The next step

Seeking agreement to vary employment contract terms

[Letter]

Draft Code of Practice on dismissal and re-engagement

[Weblink]

Changing an employment contract

Option one: express consent

The safest way to implement a contractual change is by obtaining the employee’s express and voluntary written consent. This will necessarily involve engaging in meaningful consultation openly and in good faith. Be prepared to compromise, consider alternatives or offer them a small “incentive” to agree to the change (see The next step ).

Tip. A detrimental change may be more acceptable if you tie it in with other more positive changes.

Trap. If the employee’s contract contains a general flexibility clause, it’s unlikely you can rely on it to make a detrimental change without consent.

Tip. You can generally change non-contractual policies without consent, but it’s still advisable to consult on your plans to avoid being in breach of the implied term of mutual trust and confidence.

If you change the terms of the written statement of employment particulars, you must give the employee a statement of change within one month.

Option two: unilateral variation

Alternatively, you could push through a contractual change unilaterally. This is very risky as it’s a breach of contract and if it’s a fundamental breach the employee might resign and claim constructive dismissal. Or they may make an unlawful deduction from wages claim if the change affects pay.

If the change is relatively minor and has no financial implications, the employee might continue to work to the amended terms without objection and, after a period of time, it might be possible to rely on their implied consent. You can only rely on this for terms that have day-to-day operative effect; you can’t rely on it for terms that have no immediate impact, such as restrictive covenants.

Option three: dismiss and re-engage

If you can’t reach an agreed outcome with the employee and don’t want to risk unilateral variation, your final option is to dismiss them on due notice and immediately offer re-engagement on the amended terms, i.e. “fire and rehire” . However, even if they accept the re-engagement offer, they can still claim unfair dismissal. But it can be a fair dismissal if you had a fair reason for dismissal (likely to be “some other substantial reason” ), you acted reasonably and you followed a fair procedure. If 20 or more employees may be dismissed and re-engaged, you must also comply with statutory collective consultation obligations.

Tip. Only consider fire and rehire as a last resort after all attempts at reaching agreement have failed. If you do dismiss, offer a right of appeal.

Tip. Do first re-examine your proposals and take into account the employee’s consultation feedback. Ensure there’s no reasonable alternative way of achieving your business objectives.

The government has now laid before Parliament a draft statutory Code of Practice on Dismissal and Re-engagement and, if approved, it’s expected to come into effect by summer 2024 (see The next step ). As it’s statutory, it will be taken into account by tribunals in relevant cases. So, do ensure you comply with its terms once it’s in force.

For a letter seeking agreement to vary employment contract terms and the draft Code of Practice, visit https://www.tips-and-advice.co.uk , Download Zone, year 26, issue 6.