Refusal to agree changes to terms and conditions

The economic downturn has seen a dramatic increase in the number of employers using the tactic of mass termination and re-engagement to force through cuts to pay and changes to hours and other terms and conditions, after failing to secure the consent of their workforce to the changes.

An employer who terminates the 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 even if the employee has accepted the new terms, for example an enforced pay cut, and started to work under them. However, any compensatory award would be limited to the difference in amount between the old and new earnings (Hogg v Dover College [1990] ICR 39). In Hazel v The Manchester College [2014] EWCA Civ 72, the Court of Appeal upheld an order reinstating two employees who were dismissed for refusing to accept new terms, on their old terms and conditions. The employer could not argue that reinstatement was not practical, because the employees had continued working throughout the period of the dispute, alongside their colleagues.

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, GMB v Man Truck and Bus UK Limited [2000] IRLR 636).

Each case is different, but here are some of the factors likely to influence a tribunal decision whether dismissals were fair:

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

• was there 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;

• how severe was the impact of the change on employees? The worse the impact, the harder it is for the employer to justify the reasonableness of the dismissals (Slade v TNT (UK) Limited UKEAT/0113/11/DA) (although this is just one factor to consider, see General Vending Services Ltd v Schofield [2014] UKEAT/0137/13/MC);

• did the employee consider other ways of saving money before opting to cut terms?

• was the pay cut distributed fairly across the workforce?

• was the employee offered alternatives to dismissal?;

• what proportion of the workforce accepted the change? The more employees accept the change, the more likely a dismissal for holding out against it will be judged fair. This is a very important factor. A tribunal can also take into account the need for “industrial harmony” — the “impracticality” of giving better terms to a small number of workers who refuse to agree a change;

• did the employer use fair (as opposed to misleading) arguments to encourage employees to accept the deal?

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 had agreed to the changes.