Dismissal for refusing to agree terms and conditions changes

An employer who terminates an existing employment contract and offers new terms is not in breach of contract, as long as full legal notice of termination is given (Kerry Foods v Lynch [2005] IRLR 680). This is because by giving notice to end the contract, the employer is complying with the contract rather than breaking it.

Although it is not a breach of contract, it is still a dismissal and employees with at least two years’ service will be able to claim unfair dismissal.

A claim can be brought in some circumstances even if the employee has accepted the new terms and started working under them, as long as they have enough service. However, where the new contract terms involve a cut in pay and conditions, any compensatory award will be limited to the difference between the old and new earnings:

Here is another example:

Proposals to dismiss 20 or more employees within a 90-day period and to re-engage them on new terms and conditions will trigger the duty to consult collectively (section 188 of the Trade Union and Labour Relations Consolidation Act 1992 (TULRCA), GMB v Man Truck and Bus UK Limited [2000] IRLR 636).

An employee who refuses to agree to 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. These are the kinds of factor likely to influence the outcome:

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

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

• the severity of the impact of the change on employees. The worse the impact, the harder it will be for the employer to justify the reasonableness of dismissals for failure to agree (Slade v TNT (UK) Limited UKEAT/0113/11/DA);

• whether the employer considered other ways of saving money before opting to cut terms;

• whether the pain was distributed fairly across the workforce;

• whether the employee was offered alternatives to dismissal;

• what proportion of the workforce accepted the change. The more employees that accept the change, the more likely a tribunal is to rule that those holding out against it were fairly dismissed. This is a very important factor. A tribunal can also 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 the rest of the workforce who agreed the terms;

• whether the employer used fair (as opposed to misleading) arguments to encourage employees to accept the deal.

Sometimes the proposed changes may be indirectly discriminatory, where they impact disproportionately on particular groups of workers sharing a characteristic protected by the Equality Act 2010, such as women or young workers. In Braithwaite v HCL Insurance BPO Services Limited [2015] UKEAT/0152/14/DM, the EAT confirmed that forcing employees to accept a new set of terms and conditions or else lose their jobs is a “provision criterion or practice” capable of resulting in indirect discrimination (see page 160).

Reps should also remember the Public Sector Equality Duty where the employer is a public body or exercising public functions (see page 194).

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 that 91% of employees agreed to the changes.

Lastly, where employers are trying to force through changes to collectively terms, reps should remember section 145B of TULRCA. It is unlawful for an employer to offer a member of a recognised trade union (or a union seeking recognition) an inducement to abandon collectively negotiated terms and conditions. Breach of the section carries a fixed penalty of £3,800 per claimant (2015-16). Public services union UNISON won an important tribunal victory enforcing this right against Bromley Council in 2014 (see page 112).