Implementing contract changes to get your business back on track

14/07/2020

As the lockdown restrictions ease and employees begin their return to work, it may be necessary for an employer to make some adjustments to ensure their business survives post COVID-19.

These measures could include temporary changes to their employees’ terms and conditions – such as reducing salaries and hours of work or changing benefits – to allow them to retain as many staff as possible while reducing their operating costs.

Here, Partner Julia Fitzsimmons who heads up our Employment Law and HR Team, looks at how to approach making changes to employee contracts and the potential pitfalls to avoid:

The world has changed a lot over the past three months and many employers will need to make some hard choices to ensure their business’ survival.

One way to do this is to streamline costs by making changes to employee terms and conditions as a temporary measure to help the business through the next few months, without having to cut any jobs.

However, implementing contract changes can be very tricky.

The best way to make changes is to agree them with employees first. If an agreement can be reached to the satisfaction of the workers and the business, the employee’s consent should be recorded and the changes agreed in writing.

But of course, some employees may be less than happy to accept a cut in their pay, hours or benefits.

If this is the case, the employer needs to adopt a different approach, starting by looking at the employee contract in detail. Is there a right within the contract to vary a particular term under review? If there is, the employer has reserved the right to make those changes.

If there isn’t such a clause in the contract, the business could consider imposing the change of terms and conditions onto its workers, relying on the fact that an employee has agreed to it by giving their implied consent. This approach can be dangerous, and it may lead to legal headaches further down the road.

For example, if an employer imposes a contract change without the employee’s consent this would be considered a breach of contract. If 20 or more employees refuse to accept the changes and the business is determined to push them through, there will also be issues of collective consultation to consider.

Then there is the possibility of a constructive dismissal claim should an employee work under protest or resign because of the changes. They may also refuse to work under the new terms and if they are dismissed as a result, they could submit a claim for unfair dismissal – and wrongful dismissal, if the dismissal is without notice.

An alternative course of action could be to dismiss employees for refusing to agree to the contract changes and then offer them continued employment on the new terms. But again, they may be able to bring a claim for wrongful dismissal and unfair dismissal.

In order to defend such claims, an employer would need to show the steps it had taken to agree new terms with its employees, how other employees had reacted to the changes, and what had been done to avoid the impasse.

To avoid unnecessary conflict at an already tough time for businesses, it’s worth conducting a thorough review of your employee contracts before embarking on an exercise to amend terms and conditions.


If you would like to discuss any changes to your terms and conditions, please contact Julia using the details below.

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