COVID-19 - changing terms and conditions of employment

Covid-19 has had a considerable impact on our day-to-day lives in many ways but one of the most obvious changes to our lifestyle has been to our working arrangements, in particular the increase in working from home.

As a result of the mandatory lockdown employers were forced to make quick decisions and put in place arrangements to enable their workforce to work from home. As restrictions are being eased and life is returning to normal, some employees have ventured back into the office however an increasing number of employers have implemented a hybrid flexible working arrangement or have decided their employees can remain working from home, certainly for the foreseeable future.  As you can imagine such working arrangements will have a knock on effect on employees’ terms and conditions as some benefits may now not be necessary/applicable and others too costly or difficult to provide, especially in such difficult economic times.  

In light of this employers may now need to consider updating and/or amending their employees’ terms and conditions of employment.  It should be noted that when implementing such changes it is imperative that a fair process is followed otherwise employers could risk claims to include constructive dismissal, unfair dismissal and breach of contract.

Nowadays employers offer a variety of benefits to their employees mainly to reward them and/or to maintain their ongoing loyalty.  These benefits can often include meals out, gym memberships and travel allowances, all of which have been severely restricted over the last year. Other changes that employers may be considering caused directly or indirectly by the pandemic are changes to working hours, location, pay and the reduction in /removal of individual/company-wide bonuses.

There is no legal requirement for a worker to have a written contract of employment. However, a contract of employment regardless of whether it is verbal or in writing, is a legal agreement between an employer and employee and its terms cannot lawfully be changed unilaterally and certainly not without risk.

We set out below the different ways a change can be made and the key considerations for employers when making such changes in the current economic climate:

Check to see if the change is non-contractual?

It may be the case that the change an employer is seeking to make is non-contractual and therefore can be made without adopting a drawn out procedure.Please bear in mind that even when a change is non-contractual it is always best practice to communicate it to the workforce and provide reasonable notice before implementing the change.

Is there a contractual right to vary?

Contracts can sometimes contain flexibility clauses allowing an employer to unilaterally vary terms and conditions. If this is the case then a change authorised by the employment contract is not a variation of the contract. However just because the contract appears to allow the employer to make a certain change, the employer should still act reasonably and with caution. From experience, a contact normally only contains a general not a specific power to vary its terms and one which is only useful for minor administrative changes.

Can the variation be made by express agreement?

This is the ideal way of making any changes as there is unlikely to be any dispute in the future. This method should involve discussing the proposed change with an employee and obtaining consent, preferably in writing before implementing the change.Sometimes employers offer an incentive, which is more often than not financial in nature, in order to encourage agreement. Such attractive incentives to bring about change are not considered to be undue influence however threats of demotion or dismissal are.

Is it necessary to consult with a view to terminating and re-engaging on new terms?

If an employer has sought to expressly gain the consent of an employee to the change and this has been refused then it may decide to carry out consultation and if still no agreement is reached, dismiss and offer to re-engage the employee on the new terms.Such an approach is not without risk as it can affect morale and employees may consider themselves dismissed.However provided proper notice is given or the correct PILON payment is made, affected employees will not have a claim for breach of contract (but may have a claim for unfair dismissal). It is important to bear in mind that in order to try and minimise the risk of a successful unfair dismissal claim the employer must have a good business reason for making the change (which does not need to be a financial one) and the revised contract must start immediately after the old comes to an end. Depending on the number of employees that an employer is proposing to dismiss before it re-engages them on new terms, there may be a legal requirement to carry out collective as well as individual consultation.

Is it necessary to impose a unilateral change to a contract?

This approach carries a huge risk as an employee could resign and claim constructive dismissal/breach of contract.While this approach means that the employer is in breach of contract, such an approach may however work because the employee might be taken to have impliedly agreed the variation by his or her conduct, e.g. by continuing to work without protest. The implied agreement test is more likely to be met if the change has an immediate impact, e.g. a pay cut, than if the change is not felt for some time, for example changes to pension or redundancy pay.The employee may decide to ‘work under protest’ whereby the employee disagrees with the change but remains in employment.

As you can see it is not easy implementing contractual changes to terms and conditions. However if an employer gives proper consideration to the change it is seeking to make and plans effectively in advance to mitigate the potential impact it will have on its employees, it is more likely to succeed. 

As implementing contractual changes to terms and conditions can be difficult and is not without risk it is important for an employer to seek advice on what changes can/cannot be made under a contract and how to best approach the process.  By taking this advice an employer is likely to reduce the risk of successful claims for unfair dismissal, constructive dismissal and breach of contract.

Whether or not the change has been agreed by the employee it is advisable to confirm it in writing and where possible to obtain signed consent to it, placing a copy on the personnel file for future reference. Although a section 1 statement is not a contract of employment, from April 2020 the law requires all workers to be given a written "section 1 statement" of certain particulars on or before employment commences (these can be included within a contract) and any changes to these terms should be notified in writing to the worker within one month. 

If you are an employer seeking to change terms and conditions of employment or an employee affected by such a change then please contact the Talbots Law Employment Team on 0800 118 1500 for advice and assistance.  We can also draft Section 1 statements of terms and conditions and contracts of employment.