No matter how well a contract of employment is drafted there will be occasions when changes are required.
Either because of changes to the law…
Or because of a change in your trading circumstances or business requirements.
Now, changing the terms to a contract because of a change in the law is pretty straight forward.
Both you and your employees must comply with the law.
So, such changes are not open to negotiation or consultation.
They just happen.
Like extending statutory maternity leave.
But what is your legal position if you want to make changes to a contract of
employment that are not related to changes in the law?
For example, what if the nature of the job changes so that your employee is doing a different job for you?
Or what if you want to have your employee work remotely?
Can you do this, and if so, how?
Changes to a contract of employment is called a ‘variation’.
Now a well-drafted contract usually includes a variation clause.
This is a clause within the contract that allows you to vary its terms.
You will generally find it towards the end of the contract.
It ensures that your employees are protected from changes being made to their contract without express agreement, and more importantly, without that agreement in writing.
You are at risk if you make changes unilaterally, even if you have a variation clause in the contract that allows you to do so.
The phrasing generally looks like this:
“No variation of this agreement shall be effective unless it is in writing and signed by the parties.”
This establishes that there is only one agreement, these are its terms, and its terms cannot be varied unilaterally, even by accident.
You can also have a variation clause that allows certain terms to be changed unilaterally if you have good reason to do so (financial difficulties for instance).
Such a clause might be drafted as follows:
[Business name] reserves the right to make reasonable changes to your terms and conditions of employment.
If there are any minor changes you will be notified in writing. These changes will take effect from the date of the notice or other date as specified.
Greater changes will be made only after consultation, and we will provide you with at least one month’s written notice.”
Is the change a ‘work practice’ or ‘contractual’?
You should also consider whether the change you are looking to make is related to a ‘work practice’ or ‘contractual’ in nature.
The question of what is a “work practice” and what is a contractual term is an important one.
And here’s why….
…because as an employer, you can change a work practice unilaterally.
For example, changing a break from 10am to 11am.
What is contractual, and not merely a work practice, may not be changed unilaterally (unless you have good cause – see below).
Legally there is a distinction between contractual terms (the terms expressed in a contract of employment) and work practices.
Contractual terms include pay, hours of work, sick pay and pension scheme.
Not all contractual terms may be written in a contract of employment.
Some may be in your employee handbook or a collective agreement, for example.
Changes to these terms must be agreed between you and the employee.
Work practices on the other hand can include breaks and rostering.
You may provide details of these in your employee handbook.
You can change these work practices without your employee’s consent.
That’s because it’s considered reasonable for you to update work practices or processes to save money or increase efficiency.
However, there can still be risks attached to doing so and it is always advised to notify your employees of any changes.
You should set out what changes you are proposing and why you want to make them, so your employees understand why you feel the changes are needed.
What if your contracts don’t have a variation clause?
What can you do then?
Can you change a contract?
In short, yes you can.
But you should make whatever changes you want very clear and also your reasoning for such changes.
You should then work with your employees to have them agree to those changes.
And get their agreement in writing.
But what if your employee objects to a change?
This is a difficult situation to manage.
If you can’t get their agreement and your employee refuses to accept a change to his/her contract, you have four main options:
You can press on regardless but his could lead to a claim for breach of contract or may result in a constructive dismissal claim.
Therefore, you would need to have a very strong business case for the particular change to defend such a claim
You can terminate their employment and offer re-engagement on new terms.
But in this scenario, you would need to have a very strong business case for the initial dismissal, as you could be exposing yourself to the risk of an unfair dismissal claim.
You can make the employee redundant
But again, you’d need to be able to show a genuine need for redundancy.
Otherwise, you are exposing yourself to an unfair dismissal claim.
Or you can accept the employee’s refusal and make no changes.
This is always an option, but it’s not an ideal solution as you risk having different employees on different terms and you’re not achieving the desired outcome.
Whatever way you slice it, making changes to a contract of employment is not without difficulties.
But provided you have a good business case for making the change you are in a stronger position to defend any possible actions against you.
So, to recap:
Your contracts of employment should contain a variation clause allowing you to make reasonable changes – but only after consultation.
Consider the changes you are looking to make – do they relate to a ‘work practice’ or are they ‘contractual’?
You should always look to get your employees to consent to any contractual change.
And think long and hard before making any changes unilaterally unless the changes are for very strong business reasons.
