Reducing Terms and Conditions of Employment Post-Furlough
At the time of writing, the government’s Coronavirus Job Retention Scheme is due to come to an end on 30th June 2020. There is speculation that the Scheme could be extended for certain business sectors or, that a period of “phasing-out” might be implemented. We don’t know anything for certain yet except for the fact that for many employers it probably won’t be “business as usual” for some time and companies will have to look at implementing change post-furlough in order to weather the ongoing storm.
Change in business comes in different guises but we envisage employers needing to make changes to the terms and conditions of their employees’ post-furlough as they adapt to a new way of working. Changing the terms of conditions of employment of employees is a complex area of practice and one which can expose employers to significant legal risk however, with the right advice and support an employer can successfully make changes to an employee’s contract even where these changes are ostensibly to an employee’s detriment.
An employment contract can be varied in a number of ways: by mutual agreement; by a collective agreement; by variations allowed for in the contract; by unilateral imposition of new terms, or by dismissal and re-engagement on new terms. The correct course of action will depend on the changes being proposed, the number of employees affected and an employer’s existing contractual rights. The ideal way of making contractual changes is with employee consent as this reduces the scope for any dispute in the future and in some cases, consent will actually be a pre-requisite to any change. Where an employer needs consent for any contractual changes they will need to consult with the affected employees in advance to seek this agreement.
The consultation process should be a formal process and where appropriate meet with the terms of any internal consultation policies, collective agreements and/or statutory rules on collective consultation. The consultation process to be followed will again depend on the facts of each case; most importantly the number of employees affected. Where an employer is proposing to vary more than 20 employees’ terms and conditions at any one time, this will trigger an employer’s obligation to collectively consult for a minimum period of 30 days.
Problems can arise when an employee’s terms and conditions of employment are contained in a collective agreement negotiated between an employer and a trade union. If the employer and union negotiate a change with which an employee does not agree the employee may want to claim that he is not bound by the changes. The legal position will then depend on whether the collective agreement was formally incorporated into his employment contract. In cases like this, it doesn’t actually matter if the employee is a Union member or not: the collective agreement will still apply.
Contracts of employment will sometimes contain flexibility clauses purporting to allow the employer unilaterally to vary terms and conditions however, an employer should exercise significant care when seeking to rely on these as an automatic means of varying terms and conditions of employment. Overarching terms such as, “We reserve the right to make reasonable changes to any of your terms and conditions of employment” are essentially useless because they are meaningless and offer insufficient certainty. While such a term could be used to effect relatively minor changes, it would not be of any use for more major changes such as changes in pay, hours or benefits. Tribunals will generally be unsympathetic to employers who try to use such clauses to change fundamental terms of the contract without getting employees’ consent to the changes first and giving proper notice in advance of the change.
If staff refuse to agree to changes, employers may try to impose contractual variations unilaterally or without consent. Unilateral variations to contract are unlawful but in some cases they will work if the employee has impliedly agreed the variation by his or her conduct by, for example, continuing to work. This is an uncertain situation for an employer to be in because an employee can always try and argue against implied acceptance: not necessarily a difficult feat! In the most extreme cases an employer can dismiss an employee and offer them re-engagement on the new terms but as with any dismissal, this exposes the employer to the risk of an unfair dismissal claim. Any action in this regard needs to be very carefully considered and executed.
If you want to look at your options for varying your employee’s contracts of employment as a result of the Covid-19 crisis either now or, post-furlough then please do get in touch with the Employment Team on 01274 864999. We can talk through your specific situation and tailor options to suit your particular needs and support you fully as we move through the next phase of Covid-19 action.
