Dismissal for refusing to agree changes to terms and conditions 


In recent years an increasing number of employers have been reacting to employees’ refusal to accept cuts to terms and conditions of employment by giving notice to end the employment contract, while at the same time offering a new contract that containing the new terms the employer wants. The legal position is set out below.


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, but any compensation will be limited. In particular, any award for loss of future earnings (the compensatory award) will be limited to the difference between the old and new lower earnings:


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) (See Chapter 11: Collective consultation).


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. Here are some of the significant factors that tend to make a difference in cases of this sort: 


• evidence of genuine consultation over the 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 severity of the impact of the change on employees and the extent to which the pain has been distributed fairly across the workforce (rather than, for example, being imposed on lower-paid workers but not senior-level staff). The worse the impact on those who lose out, 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 ways of saving money before opting to cut terms. Tribunals are not allowed to speculate on other ways in which the employer might have achieved their desired cuts and will not normally question the “business-sense” of the employer’s chosen course. Even so, if the employer cannot show that it properly addressed the reasonable alternatives that were 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 that 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 that could result if those who held out against change ended up with better terms than the rest of the workforce who accepted the change;


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


Contract changes that impact disproportionately on groups of workers with a characteristic protected by the Equality Act 2010, such as women or young workers, may result in discrimination. 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 (Braithwaite v HCL Insurance BPO Services Limited [2015] UKEAT/0152/14/DM). 


Reps should remember the Public Sector Equality Duty where the employer is a public body or exercising public functions (see Chapter 7).


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. 


Lastly, where employers are trying to force through changes to collectively terms, reps should remember section 145B of the Trade Union and Labour Relations (Consolidation) Act 1992 (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 their collectively negotiated terms and conditions. Breach of the section carries a fixed penalty of £3,830 per claimant (2016-17). Public services union UNISON won an important tribunal victory enforcing this right against Bromley Council in 2014 (see Chapter 5).