Dismissal for refusing to agree changes to terms and conditions 




In recent years, a growing number of employers have opted to use the hostile tactic of “dismissal and re-engagement” to force through unwelcome contract change. The employer gives notice to end the employment contract while simultaneously offering a new contract containing the new, less favourable terms the employer wants to impose. Threats to dismiss and re-engage generally take the form of a “take it or leave it” ultimatum and usually follow a period of consultation over proposed changes and/or a breakdown in negotiations. 



The legal position is that an employer who ends an existing employment contract and offers new terms in this way 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 performing the contract rather than breaking it.
Although not a contract breach, it 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 357). Legal advice must be taken before bringing any tribunal claim.


There can also be a dismissal under section 95(1)(a), ERA where the employer unilaterally imposes fundamentally different contract terms without giving notice to end the old contract, summarily withdrawing the old contract terms, as in these examples.


Where this happens, there will often be a dispute as to whether there has been a dismissal at all and if so, when was the effective date of termination (see page 347): 


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 the whole context. Here are some of the significant factors 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 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;




• evidence of the negative impact of the changes on affected employees. The more severe the impact, the harder it will be to justify the reasonableness of the decision to dismiss anyone who refused to agree (Slade v TNT (UK) Limited UKEAT/0113/11/DA); 




• whether the employer considered other measures, such as alternative ways of saving money before opting to cut terms. Tribunals will not normally question the “business sense” of an employer’s chosen course. Even so, if the employer cannot show that it properly addressed the reasonable alternatives put forward at the time, any dismissals are less likely to be judged fair; 




• whether employees were offered alternatives to dismissal;




• what proportion of the workforce accepted the change. The more employees who accept the change, the more likely a tribunal is to rule that those holding out were fairly dismissed. This is an 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 against change 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 result in unlawful discrimination (see Chapter 7, page 239). 


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 employees had accepted the changes. 




Another important source of protection in this context is section 145B, TULRCA, which bans inducements to members not to have their terms and conditions negotiated through collective bargaining with the recognised union. See page 132, Chapter 5.