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Practice Management - How to change employment contracts

Rayner Jones explains the legalities practices need to take into account when altering staff contracts.

It is important to meet staff members affected to discuss their concerns about new arrangements
It is important to meet staff members affected to discuss their concerns about new arrangements

While many believe the worst of the recession may be over, practices still face difficult times. If reducing costs is important, one course of action you might consider is trimming staff hours to bring down the salary bill.

The law allows you to do this - or change other terms and conditions - if you have a good business reason. This does not, however, mean that altering employment contracts in any way that disadvantages staff is an easy thing to do.

What the contract says
Clauses in employment contracts about making changes tend to fall into two categories: wide and narrow.

A 'wide' clause may say that the employer can make any change they want. However, employment tribunals regard such wording as not being specific enough and will rule that, unless the employee agrees, any change leading to a benefits reduction is not lawful. Fewer hours (and less pay) counts as a reduction.

'Narrow' clauses, where the wording is very specific and relates to the change (such as reducing working hours) you are considering, allow the employer to make the change.

Even if the wording in the contract is very clear, the employer still needs to follow a proper process.

An implied term in every employment contract is 'mutual trust and confidence'.

If you impose the change without consultation and without trying to reach agreement, employees can resign and claim constructive unfair dismissal because you have breached mutual trust and confidence.

Employers should always follow a proper process and try to reach agreement with the affected employees even where the specific change you want to make is allowed by the contract.

Consult affected staff
Start by explaining the proposed changes and the rationale for them to the individuals concerned. If the change will affect several staff in a particular team, it may be worth suggesting that they discuss the proposals with each other and try to come up with a plan acceptable to them that also achieves your objectives.

If agreement can be reached at this stage, write to the employee(s) confirming the new arrangements and asking them to sign and return a copy of the letter.

If agreement is not forthcoming you need to make the issue formal. This involves writing to the individuals affected, explaining the proposed change, its rationale and its likely impact on them.

Ask for an indication (perhaps by tick box) whether they are willing to agree to the proposed change or if they want a meeting to discuss it in more details. Hold meetings with staff who want to raise concerns.

Individuals may have good reasons for not wanting the change. For example, reduced hours could lead to financial hardship. On the other hand, a proposal to increase or vary their hours may be impossible for staff who look after young children or elderly parents.

It is important that you explore with staff their reasons for being unable or unwilling to agree - and try to accommodate their concerns as best you can without prejudicing what you are trying to achieve.

If agreement is impossible
If some employees still will not agree, your options are to let the matter drop for those who will not agree; force the issue by dismissing the individuals and offering to re-engage them; or impose the change.

Letting matters drop is seldom a realistic option if you need to make the change and other employees have already agreed to the change.

This is dramatic but you may decide it is necessary. It can result in an unfair dismissal claim even if the employee accepts re-engagement.

However, any dismissal should count as fair provided there is a good business reason for changing the employment contract, you have followed a reasonable procedure, considered issues raised by the employee and tried to accommodate their needs.

If a claim does succeed but the staff member accepted re-engagement, the practice might have to pay a 'compensatory' award (based on loss of earnings) if working hours have been reduced.

But this will not be the case if you have increased their hours or made some other change that does not reduce pay and does not cause any loss. In either case, however, there may be a 'basic' award (calculated in the same way as a redundancy payment, and not related to loss of earnings) even if the practice does not have to pay a 'compensatory' award.

If the individual has refused re-engagement, it is arguable that they have failed to mitigate their loss by refusing your offer, so should not be entitled to a 'compensatory' award.

Imposing changes
You should only impose a change if there is very clear wording in the employment contract allowing you to make the particular alterations, you have a good business reason for doing so and you have consulted the staff.

If you impose changes in the absence of clear wording in the contract - even if you have followed a proper procedure - employees can:

  • Work under protest and claim for deductions from wages (if their earnings reduce); or
  • Resign and claim constructive unfair dismissal; or
  • Refuse to work under the new terms.

These are all situations that practices will want to avoid.

Practical tips

  • Keep on top of the process and keep it moving - don't let it drift.
  • Be very clear with employees about the changes you want to make and the reasons for them.
  • Think carefully about who in the practice should deal with the process and how. Gaining agreement to make changes to employment contracts terms is, although this sounds cynical, essentially a selling exercise so make sure it is managed in the right way.

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