leave it” style ultimatum and usually follow a period of consultation and/or a breakdown in negotiations. 




The legal position is that by ending an existing employment contract and offering new terms in this way, the employer does not break the contract as long as full legal notice of termination is given (Kerry Foods v Lynch [2005] IRLR 680). By giving notice, the employer is performing the contract rather than breaking it. Sometimes employees argue that this way of behaving amounts to a fundamental breach of the duty of trust and confidence. This is a difficult argument to win, not least because most employers work through a process of consultation, at least on paper.


Although not a contract breach, the decision to end the contract is still a dismissal, so employees with at least two years’ service can claim unfair dismissal. A claim can sometimes be brought even if the employee has accepted the new terms and started working under them, but any compensation will be limited (see Compensatory award, page 372). Legal advice must be taken before bringing any tribunal claim.



Proposals to dismiss 20 or more employees within a 90-day period and to re-engage them on new terms will trigger the statutory duty to consult collectively (see Chapter 11: Collective consultation).



An employee who refuses to agree to unfavourable changes to terms and conditions can be fairly dismissed for “some other substantial reason”. As always, whether or not the dismissal is fair will depend on all the circumstances. Here are some of the significant factors that often make a difference to the outcome in this kind of case: 





• evidence of genuine consultation over proposed changes (see Garside and Laycock Limited v Booth [2011] UKEAT 0003/11/2705);





• evidence of a sound business reason for the changes. (The employer need not show that cutting terms and conditions is essential or the only way to save the business);





• evidence that the employer carefully considered any injustice to the affected employees and weighed these against any prejudice to the employer of allowing employees to keep their job (Dobie v Burns International Security Services Limited [EWCA Civ 11). The more severe the negative impact on employees, the harder it will be to justify the reasonableness of the decision to dismiss those who refuse to agree; 




• whether the employer considered alternative ways of saving money before opting to cut terms. In a claim for unfair dismissal, tribunals must not question the “business sense” of an employer’s chosen course, but they are entitled to ensure that the employer carefully considered any reasonable alternatives put forward by employees; 





• whether employees were offered alternatives to dismissal;





• what proportion of the workforce accepted the change. The higher the proportion, the more likely a tribunal is to rule that those holding out were fairly dismissed. This is an important factor. A tribunal can take into account the need for “industrial harmony”, and the potential industrial relations problems if those who held out were to end up with better terms than those who accepted the change;
and




• whether the employer used fair and not misleading arguments to encourage employees to accept the deal.





Contract changes that impact negatively on groups of workers protected by the Equality Act 2010 can also result in direct and indirect discrimination. Tribunals have more scope to scrutinise an employer’s decision-making in the context of discrimination than unfair dismissal (see Chapter 7, page 251). 



Solidarity, organisation and collective action are crucial to winning this kind of case. For example, in Sandford v Newcastle upon Tyne Hospitals NHS Foundation Trust UKEAT/0324/12/DM, a key reason why the claimants lost their unfair dismissal claim was because 91% of their fellow employees accepted the changes. 





Another important source of legal protection when resisting changes to terms and conditions is section 145B, TULRCA. This provision bans offers to members that are intended to remove the negotiation of any terms and conditions from collective bargaining, temporarily or permanently. See page 149.