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Refusing to agree to changes to terms and conditions
The economic downturn has seen a dramatic increase in the number of employers forcing employees to agree to downgraded terms and conditions by a draconian method which involves giving mass notice to end contracts of employment, coupled with immediate offers of re-engagement on reduced terms. As long as the correct amount of notice is given to end the contract, this is not a breach of the employment contract (see Chapter 3: Breach of Contract). Instead, it is a dismissal, and in some circumstances it can be fair.
Although each case is different, these are some of the factors likely to lead a tribunal to find this kind of dismissal fair:
• there was genuine consultation over the proposed changes;
• there was a sound business reason for the changes at the time of the dismissal. The employer need not show that reducing terms and conditions is essential, or the only way to save the business. However, the severity of the impact of the change on employees is relevant because the worse the impact on employees, the harder it will be for the employer to justify the reasonableness of the dismissal (Slade v TNT (UK) Limited UKEAT/0113/11/DA);
• the employer considered other cost-saving measures first;
• the pay cut is distributed fairly across the workforce;
• the employer offered alternatives to dismissal;
• the majority of employees agreed to the change. The more employees that accept the change, the more likely a dismissal for holding out against it will be judged fair. A tribunal can take into account the need for “industrial harmony” (in other words, the impracticality of giving better terms to a small number of workers who refuse to agree a change); and
• the employer used fair (as opposed to misleading) arguments to encourage the employees to accept the deal.
The following case provides a good example:
Garside and Laycock were suffering from the economic downturn and they presented the workforce with business forecasts suggesting that the only way of avoiding redundancies was a 5% pay cut. Everyone accepted the pay cut except Mr Booth. He had three meetings with management in which they offered him alternative options, including a deferred bonus arrangement, but he rejected these proposals and eventually he was dismissed. At his appeal hearing, he was offered another option, namely a pay review after six months, which he also rejected. His dismissal was found to be fair.
Garside and Laycock Limited v Booth UKEAT/0003/11/CEA
Where 20 or more employees are affected, the collective redundancy consultation obligations will be triggered by this tactic (see Chapter 11: Collective consultation). Cases like Garside illustrate the importance of solidarity, organisation and collective action in these circumstances.
A breakdown in trust and confidence caused by the employee can also lead to a fair dismissal for “some other substantial reason”, (Huggins v Micrel Semiconductor (UK) EAT/0009/04). However, breach of the duty of mutual trust and confidence is not a “convenient label to stick on any situation” to dismiss an employee in the absence of other lawful reasons (Leach v OFCOM [2012] EWCA Civ 959).
Third-party pressure can sometimes be used to justify a fair dismissal, for example where the third party was the employer’s only or main client (Martin v JF X-Press EAT/0010/04, Greenwood v Whiteghyll Plastics Limited [2007] AER 111). However, dismissal is unlikely to be reasonable without the employer first taking all reasonable steps to avoid or mitigate the effects of the client’s demand, most obviously by trying to get the client to change its mind and if that fails, by trying to find alternative work (Henderson v Connect South Tyneside Limited [2010] IRLR 468):
Mr Bancroft worked as a chef for a facilities management company engaged by the Home Office to provide the catering at a bail hostel run by a third sector voluntary organisation. Bancroft raised health and safety concerns, for example about smoking in the kitchen and knives left in the sink. These upset the manager of the bail hostel who took against him. When another member of staff complained about Bancroft’s language in a dispute over some margarine, he was disciplined and given a final warning. Meanwhile, the hostel manager contacted the Home Office and asked them to enforce a clause in the facilities agreement which entitled them to demand the removal of any employee of the facilities management company for no reason and without appeal.
The Home Office responded by writing to the facilities management company instructing it to find a “permanent solution”. This resulted in Bancroft’s removal from the hostel premises. He was offered another job 30 miles away and for less money which he rejected so he was dismissed. The EAT said that an employer placed under pressure from a third party to remove an employee from site must at least investigate the background circumstances and intercede to try to change the client’s mind. Bancroft’s employer was also criticised for failing to intervene earlier to try to resolve the relationship difficulties Bancroft was experiencing with the hostel manager. The case illustrates how employment law is ill-equipped to deal with the fragmentation that results from outsourcing arrangements.
Bancroft v Interserve Facilities Management Limited [2012] UKEAT/0329/1312
Refusing to sign a restrictive covenant can be a valid reason for dismissal, as long as the employer is genuinely attempting to protect the interests of the business. As always, the tribunal must consider all the circumstances, for example, whether restrictions are reasonable, and whether other staff signed up to them.