Making Variations to Contract
VARYING CONTRACTS AFTER FURLOUGH
Businesses have faced many challenges arising from COVID-19 and there are difficult decisions to be made as the furlough scheme comes to an end.
Many employers will have no choice but to make redundancies, but they may also be thinking of making changes to contracts. Changes to terms and conditions may enable employers to avoid or reduce redundancies, and to put the business on a better footing to survive during this pandemic.
There are a number of contractual changes that an employer may want to make, such as reducing working hours, reducing contractual benefits, introducing flexible working arrangements, or relocating staff.
If an employer wants to make such changes, they must bear in mind that any contractual change should be agreed by the employee as it would otherwise be a unilateral change, and therefore a breach of contract.
So what can an employer do if it wants to try to introduce changes?
The first step would be to look at the contracts of employment. If the contract includes a clause which permits changes to be made in certain circumstances, then the employer may be able to rely on this. However, any fundamental change is unlikely to be covered by a contractual term
The next step would be to try to seek agreement from the employees affected by the proposed change. Whilst you would not normally expect employees to agree to any change in their contracts which is detrimental to them, the current circumstances are exceptional. If contractual changes are an option that is presented as an alternative to redundancies, or as a way of reducing the number of redundancies, then employees may be prepared to consider accepting such changes. It is therefore important to engage in a constructive dialogue with employees, to let them know the reasons for considering changes to contract, and to give them the opportunity to make suggestions, raise questions, and be consulted. An employee who has the choice of accepting reduced hours, or being placed at risk of redundancy, may decide that a reduction in hours is the better option. This could be on the basis that it will be subject to regular review. Any agreement to a contractual change should of course be confirmed in writing, and signed by both parties.
What can an employer do if no agreement can be reached?
If an employer considers that they have no alternative but to make contractual changes in order to protect their business, but are unable to reach agreement with their employees, they may consider the option of dismissing the employees and offering to re-engage them under revised terms. If they do this, they should give clear reasons for the dismissal.
There is of course the risk that employees could then pursue claims in unfair dismissal. However, if there is no other option, it is a risk that some employers are prepared to make.
But it is always safer, and better for relationships with employees, for a meaningful consultation to be carried out, with the aim of trying to reach agreement if at all possible.
If you are looking to make contractual changes, you are likely to need legal advice to take you through the process.
You can contact me, Elaine Walker, at Elaine.Walker@mustoeshorter.co.uk, or on my direct dial number, which is : 01305 752747.
28/08/2020